FormFactor, Inc. Reports Fourth Quarter and Full Year 2018 Results
- Delivered the strongest financial performance of the year in the fourth quarter
- Demonstrated resilient business model in a challenging industry environment
- Strengthened key customer relationships with world’s top logic, memory and foundry manufacturers as three 10% customers in Q4
“Our Q4’18 results demonstrated the strength and leadership we have in our served markets," said
Fourth Quarter Highlights
On a GAAP basis, net income for the fourth quarter of fiscal 2018 was
On a non-GAAP basis, net income for the fourth quarter of fiscal 2018 was
Free cash flow for the fourth quarter of fiscal 2018 was
Outlook
“With all major customers innovating on existing nodes and utilizing existing capacity, the design-specific consumable nature of our products is significant, and we are continuing to experience solid new-design flow in the beginning of 2019. Along with the rest of the industry, our visibility is very limited at present, however, we expect these general trends to continue through the balance of this quarter,” concluded Dr. Slessor.
For the first quarter ending on
GAAP | Reconciling Items2 | Non-GAAP1 | ||||
Revenue | $127 million to $135 million | — | $127 million to $135 million | |||
Gross Margin | 37% to 40% | $6 million | 41% to 44% | |||
Net income per diluted share | $0.02 to $0.08 | $0.13 | $0.15 to $0.21 |
1Inclusion of deferred tax expenses reduces Q1 outlook for non-GAAP diluted earnings per share by approximately
4 cents .
2Reconciling items are stock-based compensation and amortization of intangibles.
We have posted our revenue breakdown by region and market segment 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 by telephone through
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 twelve months ended December 29, 2018, as well as for the comparable periods of fiscal 2017, 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
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 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, progress towards the Company’s long-term financial model, 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; the timing of customers’ transitions to new technologies; the Company’s ability to capitalize on market and customer opportunities; industry seasonality; risks to the Company’s ability to realize operational efficiencies; changes in the market, macro-economic environments; failure of the Company to realize the anticipated benefits of acquisitions; 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
FORMFACTOR, INC. | |||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Fiscal Year Ended | ||||||||||||||
December 29, 2018 |
December 30, 2017 |
December 29, 2018 |
December 30, 2017 |
||||||||||||
Revenues | $ | 140,887 | $ | 131,901 | $ | 529,675 | $ | 548,441 | |||||||
Cost of revenues | 84,865 | 83,272 | 319,336 | 332,844 | |||||||||||
Gross profit | 56,022 | 48,629 | 210,339 | 215,597 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 18,398 | 18,513 | 74,976 | 73,807 | |||||||||||
Selling, general and administrative | 25,668 | 24,238 | 99,094 | 94,679 | |||||||||||
Restructuring charges | 160 | 481 | 160 | 810 | |||||||||||
Total operating expenses | 44,226 | 43,232 | 174,230 | 169,296 | |||||||||||
Operating income | 11,796 | 5,397 | 36,109 | 46,301 | |||||||||||
Interest income | 404 | 264 | 1,356 | 548 | |||||||||||
Interest expense | (660 | ) | (1,045 | ) | (3,314 | ) | (4,491 | ) | |||||||
Other income (expense), net | 117 | (170 | ) | (224 | ) | (152 | ) | ||||||||
Income before income taxes | 11,657 | 4,446 | 33,927 | 42,206 | |||||||||||
Provision (benefit) for income taxes | (73,443 | ) | (1,142 | ) | (70,109 | ) | 1,293 | ||||||||
Net income | $ | 85,100 | $ | 5,588 | $ | 104,036 | $ | 40,913 | |||||||
Net income per share: | |||||||||||||||
Basic | $ | 1.15 | $ | 0.08 | $ | 1.42 | $ | 0.57 | |||||||
Diluted | $ | 1.13 | $ | 0.07 | $ | 1.38 | $ | 0.55 | |||||||
Weighted-average number of shares used in per share calculations: | |||||||||||||||
Basic | 74,108 | 72,846 | 73,482 | 72,292 | |||||||||||
Diluted | 75,416 | 74,756 | 75,182 | 74,239 |
FORMFACTOR, INC. | |||||||||||||||
RECONCILIATION OF NON-GAAP NET INCOME | |||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Fiscal Year Ended | ||||||||||||||
December 29, 2018 | December 30, 2017 | December 29, 2018 | December 30, 2017 | ||||||||||||
GAAP net income | $ | 85,100 | $ | 5,588 | $ | 104,036 | $ | 40,913 | |||||||
Adjustments to reconcile GAAP net income to Non-GAAP net income: | |||||||||||||||
Stock-based compensation | 5,406 | 4,952 | 17,827 | 16,230 | |||||||||||
Restructuring charges, net | 160 | 481 | 160 | 810 | |||||||||||
Acquisition and integration related expenses | — | 782 | — | 2,520 | |||||||||||
Amortization of intangibles | 7,497 | 7,515 | 29,373 | 31,509 | |||||||||||
Income tax valuation allowance release | (75,803 | ) | — | (75,803 | ) | — | |||||||||
Contingencies | — | — | — | (206 | ) | ||||||||||
Proceeds from sale of intellectual property | — | — | — | (400 | ) | ||||||||||
Benefit from U.S. tax reform | — | 715 | — | 715 | |||||||||||
Income tax effect of non-GAAP adjustments | 1,088 | (2,053 | ) | 555 | (2,624 | ) | |||||||||
Non-GAAP net income | $ | 23,448 | $ | 17,980 | $ | 76,148 | $ | 89,467 | |||||||
Non-GAAP net income per share: | |||||||||||||||
Basic | $ | 0.32 | $ | 0.25 | $ | 1.04 | $ | 1.24 | |||||||
Diluted | $ | 0.31 | $ | 0.24 | $ | 1.01 | $ | 1.21 | |||||||
Weighted-average number of shares used in per share calculations: | |||||||||||||||
Basic | 74,108 | 72,846 | 73,482 | 72,292 | |||||||||||
Diluted | 75,416 | 74,756 | 75,182 | 74,239 |
FORMFACTOR, INC. | |||||||||||||
RECONCILIATION OF GAAP GROSS MARGIN TO NON-GAAP GROSS MARGIN | |||||||||||||
(Dollars in thousands) | |||||||||||||
(Unaudited) | |||||||||||||
Three Months Ended | |||||||||||||
December 29, 2018 | December 30, 2017 | ||||||||||||
Gross Profit | Gross Margin | Gross Profit | Gross Margin | ||||||||||
GAAP Gross Profit/Margin | $ | 56,022 | 39.8 | % | $ | 48,629 | 36.9 | % | |||||
Adjustments: | |||||||||||||
Amortization of intangibles | 5,112 | 3.6 | % | 5,473 | 4.1 | % | |||||||
Stock-based compensation | 960 | 0.7 | % | 1,000 | 0.7 | % | |||||||
Acquisition and integration related expenses | — | — | % | 68 | 0.1 | % | |||||||
Non-GAAP Gross Profit/Margin | $ | 62,094 | 44.1 | % | $ | 55,170 | 41.8 | % | |||||
Fiscal Year Ended | |||||||||||||
December 29, 2018 | December 30, 2017 | ||||||||||||
Gross Profit | Gross Margin | Gross Profit | Gross Margin | ||||||||||
GAAP Gross Profit/Margin | $ | 210,339 | 39.7 | % | $ | 215,597 | 39.3 | % | |||||
Adjustments: | |||||||||||||
Amortization of intangibles | 20,530 | 3.9 | % | 23,370 | 4.3 | % | |||||||
Stock-based compensation | 3,525 | 0.7 | % | 3,539 | 0.6 | % | |||||||
Acquisition and integration related expenses | — | — | % | 74 | — | % | |||||||
Contingencies | — | — | % | (30 | ) | — | % | ||||||
Non-GAAP Gross Profit/Margin | $ | 234,394 | 44.3 | % | $ | 242,550 | 44.2 | % |
FORMFACTOR, INC. | |||||||||||||||
RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW | |||||||||||||||
(In thousands) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Fiscal Year Ended | ||||||||||||||
December 29, 2018 | December 30, 2017 | December 29, 2018 | December 30, 2017 | ||||||||||||
Net cash provided from operating activities | $ | 22,562 | $ | 26,455 | $ | 68,700 | $ | 86,323 | |||||||
Adjustments | |||||||||||||||
Cash paid for interest | 814 | 863 | 3,113 | 3,836 | |||||||||||
Capital expenditures | (7,543 | ) | (3,838 | ) | (19,869 | ) | (17,756 | ) | |||||||
(6,729 | ) | (2,975 | ) | (16,756 | ) | (13,920 | ) | ||||||||
Free cash flow | $ | 15,833 | $ | 23,480 | $ | 51,944 | $ | 72,403 |
FORMFACTOR, INC. | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(In thousands) | |||||||
(Unaudited) | |||||||
December 29, 2018 | December 30, 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 98,472 | $ | 91,184 | |||
Marketable securities | 50,531 | 48,988 | |||||
Accounts receivable, net | 95,333 | 81,515 | |||||
Inventories, net | 77,706 | 67,848 | |||||
Restricted cash | 849 | 372 | |||||
Refundable income taxes | 1,260 | 2,242 | |||||
Prepaid expenses and other current assets | 13,669 | 13,705 | |||||
Total current assets | 337,820 | 305,854 | |||||
Restricted cash | 1,225 | 1,170 | |||||
Property, plant and equipment, net | 54,054 | 46,754 | |||||
Goodwill | 189,214 | 189,920 | |||||
Intangibles, net | 67,640 | 97,484 | |||||
Deferred tax assets | 77,301 | 3,133 | |||||
Other assets | 968 | 2,259 | |||||
Total assets | $ | 728,222 | $ | 646,574 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 40,006 | $ | 35,046 | |||
Accrued liabilities | 27,731 | 33,694 | |||||
Current portion of term loan, net of unamortized issuance cost of $160 and $307 | 29,840 | 18,443 | |||||
Deferred revenue | 4,941 | 4,978 | |||||
Total current liabilities | 102,518 | 92,161 | |||||
Term loan, less current portion, net of unamortized issuance cost of $29 and $272 | 34,971 | 87,228 | |||||
Deferred tax liabilities | 2,355 | 3,379 | |||||
Deferred rent and other liabilities | 8,214 | 5,169 | |||||
Total liabilities | 148,058 | 187,937 | |||||
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; 74,139,712 and 72,532,176 shares issued and outstanding | 75 | 73 | |||||
Additional paid-in capital | 862,897 | 843,116 | |||||
Accumulated other comprehensive income | 780 | 3,021 | |||||
Accumulated deficit | (283,588 | ) | (387,573 | ) | |||
Total stockholders' equity | 580,164 | 458,637 | |||||
Total liabilities and stockholders' equity | $ | 728,222 | $ | 646,574 |
About our Non-GAAP Net Income (loss) and Adjustments:
We believe that the presentation of non-GAAP net income, non-GAAP earnings per fully-diluted share 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 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 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 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 items 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” and “Reconciliation of Cash Provided By Operating Activities to Free Cash Flow” included in this press release.
Source:
FORM-F
Investor Contact:
Investor Relations
(925) 290-4321
ir@formfactor.com
Source: FormFactor, Inc.