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FormFactor (FORM) Beats Q4 Earnings & Revenue Estimates

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FormFactor Inc. (FORM - Free Report) reported fourth-quarter adjusted earnings of 44 cents per share, which beat the Zacks Consensus Estimate of 39 cents. The figure increased 12.8% sequentially and 7.3% year over year.

Revenues increased 10.3% from the year-ago quarter and 10.7% sequentially to $197 million. Also, the top line surpassed the Zacks Consensus Estimate by 7.1%.

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 the work-from-home infrastructure.

Quarter Details

Probe card segment revenues were $162.5 million for the fourth quarter, up 7% from the prior quarter. The increase was driven by foundry and logic, and DRAM revenues, partially offset by a decline in flash revenues.

Within the probe card segment, Foundry & Logic sales (accounting for 62% of its total revenues) increased on a sequential basis to $123 million.

Systems revenues for the fourth quarter were $45 million, up 27% sequentially.

Revenues for DRAM products (18% of revenues) were $35 million, reflecting an increase of $3 million from the third quarter.

Flash revenues (3% of revenues) were $5 million, down on a sequential basis.

FormFactor, Inc. Price, Consensus and EPS Surprise

FormFactor, Inc. Price, Consensus and EPS Surprise

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

Operating Details

On a non-GAAP basis, gross margin contracted 230 basis points (bps) year over year and 330 bps sequentially to 43.4%. The decrease was mainly due to unfavorable product mix in the System segment.

Non-GAAP operating expenses were $48.1 million for the fourth quarter, up from $43.8 million in the prior-year period. The increase was due to higher investments.

Balance Sheet & Cash Flow

At fourth quarter-end, cash and cash equivalents, as well as marketable securities were $255 million compared with $241.5 million in the third quarter.

Cash flow from operations was $45 million versus $41.8 million in the third quarter. Free cash flow was $31.4 million, down from $37.2 million in the third quarter.

Guidance

FormFactor expects first-quarter 2021 revenues between $176 million and $188 million. The Zacks Consensus Estimate for revenues is currently pegged at $182.9 million.

On a non-GAAP basis, the company projects gross margin within 44-47% and earnings in the band of 34-42 cents per share. The Zacks Consensus Estimate for earnings per share is pegged at 39 cents.

Zacks Rank & Other Stocks to Consider

Currently, FormFactor carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the broader technology sector include Semtech Corporation (SMTC - Free Report) , JD.com, Inc. (JD - Free Report) and Microchip Technology Incorporated (MCHP - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Semtech, JD.com, and Microchip Technology is currently projected at 12.5%, 51.2% and 14.9%, respectively.

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