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FormFactor (FORM) Q2 Earnings Beat, Revenues Increase Y/Y

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FormFactor (FORM - Free Report) reported second-quarter adjusted earnings of 36 cents per share, which surpassed the Zacks Consensus Estimate by 9.1%. Also, it increased 9.09% year over year.

Revenues increased 19.2% year over year to $188.1 million and surpassed the Zacks Consensus Estimate of $185.3 million. On a sequential basis, revenues grew 0.8%.

The year-over-year growth in the top line was driven by strong demand for DRAM products and growth in Systems segment sales.

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 $154 million for the second quarter, down 3.1% sequentially but up 14.9% year over year.

The sequential decrease was driven by lower Foundry & Logic, and Flash revenues, partially offset by an increase in DRAM revenues.

Foundry & Logic (accounting for 55% of revenues) revenues were $103.7 million, down 5% year over year and 8.6% sequentially.

Revenues for DRAM products (22.4% of revenues) were $42.1 million, reflecting an increase of 120.4% year over year and 24.2% sequentially.

Flash revenues (4.2% of revenues) were $7.9 million, up 46.3% from the year-ago period but down 31.9% from the first quarter.

Systems revenues were $34.4 million for the reported quarter, up 24% sequentially and 43% year over year.

The sequential increase was due to higher sales of optical metrology and thermal systems, driven by advanced packaging and automotive applications.

On a non-GAAP basis, gross margin contracted 140 basis points (bps) year over year to 44.4%. Also, Probe card segment’s gross margin was 43.3%, contracting 10 bps sequentially.

Non-GAAP gross margin exceeded the guided range of 41-44% due to favorable product mix, better yields on a new DRAM design, increased precious metals recovery, and improved utilization and absorption.

Non-GAAP operating expenses increased 17.8% year over year to $48.4 million.

Balance Sheet & Cash Flow

As of Jun 26, 2021, cash & marketable securities (including restricted cash) were $258.1 million compared with $270.5 million on Mar 27, 2021.

Further, the company generated $33.8 million of cash from operations in the reported quarter, up from $32.4 million in the previous quarter.

Capital expenditure was $17.9 million, up from $13.5 million in the first quarter.

Further, free cash flow was $16.2 million for the second quarter, down from $19.2 million in the first quarter.

Guidance

FormFactor expects third-quarter 2021 revenues between $182 million and $194 million. The Zacks Consensus Estimate for revenues is currently pegged at $187.1 million.

The company expects continued strong demand, with sequentially higher Systems demand, partially offset by a moderate decline in Probe cards.

Further, management expects non-GAAP gross margin between 43% and 46%.

On a non-GAAP basis, it projects earnings in the band of 31-39 cents per share. The consensus mark for earnings is pegged at 37 cents per share.

Zacks Rank & Stocks to Consider

Currently, FormFactor has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector include NXP Semiconductors (NXPI - Free Report) , Semtech Corporation (SMTC - Free Report) and Agilent Technologies (A - Free Report) , 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 rates for NXP, Semtech and Agilent are currently projected at 10%, 12.5% and 13%, respectively.