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

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FormFactor (FORM - Free Report) reported second-quarter 2022 adjusted earnings of 46 cents per share, which surpassed the Zacks Consensus Estimate by 4.6%. Also, the bottom line increased 27.8% year over year but declined 6.1%, sequentially.

Revenues increased 8.4% year over year and 3.4%, sequentially, to $203.9 million. Further, the top line surpassed the Zacks Consensus Estimate of 203.8 million.

Year-over-year growth in the top line was driven by strong demand for Foundry & Logic, Flash and Systems. However, weak demand for DRAM products remained a headwind.

FormFactor, Inc. Price, Consensus and EPS Surprise

FormFactor, Inc. Price, Consensus and EPS Surprise

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

Segments in Detail

Probe card: Revenues from this segment were $167.7 million for the second quarter, up 9.2% year over year and 4.8%, sequentially.

Foundry & Logic (accounting for 60% of revenues) revenues were $122.4 million, up 18% year over year and 7.3%, sequentially.

Revenues for DRAM products (18% of revenues) were $36.8 million, reflecting a decrease of 12.6% year over year but an increase of 6.7% from the previous quarter’s level.

Flash revenues (4% of revenues) were $8.5 million, up 7.6% from the year-ago period’s level but down 25.4% from the prior quarter’s level.

Systems: Revenues from this segment were $36.2 million (18% of revenues), up 5.2% year over year but down 2.7%, sequentially.

Regional Details

Revenues generated from China (accounting for 24% of revenues), Malaysia (8%), Japan (5%) and the Rest of World (1%) were $49.7 million, $16.2 million, $9.9 million and $2.9 million, respectively. All revenues increased 56.3%, 406.3%, 28.6% and 11.5% each year over year.

Revenues generated from Taiwan (25%), the United States (15%), South Korea (14%), Europe (4%) and Singapore (3%) were $50 million, $31.2 million, $28.8 million, $8.1 million and $7.1 million, respectively. The metric from each country was down 3.7%, 4.6%, 20.4%, 32.5% and 29%, respectively, year over year.

Operating Results

On a non-GAAP basis, gross margin expanded 300 basis points (bps) year over year to 47.4% in the second quarter.

Non-GAAP operating expenses increased 12.5% year over year to $54.4 million. As a percentage of total second-quarter revenues, the metric expanded 96 bps year over year to 26.7%.

Non-GAAP operating income was $42.3 million, up 20.2% year over year. As a percentage of revenues, it expanded 202 bps year over year to 20.7%.

Balance Sheet & Cash Flow

As of Jun 25, 2022, cash & cash equivalents and marketable securities were $266.3 million compared with $296.4 million on Mar 26, 2022.

Cash generated from operating activities was $42.6 million for the reported quarter, down from $44.2 million in the previous quarter.

Capital expenditure was $14.5 million, down from $15.6 million in the first quarter of 2022.

Free cash flow was $28.2 million for the reported quarter, down from $28.7 million in the previous quarter.

Guidance

FormFactor expects third-quarter 2022 revenues of $183 million (+/- $6 million). The Zacks Consensus Estimate for the same is currently pegged at $210.6 million.

Management expects non-GAAP gross margin of 39% (+/- 1.5%).

On a non-GAAP basis, it projects earnings of 21 cents (+/- 4 cents) per share. The consensus mark for the metric is pegged at 45 cents per share.

In the third quarter, management expects demand for Foundry & Logic probe cards to be less in both mobile and compute applications.

Zacks Rank & Stocks to Consider

Currently, FormFactor has a Zacks Rank #3 (Hold). Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Aspen Technology (AZPN - Free Report) , Keysight Technologies (KEYS - Free Report) and Asure Software (ASUR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Aspen technology has returned 18.9% in the year-to-date period. The long-term earnings growth rate for AZPN is currently projected at 16.3%.

Keysight Technologies has lost 26.8% in the year-to-date period. KEYS’ long-term earnings growth rate is currently projected at 9.1%.

Asure Software has lost 27.2% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 14%.

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