What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-07 compared with 2023-11-07 · 152 added, 260 removed, 422 unchanged (49% of the section changed)

3 unchanged sentences

(In thousands, except share and per share amounts)

September 30,

2024 December 30,

6 unchanged sentences

Restricted cash 5,865 1,152

Assets held-for-sale 33,718 —

Prepaid expenses and other current assets 28,291 29,667

14 unchanged sentences

Deferred revenue 17,519 16,704

Liabilities held-for-sale 8,521 —

Operating lease liabilities 8,245 8,422

1 unchanged sentence

Term loan, less current portion, net of unamortized issuance costs 13,041 13,314

Deferred tax liabilities 317 2,732

Long-term operating lease liabilities 23,432 25,334

8 unchanged sentences

Accumulated other comprehensive loss ( 6,765 ) ( 4,052 )

Accumulated deficit ( 24,515 ) ( 31,056 )

Accumulated income 73,112 51,331

Total stockholders’ equity 923,750 908,804

4 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended Nine Months Ended

September 30,

2023 September 24,

2022 September 30,

2023 September 24,

Three Months Ended

2024 April 1,

Revenues $ 168,725 $ 167,448

5 unchanged sentences

Total operating expenses 61,706 60,987

Gain on sale of business 20,271 —

Operating income 21,303 91

14 unchanged sentences

(In thousands)

Three Months Ended Nine Months Ended

September 30,

2023 September 24,

2022 September 30,

2023 September 24,

Three Months Ended

2024 April 1,

Net income $ 21,781 $ 1,342

Other comprehensive loss, net of tax:

Translation adjustments ( 3,351 ) ( 7,348 ) ( 2,641 ) ( 13,902 )

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments ( 2,283 ) 832

Unrealized gains (losses) on available-for-sale marketable securities ( 198 ) 603

Unrealized losses on derivative instruments ( 232 ) ( 43 )

Other comprehensive loss, net of tax:

( 4,064 ) ( 8,903 ) ( 2,931 ) ( 16,450 )

Comprehensive income (loss) $ 307 $ ( 4,552 ) $ 3,610 $ 48,015

Other comprehensive income (loss) ( 2,713 ) 1,392

Comprehensive income $ 19,068 $ 2,734

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

7 unchanged sentences

(Deficit) Total

Nine Months Ended September 30, 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 363,190 — 8,822 — — 8,822

Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax 561,537 1 ( 9,350 ) — — ( 9,349 )

Stock-based compensation — — 29,320 — — 29,320

Other comprehensive loss — — — ( 2,931 ) — ( 2,931 )

Net income — — — — 6,541 6,541

Balances, September 30, 2023 77,839,317 $ 78 $ 873,634 $ ( 8,509 ) $ ( 24,515 ) $ 840,688

Three Months Ended September 30, 2023

Balances, July 1, 2023 77,184,012 $ 77 $ 867,517 $ ( 4,445 ) $ ( 28,886 ) $ 834,263

Issuance of common stock under the Employee Stock Purchase Plan 153,135 — 3,798 — — 3,798

Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax 502,170 1 ( 8,894 ) — — ( 8,893 )

Stock-based compensation — — 11,213 — — 11,213

Other comprehensive loss — — — ( 4,064 ) — ( 4,064 )

Net income — — — — 4,371 4,371

Balances, September 30, 2023 77,839,317 $ 78 $ 873,634 $ ( 8,509 ) $ ( 24,515 ) $ 840,688

Nine Months Ended September 24, 2022

Three Months Ended March 30, 2024

Balances, December 30, 2023 77,376,903 $ 77 $ 861,448 $ ( 4,052 ) $ 51,331 $ 908,804

Issuance of common stock under the Employee Stock Purchase Plan 197,014 — 4,948 — — 4,948

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 78,957 — ( 1,840 ) — — ( 1,840 )

3 unchanged sentences

Net income — — — — 21,781 21,781

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

Balances, March 30, 2024 77,241,118 $ 77 $ 857,326 $ ( 6,765 ) $ 73,112 $ 923,750

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

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

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

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

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

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

2 unchanged sentences

(In thousands)

Nine Months Ended

September 30,

2023 September 24,

Three Months Ended

2024 April 1,

Cash flows from operating activities:

7 unchanged sentences

Provision for excess and obsolete inventories 3,146 4,973

Gain on sale of business ( 20,271 ) —

Other adjustments to reconcile net income to net cash provided by operating activities 176 278

13 unchanged sentences

Acquisition of property, plant and equipment ( 13,436 ) ( 19,701 )

Acquisition of business — ( 3,350 )

Proceeds from sale of business 21,275 —

Purchases of marketable securities ( 37,472 ) ( 27,311 )

Purchase of promissory note receivable — ( 1,000 )

Proceeds from maturities and sales of marketable securities 25,813 33,473

4 unchanged sentences

Tax withholdings related to net share settlements of equity awards ( 1,840 ) ( 387 )

Principal repayments on term loans ( 781 ) ( 6,421 )

Net cash used in financing activities ( 1,308 ) ( 84,964 )

Payments on term loan ( 266 ) ( 259 )

Net cash provided by (used in) financing activities ( 14,492 ) 4,378

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 1,592 ) ( 276 )

Net increase (decrease) in cash, cash equivalents and restricted cash 726 ( 31,637 )

Net increase in cash, cash equivalents and restricted cash 13,108 2,872

Cash, cash equivalents and restricted cash, beginning of period 181,273 112,982

4 unchanged sentences

(In thousands)

Nine Months Ended

September 30,

2023 September 24,

Three Months Ended

2024 April 1,

Non-cash investing and financing activities:

Increase (decrease) in accounts payable and accrued liabilities related to property, plant and equipment purchases $ ( 6,222 ) $ 341

Decrease in accounts payable and accrued liabilities related to property, plant and equipment purchases $ 2,567 $ 3,755

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

7 unchanged sentences

Restricted cash, non-current 2,220 2,287

Cash and cash equivalents included in Assets held-for-sale 1,660 —

Total cash, cash equivalents and restricted cash $ 194,381 $ 115,854

10 unchanged sentences

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

Fiscal 2023 and 2022 contain 52 weeks and 53 weeks, respectively, and the nine months ended September 30, 2023 and September 24, 2022 each contained 39 weeks.

Fiscal 2024 and 2023 each contain 52 weeks and the three months ended March 30, 2024 and April 1, 2023 each contained 13 weeks.

Fiscal 2024 will end on December 28, 2024.

Significant Accounting Policies

Our significant accounting policies have not changed during the nine months ended September 30, 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 the Grant when earned as an offset to Cost of revenues and Operating expenses within our Condensed Consolidated Statements of Income.

We have presented 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.

New Accounting Pronouncements

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU provides temporary optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Interbank Offered Rate (“LIBOR“) or another reference rate expected to be discontinued.

In December 2022, the FASB issued ASU 2022-06, “Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848,” extending the relief offered in Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the optional expedients in Topic 848.

In May 2023, the Company entered into a rate replacement amendment to its credit facility loan agreement to replace LIBOR with the Secured Overnight Financing Rate (“SOFR”) and concurrently signed an amendment to modify the floating rate option on its interest rate swap to match that of the debt.

The Company applied practical expedients provided in Topic 848 allowing the modified instrument to be accounted for and presented in the same manner as the instrument existing before the modification.

These modifications had no significant impact on our financial statements.

Refer to Note 7, Debt, for further information regarding the terms of the credit facility loan agreement and interest rate swap agreement.

Our significant accounting policies have not changed during the three months ended March 30, 2024 from those disclosed in our Annual Report on Form 10-K for the year ended December 30, 2023.

Reclassifications

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

New Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-09, “ Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

” The ASU includes requirements that an entity disclose specific categories in the rate reconciliation and provide additional information for reconciling items that are greater than five percent of the amount computed by multiplying pretax income by the applicable statutory income tax rate.

The standard also requires that entities disclose income before income taxes and provision for income taxes disaggregated between domestic and foreign.

This ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

We have not yet determined the impact of this standard on our financial statements.

In November 2023, the FASB issued ASU 2023-07, “ Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .” The ASU includes requirements that an entity disclose the title of the chief operating decision maker (“CODM”) and on an interim and annual basis, significant segment expenses and the composition of other segment items for each segment's reported profit.

The standard also permits disclosure of additional measures of segment profit.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis, with early adoption permitted.

We have not yet determined the impact of this standard on our financial statements.

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 30,

2023 September 24,

2022 September 30,

2023 September 24,

Three Months Ended

2024 April 1,

Intel Corporation 15.7 % 20.0 %

Samsung Electronics., LTD.

SK Hynix Inc.

Samsung Electronics., LTD.

43.6 % 20.0 %

At September 30, 2023 and December 31, 2022, one customer accounted for 23.5 % and 13.8 % of gross accounts receivable, respectively.

At March 30, 2024 and December 30, 2023, two customers accounted for 19.0 % and 13.5 % and two customers accounted for 17.8 % and 11.0 % of gross accounts receivable, respectively.

Note 3 — Inventories, net

1 unchanged sentence

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

September 30,

2024 December 30,

3 unchanged sentences

$ 108,774 $ 111,685

Note 4 — Assets Held-For-Sale Divestiture

Note 4 — Divestitures

China Operations Divestiture

On February 7, 2024, the Company entered into a definitive agreement to sell its China operations to Grand Junction Semiconductor Pte.

(“Grand Junction”) for $ 25.0 million in cash, subject to customary purchase price adjustments, and establish an exclusive distribution and partnership agreement to continue sales and support of our products in the region.

The following subsidiaries were included as part of the divestiture:

Microprobe Hong Kong Limited, FormFactor Technology (Suzhou) Co.

Ltd., Cascade Microtech Singapore Pte, Ltd, and FormFactor International (Shanghai) Trading Co., Ltd.

These entities supported the Probe Cards and Systems segments.

On February 26, 2024, we closed on the sale of the operations in China to Grand Junction and received total consideration of $ 21.1 million, net of cash transferred and transaction expenses, and after customary adjustments for indebtedness and changes in net working capital.

The disposition of the China operations did not meet the criteria to be classified as a discontinued operation in the Company’s financial statements because the disposition did not represent a strategic shift that had, or will have, a major effect on the Company’s operations and financial results.

The following table summarizes the fair value of the sale proceeds received in connection with the divestiture, which are subject to further post-closing adjustment (in thousands):

February 26, 2024

Gross purchase price $ 25,000

Estimated working capital adjustment

Cash transferred to the buyer at closing ( 2,743 )

Direct costs to sell ( 986 )

Fair value of sale consideration, net $ 21,120

The carrying amount of net assets associated with the China operations was approximately $ 1.2 million.

The major classes of assets and liabilities sold consisted of the following (in thousands):

February 26, 2024

Accounts receivable, net $ 1,174

Inventories, net 3,729

Other current assets 391

Total current assets 5,294

Property, plant and equipment, net 1,283

Goodwill 1,117

Other assets 3,029

Total assets $ 10,723

Deferred Revenue $ 3,739

Other current liabilities 1,546

Other liabilities 4,283

Total liabilities $ 9,568

As a result of the divestiture, the Company recognized a pre-tax gain of $ 20.0 million.

The Company recorded an income tax liability associated with the divestiture of approximately $ 3.3 million.

FRT Divestiture

On September 18, 2023, the Company announced entry into a definitive agreement to sell its FRT Metrology (“FRT”) business to Camtek Ltd.

(“Camtek”) for $ 100 million in cash, subject to customary purchase price adjustments.

The Company acquired FRT in fiscal 2019 for total consideration of $ 24.4 million, net of cash acquired.

Headquartered in Bergisch Gladbach, Germany, FRT is a leading supplier of high-precision metrology solutions for the Advanced Packaging and Silicon Carbide markets, and is part of our Systems segment.

The related assets and liabilities have been classified as held-for-sale in the Company’s consolidated balance sheet and measured at the lower of their carrying amount or fair value less cost to sell.

We did not record an impairment from this event.

The planned disposition of the FRT business did not meet the criteria to be classified as a discontinued operation in the Company’s financial statements since the disposition did not represent a strategic shift that had, or will have, a major effect on the Company’s operations and financial results.

The components of held-for-sale assets and liabilities at September 30, 2023 were as follows (in thousands):

Assets held-for-sale

Accounts receivable, net of allowance for credit losses $ 5,491

The Company acquired FRT GmbH in fiscal 2019 for total consideration of $ 24.4 million, net of cash acquired.

Headquartered in Bergisch Gladbach, Germany, the FRT business is a leading supplier of high-precision metrology solutions for the Advanced Packaging and Silicon Carbide markets, and was part of the Company's Systems segment.

On November 1, 2023, we closed on the sale of the FRT business to Camtek and received net cash proceeds of $ 100.1 million, net of cash transferred and transaction expenses, and after customary adjustments for indebtedness and changes in net working capital.

The disposition of the FRT business did not meet the criteria to be classified as a discontinued operation in the Company’s financial statements because the disposition did not represent a strategic shift that had, or will have, a major effect on the Company’s operations and financial results.

The following table summarizes the fair value of the sale proceeds received in connection with the divestiture (in thousands):

November 1, 2023

Gross purchase price

Working capital adjustment

Cash transferred to the buyer at closing ( 2,049 )

Direct costs to sell ( 1,225 )

Fair value of sale consideration, net

The carrying amount of net assets associated with the FRT business was approximately $ 26.8 million.

The major classes of assets and liabilities sold consisted of the following (in thousands):

November 1, 2023

Accounts receivable, net $ 7,738

Inventories, net 6,446

Other current assets 635

Total current assets 14,819

Intangibles, net 6,897

1 unchanged sentence

Other assets 1,612

Total assets held-for-sale $ 33,718

Liabilities held-for-sale

Total assets $ 33,988

Current liabilities $ 4,300

Other liabilities 2,856

Total liabilities held-for-sale $ 8,521

On November 1, 2023, we closed on the sale of FRT to Camtek and received cash proceeds of $ 103.8 million after preliminary adjustments with respect to cash, indebtedness, and working capital.

Total liabilities $ 7,156

As a result of the divestiture, the Company recognized a pre-tax gain of $ 73.3 million.

The Company recorded an income tax liability associated with the divestiture of approximately $ 6.0 million.

Note 5 — Goodwill and Intangible Assets

2 unchanged sentences

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

Addition - Woburn Acquisition — 550 550

Reduction - FRT divestiture — ( 10,660 ) ( 10,660 )

Foreign currency translation — 306 306

Goodwill, as of December 30, 2023 178,424 22,666 201,090

Reclassification - Assets held-for-sale — ( 10,668 ) ( 10,668 )

Reduction - China divestiture ( 1,055 ) ( 62 ) ( 1,117 )

Foreign currency translation — ( 320 ) ( 320 )

Goodwill, as of September 30, 2023 $ 178,424 $ 22,061 $ 200,485

We have no t recorded goodwill impairments for the nine months ended September 30, 2023.

Goodwill, as of March 30, 2024 $ 177,369 $ 22,284 $ 199,653

We have no t recorded goodwill impairments for the three months ended March 30, 2024.

Intangible assets were as follows (in thousands):

September 30, 2023 December 31, 2022

March 30, 2024 December 30, 2023

Intangible Assets Gross Accumulated

6 unchanged sentences

$ 215,465 $ 203,168 $ 12,297 $ 215,823 $ 202,885 $ 12,938

In the current quarter, $ 7.1 million of net Intangible assets were reclassified to Assets held-for-sale as described in Note 4 , Assets Held-For-Sale Divestiture.

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

Three Months Ended Nine Months Ended

September 30,

2023 September 24,

2022 September 30,

2023 September 24,

Three Months Ended

2024 April 1,

Cost of revenues $ 449 $ 831

7 unchanged sentences

Accrued liabilities consisted of the following (in thousands):

September 30,

2024 December 30,

Accrued compensation and benefits $ 21,562 $ 20,073

Accrued income and other taxes 7,412 8,205

Accrued warranty 3,668 3,177

Employee stock purchase plan contributions withheld 1,829 4,263

Accrued income and other taxes 2,761 12,817

Accrued restructuring charges 29 1,249

Other accrued expenses 3,245 5,319

$ 37,716 $ 41,037

Note 7 — Debt

On June 22, 2020, we entered into an $ 18.0 million 15-year credit facility loan agreement (the “Building Term Loan”) with MUFG Union Bank, National Association (“Union Bank”).

The proceeds of the Building Term Loan were used to purchase a building adjacent to our leased facilities in Livermore, California.

On May 19, 2023, we amended the Building Term Loan, replacing the benchmark reference rate LIBOR with SOFR, with no change to the amount or timing of contractual cash flows.

The Building Term Loan bears interest at a rate equal to the applicable SOFR rate, plus 0.1148 %, plus 1.75 % per annum.

Interest payments are payable in monthly installments over a fifteen-year period.

The interest rate at September 30, 2023 was 7.19 %.

On March 17, 2020, we entered into an interest rate swap agreement with Union Bank to hedge the interest payment on the Building Term Loan for the notional amount of $ 18.0 million.

As future levels of LIBOR over the life of the loan were uncertain, we entered into this interest-rate swap agreement to hedge the exposure in interest rate risks associated with movement in LIBOR rates.

By entering into the agreement, we converted a floating-rate interest at one-month LIBOR plus 1.75 % into a fixed-rate interest at 2.75 %.

This agreement was amended on May 19, 2023 to replace the benchmark reference rate LIBOR with SOFR to match the Building Term Loan agreement (as amended).

After the amendment, the interest rate swap continues to convert our floating-rate interest into a fixed-rate at 2.75 %.

Note 8 — Restructuring Charges

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, 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 $ 13.3 million, with $ 10.1 million within the Probe Cards segment and $ 3.2 million within the Systems segment, which were comprised of $ 1.4 million of severance and employee-related costs, $ 2.0 million in contract and lease termination costs, $ 9.4 million in inventory impairments and other inventory related costs, and $ 0.5 million of costs 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 30, 2023 September 24, 2022

Probe Cards Systems Total Probe Cards Systems Total

Cost of revenues $ — $ — $ — $ 5,928 $ 132 $ 6,060

Research and development — — — 38 29 67

Selling, general and administrative — — — — 47 47

$ — $ — $ — $ 5,966 $ 208 $ 6,174

Nine Months Ended

September 30, 2023 September 24, 2022

Probe Cards Systems Total Probe Cards Systems Total

Cost of revenues $ 106 $ 251 $ 357 $ 6,194 $ 459 $ 6,653

Research and development 182 109 291 38 228 266

Selling, general and administrative 1,069 118 1,187 3 146 149

$ 1,357 $ 478 $ 1,835 $ 6,235 $ 833 $ 7,068

Changes to the restructuring accrual in the nine months ended September 30, 2023 were as follows (in thousands):

Employee Severance

and Benefits Stock-based Compensation Inventory

Impairments &

Other Inventory

Related Costs Contract

Termination &

Other Costs Total

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

Restructuring charges 917 295 390 233 1,835

Cash payments ( 2,137 ) — ( 89 ) ( 233 ) ( 2,459 )

Non-cash settlement — ( 295 ) ( 301 ) — ( 596 )

September 30, 2023 $ 29 $ — $ — $ — $ 29

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 30, 2023 or the year ended December 31, 2022.

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 30, 2024 or the year ended December 30, 2023.

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 2023.

No changes were made to our valuation techniques during the first three months of fiscal 2024.

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 30, 2023 Level 1 Level 2 Level 3 Total

March 30, 2024 Level 1 Level 2 Total

Cash equivalents:

5 unchanged sentences

treasuries 62,579 — 62,579

Certificates of deposit — 238 — 238

agency securities — 11,629 11,629

2 unchanged sentences

62,579 100,284 162,863

Promissory note receivable — — 922 922

Foreign exchange derivative contracts — 61 61

Interest rate swap derivative contract — 2,170 2,170

2 unchanged sentences

Total liabilities $ — $ ( 220 ) $ ( 220 )

December 31, 2022 Level 1 Level 2 Level 3 Total

December 30, 2023 Level 1 Level 2 Total

Cash equivalents:

Money market funds $ 110,980 $ — $ 110,980

Commercial paper — 4,969 — 4,969

agency securities — 996 — 996

treasuries 4,581 — 4,581

115,561 — 115,561

1 unchanged sentence

treasuries 45,837 — 45,837

Certificates of deposit — 706 — 706

agency securities — 10,003 10,003

3 unchanged sentences

Foreign exchange derivative contracts — 284 284

Promissory note receivable — — 943 943

Interest rate swap derivative contract — 1,989 1,989

6 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.

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.

8 unchanged sentences

The changes in cash flows of the interest rate swap are expected to exactly offset changes in cash flows of the variable-rate debt.

Cash settlements, in the form of cash payments or cash receipts, of the interest rate swap, in the form of cash payments or cash receipts, are recognized as a component of interest expense.

Cash settlements, in the form of cash payments or cash receipts, are recognized as a component of interest expense.

The cash flows associated with the interest rate swaps are reported in Net cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows and the fair value of the interest rate swap contracts are recorded within Prepaid expenses and other current assets and Other assets in our Condensed Consolidated Balance Sheets.

8 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 30, 2023 will mature by the third quarter of fiscal 2024.

The following table provides information about our foreign currency forward contracts outstanding as of September 30, 2023 (in thousands):

All of our foreign exchange derivative contracts outstanding at March 30, 2024 will mature by the first quarter of fiscal 2025.

The following table provides information about our foreign currency forward contracts outstanding as of March 30, 2024 (in thousands):

Currency Contract Position Contract Amount

1 unchanged sentence

Euro Dollar Buy 26,916 $ 29,357

Euro Dollar Sell 3,576 3,786

Japanese Yen Sell 2,471,086 16,388

4 unchanged sentences

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 8, Restructuring Charges, there were no assets or liabilities measured at fair value on a nonrecurring basis during the three and nine months ended September 30, 2023 or September 24, 2022.

There were no assets or liabilities measured at fair value on a nonrecurring basis during the three months ended March 30, 2024 or April 1, 2023.

Note 8 — Warranty

7 unchanged sentences

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

Nine Months Ended

September 30,

2023 September 24,

Three Months Ended

2024 April 1,

Balance at beginning of period $ 3,177 $ 4,199

1 unchanged sentence

Settlements ( 2,238 ) ( 1,717 )

Reclassification - Liabilities held-for-sale ( 106 ) —

Balance at end of period $ 3,668 $ 3,872

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

September 30,

2024 December 30,

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Total $ 205,772 $ 204,399

In the current quarter, $ 0.9 million of net Property, plant and equipment were reclassified to Assets held-for-sale as described in Note 4 , Assets Held-For-Sale Divestiture.

Note 10 — Stockholders’ Equity and Stock-Based Compensation

Common Stock Repurchase Programs

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 the nine months ended September 24, 2022, we repurchased 676,408 shares of common stock for $ 26.0 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 30, 2023, we did no t repurchase any common stock.

As of September 30, 2023, $ 18.6 million remained available for future repurchases.

On October 30, 2023, our Board of Directors authorized a new two -year program to repurchase up to $ 75 million of outstanding common stock to offset potential dilution from issuance of common stock under our stock-based compensation programs

On May 20, 2022, our Board of Directors authorized a two-year program to repurchase up to $ 75.0 million of outstanding common stock to offset potential dilution from issuance of common stock under our stock-based compensation programs.

During fiscal 2022 and fiscal 2023, we repurchased and retired 1,700,893 shares of common stock for $ 56.4 million and 504,352 shares of common stock for $ 18.6 million, respectively, utilizing the remaining shares available for repurchase under the program.

On October 30, 2023, our Board of Directors authorized an additional two-year program to repurchase up to $ 75.0 million of outstanding common stock, with the primary purpose of offsetting potential dilution from issuance of common stock under our stock-based compensation programs.

This share repurchase program will expire on October 30, 2025.

During fiscal 2023 we repurchased and retired 32,020 shares of common stock for $ 1.2 million.

During the three months ended March 30, 2024, we repurchased and retired 411,756 shares of common stock for $ 17.4 million (including excise tax accrued), and as of March 30, 2024, $ 56.4 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.

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Awards forfeited ( 5,431 ) 33.90

RSUs at September 30, 2023 2,462,494 35.74

RSUs at March 30, 2024 2,054,053 36.16

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 7, 2023, we granted 172,680 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, 2023 - June 30, 2026, 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 258,600 PRSUs granted in fiscal 2020, no ne of the 191,400 outstanding PRSU awards vested in 2023, at the end of the requisite service period, as the TSR performance was not met.

There were no market based PRSUs granted during the three months ended March 30, 2024.

PRSUs are included as part of the RSU activity above.

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

Nine Months Ended

September 30, 2023

Three Months Ended

March 30, 2024

Shares issued 197,014

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

Three Months Ended Nine Months Ended

September 30,

2023 September 24,

2022 September 30,

2023 September 24,

Three Months Ended

2024 April 1,

Cost of revenues $ 1,928 $ 1,910

3 unchanged sentences

Unrecognized Compensation Costs

At September 30, 2023, the unrecognized stock-based compensation was as follows (dollars in thousands):

At March 30, 2024, the unrecognized stock-based compensation was as follows (dollars in thousands):

Unrecognized Expense Average Expected

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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 30,

2023 September 24,

2022 September 30,

2023 September 24,

Three Months Ended

2024 April 1,

Weighted-average shares used in computing basic net income per share 77,452 77,066

5 unchanged sentences

Contractual Obligations and Commitments

Our contractual obligations and commitments have not materially changed as of September 30, 2023 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

Our contractual obligations and commitments have not materially changed as of March 30, 2024 from those disclosed in our Annual Report on Form 10-K for the year ended December 30, 2023.

Legal Matters

4 unchanged sentences

Our leases have remaining terms of 1 to 11 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 year.

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

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 30, 2023 and the weighted-average discount rate was 4.39 %.

The weighted-average remaining lease term for our operating leases was 4 years as of March 30, 2024 and the weighted-average discount rate was 4.64 %.

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

Three Months Ended Nine Months Ended

September 30,

2023 September 24,

2022 September 30,

2023 September 24,

Three Months Ended

2024 April 1,

Lease expense:

3 unchanged sentences

$ 3,000 $ 2,855

Future minimum payments under our non-cancelable operating leases were as follows as of September 30, 2023 (in thousands):

Future minimum payments under our non-cancelable operating leases were as follows as of March 30, 2024 (in thousands):

Fiscal Year Amount

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Transaction price allocated to the remaining performance obligations:

On September 30, 2023, we had $ 13.8 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.

On March 30, 2024, we had $ 11.3 million of remaining performance obligations, which were comprised of deferred service contracts, extended warranty contracts, and contracts with overtime revenue recognition that are not yet delivered.

We expect to recognize approximately 73.3 % of our remaining performance obligations as revenue in the remainder of fiscal 2024, approximately 21.9 % in fiscal 2025, and approximately 4.8 % in fiscal 2026 and thereafter.

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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 30, 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 assets as of March 30, 2024 and December 30, 2023 were $ 5.3 million and $ 3.8 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, Assets held-for-sale, and Other liabilities.

Contract liabilities as of September 30, 2023 and December 31, 2022 were $ 18.0 million and $ 30.9 million, respectively.

During the nine months ended September 30, 2023, we recognized $ 26.0 million of revenue that was included in contract liabilities as of December 31, 2022.

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 30, 2024 and December 30, 2023 were $ 18.7 million and $ 18.0 million, respectively.

During the three months ended March 30, 2024, we recognized $ 6.5 million of revenue that was included in contract liabilities as of December 30, 2023.

Costs to obtain a contract:

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Note 15 — Operating Segments and Enterprise-Wide Information

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.

Our 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.

1 unchanged sentence

Three Months Ended

September 30, 2023 September 24, 2022

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

Revenues $ 128,339 $ 43,236 $ — $ 171,575 $ 139,365 $ 41,504 $ — $ 180,869

Gross profit 49,383 22,396 ( 2,494 ) 69,285 48,252 22,284 ( 8,323 ) 62,213

Gross margin 38.5 % 51.8 % 40.4 % 34.6 % 53.7 % 34.4 %

Nine Months Ended

September 30, 2023 September 24, 2022

March 30, 2024 April 1, 2023

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

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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, share-based compensation, divestiture related expenses, and restructuring charges which are not used in evaluating the results of, or in allocating resources to, our reportable segments.

Certain components of our operating results are utilized to determine 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, share-based compensation, and restructuring charges 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

September 30, 2023 September 24, 2022

March 30, 2024 April 1, 2023

Probe Cards Systems Total Probe Cards Systems Total

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Geographical region:

United States $ 31,182 $ 12,543 $ 43,725 $ 25,909 $ 12,180 $ 38,089

Taiwan 39,155 3,820 42,975 32,227 4,611 36,838

South Korea $ 50,672 $ 45 $ 50,717 $ 19,572 $ 1,203 $ 20,775

China 10,779 10,971 21,750 27,973 8,755 36,728

Europe 2,583 6,713 9,296 3,682 8,116 11,798

Japan 2,976 3,988 6,964 4,533 3,159 7,692

Malaysia 5,778 186 5,964 6,272 237 6,509

Singapore 2,752 925 3,677 7,983 2,374 10,357

Rest of the world 1,329 820 2,149 2,668 1,253 3,921

Total $ 128,339 $ 43,236 $ 171,575 $ 139,365 $ 41,504 $ 180,869

Nine Months Ended

September 30, 2023 September 24, 2022

Probe Cards Systems Total Probe Cards Systems Total

Foundry & Logic $ 279,895 $ — $ 279,895 $ 327,106 $ — $ 327,106

DRAM 77,832 — 77,832 106,202 — 106,202

Flash 13,243 — 13,243 33,748 — 33,748

Systems — 123,969 123,969 — 114,894 114,894

Total $ 370,970 $ 123,969 $ 494,939 $ 467,056 $ 114,894 $ 581,950

Timing of revenue recognition:

Products transferred at a point in time $ 368,939 $ 116,981 $ 485,920 $ 464,139 $ 106,339 $ 570,478

Products and services transferred over time 2,031 6,988 9,019 2,917 8,555 11,472

Total $ 370,970 $ 123,969 $ 494,939 $ 467,056 $ 114,894 $ 581,950

Geographical region:

United States 35,596 10,170 45,766 24,641 13,090 37,731

Taiwan 27,179 2,698 29,877 38,897 1,432 40,329

South Korea 77,832 5,881 83,713 80,417 4,776 85,193

China 8,686 6,927 15,613 18,476 8,623 27,099

1 unchanged sentence

Japan 4,347 4,195 8,542 7,136 3,841 10,977

Malaysia 22,279 1,632 23,911 43,946 1,006 44,952

Singapore 3,516 1,242 4,758 3,200 2,140 5,340

Malaysia 1,608 255 1,863 10,324 946 11,270

Rest of the world 1,569 1,171 2,740 1,656 2,845 4,501

1 unchanged sentence

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