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FormFactor, Inc. Reports 2024 Third Quarter Results
Source: Nasdaq GlobeNewswire / 30 Oct 2024 16:01:00 America/New_York
Record Quarterly Revenue, Profitability at the Top End of the Outlook Range;
Sees Reduced Demand for Foundry and Logic in Q4, Partially Offset by Continued Strength in DRAMLIVERMORE, Calif., Oct. 30, 2024 (GLOBE NEWSWIRE) -- FormFactor, Inc. (Nasdaq: FORM) today announced its financial results for the third quarter of fiscal 2024 ended September 28, 2024. Quarterly revenues were $207.9 million, a company record and an increase of 5.3% compared to $197.5 million in the second quarter of fiscal 2024, and an increase of 21.2% from $171.6 million in the third quarter of fiscal 2023.
- Record revenue in the third quarter exceeded outlook range and non-GAAP EPS was at the top end of the range.
- Strong DDR5 demand produced third consecutive record-setting quarter of DRAM probe-card revenue.
- FormFactor’s diversification strategy enabled participation in expanding investments in generative AI and data center applications.
“We are proud to have posted our all-time revenue record in the third quarter,” said Mike Slessor, CEO of FormFactor, Inc. “This performance was driven by continued strength in our DRAM probe-card business, layered on top of moderate growth in our Foundry & Logic and Systems businesses.”
Third Quarter and Fiscal 2024 Highlights
On a GAAP basis, net income for the third quarter of fiscal 2024 was $18.7 million, or $0.24 per fully-diluted share, compared to net income for the second quarter of fiscal 2024 of $19.4 million, or $0.25 per fully-diluted share, and net income for the third quarter of fiscal 2023 of $4.4 million, or $0.06 per fully-diluted share. Gross margin for the third quarter of 2024 was 40.7%, compared with 44.0% in the second quarter of 2024, and 40.4% in the third quarter of 2023.
On a non-GAAP basis, net income for the third quarter of fiscal 2024 was $27.2 million, or $0.35 per fully-diluted share, compared to net income for the second quarter of fiscal 2024 of $27.3 million, or $0.35 per fully-diluted share, and net income for the third quarter of fiscal 2023 of $17.3 million, or $0.22 per fully-diluted share. On a non-GAAP basis, gross margin for the third quarter of 2024 was 42.2%, compared with 45.3% in the second quarter of 2024, and 41.9% in the third quarter of 2023.
A reconciliation of GAAP to non-GAAP measures is provided in the schedules included below.
GAAP net cash provided by operating activities for the third quarter of fiscal 2024 was $26.7 million, compared to $21.9 million for the second quarter of fiscal 2024, and $20.6 million for the third quarter of fiscal 2023. Free cash flow for the third quarter of fiscal 2024 was $20.0 million, compared to free cash flow for the second quarter of fiscal 2024 of $14.2 million, and free cash flow for the third quarter of 2023 of $16.9 million. A reconciliation of net cash provided by operating activities to non-GAAP free cash flow is provided in the schedules included below.
Outlook
Dr. Slessor added, “We continue to experience record levels of DRAM probe card demand, with contributions from both DDR5 and High Bandwidth Memory applications. This, combined with slightly higher Systems Segment revenue, is helping to partially offset the forecasted reduction in Foundry & Logic probe-card demand.”
For the fourth quarter ending December 28, 2024, FormFactor is providing the following outlook*:
GAAP Reconciling Items** Non-GAAP Revenue $190 million +/- $5 million — $190 million +/- $5 million Gross Margin 40% +/- 1.5% $3 million 41% +/- 1.5% Net income per diluted share $0.16 +/- $0.04 $0.13 $0.29 +/- $0.04 *This outlook assumes consistent foreign currency rates. **Reconciling items are stock-based compensation, amortization of intangible assets and fixed asset fair value adjustments due to acquisitions, and restructuring charges, net of applicable income tax impacts. We posted our revenue breakdown by geographic region, by market segment and with customers with greater than 10% of total revenue on the Investor Relations section of our website at www.formfactor.com. We will conduct a conference call at 1:25 p.m. PT, or 4:25 p.m. ET, today.
The public is invited to listen to a live webcast of FormFactor’s conference call on the Investor Relations section of our website at www.formfactor.com. A telephone replay of the conference call will be available approximately two hours after the conclusion of the call. The replay will be available on the Investor Relations section of our website, www.formfactor.com.
Use of Non-GAAP Financial Information:
To supplement our condensed consolidated financial results prepared under generally accepted accounting principles, or GAAP, we disclose certain non-GAAP measures of non-GAAP net income, non-GAAP net income per basic and diluted share, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income and free cash flow, that are adjusted from the nearest GAAP financial measure to exclude certain costs, expenses, gains and losses. Reconciliations of the adjustments to GAAP results for the three and nine months ended September 28, 2024, and for outlook provided before, as well as for the comparable periods of fiscal 2023, are provided below, and on the Investor Relations section of our website at www.formfactor.com. Information regarding the ways in which management uses non-GAAP financial information to evaluate its business, management's reasons for using this non-GAAP financial information, and limitations associated with the use of non-GAAP financial information, is included under “About our Non-GAAP Financial Measures” following the tables below.
About FormFactor:
FormFactor, Inc. (NASDAQ: FORM), is a leading provider of essential test and measurement technologies along the full semiconductor product life cycle - from characterization, modeling, reliability, and design de-bug, to qualification and production test. Semiconductor companies rely upon FormFactor’s products and services to accelerate profitability by optimizing device performance and advancing yield knowledge. The Company serves customers through its network of facilities in Asia, Europe, and North America. For more information, visit the Company’s website at www.formfactor.com.
Forward-looking Statements:
This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the federal securities laws, including with respect to the Company’s future financial and operating results, and the Company’s plans, strategies and objectives for future operations. These statements are based on management’s current expectations and beliefs as of the date of this release, and are subject to a number of risks and uncertainties, many of which are beyond the Company’s control, that could cause actual results to differ materially from those described in the forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding future financial and operating results, including under the heading “Outlook” above, customer demand, conditions in the semiconductor industry, and other statements regarding the Company’s business. Forward-looking statements may contain words such as “may,” “might,” “will,” “expect,” “plan,” “anticipate,” “forecast,” and “continue,” the negative or plural of these words and similar expressions, and include the assumptions that underlie such statements. The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: changes in demand for the Company’s products; customer-specific demand; market opportunity; anticipated industry trends; the availability, benefits, and speed of customer acceptance or implementation of new products and technologies; manufacturing, processing, and design capacity, goals, expansion, volumes, and progress; difficulties or delays in research and development; industry seasonality; risks to the Company’s realization of benefits from acquisitions, investments in capacity and investments in new electronic data systems and information technology; reliance on customers or third parties (including suppliers); changes in macro-economic environments; events affecting global and regional economic and market conditions and stability such as military conflicts, political volatility, infectious diseases and pandemics, and similar factors, operating separately or in combination; and other factors, including those set forth in the Company’s most current annual report on Form 10-K, quarterly reports on Form 10-Q and other filings by the Company with the U.S. Securities and Exchange Commission. In addition, there are varying barriers to international trade, including restrictive trade and export regulations such as the US-China restrictions, dynamic tariffs, trade disputes between the U.S. and other countries, and national security developments or tensions, that may substantially restrict or condition our sales to or in certain countries, increase the cost of doing business internationally, and disrupt our supply chain. No assurances can be given that any of the events anticipated by the forward-looking statements within this press release will transpire or occur, or if any of them do so, what impact they will have on the results of operations or financial condition of the Company. Unless required by law, the Company is under no obligation (and expressly disclaims any such obligation) to update or revise its forward-looking statements whether as a result of new information, future events, or otherwise.
FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)Three Months Ended Nine Months Ended September 28,
2024June 29,
2024September 30,
2023September 28,
2024September 30,
2023Revenues $ 207,917 $ 197,474 $ 171,575 $ 574,116 $ 494,939 Cost of revenues 123,212 110,574 102,290 339,773 304,293 Gross profit 84,705 86,900 69,285 234,343 190,646 Operating expenses: Research and development 31,243 31,564 31,014 91,434 87,599 Selling, general and administrative 35,607 37,874 35,564 106,560 101,561 Total operating expenses 66,850 69,438 66,578 197,994 189,160 Gain on sale of business — 310 — 20,581 — Operating income 17,855 17,772 2,707 56,930 1,486 Interest income, net 3,650 3,415 1,662 10,221 4,420 Other income (expense), net (558 ) 360 788 322 1,261 Income before income taxes 20,947 21,547 5,157 67,473 7,167 Provision for income taxes 2,211 2,155 786 7,564 626 Net income $ 18,736 $ 19,392 $ 4,371 $ 59,909 $ 6,541 Net income per share: Basic $ 0.24 $ 0.25 $ 0.06 $ 0.77 $ 0.08 Diluted $ 0.24 $ 0.25 $ 0.06 $ 0.76 $ 0.08 Weighted-average number of shares used in per share calculations: Basic 77,406 77,235 77,571 77,364 77,265 Diluted 78,439 78,717 78,412 78,495 77,860 FORMFACTOR, INC.
NON-GAAP FINANCIAL MEASURE RECONCILIATIONS
(In thousands, except per share amounts)
(Unaudited)Three Months Ended Nine Months Ended September 28,
2024June 29,
2024September 30,
2023September 28,
2024September 30,
2023GAAP Gross Profit $ 84,705 $ 86,900 $ 69,285 $ 234,343 $ 190,646 Adjustments: Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions, and other 530 584 1,118 1,661 3,580 Stock-based compensation 1,934 1,932 1,376 5,794 4,801 Restructuring charges 524 — — 607 357 Non-GAAP Gross Profit $ 87,693 $ 89,416 $ 71,779 $ 242,405 $ 199,384 GAAP Gross Margin 40.7 % 44.0 % 40.4 % 40.8 % 38.5 % Adjustments: Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions, and other 0.3 % 0.3 % 0.7 % 0.3 % 0.7 % Stock-based compensation 0.9 % 1.0 % 0.8 % 1.0 % 1.0 % Restructuring charges 0.3 % — % — % 0.1 % 0.1 % Non-GAAP Gross Margin 42.2 % 45.3 % 41.9 % 42.2 % 40.3 % GAAP operating expenses $ 66,850 $ 69,438 $ 66,578 $ 197,994 $ 189,160 Adjustments: Amortization of intangibles and other (240 ) (240 ) (466 ) (720 ) (3,563 ) Stock-based compensation (7,002 ) (8,277 ) (9,463 ) (23,756 ) (24,532 ) Restructuring charges (249 ) — — (249 ) (1,183 ) Costs related to sale of business (13 ) (43 ) (2,139 ) (702 ) (2,139 ) Non-GAAP operating expenses $ 59,346 $ 60,878 $ 54,510 $ 172,567 $ 157,743 GAAP operating income $ 17,855 $ 17,772 $ 2,707 $ 56,930 $ 1,486 Adjustments: Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions, and other 770 824 1,584 2,381 7,143 Stock-based compensation 8,936 10,209 10,839 29,550 29,333 Restructuring charges 773 — — 856 1,540 Gain on sale of business and related costs 13 (267 ) 2,139 (19,879 ) 2,139 Non-GAAP operating income $ 28,347 $ 28,538 $ 17,269 $ 69,838 $ 41,641 FORMFACTOR, INC.
NON-GAAP FINANCIAL MEASURE RECONCILIATIONS
(In thousands, except per share amounts)
(Unaudited)Three Months Ended Nine Months Ended September 28,
2024June 29,
2024September 30,
2023September 28,
2024September 30,
2023GAAP net income $ 18,736 $ 19,392 $ 4,371 $ 59,909 $ 6,541 Adjustments: Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions, and other 770 824 1,584 2,381 7,143 Stock-based compensation 8,936 10,209 10,839 29,550 29,333 Restructuring charges 773 — — 856 1,540 Gain on sale of business and related costs 13 (267 ) 2,139 (19,879 ) 2,139 Income tax effect of non-GAAP adjustments (2,002 ) (2,835 ) (1,617 ) (3,924 ) (5,650 ) Non-GAAP net income $ 27,226 $ 27,323 $ 17,316 $ 68,893 $ 41,046 GAAP net income per share: Basic $ 0.24 $ 0.25 $ 0.06 $ 0.77 $ 0.08 Diluted $ 0.24 $ 0.25 $ 0.06 $ 0.76 $ 0.08 Non-GAAP net income per share: Basic $ 0.35 $ 0.35 $ 0.22 $ 0.89 $ 0.53 Diluted $ 0.35 $ 0.35 $ 0.22 $ 0.88 $ 0.53 FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)Nine Months Ended September 28,
2024September 30,
2023Cash flows from operating activities: Net income $ 59,909 $ 6,541 Selected adjustments to reconcile net income to net cash provided by operating activities: Depreciation 22,197 22,880 Amortization 1,920 6,043 Stock-based compensation expense 29,550 29,333 Provision for excess and obsolete inventories 10,052 12,566 Gain on sale of business (20,581 ) — Other activity impacting operating cash flows (21,426 ) (22,011 ) Net cash provided by operating activities 81,621 55,352 Cash flows from investing activities: Acquisition of property, plant and equipment (30,773 ) (46,094 ) Proceeds from sale of business 21,585 — Purchases of marketable securities, net (15,464 ) (3,900 ) Purchase of promissory note receivable (1,500 ) — Net cash used in investing activities (26,152 ) (49,994 ) Cash flows from financing activities: Purchase of common stock through stock repurchase program (37,211 ) — Proceeds from issuances of common stock 9,748 8,822 Principal repayments on term loans (803 ) (781 ) Tax withholdings related to net share settlements of equity awards (17,990 ) (9,349 ) Net cash used financing activities (46,256 ) (1,308 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash 3 (3,324 ) Net increase in cash, cash equivalents and restricted cash 9,216 726 Cash, cash equivalents and restricted cash, beginning of period 181,273 112,982 Cash, cash equivalents and restricted cash, end of period $ 190,489 $ 113,708 FORMFACTOR, INC.
RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO NON-GAAP FREE CASH FLOW
(In thousands)
(Unaudited)Three Months Ended Nine Months Ended September 28,
2024June 29,
2024September 30,
2023September 28,
2024September 30,
2023Net cash provided by operating activities $ 26,731 $ 21,878 $ 20,571 $ 81,621 $ 55,352 Adjustments: Sale of business related payments in working capital 2,134 630 2,139 2,811 2,139 Cash paid for interest 97 101 105 298 317 Capital expenditures (8,939 ) (8,398 ) (5,917 ) (30,773 ) (46,094 ) Free cash flow $ 20,023 $ 14,211 $ 16,898 $ 53,957 $ 11,714 FORMFACTOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)September 28,
2024June 29,
2024December 30,
2023ASSETS Current assets: Cash and cash equivalents $ 184,506 $ 195,914 $ 177,812 Marketable securities 169,961 161,710 150,507 Accounts receivable, net of allowance for credit losses 116,866 113,277 102,957 Inventories, net 105,374 114,814 111,685 Restricted cash 3,773 5,939 1,152 Prepaid expenses and other current assets 34,302 28,964 29,667 Total current assets 614,782 620,618 573,780 Restricted cash 2,210 2,098 2,309 Operating lease, right-of-use-assets 25,034 26,650 30,519 Property, plant and equipment, net of accumulated depreciation 204,108 204,102 204,399 Goodwill 200,137 199,548 201,090 Intangibles, net 11,017 11,657 12,938 Deferred tax assets 92,826 88,841 78,964 Other assets 3,669 2,751 2,795 Total assets $ 1,153,783 $ 1,156,265 $ 1,106,794 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 52,086 $ 62,235 $ 63,857 Accrued liabilities 46,508 49,523 41,037 Current portion of term loan, net of unamortized issuance costs 1,098 1,090 1,075 Deferred revenue 20,972 17,953 16,704 Operating lease liabilities 8,512 8,240 8,422 Total current liabilities 129,176 139,041 131,095 Term loan, less current portion, net of unamortized issuance costs 12,488 12,765 13,314 Long-term operating lease liabilities 19,731 21,441 25,334 Deferred grant 18,000 18,000 18,000 Other liabilities 19,378 17,102 10,247 Total liabilities 198,773 208,349 197,990 Stockholders’ equity: Common stock 77 77 77 Additional paid-in capital 845,466 863,283 861,448 Accumulated other comprehensive loss (1,773 ) (7,948 ) (4,052 ) Accumulated income 111,240 92,504 51,331 Total stockholders’ equity 955,010 947,916 908,804 Total liabilities and stockholders’ equity $ 1,153,783 $ 1,156,265 $ 1,106,794 About our Non-GAAP Financial Measures:
We believe that the presentation of non-GAAP net income, non-GAAP net income per basic and diluted share, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income and free cash flow provides supplemental information that is important to understanding financial and business trends and other factors relating to our financial condition and results of operations. Non-GAAP net income, non-GAAP net income per basic and diluted share, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, and non-GAAP operating income are among the primary indicators used by management as a basis for planning and forecasting future periods, and by management and our board of directors to determine whether our operating performance has met certain targets and thresholds. Management uses non-GAAP net income, non-GAAP net income per basic and diluted share, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, and non-GAAP operating income when evaluating operating performance because it believes that the exclusion of the items indicated herein, for which the amounts or timing may vary significantly depending upon our activities and other factors, facilitates comparability of our operating performance from period to period. We use free cash flow to conduct and evaluate our business as an additional way of viewing our liquidity that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our cash flows. Many investors also prefer to track free cash flow, as opposed to only GAAP earnings. Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures, and therefore it is important to view free cash flow as a complement to our entire consolidated statements of cash flows. We have chosen to provide this non-GAAP information to investors so they can analyze our operating results closer to the way that management does, and use this information in their assessment of our business and the valuation of our Company. We compute non-GAAP net income, non-GAAP net income per basic and diluted share, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, and non-GAAP operating income, by adjusting GAAP net income, GAAP net income per basic and diluted share, GAAP gross profit, GAAP gross margin, GAAP operating expenses, and GAAP operating income to remove the impact of certain items and the tax effect, if applicable, of those adjustments. These non-GAAP measures are not in accordance with, or an alternative to, GAAP, and may be materially different from other non-GAAP measures, including similarly titled non-GAAP measures used by other companies. The presentation of this additional information should not be considered in isolation from, as a substitute for, or superior to, net income, net income per basic and diluted share, gross profit, gross margin, operating expenses, or operating income in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect certain items that may have a material impact upon our reported financial results. We may expect to continue to incur expenses of a nature similar to the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP net income, non-GAAP net income per basic and diluted share, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, and non-GAAP operating income should not be construed as an inference that these costs are unusual, infrequent or non-recurring. For more information on the non-GAAP adjustments, please see the table captioned “Non-GAAP Financial Measure Reconciliations” and “Reconciliation of Cash Provided by Operating Activities to non-GAAP Free Cash Flow” included in this press release.
Source: FormFactor, Inc.
FORM-FInvestor Contact:
Stan Finkelstein
Investor Relations
(925) 290-4321
ir@formfactor.com
