FormFactor FORM delivered third-quarter 2024 adjusted earnings of 35 cents per share, beating the Zacks Consensus Estimate by 12.90%. The figure jumped 59.1% year over year.

FORM’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, met in one, and missed in the remaining one, the average surprise being 5.14%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

However, shares dropped 13.31% to close at $37.98 on Thursday due to an unimpressive fourth-quarter 2024 guidance. Year to date, FormFactor shares have gained 13.6% compared with the Zacks Computer & Technology sector’s appreciation of 41.6%.

FormFactor’s Segmental Details

Revenues of $207.9 million beat the Zacks Consensus Estimate by 3.7% and increased 21.2% year over year. Top-line growth was driven by continued strength in the DRAM probe-card business, which increased 118.9% year over year.

Probe card revenues were $172.2 million, up 34.1% year over year.

Foundry & Logic revenues (accounting for 51.7% of the total revenues) were $107.5 million, up 11.5% year over year.

DRAM revenues (29% of revenues) were $60.2 million, up 118.9% year over year. Strong DDR5 demand drove a third consecutive record-setting quarter for DRAM probe-card revenues. The company expects continued growth in DRAM probe-card revenues in the fourth quarter.

Flash revenues (2.2% of the total revenues) were $4.5 million. The reported figure was unchanged year over year.

Systems revenues (17.2% of the total revenues) were $35.7 million, down 17.4% year over year.

Revenues generated from the United States, Taiwan, South Korea, China, Japan, Singapore, and the rest of the world increased 25.9%, 11.4%, 18.8%, 58.3%, 15.7%, 48.6% and 5%, respectively, year over year.

Revenues generated from Europe and Malaysia declined 16.1% and 11.7%, respectively, year over year.

FORM’s Operating Results

In the third quarter of 2024, the gross margin increased 40 basis points (bps) year over year to 42.2%.

Non-GAAP operating expenses increased 8.9% year over year to $59.3 million. As a percentage of revenues, operating expenses were down 320 bps year over year to 28.5%.

The non-GAAP operating margin expanded 360 bps year over year to 13.6%.

FormFactor’s Balance Sheet & Cash Flow

As of Sept. 28, 2024, cash and cash equivalents, and marketable securities were $354.5 million compared with $357.6 million as of June 29, 2024.

Cash generated from operating activities was $26.7 million in the reported quarter, up from $22 million in the previous quarter.

The free cash flow was $20 million in the reported quarter compared with $14.2 million in the previous quarter. This increase was led by higher non-cash expenses of $2.4 million and a $3.1 million reduction in working capital outflows, partially offset by a $ 0.5 million rise in capital expenditure.

FORM’s Q4 Guidance

FormFactor expects fourth-quarter 2024 revenues of $190 million (+/- $5 million). The Zacks Consensus Estimate is pegged at $189.29 million, indicating 12.57% growth from the figure reported in the year-ago quarter.

The company expects a non-GAAP gross margin of 41% (+/- 1.5%).

On a non-GAAP basis, FORM expects earnings of 29 cents (+/- 4 cents) per share. The Zacks Consensus Estimate is pegged at 31 cents per share, indicating 55% growth from the figure reported in the year-ago quarter.

FormFactor’s Zacks Rank & Other Stocks to Consider

The company currently carries a Zacks Rank #2 (Buy).

Yelp YELP, Cirrus Logic CRUS and Olo OLO are some other top-ranked stocks in the broader sector.   

Yelp sports a Zacks Rank #1 (Strong Buy), and Cirrus Logic and Olo carry a Zacks Rank #2 each. You can see the complete list of today’s Zacks #1 Rank stocks here.

YELP shares have declined 27.8% year to date. Yelp is set to report third-quarter 2024 results on Nov. 7.

CRUS shares have gained 32% year to date. Cirrus Logic is set to report second-quarter fiscal 2025 results on Nov 4.

OLO shares have moved down 12.4% year to date. Olo is set to post third-quarter 2024 results on Nov. 7.

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