EX-99.01 2 q223exhibit9901.htm EX-99.01 Document

EXHIBIT 99.01
ffq118logorgbinlinea06a.jpg                            
News Release
 
Investor Contact:
Stan Finkelstein
Investor Relations
(925) 290-4321
ir@formfactor.com
 


FORMFACTOR, INC. REPORTS 2023 SECOND QUARTER RESULTS
Strong Gross Margin and Good Expense Control Drive Higher Than Expected Profitability;
Experiencing Stable Demand in Q3

LIVERMORE, Calif. — August 2, 2023 —FormFactor, Inc. (Nasdaq: FORM) today announced its financial results for the second quarter of fiscal 2023 ended July 1, 2023. Quarterly revenues were $155.9 million, a decrease of 6.9% compared to $167.4 million in the first quarter of fiscal 2023, and a decrease of 23.5% from $203.9 million in the second quarter of fiscal 2022.

•Higher than expected gross margin and good operating expense control produced non-GAAP EPS at the top end of the range despite revenue below the outlook range due to shipment pushouts.
•Continued strong Systems segment results, with revenue at near-record levels.
•Adoption of generative Artificial Intelligence technologies driving strong demand for DDR5 and High Bandwidth Memory probe cards.

“As we navigate the current cyclical downturn, we continue to benefit from FormFactor’s diversification strategy and broad Lab-to-Fab product portfolio, which differentiate us from our direct competitors,” said Mike Slessor, CEO of FormFactor, Inc. “We are carefully balancing short-term results and long-term investments, with disciplined cost control that maximizes quarterly profitability and protects our strong balance sheet. These investments are designed to produce market-share gains and above-industry revenue and profit growth when we emerge from the current cyclical trough.”

Second Quarter Highlights

On a GAAP basis, net income for the second quarter of fiscal 2023 was $0.8 million, or $0.01 per fully-diluted share, compared to net income for the first quarter of fiscal 2023 of $1.3 million, or $0.02 per fully-diluted share, and net income for the second quarter of fiscal 2022 of $30.2 million, or $0.38 per fully-diluted share. Gross margin for the second quarter of fiscal 2023 was 38.7%, compared with 36.5% in the first quarter of fiscal 2023, and 46.3% in the second quarter of fiscal 2022.
 
On a non-GAAP basis, net income for the second quarter of fiscal 2023 was $11.2 million, or $0.14 per fully-diluted share, compared to net income for the first quarter of fiscal 2023 of $12.5 million, or $0.16 per fully-diluted share, and net income for the second quarter of fiscal 2022 of $36.8 million, or $0.46 per fully-diluted share. On a non-GAAP basis, gross margin for the second quarter of fiscal 2023 was 40.6%, compared with 38.4% in the first quarter of fiscal 2023, and 47.4% in the second quarter of fiscal 2022.

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

GAAP net cash provided by operating activities for the second quarter of fiscal 2023 was $22.5 million, compared to $12.3 million for the first quarter of fiscal 2023, and $42.6 million for the second quarter of fiscal 2022. Free cash flow for the second quarter of fiscal 2023 was $2.1 million, compared to free cash flow for the first quarter of fiscal 2023 of negative $7.3 million, and free cash flow for the second quarter of 2022 of $28.3 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, “In the short-term, we continue to operate in an overall demand environment that remains relatively steady, as is evident from our third-quarter outlook, and are encouraged by the stabilization of demand across our diversified product and technology portfolio.”

For the third quarter ending September 30, 2023, FormFactor is providing the following outlook*:

GAAPReconciling Items**Non-GAAP
Revenue
$167 million +/- $5 million
—
$167 million +/- $5 million
Gross Margin
38% +/- 1.5%
$3 million
40% +/- 1.5%
Net income (loss) per diluted share
$0.05 +/- $0.04
$0.12
$0.17 +/- $0.04
*This outlook assumes consistent foreign currency rates.
**Reconciling items are stock-based compensation, restructuring charges, and amortization of intangibles, inventory, and fixed asset fair value adjustments due to acquisitions, 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. PDT, or 4:25 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 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 and non-GAAP operating income, 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 six months ended July 1, 2023, and for outlook provided before, as well as for the comparable periods of fiscal 2022, 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 metrology and inspection, 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, 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; 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 infectious diseases and pandemics, military conflicts, political volatility 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. We continue to operate in an environment with substantial uncertainties arising from global, regional and national health crises such as the COVID-19 pandemic, including with respect to their impact on our operations, capacity, customer demand, and supply chain, as well as the macroeconomic environment. In addition, there are varying barriers to international trade, including restrictive trade and export regulations, dynamic tariffs, trade disputes between the U.S. and other countries, such as the recent US-China restrictions, 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 EndedSix Months Ended
 July 1,
2023		April 1,
2023		June 25,
2022		July 1,
2023		June 25,
2022
Revenues$155,916 $167,448 $203,907 $323,364 $401,081 
Cost of revenues95,633 106,370 109,538 202,003 212,488 
Gross profit60,283 61,078 94,369 121,361 188,593 
Operating expenses:    
Research and development28,340 28,245 28,317 56,585 55,451 
Selling, general and administrative33,255 32,742 33,406 65,997 66,312 
Total operating expenses61,595 60,987 61,723 122,582 121,763 
Operating income (loss)(1,312)91 32,646 (1,221)66,830 
Interest income, net1,482 1,276 181 2,758 127 
Other income, net450 23 551 473 743 
Income before income taxes620 1,390 33,378 2,010 67,700 
Provision (benefit) for income taxes(208)48 3,136 (160)7,586 
Net income$828 $1,342 $30,242 $2,170 $60,114 
Net income per share:  
Basic $0.01 $0.02 $0.39 $0.03 $0.77 
Diluted$0.01 $0.02 $0.38 $0.03 $0.76 
Weighted-average number of shares used in per share calculations: 
Basic 77,159 77,066 77,897 77,112 78,071 
Diluted77,616 77,255 79,210 77,450 79,423 



FORMFACTOR, INC. 
NON-GAAP FINANCIAL MEASURE RECONCILIATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months EndedSix Months Ended
July 1,
2023		April 1,
2023		June 25,
2022		July 1,
2023		June 25,
2022
GAAP Gross Profit$60,283 $61,078 $94,369 $121,361 $188,593 
Adjustments:
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions1,106 1,356 1,139 2,462 2,307 
Stock-based compensation1,515 1,910 734 3,425 1,812 
Restructuring charges332 25 454 357 593 
Non-GAAP Gross Profit$63,236 $64,369 $96,696 $127,605 $193,305 
GAAP Gross Margin38.7 %36.5 %46.3 %37.5 %47.0 %
Adjustments:
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions0.7 %0.8 %0.5 %0.8 %0.6 %
Stock-based compensation1.0 %1.1 %0.4 %1.1 %0.5 %
Restructuring charges0.2 %— %0.2 %0.1 %0.1 %
Non-GAAP Gross Margin40.6 %38.4 %47.4 %39.5 %48.2 %
GAAP operating expenses$61,595 $60,987 $61,723 $122,582 $121,763 
Adjustments:
Amortization of intangibles(1,550)(1,547)(1,526)(3,097)(3,087)
Stock-based compensation(7,689)(7,380)(5,624)(15,069)(12,066)
Restructuring charges(286)(897)(127)(1,183)(301)
Non-GAAP operating expenses$52,070 $51,163 $54,446 $103,233 $106,309 
GAAP operating income (loss)$(1,312)$91 $32,646 $(1,221)$66,830 
Adjustments:
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions2,656 2,903 2,665 5,559 5,394 
Stock-based compensation9,204 9,290 6,358 18,494 13,878 
Restructuring charges618 922 581 1,540 894 
Non-GAAP operating income$11,166 $13,206 $42,250 $24,372 $86,996 




FORMFACTOR, INC. 
NON-GAAP FINANCIAL MEASURE RECONCILIATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months EndedSix Months Ended
July 1,
2023		April 1,
2023		June 25,
2022		July 1,
2023		June 25,
2022
GAAP net income$828 $1,342 $30,242 $2,170 $60,114 
Adjustments:
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions2,656 2,903 2,665 5,559 5,394 
Stock-based compensation9,204 9,290 6,358 18,494 13,878 
Restructuring charges618 922 581 1,540 894 
Income tax effect of non-GAAP adjustments(2,068)(1,965)(3,071)(4,033)(4,796)
Non-GAAP net income $11,238 $12,492 $36,775 $23,730 $75,484 
GAAP net income per share:
Basic$0.01 $0.02 $0.39 $0.03 $0.77 
Diluted$0.01 $0.02 $0.38 $0.03 $0.76 
Non-GAAP net income per share:
Basic$0.15 $0.16 $0.47 $0.31 $0.97 
Diluted$0.14 $0.16 $0.46 $0.31 $0.95 







FORMFACTOR, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
July 1,
2023		June 25,
2022
Cash flows from operating activities:
Net income $2,170 $60,114 
Selected adjustments to reconcile net income to net cash provided by operating activities:
Depreciation15,121 14,146 
Amortization4,766 4,702 
Stock-based compensation expense18,494 13,878 
Provision for excess and obsolete inventories8,628 4,726 
Other activity impacting operating cash flows(14,398)(10,765)
Net cash provided by operating activities34,781 86,801 
Cash flows from investing activities:
Acquisition of property, plant and equipment(40,177)(30,116)
Acquisition of business— (3,121)
Purchase of promissory note receivable— (1,000)
Purchases of marketable securities, net(8,287)(6,874)
Net cash used in investing activities(48,464)(41,111)
Cash flows from financing activities:
Purchase of common stock through stock repurchase program— (54,328)
Proceeds from issuances of common stock5,024 5,687 
Tax withholdings related to net share settlements of equity awards(456)(4,243)
Principal repayments on term loans(519)(4,379)
Net cash provided by (used in) financing activities4,049 (57,263)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(1,958)(3,470)
Net decrease in cash, cash equivalents and restricted cash(11,592)(15,043)
Cash, cash equivalents and restricted cash, beginning of period112,982 155,342 
Cash, cash equivalents and restricted cash, end of period$101,390 $140,299 







FORMFACTOR, INC. 
RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO
NON-GAAP FREE CASH FLOW
(In thousands)
(Unaudited)
Three Months EndedSix Months Ended
July 1,
2023		April 1,
2023		June 25,
2022		July 1,
2023		June 25,
2022
Net cash provided by operating activities$22,472 $12,309 $42,646 $34,781 $86,801 
Adjustments:
Cash paid for interest106 106 131 212 294 
Capital expenditures(20,476)(19,701)(14,510)(40,177)(30,116)
Free cash flow$2,102 $(7,286)$28,267 $(5,184)$56,979 




FORMFACTOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited) 
 July 1,
2023		April 1,
2023		December 31,
2022
ASSETS
Current assets:
Cash and cash equivalents$97,981 $112,360 $109,130 
Marketable securities138,943 123,891 129,006 
Accounts receivable, net of allowance for credit losses94,013 103,969 88,143 
Inventories, net120,298 116,553 123,157 
Restricted cash1,144 1,207 1,221 
Prepaid expenses and other current assets25,876 22,941 23,895 
Total current assets478,255 480,921 474,552 
Restricted cash2,265 2,287 2,631 
Operating lease, right-of-use-assets31,001 30,420 31,362 
Property, plant and equipment, net of accumulated depreciation204,577 198,232 189,848 
Goodwill211,929 211,773 211,444 
Intangibles, net22,149 24,486 26,751 
Deferred tax assets71,172 67,951 67,646 
Other assets3,790 3,686 3,994 
Total assets$1,025,138 $1,019,756 $1,008,228 
LIABILITIES AND STOCKHOLDERS’ EQUITY 
Current liabilities: 
Accounts payable$63,770 $63,756 $69,308 
Accrued liabilities31,413 31,981 42,115 
Current portion of term loan, net of unamortized issuance costs1,150 1,142 1,045 
Deferred revenue19,899 23,779 29,846 
Operating lease liabilities7,871 7,512 7,353 
Total current liabilities124,103 128,170 149,667 
Term loan, less current portion, net of unamortized issuance costs13,765 14,034 14,389 
Deferred tax liabilities2,704 2,905 2,732 
Long-term operating lease liabilities26,458 26,407 27,587 
Deferred grant18,000 18,000 — 
Other liabilities5,845 5,868 5,568 
Total liabilities190,875 195,384 199,943 
Stockholders’ equity: 
Common stock77 77 77 
Additional paid-in capital867,517 858,195 844,842 
Accumulated other comprehensive loss(4,445)(4,186)(5,578)
Accumulated deficit(28,886)(29,714)(31,056)
Total stockholders’ equity834,263 824,372 808,285 
Total liabilities and stockholders’ equity$1,025,138 $1,019,756 $1,008,228 



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 (loss) 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 (loss) 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-F