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FormFactor (FORM) Beats Earnings & Revenue Estimates in Q2

Zacks Equity Research

FormFactor Inc. FORM reported second-quarter adjusted earnings of 21 cents per share, beating the Zacks Consensus Estimate by a couple of cents. The figure increased 5% sequentially but decreased 22.2% year over year.

Revenues increased 1.9% from the year-ago quarter and 4.4% sequentially to $138 million. The top line beat the Zacks Consensus Estimate of $135 million and was at the high end of the company’s guided range of $131-$139 million.

The top-line growth was driven by strength in Foundry & Logic, and DRAM probe card demand. Also, continued adoption of test-intensive advanced packaging aided the results.

Quarter Details

Probe card segment revenues were $113.6 million in the second quarter, up 5.1% from the first quarter.

Within the probe card segment, Foundry & Logic sales (accounting for 53% of its total revenues) increased 3% on a sequential basis to $73.4 million.

Revenues for DRAM products (26% of revenues) were $36 million, up $7.1 million from the first quarter.

Flash revenues were $4.2 million, down on a sequential basis. Almost $2.6 million of the flash revenues were from NAND flash applications.

Systems revenues in the second quarter were $24.4 million, up 1.1% sequentially.

FormFactor, Inc. Price, Consensus and EPS Surprise

 

FormFactor, Inc. Price, Consensus and EPS Surprise

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

Operating Details

On a non-GAAP basis, gross margin contracted 160 basis points (bps) year over year but expanded20 bps sequentially to 44.3%. The sequential increase was due to better factory utilization and lower spend, partially offset by a less favorable product mix.

Non-GAAP operating expenses were $39.6 million in the second quarter, up $1.5 million from the first quarter. The increase was due to higher R&D investments.

Balance Sheet & Cash Flow

At the end of the second quarter, cash and cash equivalents as well as marketable securities were $176.9 million compared with $159.8 million in the first quarter.

Cash flow from operations was $34.9 million in the second quarter. Free cash flow was $29.9 million, up from $14.9 million in the first quarter.

Guidance

FormFactor expects third-quarter 2019 revenues between $137 million and $145 million. The Zacks Consensus Estimate for revenues is currently pegged at $140.7 million.

On a non-GAAP basis, the company projects gross margin within 32-45% and earnings in the band of 18-24 cents per share. The Zacks Consensus Estimate for earnings per share is pegged at 21 cents.

Zacks Rank & Stocks to Consider

Currently, FormFactor carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the broader technology sector include Alibaba Group Holding Limited BABA, Teradyne, Inc. TER and eBay Inc. EBAY, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Alibaba, Teradyne and eBay is currently projected at 26.8%, 11.4% and 9.4%, respectively.

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