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FormFactor (FORM) Beats on Earnings and Revenues in Q4

FormFactor Inc.FORM reported fourth-quarter 2016 earnings of 16 cents, which beat the Zacks Consensus Estimate by 3 cents. The stock was up 1.6% in Wednesday's after- hours trading.

Over the last one year, the stock has however underperformed the Zacks Electronics - Semiconductors industry. It has gained 88.84% compared with the industry's gain of 90.90%.

Earnings were driven by contribution from acquisition of Cascade Microtech and growth in the core business segments. The acquisition enhanced FormFactor's product and market diversification, enabling the company to further strengthen its foothold in the semiconductor space.

In the fourth quarter, the company's board of directors authorized a $25 million share repurchase program to make up for possible dilution from sales of common stock under the company's employee stock purchase plan and exercise of its stock options.

The numbers in detail-

Revenues

Revenues of $123.9 million were up 0.5% sequentially and 72.6% year over year. Also, revenues beat the Zacks Consensus Estimate of $120.3 million and came in almost at the higher end of the company's guidance of $116-$124 million.

The improvement was driven by continued strength in the FormFactor core probe card business as well as the growing probe card and engineering systems businesses from Cascade Microtech.

FormFactor's revenues of $383.9 million in 2016 were up 36% from $282.4 million in 2015.

Revenues by Geography

North America contributed 31.9% to fourth-quarter revenues (down 0.3% sequentially but up 291.1% year over year); Asia pacific accounted for 26% (down 8.5% sequentially but up 55.6% year over year); South Korea brought in 17.4% (up 22% sequentially and 1.9% year over year); Japan accounted for 13.6% (up 19.9% sequentially and 238% year on year); Europe/Middle East contributed 10.6% (down 20.6% sequentially but up 47.2% yearover year) and rest of the world contributed 0.6% (up 133.3% sequentially).

Revenues by End User

Foundry & Logic revenues were $68.5 million, down 9.6% from the prior quarter but up 87.7% from the year-ago quarter.

Reported revenues for DRAM products were $24.1 million, up 8.1% sequentially but down 13.7% year over year.

Flash revenues were $6 million, up 13.2% from the previous quarter and 215.8% from the year-ago period.

Systems revenues were $25.3 million, up 22.8% sequentially.

Margins

Non-GAAP gross profit was $40.3 million, down from $52.1 million last quarter. Gross margin of 32.5% was up 1048 bps sequentially but down 76 bps year over year. The increase was attributed to higher revenues and a favorable product mix.

Adjusted operating expenses were $27.3 million, up 119.7% sequentially and 28.3% year over year. Operating margin of 12.0% was up both sequentially as well as year over year.

Pro-forma net income was $13 million in the fourth quarter compared with $0.4 million in the year-ago quarter.

On a GAAP basis, net loss in the fourth quarter was $15.4 million (or loss of 22 cents) compared with net loss of $0.62 million (loss of a penny) in the year-ago period.

Balance Sheet

FormFactor exited the quarter with cash (comprising cash and cash equivalent, and Marketable securities) of $108.9 million, up from $107.4 million reported in the prior quarter. Free cash flow was $15.2 million in the fourth.

FormFactor, Inc. Price, Consensus and EPS Surprise

FormFactor, Inc. Price, Consensus and EPS Surprise | FormFactor, Inc. Quote

Guidance

Management expects first-quarter 2017 revenues in a range of $120-$128 million. The Zacks Consensus Estimate is pegged at $112.75 million. On a GAAP basis, the company projects gross margin of 34-37% and fully diluted income per share of 0-6 cents. On a non-GAAP basis, gross margin is expected in a range of 41-44% and earnings per share are projected in a range of 17-23 cents. The Zacks Consensus estimate is pegged at 11 cents. Cash flow is expected to be in a range of $3 million to $15 million, excluding acquisition-related payments.

Zacks Rank and Stocks to Consider

FormFactor carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include NVIDIA Corporation NVDA , Intersil Corporation ISIL and CACI International Inc CACI , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

For the current year, the estimates for NVIDIA stayed unchanged while the same for Intersil and CACI International Inc (CACI) went up 1.47% and 1.44%, respectively in the past 60 days.

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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 Nasdaq, Inc.


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

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