2016 proved to be a transformative year for FormFactor (NASDAQ:FORM). The semiconductor probe card manufacturer made a bold bet by shelling out more than $350 million to acquire Cascade Microtech, one of its primary competitors. That move nearly doubled the size of its business and promised to make the company stronger than ever.

Coming into Wednesday's fourth-quarter earnings report, investors were expecting that the new FormFactor would post strong revenue and adjusted profit growth. Let's check in on the company's results to see if it was able to meet those lofty expectations. 

Semiconductor wafer

Image source: Getty Images.

FormFactor Q4: The raw numbers


Q4 2016

Q4 2015

Year-Over-Year Change


$123.9 million

$71.8 million


Non-GAAP net income

$14.4 million

$5.8 million


Non-GAAP earnings per share




Data source: FormFactor.

What happened with FormFactor this quarter?

  • FormFactor's big top-line jump is largely owed to the Cascade Microtech acquisition. On a sequential basis, revenue growth was far more muted at only 0.5%.
  • On a GAAP basis, FormFactor recorded a quarterly net loss of $15.4 million, or $0.22 per share. This figure was far higher than the $0.6 million net loss that was recorded in the year-ago period.
  • On a non-GAAP (adjusted) basis -- which excludes items like stock-based compensation and restructuring charges -- the company recorded net income of $14.4 million, or $0.20 per share.
  • FormFactor's cash generation during the period was $2.1 million. That's down from $3.8 million in the same quarter a year ago. However, if you exclude acquisition costs, free cash flow generation would have been $15.2 million.
  • The board of directors authorized a new $25 million share repurchase program to offset potential dilution.

For perspective, management was guiding for revenue this quarter to land between $116 million and $124 million. They also called for non-GAAP EPS to come in between $0.15 and $0.21. Thus, the company's actual results came in at the high end of the range on both metrics. 

What management had to say

CEO Mike Slessor was quite happy with the quarterly performance, saying, "FormFactor delivered solid growth fueled by our transformative acquisition of Cascade Microtech, which provided significant product and market diversification, as well as growth in our core probe card business as we doubled capacity for our largest foundry and logic customer."

He went on to say that the company has already achieved more than half of the committed $10 million to $12 million of annual cost synergies promised when the deal was first announced. Management believes that these achievements position it well to drive accelerated earnings growth from here.

Looking ahead

On the earnings call, Slessor noted that the company was off to a great start for the year, saying:

As we start 2017, our increased product and market diversification is enabling us to benefit from broad-based strength in semiconductor industry demand. At the same time we are also capitalizing on some FormFactor specific market gains. Both of these factors are boosting our business over the seasonal softness we have historically experienced in the first quarter and are reflected in the go-forward guidance we are providing today.

As a result of that strength, management offered the following guidance for the first quarter:



Q1 2016


$120 million-$128 million

$53.6 million




Data source: FormFactor.

As for 2017 as a whole, the company is projecting that revenue will land between $480 million and $500 million, although management admits that its visibility about the second half of the year remains limited.

Fourth-quarter results clearly show that management is making good on its promises to drive strong revenue and profit growth while simultaneously realizing cost savings. If the company can keep this momentum going in 2017, then shareholders look poised to have a prosperous year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.