Overview

FormFactor, Inc. is a leading provider of electrical and optical test and measurement technologies for the semiconductor industry. The company operates in two reportable segments: Probe Cards and Systems. FormFactor’s fiscal 2024 results reflected strengthening momentum driven by increasing demand for high bandwidth memory (HBM) chips used in generative artificial intelligence applications.

In February 2024, FormFactor completed the sale of its China operations for $21.4 million, resulting in a pre-tax gain of $20.3 million. The company also established an exclusive distribution and partnership agreement to continue sales and support in the region.

FormFactor generated net income of $69.6 million in fiscal 2024, down from $82.4 million in fiscal 2023. The decrease was primarily due to a lower gain on the sale of the China business compared to the prior year’s gain from the sale of the FRT Metrology business. Excluding these gains, FormFactor’s financial performance was driven by stronger demand in certain semiconductor markets, particularly for HBM chips used in AI applications.

Recent Development

In February 2025, FormFactor acquired a 20% equity stake in FICT Limited, a provider of semiconductor test and high-performance computing technologies, for $59.6 million. This investment was made in partnership with private equity firm MBK Partners.

Fiscal Year

FormFactor operates on a ⁵²⁄₅₃ week fiscal year, with the fiscal year ending on the last Saturday of December. Fiscal 2024, 2023, and 2022 included 52, 52, and 53 weeks, respectively.

Use of Estimates and Critical Accounting Policies

FormFactor’s financial statements require management to make estimates and assumptions that affect the reported amounts. Critical accounting policies include inventory valuation and revenue recognition.

The company regularly assesses the value of its inventory and records write-downs for estimated excess and obsolete items. Revenue is recognized upon transferring control of products and services, with performance obligations identified and allocated based on standalone selling prices.

Results of Operations

FormFactor’s revenues increased 15.2% to $763.6 million in fiscal 2024, up from $663.1 million in fiscal 2023. This growth was driven by stronger demand in the Probe Cards segment, particularly for DRAM products used in AI applications and new mobile processor designs. However, the Systems segment saw a 16.7% decline in revenue due to the absence of metrology system sales following the divestiture of the FRT business.

Gross profit and gross margin increased in the Probe Cards segment, reaching 41.4% in fiscal 2024 compared to 37.2% in the prior year. This was due to higher revenues and more favorable cost absorption, partially offset by an unfavorable product mix shift towards lower-margin DRAM products. Gross profit and margin in the Systems segment declined, impacted by lower revenues and less favorable cost absorption.

Research and development expenses increased 5.3% to $121.9 million, driven by higher employee compensation costs. Selling, general, and administrative expenses rose 6.6% to $141.8 million, also primarily due to increased employee costs.

FormFactor recorded a $20.3 million gain on the sale of its China operations in fiscal 2024, compared to a $73.0 million gain on the sale of the FRT business in fiscal 2023. Interest income increased to $14.1 million in fiscal 2024 due to higher invested balances and yields. The effective tax rate rose to 12.3% in fiscal 2024 from 7.7% in the prior year, primarily due to the absence of the capital gain exclusion related to the FRT sale.

Liquidity and Capital Resources

FormFactor’s working capital increased to $473.8 million at the end of fiscal 2024, up from $442.7 million a year earlier. The company’s cash, cash equivalents, and marketable securities totaled $360.0 million, providing ample liquidity to fund operations and capital expenditures.

Net cash provided by operating activities was $117.5 million in fiscal 2024, up from $64.6 million in the prior year. This increase was driven by higher net income and non-cash adjustments, partially offset by changes in working capital. Investing activities used $33.5 million of cash, primarily for capital expenditures and net purchases of marketable securities, offset by proceeds from the China business sale. Financing activities used $64.6 million of cash, mainly for stock repurchases and tax withholdings on equity awards.

FormFactor has an $18.0 million term loan outstanding, which is subject to an interest rate swap that fixes the rate at 2.75%. The company also has authorization for up to $75 million in stock repurchases, of which $20.5 million remained available as of the end of fiscal 2024.

Outlook and Analysis

FormFactor’s fiscal 2024 results demonstrate its ability to capitalize on growing demand for semiconductor testing solutions, particularly in the HBM and mobile processor markets. The company’s Probe Cards segment has benefited from this trend, with DRAM revenue nearly doubling year-over-year.

However, the divestiture of the FRT Metrology business has weighed on the Systems segment, which saw a significant revenue decline. FormFactor will need to find ways to offset this loss and diversify its Systems offerings to drive more balanced growth across the company.

The acquisition of the FICT stake represents an interesting strategic move, providing FormFactor exposure to advanced packaging and high-performance computing technologies. This investment could open up new market opportunities, though the financial impact remains to be seen.

Overall, FormFactor appears well-positioned to capitalize on semiconductor industry trends, with a strong balance sheet and ample liquidity to fund growth initiatives. The company’s focus on innovation and customer partnerships should continue to drive demand for its test and measurement solutions. However, managing product mix and diversifying the Systems business will be key to sustaining profitability and market share going forward.