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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 Form 10-Q
 
(Mark one)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 24, 2022
Or 
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to            
 
Commission file number: 000-50307
 
FormFactor, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3711155
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
 
7005 Southfront Road, Livermore, California 94551
(Address of principal executive offices, including zip code)
 
(925) 290-4000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section12(b) of the Act:
Title of each classTrading Symbol(s) Name of each exchange on which registered
Common stock, $0.001 par valueFORM Nasdaq Global Market
 ______________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes   No 
 
Indicate by check mark whether the registrant submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of the Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated FilerAccelerated FilerNon-accelerated Filer
Smaller Reporting CompanyEmerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No  

As of October 27, 2022, 77,025,103 shares of the registrant’s common stock, par value $0.001 per share, were outstanding.





FORMFACTOR, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 24, 2022
INDEX
 
   
 
   
 
   
  
 
  
 
  
  
  
  
  
  
 

2


PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
FORMFACTOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
 September 24,
2022
December 25,
2021
ASSETS 
Current assets:  
Cash and cash equivalents$120,602 $151,010 
Marketable securities130,991 125,055 
Accounts receivable, net of allowance for credit losses of $190 and $195
110,497 115,541 
Inventories, net132,029 111,548 
Restricted cash1,263 2,233 
Prepaid expenses and other current assets20,932 18,652 
Total current assets516,314 524,039 
Restricted cash1,840 2,099 
Operating lease, right-of-use-assets31,508 35,210 
Property, plant and equipment, net of accumulated depreciation163,384 146,555 
Goodwill209,105 212,299 
Intangibles, net28,208 36,342 
Deferred tax assets67,775 61,995 
Other assets4,229 1,981 
Total assets$1,022,363 $1,020,520 
LIABILITIES AND STOCKHOLDERS’ EQUITY 
Current liabilities: 
Accounts payable$75,021 $57,862 
Accrued liabilities46,328 50,836 
Current portion of term loans, net of unamortized issuance costs2,734 8,931 
Deferred revenue31,974 23,224 
Operating lease liabilities7,699 7,901 
Total current liabilities163,756 148,754 
Term loans, less current portion, net of unamortized issuance costs14,653 15,434 
Deferred tax liabilities2,232 3,623 
Long-term operating lease liabilities27,858 31,009 
Other liabilities5,562 5,920 
Total liabilities214,061 204,740 
 
Stockholders’ equity: 
Common stock, $0.001 par value:
 
250,000,000 shares authorized; 77,265,099 and 78,240,506 shares issued and outstanding
77 78 
Additional paid-in capital843,453 898,945 
Accumulated other comprehensive loss(17,899)(1,449)
Accumulated deficit(17,329)(81,794)
Total stockholders’ equity808,302 815,780 
Total liabilities and stockholders’ equity$1,022,363 $1,020,520 
 
The accompanying notes are an integral part of these condensed consolidated financial statements. 
3


FORMFACTOR, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
 Three Months EndedNine Months Ended
 September 24,
2022
September 25,
2021
September 24,
2022
September 25,
2021
Revenues$180,869 $189,964 $581,950 $564,676 
Cost of revenues118,656 109,745 331,144 331,468 
Gross profit62,213 80,219 250,806 233,208 
Operating expenses:    
Research and development26,549 26,026 82,000 75,526 
Selling, general and administrative31,637 30,940 97,949 91,434 
Total operating expenses58,186 56,966 179,949 166,960 
Operating income4,027 23,253 70,857 66,248 
Interest income709 121 1,147 463 
Interest expense(152)(151)(463)(447)
Other income, net1,041 58 1,784 36 
Income before income taxes5,625 23,281 73,325 66,300 
Provision for income taxes1,274 2,784 8,860 8,273 
Net income$4,351 $20,497 $64,465 $58,027 
Net income per share: 
Basic $0.06 $0.26 $0.83 $0.75 
Diluted$0.06 $0.26 $0.82 $0.73 
Weighted-average number of shares used in per share calculations:   
Basic 77,245 77,869 77,796 77,643 
Diluted77,688 79,029 78,492 79,190 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4


FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
Three Months EndedNine Months Ended
September 24,
2022
September 25,
2021
September 24,
2022
September 25,
2021
Net income $4,351 $20,497 $64,465 $58,027 
Other comprehensive loss, net of tax:
Translation adjustments(7,348)(1,511)(13,902)(3,258)
Unrealized losses on available-for-sale marketable securities(674)(62)(2,425)(290)
Unrealized losses on derivative instruments(881)(323)(123)(638)
Other comprehensive loss, net of tax:(8,903)(1,896)(16,450)(4,186)
Comprehensive income (loss)$(4,552)$18,601 $48,015 $53,841 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except shares)
(Unaudited)
 Shares of
Common
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
 Income (Loss)
Accumulated
Deficit
Total
Nine Months Ended September 24, 2022
Balances, December 25, 202178,240,506 $78 $898,945 $(1,449)$(81,794)$815,780 
Issuance of common stock under the Employee Stock Purchase Plan316,861 — 10,457 — — 10,457 
Issuance of common stock pursuant to exercise of options6,000 — 42 — — 42 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax713,554 1 (15,564)— — (15,563)
Purchase and retirement of common stock through repurchase program(2,011,822)(2)(73,476)— — (73,478)
Stock-based compensation— — 23,049 — — 23,049 
Other comprehensive loss— — — (16,450)— (16,450)
Net income— — — — 64,465 64,465 
Balances, September 24, 202277,265,099 $77 $843,453 $(17,899)$(17,329)$808,302 
Three Months Ended September 24, 2022
Balances, June 25, 202277,194,733 $77 $860,584 $(8,996)$(21,680)$829,985 
Issuance of common stock under the Employee Stock Purchase Plan159,219 — 4,812 — — 4,812 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax479,478 1 (11,321)— — (11,320)
Purchase and retirement of common stock through repurchase program(568,331)(1)(19,149)— — (19,150)
Stock-based compensation— — 8,527 — — 8,527 
Other comprehensive loss— — — (8,903)— (8,903)
Net income— — — — 4,351 4,351 
Balances, September 24, 202277,265,099 $77 $843,453 $(17,899)$(17,329)$808,302 

The accompanying notes are an integral part of these condensed consolidated financial statements.



6



FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except shares)
(Unaudited)
Shares of
Common
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
 Income (Loss)
Accumulated
Deficit
Total
Nine Months Ended September 25, 2021
Balances, December 26, 202077,437,997 $78 $903,838 $5,886 $(165,718)$744,084 
Issuance of common stock under the Employee Stock Purchase Plan378,584 — 9,809 — — 9,809 
Issuance of common stock pursuant to exercise of options100,000  844 — — 844 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax910,838 1 (19,602)— — (19,601)
Purchase and retirement of common stock through repurchase program(620,200)(1)(23,950)— — (23,951)
Stock-based compensation— — 21,364 — — 21,364 
Other comprehensive loss— — — (4,186)— (4,186)
Net income— — — — 58,027 58,027 
Balances, September 25, 202178,207,219 $78 $892,303 $1,700 $(107,691)$786,390 
Three Months Ended September 25, 2021
Balances, June 26, 202177,454,800 $77 $894,062 $3,596 $(128,188)$769,547 
Issuance of common stock under the Employee Stock Purchase Plan149,800  4,744 — — 4,744 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax602,619 1 (14,341)— — (14,340)
Stock-based compensation— — 7,838 — — 7,838 
Other comprehensive income— — — (1,896)— (1,896)
Net income— — — — 20,497 20,497 
Balances, September 25, 202178,207,219 $78 $892,303 $1,700 $(107,691)$786,390 

The accompanying notes are an integral part of these condensed consolidated financial statements.
7


FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine Months Ended
 September 24,
2022
September 25,
2021
Cash flows from operating activities:  
Net income $64,465 $58,027 
Adjustments to reconcile net income to net cash provided by operating activities: 
Depreciation21,189 19,256 
Amortization7,056 16,362 
Reduction in the carrying amount of right-of-use assets5,900 5,412 
Stock-based compensation expense21,873 21,585 
Deferred income tax benefit(6,881)(873)
Provision for excess and obsolete inventories16,078 11,621 
Non-cash restructuring charges710 1,592 
Gain on contingent consideration (95)
Other adjustments to reconcile net income to net cash provided by operating activities3,356 2,500 
Changes in assets and liabilities:
Accounts receivable1,654 1,157 
Inventories(33,023)(30,335)
Prepaid expenses and other current assets(2,016)3,631 
Other assets(117)(333)
Accounts payable17,613 1,488 
Accrued liabilities(5,035)(6,951)
Other liabilities276 47 
Deferred revenues3,776 2,000 
Operating lease liabilities(5,826)(5,654)
Net cash provided by operating activities111,048 100,437 
Cash flows from investing activities:  
Acquisition of property, plant and equipment(39,024)(51,353)
Acquisition of business(3,350) 
Purchases of marketable securities(80,249)(114,898)
Purchase of promissory note receivable(1,000) 
Proceeds from maturities and sales of marketable securities71,610 71,275 
Net cash used in investing activities(52,013)(94,976)
Cash flows from financing activities:  
Proceeds from issuances of common stock10,499 10,647 
Purchase of common stock through stock repurchase program(73,478)(23,951)
Tax withholdings related to net share settlements of equity awards(15,564)(12,643)
Payment of contingent consideration (3,873)
Principal repayments on term loans(6,421)(7,049)
Net cash used in financing activities(84,964)(36,869)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(5,708)(2,216)
Net decrease in cash, cash equivalents and restricted cash(31,637)(33,624)
Cash, cash equivalents and restricted cash, beginning of period155,342 191,098 
Cash, cash equivalents and restricted cash, end of period$123,705 $157,474 

The accompanying notes are an integral part of these condensed consolidated financial statements.
8



FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 24,
2022
September 25,
2021
Non-cash investing and financing activities:
Increase in accounts payable and accrued liabilities related to property, plant and equipment purchases$341 $4,684 
Increase in accrued liabilities related to tax withholdings related to net share settlements of equity awards 6,952 
Operating lease, right-of-use assets obtained in exchange for lease obligations3,457 11,699 
Supplemental disclosure of cash flow information:
Cash paid for income taxes, net$9,911 $6,795 
Cash paid for interest455 496 
Operating cash outflows from operating leases6,670 6,553 
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents$120,602 $153,781 
Restricted cash, current1,263 2,019 
Restricted cash, non-current1,840 1,674 
Total cash, cash equivalents and restricted cash$123,705 $157,474 

The accompanying notes are an integral part of these condensed consolidated financial statements.
9


FORMFACTOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Note 1 — Basis of Presentation and New Accounting Pronouncements
 
Basis of Presentation
The accompanying condensed consolidated financial information of FormFactor, Inc. is unaudited and has been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). However, such information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and the notes thereto included in our 2021 Annual Report on Form 10-K filed with the SEC on February 18, 2022. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.
 
Fiscal Year 
We operate on a 52/53 week fiscal year, whereby the fiscal year ends on the last Saturday of December. Fiscal 2022 and 2021 contain 53 weeks and 52 weeks, respectively, and the nine months ended September 24, 2022 and September 25, 2021 each contained 39 weeks. Fiscal 2022 will end on December 31, 2022.

Significant Accounting Policies
Our significant accounting policies have not changed during the nine months ended September 24, 2022 from those disclosed in our Annual Report on Form 10-K for the year ended December 25, 2021.

Reclassifications
Certain immaterial reclassifications were made to the prior year financial statements to conform to the current year presentation.

New Accounting Pronouncements
ASU 2021-08
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The new guidance requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards Codification 606, “Revenue from Contracts with Customers,” as if it had originated the contracts. The Company elected to early adopt on a prospective basis during the second quarter of fiscal 2022. The adoption did not have a material effect on the Company's Consolidated Financial Statements.

Note 2 — Concentration of Credit and Other Risks

Each of the following customers accounted for 10% or more of our revenues for the periods indicated:
Three Months EndedNine Months Ended
September 24,
2022
September 25,
2021
September 24,
2022
September 25,
2021
Intel Corporation17.0 %20.8 %19.7 %21.7 %
SK Hynix Inc.10.7 ***
Samsung Electronics., LTD.*12.9 %*10.5 %
27.7 %33.7 %19.7 %32.2 %

At September 24, 2022, one customer accounted for 18.1% of gross accounts receivable. At December 25, 2021, one customer accounted for 13.8% of gross accounts receivable.

Note 3 — Inventories, net

Inventories are stated at the lower of cost (principally standard cost, which approximates actual cost on a first in, first out basis) or net realizable value.
 
10


Inventories, net, consisted of the following (in thousands):
September 24,
2022
December 25,
2021
Raw materials$61,312 $57,673 
Work-in-progress48,439 35,935 
Finished goods22,278 17,940 
$132,029 $111,548 

Note 4 Acquisition

Woburn Acquisition
On June 9, 2022, we acquired the assets of the dilution refrigerator product line of American ULT Cryogenics, formerly d/b/a JanisULT (“Woburn”), for total consideration of $3.4 million. This acquisition adds cryogen-free dilution refrigerators capable of cooling to sub-10 millikelvin to our product portfolio, which is required for operation of superconducting quantum computers.

The acquisition price was allocated to the tangible and identified intangible assets acquired and liabilities assumed as of the closing date of the acquisition based upon their respective fair values. The fair values assigned to assets acquired and liabilities assumed were based on management’s assumptions as of the reporting date. Goodwill represents the excess of purchase price over the fair value assigned to the assets acquired and liabilities assumed and is allocated to the HPD reporting unit within the Systems reportable segment. The identified intangible asset, developed technology, has a useful life of three years.

Our purchase accounting remains open as of the reporting date, with the purchase price preliminarily allocated to acquired assets and liabilities assumed that are subject to change as more information becomes available. The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of inventories, developed technology intangible asset, and residual goodwill. The preliminary fair value of assets acquired, including goodwill and intangibles, and liabilities assumed for the purchase as follows (in thousands):
Amount
Accounts receivable$178 
Inventories7,041 
Property, plant and equipment479 
Prepaid expenses and other current assets117 
Other assets28 
Tangible assets acquired7,843 
Deferred revenue(5,513)
Accounts payable and accrued liabilities(30)
Total tangible assets acquired and liabilities assumed2,300 
Developed technology intangible asset500 
Goodwill550 
Net assets acquired$3,350 

11


Note 5 Goodwill and Intangible Assets

Goodwill by reportable segment was as follows (in thousands):
Probe CardsSystemsTotal
Goodwill, as of December 26, 2020$178,072 $34,689 $212,761 
Addition - Baldwin Park Acquisition352  352 
Addition - HPD Acquisition 1,254 1,254 
Foreign currency translation (2,068)(2,068)
Goodwill, as of December 25, 2021178,424 33,875 212,299 
Addition - Woburn Acquisition 550 550 
Foreign currency translation (3,744)(3,744)
Goodwill, as of June 25, 2022$178,424 $30,681 $209,105 

We have not recorded goodwill impairments for the nine months ended September 24, 2022.

Intangible assets were as follows (in thousands):
September 24, 2022December 25, 2021
Intangible Assets GrossAccumulated
Amortization
NetGrossAccumulated
Amortization
Net
Existing developed technologies $169,246 $148,916 $20,330 $172,259 $148,784 $23,475 
Customer relationships50,316 43,094 7,222 51,270 39,254 12,016 
Trade name7,835 7,579 256 8,054 7,603 451 
Backlog   1,896 1,896  
In-process research and development400  400 400  400 
$227,797 $199,589 $28,208 $233,879 $197,537 $36,342 

Amortization expense was included in our Condensed Consolidated Statements of Income as follows (in thousands):
 Three Months EndedNine Months Ended
 September 24,
2022
September 25,
2021
September 24,
2022
September 25,
2021
Cost of revenues$824 $858 $2,420 $11,453 
Selling, general and administrative1,530 1,604 4,636 4,909 
$2,354 $2,462 $7,056 $16,362 

The estimated future amortization of definite-lived intangible assets, excluding in-process research and development, is as follows (in thousands):
Fiscal YearAmount
Remainder of 2022$2,307 
20236,944 
20244,393 
20254,062 
20263,011 
Thereafter7,091 
$27,808 

12


Note 6 Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):
September 24,
2022
December 25,
2021
Accrued compensation and benefits$23,398 $29,706 
Accrued income and other taxes11,835 8,086 
Accrued warranty3,806 2,805 
Employee stock purchase plan contributions withheld1,979 4,693 
Accrued restructuring charges