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PRESS RELEASE: Paid content from Globe Newswire
Press release content from Globe Newswire. The AP news staff was not involved in its creation.

FormFactor, Inc. Reports 2019 Third Quarter Results

October 30, 2019 GMT

LIVERMORE, Calif., Oct. 30, 2019 (GLOBE NEWSWIRE) -- 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 Non-GAAP Items** ---------------------------- ----------- ---------------------------- 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 September September September 28, 29, 28, 29, 2019 2018 2019 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 September September September 28, 29, 28, 29, 2019 2018 2019 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 September 28, 29, 2019 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 September September September 28, 29, 28, 29, 2019 2018 2019 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 December 28, 29, 2019 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 56,240 54,054 $263,102 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 76 74 outstanding 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

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