FormFactor (NASDAQ:FORM), a supplier of probe cards to semiconductor manufacturers, reported its third-quarter earnings results after the market close on Oct. 28. The company reported a year-over-year decline in both revenue and profits, with all of its major segments reporting lower revenue compared with the third quarter of 2014. Industrywide weakness is to blame, according to the company, although FormFactor did beat analyst estimates across the board.
A rough quarter
FormFactor reported quarterly revenue of $65.9 million, down 11% both year over year and compared with the previous quarter. Strength in South Korea, where sales jumped 46% year over year, was more than offset by revenue declines in nearly every other geographical region. Revenue from the Asia-Pacific region slumped 15.5%, while North American revenue fell 48% and revenue from Japan fell 30%. The Europe/Middle East region grew slightly, with revenue increasing by 8.5% year over year.
All of FormFactor's three market segments suffered year-over-year revenue declines during the quarter. Revenue from the SoC segment declined by 7.4% year over year, although revenue did grow by 3% compared with the second quarter. DRAM revenue fell by 12.4% year over year and by 22.1% compared with the second quarter, while Flash revenue was cut in half compared with the second quarter and declined by 38.7% year over year.
FormFactor reported a GAAP net loss of $2.5 million, or $0.04 per share, compared with a net loss of $0.3 million during the third quarter of 2014. On a non-GAAP basis, net income was $3.3 million, or $0.06 per share, for the quarter, down from $9 million, or $0.16 per share, during the third quarter of 2014. GAAP gross margin fell to 28%, down from 32.7% during the same period last year.
CEO Mike Slessor had this to say about FormFactor's quarter: "Our continued focus on cost control and operational execution enabled FormFactor to deliver a sixth consecutive quarter of non-GAAP profitability and cash generation, despite well-publicized industry demand headwinds. In addition, we experienced strengthening demand toward the end of Q3 with continued momentum into Q4, as customers increasingly rely on FormFactor to enable their new product introductions and ramps."
FormFactor's results during the third quarter, while better than analysts expected, are the polar opposite of the company's second-quarter results. During the second quarter, FormFactor managed to grow both revenue and profit year over year, with strong growth in the DRAM segment more than offsetting modest declines elsewhere.
The second quarter was also a rare quarter of GAAP profitability for the company, a trend that didn't continue into the third quarter. FormFactor has posted GAAP losses every year since 2008, and this year will probably be no different.
FormFactor did better than analysts were expecting, but the company's third quarter was weak compared with the same period last year. A big decline in DRAM revenue accounted for about half of the company's year-over-year revenue decline, and with DRAM manufacturers such as Micron currently struggling amid falling DRAM prices, the segment may continue to be weak going forward.
Despite a weak third quarter, the first nine months of this year showed improvement compared with the first nine months of 2014. Revenue is up 6.8%, and a GAAP net loss of $0.02 per share is far smaller than a loss of $0.31 per share last year. While FormFactor's results have been lumpy, the numbers are moving in the right direction.