FormFactor (FORM -2.75%), a supplier to the semiconductor industry, reported its fourth-quarter and full-year results on Wednesday.

The company's financials have been under pressure all year long due to weak industry conditions. That pressure didn't let up in the fourth quarter. However, FormFactor was able to overcome the industry headwinds and record year-over-year growth on the top and bottom lines. 

FormFactor's fourth-quarter results: The raw numbers


Q4 2018

Q4 2017

Year-Over-Year Change


$140.9 million

$131.9 million


Non-GAAP net income

$23.5 million

$18 million


Non-GAAP earnings per share




Data source: FormFactor. Non-GAAP = adjusted.

What happened with FormFactor this quarter?

  • Quarterly sales of $141 million came in above the high end of management's guidance range
  • Non-GAAP gross margin was 44.1%. This figure was within the guidance range.
  • Non-GAAP EPS of $0.31 exceeded the high end of guidance by $0.02.
  • Free cash flow was $15.8 million. 

Zooming out to fiscal 2018, here's an overview of the company's performance:

  • Revenue declined 3.4% to $529.7 million.
  • Non-GAAP gross margin increased 10 basis points to 44.3%.
  • Non-GAAP net income fell 15% to $76.1 million.
  • Non-GAAP EPS declined 17% to $1.01.
  • Free cash flow plunged 28% to $51.9 million.
Semiconductor on top of graph paper

Image source: Getty Images.

What management had to say

CEO Mike Slessor commented that he was happy with the company's year-end performance given the macro environment: "Despite a very dynamic industry environment and several customer node transition delays, we delivered solid financial and operational results by capitalizing on our broad and diverse opportunity set in advanced probe cards and engineering systems."

On the conference call with investors, Slessor expounded on some of the factors that allowed the company to outperform guidance during the quarter: "The primary driver of this performance was robust demand in both foundry and logic probe cards and engineering systems, along with some customer pull-ins from 2019. As is evident from our first-quarter outlook, we continue to experience relatively stable demand given the general industry backdrop."

Check out the latest earnings call transcripts for companies we cover.

Looking ahead

Management expects that FormFactor will be able to post growth in the current quarter. However, its reported tax rate is expected to rise significantly in future quarters. This change won't impact the company's cash tax rate, but it will act as a huge drag on non-GAAP earnings.

With that impact in mind, here's a look at the company's guidance for the current quarter:

Metric Q1 2019 Guidance Range  Q1 2018 Actual Year-Over-Year Change at Midpoint
Revenue $127 million to $135 million $118.3 million 11%
Non-GAAP EPS $0.15 to $0.21  $0.17 6%

Data source: FormFactor.

CFO Shai Shahar also stated that this change in the company's tax rate is expected to negatively impact a part of the company's long-term financial targets: "Our target financial model EPS is expected to be $1.25 as compared to the $1.50 prior to the release of the valuation allowance. The other elements of our target financial model are not affected and we continue to target $650 million of revenue, 46% gross margin, 19% of operating income, and strong annual free cash flow generation of $110 million."