SOURCE: FormFactor

FormFactor

August 02, 2016 16:05 ET

FormFactor, Inc. Reports Second Quarter Results

Company Completes Transformative Acquisition of Cascade Microtech

LIVERMORE, CA--(Marketwired - Aug 2, 2016) - FormFactor, Inc. (NASDAQ: FORM), today announced its financial results for the second quarter of fiscal 2016 ended June 25, 2016. Revenues were $83.1 million, up 55% from $53.6 million reported in the first quarter and up 12% for the second quarter year-over-year.

"Our strong revenue result -- the highest level since 2007 -- reflects our solid execution as we doubled our Foundry and Logic shipments for a key customer and experienced improvement in our DRAM business," said Mike Slessor, CEO of FormFactor, Inc. "In addition, we completed the acquisition of Cascade Microtech, to create a more valuable industry player, with a larger addressable market, extended product breadth, greater diversification, and new growth opportunities."

FormFactor Results

On a GAAP basis, net income for the second quarter of fiscal 2016 was $36.9 million, or $0.61 per fully-diluted share, compared to a net loss for the first quarter of fiscal 2016 of ($13.8) million, or ($0.24) per fully-diluted share, and a net income for the second quarter of fiscal 2015 of $0.8 million, or $0.01 per fully-diluted share. The results for the second quarter of fiscal 2016 include a net acquisition-related benefit of $33.2 million, or $0.55 per fully diluted share, including a one-time tax benefit of $43.9 million.

On a non-GAAP basis, net income for the second quarter of fiscal 2016 was $8.0 million, or $0.13 per fully-diluted share, compared to a net loss for the first quarter of fiscal 2016 of ($6.3) million, or ($0.11) per fully-diluted share, and net income for the second quarter of fiscal 2015 of $6.7 million, or $0.11 per fully-diluted share. A reconciliation of GAAP to non-GAAP net income and net income per share is provided in the schedules included below.

Cash usage in the second quarter of fiscal 2016 was $68.8 million, compared to cash usage in the first quarter of fiscal 2016 of $0.4 million and cash generation of $7.1 million for the second quarter of fiscal 2015. Excluding cash attributable to the acquisition of Cascade Microtech, cash usage for the second quarter was $1.5 million. At the close of the acquisition, FormFactor had $118.8 million in cash and cash equivalents, marketable securities and restricted cash.

Cascade Microtech Second Quarter results ending June 24, 2016

Cascade Microtech's second quarter fiscal 2016 revenue was $37.0 million. On a GAAP basis, gross margin was 61.4% and GAAP operating income was nil. On a non-GAAP basis, gross margin was 61.5% and non-GAAP operating income was $7.9 million.

A reconciliation of Cascade's GAAP to non-GAAP gross margin and operating income for the three months ended June 24, 2016 is provided below (in thousands):

       
    June 24, 2016  
Gross profit per GAAP   $ 22,746  
Stock-based compensation     41  
Non-GAAP gross profit   $ 22,787  
Non-GAAP gross margin     61.5 %
         
    June 24, 2016  
Operating loss per GAAP   $ (30 )
Stock-based compensation     1,177  
Amortization of intangibles     508  
Acquisition related expenses     6,282  
    $ 7,937  
         

Outlook

"We are currently expecting strong second half performance in each of our businesses," said Mike Slessor. "We are enthusiastic about the Cascade product line-up's ability to expand our market share in the Foundry and Logic probe card business driven by secular trends in RF filter growth as well as continued strength at FormFactor's historical Foundry and Logic customers. Our third quarter guidance includes the immediately accretive impact of Cascade, and we are confident that 2016 will be a solid growth year for FormFactor."

For the third quarter ending on September 24, 2016, FormFactor is providing the following guidance:

             
    U.S. GAAP   Reconciling Items*   Non-GAAP
Revenue   $118 million to $126 million   --   $118 million to $126 million
Gross Margin   32% to 36%   $10 million   40% to 44%
Net income (loss) per diluted share   ($0.03) to $0.03   $0.20   $0.17 to $0.23
*Reconciling items are stock based compensation and amortization of intangibles
 

Cash flow is forecasted to be positive $10 million to $12 million excluding acquisition related payments.

The company has posted its revenue breakdown by region and market segment on the Investors section of its website at www.formfactor.com. FormFactor 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 Investors section of the company's web site at www.formfactor.com. A telephone recording of the conference call will be available approximately two hours after the conclusion of the call. The recording will be available by telephone through August 4, 2016, 8:30 p.m. PDT, and can be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) and entering confirmation code 47175796. The recording will also be available on the Investors 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 and non-GAAP earnings per fully-diluted share that are adjusted from the nearest GAAP financial measure to exclude certain costs, expenses and gains. Reconciliations of the adjustments to GAAP results for the three and six months ended June 25, 2016 are provided below. 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 Net Income and Adjustments" following the tables below.

About FormFactor:

FormFactor, Inc. (NASDAQ: FORM), is a worldwide leader in essential test technologies and expertise, including a broad portfolio of high-performance probe cards, engineering probes, probe stations and reliability test systems. For semiconductor companies and scientific institutions, FormFactor delivers access to electrical information from wafers, integrated circuits (ICs), IC packages, optical devices, and more. Customers use FormFactor's products and services to lower overall production costs, improve their yields, and enable complex next-generation ICs. The company services 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 Private Securities Litigation Reform Act of 1995, including with respect to the company's future financial and operating results, the company's plans, strategies and objectives for future operations, and the anticipated results of the acquisition of Cascade Microtech. 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, expected financial synergies, gross margins, profitability and earnings accretion; future financial and operating results; benefits of the acquisition of Cascade Microtech; potential synergies and cost savings; the ability of the company to drive growth and expand customer and partner relationships; the plans, strategies and objectives of the company for future operations; the expected development, performance, market share or competitive performance relating to the company's products and services; 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: failure of the company to realize the anticipated benefits of the acquisition of Cascade Microtech; the company's ability to remain in compliance with the terms of its debt financing; changes in demand for the company's products; industry seasonality; risks to the company's ability to realize operational efficiencies; changes in the market, 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.

FORM-F

 
FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME 
 (In thousands, except per share amounts) 
 (Unaudited)
 
    Three Months Ended   Six Months Ended
    June 25, 2016     June 27, 2015   June 25, 2016     June 27, 2015
Revenues   $ 83,083     $ 73,885   $ 136,694     $ 144,714
Cost of revenues     57,656       50,582     101,475       98,621
Gross profit     25,427       23,303     35,219       46,093
Operating expenses:                            
  Research and development     11,133       11,217     21,982       22,302
  Selling, general and administrative     14,030       11,381     26,546       23,265
  Restructuring charges, net     6,910       --     6,910       503
  Impairment of long-lived assets     --       8     --       8
    Total operating expenses     32,073       22,606     55,438       46,078
Operating income (loss)     (6,646 )     697     (20,219 )     15
Interest income, net     88       65     205       149
Other income (expense), net     (302 )     100     (616 )     1,602
Income (loss) before income taxes     (6,860 )     862     (20,630 )     1,766
Provision (benefit) for income taxes     (43,744 )     24     (43,714 )     145
Net income   $ 36,884     $ 838   $ 23,084     $ 1,621
Net income per share:                            
  Basic   $ 0.62     $ 0.01   $ 0.39     $ 0.03
  Diluted   $ 0.61     $ 0.01   $ 0.39     $ 0.03
Weighted-average number of shares used in per share calculations:                            
  Basic     59,572       58,109     59,001       57,532
  Diluted     59,988       59,094     59,639       58,874
 
 
FORMFACTOR, INC.
RECONCILIATION OF NON-GAAP NET INCOME
 (In thousands, except per share amounts) 
 (Unaudited)
 
    Three Months Ended     Six Months Ended  
    June 25, 2016     June 27, 2015     June 25, 2016     June 27, 2015  
GAAP net income   $ 36,884     $ 838     $ 23,084     $ 1,621  
Stock-based compensation     1,541       2,506       4,275       5,415  
Restructuring charges, net     6,910       --       6,910       503  
Acquisition and integration related expenses (recoveries)     3,795       2       5,796       (89 )
Amortization of intangibles, inventory and fixed assets fair value adjustment due to acquisition     2,767       3,430       5,537       6,722  
Impairment of long-lived assets     --       8       --       8  
Income tax valuation allowance release     (43,938 )     --       (43,938 )     --  
Business interruption insurance claim recovery     --       (37 )     --       (1,521 )
Non-GAAP net income   $ 7,959     $ 6,747     $ 1,664     $ 12,659  
                                 
Non-GAAP net income per share:                                
Basic   $ 0.13     $ 0.12     $ 0.03     $ 0.22  
Diluted   $ 0.13     $ 0.11     $ 0.03     $ 0.22  
                                 
Weighted-average number of shares used in per share calculations:                                
Basic     59,572       58,109       59,001       57,532  
Diluted     59,988       59,094       59,639       58,874  
 
 
FORMFACTOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS 
 (In thousands)
(Unaudited)
 
    June 25, 2016     December 26, 2015  
ASSETS            
Current assets:            
  Cash and cash equivalents   $ 100,225     $ 146,264  
  Marketable securities     18,108       41,325  
  Accounts receivable, net     86,137       36,725  
  Inventories, net     68,357       27,223  
  Refundable income taxes     1,517       --  
  Prepaid expenses and other current assets     10,094       6,481  
    Total current assets     284,438       258,018  
Restricted cash     438       435  
Property, plant and equipment, net     43,791       23,853  
Goodwill     188,517       30,731  
Intangibles, net     172,146       25,552  
Deferred tax assets     3,926       3,281  
Other assets     2,000       853  
    Total assets   $ 695,256     $ 342,723  
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Accounts payable   $ 54,063     $ 18,072  
  Accrued liabilities     51,088       21,507  
  Current portion of term loan     7,077       --  
  Income taxes payable     1,662       110  
  Deferred revenue     4,868       3,892  
    Total current liabilities     118,758       43,581  
Long-term income taxes payable     1,240       1,069  
Term loan, less current portion     141,417       --  
Deferred tax liabilities     5,662       --  
Deferred rent and other liabilities     4,595       3,392  
    Total liabilities     271,672       48,042  
Commitments and contingencies                
Stockholders' equity:                
  Common stock and capital in excess of par value     823,222       718,962  
  Accumulated other comprehensive loss     (663 )     (2,222 )
  Accumulated deficit     (398,975 )     (422,059 )
    Total stockholders' equity     423,584       294,681  
    Total liabilities and stockholders' equity   $ 695,256     $ 342,723  
                     

About our Non-GAAP Net Income and Adjustments:

We believe that the presentation of non-GAAP net income and non-GAAP earnings per fully-diluted share provides supplemental information that we believe are important to understanding financial and business trends relating to our financial condition and results of operations. Non-GAAP net income and non-GAAP earnings per fully-diluted share 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 and non-GAAP earnings per fully-diluted share 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 the company's activities and other factors, facilitates comparability of the company's operating performance from period to period. We have chosen to provide this 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 and non-GAAP fully-diluted earnings per share by adjusting GAAP net income and GAAP earnings per fully-diluted share to remove the impact of certain adjustments and the tax effect 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 or earnings per fully-diluted share 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 and non-GAAP earnings per fully-diluted share 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 non-GAAP Net Income" included in this press release.

Contact Information

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