What changed in this filing

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Item 1. Financial Statements

2023-05-09 compared with 2022-11-01 · 121 added, 249 removed, 415 unchanged (47% of the section changed)

3 unchanged sentences

(In thousands, except share and per share amounts)

September 24,

2023 December 31,

20 unchanged sentences

Accrued liabilities 31,981 42,115

Current portion of term loans, net of unamortized issuance costs 2,734 8,931

Current portion of term loan, net of unamortized issuance costs 1,142 1,045

Deferred revenue 23,779 29,846

1 unchanged sentence

Total current liabilities 128,170 149,667

Term loans, less current portion, net of unamortized issuance costs 14,653 15,434

Term loan, less current portion, net of unamortized issuance costs 14,034 14,389

Deferred tax liabilities 2,905 2,732

Long-term operating lease liabilities 26,407 27,587

Deferred grant 18,000 —

Other liabilities 5,868 5,568

13 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended Nine Months Ended

September 24,

2022 September 25,

2021 September 24,

2022 September 25,

Three Months Ended

2023 March 26,

Revenues $ 167,448 $ 197,174

6 unchanged sentences

Operating income 91 34,184

Interest income 709 121 1,147 463

Interest expense ( 152 ) ( 151 ) ( 463 ) ( 447 )

Interest income (expense), net 1,276 ( 54 )

Other income, net 23 192

12 unchanged sentences

(In thousands)

Three Months Ended Nine Months Ended

September 24,

2022 September 25,

2021 September 24,

2022 September 25,

Three Months Ended

2023 March 26,

Net income $ 1,342 $ 29,872

Other comprehensive loss, net of tax:

Other comprehensive income (loss), net of tax:

Translation adjustments 832 ( 2,698 )

Unrealized losses on available-for-sale marketable securities ( 674 ) ( 62 ) ( 2,425 ) ( 290 )

Unrealized losses on derivative instruments ( 881 ) ( 323 ) ( 123 ) ( 638 )

Other comprehensive loss, net of tax:

Unrealized gains (losses) on available-for-sale marketable securities 603 ( 1,204 )

Unrealized gains (losses) on derivative instruments ( 43 ) 874

Other comprehensive income (loss), net of tax:

1,392 ( 3,028 )

Comprehensive income (loss) $ ( 4,552 ) $ 18,601 $ 48,015 $ 53,841

Comprehensive income $ 2,734 $ 26,844

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

7 unchanged sentences

Deficit Total

Nine Months Ended September 24, 2022

Three Months Ended April 1, 2023

Balances, December 31, 2022 76,914,590 $ 77 $ 844,842 $ ( 5,578 ) $ ( 31,056 ) $ 808,285

Issuance of common stock under the Employee Stock Purchase Plan 210,055 — 5,024 — — 5,024

Issuance of common stock pursuant to exercise of options 6,000 — 42 — — 42

Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax 17,378 — ( 387 ) — — ( 387 )

Purchase and retirement of common stock through repurchase program ( 2,011,822 ) ( 2 ) ( 73,476 ) — — ( 73,478 )

Stock-based compensation — — 8,716 — — 8,716

Other comprehensive loss — — — ( 16,450 ) — ( 16,450 )

Net income — — — — 64,465 64,465

Balances, September 24, 2022 77,265,099 $ 77 $ 843,453 $ ( 17,899 ) $ ( 17,329 ) $ 808,302

Three Months Ended September 24, 2022

Balances, June 25, 2022 77,194,733 $ 77 $ 860,584 $ ( 8,996 ) $ ( 21,680 ) $ 829,985

Issuance of common stock under the Employee Stock Purchase Plan 159,219 — 4,812 — — 4,812

Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax 479,478 1 ( 11,321 ) — — ( 11,320 )

Purchase and retirement of common stock through repurchase program ( 568,331 ) ( 1 ) ( 19,149 ) — — ( 19,150 )

Stock-based compensation — — 8,527 — — 8,527

Other comprehensive loss — — — ( 8,903 ) — ( 8,903 )

Other comprehensive income — — — 1,392 — 1,392

Net income — — — — 1,342 1,342

Balances, September 24, 2022 77,265,099 $ 77 $ 843,453 $ ( 17,899 ) $ ( 17,329 ) $ 808,302

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 Additional

Capital Accumulated

Comprehensive

Income (Loss) Accumulated

Deficit Total

Nine Months Ended September 25, 2021

Balances, April 1, 2023 77,142,023 $ 77 $ 858,195 $ ( 4,186 ) $ ( 29,714 ) $ 824,372

Three Months Ended March 26, 2022

Balances, December 25, 2021 78,240,506 $ 78 $ 898,945 $ ( 1,449 ) $ ( 81,794 ) $ 815,780

6 unchanged sentences

Net income — — — — 29,872 29,872

Balances, September 25, 2021 78,207,219 $ 78 $ 892,303 $ 1,700 $ ( 107,691 ) $ 786,390

Three Months Ended September 25, 2021

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

Issuance of common stock under the Employee Stock Purchase Plan 149,800 — 4,744 — — 4,744

Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax 602,619 1 ( 14,341 ) — — ( 14,340 )

Stock-based compensation — — 7,838 — — 7,838

Other comprehensive income — — — ( 1,896 ) — ( 1,896 )

Net income — — — — 20,497 20,497

Balances, September 25, 2021 78,207,219 $ 78 $ 892,303 $ 1,700 $ ( 107,691 ) $ 786,390

Balances, March 26, 2022 78,166,212 $ 78 $ 902,994 $ ( 4,477 ) $ ( 51,922 ) $ 846,673

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

2 unchanged sentences

(In thousands)

Nine Months Ended

September 24,

2022 September 25,

Three Months Ended

2023 March 26,

Cash flows from operating activities:

5 unchanged sentences

Stock-based compensation expense 9,290 7,520

Deferred income tax benefit ( 6,881 ) ( 873 )

Provision for excess and obsolete inventories 4,973 2,501

Non-cash restructuring charges 710 1,592

Gain on contingent consideration — ( 95 )

Other adjustments to reconcile net income to net cash provided by operating activities 133 182

8 unchanged sentences

Deferred revenues ( 6,046 ) 3,908

Deferred grant 18,000 —

Operating lease liabilities ( 1,721 ) ( 2,435 )

2 unchanged sentences

Acquisition of property, plant and equipment ( 19,701 ) ( 15,606 )

Acquisition of business ( 3,350 ) —

Purchases of marketable securities ( 27,311 ) ( 23,462 )

Purchase of promissory note receivable ( 1,000 ) —

Proceeds from maturities and sales of marketable securities 33,473 17,990

4 unchanged sentences

Tax withholdings related to net share settlements of equity awards ( 387 ) ( 72 )

Payment of contingent consideration — ( 3,873 )

Principal repayments on term loans ( 259 ) ( 2,234 )

Net cash used in financing activities ( 84,964 ) ( 36,869 )

Net cash provided by (used) in financing activities 4,378 ( 6,016 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 276 ) ( 1,142 )

Net decrease in cash, cash equivalents and restricted cash ( 31,637 ) ( 33,624 )

Net increase in cash, cash equivalents and restricted cash 2,872 15,919

Cash, cash equivalents and restricted cash, beginning of period 112,982 155,342

4 unchanged sentences

(In thousands)

Nine Months Ended

September 24,

2022 September 25,

Three Months Ended

2023 March 26,

Non-cash investing and financing activities:

Increase in accounts payable and accrued liabilities related to property, plant and equipment purchases $ 341 $ 4,684

Increase in accrued liabilities related to tax withholdings related to net share settlements of equity awards — 6,952

Decrease in accounts payable and accrued liabilities related to property, plant and equipment purchases $ 3,755 $ 2,524

Operating lease, right-of-use assets obtained in exchange for lease obligations 727 3,359

11 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Basis of Presentation and New Accounting Pronouncements

Note 1 — Basis of Presentation and Significant Accounting Policies

Basis of Presentation

5 unchanged sentences

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

Fiscal 2022 and 2021 contain 53 weeks and 52 weeks, respectively, and the nine months ended September 24, 2022 and September 25, 2021 each contained 39 weeks.

Fiscal 2023 and 2022 contain 52 weeks and 53 weeks, respectively, and the three months ended April 1, 2023 and March 26, 2022 each contained 13 weeks.

Fiscal 2023 will end on December 30, 2023.

Significant Accounting Policies

Our significant accounting policies have not changed during the nine months ended September 24, 2022 from those disclosed in our Annual Report on Form 10-K for the year ended December 25, 2021.

Reclassifications

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

New Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

The new guidance requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards Codification 606, “Revenue from Contracts with Customers,” as if it had originated the contracts.

The Company elected to early adopt on a prospective basis during the second quarter of fiscal 2022.

The adoption did not have a material effect on the Company's Consolidated Financial Statements.

Our significant accounting policies have not changed during the three months ended April 1, 2023 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, except for:

Government Assistance

In January 2023, we received $ 18.0 million in cash from a California Competes Grant (the “Grant”) awarded from the California Governor’s Office of Business and Economic Development.

The Grant requires FormFactor to create and maintain full-time jobs and make significant infrastructure investments within California over a 5-year term.

If we do not meet the requirements of the Grant, we will be required to repay all or a portion of the Grant.

The Grant is included in our Condensed Consolidated Balance Sheets within Deferred grant and we have elected to recognize when earned as an offset to Cost of revenues and Operating expenses within our Condensed Consolidated Statements of Income.

We have elected to present the proceeds from the Grant as cash provided by operating activities within our Condensed Consolidated Statements of Cash Flows as the grant is to offset operations.

Note 2 — Concentration of Credit and Other Risks

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

Three Months Ended Nine Months Ended

September 24,

2022 September 25,

2021 September 24,

2022 September 25,

Three Months Ended

2023 March 26,

Intel Corporation 20.0 % 20.8 %

SK Hynix Inc.

Samsung Electronics., LTD.

* 12.9 % * 10.5 %

Taiwan Semiconductor Manufacturing Co., LTD.

20.0 % 31.5 %

At September 24, 2022, one customer accounted for 18.1 % of gross accounts receivable.

At April 1, 2023, two customers accounted for 17.9 % and 15.9 % of gross accounts receivable, respectively.

At December 31, 2022, one customer accounted for 13.8 % of gross accounts receivable.

2 unchanged sentences

Inventories, net, consisted of the following (in thousands):

September 24,

2023 December 31,

3 unchanged sentences

$ 116,553 $ 123,157

Note 4 — Acquisition

Woburn Acquisition

On June 9, 2022, we acquired the assets of the dilution refrigerator product line of American ULT Cryogenics, formerly d/b/a JanisULT (“Woburn”), for total consideration of $ 3.4 million.

This acquisition adds cryogen-free dilution refrigerators capable of cooling to sub-10 millikelvin to our product portfolio, which is required for operation of superconducting quantum computers.

The acquisition price was allocated to the tangible and identified intangible assets acquired and liabilities assumed as of the closing date of the acquisition based upon their respective fair values.

The fair values assigned to assets acquired and liabilities assumed were based on management’s assumptions as of the reporting date.

Goodwill represents the excess of purchase price over the fair value assigned to the assets acquired and liabilities assumed and is allocated to the HPD reporting unit within the Systems reportable segment.

The identified intangible asset, developed technology, has a useful life of three years.

Our purchase accounting remains open as of the reporting date, with the purchase price preliminarily allocated to acquired assets and liabilities assumed that are subject to change as more information becomes available.

The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of inventories, developed technology intangible asset, and residual goodwill.

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

Accounts receivable $ 178

Inventories 7,041

Property, plant and equipment 479

Prepaid expenses and other current assets 117

Other assets 28

Tangible assets acquired 7,843

Deferred revenue ( 5,513 )

Accounts payable and accrued liabilities ( 30 )

Total tangible assets acquired and liabilities assumed 2,300

Developed technology intangible asset 500

Net assets acquired $ 3,350

Note 4 — Goodwill and Intangible Assets

2 unchanged sentences

Goodwill, as of December 25, 2021 $ 178,424 $ 33,875 $ 212,299

Addition - Baldwin Park Acquisition 352 — 352

Addition - HPD Acquisition — 1,254 1,254

Addition - Woburn Acquisition — 550 550

Foreign currency translation — ( 1,405 ) ( 1,405 )

Goodwill, as of December 31, 2022 178,424 33,020 211,444

Addition - Woburn Acquisition — 550 550

Foreign currency translation — 329 329

Goodwill, as of June 25, 2022 $ 178,424 $ 30,681 $ 209,105

We have no t recorded goodwill impairments for the nine months ended September 24, 2022.

Goodwill, as of April 1, 2023 $ 178,424 $ 33,349 $ 211,773

We have no t recorded goodwill impairments for the three months ended April 1, 2023.

Intangible assets were as follows (in thousands):

September 24, 2022 December 25, 2021

April 1, 2023 December 31, 2022

Intangible Assets Gross Accumulated

4 unchanged sentences

Trade name 7,992 7,833 159 7,972 7,759 213

Backlog — — — 1,896 1,896 —

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 Nine Months Ended

September 24,

2022 September 25,

2021 September 24,

2022 September 25,

Three Months Ended

2023 March 26,

Cost of revenues $ 831 $ 808

7 unchanged sentences

Accrued liabilities consisted of the following (in thousands):

September 24,

2023 December 31,

7 unchanged sentences

Note 6 — Restructuring Charges

On September 25, 2021, we adopted restructuring plans to improve our business effectiveness and streamline our operations by consolidating certain manufacturing facilities for both the Probe Cards segment and the Systems segment.

2022 Restructuring Plan

On October 25, 2022, we adopted a restructuring plan (“2022 restructuring plan”) to align our cost structure with reduced demand levels, by streamlining and improving the efficiency and business effectiveness of our operations.

This plan included lowering headcount by approximately 13 % of our workforce.

The Company has recognized 2022 restructuring plan charges of approximately $ 8.1 million for severance and employee-related costs, including $ 0.3 million for stock-based compensation, with $ 7.1 million within the Probe Cards segment, $ 0.5 million within the Systems segment, and $ 0.5 million within Corporate.

We do not expect to incur additional material costs related to the 2022 restructuring plan.

2021 Restructuring Plan

On September 25, 2021, we adopted restructuring plans (“2021 restructuring plans”) to improve our business effectiveness and streamline our operations by consolidating certain manufacturing facilities for both the Probe Cards segment and the Systems segment.

This included plans to consolidate or relocate certain leased locations in the United States to other locations in the United States, Germany and Asia.

As a result of these changes to certain work locations, we have incurred personnel related costs to sever, relocate, or retain select employees.

Additionally, this included plans to adjust capacity for certain product offerings, which resulted in contract termination costs and receipt of inventories ultimately deemed to be impaired to satisfy contract obligations.

We expect the actions defined under these plans will be largely completed by the end of December 2022, except facilities charges which may extend beyond that time.

These plans are expected to result in FormFactor recording restructuring and other charges in the aggregate amount of approximately $ 10.5 million to $ 12.6 million, estimated to be comprised primarily of $ 1.0 million to $ 1.2 million of severance and employee-related costs, $ 1.5 million to $ 1.9 million in contract and lease termination costs, $ 7.5 million to $ 8.5 million in inventory impairments, and $ 0.5 million to $ 1.0 million of cost related to impairment of leasehold improvements, facility exits, and other costs.

Approximately $ 8.7 million to $ 9.7 million is expected within the Probe Cards segment and $ 1.8 million to $ 2.9 million is expected within the Systems segments.

The Company has recognized restructuring and other charges to date in the aggregate amount of $ 11.2 million, comprised of $ 1.2 million of severance and employee-related costs, $ 1.5 million in contract and lease termination costs, $ 8.0 million in inventory impairments, and $ 0.6 million of cost related to impairment of leasehold improvements, facility exits and other costs.

During the three months ended September 24, 2022 we reassessed the estimate for excess inventory received to satisfy our contract obligations from our adjustment of certain product offerings.

As a result of receiving additional clarity regarding future customer demand, we recorded an additional $ 5.9 million inventory impairment not included in our original estimate of restructuring charges.

Restructuring charges by reportable segment included in our Condensed Consolidated Statements of Income were as follows (in thousands):

Additionally, as part of these plans we have undertaken actions to adjust capacity for certain product offerings, which included contract termination costs to satisfy contract obligations.

The Company has recognized 2021 restructuring plans charges of approximately $ 12.7 million, with $ 9.9 million within the Probe Cards segment and $ 2.8 million within the Systems segment, and were comprised of $ 1.3 million of severance and employee-related costs, $ 1.8 million in contract and lease termination costs, $ 9.1 million in inventory impairments and other inventory related costs, and $ 0.5 million of cost related to impairment of leasehold improvements, facility exits and fixed asset related costs.

We do not expect additional material costs related to the 2021 restructuring plan.

Total restructuring charges for both the 2022 and 2021 restructuring plans included in our Condensed Consolidated Statements of Income were as follows (in thousands):

Three Months Ended

September 24, 2022 September 25, 2021

Probe Cards Systems Total Probe Cards Systems Total

Cost of revenues $ 5,928 $ 132 $ 6,060 $ 4,070 $ 252 $ 4,322

Research and development 38 29 67 — 289 289

Selling, general and administrative — 47 47 — 22 22

$ 5,966 $ 208 $ 6,174 $ 4,070 $ 563 $ 4,633

Nine Months Ended

September 24, 2022 September 25, 2021

April 1, 2023 March 26, 2022

Probe Cards Systems Total Probe Cards Systems Total

3 unchanged sentences

$ 1,134 $ 83 $ 1,217 $ 42 $ 271 $ 313

Changes to the restructuring accrual in the nine months ended September 24, 2022 were as follows (in thousands):

Changes to the restructuring accrual in the three months ended April 1, 2023 were as follows (in thousands):

Employee Severance

and Benefits Inventory

Impairments Property and Equipment Impairments and Move Costs Contract

Termination Costs Total

and Benefits Stock-based Compensation Inventory

Impairments &

Other Inventory

Related Costs Total

December 31, 2022 $ 1,249 $ — $ — $ 1,249

2 unchanged sentences

Non-cash settlement — ( 295 ) ( 17 ) ( 312 )

September 24, 2022 $ — $ — $ — $ — $ —

April 1, 2023 $ 376 $ — $ — $ 376

Note 7 — Fair Value and Derivative Instruments

4 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 and nine months ended September 24, 2022 or the year ended December 25, 2021.

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 April 1, 2023 or the year ended December 31, 2022.

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

No changes were made to our valuation techniques during the first nine months of fiscal 2022.

No changes were made to our valuation techniques during the first three months of fiscal 2023.

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):

September 24, 2022 Level 1 Level 2 Level 3 Total

April 1, 2023 Level 1 Level 2 Level 3 Total

Cash equivalents:

1 unchanged sentence

Commercial paper — 4,475 — 4,475

Corporate bonds — 2,995 — 2,995

44,777 4,475 — 49,252

Marketable securities:

Corporate bonds — 69,548 — 69,548

treasuries 25,144 — — 25,144

Commercial paper — 16,881 — 16,881

agency securities — 11,041 — 11,041

Certificates of deposit — 471 — 471

agency securities — 13,062 — 13,062

Corporate bonds — 53,899 — 53,899

Commercial paper — 31,315 — 31,315

25,144 98,747 — 123,891

Foreign exchange derivative contracts — 763 — 763

Promissory note receivable — — 943 943

1 unchanged sentence

Total assets $ 69,921 $ 106,026 $ 943 $ 176,890

Foreign exchange derivative contracts $ — $ ( 2,457 ) $ — $ ( 2,457 )

Interest rate swap derivative contracts $ — $ ( 2 ) $ — $ ( 2 )

Total liabilities $ — $ ( 2 ) $ — $ ( 2 )

December 31, 2022 Level 1 Level 2 Level 3 Total

1 unchanged sentence

Money market funds $ 21,279 $ — $ — $ 21,279

agency securities — 5,556 — 5,556

treasuries 2,500 — — 2,500

Commercial paper — 4,969 — 4,969

agency securities — 996 — 996

21,279 5,965 — 27,244

Marketable securities:

Corporate bonds — 52,709 — 52,709

treasuries 25,019 — — 25,019

Commercial paper — 32,162 — 32,162

Certificates of deposit — 706 — 706

agency securities — 11,045 — 11,045

Corporate bonds — 67,396 — 67,396

Commercial paper — 24,840 — 24,840

25,019 103,987 — 129,006

Foreign exchange derivative contracts — 664 — 664

Promissory note receivable — — 943 943

Interest rate swap derivative contracts — 2,374 — 2,374

1 unchanged sentence

Foreign exchange derivative contracts $ — $ ( 193 ) $ — $ ( 193 )

Interest rate swap derivative contracts — ( 55 ) — ( 55 )

Total liabilities $ — $ ( 193 ) $ — $ ( 193 )

3 unchanged sentences

We classify our marketable securities as available-for-sale and value them utilizing a market approach.

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.

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.

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

15 unchanged sentences

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 September 24, 2022 will mature by the third quarter of fiscal 2023.

The following table provides information about our foreign currency forward contracts outstanding as of September 24, 2022 (in thousands):

All of our foreign exchange derivative contracts outstanding at April 1, 2023 will mature by the first quarter of fiscal 2024.

The following table provides information about our foreign currency forward contracts outstanding as of April 1, 2023 (in thousands):

Currency Contract Position Contract Amount

1 unchanged sentence

Euro Dollar Buy 23,004 $ 24,250

Euro Dollar Sell 2,356 2,472

Japanese Yen Sell 3,227,282 24,377

1 unchanged sentence

Taiwan Dollar Sell 43,413 1,435

Total USD notional amount of outstanding foreign exchange contracts $ ( 15,838 )

Our foreign currency contracts are classified within Level 2 of the fair value hierarchy as they are valued using pricing models that utilize observable market inputs.

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, and Note 7, Restructuring Charges, there were no assets or liabilities measured at fair value on a nonrecurring basis during the three and nine months ended September 24, 2022 or September 25, 2021.

Other than as discussed in Note 6, Restructuring Charges, there were no assets or liabilities measured at fair value on a nonrecurring basis during the three months ended April 1, 2023 or March 26, 2022.

Note 8 — Warranty

7 unchanged sentences

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

Nine Months Ended

September 24,

2022 September 25,

Three Months Ended

2023 March 26,

Balance at beginning of period $ 4,199 $ 2,805

4 unchanged sentences

Property, plant and equipment, net consisted of the following (in thousands):

September 24,

2023 December 31,

13 unchanged sentences

On October 26, 2020, our Board of Directors authorized a two-year program to repurchase up to $ 50 million of outstanding common stock to offset potential dilution from issuances of common stock under our stock-based compensation programs.

During fiscal 2021 we repurchased and retired 622,400 shares of common stock for $ 24.0 million.

During the nine months ended September 24, 2022, we repurchased and retired 676,408 shares of common stock for $ 26.0 million, utilizing the remaining funds available for repurchase.

During the three months ended March 26, 2022, we repurchased 240,548 shares of common stock for $ 9.4 million.

We utilized the remaining funds available for repurchase under this program during fiscal 2022.

On May 20, 2022, our Board of Directors authorized an additional program to repurchase up to $ 75 million of outstanding common stock, also with the primary purpose to offset potential dilution from issuances of common stock under our stock-based compensation programs.

The share repurchase program will expire on May 20, 2024.

During the nine months ended September 24, 2022, we repurchased and retired 1,335,414 shares of common stock for $ 47.5 million under the program.

As of September 24, 2022, $ 27.5 million remained available for future repurchases.

During the three months ended April 1, 2023, we did no t repurchase any common stock.

As of April 1, 2023, $ 18.6 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 ( 82,523 ) 35.16

RSUs at September 24, 2022 2,305,151 35.27

RSUs at April 1, 2023 2,192,827 34.94

Performance Restricted Stock Units

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

On August 1, 2022, we granted 204,903 PRSUs to certain senior executives for a total grant date fair value of $ 8.6 million which will be recognized ratably over the requisite service period.

The performance criteria are based on Total Shareholder Returns (“TSR”) for the period of July 1, 2022 - June 30, 2025, relative to the TSR of the companies identified as being part of the S&P Semiconductors Select Industry Index (FormFactor peer companies) as of the grant date.

Of the 273,000 PRSUs granted in fiscal 2019, 36,000 shares were forfeited, resulting in 237,000 shares vesting in 2022.

These shares achieved 147 % TSR performance, which resulted in an additional 110,605 shares issued in fiscal 2022 related to the fiscal 2019 PRSU grant.

There were no market based PRSUs granted during the three months ended April 1, 2023.

PRSUs are included as part of the RSU activity above.

1 unchanged sentence

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

Nine Months Ended

September 24, 2022

Three Months Ended

April 1, 2023

Shares issued 210,055

3 unchanged sentences

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

Three Months Ended Nine Months Ended

September 24,

2022 September 25,

2021 September 24,

2022 September 25,

Three Months Ended

April 1, 2023 March 26, 2022

Cost of revenues $ 1,910 $ 1,078

3 unchanged sentences

Unrecognized Compensation Costs

At September 24, 2022, the unrecognized stock-based compensation was as follows (dollars in thousands):

Unrecognized Expense Average Expected Recognition Period in Years

At April 1, 2023, the unrecognized stock-based compensation was as follows (dollars in thousands):

Unrecognized Expense Average Expected

Recognition Period

Restricted stock units $ 39,761 1.98

4 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 Nine Months Ended

September 24,

2022 September 25,

2021 September 24,

2022 September 25,

Three Months Ended

April 1, 2023 March 26, 2022

Weighted-average shares used in computing basic net income per share 77,066 78,246

5 unchanged sentences

Contractual Obligations and Commitments

Our contractual obligations and commitments have not materially changed as of September 24, 2022 from those disclosed in our Annual Report on Form 10-K for the year ended December 25, 2021.

Our contractual obligations and commitments have not materially changed as of April 1, 2023 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

Legal Matters

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

As of September 24, 2022, and as of the filing of this Quarterly Report on Form 10-Q, we were not involved in any material legal proceedings.

As of April 1, 2023, 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

1 unchanged sentence

Our leases have remaining terms of 1 to 6 years, and some leases include options to extend up to 20 years.

We also have operating leases for automobiles with remaining lease terms of 1 to 3 years.

We also have operating leases for automobiles with remaining lease terms of 1 year.

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 5 years as of September 24, 2022 and the weighted-average discount rate was 3.75 %.

The weighted-average remaining lease term for our operating leases was 5 years as of April 1, 2023 and the weighted-average discount rate was 3.92 %.

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

Three Months Ended Nine Months Ended

September 24,

2022 September 25,

2021 September 24,

2022 September 25,

Three Months Ended

April 1, 2023 March 26, 2022

Lease expense:

3 unchanged sentences

$ 2,855 $ 2,719

Future minimum payments under our non-cancelable operating leases were as follows as of September 24, 2022 (in thousands):

Future minimum payments under our non-cancelable operating leases were as follows as of April 1, 2023 (in thousands):

Fiscal Year Amount

8 unchanged sentences

Transaction price allocated to the remaining performance obligations:

On September 24, 2022, we had $ 8.3 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 April 1, 2023, we had $ 9.8 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 67.6 % of our remaining performance obligations as revenue in the remainder of fiscal 2023, approximately 26.8 % in fiscal 2024, and approximately 5.6 % in fiscal 2025 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 September 24, 2022 and December 25, 2021 were $ 3.0 million and $ 0.9 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 April 1, 2023 and December 31, 2022 were $ 2.9 million and $ 1.9 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 and payments due 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 September 24, 2022 and December 25, 2021 were $ 33.1 million and $ 24.2 million, respectively.

During the nine months ended September 24, 2022, we recognized $ 19.0 million of revenue that was included in contract liabilities as of December 25, 2021.

Contract liabilities as of April 1, 2023 and December 31, 2022 were $ 24.9 million and $ 30.9 million, respectively.

During the three months ended April 1, 2023, we recognized $ 14.0 million of revenue that was included in contract liabilities as of December 31, 2022.

Costs to obtain a contract:

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Our chief operating decision maker (“CODM”) is our Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire company.

We operate in two reportable segments consisting of the Probe Cards segment and the Systems segment.

We operate in two reportable segments consisting

of the Probe Cards segment and the Systems segment.

The following table summarizes the operating results by reportable segment (dollars in thousands):

Three Months Ended

September 24, 2022 September 25, 2021

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

Revenues $ 139,365 $ 41,504 $ — $ 180,869 $ 154,850 $ 35,114 $ — $ 189,964

Gross profit 48,252 22,284 ( 8,323 ) 62,213 69,868 17,553 ( 7,202 ) 80,219

Gross margin 34.6 % 53.7 % 34.4 % 45.1 % 50.0 % 42.2 %

Nine Months Ended

September 24, 2022 September 25, 2021

April 1, 2023 March 26, 2022

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

7 unchanged sentences

Three Months Ended

September 24, 2022 September 25, 2021

Probe Cards Systems Total Probe Cards Systems Total

Foundry & Logic $ 90,605 $ — $ 90,605 $ 104,640 $ — $ 104,640

DRAM 34,922 — 34,922 39,816 — 39,816

Flash 13,838 — 13,838 10,394 — 10,394

Systems — 41,504 41,504 — 35,114 35,114

Total $ 139,365 $ 41,504 $ 180,869 $ 154,850 $ 35,114 $ 189,964

Timing of revenue recognition:

Products transferred at a point in time $ 138,602 $ 37,842 $ 176,444 $ 154,217 $ 33,564 $ 187,781

Products and services transferred over time 763 3,662 4,425 633 1,550 2,183

Total $ 139,365 $ 41,504 $ 180,869 $ 154,850 $ 35,114 $ 189,964

Geographical region:

United States $ 25,909 $ 12,180 $ 38,089 $ 18,530 $ 6,938 $ 25,468

Taiwan 32,227 4,611 36,838 34,100 7,474 41,574

China 27,973 8,755 36,728 46,011 5,036 51,047

South Korea 28,118 819 28,937 27,895 1,077 28,972

Europe 3,682 8,116 11,798 3,595 6,891 10,486

Singapore 7,983 2,374 10,357 6,841 711 7,552

Japan 4,533 3,159 7,692 5,767 4,961 10,728

Malaysia 6,272 237 6,509 11,353 280 11,633

Rest of the world 2,668 1,253 3,921 758 1,746 2,504

Total $ 139,365 $ 41,504 $ 180,869 $ 154,850 $ 35,114 $ 189,964

Nine Months Ended

September 24, 2022 September 25, 2021

April 1, 2023 March 26, 2022

Probe Cards Systems Total Probe Cards Systems Total

10 unchanged sentences

Taiwan $ 38,897 $ 1,432 $ 40,329 $ 42,522 $ 10,547 $ 53,069

China 101,342 23,520 124,862 107,838 17,661 125,499

United States 24,641 13,090 37,731 19,976 5,671 25,647

China 18,476 8,623 27,099 32,791 5,608 38,399

South Korea 19,572 1,203 20,775 24,881 2,620 27,501

Malaysia 10,324 946 11,270 21,517 682 22,199

Singapore 23,398 4,963 28,361 23,070 3,002 26,072

Europe 9,888 18,396 28,284 12,894 19,601 32,495

Japan 7,136 3,841 10,977 4,785 4,597 9,382

Europe 3,426 6,000 9,426 2,382 6,013 8,395

Singapore 3,200 2,140 5,340 10,284 612 10,896

Rest of the world 1,656 2,845 4,501 845 841 1,686

Total $ 127,328 $ 40,120 $ 167,448 $ 159,983 $ 37,191 $ 197,174

Note 17 — Subsequent Events

On October 25, 2022, we adopted a restructuring plan to align our cost structure with reduced demand levels within the Probe Cards segment by streamlining and improving the efficiency and business effectiveness of our operations.

The plan includes lowering headcount by approximately 13 % of our workforce, which is expected to result in recognizing restructuring charges of approximately $ 6.6 million in cash, consisting of severance and employee-related costs.

We expect the actions defined under this plan will be largely completed by the end of the fourth quarter of fiscal 2022.

Upon completion, this action is expected to reduce our cost structure by approximately $ 25 to $ 30 million on an annualized basis.

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