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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 Fourth Quarter and Full Year 2019 Results

February 5, 2020 GMT

LIVERMORE, Calif., Feb. 05, 2020 (GLOBE NEWSWIRE) -- FormFactor, Inc. (Nasdaq: FORM) today announced its financial results for the fourth quarter of fiscal 2019 ended December 28, 2019. Quarterly revenues were $178.6 million, up 27.0% from $140.6 million in the third quarter of fiscal 2019 and up 26.8% from $140.9 million in the fourth quarter of fiscal 2018. For fiscal 2019, FormFactor posted revenues of $589.5 million, up 11.3% from $529.7 million in fiscal 2018.

-- Benefitted from accelerated demand for Foundry & Logic probe cards, layered upon steady demand for other products -- Captured incremental demand by quickly and efficiently adding capacity -- Delivered record quarterly revenue, non-GAAP EPS and Free Cash Flow

“FormFactor’s strong fourth quarter performance closed an exceptional year, again demonstrating the benefits of our broadly diversified leadership positions in semiconductor test and measurement,” said Mike Slessor, CEO of FormFactor, Inc. “We delivered exceptional results by executing effectively to capitalize on strong customer demand.”

Fourth Quarter Highlights

On a GAAP basis, net income for the fourth quarter of fiscal 2019 was $18.6 million, or $0.24 per fully-diluted share, compared to net income for the third quarter of fiscal 2019 of $8.3 million or $0.11 per fully-diluted share, and net income for the fourth quarter of fiscal 2018 of $85.1 million, or $1.13 per fully-diluted share. Net income for fiscal 2019 was $39.3 million, or $0.51 per fully-diluted share, compared to net income of $104.0 million, or $1.38, per fully-diluted share. GAAP net income for the fourth quarter of fiscal 2018 and fiscal 2018 included a release of $75.8 million dollars of the valuation allowance which was previously recorded against the majority of our deferred tax assets. On a GAAP basis, gross margin for the fourth quarter of fiscal 2019 was 41.6%, compared with 39.3% in the third quarter of fiscal 2019, and 39.8% in the fourth quarter of fiscal 2018. Gross margin for fiscal 2019 was 40.3%, compared to 39.7% for fiscal 2018.

On a non-GAAP basis, net income for the fourth quarter of fiscal 2019 was $32.0 million, or $0.41 per fully-diluted share, compared to net income for the third quarter of fiscal 2019 of $17.3 million, or $0.22 per fully-diluted share, and net income for the fourth quarter of fiscal 2018 of $23.4 million, or $0.31 per fully-diluted share. Net income for fiscal 2019 was $80.6 million, or $1.04 per fully-diluted share, compared to net income of $76.1 million, or $1.01 per fully-diluted share for fiscal 2018. On a non-GAAP basis, gross margin for the fourth quarter of fiscal 2019 was 45.7%, compared with 43.5% in the third quarter of fiscal 2019, and 44.1% in the fourth quarter of fiscal 2018. Gross margin for fiscal 2019 was 44.5%, compared to 44.3% for fiscal 2018.

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

Free cash flow for the fourth quarter of fiscal 2019 was $31.6 million, compared to free cash flow for the third quarter of fiscal 2019 of $25.6 million, and free cash flow for the fourth quarter of fiscal 2018 of $15.8 million. Free cash flow for fiscal 2019 and fiscal 2018 was $101.8 million and $51.9 million, respectively. A reconciliation of net cash provided by operating activities to free cash flow is provided in the schedules included below.

Outlook

Dr. Slessor added, “midway through the first quarter, we continue to benefit from strong demand for Foundry & Logic probe cards, which will use the capacity we added in the fourth quarter, albeit at moderately lower levels.”

For the first quarter ending on March 28, 2020, FormFactor is providing the following outlook*:

GAAP Reconciling Items** Non-GAAP ---------------------------- ------------------- ---------------------------- Revenue $160 million to $172 million — $160 million to $172 million Gross Margin 39% to 42% $7 million 43% to 46% Net income per diluted share $0.11 to $0.19 $0.16 $0.27 to $0.35

*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. PST, or 4:30 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 12, 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 9678277. 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, 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 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; events affecting global and regional economic stability such as Brexit, epidemics (such as the current 2019-nCoV), 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. 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 Fiscal Year Ended December December December December 28, 29, 28, 29, 2019 2018 2019 2018 ----------- ----------- ----------- ----------- Revenues $ 178,629 $ 140,887 $ 589,464 $ 529,675 Cost of revenues 104,324 84,865 351,968 319,336 --------- - --------- - --------- - --------- - Gross profit 74,305 56,022 237,496 210,339 Operating expenses: Research and development 21,606 18,398 81,499 74,976 Selling, general and administrative 28,981 25,828 106,335 99,254 Total operating expenses 50,587 44,226 187,834 174,230 --------- - --------- - --------- - --------- - Operating income 23,718 11,796 49,662 36,109 Interest income 726 404 2,714 1,356 Interest expense (376 ) (660 ) (1,915 ) (3,314 ) Other income (expense), net 379 117 602 (224 ) --------- - --------- - --------- - --------- - Income before income taxes 24,447 11,657 51,063 33,927 Provision (benefit) for income taxes 5,811 (73,443 ) 11,717 (70,109 ) Net income $ 18,636 $ 85,100 $ 39,346 $ 104,036 - ------- - - ------- - - ------- - - ------- - Net income per share: Basic $ 0.25 $ 1.15 $ 0.52 $ 1.42 - ------- - - ------- - - ------- - - ------- - Diluted $ 0.24 $ 1.13 $ 0.51 $ 1.38 - ------- - - ------- - - ------- - - ------- - Weighted-average number of shares used in per share calculations: Basic 75,731 74,108 74,994 73,482 --------- - --------- - --------- - --------- - Diluted 78,055 75,416 77,286 75,182 --------- - --------- - --------- - --------- -

FORMFACTOR, INC. NON-GAAP FINANCIAL MEASURE RECONCILIATIONS (In thousands, except per share amounts) (Unaudited) Three Months Ended Fiscal Year Ended December December December December 28, 29, 28, 29, 2019 2018 2019 2018 ---------- ---------- ----------- ----------- GAAP Gross Profit $ 74,305 $ 56,022 $ 237,496 $ 210,339 Adjustments: Amortization of intangibles and inventory fair value 6,364 5,112 20,501 20,530 adjustment due to acquisition Stock-based compensation 1,024 960 4,055 3,525 Restructuring charges — — 258 — Non-GAAP Gross Profit $ 81,693 $ 62,094 $ 262,310 $ 234,394 - ------ - - ------ - - ------- - - ------- - GAAP Gross Margin 41.6 % 39.8 % 40.3 % 39.7 % Adjustments: Amortization of intangibles and inventory fair value 3.5 % 3.6 % 3.5 % 3.9 % adjustment due to acquisition Stock-based compensation 0.6 % 0.7 % 0.7 % 0.7 % Restructuring charges — % — % — % — % Non-GAAP Gross Margin 45.7 % 44.1 % 44.5 % 44.3 % -------- - -------- - --------- - --------- - GAAP operating expenses $ 50,587 $ 44,226 $ 187,834 $ 174,230 Adjustments: Amortization of intangibles (1,525 ) (2,385 ) (7,636 ) (8,843 ) Stock-based compensation (5,064 ) (4,446 ) (19,121 ) (14,302 ) Restructuring charges (24 ) (160 ) (223 ) (160 ) Acquisition related expenses (213 ) — (460 ) — Non-GAAP operating expenses $ 43,761 $ 37,235 $ 160,394 $ 150,925 - ------ - - ------ - - ------- - - ------- - GAAP operating income $ 23,718 $ 11,796 $ 49,662 $ 36,109 Adjustments: Amortization of intangibles and inventory fair value 7,889 7,497 28,137 29,373 adjustment due to acquisition Stock-based compensation 6,088 5,406 23,176 17,827 Restructuring charges 24 160 481 160 Acquisition related expenses 213 — 460 — Non-GAAP operating income $ 37,932 $ 24,859 $ 101,916 $ 83,469 - ------ - - ------ - - ------- - - ------- - GAAP net income $ 18,636 $ 85,100 $ 39,346 $ 104,036 Adjustments: Amortization of intangibles and inventory fair value 7,889 7,497 28,137 29,373 adjustment due to acquisition Stock-based compensation 6,088 5,406 23,176 17,827 Restructuring charges 24 160 481 160 Acquisition related expenses 213 — 460 — Income tax valuation allowance release — (75,803 ) — (75,803 ) Income tax effect of non-GAAP adjustments (893 ) 1,088 (11,030 ) 555 Non-GAAP net income $ 31,957 $ 23,448 $ 80,570 $ 76,148 - ------ - - ------ - - ------- - - ------- - Non-GAAP net income per share: Basic $ 0.42 $ 0.32 $ 1.07 $ 1.04 - ------ - - ------ - - ------- - - ------- - Diluted $ 0.41 $ 0.31 $ 1.04 $ 1.01 - ------ - - ------ - - ------- - - ------- -

FORMFACTOR, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Fiscal Year Ended December December 28, 29, 2019 2018 ----------- ----------- Cash flows from operating activities: Net income $ 39,346 $ 104,036 Selected adjustments to reconcile net income to net cash provided by operating activities: Depreciation 17,185 14,314 Amortization 27,672 29,373 Stock-based compensation expense 23,176 17,827 Provision for excess and obsolete inventories 10,421 10,479 Other activity impacting operating cash flows 3,248 (107,329 ) --------- - --------- - Net cash provided by operating activities 121,048 68,700 Cash flows from investing activities: Acquisition of property, plant and equipment (20,847 ) (19,869 ) Purchases of marketable securities, net (25,113 ) (1,543 ) Acquisition of FRT GmbH, net of cash acquired (20,524 ) — Other activity impacting investing cash flows 132 117 --------- - --------- - Net cash used in investing activities (66,352 ) (21,295 ) Cash flows from financing activities: Proceeds from issuances of common stock 8,094 7,712 Tax withholdings related to net share settlements of equity awards (8,026 ) (5,791 ) Proceeds from term loan 23,354 — Principal repayments on term loan (30,000 ) (41,250 ) --------- - --------- - Net cash used in financing activities (6,578 ) (39,329 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash (727 ) (256 ) --------- - --------- - Net increase in cash, cash equivalents and restricted cash 47,391 7,820 Cash, cash equivalents and restricted cash, beginning of period 100,546 92,726 Cash, cash equivalents and restricted cash, end of period $ 147,937 $ 100,546 - ------- - - ------- -

FORMFACTOR, INC. RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW (In thousands) (Unaudited) Three Months Ended Fiscal Year Ended December December December December 28, 29, 28, 29, 2019 2018 2019 2018 ---------- ---------- ----------- ---------- Net cash provided by operating activities $ 37,670 $ 22,562 $ 121,048 $ 68,700 Adjustments: Acquisition-related payments in working capital 213 — 213 — Cash paid for interest 277 814 1,405 3,113 Capital expenditures (6,605 ) (7,543 ) (20,847 ) (19,869 ) -------- - -------- - --------- - -------- - (6,115 ) (6,729 ) (19,229 ) (16,756 ) -------- - -------- - --------- - -------- - Free cash flow $ 31,555 $ 15,833 $ 101,819 $ 51,944 - ------ - - ------ - - ------- - - ------ -

FORMFACTOR, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) December December 28, 29, 2019 2018 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 144,545 $ 98,472 Marketable securities 76,327 50,531 Accounts receivable, net 97,868 95,333 Inventories, net 83,258 77,706 Restricted cash 1,981 849 Prepaid expenses and other current assets 15,064 14,929 --------- - --------- - Total current assets 419,043 337,820 Restricted cash 1,411 1,225 Operating lease, right-of-use-assets 31,420 — Property, plant and equipment, net 58,747 54,054 Goodwill 199,196 189,214 Intangibles, net 57,610 67,640 Deferred tax assets 71,252 77,301 Other assets 1,203 968 --------- - --------- - Total assets $ 839,882 $ 728,222 - ------- - - ------- - LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 40,914 $ 40,006 Accrued liabilities 36,439 27,731 Current portion of term loans, net of unamortized issuance cost of $29 and $160 42,846 29,840 Deferred revenue 9,810 4,941 Operating lease liabilities 6,551 — --------- - --------- - Total current liabilities 136,560 102,518 Term loan, less current portion, net of unamortized issuance cost of $0 and $29 15,639 34,971 Deferred tax liabilities 6,986 2,355 Long-term operating lease liabilities 29,088 — Other liabilities 10,612 8,214 --------- - --------- - Total liabilities 198,885 148,058 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; 75,764,990 and 74,139,712 shares issued and 76 74 outstanding Additional paid-in capital 885,821 862,897 Accumulated other comprehensive income (loss) (659 ) 780 Accumulated deficit (244,241 ) (283,587 ) --------- - --------- - Total stockholders’ equity 640,997 580,164 --------- - --------- - Total liabilities and stockholders’ equity $ 839,882 $ 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, 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 earnings per fully-diluted share, 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 earnings per fully-diluted share, 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 fully-diluted earnings per share, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, by adjusting GAAP net income, GAAP earnings per fully-diluted share, non-GAAP gross margin, non-GAAP operating expenses, and non-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, earnings per fully-diluted share, 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 earnings per fully-diluted share, 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 Free Cash Flow” included in this press release.

Source: FormFactor, Inc.FORM-F

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