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FormFactor (FORM - Free Report) reported fourth-quarter 2022 adjusted earnings of 5 cents per share, which surpassed the Zacks Consensus Estimate by 66.7%. However, the bottom line decreased by 88.6% year over year.
Revenues of $165.99 million surpassed the Zacks Consensus Estimate of $155.45 million. However, the figure declined by 19% on a year-over-year basis.
The top-line decline was primarily attributed to softness in probe cards. Weak demand for DRAM and Foundry & Logic remained a concern.
Nevertheless, strong demand for Flash and Systems was a positive.
FormFactor, Inc. Price, Consensus and EPS Surprise
Probe card: Revenues from this segment were $124.4 million for the fourth quarter, down 25% year over year.
Foundry & Logic’s (accounting for 49.5% of revenues) revenues were $82.1 million, down 27.9% year over year.
Revenues for DRAM products (16.4% of revenues) were $27.3 million, reflecting a decrease of 32.3% year over year.
Flash’s revenues (9% of revenues) were $15 million, up 29.3% from the year-ago period’s level.
Systems: Revenues from this segment were $41.6 million (25.1% of revenues), up 6.4% year over year.
Regional Details
Revenues generated from the United States, Europe, Singapore and the Rest of World were $32.8 million, $11 million, $11 million and $2.8 million, respectively. Revenues in United States and Europe declined 4.9% and 1.8%, respectively. Nevertheless, revenues in Singapore and Rest of the World increased 8.9% and 40% year over year, respectively.
Revenues generated from Taiwan, China, South Korea, Malaysia and Japan were $29.9 million, $35.8 million, $26.2 million, $5.1 million and $11.4 million, respectively. Revenues from Taiwan, China, South Korea and Malaysia were down 36.2%, 4.8%, 33.2% and 65.3%, respectively, year over year.
Revenues from Japan were up 29.5% from year-ago quarter.
Operating Results
On a non-GAAP basis, gross margin significantly contracted from 44.3% in the year-ago quarter to 31.7% in the reported quarter.
Non-GAAP operating expenses decreased 3.6% year over year to $47.9 million. As a percentage of total third-quarter revenues, the metric expanded 460 basis points (bps) year over year to 28.8%.
Non-GAAP operating margin was 2.9%, which contracted significantly from 20.1% in the year-ago quarter.
Balance Sheet & Cash Flow
As of Dec 31, 2022, cash and cash equivalents and marketable securities were $238.1 million compared with $251.6 million on Sep 24, 2022.
Cash generated from operating activities was $20.7 million for the reported quarter, down from $24.2 million in the previous quarter.
Capital expenditure was $26.2 million in the fourth quarter. Free cash flow was an outflow of $5.4 million in the same quarter.
Guidance
FormFactor expects first-quarter 2023 revenues of $162 million (+/- $5 million). The Zacks Consensus Estimate for the same is currently pegged at $152.26 million.
Management expects a non-GAAP gross margin of 37% (+/- 1.5%).
On a non-GAAP basis, it projects earnings of 13 cents (+/- 4 cents) per share. The consensus mark for the metric is pegged at 9 cents per share.
For the first quarter, the company expects moderate improvement in demand for Foundry & Logic probe cards. However, the outlook for DRAM and Flash memory probe cards is weak.
The Systems business is anticipated to sustain its strong momentum in the first quarter.
Image: Bigstock
FormFactor's (FORM) Q4 Earnings Beat, Revenues Decline Y/Y
FormFactor (FORM - Free Report) reported fourth-quarter 2022 adjusted earnings of 5 cents per share, which surpassed the Zacks Consensus Estimate by 66.7%. However, the bottom line decreased by 88.6% year over year.
Revenues of $165.99 million surpassed the Zacks Consensus Estimate of $155.45 million. However, the figure declined by 19% on a year-over-year basis.
The top-line decline was primarily attributed to softness in probe cards. Weak demand for DRAM and Foundry & Logic remained a concern.
Nevertheless, strong demand for Flash and Systems was a positive.
FormFactor, Inc. Price, Consensus and EPS Surprise
FormFactor, Inc. price-consensus-eps-surprise-chart | FormFactor, Inc. Quote
Segments in Detail
Probe card: Revenues from this segment were $124.4 million for the fourth quarter, down 25% year over year.
Foundry & Logic’s (accounting for 49.5% of revenues) revenues were $82.1 million, down 27.9% year over year.
Revenues for DRAM products (16.4% of revenues) were $27.3 million, reflecting a decrease of 32.3% year over year.
Flash’s revenues (9% of revenues) were $15 million, up 29.3% from the year-ago period’s level.
Systems: Revenues from this segment were $41.6 million (25.1% of revenues), up 6.4% year over year.
Regional Details
Revenues generated from the United States, Europe, Singapore and the Rest of World were $32.8 million, $11 million, $11 million and $2.8 million, respectively. Revenues in United States and Europe declined 4.9% and 1.8%, respectively. Nevertheless, revenues in Singapore and Rest of the World increased 8.9% and 40% year over year, respectively.
Revenues generated from Taiwan, China, South Korea, Malaysia and Japan were $29.9 million, $35.8 million, $26.2 million, $5.1 million and $11.4 million, respectively. Revenues from Taiwan, China, South Korea and Malaysia were down 36.2%, 4.8%, 33.2% and 65.3%, respectively, year over year.
Revenues from Japan were up 29.5% from year-ago quarter.
Operating Results
On a non-GAAP basis, gross margin significantly contracted from 44.3% in the year-ago quarter to 31.7% in the reported quarter.
Non-GAAP operating expenses decreased 3.6% year over year to $47.9 million. As a percentage of total third-quarter revenues, the metric expanded 460 basis points (bps) year over year to 28.8%.
Non-GAAP operating margin was 2.9%, which contracted significantly from 20.1% in the year-ago quarter.
Balance Sheet & Cash Flow
As of Dec 31, 2022, cash and cash equivalents and marketable securities were $238.1 million compared with $251.6 million on Sep 24, 2022.
Cash generated from operating activities was $20.7 million for the reported quarter, down from $24.2 million in the previous quarter.
Capital expenditure was $26.2 million in the fourth quarter. Free cash flow was an outflow of $5.4 million in the same quarter.
Guidance
FormFactor expects first-quarter 2023 revenues of $162 million (+/- $5 million). The Zacks Consensus Estimate for the same is currently pegged at $152.26 million.
Management expects a non-GAAP gross margin of 37% (+/- 1.5%).
On a non-GAAP basis, it projects earnings of 13 cents (+/- 4 cents) per share. The consensus mark for the metric is pegged at 9 cents per share.
For the first quarter, the company expects moderate improvement in demand for Foundry & Logic probe cards. However, the outlook for DRAM and Flash memory probe cards is weak.
The Systems business is anticipated to sustain its strong momentum in the first quarter.
Zacks Rank & Stocks to Consider
Currently, FormFactor has a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader Zacks Computer & Technology sector are Agilent Technologies (A - Free Report) , Arista Networks (ANET - Free Report) and Garmin (GRMN - Free Report) , all three carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Agilent has gained 8.4% in the past year. A’s long-term earnings growth rate is currently projected at 10%.
Arista Networks has gained 6.1% in the past year. The long-term earnings growth rate for ANET is currently projected at 17.5%.
Garmin has lost 24.6% in the past year. The long-term earnings growth rate for GRMN is currently projected at 5.6%.