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FormFactor (FORM) Up 10.7% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for FormFactor (FORM - Free Report) . Shares have added about 10.7% 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 its most recent earnings report in order to get a better handle on the important drivers.

FormFactor Q3 Earnings Beat, Revenues Fall Y/Y

FormFactor reported third-quarter 2022 adjusted earnings of 24 cents per share, which surpassed the Zacks Consensus Estimate by 9.1%. However, the bottom line decreased 40% year over year and 47.8%, sequentially.

Revenues declined 4.8% year over year and 11.3%, sequentially, to $180.9 million. The top line missed the Zacks Consensus Estimate by 1.9%.

The top-line decline was attributed to weak demand for Foundry & Logic and DRAM products.

Nevertheless, strong demand for Flash and Systems remained a tailwind.

FormFactor has a negative outlook for the fourth quarter. It is expected to reflect the negative impact of the export regulations announced by the U.S. government on the sale of U.S. semiconductor technology to China. Management also expects weak demand for Foundry & Logic and DRAM probe card.

Segments in Detail

Probe card: Revenues from this segment were $139.4 million for the third quarter, down 10% year over year and 99.9%, sequentially.

Foundry & Logic (accounting for 50% of revenues) revenues were $90.6 million, down 13.5% year over year and 25.98%, sequentially.

Revenues for DRAM products (19% of revenues) were $34.9 million, reflecting a decrease of 12.3% year over year and 5.2% from the previous quarter’s level.

Flash revenues (8% of revenues) were $13.9 million, up 33.7% from the year-ago period’s level and 63.5% from the prior quarter’s level.

Systems: Revenues from this segment were $41.5 million (23% of revenues), up 18.2% year over year and 14.6%, sequentially.

Regional Details

Revenues generated from the United States (accounting for 21% of revenues), Europe (7%), Singapore (6%) and the Rest of World (2%) were $38.1 million, $11.8 million, $10.4 million and $4 million, respectively. All revenues increased 49.4%, 12.4%, 36.8% and 60% each year over year.

Revenues generated from Taiwan (20%), China (20%), South Korea (16%), Malaysia (4%) and Japan (4%) were $36.8 million, $36.7 million, $28.9 million, $6.5 million and $7.7 million, respectively. The metric from each country was down 11.5%, 28%, 0.3%, 44% and 28%, respectively, year over year.

Operating Results

On a non-GAAP basis, gross margin contracted 700 basis points (bps) year over year to 39% in the third quarter.

Non-GAAP operating expenses increased 2.1% year over year to $49.5 million. As a percentage of total third-quarter revenues, the metric expanded 184 bps year over year to 27.4%.

Non-GAAP operating income was $21 million, down 46.1% year over year. As a percentage of revenues, it contracted 889 bps year over year to 11.6%.

Balance Sheet & Cash Flow

As of Sep 24, 2022, cash & cash equivalents and marketable securities were $251.6 million compared with $266.3 million on Jun 25, 2022.

Cash generated from operating activities was $24.2 million for the reported quarter, down from $42.6 million in the previous quarter.

Capital expenditure was $8.91 million, down from $14.5 million in the second quarter of 2022.

Free cash flow was $15.5 million for the reported quarter, down from $28.3 million in the previous quarter.


FormFactor expects fourth-quarter 2022 revenues of $155 million (+/- $5 million).

Management expects a non-GAAP gross margin of 33% (+/- 1.5%).

On a non-GAAP basis, it projects earnings of 3 cents (+/- 3 cents) per share.

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted -115.77% due to these changes.

VGM Scores

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

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


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.

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