FormFactor Inc. (NASDAQ:FORM) reported fourth-quarter adjusted earnings of 41 cents per share, beating the Zacks Consensus Estimate of 32 cents. The figure increased 86.4% sequentially and 32.3% year over year.
Moreover, revenues increased 26.8% from the year-ago quarter and 27% sequentially to $178.63 million. The figure was at the high end of the company’s guided range of $170-$178 million. Also, the top line outpaced the Zacks Consensus Estimate by 2.7%.
The top-line growth was driven by strong demand for both Foundry & Logic probe cards. Customer node transitions and new design releases also aided revenue growth.
Management continues to expect strong demand for Foundry & Logic probe cards in the near term. It expects a sequential reduction in DRAM probe card demand in first-quarter 2020 but long-term DRAM probe card demand is likely to remain solid.
FormFactor, Inc. Price, Consensus and EPS Surprise
Quarter Details
Probe card segment revenues were $153.2 million in the fourth quarter, up 31.5% from the third quarter.
Within the probe card segment, Foundry & Logic sales (accounting for 59% of its total revenues) increased 53.7% on a sequential basis to $105.1 million.
Revenues for DRAM products (24% of revenues) were $42.9 million, up $3.5 million from the third quarter.
Flash revenues were $5.2 million, down on a sequential basis.
Systems revenues in the fourth quarter were $25.5 million, up 5.4% sequentially.
Operating Details
On a non-GAAP basis, gross margin expanded 160 basis points (bps) year over year and 220 bps sequentially to 45.7%. The increase was due to higher volume and lower manufacturing variances.
Non-GAAP operating expenses were $43.8 million in the fourth quarter, up from $37.2 million in the prior-year period. The increase was due to higher R&D investments.
Balance Sheet & Cash Flow
At the end of the fourth quarter, cash and cash equivalents, as well as marketable securities were $220.87 million compared with $199.97 million in the third quarter.
Cash flow from operations was $37.7 million in the fourth quarter. Free cash flow was $31.6 million, up from $25.6 million in the third quarter.
Guidance
FormFactor expects first-quarter 2020 revenues between $160 million and $172 million. The Zacks Consensus Estimate for revenues is currently pegged at $154.6 million.
On a non-GAAP basis, the company projects gross margin within 43-46% and earnings in the band of 27-35 cents per share. The Zacks Consensus Estimate for earnings per share is pegged at 26 cents.
Zacks Rank & Other Stocks to Consider
Currently, FormFactor carries a Zacks Rank #1 (Strong Buy). Other top-ranked stocks in the broader technology sector include Itron, Inc. (NASDAQ:ITRI) , SplunkInc. (NASDAQ:SPLK) and Waters Corporation (NYSE:WAT) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth for Itron, Splunk, and Waters Corp. is currently projected at 25%, 31.2% and 9.5%, respectively.
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