FormFactor (FORM) Beats Q3 Earnings & Revenue Estimates

Zacks Equity Research
·4-min read

FormFactor Inc. FORM reported third-quarter adjusted earnings of 39 cents per share, which beat the Zacks Consensus Estimate of 36 cents. The figure increased 18.2% sequentially and 77.3% year over year.

Revenues increased 26.6% from the year-ago quarter and 12.8% sequentially to $178 million. Also, the top line surpassed the Zacks Consensus Estimate by 1.3%.

The top line was driven by strong demand for both Foundry & Logic probe cards, along with strength in advanced packaging. Customer node transitions and new design releases also aided revenues.

Management continues to expect strong demand for Foundry & Logic probe cards in the near term due to acceleration of 5G handset pilot production and persistent spending on work-from-home infrastructure.

In addition, the company announced that it has acquired High Precision Devices, Inc.. The deal is expected to complement FormFactor’s existing capabilities, and product portfolio of engineering system test and measurement capabilities.

FormFactor, Inc. Price, Consensus and EPS Surprise

FormFactor, Inc. Price, Consensus and EPS Surprise
FormFactor, Inc. Price, Consensus and EPS Surprise

FormFactor, Inc. price-consensus-eps-surprise-chart | FormFactor, Inc. Quote

Quarter Details

Probe card segment revenues were $161 million for the third quarter, up 13% from the prior quarter. The increase was driven by higher DRAM and Flash revenues, partially offset by a decline in foundry and logic revenues.

Within the probe card segment, Foundry & Logic sales (accounting for 61% of its total revenues) decreased 0.9% on a sequential basis to $108 million.

Revenues for DRAM products (18% of revenues) were $31 million, reflecting an increase of $12 million from the second quarter.

Flash revenues (6% of revenues) were $11 million, up on a sequential basis.

Systems revenues for the third quarter were $27 million, up 13% sequentially.

Operating Details

On a non-GAAP basis, gross margin expanded 320 basis points (bps) year over year and 90 bps sequentially to 46.7%. The increase was mainly due to higher revenues and gross margin in the Systems segment.

Non-GAAP operating expenses were $48.4 million for the third quarter, up from $41.1 million in the prior-year period. The increase was due to higher investments.

Balance Sheet & Cash Flow

At third quarter-end, cash and cash equivalents, as well as marketable securities were $241.5 million compared with $261.1 million in the second quarter.

Cash flow from operations was $41.8 million versus $43.1 million in the second quarter. Free cash flow was $37.2 million, up from $18.6 million in the second quarter.

Guidance

FormFactor expects fourth-quarter 2020 revenues between $178 million and $190 million. The Zacks Consensus Estimate for revenues is currently pegged at $173.75 million.

On a non-GAAP basis, the company projects gross margin within 44-47% and earnings in the band of 35-43 cents per share. The Zacks Consensus Estimate for earnings per share is pegged at 36 cents.

Zacks Rank & Stocks to Consider

Currently, FormFactor carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include ON Semiconductor Corporation ON, Silicon Laboratories, Inc. SLAB and Alibaba Group Holding Limited BABA, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for ON Semiconductor, Silicon Laboratories, and Alibaba is currently projected at 1.3%, 15% and 19.4%, respectively.

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