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FormFactor (FORM) Q3 Earnings Beat, Revenues Decline Y/Y

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FormFactor (FORM - Free Report) delivered third-quarter 2023 adjusted earnings of 22 cents per share, which surpassed the Zacks Consensus Estimate by 29.41%. However, the bottom-line figure decreased 8.3% year over year.

Revenues of $171.6 million beat the Zacks Consensus Estimate by 2.53% but declined 5.1% on a year-over-year basis.

The top-line decline was primarily attributed to softness in probe cards. Weak demand for DRAM and Flash hurt top-line growth. Nevertheless, FormFactor witnessed continued growth in the systems business.

FORM shares have outperformed the Zacks Computer & Technology sector year to date. Shares have gained 50.4%, while the broader sector returned 30.3%.

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 were $128.4 million, down 7.9% year over year.

Foundry & Logic (accounting for 56.2% of revenues) revenues were $96.4 million, up 6.4% year over year.

DRAM revenues (16% of revenues) were $27.5 million, down 17.1% year over year. Flash revenues (2.6% of revenues) were $4.5 million, down 67.6% year over year.

Systems revenues (25.2% of revenues) were $43.2 million, up 4.1% year over year.

Regionally, revenues generated from the United States, Taiwan and South Korea increased 14.7%, 16.8% and 21.5% year over year, respectively.

Revenues generated from China, Europe, Japan, Malaysia, Singapore, and the Rest of World were down 40.6%, 21.2%, 9.1%, 7.7%, 64.4% and 50%, respectively, year over year.

Operating Results

In third-quarter 2023, gross margin contracted 280 basis points (bps) year over year to 41.8% in the reported quarter.

Non-GAAP operating expenses increased 10.1% year over year to $54.5 million. As a percentage of revenues, operating expenses were 440 bps year over year to 31.8%.

Non-GAAP operating margin contracted 150 bps year over year to 10.1%.

Balance Sheet & Cash Flow

As of Sep 30, 2023, cash and cash equivalents and marketable securities were $244.4 million compared with $236.9 million on Jul 1.

Cash generated from operating activities was $20.6 million for the reported quarter, down from $22.5 million in the previous quarter.

Free cash flow was $16.9 million for the reported quarter, up from $2.1 million reported in the previous quarter.


FormFactor expects fourth-quarter 2023 revenues of $165 million (+/- $5 million). The Zacks Consensus Estimate for the same is currently pegged at $167.59 million.

Revenue guidance reflects a moderate decline on a sequential basis due to the sale of FRT and weaker Foundry & Logic probe card demand, primarily attributed to a short-term reduction in customer spending.

The company expects a non-GAAP gross margin of 41% (+/- 1.5%).

On a non-GAAP basis, FormFactor expects earnings of 20 cents (+/- 4 cents) per share. The consensus mark for the same is pegged at 17 cents per share.

Zacks Rank & Stocks to Consider

FormFactor currently carries a Zacks Rank #3 (Hold).

NetEase (NTES - Free Report) , Ballard Power Systems (BLDP - Free Report) and Model N are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NetEase shares have declined 33.8% year to date. NTES is set to report its third-quarter 2023 results on Nov 16.

Ballard Power shares have declined 1.8% year to date. BLDP is set to report its third-quarter 2023 results on Nov 7.

Model N shares have returned 12.2% year to date. MODN is set to report its fourth-quarter fiscal 2023 results on Nov 9.

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