FormFactor, Inc. Reports 2021 Fourth Quarter Results

Achieves Record Quarterly and Annual Revenue; Healthy Demand Continues in Q1


LIVERMORE, Calif., Feb. 02, 2022 (GLOBE NEWSWIRE) -- FormFactor, Inc. (Nasdaq: FORM) today announced its financial results for the fourth quarter of fiscal 2021 ended December 25, 2021. Quarterly revenues were $205.0 million, an increase of 7.9% compared to $190.0 million in the third quarter of fiscal 2021, an increase of 4.0% from $197.0 million in the fourth quarter of fiscal 2020. For fiscal 2021, FormFactor recorded revenues of $770 million, up 11.0% from $694 million in fiscal 2020.

  • Delivered Q4 revenue above the outlook range, EPS at the high end of the outlook range
  • Achieved record Systems segment revenue, launched cryogenic testing as a service for quantum applications
  • Began customer shipments from new Livermore Manufacturing Center

“FormFactor posted revenue of over $200 million for the first time in our history, capping a record year that produced over three-quarters of a billion dollars in revenue and nearly $100 million of GAAP operating income,” said Mike Slessor, CEO of FormFactor, Inc. “I’d like to take this opportunity to thank the worldwide FormFactor team for their perseverance and dedication that produced these outstanding results.”

Fourth Quarter Highlights

On a GAAP basis, net income for the fourth quarter of fiscal 2021 was $25.9 million, or $0.33 per fully-diluted share, compared to net income for the third quarter of fiscal 2021 of $20.5 million, or $0.26 per fully-diluted share, and net income for the fourth quarter of fiscal 2020 of $19.3 million, or $0.24 per fully-diluted share. Net income for fiscal 2021 was $83.9 million, or $1.06 per fully-diluted share, compared to net income for fiscal 2020 of $78.5 million, or $0.99, per fully-diluted share. Gross margin for the fourth quarter of 2021 was 43.7%, compared with 42.2% in the third quarter of 2021, and 39.4% in the fourth quarter of 2020. Gross margin for fiscal 2021 was 41.9%, compared to 41.5% for fiscal 2020.

On a non-GAAP basis, net income for the fourth quarter of fiscal 2021 was $34.7 million, or $0.44 per fully-diluted share, compared to net income for the third quarter of fiscal 2021 of $31.6 million, or $0.40 per fully-diluted share, and net income for the fourth quarter of fiscal 2020 of $35.3 million, or $0.44 per fully-diluted share. Net income for fiscal 2021 was $125.5 million, or $1.59 per fully-diluted share, compared to net income of $118.0 million, or $1.49 per fully-diluted share for fiscal 2020. On a non-GAAP basis, gross margin for the fourth quarter of 2021 was 44.3%, compared with 46.0% in the third quarter of 2021, and 43.4% in the fourth quarter of 2020. Non-GAAP gross margin for fiscal 2021 was 44.9%, compared to 45.4% for fiscal 2020.

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

Free cash flow for the fourth quarter of fiscal 2021 was $23.9 million, compared to free cash flow for the third quarter of fiscal 2021 of $14.4 million, and free cash flow for the fourth quarter of 2020 of $31.4 million. Free cash flow for fiscal 2021 and fiscal 2020 was $73.7 million and $114.8 million, respectively. 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, “As we start 2022, we continue to benefit from solid demand across all our served markets in probe cards and engineering systems. We believe our leadership position in our attractive served markets, paired with our differentiated strategy and disciplined execution, will drive continued growth and share gains as we progress towards our target model and beyond.”

For the first quarter ending March 26, 2022, FormFactor is providing the following outlook*:

  GAAP Reconciling
Items**
 Non-GAAP
Revenue $188 million to $200 million  $188 million to $200 million
Gross Margin 42% to 45% $3 million 44% to 47%
Net income per diluted share $0.23 to $0.31 $0.12 $0.35 to $0.43
*This outlook assumes consistent foreign currency rates.
**Reconciling items are stock-based compensation, restructuring charges, and amortization of intangibles and fixed asset fair value adjustments due to acquisitions.
 

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. PST, or 4:25 p.m. EST, 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 February 9, 2022 4:25 p.m. PST, and can be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) and entering confirmation code 8851319. 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 net income per basic and diluted share, non-GAAP revenue, 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 twelve months ended December 25, 2021 and for outlook provided before, as well as for the comparable periods of fiscal 2020, 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 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 (including the current COVID-19 pandemic), 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 are operating in an environment with especially substantial uncertainties arising from the COVID-19 pandemic, including with respect to its current and future impact on our operations, workforce, manufacturing capacity, customer demand, supply chain, macroeconomic environment and other important aspects of our business. 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, including China, and national security developments or tensions, that may substantially restrict or condition our sales in certain countries, increase the cost of doing business internationally, and disrupt our supply chains. 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.

Investor Contact:
Stan Finkelstein
Investor Relations
(925) 290-4321
ir@formfactor.com


FORMFACTOR, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)

 Three Months EndedTwelve Months Ended
 December 25,
2021
 September 25,
2021
 December 26,
2020
 December 25,
2021
 December 26,
2020
Revenues$204,998  $189,964  $197,043  $769,674  $693,616 
Cost of revenues 115,439   109,745   119,429   446,907   405,696 
Gross profit 89,559   80,219   77,614   322,767   287,920 
Operating expenses:         
Research and development 25,411   26,026   23,970   100,937   89,034 
Selling, general and administrative 32,358   30,940   32,816   123,792   115,098 
Total operating expenses 57,769   56,966   56,786   224,729   204,132 
Operating income 31,790   23,253   20,828   98,038   83,788 
Interest income 106   121   191   569   1,501 
Interest expense (155)  (151)  (182)  (602)  (864)
Other income, net 459   58   609   495   750 
Income before income taxes 32,200   23,281   21,446   98,500   85,175 
Provision for income taxes 6,303   2,784   2,173   14,576   6,652 
Net income$25,897  $20,497  $19,273  $83,924  $78,523 
Net income per share:         
Basic$0.33  $0.26  $0.25  $1.08  $1.02 
Diluted$0.33  $0.26  $0.24  $1.06  $0.99 
Weighted-average number of shares used in per share calculations:         
Basic 78,220   77,869   77,416   77,787   76,681 
Diluted 79,121   79,029   79,562   79,133   79,001 
                    


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

 Three Months EndedTwelve Months Ended
 December 25,
2021
 September 25,
2021
 December 26,
2020
 December 25,
2021
 December 26,
2020
GAAP Revenue$204,998  $189,964  $197,043  $769,674  $693,616 
Adjustments:         
Amortization of deferred revenue fair value adjustments due to acquisitions    57   109   260   109 
Non-GAAP Revenue$204,998  $190,021  $197,152  $769,934  $693,725 
          
GAAP Gross Profit$89,559  $80,219  $77,614  $322,767  $287,920 
Adjustments:         
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions 1,197   1,545   6,869   14,795   23,288 
Stock-based compensation 1,394   1,392   1,151   5,200   3,951 
Restructuring charges (1,285)  4,322      3,205    
Non-GAAP Gross Profit$90,865  $87,478  $85,634  $345,967  $315,159 
          
GAAP Gross Margin 43.7%  42.2%  39.4%  41.9%  41.5%
Adjustments:         
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions 0.5%  0.8%  3.4%  1.9%  3.3%
Stock-based compensation 0.7%  0.7%  0.6%  0.7%  0.6%
Restructuring charges(0.6)%  2.3%  %  0.4%  %
Non-GAAP Gross Margin 44.3%  46.0%  43.4%  44.9%  45.4%
          
GAAP operating expenses$57,769  $56,966  $56,786  $224,729  $204,132 
Adjustments:         
Amortization of intangibles (1,569)  (1,604)  (1,794)  (6,478)  (6,382)
Stock-based compensation (6,405)  (6,528)  (5,905)  (24,184)  (19,879)
Restructuring charges (142)  (311)     (919)   
Loss (gain) on contingent consideration       (892)  95   2,879 
Acquisition related expenses       (140)  (209)  (509)
Non-GAAP operating expenses$49,653  $48,523  $48,055  $193,034  $180,241 
          
GAAP operating income$31,790  $23,253  $20,828  $98,038  $83,788 
Adjustments:         
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions 2,766   3,149   8,663   21,273   29,670 
Stock-based compensation 7,799   7,920   7,056   29,384   23,830 
Restructuring charges (1,143)  4,633      4,124    
Loss (gain) on contingent consideration       892   (95)  (2,879)
Acquisition related expenses       140   209   509 
Non-GAAP operating income$41,212  $38,955  $37,579  $152,933  $134,918 
                    


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

 Three Months EndedTwelve Months Ended
 December 25,
2021
 September 25,
2021
 December 26,
2020
 December 25,
2021
 December 26,
2020
GAAP net income$25,897  $20,497  $19,273  $83,924  $78,523 
Adjustments:         
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions 2,766   3,149   8,663   21,273   29,670 
Stock-based compensation 7,799   7,920   7,056   29,384   23,830 
Restructuring charges (1,143)  4,633      4,124    
Loss (gain) on contingent consideration       892   (95)  (2,879)
Acquisition related expenses       140   209   509 
Income tax effect of non-GAAP adjustments (657)  (4,571)  (675)  (13,307)  (11,669)
Non-GAAP net income$34,662  $31,628  $35,349  $125,512  $117,984 
          
GAAP net income per share:         
Basic$0.33  $0.26  $0.25  $1.08  $1.02 
Diluted$0.33  $0.26  $0.24  $1.06  $0.99 
          
Non-GAAP net income per share:         
Basic$0.44  $0.41  $0.46  $1.61  $1.54 
Diluted$0.44  $0.40  $0.44  $1.59  $1.49 
                    


FORMFACTOR, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 Twelve Months Ended
 December 25,
2021
 December 26,
2020
Cash flows from operating activities:   
Net income$83,924  $78,523 
Selected adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation 25,772   20,694 
Amortization 18,747   27,991 
Stock-based compensation expense 29,384   23,830 
Provision for excess and obsolete inventories 15,544   13,117 
Non-cash restructuring 1,646    
Gain on contingent consideration (95)  (2,879)
Other activity impacting operating cash flows (35,558)  7,980 
Net cash provided by operating activities 139,364   169,256 
Cash flows from investing activities:   
Acquisition of property, plant and equipment (66,496)  (55,865)
Acquisition of businesses, net of cash acquired    (51,880)
Proceeds (purchases) of marketable securities, net (58,245)  8,741 
Other activity impacting investing cash flows    82 
Net cash used in investing activities (124,741)  (98,922)
Cash flows from financing activities:   
Purchase of common stock through stock repurchase program (24,038)   
Proceeds from issuances of common stock 10,653   10,010 
Payment of contingent consideration (3,873)   
Proceeds from term loan debt    18,000 
Payment of term loan debt issuance costs    (78)
Principal repayments on term loans (9,337)  (43,417)
Tax withholdings related to net share settlements of equity awards (20,604)  (15,450)
Net cash used in financing activities (47,199)  (30,935)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (3,180)  3,762 
Net increase (decrease) in cash, cash equivalents and restricted cash (35,756)  43,161 
Cash, cash equivalents and restricted cash, beginning of period 191,098   147,937 
Cash, cash equivalents and restricted cash, end of period$155,342  $191,098 
        


FORMFACTOR, INC. 
RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO NON-GAAP FREE CASH FLOW
(In thousands)
(Unaudited)

 Three Months EndedTwelve Months Ended
 December 25,
2021
 September 25,
2021
 December 26,
2020
 December 25,
2021
 December 26,
2020
Net cash provided by operating activities$38,927  $34,282  $45,047  $139,364  $169,256 
Adjustments:         
Acquisition related payments in working capital       140   209   509 
Cash paid for interest 147   157   184   643   867 
Capital expenditures (15,143)  (20,031)  (13,978)  (66,496)  (55,865)
Free cash flow$23,931  $14,408  $31,393  $73,720  $114,767 
                    


FORMFACTOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited) 

  December 25,
2021
 September 25,
2021
 December 26,
2020
ASSETS      
Current assets:      
Cash and cash equivalents $151,010  $153,781  $187,225 
Marketable securities  125,055   110,898   67,810 
Accounts receivable, net of allowance for doubtful accounts  115,541   105,807   107,603 
Inventories, net  111,548   115,104   99,229 
Restricted cash  2,233   2,019   1,904 
Prepaid expenses and other current assets  18,652   18,892   23,303 
Total current assets  524,039   506,501   487,074 
Restricted cash  2,099   1,674   1,969 
Operating lease, right-of-use-assets  35,210   36,669   30,756 
Property, plant and equipment, net of accumulated depreciation  146,555   140,098   104,103 
Goodwill  212,299   213,293   212,761 
Intangibles, net  36,342   39,195   59,147 
Deferred tax assets  61,995   67,231   66,242 
Other assets  1,981   1,930   1,165 
Total assets $1,020,520  $1,006,591  $963,217 
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $57,862  $64,925  $62,045 
Accrued liabilities  50,836   54,625   55,342 
Current portion of term loans, net of unamortized issuance costs  8,931   9,213   9,516 
Deferred revenue  23,224   23,275   20,964 
Operating lease liabilities  7,901   7,962   6,704 
Total current liabilities  148,754   160,000   154,571 
Term loans, less current portion, net of unamortized issuance costs  15,434   17,742   24,978 
Deferred tax liabilities  3,623   4,264   5,346 
Long-term operating lease liabilities  31,009   32,401   27,996 
Other liabilities  5,920   5,794   6,242 
Total liabilities  204,740   220,201   219,133 
       
Stockholders' equity:      
Common stock  78   78   78 
Additional paid-in capital  898,945   892,303   903,838 
Accumulated other comprehensive income (loss)  (1,449)  1,700   5,886 
Accumulated deficit  (81,794)  (107,691)  (165,718)
Total stockholders' equity  815,780   786,390   744,084 
Total liabilities and stockholders' equity $1,020,520  $1,006,591  $963,217 
             


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 revenue, 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 revenue, 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 revenue, 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 revenue, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, by adjusting GAAP net income, GAAP net income per basic and diluted share, GAAP revenue, 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, revenue, 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 revenue, 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