Optimistic About Formfactor - Analyst Blog

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Formfactor 's ( FORM ) first quarter loss was $0.14, less than the Zacks Consensus.

Formfactor's revenue of $34.8 million was up 15.2% sequentially and down 13.9% from a year ago, just above the high end of management's expectations of $30−$34 million (an increase of 0-12% sequentially).

Management stated that revenue growth in the quarter would have been even stronger if order growth had been relatively linear. However, since the quarter was back-end loaded, some of the revenue related to orders generated at the end will only materialize in the second quarter.

Revenue by End User

The DRAM, flash and SoC customers generated 63%, 22% and 15%, respectively, of first quarter revenue.

The DRAM business saw a rise of 19.0% to $21.9 million. This was a mixed quarter for DRAM, with prices falling in the first half due to PC market issues related to the Thailand flooding. However, with supply chain issues improving in the second half of the quarter, prices stabilized, positively impacting revenue.

The Flash business was down 13.0% sequentially to $5.1 million. NAND revenue was marginally up to $2.7 million but it was offset by decrease in NOR flash revenue.

The SoC business was very strong, however, increasing 30.0% sequentially to $7.8 million. The positive results were driven by automotive applications, microcontrollers and image sensors.

The DRAM, flash and SoC segments grew -18.4%, 6.9% and 1.9% from the year-ago quarter.

Revenue by Geography

Revenue contribution from South Korea has grown considerably over the past year, with Asia/Pacific staying flat and all other regions declining. These two regions generated 46% and 9% of revenue in the last quarter. Japan and Taiwan, which are not included in Äsia/Pacific accounted for 10.6% and 20.5% of quarterly revenue, respectively. North America made a 10% contribution, while Europe accounted for the remaining 4%.

Margins

The GAAP gross margin increased 180 bps year over year to 11.9%. Higher volumes were the main reason for the gross margin expansion.

Total operating expenses of $22.1 million were down 12.7% from the year-ago quarter's $25.3 million. The operating margin was -51.6%, up 100 bps from -52.6% recorded in the previous quarter. Both R&D and SG&A increased as a percentage of sales, although the higher gross margin was an offsetting factor.

Net Income

The GAAP net loss was $17.5 million, or 50.1% of sales, compared to loss of $21.4 million, or 53.0% in the year-ago quarter. After adjusting for restructuring charges and impairment of long-lived assets, the net loss per share came to 35 cents in the last quarter, compared to 40 cents in the year-ago quarter.

Balance Sheet

Inventories were up 11.4% in the last quarter, taking the inventory turns from 7.8x to 6.0x. Days sales outstanding (DSOs) went from 38 to 63. The company ended with cash and marketable securities of $280.3 million, down $16.4 million during the quarter. Formfactor has no debt, and long-term liabilities totaled $8.4 million at quarter-end.

Guidance

For the first quarter, Formfactor expects revenue of $43.0−$47.0 million (up 23.5% to 35.0% sequentially). The non-GAAP gross margin is expected to be in the range of 22.0%-24.0%. The cash burn in the second quarter is expected to be $6.0-$8.0 million, which excludes any stock repurchase activity.

Our Recommendation

The Zacks Rank for FORM shares is #2, implying a Buy recommendation in the short term (1-3 months).


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: FORM

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