8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 ____________________________

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported):  October 30, 2019

FORMFACTOR, INC.

(Exact Name of Registrant as Specified in Charter)

Delaware		000-50307	13-3711155
(State or Other Jurisdiction of Incorporation)		(Commission File Number)	(IRS Employer Identification No.)
7005 Southfront Road
Livermore,	CA		94551
(Address of Principal Executive Offices)			(Zip Code)

Registrant’s telephone number, including area code:  (925) 290-4000

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

_____________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.001 par value	FORM	NASDAQ Global Market

 Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933(§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

☐     Emerging growth company

☐    If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Item 2.02.  Results of Operations and Financial Condition.

On October 30, 2019, FormFactor, Inc. (“FormFactor”) issued a press release announcing its financial results for the third quarter of fiscal 2019 that ended on September 28, 2019. A copy of the press release is furnished as Exhibit 99.01 to this report and is incorporated herein by reference.

Item 9.01.  Financial Statements and Exhibits.

(d) Exhibits.

The following exhibit is filed herewith and this list is intended to constitute the exhibit index.

Exhibit Number	Description
99.01	Press release dated October 30, 2019

The information in this report and the accompanying exhibit shall not be incorporated by reference into any filing of FormFactor with the Securities and Exchange Commission, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference in such filing. The information in this report, including the accompanying exhibit, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		FORMFACTOR, INC.
Date:	October 30, 2019	By:	/s/ SHAI SHAHAR
			Name:	Shai Shahar
			Title:	Chief Financial Officer

EX-99.01

EXHIBIT 99.01

News Release

Investor Contact:

Stan Finkelstein

Investor Relations

(925) 290-4321

ir@formfactor.com

FORMFACTOR, INC. REPORTS 2019 THIRD QUARTER RESULTS

Company Delivers Sequential and Year-on-Year Revenue Growth, Expects Continued Growth in Q4

LIVERMORE, Calif. — October 30, 2019 —FormFactor, Inc. (Nasdaq: FORM) today announced its financial results for the third quarter of fiscal 2019 ended September 28, 2019. Quarterly revenues were $140.6 million, up 1.9% from $138.0 million in the second quarter of fiscal 2019, and up 4.2% from $135.0 million in the third quarter of fiscal 2018.

• Sequential and year-over-year revenue growth, with non-GAAP EPS exceeding midpoint of outlook range

• Highest DRAM probe card revenue in a decade, in contrast to generally weak memory spending

• Completed the acquisition of FRT GmbH, adding $150 million of addressable market

“Our third quarter results continue to validate FormFactor’s diversified position in attractive consumables and R&D-driven semiconductor test and measurement markets,” said Mike Slessor, CEO of FormFactor, Inc. “We again benefited from our leadership positions in advanced probe cards, with strong demand in both DRAM and Flash applications more than offsetting a moderate sequential reduction in Foundry & Logic.”

Third Quarter Highlights

On a GAAP basis, net income for the third quarter of fiscal 2019 was $8.3 million, or $0.11 per fully-diluted share, compared to net income for the second quarter of fiscal 2019 of $6.9 million, or $0.09 per fully-diluted share, and net income for the third quarter of fiscal 2018 of $7.7 million, or $0.10 per fully-diluted share. Gross margin for the third quarter of 2019 was 39.3%, compared with 40.1% in the second quarter of 2019, and 39.2% in the third quarter of 2018.

On a non-GAAP basis, net income for the third quarter of fiscal 2019 was $17.3 million, or $0.22 per fully-diluted share, compared to net income for the second quarter of fiscal 2019 of $16.1 million, or $0.21 per fully-diluted share, and net income for the third quarter of fiscal 2018 of $19.6 million, or $0.26 per fully-diluted share. On a non-GAAP basis, gross margin for the third quarter of 2019 was 43.5%, compared with 44.3% in the second quarter of 2019, and 43.7% in the third quarter of 2018.

A reconciliation of GAAP to non-GAAP measures is provided in the schedules included below.

Free cash flow for the third quarter of fiscal 2019 was $25.6 million, compared to free cash flow for the second quarter of fiscal 2019 of $29.8 million, and free cash flow for the third quarter of 2018 of $13.0 million. A reconciliation of net cash provided by operating activities to free cash flow is provided in the schedules included below.

Outlook

Dr. Slessor added, “In the fourth quarter we are capitalizing on particularly strong year-end demand for Foundry & Logic probe cards on top of continued solid demand for our other products.”

For the fourth quarter ending on December 28,2019, FormFactor is providing the following outlook*:

	GAAP	Reconciling Items**	Non-GAAP
Revenue	$145 million to $155 million	—	$145 million to $155 million
Gross Margin	38% to 42%	$6 million	42% to 46%
Net income per diluted share	$0.09 to $0.17	$0.13	$0.22 to $0.30

*This outlook assumes consistent foreign currency rates.

**Reconciling items are amortization of intangibles, stock-based compensation, restructuring charges, and acquisition related expenses.

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 1:30 p.m. PDT, or 4:30 p.m. EDT, today.

The public is invited to listen to a live webcast of FormFactor’s conference call on the Investor Relations section of our web site at www.formfactor.com. A telephone replay of the conference call will be available approximately two hours after the conclusion of the call. The telephone replay will be available through November 1, 7:30 p.m. Pacific Time, and can be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) and entering confirmation code 6127926. Additionally, 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 earnings per fully-diluted share, and non-GAAP gross margin, 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, 2019 and for outlook provided before, as well as for the comparable periods of fiscal 2018, 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 IC 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, 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 hereof, 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, customer demand, conditions in the semiconductor industry, and growth opportunities, and other statements regarding the Company’s business. Forward-looking statements may contain words such as “may,” “might,” “will,” “expect,” “plan,” “anticipate,” 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; the speed of customer implementation of new technologies; industry seasonality; risks to the Company’s ability to realize operational efficiencies; changes macro-economic environments; 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. No assurances can be given that any of the events anticipated by the forward-looking statements 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, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Revenues	$	140,604		$	134,989		$	410,835		$	388,788
Cost of revenues	85,286			82,019			247,644			234,471
Gross profit	55,318			52,970			163,191			154,317
Operating expenses:
Research and development	20,096			18,857			59,893			56,578
Selling, general and administrative	25,887			24,745			77,354			73,426
Total operating expenses	45,983			43,602			137,247			130,004
Operating income	9,335			9,368			25,944			24,313
Interest income	724			369			1,988			952
Interest expense	(422		)	(777		)	(1,539		)	(2,654		)
Other income (expense), net	226			121			223			(341		)
Income before income taxes	9,863			9,081			26,616			22,270
Provision for income taxes	1,584			1,393			5,906			3,334
Net income	$	8,279		$	7,688		$	20,710		$	18,936
Net income per share:
Basic	$	0.11		$	0.10		$	0.28		$	0.26
Diluted	$	0.11		$	0.10		$	0.27		$	0.25
Weighted-average number of shares used in per share calculations:
Basic	75,280			73,837			74,749			73,273
Diluted	77,291			74,962			76,763			74,628

FORMFACTOR, INC.

NON-GAAP FINANCIAL MEASURE RECONCILIATIONS
(In thousands, except per share amounts)
(Unaudited)

	Three Months Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
GAAP Gross Profit	$	55,318		$	52,970		$	163,191		$	154,317
Adjustments:
Amortization of intangibles	4,707			5,123			14,137			15,418
Stock-based compensation	1,117			832			3,031			2,565
Restructuring charges	—			—			258			—
Non-GAAP Gross Profit	$	61,142		$	58,925		$	180,617		$	172,300
GAAP Gross Margin	39.3		%	39.2		%	39.7		%	39.7		%
Adjustments:
Amortization of intangibles	3.3		%	3.9		%	3.4		%	4.0		%
Stock-based compensation	0.9		%	0.6		%	0.7		%	0.6		%
Restructuring charges	—		%	—		%	0.1		%	—		%
Non-GAAP Gross Margin	43.5		%	43.7		%	43.9		%	44.3		%
GAAP operating expenses	$	45,983		$	43,602		$	137,247		$	130,004
Adjustments:
Amortization of intangibles	(1,372		)	(2,389		)	(6,111		)	(6,458		)
Stock-based compensation	(5,387		)	(3,705		)	(14,057		)	(9,856		)
Restructuring charges	(22		)	—			(199		)	—
Acquisition related expenses	(247		)	—			(247		)	—
Non-GAAP operating expenses	$	38,955		$	37,508		$	116,633		$	113,690
GAAP operating income	$	9,335		$	9,368		$	25,944		$	24,313
Adjustments:
Amortization of intangibles	6,079			7,512			20,248			21,876
Stock-based compensation	6,504			4,537			17,088			12,421
Restructuring charges	22			—			457			—
Acquisition related expenses	247			—			247			—
Non-GAAP operating income	$	22,187		$	21,417		$	63,984		$	58,610
GAAP net income	$	8,279		$	7,688		$	20,710		$	18,936
Adjustments:
Amortization of intangibles	6,079			7,512			20,248			21,876
Stock-based compensation	6,504			4,537			17,088			12,421
Restructuring charges	22			—			457			—
Acquisition related expenses	247			—			247			—
Income tax effect of non-GAAP adjustments	(3,812		)	(111		)	(10,137		)	(533		)
Non-GAAP net income	$	17,319		$	19,626		$	48,613		$	52,700
Non-GAAP net income per share:
Basic	$	0.23		$	0.27		$	0.65		$	0.72
Diluted	$	0.22		$	0.26		$	0.63		$	0.71

FORMFACTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended
	September 28, 2019			September 29, 2018
Cash flows from operating activities:
Net income	$	20,710		$	18,936
Selected adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	12,644			10,494
Amortization	20,248			21,876
Stock-based compensation expense	17,088			12,421
Provision for excess and obsolete inventories	8,046			7,414
Other activity impacting operating cash flows	4,642			(25,003		)
Net cash provided by operating activities	83,378			46,138
Cash flows from investing activities:
Acquisition of property, plant and equipment	(14,242		)	(12,326		)
Purchases of marketable securities, net	(25,898		)	(1,227		)
Other activity impacting investing cash flows	93			90
Net cash used in investing activities	(40,047		)	(13,463		)
Cash flows from financing activities:
Proceeds from issuances of common stock	7,672			7,712
Tax withholdings related to net share settlements of equity awards	(7,898		)	(5,694		)
Principal repayments on term loan	(18,750		)	(33,750		)
Net cash used in financing activities	(18,976		)	(31,732		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(161		)	(516		)
Net increase in cash, cash equivalents and restricted cash	24,194			427
Cash, cash equivalents and restricted cash, beginning of period	100,546			92,726
Cash, cash equivalents and restricted cash, end of period	$	124,740		$	93,153

FORMFACTOR, INC.

RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(In thousands)
(Unaudited)

	Three Months Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Net cash provided by operating activities	$	28,002		$	16,080		$	83,378		$	46,138
Adjustments:
Cash paid for interest	350			682			1,128			2,299
Capital expenditures	(2,782		)	(3,781		)	(14,242		)	(12,326		)
Free cash flow	$	25,570		$	12,981		$	70,264		$	36,111

FORMFACTOR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) (Unaudited)

	September 28, 2019			December 29, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	122,946		$	98,472
Marketable securities	77,025			50,531
Accounts receivable, net of allowance for doubtful accounts of $194 and $185	84,750			95,333
Inventories, net	85,989			77,706
Restricted cash	765			849
Refundable income taxes	478			1,260
Prepaid expenses and other current assets	17,834			13,669
Total current assets	389,787			337,820
Restricted cash	1,029			1,225
Operating lease, right-of-use-assets	32,300			—
Property, plant and equipment, net of accumulated depreciation of $268,486 and $263,102	56,240			54,054
Goodwill	188,559			189,214
Intangibles, net	47,054			67,640
Deferred tax assets	77,274			77,301
Other assets	1,362			968
Total assets	$	793,605		$	728,222
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	50,968		$	40,006
Accrued liabilities	30,015			27,731
Current portion of term loan, net of unamortized issuance cost of $57 and $160	46,193			29,840
Deferred revenue	8,315			4,941
Operating lease liabilities	6,416			—
Total current liabilities	141,907			102,518
Term loan, less current portion, net of unamortized issuance cost of $0 and $29	—			34,971
Deferred tax liabilities	2,244			2,355
Long-term operating lease liabilities	30,074			—
Other liabilities	4,834			8,214
Total liabilities	179,059			148,058
Stockholders’ equity:
Preferred stock, $0.001 par value:
10,000,000 shares authorized; no shares issued and outstanding	—			—
Common stock, $0.001 par value:
250,000,000 shares authorized; 75,696,234 and 74,139,712 shares issued and outstanding	76			74
Additional paid-in capital	879,527			862,897
Accumulated other comprehensive income (loss)	(2,180		)	780
Accumulated deficit	(262,877		)	(283,587		)
Total stockholders’ equity	614,546			580,164
Total liabilities and stockholders’ equity	$	793,605		$	728,222

About our Non-GAAP Financial Measures:

We believe that the presentation of non-GAAP net income, non-GAAP earnings per fully-diluted share, non-GAAP gross margin, 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 earnings per fully-diluted share, and non-GAAP gross margin 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 earnings per fully-diluted share, and non-GAAP gross margin 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 fully-diluted earnings per share, and non-GAAP gross margin, by adjusting GAAP net income, GAAP earnings per fully-diluted share, and GAAP gross margin 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, earnings per fully-diluted share, or gross margin prepared 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 earnings per fully-diluted share, and non-GAAP gross margin 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 “Reconciliation of GAAP Net Income to Non-GAAP Net Income,” "Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin," and “Reconciliation of Cash Provided By Operating Activities to Free Cash Flow” included in this press release.

Source: FormFactor, Inc.

FORM-F

XML

Cover	Oct. 30, 2019
Cover page.
Title of 12(b) Security	Common stock, $0.001 par value
Document Type	8-K
Document Period End Date	Oct. 30, 2019
Entity Registrant Name	FORMFACTOR, INC.
Entity Incorporation, State or Country Code	DE
Entity File Number	000-50307
Entity Tax Identification Number	13-3711155
Entity Address, Address Line One	7005 Southfront Road
Entity Address, City or Town	Livermore,
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94551
City Area Code	925
Local Phone Number	290-4000
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Central Index Key	0001039399
Trading Symbol	FORM
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false
Amendment Flag	false