What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-07-30 compared with 2021-05-04 · 177 added, 106 removed, 560 unchanged (34% of the section changed)

38 unchanged sentences

77,454,800 and 77,437,997 shares issued and outstanding

Treasury stock, at cost, 136,402 and — shares

Additional paid-in capital 894,062 903,838

7 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended

2021 March 28,

Three Months Ended Six Months Ended

2021 June 27,

2020 June 26,

2021 June 27,

Revenues $ 188,076 $ 157,824 $ 374,712 $ 318,577

8 unchanged sentences

Interest expense ( 116 ) ( 171 ) ( 296 ) ( 489 )

Other income (expense), net 172 ( 91 )

Other expense, net ( 194 ) ( 67 ) ( 22 ) ( 158 )

Income before income taxes 20,188 22,631 43,019 41,337

11 unchanged sentences

(In thousands)

Three Months Ended

2021 March 28,

Three Months Ended Six Months Ended

2021 June 27,

2020 June 26,

2021 June 27,

Net income $ 17,905 $ 20,469 $ 37,530 $ 36,359

Other comprehensive loss, net of tax:

Other comprehensive income (loss), net of tax:

Translation adjustments and other 632 763 ( 1,747 ) 364

Unrealized losses on available-for-sale marketable securities ( 131 ) ( 27 )

Unrealized gains (losses) on available-for-sale marketable securities ( 97 ) 524 ( 228 ) 497

Unrealized gains (losses) on derivative instruments ( 89 ) 80 ( 315 ) 256

Other comprehensive loss, net of tax ( 2,736 ) ( 250 )

Other comprehensive income (loss), net of tax 446 1,367 ( 2,290 ) 1,117

Comprehensive income $ 18,351 $ 21,836 $ 35,240 $ 37,476

10 unchanged sentences

Deficit Total

Three Months Ended March 27, 2021

Six Months Ended June 26, 2021

Balances, December 26, 2020 77,437,997 $ 78 — $ — $ 903,838 $ 5,886 $ ( 165,718 ) $ 744,084

2 unchanged sentences

Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax 308,219 — — — ( 5,261 ) — — ( 5,261 )

Purchase of common stock through repurchase program — — ( 136,402 ) ( 5,738 ) — — — ( 5,738 )

Purchase and retirement of common stock through repurchase program ( 620,200 ) ( 1 ) — — ( 23,950 ) — — ( 23,951 )

Stock-based compensation — — — — 13,526 — — 13,526

1 unchanged sentence

Net income — — — — — — 37,530 37,530

Balances, June 26, 2021 77,454,800 $ 77 — $ — $ 894,062 $ 3,596 $ ( 128,188 ) $ 769,547

Three Months Ended June 26, 2021

Balances, March 27, 2021 77,758,530 $ 78 ( 136,402 ) $ ( 5,738 ) $ 915,136 $ 3,150 $ ( 146,093 ) $ 766,533

Issuance of common stock pursuant to exercise of options 50,000 — — — 422 — — 422

Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax 266,470 — — — ( 4,120 ) — — ( 4,120 )

Purchase and retirement of common stock through repurchase program ( 620,200 ) ( 1 ) 136,402 5,738 ( 23,950 ) — — ( 18,213 )

Stock-based compensation — — — — 6,574 — — 6,574

Other comprehensive income — — — — — 446 — 446

Net income — — — — — — 17,905 17,905

Balances, June 26, 2021 77,454,800 $ 77 — $ — $ 894,062 $ 3,596 $ ( 128,188 ) $ 769,547

The accompanying notes are an integral part of these condensed consolidated financial statements.

FORMFACTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except shares)

Stock Shares of

3 unchanged sentences

Comprehensive

Loss Accumulated

Income (Loss) Accumulated

Deficit Total

Three Months Ended March 28, 2020

Six Months Ended June 27, 2020

Balances, December 28, 2019 75,764,990 $ 76 — $ — $ 885,821 $ ( 659 ) $ ( 244,241 ) $ 640,997

3 unchanged sentences

Stock-based compensation — — — — 11,114 — — 11,114

Other comprehensive loss — — — — — ( 250 ) — ( 250 )

Other comprehensive income — — — — — 1,117 — 1,117

Net income — — — — — — 36,359 36,359

Balances, June 27, 2020 76,501,459 $ 77 — $ — $ 898,069 $ 458 $ ( 207,882 ) $ 690,722

Three Months Ended June 27, 2020

Balances, March 28, 2020 76,158,251 $ 77 $ — $ — $ 895,600 $ ( 909 ) $ ( 228,351 ) $ 666,417

Issuance of common stock pursuant to exercise of options 50,000 — — — 422 — — 422

Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax 293,208 — — — ( 3,415 ) — — ( 3,415 )

Stock-based compensation — — — — 5,462 — — 5,462

Other comprehensive income — — — — — 1,367 — 1,367

Net income — — — — — — 20,469 20,469

Balances, June 27, 2020 76,501,459 $ 77 — $ — $ 898,069 $ 458 $ ( 207,882 ) $ 690,722

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Three Months Ended

2021 March 28,

Six Months Ended

2021 June 27,

Cash flows from operating activities:

6 unchanged sentences

Provision for excess and obsolete inventories 6,898 6,407

Gain on contingent consideration ( 95 ) ( 3,700 )

Other adjustments to reconcile net income to net cash provided by operating activities 1,211 1,327

20 unchanged sentences

Tax withholdings related to net share settlements of equity awards ( 5,261 ) ( 3,800 )

Payment of contingent consideration ( 3,873 ) —

Proceeds from term loan debt — 18,000

Principal repayments on term loans ( 4,740 ) ( 26,322 )

Payment of term loan debt issuance costs — ( 78 )

Net cash used in financing activities ( 31,916 ) ( 7,265 )

7 unchanged sentences

(In thousands)

Three Months Ended

2021 March 28,

Six Months Ended

2021 June 27,

Non-cash investing and financing activities:

Change in accounts payable and accrued liabilities related to property, plant and equipment purchases $ 1,087 $ ( 2,116 )

Increase (decrease) in accounts payable and accrued liabilities related to property, plant and equipment purchases $ 2,906 $ ( 2,274 )

Operating lease, right-of-use assets obtained in exchange for lease obligations 11,629 428

5 unchanged sentences

Restricted cash, current 1,857 1,424

Restricted cash 1,894 1,361

Restricted cash, non-current 1,836 1,375

Total cash, cash equivalents and restricted cash $ 163,966 $ 202,725

10 unchanged sentences

We operate on a 52/53 week fiscal year, whereby the fiscal year ends on the last Saturday of December.

Fiscal 2021 and 2020 each contain 52 weeks and the three months ended March 27, 2021 and March 28, 2020 each contained 13 weeks.

Fiscal 2021 and 2020 each contain 52 weeks and the six months ended June 26, 2021 and June 27, 2020 each contained 26 weeks.

Fiscal 2021 will end on December 25, 2021.

Significant Accounting Policies

Our significant accounting policies have not changed during the three months ended March 27, 2021 from those disclosed in our Annual Report on Form 10-K for the year ended December 26, 2020.

Reclassifications

Certain immaterial reclassifications were made to the prior year financial statements to conform to the current year presentation.

Our significant accounting policies have not changed during the six months ended June 26, 2021 from those disclosed in our Annual Report on Form 10-K for the year ended December 26, 2020.

New Accounting Pronouncements

11 unchanged sentences

Each of the following customers accounted for 10% or more of our revenues for the periods indicated:

Three Months Ended

2021 March 28,

Three Months Ended Six Months Ended

2021 June 27,

2020 June 26,

2021 June 27,

Intel Corporation 16.2 % 36.1 % 22.1 % 36.2 %

Samsung Electronics., LTD.

Taiwan Semiconductor Manufacturing Co., LTD.

11.0 % * 11.2 % *

41.9 % 36.1 % 33.3 % 36.2 %

*Represents less than 10% of total revenues.

At March 27, 2021, one customer accounted for 22.8 % of gross accounts receivable.

At June 26, 2021, one customer accounted for 20.6 % of gross accounts receivable.

At December 26, 2020, two customers accounted for 15.3 % and 13.7 % of gross accounts receivable, respectively.

9 unchanged sentences

High Precision Devices, Inc.

On October 19, 2020, we acquired 100 % of the shares of HPD for total consideration of $ 16.9 million, net of cash acquired of $ 1.7 million, which included an estimated adjustment for changes in working capital, which is not yet finalized.

On October 19, 2020, we acquired 100 % of the shares of HPD for total consideration of $ 16.9 million, net of cash acquired of $ 1.7 million, which included an adjustment for changes in working capital.

This acquisition brings highly specialized skills and know-how to address the unique test challenges within the emerging quantum computing, superconducting computing, and ultra-sensitive sensor markets which operate at temperatures as low as 30 millikelvin.

7 unchanged sentences

We subsequently made certain immaterial adjustments within the measurement period to the preliminary acquisition price allocation.

See Note 5, Goodwill and Intangible Assets , for changes in identified intangible values and goodwill.

Our purchase accounting remains open at March 27, 2021, subject to finalization of the fair value of

consideration and certain deferred tax items.

See Note 5, Goodwill and Intangible Assets , for changes in identified intangible values

and goodwill.

Our purchase accounting remains open at June 26, 2021, subject to finalization of certain deferred tax items.

The estimated fair value of assets acquired, including goodwill and intangibles, and liabilities assumed is as follows (in thousands):

1 unchanged sentence

Accounts receivable 1,017

Inventory 3,047

Inventories 3,047

Property, plant and equipment 669

50 unchanged sentences

See Note 5, Goodwill and Intangible Assets, for changes in identified intangible values and goodwill.

In the current quarter ended March 27, 2021, we finalized our allocation of the assets acquired, including goodwill and intangibles, and liabilities assumed for the purchase as follows (in thousands):

The final allocation of the assets acquired, including goodwill and intangibles, and liabilities assumed for the purchase as follows (in thousands):

Accounts receivable $ 4,365

Inventory 2,727

Inventories 2,727

Property, plant and equipment 9,053

4 unchanged sentences

Operating lease liabilities ( 519 )

Total net tangible assets acquired and liabilities assumed 15,458

Total tangible assets acquired and liabilities assumed 15,458

Intangible assets 13,600

18 unchanged sentences

The incremental cash flows are then discounted to a present value to arrive at an estimate of fair value for this asset class.

In-process research and development (“IPR&D”) acquired primarily consists of research and development projects that were in process at the time of acquisition related to technologies used in DRAM probe cards.

Once these projects are complete they will be amortized over their useful life.

We valued the IPR&D using the multi-period excess earnings method under the income approach.

Using this approach, the estimated fair values were calculated using expected future cash flows from specific products discounted to their net present values at an appropriate risk-adjusted rate of return.

The value of customer relationships represents the fair value of future projected revenues that will be derived from the sale of products to Baldwin Park's existing customers.

2 unchanged sentences

The incremental cash flows are then discounted to a present value to arrive at an estimate of fair value for this asset class.

Once these projects are complete they will be amortized over their useful life.

We valued the IPR&D using the multi-period excess earnings method under the income approach.

The excess of purchase price over the fair value assigned to the assets acquired and liabilities assumed represents the amount of goodwill resulting from the acquisition.

16 unchanged sentences

Foreign currency translation — ( 576 ) ( 576 )

Goodwill, gross, as of March 27, 2021 $ 178,424 $ 35,794 $ 214,218

We have no t recorded goodwill impairments for the three months ended March 27, 2021.

Goodwill, gross, as of July 26, 2021 $ 178,424 $ 36,124 $ 214,548

We have no t recorded goodwill impairments for the six months ended June 26, 2021.

Intangible assets were as follows (in thousands):

March 27, 2021 December 26, 2020

June 26, 2021 December 26, 2020

Intangible Assets Gross Accumulated

2 unchanged sentences

Developed technologies $ 173,627 $ 147,968 $ 25,659 $ 176,265 $ 137,754 $ 38,511

Trade names 8,100 7,418 682 8,162 7,363 799

Customer relationships 51,641 36,437 15,204 52,488 33,378 19,110

Backlog 1,969 1,897 72 2,227 1,900 327

Trade names 8,140 7,520 620 8,162 7,363 799

Order backlog 1,990 1,960 30 2,227 1,900 327

In-process research and development 400 — 400 400 — 400

1 unchanged sentence

Amortization expense was included in our Condensed Consolidated Statements of Income as follows (in thousands):

Three Months Ended

2021 March 28,

Three Months Ended Six Months Ended

2021 June 27,

2020 June 26,

2021 June 27,

Cost of revenues $ 5,505 $ 4,926 $ 10,595 $ 10,676

21 unchanged sentences

• Level 3 valuations utilize unobservable inputs to the valuation methodology and include our own data about assumptions market participants would use in pricing the asset or liability based on the best information available under the circumstances.

We did not have any transfers of assets or liabilities measured at fair value on a recurring basis to or from Level 1, Level 2 or Level 3 during the three months ended March 27, 2021 or the year ended December 26, 2020.

We did not have any transfers of assets or liabilities measured at fair value on a recurring basis to or from Level 1, Level 2 or Level 3 during the three and six months ended June 26, 2021 or the year ended December 26, 2020.

The carrying values of Cash, Accounts receivable, net, Restricted cash, Prepaid expenses and other current assets, Accounts payable, Accrued liabilities, and term loans, net of unamortized issuance costs, approximate fair value due to their short maturities.

No changes were made to our valuation techniques during the first three months of fiscal 2021.

No changes were made to our valuation techniques during the first six months of fiscal 2021.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):

March 27, 2021 Level 1 Level 2 Level 3 Total

June 26, 2021 Level 1 Level 2 Level 3 Total

Cash equivalents:

Money market funds $ 25,917 $ — $ — $ 25,917

Commercial paper 5,500 — — 5,500

39,754 — — 39,754

Marketable securities:

10 unchanged sentences

Interest rate swap derivative contracts — ( 103 ) — ( 103 )

Contingent consideration — — ( 3,884 ) ( 3,884 )

Total liabilities $ — $ ( 156 ) $ — $ ( 156 )

19 unchanged sentences

Our investments are priced by pricing vendors who provide observable inputs for their pricing without applying significant judgment.

Broker pricing is used mainly when a quoted price is not available, the investment is not priced by our pricing vendors or when a broker price

is more reflective of fair value.

Broker pricing is used mainly when a quoted price is not available, the investment is not priced by our pricing vendors or when a broker price is more reflective of fair value.

Our broker-priced investments are categorized as Level 2 investments because fair value is based on similar assets without applying significant judgments.

In addition, all investments have a sufficient trading volume to demonstrate that the fair value is appropriate.

Unrealized gains and losses were immaterial and were recorded as a component of Accumulated other comprehensive income in our Condensed Consolidated Balance Sheets.

Unrealized gains and losses were immaterial and were recorded as a component of Accumulated other comprehensive income

in our Condensed Consolidated Balance Sheets.

We did not have any other-than-temporary unrealized gains or losses at either period end included in these financial statements.

Contingent Consideration

Contingent consideration, arising from the acquisition of FRT, is a cash amount equal to 1.5 x EBIT as defined in the purchase agreement, up to a maximum of € 10.3 million, payable subject to the performance of the acquired business in calendar 2020.

Contingent consideration, arising from the acquisition of FRT, was a cash amount equal to 1.5 x EBIT as defined in the purchase agreement, up to a maximum of € 10.3 million, payable subject to the performance of the acquired business in calendar 2020.

We estimated the fair value of contingent consideration using a probability weighted approach.

Key assumptions in determining the fair value of contingent consideration included estimating EBIT levels that we believed as of the acquisition date were likely to be achieved during the performance period and discounting at an appropriate discount rate.

Contingent consideration as of March 27, 2021 was estimated to be $ 3.9 million, with the change from December 26, 2020 resulting from foreign currency translation.

We settled our contingent consideration in the current quarter for $ 3.9 million, resulting in a $ 0.1 million credit to Selling, general and administrative expense with the remaining change from December 26, 2020 resulting from foreign currency translation.

Interest Rate Swaps

4 unchanged sentences

Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion) Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion)

Three Months Ended March 27, 2021 $ 624 Interest expense $ ( 38 ) Interest expense $ —

Three Months Ended March 28, 2020 $ ( 96 ) Interest expense $ 22 Interest expense $ —

Three Months Ended June 26, 2021 $ ( 203 ) Interest expense $ ( 39 ) Interest expense $ —

Three Months Ended June 27, 2020 $ ( 174 ) Interest expense $ ( 10 ) Interest expense $ —

Six Months Ended June 26, 2021 $ 421 Interest expense $ ( 77 ) Interest expense $ —

Six Months Ended June 27, 2020 $ ( 270 ) Interest expense $ 12 Interest expense $ —

Foreign Exchange Derivative Contracts

4 unchanged sentences

We do not use derivative financial instruments for speculative or trading purposes.

For accounting purposes, certain of our foreign currency forward contracts are not designated as hedging instruments and, accordingly, we record the fair value of these contracts as of the end of our reporting period in our Condensed Consolidated Balance Sheets with changes in fair value recorded within Other income (expense), net in our Condensed Consolidated Statement of Income for both realized and unrealized gains and losses.

For accounting purposes, certain of our foreign currency forward contracts are not designated as hedging instruments and, accordingly, we record the fair value of these contracts as of the end of our reporting period in our Condensed Consolidated Balance Sheets with changes in fair value recorded within Other expense, net in our Condensed Consolidated Statement of Income for both realized and unrealized gains and losses.

Certain of our foreign currency forward contracts are designated as cash flow hedges, and, accordingly, we record the fair value of these contracts as of the end of our reporting period in our Condensed Consolidated Balance Sheets with changes in fair value recorded as a component of Accumulated other comprehensive income and reclassified into earnings in the same period in which the hedged transaction affects earnings, and in the same line item on the Condensed Consolidated Statements of Income as the impact of the hedge transaction.

The fair value of our foreign exchange derivative contracts was determined based on current foreign currency exchange rates and forward points.

All of our foreign exchange derivative contracts outstanding at March 27, 2021 will mature by the first quarter of fiscal 2022.

The following table provides information about our foreign currency forward contracts outstanding as of March 27, 2021 (in thousands):

All of our foreign exchange derivative contracts outstanding at June 26, 2021 will mature by the second quarter of fiscal 2022.

The following table provides information about our foreign currency forward contracts outstanding as of June 26, 2021 (in thousands):

Currency Contract Position Contract Amount

(Local Currency)

Contract Amount

(Local Currency) Contract Amount

Euro Dollar Buy ( 12,678 ) $ ( 15,124 )

Euro Dollar Sell 11,043 13,026

Japanese Yen Buy ( 1,971,765 ) ( 17,977 )

Korean Won Sell 3,129,743 2,767

Taiwan Dollar Sell 7,972 279

Japanese Yen Sell 1,802,229 16,251

Korean Won Buy ( 3,050,367 ) ( 2,703 )

Total USD notional amount of outstanding foreign exchange contracts $ ( 1,576 )

2 unchanged sentences

Amount of Gain (Loss) Recognized on Derivatives

Three Months Ended

Derivatives Not Designated as Hedging Instruments Location of Gain (Loss) Recognized on Derivatives March 27,

2021 March 28,

Foreign exchange forward contracts Other income (expense), net $ 1,288 $ ( 115 )

Three Months Ended Six Months Ended

Derivatives Not Designated as Hedging Instruments Location of Gain (Loss) Recognized on Derivatives June 26,

2021 June 27,

2020 June 26,

2021 June 27,

Foreign exchange forward contracts Other expense, net $ ( 69 ) $ 234 $ 1,220 $ 349

The impact of foreign exchange derivative contracts designated as cash flow hedges on our Condensed Consolidated Statements of Income was as follows (in thousands):

Amount of Gain (Loss) Recognized in Accumulated OCI on Derivative Location of Gain (Loss) Reclassified from Accumulated OCI into Income Amount of Gain (Loss) Reclassified from Accumulated OCI into Income

Three Months Ended March 27, 2021 $ ( 526 ) Cost of revenues $ 250

Three Months Ended June 26, 2021 $ 278 Cost of revenues $ 134

Research and development 16

Selling, general and administrative 52

Three Months Ended March 28, 2020 $ ( 3 ) Cost of revenues $ ( 120 )

Three Months Ended June 27, 2020 $ 52 Cost of revenues $ ( 139 )

Research and development ( 17 )

Selling, general and administrative ( 35 )

Six Months Ended June 26, 2021 $ ( 248 ) Cost of revenues $ 384

Research and development 46

Selling, general and administrative 134

Six Months Ended June 27, 2020 $ ( 126 ) Cost of revenues $ ( 258 )

Research and development ( 35 )

Selling, general and administrative ( 79 )

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

We measure and report our non-financial assets such as Property, plant and equipment, Goodwill and Intangible assets at fair value on a non-recurring basis if we determine these assets to be impaired or in the period when we make a business acquisition.

Other than as discussed in Note 4, Acquisition , there were no assets or liabilities measured at fair value on a nonrecurring basis during the three months ended March 27, 2021 or March 28, 2020.

Other than as discussed in Note 4, Acquisition , there were no assets or liabilities measured at fair value on a nonrecurring basis during the three and six months ended June 26, 2021 or June 27, 2020.

Note 8 — Warranty

1 unchanged sentence

The warranty liability is based upon historical experience and our estimate of the level of future costs.

While we engage in product quality programs and processes, our warranty obligation is affected by product failure rates,

material usage and service delivery costs.

While we engage in product quality programs and processes, our warranty obligation is affected by product failure rates, material usage and service delivery costs.

We continuously monitor product returns for warranty and maintain a reserve for the related expenses based upon our historical experience and any specifically identified failures.

3 unchanged sentences

Changes in our warranty liability were as follows (in thousands):

Three Months Ended

2021 March 28,

Six Months Ended

2021 June 27,

Balance at beginning of period $ 3,918 $ 1,942

19 unchanged sentences

The share repurchase program will expire on October 28, 2022.

During the three months ended March 27, 2021, we repurchased 136,402 shares of common stock for $ 5.7 million and, as of March 27, 2021, $ 44.3 million remained available for future repurchases.

During the six months ended June 26, 2021, we repurchased and retired 620,200 shares of common stock for $ 24.0 million and, as of June 26, 2021, $ 26.0 million remained available for future repurchases.

Our policy related to repurchases of our common stock is to charge the excess of cost over par value to additional paid-in capital once the shares are retired.

7 unchanged sentences

Awards forfeited ( 26,996 ) 22.66

RSUs at March 27, 2021 2,770,912 19.96

RSUs at June 26, 2021 2,405,918 20.80

Performance Restricted Stock Units

We may grant Performance RSUs (“PRSUs”) to certain executives, which vest based upon us achieving certain market performance criteria.

There were no PRSUs granted during the three months ended March 27, 2021.

There were no PRSUs granted during the six months ended June 26, 2021.

PRSUs are included as part of the RSU activity above.

2 unchanged sentences

Options Outstanding Weighted Average Exercise Price Weighted Average Remaining Contractual Life in Years Aggregate Intrinsic Value

(in thousands)

Outstanding at December 26, 2020 106,000 $ 8.35

Options exercised ( 100,000 ) 8.44

Outstanding at March 27, 2021 56,000 $ 8.28 0.92 $ 2,078,820

Vested and expected to vest at March 27, 2021 56,000 $ 8.28 0.92 $ 2,078,820

Exercisable at March 27, 2021 56,000 $ 8.28 0.92 $ 2,078,820

Outstanding at June 26, 2021 6,000 $ 6.93 1.11 $ 172

Vested and expected to vest at June 26, 2021 6,000 $ 6.93 1.11 $ 172

Exercisable at June 26, 2021 6,000 $ 6.93 1.11 $ 172

Employee Stock Purchase Plan

Information related to activity under our Employee Stock Purchase Plan (“ESPP”) was as follows:

Three Months Ended

March 27, 2021

Six Months Ended

June 26, 2021

Shares issued 228,784

3 unchanged sentences

Stock-based compensation was included in our Condensed Consolidated Statements of Income as follows (in thousands):

Three Months Ended

2021 March 28,

Three Months Ended Six Months Ended

2021 June 27,

2020 June 26,

2021 June 27,

Cost of revenues $ 1,079 $ 901 $ 2,414 $ 1,838

3 unchanged sentences

Unrecognized Compensation Costs

At March 27, 2021, the unrecognized stock-based compensation was as follows (dollars in thousands):

At June 26, 2021, the unrecognized stock-based compensation was as follows (dollars in thousands):

Unrecognized Expense Average Expected Recognition Period in Years

5 unchanged sentences

The following table reconciles the shares used in calculating basic net income per share and diluted net income per share (in thousands):

Three Months Ended

2021 March 28,

Three Months Ended Six Months Ended

2021 June 27,

2020 June 26,

2021 June 27,

Weighted-average shares used in computing basic net income per share 77,463 76,275 77,530 76,140

5 unchanged sentences

Contractual Obligations and Commitments

Our contractual obligations and commitments have not materially changed as of March 27, 2021 from those disclosed in our Annual Report on Form 10-K for the year ended December 26, 2020.

Our contractual obligations and commitments have not materially changed as of June 26, 2021 from those disclosed in our Annual Report on Form 10-K for the year ended December 26, 2020.

Legal Matters

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business.

As of March 27, 2021, and as of the filing of this Quarterly Report on Form 10-Q, we were not involved in any material legal proceedings.

As of June 26, 2021, and as of the filing of this Quarterly Report on Form 10-Q, we were not involved in any material legal proceedings.

Note 13 — Leases

3 unchanged sentences

We did not include any of our renewal options in our lease terms for calculating our lease liability as the renewal options allow us to maintain operational flexibility and we are not reasonably certain we will exercise these options at this time.

The weighted-average remaining lease term for our operating leases was 6 years as of March 27, 2021 and the weighted-average discount rate was 3.85 %.

The weighted-average remaining lease term for our operating leases was 6 years as of June 26, 2021 and the weighted-average discount rate was 3.70 %.

The components of lease expense were as follows (in thousands):

Three Months Ended

2021 March 28,

Three Months Ended Six Months Ended

2021 June 27,

2020 June 26,

2021 June 27,

Lease expense:

3 unchanged sentences

$ 2,519 $ 2,220 $ 5,216 $ 4,567

Future minimum payments under our non-cancelable operating leases were as follows as of March 27, 2021 (in thousands):

Future minimum payments under our non-cancelable operating leases were as follows as of June 26, 2021 (in thousands):

Fiscal Year Amount

8 unchanged sentences

Transaction price allocated to the remaining performance obligations:

On March 27, 2021, we had $ 6.3 million of remaining performance obligations, which were comprised of deferred service contracts and extended warranty contracts and contracts with overtime revenue recognition that are not yet delivered.

On June 26, 2021, we had $ 10.7 million of remaining performance obligations, which were comprised of deferred service contracts and extended warranty contracts and contracts with overtime revenue recognition that are not yet delivered.

We expect to recognize approximately 41.2 % of our remaining performance obligations as revenue in the remainder of fiscal 2021, approximately 43.6 % in fiscal 2022, and approximately 15.2 % in fiscal 2023 and thereafter.

5 unchanged sentences

A contract asset is recorded when we have performed under the contract but our right to consideration is conditional on something other than the passage of time.

Contract assets as of March 27, 2021 and December 26, 2020 were $ 4.8 million and $ 3.7 million, respectively, and are reported on the Condensed Consolidated Balance Sheets as a component of Prepaid expenses and other current assets.

Contract assets as of June 26, 2021 and December 26, 2020 were $ 3.6 million and $ 3.7 million, respectively, and are reported on the Condensed Consolidated Balance Sheets as a component of Prepaid expenses and other current assets.

Contract liabilities include payments received in advance of performance under a contract and are satisfied as the associated revenue is recognized.

Contract liabilities are reported on the Condensed Consolidated Balance Sheets at the end of each reporting period as a component of Deferred revenue and Other liabilities.

Contract liabilities as of March 27, 2021 and December 26, 2020 were $ 19.9 million and $ 22.2 million, respectively.

During the three months ended March 27, 2021, we recognized $ 9.3 million of revenue, that was included in contract liabilities as of December 26, 2020.

Contract liabilities as of June 26, 2021 and December 26, 2020 were $ 23.9 million and $ 22.2 million, respectively.

During the six months ended June 26, 2021, we recognized $ 12.8 million of revenue, that was included in contract liabilities as of December 26, 2020.

Costs to obtain a contract:

7 unchanged sentences

Three Months Ended

March 27, 2021 March 28, 2020

June 26, 2021 June 27, 2020

Probe Cards Systems Corporate and Other Total Probe Cards Systems Corporate and Other Total

2 unchanged sentences

Gross margin 43.3 % 49.1 % 40.6 % 46.0 % 44.6 % 41.9 %

Six Months Ended

June 26, 2021 June 27, 2020

Probe Cards Systems Corporate and Other Total Probe Cards Systems Corporate and Other Total

Revenues $ 312,539 $ 62,173 $ — $ 374,712 $ 268,499 $ 50,078 $ — $ 318,577

Gross profit $ 136,915 $ 30,506 $ ( 14,432 ) $ 152,989 $ 122,266 $ 24,053 $ ( 12,762 ) $ 133,557

Gross margin 43.8 % 49.1 % 40.8 % 45.5 % 48.0 % 41.9 %

Operating results provide useful information to our management for assessment of our performance and results of operations.

Certain components of our operating results are utilized to determine executive compensation along with other measures.

Corporate and Other includes unallocated expenses relating to amortization of intangible assets, inventory and fixed asset fair value adjustments due to acquisitions and share-based compensation, which are not used in evaluating the results of, or in allocating resources to, our reportable segments.

Corporate and Other includes unallocated expenses relating to amortization of intangible assets, inventory and fixed asset fair value adjustments due to acquisitions, share-based compensation, and other, which are not used in evaluating the results of, or in allocating resources to, our reportable segments.

Certain revenue category information by reportable segment was as follows (in thousands):

Three Months Ended

March 27, 2021 March 28, 2020

June 26, 2021 June 27, 2020

Probe Cards Systems Total Probe Cards Systems Total

10 unchanged sentences

Taiwan $ 46,737 $ 5,147 $ 51,884 $ 29,806 $ 3,365 $ 33,171

China 37,831 4,794 42,625 37,280 6,362 43,642

South Korea 35,426 751 36,177 14,249 864 15,113

United States 24,174 8,476 32,650 22,368 5,753 28,121

China 23,996 7,831 31,827 45,625 3,133 48,758

Asia-Pacific 1

12,569 1,719 14,288 4,347 2,153 6,500

Europe 6,466 5,544 12,010 8,767 5,365 14,132

Japan 3,477 4,227 7,704 6,679 3,380 10,059

Rest of the world 796 740 1,536 1,943 27 1,970

Total $ 153,641 $ 34,435 $ 188,076 $ 133,784 $ 24,040 $ 157,824

Six Months Ended

June 26, 2021 June 27, 2020

Probe Cards Systems Total Probe Cards Systems Total

Foundry & Logic $ 217,136 $ — $ 217,136 $ 215,092 $ — $ 215,092

DRAM 75,986 — 75,986 43,748 — 43,748

Flash 19,417 — 19,417 9,659 — 9,659

Systems — 62,173 62,173 — 50,078 50,078

Total $ 312,539 $ 62,173 $ 374,712 $ 268,499 $ 50,078 $ 318,577

Timing of revenue recognition:

Products transferred at a point in time $ 311,605 $ 55,555 $ 367,160 $ 267,277 $ 47,406 $ 314,683

Products and services transferred over time 934 6,618 7,552 1,222 2,672 3,894

Total $ 312,539 $ 62,173 $ 374,712 $ 268,499 $ 50,078 $ 318,577

Geographical region:

Taiwan $ 91,471 $ 5,993 $ 97,464 $ 60,245 $ 4,706 $ 64,951

China 61,827 12,625 74,452 82,905 9,495 92,400

United States 45,482 16,654 62,136 47,979 12,058 60,037

South Korea 53,427 1,835 55,262 27,941 1,260 29,201

Asia-Pacific 1

40,447 2,799 43,246 8,802 5,561 14,363

Europe 9,299 12,710 22,009 24,977 10,198 35,175

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements