FormFactor, Inc. is a leading provider of essential test and measurement technologies along the full semiconductor product lifecycle. The company's products and services enable semiconductor companies to accelerate profitability by optimizing device performance and advancing yield knowledge. FormFactor operates in two reportable segments: Probe Cards and Systems.

Financials

In fiscal year 2023, FormFactor generated annual revenue of $663.1 million and net income of $82.4 million. The company's annual operating cash flow was $64.6 million, while its annual free cash flow stood at $8.6 million. These financial metrics demonstrate FormFactor's ability to generate consistent revenue and profitability, as well as its strong cash flow generation capabilities.

Turning to the company's quarterly performance, FormFactor reported first quarter 2024 revenue of $168.7 million, a 0.8% increase from the prior year period. Non-GAAP gross margin for the quarter was 38.7%, down from 42.1% in the previous quarter, primarily due to a less favorable product mix and higher warranty expenses. Non-GAAP net income for the quarter was $14.3 million, or $0.18 per diluted share, compared to $15.7 million, or $0.20 per diluted share, in the fourth quarter of 2023.

For the second quarter of 2024, FormFactor provided guidance for revenue of $195 million, plus or minus $5 million, representing a significant sequential increase of approximately $25 million. The company expects non-GAAP gross margin to improve to 45%, plus or minus 150 basis points, driven by higher volumes and a more favorable product mix. Non-GAAP earnings per diluted share are expected to be $0.31, plus or minus $0.04.

Business Overview

Probe Cards Segment

The company's Probe Cards segment, which includes sales of probe cards and analytical probes, generated revenue of $136.7 million in the first quarter, an increase of 7.6% sequentially. This growth was driven by a small increase in foundry and logic revenues and a significant increase in DRAM revenues, partially offset by a decrease in flash revenues.

Within the Probe Cards segment, foundry and logic revenues were $86.8 million, a 3.6% increase from the previous quarter and representing 51.5% of total company revenue. DRAM revenues reached a record $45.9 million, a 27.9% sequential increase and representing 27.2% of total revenue. The increase in DRAM revenue was primarily driven by strong demand for high-bandwidth memory (HBM) chips, which accounted for nearly half of FormFactor's DRAM revenue in the quarter and doubled the quarterly levels delivered in the second half of 2023.

Systems Segment

The Systems segment, which includes sales of probe stations, thermal systems, and cryogenic systems, generated revenue of $32.0 million, a 22.4% sequential decrease due to the sale of the company's FRT Metrology business in the fourth quarter of 2023. Excluding the impact of the FRT divestiture, Systems segment revenue decreased by 11.0% sequentially, driven primarily by timing of demand for cryogenic systems.

Geographic Distribution

Geographically, FormFactor's revenue was diversified, with South Korea accounting for 30.1% of total revenue, the United States 27.1%, Taiwan 17.7%, and China 9.3% in the first quarter of 2024. The company's customer base includes leading semiconductor manufacturers, such as Intel, SK Hynix, and Samsung Electronics.

Recent Developments

FormFactor's strong position in enabling advanced packaging technologies, such as high-bandwidth memory (HBM) and chiplets, is a key driver of the company's growth. The increasing adoption of these advanced packaging solutions is leading to higher test intensity and complexity, which in turn is driving increased demand for FormFactor's probe cards and systems.

The company's recent organizational changes, including the consolidation of global operations and the addition of experienced executives, are designed to position FormFactor for its next phase of growth. These initiatives are expected to enhance the company's ability to develop and introduce highly differentiated products while improving its manufacturing capabilities.

Liquidity

FormFactor's balance sheet remains strong, with total cash and investments of $357.2 million as of the end of the first quarter of 2024. The company has one remaining term loan with a balance of $14.0 million. During the first quarter, FormFactor generated $19.7 million in free cash flow and repurchased $17.4 million worth of shares under its $75 million share repurchase program.

Outlook

Looking ahead, FormFactor's guidance and the industry trends supporting advanced packaging adoption suggest the company is well-positioned for continued growth. The company's focus on innovation, operational excellence, and customer relationships positions it as a leader in the semiconductor test and measurement market.