Back to top

Image: Bigstock

Why Is FormFactor (FORM) Up 0.1% Since Last Earnings Report?

Read MoreHide Full Article

A month has gone by since the last earnings report for FormFactor (FORM - Free Report) . Shares have added about 0.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is FormFactor due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

FormFactor Q4 Earnings Beat, Revenues Increase Y/Y

FormFactor reported fourth-quarter 2021 adjusted earnings of 44 cents per share, which surpassed the Zacks Consensus Estimate by 7.3%. Also, the bottom line increased 10% on a sequential basis and came in line with the year-ago reported figure.

Revenues increased 4% year over year and 7.9% from the third quarter to $205 million. Further, the figure surpassed the Zacks Consensus Estimate by 3.5%.

The year-over-year growth in the top line was driven by strong demand for DRAM, Flash and Systems. Further, the launch of cryogenic testing as a service for quantum applications remained a tailwind.

Yet, weak momentum in the foundry and logic market remained a concern.

Segments in Detail

Probe card: Revenues from this segment were $165.9 million for the fourth quarter, up 7.1% sequentially and 2.1% year over year.

Foundry & Logic (accounting for 55.6% of revenues) revenues were $114 million, down 7% year over year but up 8.9% sequentially.

Revenues for DRAM products (19.7% of revenues) were $40.3 million, reflecting an increase of 16.5% year over year and 1.3% sequentially.

Flash revenues (5.7% of revenues) were $11.6 million, up 123.1% from the year-ago period and 11.5% from the third quarter.

Systems: Revenues from this segment were $39.1 million (19.1% of revenues), up 11.4% sequentially and 13.3% year over year.

Regional Details

Revenues generated from Taiwan (accounting for 23% of revenues), China (18%), Europe (5%), and the rest of the world (1%) were $46.9 million, $37.6 million, $11.2 million and $1.4 million, respectively. The respective revenues decreased 4.3%, 30.4%, 16.4% and 58.8% year over year.

Then again, revenues generated from South Korea (19%), the United States (17%), Asia Pacific (12%) and Japan (4%) were $39.2 million, $34.5 million, $25.4 million and $8.8 million, respectively. The respective revenues were up 39%, 10.2%, 161.9% and 10% year over year.

Operating Results

On a non-GAAP basis, gross margin expanded 90 basis points (bps) year over year to 44.3%. Also, the Probe card segment’s gross margin was 44.1%, expanding 20 bps year over year. The Systems segment’s gross margin was 45.5%, expanding 440 bps year over year.

Non-GAAP operating expenses increased 3.3% year over year to $49.7 million. As a percentage of total fourth-quarter revenues, the metric contracted 17 bps year over year to 24.2%.

Non-GAAP operating income was $41.2 million, up 9.7% year over year. As a percentage of revenues, it expanded 103 bps year over year to 20.1%.

Balance Sheet & Cash Flow

As of Dec 25, 2021, cash & cash equivalents and marketable securities were $276.1 million compared with $264.7 million on Sep 25, 2021.

Further, cash generated from operating activities was $38.9 million for the reported quarter, up from $34.3 million in the previous quarter.

Capital expenditure was $15.1 million, down from $20 million in the third quarter.

Further, free cash flow was $23.9 million for the fourth quarter, up from $14.4 million in the third quarter.

Guidance

FormFactor expects first-quarter 2022 revenues between $188 million and $200 million.

The company expects a seasonal decline in Foundry and Logic revenues and a moderate decrease in DRAM revenues.

Further, management expects non-GAAP gross margin between 44% and 47%.

On a non-GAAP basis, it projects earnings in the band of 35-43 cents per share.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -9.03% due to these changes.

VGM Scores

At this time, FormFactor has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, FormFactor has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


FormFactor, Inc. (FORM) - free report >>

Published in