Formfactor, Inc. · NASDAQ:FORM
Formfactor — Investor Presentation (October 2020)
31 slides from Formfactor's investor presentation, October 2020
Slide 1: Investor Presentation
Investor Presentation October 2020
Slide 2: Forward-Looking Statements; Non-GAAP Financial Measures
Forward-Looking Statements; Non-GAAP Financial Measures This presentation contains forward-looking statements within the meaning of the U.S. Securities Exchange Act of 1934 and the Securities Act of 1933. The forward-looking statements include statements concerning, among other things, our future bu
Slide 3: FormFactor At a Glance
FormFactor At a Glance Advanced Probe Cards Engineering Systems TTM Revenue* for Chip Production ~ $675M 60,000,000+ MEMS PROBES/YEAR 10,000+ INSTALLED PROBERS Global Manufacturing, Design Recognized by and Customer Service Presence Industry Leaders ** 2,000 Intel TSMC Micron PEOPLE SK hynix Samsung
Slide 4: Compelling Investment Thesis
Compelling Investment Thesis Market leader in Benefits from powerful Technology leadership Profitable financial Active execution of large and growing secular trends: enables customers’ model with earnings acquisition strategy semiconductor test and • Exponential growth in most critical roadmap growt
Slide 5: Proven Track Record
Proven Track Record Revenue Non-GAAP Gross Margin Non-GAAP EPS* Free Cash Flow $ IN MILLIONS $ IN MILLIONS $115 $675 $102 46.1% $1.46 $1.21 $72 $589 $1.01 $1.04 44.5% 44.2% 44.3% $52 $548 $530 2017 2018 2019 TTM 2017 2018 2019 2017 2018 2019 2017 2018 2019 TTM TTM TTM Benefits From Scale and Expandi
Slide 6: Recognized Industry Leader
Recognized Industry Leader “Customers give FormFactor high rankings for trust in supplier and technical leadership,” said G. Dan Hutcheson, 2014 . 2015 . 2016 CEO of VLSIresearch. “… 2017 . 2018 . 2019 FormFactor continues to be a five-star supplier.” 2020 Trusted by leading semiconductor designers
Slide 7: How FormFactor Wins
How FormFactor Wins Early Customer Engagement Technology and Applications Creates Competitive Advantage Leadership Relied Upon and High Barriers to Entry by Customers Deliver Market-Leading Largest R&D Budget in Products with World-Class Served Markets, Enabled Cycle Times and Quality by Industry-Le
Slide 8: FormFactor Occupies a Unique Place in Semiconductor Industry
FormFactor Occupies a Unique Place in Semiconductor Industry Front-End: Back-End: Wafer Fabrication Equipment Wafer Test & Measurement Wafer Assembly and Final Test Industry: $55 Billion Industry: $1.9 Billion Industry: $3.5 Billion Advanced Probe Cards: $1.5B; Engineering Systems: $0.4B • 6% CAGR •
Slide 9: Customers Value, FormFactor Benefits From "Lab to Fab" Capabilities
Customers Value, FormFactor Benefits From “Lab to Fab” Capabilities FormFactor Engages Customers Throughout Their Product Life Cycle Customers benefit from FormFactor’s unique visibility accelerated path from concept R&D/Engineering to emerging trends, e.g. to volume production Silicon Photonics, Qu
Slide 10: FormFactor Benefits from Two Industry Dynamics
FormFactor Benefits from Two Industry Dynamics Slowing of Moore’s Law: Secular Growth in the Semiconductor Industry Node shrinks no longer provide cost reduction Exponential Growth in Normalized Cost / yielded mm Semiconductor Use Increased Infrastructure and Enterprise Spending 4X 5G Applications i
Slide 11: Exponential Growth in Silicon Devices Will Be Accelerated by 5G
Exponential Growth in Silicon Devices Will Be Accelerated by 5G Key Factors for 5G Success 5G • RF expertise • R&D-intensity • Dependable supplier • Customer intimacy 1981-1995 1996-2006 2007-2019 2020+ Source: Yole Development of Technology for 5G. 11
Slide 12: Infrastructure Spending and 5G Adoption Are Spurring Semiconductor and Probe Card Use
Infrastructure Spending and 5G Adoption Are Spurring Semiconductor and Probe Card Use Data Center Capital Spending Forecast1 5G Will Drive Increased Content in IN BILLIONS Mobility and Automotive Applications $120 10% ͌ 30B Mobility2 Connected Connected devices by 2023 $110 Devices 2018-2023 M2M Sma
Slide 13: Advanced Packaging Addresses Scaling Challenges As Moore's Law Slows
Advanced Packaging Addresses Scaling Challenges As Moore’s Law Slows Node shrinks no longer provide cost reduction Normalized Cost / yielded mm 4X Advanced Packaging improves product-level performance, power and density 45nm 7nm Source: Su (AMD), IEDM 2017. Note: Cost per yielded mm2 for a 250 mm2 d
Slide 14: Probe Cards are Critical to Advanced Packaging
Probe Cards are Critical to Advanced Packaging Cost of the Advanced TEST Packaging Solution INTENSITY Low High Semiconductor Die Yield Low Some LOTS! High Little Some Test intensity, and therefore probe card demand, increases as advanced packaging becomes widespread 14
Slide 15: FormFactor's Markets Offer Attractive Growth Opportunities
FormFactor’s Markets Offer Attractive Growth Opportunities Incremental Growth from Advanced Packaging and 5G Data Center Growth From FormFactor’s $650M → $850M Industry-Leading Position in $200 MILLION Fast-Growing Markets Mobility Incremental Revenue By ~2023* Automotive *Based on VLSIresearch esti
Slide 16: Unique Capabilities Position FormFactor for Faster Growth in Advanced Probe Cards
Unique Capabilities Position FormFactor for Faster Growth in Advanced Probe Cards 8%+ CAGR** FormFactor Memory • Proprietary Technologies • Strong Customer Relationships • Productive R&D Spend 6% CAGR* High Frequency (RF) Advanced Probe Card Market 5% CAGR* Probe Card Market Logic $2 Billion Advance
Slide 17: Poised for Above-Market Growth in Engineering Systems
Poised for Above-Market Growth in Engineering Systems 3D Surface Metrology 5%+ CAGR** FormFactor 200 mm • Largest Installed Base Automated • Autonomous Measurement Solutions Leader • Broadest Portfolio 3% CAGR* 300 mm Engineering Systems Market Automated Technology Leadership and Worldwide Infrastru
Slide 18: FormFactor's New Target Model
FormFactor’s New Target Model 2012 20% Target Model Revenue $178M $0.9B 16% 100% Served available market Advanced Probe Cards 36% 2019 Revenue 17% $850M 33% Revenue 84% $590M 83% $2.4B* $1.8B Served available market Advanced Served available market Advanced Probe Cards & Engineering Systems Probe Ca
Slide 19: Growth to $850M Target Model Revenue, Delivers $2.00 Non-GAAP EPS
Growth to $850M Target Model Revenue, Delivers $2.00 Non-GAAP EPS 2019 Actuals Target Model Revenue $590M $850M Non-GAAP Gross Margin 44.5% 47.0% Non-GAAP Operating Margin 17.3% 22.0% Non-GAAP Effective Tax Rate 22.0% 17.0% Non-GAAP Diluted Earnings Per Share $1.04 $2.00 Free Cash Flow $102M $160M S
Slide 20: Drivers of Shareholder Value Creation
Drivers of Shareholder Value Creation Revenue Growth Operating Leverage Capital Allocation • Underlying growth in • Gross Margin expansion Focused reinvestment semiconductor applications • Disciplined operating structure • R&D • Participation in Advanced • Robust Operating Cash Flow and • Capacity e
Slide 21: Revenue Growth Drives Increased Profitability
Revenue Growth Drives Increased Profitability Non-GAAP Gross Margin 47.0% 45.9% 44.2% 44.3% 44.5% 2017 2018 2019 1H 2020 Target Model TARGET MODEL Improving operating efficiency and factory utilization will drive gross margin expansion See Supplemental Information below for reconciliations of non-GA
Slide 22: Scale Enhances Margins, Finances Differentiating R&D
Scale Enhances Margins, Finances Differentiating R&D Non-GAAP Operating Expense as % of Revenue SG&A R&D 28% 27% 26% 26% 25% 13% 13% 12% 12% 13% 15% 14% 14% 14% 12% 2017 2018 2019 1H 2020 Target Model TARGET MODEL Capitalize on scale to leverage our operating expense infrastructure. Continued signif
Slide 23: Driving Operating Leverage Through Scale
Driving Operating Leverage Through Scale Non-GAAP Operating Margin 22% 20% 18% 17% 16% 2017 2018 2019 1H 2020 Target Model TARGET MODEL Disciplined spending and increasing scale will continue to enhance profitability See Supplemental Information below for reconciliations of non-GAAP financial measur
Slide 24: Capital Expenditures to Support Organic Growth
Capital Expenditures to Support Organic Growth Target CapEx 2017 2018 2019 2020 Model CapEx $18M $20M $21M $30M - $35M $50M-$60M Revenue $548M $530M $590M Capacity $850M Expansion CapEx as % 3.2% 3.8% 3.5% 3.5%-4.0% of Revenue New Livermore Facility Highly Automated Manufacturing Factory Expansions
Slide 25: Acquisition Strategy Adds Scale and Diversification
Proven track record of Acquisition Strategy Adds Scale identifying and integrating and Diversification accretive acquisitions Established process focused on extending long-term industry leadership Year: 2012 • Acquisition priorities Amount: $117M – Market leader in growing market – Compelling techni
Slide 26: Highly Resilient Business Model
Highly Resilient Business Model Enabled by Flexible Cost Structure • 100% of employees with variable pay component • Flexible staffing model Strong and Healthy Balance Sheet • Supported by strong free cash flows • History of successfully managing debt and significant borrowing capacity available if
Slide 27: Recent Results (non-GAAP)
Recent Results (non-GAAP) Revenue Gross Margin Diluted EPS Free Cash Flow Q2’20 ACTUAL $157.8M 45.8% $0.33 $18.6M Q3’20 ACTUAL $178.0M 46.7% $0.39 $37.2M Q4’20 OUTLOOK $178M-$190M 44%-47% $0.35-$0.43 Q3’20 and Q4’20 Themes: • Q3 results benefitted from by higher DRAM and Flash revenues, on top of co
Slide 28: Supplemental Information
Supplemental Information
Slide 29: FY 2019 GAAP to Non-GAAP Reconciliation
FY 2019 GAAP to Non-GAAP Reconciliation GAAP Adjustments Non-GAAP 12-Months Ended Stock-based Amortization of Amortization of 12-Months Ended December 28, 2019 Compensation Intangibles Inventory Step-Up Restructuring Charges Acquisition Related December 28, 2019 Revenues $ 589,464 $ - $ - $ - $ - $
Slide 30: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation in thousands 2014 2015 2016 2017 2018 2019 YTD 2020 Net cash provided by (used in operating activities) $ 17,659 $ 36,122 $ 17,423 $ 86,323 $ 68,700 $ 121,048 $ 124,209 Add: Cash paid for interest - - 2,110 3,836 3,113 1,405 683 Add: Cash paid for acquisition related ex
Slide 31: About Non-GAAP Financial Measures
About Non-GAAP Financial Measures We believe that the presentation of non-GAAP earnings per fully-diluted share, free cash flow and other non-GAAP measures in this presentation provides supplemental information that is important to understanding financial and business trends and other factors relati