GlobeNewswire Inc | Feb 3, 2021 04:02PM EST

February 03, 2021

Sets Quarterly and Annual Records for Revenue and Profitability;Expects Continued Robust Demand in Q1

LIVERMORE, Calif., Feb. 03, 2021 (GLOBE NEWSWIRE) -- FormFactor,Inc. (Nasdaq: FORM) today announced its financial results for the fourth quarter of fiscal 2020 ended December26, 2020. Quarterly revenues were $197.0 million, an increase of 10.7% compared to $178.0 million in the third quarter of fiscal 2020, an increase of 10.3% from $178.6 million in the fourth quarter of fiscal 2019. For fiscal 2020, FormFactor posted revenues of $693.6 million, up 17.7% from $589.5 million in fiscal 2019.

-- Delivered Q4 revenue and non-GAAP EPS above outlook range -- Continued to invest in capacity, with increased capital expenditures to meet sustained robust demand -- Significant progress on integrating recent acquisitions

FormFactor delivered strong results in the fourth quarter of 2020, setting all-time quarterly and annual company records for revenue, as well as non-GAAP operating profit and net profit, said Mike Slessor, CEO of FormFactor, Inc. I want to thank and congratulate the global FormFactor team, who demonstrated a combination of agility and tenacity to overcome a myriad of challenges and deliver these record results.

Fourth Quarter Highlights

On a GAAP basis, net income for the fourth quarter of fiscal 2020 was $19.3 million, or $0.24 per fully-diluted share, compared to net income for the third quarter of fiscal 2020 of $22.9 million, or $0.29 per fully-diluted share, and net income for the fourth quarter of fiscal 2019 of $18.6 million, or $0.24 per fully-diluted share. Net income for fiscal 2020 was $78.5 million, or $0.99 per fully-diluted share, compared to net income for fiscal 2019 of $39.3 million, or $0.51, per fully-diluted share. Gross margin for the fourth quarter of 2020 was 39.4%, compared with 43.1% in the third quarter of 2020, and 41.6% in the fourth quarter of 2019. Gross margin for fiscal 2020 was 41.5%, compared to 40.3% for fiscal 2019.

On a non-GAAP basis, net income for the fourth quarter of fiscal 2020 was $35.3 million, or $0.44 per fully-diluted share, compared to net income for the third quarter of fiscal 2020 of $30.7 million, or $0.39 per fully-diluted share, and net income for the fourth quarter of fiscal 2019 of $32.0 million, or $0.41 per fully-diluted share. Net income for fiscal 2020 was $118.0 million, or $1.49 per fully-diluted share, compared to net income of $80.6 million, or $1.04 per fully-diluted share for fiscal 2019. On a non-GAAP basis, gross margin for the fourth quarter of 2020 was 43.4%, compared with 46.7% in the third quarter of 2020, and 45.7% in the fourth quarter of 2019. Non-GAAP gross margin for fiscal 2020 was 45.4%, compared to 44.5% for fiscal 2019.

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

Free cash flow for the fourth quarter of fiscal 2020 was $31.4 million, compared to free cash flow for the third quarter of fiscal 2020 of $37.2 million, and free cash flow for the fourth quarter of 2019 of $31.6 million. Free cash flow for fiscal 2020 and fiscal 2019 was $114.8 million and $101.8 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, As we begin 2021, we are adding capacity to meet long term demand for our products, including a new facility in Livermore that is scheduled to begin revenue shipments in the second half of this year.

For the first quarter ending March 27, 2021, FormFactor is providing the following outlook*:

GAAP Reconciling Non-GAAP Items**Revenue $176 million to ? $176 million to $188 million $188 millionGross Margin 40% to 43% $7 million 44% to 47%Net income per $0.18 to $0.26 0.16 $0.34 to $0.42diluted share

*This outlook assumes consistent foreign currency rates.**Reconciling items are stock-based compensation, restructuring charges, acquisition related expenses and amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisition.

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 1:25p.m. PDT, or 4:25p.m. EDT, today.

The public is invited to listen to a live webcast of FormFactors 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 10, 2021 4:25 p.m. PDT, and can be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) and entering confirmation code 9675656. 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 revenue, 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 December26, 2020 and for outlook provided before, as well as for the comparable periods of fiscal 2019, 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 FormFactors 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 Companys 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 Companys future financial and operating results, the Companys plans, strategies and objectives for future operations. These statements are based on managements 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 Companys 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 Companys 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 Companys products; customer-specific demand; the speed of customer implementation of new technologies; industry seasonality; risks to the Companys realization of benefits from acquisitions, investments in capacity and investments in new electronic data systems and information technology; changes macro-economic environments; events affecting global and regional economic conditions and stability such as Brexit, infectious diseases and pandemics (such as 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 Companys 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 increasingly restrictive export regulations being adopted in the U.S., including recently published amendments to export regulations that may substantially restrict or condition our sales in China with considerable uncertainty regarding the ultimate interpretation and implementation of these rules. 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 Ended Twelve Months Ended December 26, December 28, December 26, December 28, 2020 2019 2020 2019Revenues $ 197,043 $ 178,629 $ 693,616 $ 589,464 Cost of revenues 119,429 104,324 405,696 351,968 Gross profit 77,614 74,305 287,920 237,496 Operating expenses:Research and 23,970 21,606 89,034 81,499 developmentSelling, generaland 32,816 28,981 115,098 106,335 administrativeTotal operating 56,786 50,587 204,132 187,834 expensesOperating income 20,828 23,718 83,788 49,662 Interest income 191 726 1,501 2,714 Interest expense (182 ) (376 ) (864 ) (1,915 ) Other income, 609 379 750 602 netIncome before 21,446 24,447 85,175 51,063 income taxesProvision for 2,173 5,811 6,652 11,717 income taxesNet income $ 19,273 $ 18,636 $ 78,523 $ 39,346 Net income per share:Basic $ 0.25 $ 0.25 $ 1.02 $ 0.52 Diluted $ 0.24 $ 0.24 $ 0.99 $ 0.51 Weighted-averagenumber of sharesused in per sharecalculations:Basic 77,416 75,731 76,681 74,994 Diluted 79,562 78,055 79,001 77,286

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

Three Months Ended Twelve Months Ended December 26, December 28, September 26, December 26, December 28, 2020 2019 2020 2020 2019GAAP Revenue $ 197,043 $ 178,629 $ 177,996 $ 693,616 $ 589,464 Adjustments: Amortizationof deferredrevenue fairvalue 109 ? ? 109 ? adjustmentsdue toacquisitionNon-GAAP $ 197,152 $ 178,629 $ 177,996 $ 693,725 $ 589,464 Revenue GAAP Gross $ 77,614 $ 74,305 $ 76,749 $ 287,920 $ 237,496 ProfitAdjustments: Amortizationofintangibles,inventory andfixed asset 6,869 6,364 5,495 23,288 20,501 fair valueadjustmentsdue toacquisitionStock-based 1,151 1,024 962 3,951 4,055 compensationRestructuring ? ? ? ? 258 chargesNon-GAAP $ 85,634 $ 81,693 $ 83,206 $ 315,159 $ 262,310 Gross Profit GAAP Gross 39.4 % 41.6 % 43.1 % 41.5 % 40.3 %MarginAdjustments: Amortizationofintangibles,inventory andfixed asset 3.4 % 3.5 % 3.1 % 3.3 % 3.5 %fair valueadjustmentsdue toacquisitionStock-based 0.6 % 0.6 % 0.5 % 0.6 % 0.7 %compensationNon-GAAP 43.4 % 45.7 % 46.7 % 45.4 % 44.5 %Gross Margin GAAPoperating $ 56,786 $ 50,587 $ 54,712 $ 204,132 $ 187,834 expensesAdjustments: Amortizationof (1,794 ) (1,525 ) (1,547 ) (6,382 ) (7,636 ) intangiblesStock-based (5,905 ) (5,064 ) (4,547 ) (19,879 ) (19,121 ) compensationRestructuring ? (24 ) ? ? (223 ) chargesLoss (gain)on contingent (892 ) ? 71 2,879 ? considerationAcquisitionrelated (140 ) (213 ) (334 ) (509 ) (460 ) expensesNon-GAAPoperating $ 48,055 $ 43,761 $ 48,355 $ 180,241 $ 160,394 expenses GAAPoperating $ 20,828 $ 23,718 $ 22,037 $ 83,788 $ 49,662 incomeAdjustments: Amortizationofintangibles,inventory andfixed asset 8,663 7,889 7,042 29,670 28,137 fair valueadjustmentsdue toacquisitionStock-based 7,056 6,088 5,509 23,830 23,176 compensationRestructuring ? 24 ? ? 481 chargesLoss (gain)on contingent 892 ? (71 ) (2,879 ) ? considerationAcquisitionrelated 140 213 334 509 460 expensesNon-GAAPoperating $ 37,579 $ 37,932 $ 34,851 $ 134,918 $ 101,916 income

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

Three Months Ended Twelve Months Ended December 26, December 28, September December 26, December 28, 2020 2019 26, 2020 2019 2020GAAP net $ 19,273 $ 18,636 $ 22,891 $ 78,523 $ 39,346 incomeAdjustments: Amortizationofintangibles,inventory andfixed asset 8,663 7,889 7,042 29,670 28,137 fair valueadjustmentsdue toacquisitionStock-based 7,056 6,088 5,509 23,830 23,176 compensationRestructuring ? 24 ? ? 481 chargesLoss (gain)on contingent 892 ? (71 ) (2,879 ) ? considerationAcquisitionrelated 140 213 334 509 460 expensesIncome taxeffect of (675 ) (893 ) (4,970 ) (11,669 ) (11,030 ) non-GAAPadjustmentsNon-GAAP net $ 35,349 $ 31,957 $ 30,735 $ 117,984 $ 80,570 income Non-GAAP netincome per share:Basic $ 0.46 $ 0.42 $ 0.40 $ 1.54 $ 1.07 Diluted $ 0.44 $ 0.41 $ 0.39 $ 1.49 $ 1.04

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

Twelve Months Ended December 26, December 28, 2020 2019Cash flows from operating activities: Net income $ 78,523 $ 39,346 Selected adjustments to reconcile net income to net cash provided by operating activities:Depreciation 20,694 17,185 Amortization 27,991 27,672 Stock-based compensation expense 23,830 23,176 Provision for excess and obsolete inventories 12,996 10,421 Gain on contingent consideration (2,879 ) ? Other activity impacting operating cash flows 8,101 3,248 Net cash provided by operating activities 169,256 121,048 Cash flows from investing activities: Acquisition of property, plant and equipment (55,865 ) (20,847 ) Acquisition of businesses, net of cash acquired (51,880 ) (20,524 ) Proceeds (purchases) of marketable securities, 8,741 (25,113 ) netOther activity impacting investing cash flows 82 132 Net cash used in investing activities (98,922 ) (66,352 ) Cash flows from financing activities: Proceeds from issuances of common stock 10,010 8,093 Proceeds from term loan debt 18,000 23,354 Payment of term loan debt issuance costs (78 ) ? Principal repayments on term loans (43,417 ) (30,000 ) Tax withholdings related to net share settlements (15,450 ) (8,025 ) of equity awardsNet cash used in financing activities (30,935 ) (6,578 ) Effect of exchange rate changes on cash, cash 3,762 (727 ) equivalents and restricted cashNet increase in cash, cash equivalents and 43,161 47,391 restricted cashCash, cash equivalents and restricted cash, 147,937 100,546 beginning of periodCash, cash equivalents and restricted cash, end $ 191,098 $ 147,937 of period

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

Three Months Ended Twelve Months Ended December 26, December 28, September 26, December 26, December 28, 2020 2019 2020 2020 2019Net cashprovided by $ 45,047 $ 37,670 $ 41,762 $ 169,256 $ 121,048 operatingactivitiesAdjustments: Acquisitionrelatedpayments in 140 213 334 509 213 workingcapitalCash paid 184 277 210 867 1,405 for interestCapital (13,978 ) (6,605 ) (5,144 ) (55,865 ) (20,847 ) expendituresFree cash $ 31,393 $ 31,555 $ 37,162 $ 114,767 $ 101,819 flow

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

December 26, December 28, 2020 2019ASSETS Current assets: Cash and cash equivalents $ 187,225 $ 144,545 Marketable securities 67,810 76,327 Accounts receivable, net 107,603 97,868 Inventories, net 99,229 83,258 Restricted cash 1,904 1,981 Prepaid expenses and other current assets 23,303 15,064 Total current assets 487,074 419,043 Restricted cash 1,969 1,411 Operating lease, right-of-use-assets 30,756 31,420 Property, plant and equipment, net 104,103 58,747 Goodwill 212,761 199,196 Intangibles, net 59,147 57,610 Deferred tax assets 66,242 71,252 Other assets 1,165 1,203 Total assets $ 963,217 $ 839,882 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Accounts payable $ 62,045 $ 40,914 Accrued liabilities 55,342 36,439 Current portion of term loans, net of 9,516 42,846 unamortized issuance costsDeferred revenue 20,964 9,810 Operating lease liabilities 6,704 6,551 Total current liabilities 154,571 136,560 Term loans, less current portion, net of 24,978 15,639 unamortized issuance costsDeferred tax liabilities 5,346 6,986 Long-term operating lease liabilities 27,996 29,088 Other liabilities 6,242 10,612 Total liabilities 219,133 198,885 Stockholders' equity: Common stock, $0.001 par value: 250,000,000 shares authorized; 77,437,997 and 78 76 75,764,990 shares issued and outstandingAdditional paid-in capital 903,838 885,821 Accumulated other comprehensive income (loss) 5,886 (659 ) Accumulated deficit (165,718 ) (244,241 ) Total stockholders' equity 744,084 640,997 Total liabilities and stockholders' equity $ 963,217 $ 839,882

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 revenue, 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 revenue, 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 revenue, 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 revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, by adjusting GAAP net income, GAAP earnings per fully-diluted share, GAAP revenue, 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, earnings per fully-diluted share, revenue, 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 revenue, 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