UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 Form 10-Q
 
(Mark one)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 26,June 25, 2022
Or 
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to            
 
Commission file number: 000-50307
 
FormFactor, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3711155
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
 
7005 Southfront Road, Livermore, California 94551
(Address of principal executive offices, including zip code)
 
(925) 290-4000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section12(b) of the Act:
Title of each classTrading Symbol(s) Name of each exchange on which registered
Common stock, $0.001 par valueFORM Nasdaq Global Market
 ______________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes   No 
 
Indicate by check mark whether the registrant submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of the Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated FilerAccelerated FilerNon-accelerated Filer
Smaller Reporting CompanyEmerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No  

As of AprilJuly 27, 2022, 78,063,87077,132,681 shares of the registrant’s common stock, par value $0.001 per share, were outstanding.





FORMFACTOR, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 26,JUNE 25, 2022
INDEX
 
   
 
   
 
   
  
 
  
 
  
  
  
  
  
  
 

2


PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
FORMFACTOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
March 26,
2022
December 25,
2021
June 25,
2022
December 25,
2021
ASSETSASSETS ASSETS 
Current assets:Current assets:  Current assets:  
Cash and cash equivalentsCash and cash equivalents$167,182 $151,010 Cash and cash equivalents$136,395 $151,010 
Marketable securitiesMarketable securities129,174 125,055 Marketable securities129,919 125,055 
Accounts receivable, net of allowance for credit losses of $194 and $195113,505 115,541 
Accounts receivable, net of allowance for credit losses of $193 and $195Accounts receivable, net of allowance for credit losses of $193 and $195107,726 115,541 
Inventories, netInventories, net125,590 111,548 Inventories, net143,475 111,548 
Restricted cashRestricted cash2,026 2,233 Restricted cash2,102 2,233 
Prepaid expenses and other current assetsPrepaid expenses and other current assets18,671 18,652 Prepaid expenses and other current assets17,447 18,652 
Total current assetsTotal current assets556,148 524,039 Total current assets537,064 524,039 
Restricted cashRestricted cash2,053 2,099 Restricted cash1,802 2,099 
Operating lease, right-of-use-assetsOperating lease, right-of-use-assets35,764 35,210 Operating lease, right-of-use-assets33,499 35,210 
Property, plant and equipment, net of accumulated depreciationProperty, plant and equipment, net of accumulated depreciation152,179 146,555 Property, plant and equipment, net of accumulated depreciation157,814 146,555 
GoodwillGoodwill211,553 212,299 Goodwill212,357 212,299 
Intangibles, netIntangibles, net33,638 36,342 Intangibles, net30,872 36,342 
Deferred tax assetsDeferred tax assets62,746 61,995 Deferred tax assets65,059 61,995 
Other assetsOther assets2,799 1,981 Other assets3,980 1,981 
Total assetsTotal assets$1,056,880 $1,020,520 Total assets$1,042,447 $1,020,520 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY LIABILITIES AND STOCKHOLDERS’ EQUITY 
Current liabilities:Current liabilities: Current liabilities: 
Accounts payableAccounts payable$65,378 $57,862 Accounts payable$60,927 $57,862 
Accrued liabilitiesAccrued liabilities47,438 50,836 Accrued liabilities54,835 50,836 
Current portion of term loans, net of unamortized issuance costsCurrent portion of term loans, net of unamortized issuance costs6,790 8,931 Current portion of term loans, net of unamortized issuance costs4,725 8,931 
Deferred revenueDeferred revenue27,002 23,224 Deferred revenue31,255 23,224 
Operating lease liabilitiesOperating lease liabilities8,049 7,901 Operating lease liabilities7,843 7,901 
Total current liabilitiesTotal current liabilities154,657 148,754 Total current liabilities159,585 148,754 
Term loans, less current portion, net of unamortized issuance costsTerm loans, less current portion, net of unamortized issuance costs15,175 15,434 Term loans, less current portion, net of unamortized issuance costs14,915 15,434 
Deferred tax liabilitiesDeferred tax liabilities3,131 3,623 Deferred tax liabilities2,909 3,623 
Long-term operating lease liabilitiesLong-term operating lease liabilities31,366 31,009 Long-term operating lease liabilities29,511 31,009 
Other liabilitiesOther liabilities5,878 5,920 Other liabilities5,542 5,920 
Total liabilitiesTotal liabilities210,207 204,740 Total liabilities212,462 204,740 
  
Stockholders’ equity:Stockholders’ equity: Stockholders’ equity: 
Common stock, $0.001 par value:Common stock, $0.001 par value: Common stock, $0.001 par value: 
250,000,000 shares authorized; 78,166,212 and 78,240,506 shares issued and outstanding78 78 
250,000,000 shares authorized; 77,194,733 and 78,240,506 shares issued and outstanding250,000,000 shares authorized; 77,194,733 and 78,240,506 shares issued and outstanding77 78 
Additional paid-in capitalAdditional paid-in capital902,994 898,945 Additional paid-in capital860,584 898,945 
Accumulated other comprehensive lossAccumulated other comprehensive loss(4,477)(1,449)Accumulated other comprehensive loss(8,996)(1,449)
Accumulated deficitAccumulated deficit(51,922)(81,794)Accumulated deficit(21,680)(81,794)
Total stockholders’ equityTotal stockholders’ equity846,673 815,780 Total stockholders’ equity829,985 815,780 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$1,056,880 $1,020,520 Total liabilities and stockholders’ equity$1,042,447 $1,020,520 
 
The accompanying notes are an integral part of these condensed consolidated financial statements. 
3



FORMFACTOR, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Three Months EndedSix Months Ended
March 26,
2022
March 27,
2021
June 25,
2022
June 26,
2021
June 25,
2022
June 26,
2021
RevenuesRevenues$197,174 $186,636 Revenues$203,907 $188,076 $401,081 $374,712 
Cost of revenuesCost of revenues102,950 109,930 Cost of revenues109,538 111,793 212,488 221,723 
Gross profitGross profit94,224 76,706 Gross profit94,369 76,283 188,593 152,989 
Operating expenses:Operating expenses:  Operating expenses:    
Research and developmentResearch and development27,134 24,046 Research and development28,317 25,454 55,451 49,500 
Selling, general and administrativeSelling, general and administrative32,906 30,015 Selling, general and administrative33,406 30,479 66,312 60,494 
Total operating expensesTotal operating expenses60,040 54,061 Total operating expenses61,723 55,933 121,763 109,994 
Operating incomeOperating income34,184 22,645 Operating income32,646 20,350 66,830 42,995 
Interest incomeInterest income138 194 Interest income300 148 438 342 
Interest expenseInterest expense(192)(180)Interest expense(119)(116)(311)(296)
Other income, net192 172 
Other income (expense), netOther income (expense), net551 (194)743 (22)
Income before income taxesIncome before income taxes34,322 22,831 Income before income taxes33,378 20,188 67,700 43,019 
Provision for income taxesProvision for income taxes4,450 3,206 Provision for income taxes3,136 2,283 7,586 5,489 
Net incomeNet income$29,872 $19,625 Net income$30,242 $17,905 $60,114 $37,530 
Net income per share:Net income per share: Net income per share: 
BasicBasic$0.38 $0.25 Basic$0.39 $0.23 $0.77 $0.48 
DilutedDiluted$0.38 $0.25 Diluted$0.38 $0.23 $0.76 $0.47 
Weighted-average number of shares used in per share calculations:Weighted-average number of shares used in per share calculations:  Weighted-average number of shares used in per share calculations:   
BasicBasic78,246 77,598 Basic77,897 77,463 78,071 77,530 
DilutedDiluted79,468 79,988 Diluted79,210 79,466 79,423 79,621 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4



FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
Three Months EndedThree Months EndedSix Months Ended
March 26,
2022
March 27,
2021
June 25,
2022
June 26,
2021
June 25,
2022
June 26,
2021
Net incomeNet income$29,872 $19,625 Net income$30,242 $17,905 $60,114 $37,530 
Other comprehensive loss, net of tax:
Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:
Translation adjustments and otherTranslation adjustments and other(2,698)(2,379)Translation adjustments and other(3,856)632 (6,554)(1,747)
Unrealized losses on available-for-sale marketable securitiesUnrealized losses on available-for-sale marketable securities(1,204)(131)Unrealized losses on available-for-sale marketable securities(547)(97)(1,751)(228)
Unrealized gains (losses) on derivative instrumentsUnrealized gains (losses) on derivative instruments874 (226)Unrealized gains (losses) on derivative instruments(116)(89)758 (315)
Other comprehensive loss, net of tax(3,028)(2,736)
Other comprehensive income (loss), net of taxOther comprehensive income (loss), net of tax(4,519)446 (7,547)(2,290)
Comprehensive incomeComprehensive income$26,844 $16,889 Comprehensive income$25,723 $18,351 $52,567 $35,240 

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

5


FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except shares)
(Unaudited)
 Shares of
Common
Stock
Common
Stock
Shares of
Treasury
Stock
Treasury
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
 Income (Loss)
Accumulated
Deficit
Total
Three Months Ended March 26, 2022
Balances, December 25, 202178,240,506 $78 — $— $898,945 $(1,449)$(81,794)$815,780 
Issuance of common stock under the Employee Stock Purchase Plan157,642 — — — 5,645 — — 5,645 
Issuance of common stock pursuant to exercise of options6,000 — — — 42 — — 42 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax2,612 — — — (72)— — (72)
Purchase and retirement of common stock through repurchase program(240,548)— — — (9,397)— — (9,397)
Stock-based compensation— — — — 7,831 — — 7,831 
Other comprehensive loss— — — — — (3,028)— (3,028)
Net income— — — — — — 29,872 29,872 
Balances, March 26, 202278,166,212 $78 — $— $902,994 $(4,477)$(51,922)$846,673 
Shares of
Common
Stock
Common
Stock
Shares of
Treasury
Stock
Treasury
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
 Income (Loss)
Accumulated
Deficit
Total Shares of
Common
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
 Income (Loss)
Accumulated
Deficit
Total
Three Months Ended March 27, 2021Six Months Ended June 25, 2022
Balances, December 26, 202077,437,997 $78 — $— $903,838 $5,886 $(165,718)$744,084 
Balances, December 25, 2021Balances, December 25, 202178,240,506 $78 $898,945 $(1,449)$(81,794)$815,780 
Issuance of common stock under the Employee Stock Purchase PlanIssuance of common stock under the Employee Stock Purchase Plan228,784 — — — 5,065 — — 5,065 Issuance of common stock under the Employee Stock Purchase Plan157,642 — 5,645 — — 5,645 
Issuance of common stock pursuant to exercise of optionsIssuance of common stock pursuant to exercise of options50,000 — — — 422 — — 422 Issuance of common stock pursuant to exercise of options6,000 — 42 — — 42 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for taxIssuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax41,749 — — — (1,141)— — (1,141)Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax234,076 — (4,243)— — (4,243)
Purchase of common stock through repurchase program— — (136,402)(5,738)— — — (5,738)
Purchase and retirement of common stock through repurchase programPurchase and retirement of common stock through repurchase program(1,443,491)(1)(54,327)— — (54,328)
Stock-based compensationStock-based compensation— — — — 6,952 — — 6,952 Stock-based compensation— — 14,522 — — 14,522 
Other comprehensive income— — — — — (2,736)— (2,736)
Other comprehensive lossOther comprehensive loss— — — (7,547)— (7,547)
Net incomeNet income— — — — — — 19,625 19,625 Net income— — — — 60,114 60,114 
Balances, March 27, 202177,758,530 $78 (136,402)$(5,738)$915,136 $3,150 $(146,093)$766,533 
Balances, June 25, 2022Balances, June 25, 202277,194,733 $77 $860,584 $(8,996)$(21,680)$829,985 
Three Months Ended June 25, 2022
Balances, March 26, 2022Balances, March 26, 202278,166,212 $78 $902,994 $(4,477)$(51,922)$846,673 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for taxIssuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax231,464 — (4,171)— — (4,171)
Purchase and retirement of common stock through repurchase programPurchase and retirement of common stock through repurchase program(1,202,943)(1)(44,930)— — (44,931)
Stock-based compensationStock-based compensation— — 6,691 — — 6,691 
Other comprehensive lossOther comprehensive loss— — — (4,519)— (4,519)
Net incomeNet income— — — — 30,242 30,242 
Balances, June 25, 2022Balances, June 25, 202277,194,733 $77 $860,584 $(8,996)$(21,680)$829,985 

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



6



FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSSTOCKHOLDERS' EQUITY
(In thousands)thousands, except shares)
(Unaudited)
 Three Months Ended
 March 26,
2022
March 27,
2021
Cash flows from operating activities:  
Net income$29,872 $19,625 
Adjustments to reconcile net income to net cash provided by operating activities: 
Depreciation6,960 6,130 
Amortization2,369 6,805 
Reduction in the carrying amount of right-of-use assets2,492 1,811 
Stock-based compensation expense7,520 7,077 
Provision for excess and obsolete inventories2,501 3,394 
Non-cash restructuring charges150 — 
Other adjustments to reconcile net income to net cash provided by operating activities32 2,140 
Changes in assets and liabilities:
Accounts receivable966 3,576 
Inventories(17,080)(9,911)
Prepaid expenses and other current assets(144)3,011 
Other assets(73)(50)
Accounts payable10,150 5,722 
Accrued liabilities(3,120)(12,732)
Other liabilities87 114 
Deferred revenues3,908 (2,411)
Operating lease liabilities(2,435)(1,945)
Net cash provided by operating activities44,155 32,356 
Cash flows from investing activities:  
Acquisition of property, plant and equipment(15,606)(13,470)
Purchases of marketable securities(23,462)(41,062)
Proceeds from maturities and sales of marketable securities17,990 14,610 
Net cash used in investing activities(21,078)(39,922)
Cash flows from financing activities:  
Proceeds from issuances of common stock5,687 5,487 
Purchase of common stock through stock repurchase program(9,397)(5,738)
Tax withholdings related to net share settlements of equity awards(72)(1,141)
Principal repayments on term loans(2,234)(2,376)
Net cash used in financing activities(6,016)(3,768)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(1,142)(1,456)
Net increase (decrease) in cash, cash equivalents and restricted cash15,919 (12,790)
Cash, cash equivalents and restricted cash, beginning of period155,342 191,098 
Cash, cash equivalents and restricted cash, end of period$171,261 $178,308 
Shares of
Common
Stock
Common
Stock
Shares of
Treasury
Stock
Treasury
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
 Income (Loss)
Accumulated
Deficit
Total
Six Months Ended June 26, 2021
Balances, December 26, 202077,437,997 $78 — $— $903,838 $5,886 $(165,718)$744,084 
Issuance of common stock under the Employee Stock Purchase Plan228,784 — — — 5,065 — — 5,065 
Issuance of common stock pursuant to exercise of options100,000 — — — 844 — — 844 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax308,219 — — — (5,261)— — (5,261)
Purchase and retirement of common stock through repurchase program(620,200)(1)— — (23,950)— — (23,951)
Stock-based compensation— — — — 13,526 — — 13,526 
Other comprehensive loss— — — — — (2,290)— (2,290)
Net income— — — — — — 37,530 37,530 
Balances, June 26, 202177,454,800 $77 — $— $894,062 $3,596 $(128,188)$769,547 
Three Months Ended June 26, 2021
Balances, March 27, 202177,758,530 $78 (136,402)$(5,738)$915,136 $3,150 $(146,093)$766,533 
Issuance of common stock pursuant to exercise of options50,000 — — — 422 — — 422 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax266,470 — — — (4,120)— — (4,120)
Purchase and retirement of common stock through repurchase program(620,200)(1)136,402 5,738 (23,950)— — (18,213)
Stock-based compensation— — — — 6,574 — — 6,574 
Other comprehensive income— — — — — 446 — 446 
Net income— — — — — — 17,905 17,905 
Balances, June 26, 202177,454,800 $77 — $— $894,062 $3,596 $(128,188)$769,547 

The accompanying notes are an integral part of these condensed consolidated financial statements.
7


FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Six Months Ended
 June 25,
2022
June 26,
2021
Cash flows from operating activities:  
Net income$60,114 $37,530 
Adjustments to reconcile net income to net cash provided by operating activities: 
Depreciation14,146 12,678 
Amortization4,702 13,900 
Reduction in the carrying amount of right-of-use assets4,414 3,652 
Stock-based compensation expense13,878 13,665 
Provision for excess and obsolete inventories4,726 6,898 
Non-cash restructuring charges710 — 
Gain on contingent consideration— (95)
Other adjustments to reconcile net income to net cash provided by operating activities(567)1,211 
Changes in assets and liabilities:
Accounts receivable5,530 (1,194)
Inventories(32,268)(20,388)
Prepaid expenses and other current assets1,295 3,179 
Other assets(40)(344)
Accounts payable7,521 (2,028)
Accrued liabilities4,102 (235)
Other liabilities73 184 
Deferred revenues2,727 1,522 
Operating lease liabilities(4,262)(3,980)
Net cash provided by operating activities86,801 66,155 
Cash flows from investing activities:  
Acquisition of property, plant and equipment(30,116)(31,322)
Acquisition of business(3,121)— 
Purchases of marketable securities(52,344)(71,186)
Purchase of promissory note receivable(1,000)— 
Proceeds from maturities and sales of marketable securities45,470 42,695 
Net cash used in investing activities(41,111)(59,813)
Cash flows from financing activities:  
Proceeds from issuances of common stock5,687 5,909 
Purchase of common stock through stock repurchase program(54,328)(23,951)
Tax withholdings related to net share settlements of equity awards(4,243)(5,261)
Payment of contingent consideration— (3,873)
Principal repayments on term loans(4,379)(4,740)
Net cash used in financing activities(57,263)(31,916)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(3,470)(1,558)
Net decrease in cash, cash equivalents and restricted cash(15,043)(27,132)
Cash, cash equivalents and restricted cash, beginning of period155,342 191,098 
Cash, cash equivalents and restricted cash, end of period$140,299 $163,966 

The accompanying notes are an integral part of these condensed consolidated financial statements.
8



FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months EndedSix Months Ended
March 26,
2022
March 27,
2021
June 25,
2022
June 26,
2021
Non-cash investing and financing activities:Non-cash investing and financing activities:Non-cash investing and financing activities:
Increase (decrease) in accounts payable and accrued liabilities related to property, plant and equipment purchasesIncrease (decrease) in accounts payable and accrued liabilities related to property, plant and equipment purchases$(2,524)$1,087 Increase (decrease) in accounts payable and accrued liabilities related to property, plant and equipment purchases$(4,165)$2,906 
Operating lease, right-of-use assets obtained in exchange for lease obligationsOperating lease, right-of-use assets obtained in exchange for lease obligations3,359 8,572 Operating lease, right-of-use assets obtained in exchange for lease obligations3,438 11,629 
Supplemental disclosure of cash flow information:Supplemental disclosure of cash flow information:Supplemental disclosure of cash flow information:
Cash paid for income taxes, netCash paid for income taxes, net$890 $1,034 Cash paid for income taxes, net$6,473 $4,559 
Cash paid for interestCash paid for interest163 173 Cash paid for interest294 339 
Operating cash outflows from operating leasesOperating cash outflows from operating leases2,094 2,201 Operating cash outflows from operating leases4,379 4,352 
Reconciliation of cash, cash equivalents and restricted cash:Reconciliation of cash, cash equivalents and restricted cash:Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalentsCash and cash equivalents$167,182 $173,616 Cash and cash equivalents$136,395 $160,273 
Restricted cash, currentRestricted cash, current2,026 2,798 Restricted cash, current2,102 1,857 
Restricted cash, non-currentRestricted cash, non-current2,053 1,894 Restricted cash, non-current1,802 1,836 
Total cash, cash equivalents and restricted cashTotal cash, cash equivalents and restricted cash$171,261 $178,308 Total cash, cash equivalents and restricted cash$140,299 $163,966 

The accompanying notes are an integral part of these condensed consolidated financial statements.
89


FORMFACTOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Note 1 — Basis of Presentation and New Accounting Pronouncements
 
Basis of Presentation
The accompanying condensed consolidated financial information of FormFactor, Inc. is unaudited and has been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). However, such information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and the notes thereto included in our 2021 Annual Report on Form 10-K filed with the SEC on February 18, 2022. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.
 
Fiscal Year 
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 threesix months ended March 26,June 25, 2022 and March 27,June 26, 2021 each contained 1326 weeks. Fiscal 2022 will end on December 31, 2022.

Significant Accounting Policies
Our significant accounting policies have not changed during the threesix months ended March 26,June 25, 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
ASU 2020-04
In March 2020, the FASB issued ASU 2020-04, “Referenced 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 generally accepted accounting principles 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 January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848),” which permits entities to apply optional expedients in Topic 848 to derivative instruments modified because of discounting transition resulting from reference rate reform. ASU 2020-04 became effective upon issuance and may be applied prospectively to contract modifications made on or before December 31, 2022. ASU 2021-01 became effective upon issuance and may be applied on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 or prospectively for contract modifications made on or before December 31, 2022. The Company has not yet applied the relief afforded by these standard amendments and is currently assessing contracts that will require modification due to reference rate reform to which these standard amendments may be applied.

ASU 2021-08
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“Revenue from Contracts with Customers, as if it had originated the contracts. This approach differs fromThe Company elected to early adopt on a prospective basis during the current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. This guidance is effective forsecond quarter of fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted.2022. The adoption impact of the new standard will dependdid not have a material effect on the magnitude of future acquisitions. The standard will not impact acquired contract assets or liabilities from business combinations occurring prior to the adoption date.Company's Consolidated Financial Statements.

910


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 EndedThree Months EndedSix Months Ended
March 26,
2022
March 27,
2021
June 25,
2022
June 26,
2021
June 25,
2022
June 26,
2021
Intel CorporationIntel Corporation20.8 %28.1 %Intel Corporation20.9 %16.2 %20.9 %22.1 %
Samsung Electronics., LTD.Samsung Electronics., LTD.*14.7 %**
Taiwan Semiconductor Manufacturing Co., LTD.Taiwan Semiconductor Manufacturing Co., LTD.10.7 %11.5 %Taiwan Semiconductor Manufacturing Co., LTD.*11.0 %*11.2 %
31.5 %39.6 %20.9 %41.9 %20.9 %33.3 %

At March 26,June 25, 2022, one customer accounted for 22.8%20.0% of gross accounts receivable. At December 25, 2021, one customer accounted for 13.8% of gross accounts receivable.

Note 3 — Inventories, net

Inventories are stated at the lower of cost (principally standard cost, which approximates actual cost on a first in, first out basis) or net realizable value.
 
Inventories, net, consisted of the following (in thousands):
March 26,
2022
December 25,
2021
June 25,
2022
December 25,
2021
Raw materialsRaw materials$60,976 $57,673 Raw materials$68,247 $57,673 
Work-in-progressWork-in-progress41,875 35,935 Work-in-progress52,619 35,935 
Finished goodsFinished goods22,739 17,940 Finished goods22,609 17,940 
$125,590 $111,548 $143,475 $111,548 

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 $3.1 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.

As of the reporting date, we have not completed the valuation of assets acquired and liabilities assumed. Upon the completion of purchase accounting, we expect certain amounts provisionally recorded as goodwill will be ultimately allocated to developed technologies, but at this time we do not have an estimate of the allocation of value between amortizing and non-amortizing intangible assets. We do expect that some amount of intangible assets provisionally recorded as goodwill will ultimately be allocated to an amortizing intangible asset. At the time such amount is estimable, we will record any amortization required between the acquisition date and the date at which the amounts become estimable. While we do not yet have a reasonable basis on which to record any such amortization, the impact to the financial statements as a whole is not expected to be material assuming typical lives of these assets and ranges of potential allocation of value.

The amounts presented below represent provisional amounts of assets acquired and liabilities assumed, which are recorded based on the best information available, and are subject to revision as the fair value of the associated assets acquired and
11


liabilities assumed are finalized. The total estimated purchase price has been provisionally allocated to the underlying assets acquired and liabilities assumed, as follows (in thousands):
Amount
Accounts receivable$178 
Inventories6,064 
Property, plant and equipment479 
Prepaid expenses and other current assets117 
Other assets28 
Tangible assets acquired6,866 
Deferred revenue(5,513)
Accounts payable and accrued liabilities(30)
Total tangible assets acquired and liabilities assumed1,323 
Goodwill1,798 
Net Assets Acquired$3,121 

Note 5 — Goodwill and Intangible Assets

Goodwill by reportable segment was as follows (in thousands):
Probe CardsSystemsTotalProbe CardsSystemsTotal
Goodwill, as of December 26, 2020Goodwill, as of December 26, 2020$178,072 $34,689 $212,761 Goodwill, as of December 26, 2020$178,072 $34,689 $212,761 
Addition - Baldwin Park AcquisitionAddition - Baldwin Park Acquisition352 — 352 Addition - Baldwin Park Acquisition352 — 352 
Addition - HPD AcquisitionAddition - HPD Acquisition— 1,254 1,254 Addition - HPD Acquisition— 1,254 1,254 
Foreign currency translationForeign currency translation— (2,068)(2,068)Foreign currency translation— (2,068)(2,068)
Goodwill, as of December 25, 2021Goodwill, as of December 25, 2021178,424 33,875 212,299 Goodwill, as of December 25, 2021178,424 33,875 212,299 
Addition - Woburn AcquisitionAddition - Woburn Acquisition— 1,798 1,798 
Foreign currency translationForeign currency translation— (746)(746)Foreign currency translation— (1,740)(1,740)
Goodwill, as of March 26, 2022$178,424 $33,129 $211,553 
Goodwill, as of June 25, 2022Goodwill, as of June 25, 2022$178,424 $33,933 $212,357 

We have not recorded goodwill impairments for the threesix months ended March 26,June 25, 2022.

Intangible assets were as follows (in thousands):
March 26, 2022December 25, 2021June 25, 2022December 25, 2021
Intangible AssetsIntangible AssetsGrossAccumulated
Amortization
NetGrossAccumulated
Amortization
NetIntangible AssetsGrossAccumulated
Amortization
NetGrossAccumulated
Amortization
Net
Existing developed technologiesExisting developed technologies$171,560 $149,149 $22,411 $172,259 $148,784 $23,475 Existing developed technologies$170,627 $149,338 $21,289 $172,259 $148,784 $23,475 
Customer relationshipsCustomer relationships51,080 40,638 10,442 51,270 39,254 12,016 Customer relationships50,827 41,966 8,861 51,270 39,254 12,016 
Trade nameTrade name8,010 7,625 385 8,054 7,603 451 Trade name7,952 7,630 322 8,054 7,603 451 
BacklogBacklog— — — 1,896 1,896 — Backlog— — — 1,896 1,896 — 
In-process research and developmentIn-process research and development400 — 400 400 — 400 In-process research and development400 — 400 400 — 400 
$231,050 $197,412 $33,638 $233,879 $197,537 $36,342 $229,806 $198,934 $30,872 $233,879 $197,537 $36,342 

10


Amortization expense was included in our Condensed Consolidated Statements of Income as follows (in thousands):
Three Months Ended Three Months EndedSix Months Ended
March 26,
2022
March 27,
2021
June 25,
2022
June 26,
2021
June 25,
2022
June 26,
2021
Cost of revenuesCost of revenues$808 $5,090 Cost of revenues$788 $5,505 $1,596 $10,595 
Selling, general and administrativeSelling, general and administrative1,561 1,715 Selling, general and administrative1,545 1,590 3,106 3,305 
$2,369 $6,805 $2,333 $7,095 $4,702 $13,900 

12


The estimated future amortization of definite-lived intangible assets, excluding in-process research and development, is as follows (in thousands):
Fiscal YearFiscal YearAmountFiscal YearAmount
Remainder of 2022Remainder of 2022$7,056 Remainder of 2022$4,650 
202320237,062 20236,968 
202420244,472 20244,390 
202520254,219 20254,142 
202620263,195 20263,134 
ThereafterThereafter7,234 Thereafter7,188 
$33,238 $30,472 

Note 56 — Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):
March 26,
2022
December 25,
2021
June 25,
2022
December 25,
2021
Accrued compensation and benefitsAccrued compensation and benefits$28,321 $29,706 Accrued compensation and benefits$32,001 $29,706 
Accrued income and other taxesAccrued income and other taxes10,276 8,086 Accrued income and other taxes9,468 8,086 
Accrued warrantyAccrued warranty2,775 2,805 Accrued warranty3,978 2,805 
Employee stock purchase plan contributions withheldEmployee stock purchase plan contributions withheld2,027 4,693 Employee stock purchase plan contributions withheld4,789 4,693 
Accrued restructuring chargesAccrued restructuring charges890 2,478 Accrued restructuring charges592 2,478 
Other accrued expensesOther accrued expenses3,149 3,068 Other accrued expenses4,007 3,068 
$47,438 $50,836 $54,835 $50,836 

Note 67 — 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. This includesincluded 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, and expect to incur, personnel related costs to sever, relocate, or retain select employees. Additionally, we are undertaking actionsthis included plans to adjust capacity for certain product offerings. As a result of these adjustments,offerings, which resulted in contract termination costs include charges to satisfy contract obligations. The liability was recognized using our best estimate and it is reasonably possible that the final amount will differ from the amount estimated in the near term. 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 $6.0$5.0 million to $9.0$8.5 million, estimated to be comprised primarily of $1.0 million to $2.0 million of severance and employee-related costs, $2.0$1.5 million to 3.0$2.5 million in contract and lease termination costs, $1.0$2.0 million to $1.5$3.0 million in inventory impairments, and $2.0$0.5 million to $2.5$1.0 million of cost related to impairment of leasehold improvements, facility exits, and other costs. Approximately $3.0 million to $4.5 million and $3.0$2.5 million to $4.5 million is expected within each of the Probe Cards segment and Systems segment,segments, respectively.

The Company has recognized to date restructuring and other charges in the aggregate amount of $4.4$5.0 million, comprised of $1.2 million of severance and employee-related costs, $1.5 million in contract and lease termination costs, $1.5$2.0 million in inventory impairments, and $0.3 million of cost related to impairment of leasehold improvements, facility exits and other costs.
1113


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

Three Months EndedThree Months EndedSix Months Ended
March 26, 2022June 25, 2022June 25, 2022
Probe CardsSystemsTotalProbe CardsSystemsTotalProbe CardsSystemsTotal
Cost of revenuesCost of revenues$39 $100 $139 Cost of revenues$227 $227 $454 $266 $327 $593 
Research and developmentResearch and development— 146 146 Research and development— 53 53 — 199 199 
Selling, general and administrativeSelling, general and administrative25 28 Selling, general and administrative— 74 74 99 102 
$42 $271 $313 $227 $354 $581 $269 $625 $894 

Changes to the restructuring accrual in the threesix months ended March 26,June 25, 2022 were as follows (in thousands):
Employee Severance
and Benefits
Inventory
Impairments
Contract
 Termination Costs
TotalEmployee Severance
and Benefits
Inventory
Impairments
Contract
 Termination Costs
Total
December 25, 2021December 25, 2021$1,028 $— $1,450 $2,478 December 25, 2021$1,028 $— $1,450 $2,478 
Restructuring chargesRestructuring charges163 150 — 313 Restructuring charges185 646 — 894 
Cash paymentsCash payments(301)— (1,450)(1,751)Cash payments(621)— (1,450)(2,071)
Non-cash settlementNon-cash settlement— (150)— (150)Non-cash settlement— (646)— (709)
March 26, 2022$890 $— $— $890 
June 25, 2022June 25, 2022$592 $— $— $592 

Note 78 — Fair Value and Derivative Instruments

Whenever possible, the fair values of our financial assets and liabilities are determined using quoted market prices of identical securities or quoted market prices of similar securities from active markets. The three levels of inputs that may be used to measure fair value are as follows:
Level 1 valuations are obtained from real-time quotes for transactions in active exchange markets involving identical securities;
Level 2 valuations utilize significant observable inputs, such as quoted prices for similar assets or liabilities, quoted prices near the reporting date in markets that are less active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
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 six months ended March 26,June 25, 2022 or the year ended December 25, 2021.

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

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

1214


Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis were as follows (in thousands): 
March 26, 2022Level 1Level 2Total
June 25, 2022June 25, 2022Level 1Level 2Level 3Total
Assets:Assets:Assets:
Cash equivalents:Cash equivalents:Cash equivalents:
Money market fundsMoney market funds$25,172 $— $25,172 Money market funds$39,228 $— $— $39,228 
Commercial paperCommercial paper— 7,132 7,132 Commercial paper— 3,393 — 3,393 
U.S. agency securitiesU.S. agency securities— 2,558 — 2,558 
U.S. treasuriesU.S. treasuries6,000 — 6,000 U.S. treasuries1,995 — — 1,995 
31,172 7,132 38,304 41,223 5,951 — 47,174 
Marketable securities:Marketable securities:Marketable securities:
Corporate bonds Corporate bonds— 64,930 — 64,930 
U.S. treasuries U.S. treasuries40,039 — 40,039  U.S. treasuries35,894 — — 35,894 
Commercial paper Commercial paper— 22,480 — 22,480 
U.S. agency securities U.S. agency securities— 5,912 — 5,912 
Certificates of deposit Certificates of deposit— 951 951  Certificates of deposit— 703 — 703 
U.S. agency securities— 1,939 1,939 
Corporate bonds— 58,318 58,318 
Commercial paper— 27,927 27,927 
40,039 89,135 129,174 35,894 94,025 — 129,919 
Promissory note receivablePromissory note receivable— — 1,007 1,007 
Interest rate swap derivative contractsInterest rate swap derivative contracts— 1,537 1,537 Interest rate swap derivative contracts— 1,990 — 1,990 
Total assetsTotal assets$71,211 $97,804 $169,015 Total assets$77,117 $101,966 $1,007 $180,090 
Liabilities:Liabilities:Liabilities:
Foreign exchange derivative contractsForeign exchange derivative contracts$— $(577)$(577)Foreign exchange derivative contracts$— $(1,146)$— $(1,146)

December 25, 2021December 25, 2021Level 1Level 2TotalDecember 25, 2021Level 1Level 2Level 3Total
Assets:Assets:Assets:
Cash equivalents:Cash equivalents:Cash equivalents:
Money market fundsMoney market funds$9,526 $— $9,526 Money market funds$9,526 $— $— $9,526 
U.S. agency securitiesU.S. agency securities— 5,556 — 5,556 
U.S. treasuriesU.S. treasuries2,500 — 2,500 U.S. treasuries2,500 — — 2,500 
Commercial paperCommercial paper— 1,000 1,000 Commercial paper— 1,000 — 1,000 
U.S. agency securities— 5,556 5,556 
12,026 6,556 18,582 12,026 6,556 — 18,582 
Marketable securities:Marketable securities:Marketable securities:
Corporate bondsCorporate bonds— 52,709 — 52,709 
U.S. treasuriesU.S. treasuries38,985 — 38,985 U.S. treasuries38,985 — — 38,985 
Commercial paperCommercial paper— 32,162 — 32,162 
Certificates of depositCertificates of deposit— 1,199 1,199 Certificates of deposit— 1,199 — 1,199 
Corporate bonds— 52,709 52,709 
Commercial paper— 32,162 32,162 
38,985 86,070 125,055 38,985 86,070 — 125,055 
Interest rate swap derivative contractsInterest rate swap derivative contracts— 629 629 Interest rate swap derivative contracts— 629 — 629 
Total assetsTotal assets$51,011 $93,255 $144,266 Total assets$51,011 $93,255 $— $144,266 
Liabilities:Liabilities:Liabilities:
Foreign exchange derivative contractsForeign exchange derivative contracts$— $(489)$(489)Foreign exchange derivative contracts$— $(489)$— $(489)
Interest rate swap derivative contractsInterest rate swap derivative contracts— (55)(55)Interest rate swap derivative contracts— (55)— (55)
Total liabilitiesTotal liabilities$— $(544)$(544)Total liabilities$— $(544)$— $(544)
 
Cash Equivalents
The fair value of our cash equivalents is determined based on quoted market prices for similar or identical securities.

Marketable Securities
We classify our marketable securities as available-for-sale and value them utilizing a market approach. Our investments are
15


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
13


based on similar assets without applying significant judgments. In addition, all investments have a sufficient trading volume to demonstrate that the fair value is appropriate.

Unrealized gains and losses were immaterial and were recorded as a component of Accumulated other comprehensive incomeloss in our Condensed Consolidated Balance Sheets. We did not have any other-than-temporary unrealized gains or losses at either period end included in these financial statements.

Interest Rate Swaps
The fair value of our interest rate swap contracts is determined at the end of each reporting period based on valuation models that use interest rate yield curves as inputs. For accounting purposes, our interest rate swap contracts qualify for, and are designated as, cash flow hedges. 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.

Foreign Exchange Derivative Contracts
We operate and sell our products in various global markets. As a result, we are exposed to changes in foreign currency exchange rates. We utilize foreign currency forward contracts to hedge against future movements in foreign exchange rates that affect certain existing foreign currency denominated assets and liabilities and forecasted foreign currency revenue and expense transactions. Under this program, our strategy is to have increases or decreases in our foreign currency exposures mitigated by gains or losses on the foreign currency forward contracts in order to mitigate the risks and volatility associated with foreign currency transaction gains or losses.

We do not use derivative financial instruments for speculative or trading purposes. For accounting purposes, certain of our foreign currency forward contracts are not designated as hedging instruments and, accordingly, we record the fair value of these contracts as of the end of our reporting period in our Condensed Consolidated Balance Sheets with changes in fair value recorded within Other income (expense), net in our Condensed Consolidated Statement of Income for both realized and unrealized gains and losses. Certain of our foreign currency forward contracts are designated as cash flow hedges, and, accordingly, we record the fair value of these contracts as of the end of our reporting period in our Condensed Consolidated Balance Sheets with changes in fair value recorded as a component of Accumulated other comprehensive loss and reclassified into earnings in the same period in which the hedged transaction affects earnings, and in the same line item on the Condensed Consolidated Statements of Income as the impact of the hedge transaction.

The fair value of our foreign exchange derivative contracts was determined based on current foreign currency exchange rates and forward points. All of our foreign exchange derivative contracts outstanding at March 26,June 25, 2022 will mature by the firstsecond quarter of fiscal 2023.

The following table provides information about our foreign currency forward contracts outstanding as of March 26,June 25, 2022 (in thousands):
CurrencyCurrencyContract PositionContract Amount
(Local Currency)
Contract Amount
(U.S. Dollars)
CurrencyContract PositionContract Amount
(Local Currency)
Contract Amount
(U.S. Dollars)
Euro DollarEuro DollarBuy(9,967)$(11,617)Euro DollarBuy(21,445)$(24,117)
Euro DollarSell2,065 2,269 
Japanese YenJapanese YenSell2,334,287 19,127 Japanese YenSell2,247,411 16,633 
Korean WonKorean WonBuy(1,281,414)(1,052)Korean WonBuy(1,010,988)(779)
Taiwan DollarTaiwan DollarSell27,806 972 Taiwan DollarSell28,890 974 
Total USD notional amount of outstanding foreign exchange contractsTotal USD notional amount of outstanding foreign exchange contracts$9,699 Total USD notional amount of outstanding foreign exchange contracts$(7,289)

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
16


acquisition. Other than as discussed in Note 6,4, Acquisition, and Note 7, Restructuring Charges, there were no assets or liabilities measured at fair value on a nonrecurring basis during the three and six months ended March 26,June 25, 2022 or March 27,June 26, 2021.

14


Note 89 — Warranty
We offer warranties on certain products and record a liability for the estimated future costs associated with warranty claims at the time revenue is recognized. The warranty liability is based upon historical experience and our estimate of the level of future costs. While we engage in product quality programs and processes, our warranty obligation is affected by product failure rates, material usage and service delivery costs. We regularly monitor product returns for warranty and maintain a reserve for the related expenses based upon our historical experience and any specifically identified failures. As we sell new products to our customers, we must exercise considerable judgment in estimating the expected failure rates. This estimating process is based on historical experience of similar products, as well as various other assumptions that we believe to be reasonable under the circumstances. We provide for the estimated cost of product warranties at the time revenue is recognized as a component of Cost of revenues in our Condensed Consolidated Statement of Income.

Changes in our warranty liability were as follows (in thousands):
Three Months EndedSix Months Ended
March 26,
2022
March 27,
2021
June 25,
2022
June 26,
2021
Balance at beginning of periodBalance at beginning of period$2,805 $3,918 Balance at beginning of period$2,805 $3,918 
AccrualsAccruals1,214 1,374 Accruals3,846 3,472 
SettlementsSettlements(1,244)(1,573)Settlements(2,673)(3,132)
Balance at end of periodBalance at end of period$2,775 $3,719 Balance at end of period$3,978 $4,258 

Note 910 — Property, Plant and Equipment, net

Property, plant and equipment, net consisted of the following (in thousands):
March 26,
2022
December 25,
2021
June 25,
2022
December 25,
2021
LandLand$4,751 $4,751 Land$4,751 $4,751 
Building and building improvementsBuilding and building improvements44,123 41,722 Building and building improvements44,429 41,722 
Machinery and equipmentMachinery and equipment258,783 252,632 Machinery and equipment263,851 252,632 
Computer equipment and softwareComputer equipment and software45,200 44,667 Computer equipment and software45,727 44,667 
Furniture and fixturesFurniture and fixtures7,367 7,293 Furniture and fixtures7,434 7,293 
Leasehold improvementsLeasehold improvements83,707 82,266 Leasehold improvements83,127 82,266 
Sub-totalSub-total443,931 433,331 Sub-total449,319 433,331 
Less: Accumulated depreciation and amortizationLess: Accumulated depreciation and amortization(318,726)(312,700)Less: Accumulated depreciation and amortization(323,779)(312,700)
Net, property, plant and equipmentNet, property, plant and equipment125,205 120,631 Net, property, plant and equipment125,540 120,631 
Construction-in-processConstruction-in-process26,974 25,924 Construction-in-process32,274 25,924 
TotalTotal$152,179 $146,555 Total$157,814 $146,555 

Note 1011 — Stockholders’ Equity and Stock-Based Compensation

Common Stock Repurchase ProgramPrograms
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 plans. The share repurchase program will expire on October 28, 2022. During the three months ended March 26, 2022, we repurchased and retired 240,548 shares of common stock for $9.4 million.programs. During fiscal 2021 we repurchased and retired 622,400 shares of common stock for $24.0 million. During the six months ended June 25, 2022, we repurchased and retired 676,408 shares of common stock for $26.0 million, utilizing the remaining funds available for repurchase.

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 three months ended June 25, 2022, we repurchased and retired 767,083 shares of common stock for $28.4 million under the program. As of March 26,June 25, 2022, $16.6$46.6 million remained available for future repurchases.
17



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. All repurchases were made in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended.

15


Restricted Stock Units
Restricted stock unit (“RSU”) activity under our equity incentive plan was as follows:
UnitsWeighted Average Grant Date Fair ValueUnitsWeighted Average Grant Date Fair Value
RSUs at December 25, 2021RSUs at December 25, 20212,166,934 $28.63 RSUs at December 25, 20212,166,934 $28.63 
Awards grantedAwards granted12,450 40.94 Awards granted63,697 41.25 
Awards vestedAwards vested(4,255)36.70 Awards vested(338,825)16.73 
Awards forfeitedAwards forfeited(19,511)28.18 Awards forfeited(51,941)30.23 
RSUs at March 26, 20222,155,618 28.69 
RSUs at June 25, 2022RSUs at June 25, 20221,839,865 31.22 

Performance Restricted Stock Units
We may grant Performance RSUs (“PRSUs”) to certain executives, which vest based upon us achieving certain market performance criteria. There were no PRSUs granted during the threesix months ended March 26,June 25, 2022. PRSUs are included as part of the RSU activity above.

Employee Stock Purchase Plan
Information related to activity under our Employee Stock Purchase Plan (“ESPP”) was as follows:
 ThreeSix Months Ended
 March 26,June 25, 2022
Shares issued157,642 
Weighted average per share purchase price$35.81 
Weighted average per share discount from the fair value of our common stock on the date of issuance$(6.93)

Stock-Based Compensation
Stock-based compensation was included in our Condensed Consolidated Statements of Income as follows (in thousands):
Three Months EndedThree Months EndedSix Months Ended
March 26,
2022
March 27,
2021
June 25,
2022
June 26,
2021
June 25,
2022
June 26,
2021
Cost of revenuesCost of revenues$1,078 $1,335 Cost of revenues$734 $1,079 $1,812 $2,414 
Research and developmentResearch and development1,986 1,689 Research and development1,695 1,663 3,681 3,352 
Selling, general and administrativeSelling, general and administrative4,456 4,053 Selling, general and administrative3,929 3,846 8,385 7,899 
Total stock-based compensationTotal stock-based compensation$7,520 $7,077 Total stock-based compensation$6,358 $6,588 $13,878 $13,665 
 
Unrecognized Compensation Costs
At March 26,June 25, 2022, the unrecognized stock-based compensation was as follows (dollars in thousands): 
Unrecognized ExpenseAverage Expected Recognition Period in YearsUnrecognized ExpenseAverage Expected Recognition Period in Years
Restricted stock unitsRestricted stock units$31,005 2.00Restricted stock units$27,430 1.80
Performance restricted stock unitsPerformance restricted stock units8,652 1.90Performance restricted stock units7,202 1.74
Employee stock purchase planEmployee stock purchase plan1,140 0.86Employee stock purchase plan285 0.61
Total unrecognized stock-based compensation expenseTotal unrecognized stock-based compensation expense$40,797 1.95Total unrecognized stock-based compensation expense$34,917 1.77

1618


Note 1112 — Net Income per Share

The following table reconciles the shares used in calculating basic net income per share and diluted net income per share (in thousands):
Three Months EndedThree Months EndedSix Months Ended
March 26,
2022
March 27,
2021
June 25,
2022
June 26,
2021
June 25,
2022
June 26,
2021
Weighted-average shares used in computing basic net income per shareWeighted-average shares used in computing basic net income per share78,246 77,598 Weighted-average shares used in computing basic net income per share77,897 77,463 78,071 77,530 
Add potentially dilutive securitiesAdd potentially dilutive securities1,222 2,390 Add potentially dilutive securities1,313 2,003 1,352 2,091 
Weighted-average shares used in computing diluted net income per shareWeighted-average shares used in computing diluted net income per share79,468 79,988 Weighted-average shares used in computing diluted net income per share79,210 79,466 79,423 79,621 
Securities not included as they would have been antidilutiveSecurities not included as they would have been antidilutive— Securities not included as they would have been antidilutive23 128 — 118 

Note 1213 — Commitments and Contingencies

Leases
See Note 13,14, Leases.

Contractual Obligations and Commitments
Our contractual obligations and commitments have not materially changed as of March 26,June 25, 2022 from those disclosed in our Annual Report on Form 10-K for the year ended December 25, 2021.

Legal Matters
From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. As of March 26,June 25, 2022, and as of the filing of this Quarterly Report on Form 10-Q, we were not involved in any material legal proceedings.

Note 1314 — Leases

We lease real estate space under non-cancelable operating lease agreements for commercial and industrial space, as well as for a portion of our corporate headquarters located in Livermore, California. Our leases have remaining terms of 1 to 7 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 did not include any of our renewal options in our lease terms for calculating our lease liability as the renewal options allow us to maintain operational flexibility and we are not reasonably certain we will exercise these options at this time. The weighted-average remaining lease term for our operating leases was 6 years as of March 26,June 25, 2022 and the weighted-average discount rate was 3.67%3.69%.

The components of lease expense were as follows (in thousands):
Three Months EndedThree Months EndedSix Months Ended
March 26,
2022
March 27,
2021
June 25,
2022
June 26,
2021
June 25,
2022
June 26,
2021
Lease expense:Lease expense:Lease expense:
Operating lease expenseOperating lease expense$2,221 $2,123 Operating lease expense$2,183 $2,048 $4,404 $4,171 
Short-term lease expenseShort-term lease expense40 37 Short-term lease expense76 45 116 82 
Variable lease expenseVariable lease expense458 537 Variable lease expense677 426 1,135 963 
$2,719 $2,697 $2,936 $2,519 $5,655 $5,216 


1719


Future minimum payments under our non-cancelable operating leases were as follows as of March 26,June 25, 2022 (in thousands):
Fiscal YearFiscal YearAmountFiscal YearAmount
Remainder of 2022Remainder of 2022$6,589 Remainder of 2022$4,319 
202320237,680 20237,564 
202420247,317 20247,224 
202520257,270 20257,187 
202620266,532 20266,505 
ThereafterThereafter9,195 Thereafter9,143 
Total minimum lease payments Total minimum lease payments44,583  Total minimum lease payments41,942 
Less: interestLess: interest(5,168)Less: interest(4,588)
Present value of net minimum lease payments Present value of net minimum lease payments39,415  Present value of net minimum lease payments37,354 
Less: current portionLess: current portion(8,049)Less: current portion(7,843)
Total long-term operating lease liabilities Total long-term operating lease liabilities$31,366  Total long-term operating lease liabilities$29,511 

Note 1415 — Revenue

Transaction price allocated to the remaining performance obligations: On March 26,June 25, 2022, we had $7.7$9.7 million of remaining performance obligations, which were comprised of deferred service contracts and extended warranty contracts and contracts with overtime revenue recognition that are not yet delivered. We expect to recognize approximately 75.6%66.9% of our remaining performance obligations as revenue in the remainder of fiscal 2022, approximately 18.4%27.7% in fiscal 2023, and approximately 6.0%5.4% in fiscal 2024 and thereafter. The foregoing excludes the value of other remaining performance obligations as they have original durations of one year or less, and also excludes information about variable consideration allocated entirely to a wholly unsatisfied performance obligation.

Contract balances: The timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable is recorded at the invoiced amount, net of an allowance for credit losses. A receivable is recognized in the period we deliver goods or provide services or when our right to consideration is unconditional. A contract asset is recorded when we have performed under the contract but our right to consideration is conditional on something other than the passage of time. Contract assets as of March 26,June 25, 2022 and December 25, 2021 were $0.9$2.0 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 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 March 26,June 25, 2022 and December 25, 2021 were $28.0$32.2 million and $24.2 million, respectively. During the threesix months ended March 26,June 25, 2022, we recognized $11.0$16.5 million of revenue that was included in contract liabilities as of December 25, 2021.

Costs to obtain a contract: We generally expense sales commissions when incurred as a component of Selling, general and administrative expense, as the amortization period is typically less than one year.

Revenue by Category: Refer to Note 15,16, Operating Segments and Enterprise-Wide Information, for further details.

Note 1516 — 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. We operate in 2 reportable segments consisting
1820


of the Probe Cards segment and the Systems segment. The following table summarizes the operating results by reportable segment (dollars in thousands):
Three Months EndedThree Months Ended
March 26, 2022March 27, 2021June 25, 2022June 26, 2021
Probe CardsSystemsCorporate and OtherTotalProbe CardsSystemsCorporate and OtherTotalProbe CardsSystemsCorporate and OtherTotalProbe CardsSystemsCorporate and OtherTotal
RevenuesRevenues$159,983 $37,191 $— $197,174 $158,898 $27,738 $— $186,636 Revenues$167,708 $36,199 $— $203,907 $153,641 $34,435 $— $188,076 
Gross profitGross profit77,202 19,407 (2,385)94,224 70,315 13,599 (7,208)76,706 Gross profit78,420 18,276 (2,327)94,369 66,600 16,907 (7,224)76,283 
Gross marginGross margin48.3 %52.2 %047.8 %44.3 %49.0 %041.1 %Gross margin46.8 %50.5 %046.3 %43.3 %49.1 %040.6 %
Six Months Ended
June 25, 2022June 26, 2021
Probe CardsSystemsCorporate and OtherTotalProbe CardsSystemsCorporate and OtherTotal
RevenuesRevenues$327,691 $73,390 $— $401,081 $312,539 $62,173 $— $374,712 
Gross profitGross profit$155,622 $37,683 $(4,712)$188,593 $136,915 $30,506 $(14,432)$152,989 
Gross marginGross margin47.5 %51.3 %047.0 %43.8 %49.1 %040.8 %

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, 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 EndedThree Months Ended
March 26, 2022March 27, 2021June 25, 2022June 26, 2021
Probe CardsSystemsTotalProbe CardsSystemsTotalProbe CardsSystemsTotalProbe CardsSystemsTotal
Market:Market:Market:
Foundry & LogicFoundry & Logic$114,121 $— $114,121 $113,410 $— $113,410 Foundry & Logic$122,380 $— $122,380 $103,726 $— $103,726 
DRAMDRAM34,437 — 34,437 33,898 — 33,898 DRAM36,843 — 36,843 42,088 — 42,088 
FlashFlash11,425 — 11,425 11,590 — 11,590 Flash8,485 — 8,485 7,827 — 7,827 
SystemsSystems— 37,191 37,191 — 27,738 27,738 Systems— 36,199 36,199 — 34,435 34,435 
TotalTotal$159,983 $37,191 $197,174 $158,898 $27,738 $186,636 Total$167,708 $36,199 $203,907 $153,641 $34,435 $188,076 
Timing of revenue recognition:Timing of revenue recognition:Timing of revenue recognition:
Products transferred at a point in timeProducts transferred at a point in time$158,836 $35,416 $194,252 $158,476 $24,671 $183,147 Products transferred at a point in time$166,701 $33,081 $199,782 $153,129 $30,884 $184,013 
Products and services transferred over timeProducts and services transferred over time1,147 1,775 2,922 422 3,067 3,489 Products and services transferred over time1,007 3,118 4,125 512 3,551 4,063 
TotalTotal$159,983 $37,191 $197,174 $158,898 $27,738 $186,636 Total$167,708 $36,199 $203,907 $153,641 $34,435 $188,076 
Geographical region:Geographical region:Geographical region:
TaiwanTaiwan$42,522 $10,547 $53,069 $44,734 $846 $45,580 Taiwan$45,188 $4,832 $50,020 $46,737 $5,147 $51,884 
ChinaChina32,791 5,608 38,399 37,831 4,794 42,625 China40,578 9,157 49,735 23,996 7,831 31,827 
United StatesUnited States21,539 9,703 31,242 24,174 8,476 32,650 
South KoreaSouth Korea24,881 2,620 27,501 18,001 1,084 19,085 South Korea27,418 1,337 28,755 35,426 751 36,177 
MalaysiaMalaysia21,517 682 22,199 19,888 42 19,930 Malaysia16,157 87 16,244 3,034 161 3,195 
United States19,976 5,671 25,647 21,308 8,178 29,486 
Singapore10,284 612 10,896 7,627 931 8,558 
JapanJapan4,785 4,597 9,382 5,249 4,072 9,321 Japan6,716 3,221 9,937 3,477 4,227 7,704 
EuropeEurope2,382 6,013 8,395 2,833 7,166 9,999 Europe3,824 4,267 8,091 6,466 5,544 12,010 
SingaporeSingapore5,131 1,977 7,108 8,602 1,360 9,962 
Rest of the worldRest of the world845 841 1,686 1,427 625 2,052 Rest of the world1,157 1,618 2,775 1,729 938 2,667 
TotalTotal$159,983 $37,191 $197,174 $158,898 $27,738 $186,636 Total$167,708 $36,199 $203,907 $153,641 $34,435 $188,076 
21


Six Months Ended
June 25, 2022June 26, 2021
Probe CardsSystemsTotalProbe CardsSystemsTotal
Market:
Foundry & Logic$236,501 $— $236,501 $217,136 $— $217,136 
DRAM71,280 — 71,280 75,986 — 75,986 
Flash19,910 — 19,910 19,417 — 19,417 
Systems— 73,390 73,390 — 62,173 62,173 
Total$327,691 $73,390 $401,081 $312,539 $62,173 $374,712 
Timing of revenue recognition:
Products transferred at a point in time$325,537 $68,497 $394,034 $311,605 $55,555 $367,160 
Products and services transferred over time2,154 4,893 7,047 934 6,618 7,552 
Total$327,691 $73,390 $401,081 $312,539 $62,173 $374,712 
Geographical region:
Taiwan$87,710 $15,379 $103,089 $91,471 $5,993 $97,464 
China73,369 14,765 88,134 61,827 12,625 74,452 
United States41,515 15,374 56,889 45,482 16,654 62,136 
South Korea52,299 3,957 56,256 53,427 1,835 55,262 
Malaysia37,674 769 38,443 22,922 203 23,125 
Japan11,501 7,818 19,319 8,726 8,299 17,025 
Singapore15,415 2,589 18,004 16,229 2,291 18,520 
Europe6,206 10,280 16,486 9,299 12,710 22,009 
Rest of the world2,002 2,459 4,461 3,156 1,563 4,719 
Total$327,691 $73,390 $401,081 $312,539 $62,173 $374,712 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Cautionary Statement Regarding Forward-Looking Statements
 
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Securities Exchange Act of 1934 and the Securities Act of 1933, which are subject to risks and uncertainties. The forward-looking statements include statements concerning, among other things, our business strategy, financial and operating results, gross margins, liquidity and capital expenditure requirements and impact of accounting standards. In some cases, you can identify these statements by forward-looking words, such as “may,” “might,” “will,” “could,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend” and “continue,” the negative or plural of these words and other comparable terminology.

19


The forward-looking statements are only predictions based on our current expectations and our projections about future events. All forward-looking statements included in this Quarterly Report on Form 10-Q are based upon information available to us as of the filing date of this Quarterly Report on Form 10-Q. You should not place undue reliance on these forward-looking statements. We have no obligation to update any of these statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these statements, including risks related to general market trends, the benefits of acquisitions and investments, our supply chain, uncertainties related to COVID-19 and the impact of our responses to it, the interpretation and impacts of changes in export controls and other trade barriers, military conflicts, political volatility and similar factors, (including developments related to Ukraine and Russia), our ability to execute our business strategy and other risks discussed in the section titled “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 25, 2021 and in this Quarterly Report on Form 10-Q. You should carefully consider the numerous risks and uncertainties described under these sections.
 
The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the accompanying notes contained in this Quarterly Report on Form 10-Q. Unless expressly stated or the context otherwise requires, the terms “we,” “our,” “us” and “FormFactor” refer to FormFactor, Inc. and its subsidiaries.

Overview

FormFactor, Inc., headquartered in Livermore, California, is a leading provider of essential test and measurement technologies along the full semiconductor product lifecycle - from characterization, modeling, reliability, and design de-bug, to qualification
22


and production test. We provide a broad range of high-performance probe cards, analytical probes, probe stations, metrology systems, thermal systems, and cryogenic systems to both semiconductor companies and scientific institutions. Our products provide electrical and physical information from a variety of semiconductor and electro-optical devices and integrated circuits from early research, through development, to high-volume production. Customers use our products and services to accelerate profitability by optimizing device performance and advancing yield knowledge.

We operate in two reportable segments consisting of the Probe Cards segment and the Systems segment. Sales of our probe cards and analytical probes are included in the Probe Cards segment, while sales of our probe stations, metrology systems, thermal systems and cryogenic systems are included in the Systems segment.

We generated net income of $29.9$60.1 million in the first threesix months of fiscal 2022 as compared to $19.6$37.5 million in the first threesix months of fiscal 2021. The increase in net income was primarily due to increased revenue with improved gross margins from a change in product mix and a reduction in the amortization of intangibles from significant intangibles becoming fully amortized, partially offset by higher operating expenses.

Impact of COVID-19

The COVID-19 pandemic continues to cause serious illness and death in many of the regions that we, our customers and our suppliers operate. The COVID-19 pandemic has resulted in significant governmental actions designed to control the spread of the virus, including the imposition of safety requirements and other orders in locations where we have manufacturing and other activities.

We continue to operate our manufacturing sites at production levels greater than those prior to the pandemic, albeit subject to certain safety and related constraints. Our other operations are continuing with substantial work-from-home activities.

If the provisions of governmental health orders or other safety requirements applicable to us or our customers or suppliers become more restrictive for an extended period of time, or if we have repeated occurrences of COVID-19 in any of our facilities, we may experience disruptions or delays in manufacturing, product design, product development, customer support, manufacturing and sales, and an overall loss of productivity and efficiency.

While the disruptions in our operations, supply chain and customer demand as a result of the COVID-19 pandemic have been somewhat limited, we continue to see impacts on elements in the supply chain and believe that the COVID-19 pandemic represents a sustained threat that may give rise to a variety of more significant adverse impacts on our business and financial results. The semiconductor industry is experiencing various supply constraints due to the pandemic. While we are working with our global supply chain partners to mitigate this risk, the duration and extent of the supply chain disruptions remain uncertain. For a further description of the uncertainties and business risks associated with the COVID-19 pandemic, see the risk factors discussed in our Annual Report on Form 10-K for the year ended December 25, 2021.

20


Significant Accounting Policies and the Use of Estimates

Management’s Discussion and Analysis and Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements in our 2021 Annual Report on Form 10-K describe the significant accounting estimates and significant accounting policies used in preparation of the Consolidated Financial Statements. Actual results in these areas could differ from management’s estimates. During the threesix months ended March 26,June 25, 2022, there were no significant changes in our significant accounting policies or estimates from those reported in our Annual Report on Form 10-K for the year ended December 25, 2021, which was filed with the Securities and Exchange Commission on February 18, 2022.

23


Results of Operations
 
The following table sets forth our operating results as a percentage of revenues for the periods indicated:
Three Months Ended Three Months EndedSix Months Ended
March 26,
2022
March 27,
2021
June 25,
2022
June 26,
2021
June 25,
2022
June 26,
2021
RevenuesRevenues100.0 %100.0 %Revenues100.0 %100.0 %100.0 %100.0 %
Cost of revenuesCost of revenues52.2 58.9 Cost of revenues53.7 59.4 53.0 59.2 
Gross profitGross profit47.8 41.1 Gross profit46.3 40.6 47.0 40.8 
Operating expenses:Operating expenses:  Operating expenses:    
Research and developmentResearch and development13.8 12.9 Research and development13.9 13.5 13.8 13.2 
Selling, general and administrativeSelling, general and administrative16.7 16.1 Selling, general and administrative16.4 16.2 16.5 16.1 
Total operating expensesTotal operating expenses30.5 29.0 Total operating expenses30.3 29.7 30.3 29.3 
Operating incomeOperating income17.3 12.1 Operating income16.0 10.9 16.7 11.5 
Interest incomeInterest income0.1 0.1 Interest income0.1 0.1 0.1 0.1 
Interest expenseInterest expense(0.1)(0.1)Interest expense(0.1)(0.1)(0.1)(0.1)
Other income, net0.1 0.1 
Other income (expense), netOther income (expense), net0.3 (0.1)0.2 — 
Income before income taxesIncome before income taxes17.4 12.2 Income before income taxes16.3 10.8 16.9 11.5 
Provision for income taxesProvision for income taxes2.2 1.7 Provision for income taxes1.5 1.2 1.9 1.5 
Net incomeNet income15.2 %10.5 %Net income14.8 %9.6 %15.0 %10.0 %

Revenues by Segment and Market
 Three Months Ended
 March 26,
2022
March 27,
2021
 (In thousands)
Probe Cards$159,983 $158,898 
Systems37,191 27,738 
$197,174 $186,636 

Three Months Ended
March 26,
2022
% of RevenuesMarch 27,
2021
% of Revenues$ Change% Change
(Dollars in thousands)
Probe Cards Markets:
Foundry & Logic$114,121 57.8 %$113,410 60.7 %$711 0.6 %
DRAM34,437 17.5 33,898 18.2 539 1.6 
Flash11,425 5.8 11,590 6.2 (165)(1.4)
Systems Market:
Systems37,191 18.9 27,738 14.9 9,453 34.1 
Total revenues$197,174 100.0 %$186,636 100.0 %$10,538 5.6 %
 Three Months EndedSix Months Ended
 June 25,
2022
June 26,
2021
June 25,
2022
June 26,
2021
 (In thousands)
Probe Cards$167,708 $153,641 $327,691 $312,539 
Systems36,199 34,435 73,390 62,173 
$203,907 $188,076 $401,081 $374,712 

2124


Our Probe Cards markets
Three Months Ended
June 25,
2022
% of RevenuesJune 26,
2021
% of Revenues$ Change% Change
(Dollars in thousands)
Probe Cards Markets:
Foundry & Logic$122,380 60.0 %$103,726 55.1 %$18,654 18.0 %
DRAM36,843 18.0 42,088 22.4 (5,245)(12.5)
Flash8,485 4.2 7,827 4.2 658 8.4 
Systems Market:
Systems36,199 17.8 34,435 18.3 1,764 5.1 
Total revenues$203,907 100.0 %$188,076 100.0 %$15,831 8.4 %
Six Months Ended
June 25,
2022
% of RevenuesJune 26,
2021
% of Revenues$ Change% Change
(Dollars in thousands)
Probe Cards Markets:
Foundry & Logic$236,501 58.9 %$217,136 57.9 %$19,365 8.9 %
DRAM71,280 17.8 75,986 20.3 (4,706)(6.2)
Flash19,910 5.0 19,417 5.2 493 2.5 
Systems Market:
Systems73,390 18.3 62,173 16.6 11,217 18.0 
Total revenues$401,081 100.0 %$374,712 100.0 %$26,369 7.0 %

The increase in Foundry & Logic product revenue for the three and six months ended March 26,June 25, 2022, improved slightly in total compared to the three and six months ended March 27,June 26, 2021, despite a decline within our top two customerswas driven principally by the increased demand and increased unit sales to other large semiconductor foundries and integrated device manufacturers.

The decrease in these periods. Our abilityDRAM product revenue for the three and six months ended June 25, 2022, compared to maintainthe three and grow our revenues, despitesix months ended June 26, 2021, was driven by decreased design wins and customer demand.

The increase in Flash product mix changes between our top customers, isrevenue for the result of our long-termthree and six months ended June 25, 2022, compared to the three and six months ended June 26, 2021, was driven by increased customer and market diversification initiatives.demand.

The increase in Systems market revenue for the three and six months ended March 26,June 25, 2022, compared to the three and six months ended March 27,June 26, 2021, was driven by both increased sales of metrology systems and our 200 and 300 millimeter probe stations.

25


Revenues by Geographic Region
Three Months EndedThree Months EndedSix Months Ended
March 26,
2022
% of
Revenue
March 27,
2021
% of
Revenue
June 25,
2022
% of
Revenue
June 26,
2021
% of
Revenue
June 25,
2022
% of
Revenue
June 26,
2021
% of
Revenue
(Dollars in thousands) (Dollars in thousands)
TaiwanTaiwan$53,069 26.9 %$45,580 24.4 %Taiwan$50,020 24.5 %$51,884 27.6 %$103,089 25.7 %$97,464 26.0 %
ChinaChina38,399 19.5 42,625 22.8 China49,735 24.4 31,827 16.9 88,134 22.0 74,452 19.9 
United StatesUnited States31,242 15.3 32,650 17.4 56,889 14.2 62,136 16.6 
South KoreaSouth Korea27,501 13.9 19,085 10.2 South Korea28,755 14.1 36,177 19.2 56,256 14.0 55,262 14.7 
United States25,647 13.0 29,486 15.8 
MalaysiaMalaysia22,199 11.3 19,930 10.7 Malaysia16,244 8.0 3,195 1.7 38,443 9.6 23,125 6.2 
Singapore10,896 5.5 8,558 4.6 
JapanJapan9,382 4.8 9,321 5.0 Japan9,937 4.9 7,704 4.1 19,319 4.8 17,025 4.5 
EuropeEurope8,395 4.3 9,999 5.4 Europe8,091 4.0 12,010 6.4 16,486 4.1 22,009 5.9 
SingaporeSingapore7,108 3.5 9,962 5.3 18,004 4.5 18,520 4.9 
Rest of the worldRest of the world1,686 0.8 2,052 1.1 Rest of the world2,775 1.3 2,667 1.4 4,461 1.1 4,719 1.3 
Total revenuesTotal revenues$197,174 100.0 %$186,636 100.0 %Total revenues$203,907 100.0 %$188,076 100.0 %$401,081 100.0 %$374,712 100.0 %

Geographic revenue information is based on the location to which we ship the product. For example, if a certain South Korean customer purchases through their U.S. subsidiary and requests the products to be shipped to an address in South Korea, this sale will be reflected in the revenue for South Korea rather than the U.S.

Changes in revenue by geographic region for the three and six months ended March 26,June 25, 2022, compared to the three and six months ended March 27,June 26, 2021, were primarily attributable to changes in customer demand, shifts in customer regional manufacturing strategies, particularly with our large multinational customers, and product sales mix. More specifically, the increase in revenues for China and Malaysia were driven principally by a single large U.S.-based company with operations in China and Malaysia. Further increases in China were driven by increased demand from a large Chinese DRAM integrated device manufacturer.

Cost of Revenues and Gross Margins

Cost of revenues consists primarily of manufacturing materials, compensation and benefits, shipping and handling costs, manufacturing-related overhead and amortization of certain intangible assets. Our manufacturing operations rely on a limited number of suppliers to provide key components and materials for our products, some of which are a sole source. We order materials and supplies based on backlog and forecasted customer orders. Tooling and setup costs related to changing manufacturing lots at our suppliers are also included in the cost of revenues. We expense all warranty costs, inventory provisions and amortization of certain intangible assets as cost of revenues.

Our gross profit and gross margin were as follows (dollars in thousands):
Three Months Ended Three Months Ended
March 26,
2022
March 27,
2021
$ Change% Change June 25,
2022
June 26,
2021
$ Change% Change
Gross profitGross profit$94,224 $76,706 $17,518 22.8 %Gross profit$94,369 $76,283 $18,086 23.7 %
Gross marginGross margin47.8 %41.1 %Gross margin46.3 %40.6 %
Six Months Ended
June 25,
2022
June 26,
2021
$ Change% Change
Gross profitGross profit$188,593 $152,989 $35,604 23.3 %
Gross marginGross margin47.0 %40.8 %

2226


Our gross profit and gross margin by segment were as follows (dollars in thousands):
Three Months EndedThree Months Ended
March 26, 2022March 27, 2021June 25, 2022June 26, 2021
Probe CardsSystemsCorporate and OtherTotalProbe CardsSystemsCorporate and OtherTotalProbe CardsSystemsCorporate and OtherTotalProbe CardsSystemsCorporate and OtherTotal
Gross profitGross profit$77,202 $19,407 $(2,385)$94,224 $70,315 $13,599 $(7,208)$76,706 Gross profit$78,420 $18,276 $(2,327)$94,369 $66,600 $16,907 $(7,224)$76,283 
Gross marginGross margin48.3 %52.2 %47.8 %44.3 %49.0 %41.1 %Gross margin46.8 %50.5 %46.3 %43.3 %49.1 %40.6 %
Six Months Ended
June 25, 2022June 26, 2021
Probe CardsSystemsCorporate and OtherTotalProbe CardsSystemsCorporate and OtherTotal
Gross profitGross profit$155,622$37,683 $(4,712)$188,593 $136,915$30,506 $(14,432)$152,989 
Gross marginGross margin47.5 %51.3 %47.0 %43.8 %49.1 %40.8 %

Probe Cards
For the three and six months ended March 26,June 25, 2022, gross margins increased compared to the three and six months ended March 27,June 26, 2021, primarily due to higher revenues and improved standard margins duerelated to change infavorable product mix, favorable absorption of costs on higher production volumes, and favorable capitalization, partially offset by higher net manufacturing spending driven by higher material and labor costs, from fluctuations in commodity costs.and — for the three month periods — unfavorable absorption of costs despite higher production volumes.

Systems
For the three and six months ended March 26,June 25, 2022, gross margins increased compared to the three and six months ended March 27,June 26, 2021, primarily as a result of favorable product mix largely related toprimarily driven by increased sales of metrology systemstools at favorable margins, and improved leverage on fixed costs at these higher volumes.

Corporate and Other
Corporate and Other includes unallocated expenses relating to share-based compensation and amortization of intangible assets, inventory and fixed asset fair value adjustments due to acquisitions, and restructuring which are not used in evaluating the results of, or in allocating resources to, our reportable segments. The reduction in Corporate and Other for the three and six months ended March 26,June 25, 2022 compared to the three and six months ended March 27,June 26, 2021 is primarily due to a reduction in the amortization of intangibles resulting from significant intangibles becoming fully amortized.amortized, partially offset by increased share-based compensation driven by increases in headcount to support our growth.

Overall
Gross profit and gross margins fluctuate with revenue levels, product mix, selling prices, factory loading and material costs. For the three and six months ended March 26,June 25, 2022, compared to the three and six months ended March 27,June 26, 2021, gross profit and gross margins have increased on greaterhigher revenue levels, a favorable product mix, and less amortization of intangibles.

Cost of revenues included stock-based compensation expense as follows (in thousands):
Three Months Ended
March 26,
2022
March 27,
2021
Stock-based compensation$1,078 $1,335 
Three Months EndedSix Months Ended
June 25,
2022
June 26,
2021
June 25,
2022
June 26,
2021
Stock-based compensation$734 $1,079 $1,812 $2,414 

27


Research and Development
Three Months EndedThree Months Ended
March 26,
2022
March 27,
2021
$ Change% ChangeJune 25,
2022
June 26,
2021
$ Change% Change
(Dollars in thousands)(Dollars in thousands)
Research and developmentResearch and development$27,134 $24,046 $3,088 12.8 %Research and development$28,317 $25,454 $2,863 11.2 %
% of revenues% of revenues13.8 %12.9 %% of revenues13.9 %13.5 %
Six Months Ended
June 25,
2022
June 26,
2021
$ Change% Change
(Dollars in thousands)
Research and developmentResearch and development$55,451 $49,500 $5,951 12.0 %
% of revenues% of revenues13.8 %13.2 %

The increase in research and development expenses in the three and six months ended March 26,June 25, 2022 when compared to the corresponding period in the prior year was primarily driven by an increase in headcount to support current operating levels.our continued investment in technology leadership. Increased general operational costs, annual salary adjustments, project material costs, and stock-based compensation also contributed to the increase.

23


A detail of the changes is as follows (in thousands):
Three Months Ended March 26, 2022 compared to Three Months Ended March 27, 2021
Employee compensation costs$1,606 
Other general operations967 
Stock-based compensation297 
Project material costs218 
$3,088 
Three Months Ended June 25, 2022 compared to Three Months Ended June 26, 2021Six Months Ended June 25, 2022 compared to Six Months Ended June 26, 2021
Employee compensation costs$1,006 $2,612 
Other general operations1,421 2,387 
Stock-based compensation32 329 
Project material costs404 623 
$2,863 $5,951 

Research and development included stock-based compensation expense as follows (in thousands):
Three Months Ended
March 26,
2022
March 27,
2021
Stock-based compensation$1,986 $1,689 
Three Months EndedSix Months Ended
June 25,
2022
June 26,
2021
June 25,
2022
June 26,
2021
Stock-based compensation$1,695 $1,663 $3,681 $3,352 

Selling, General and Administrative
Three Months EndedThree Months Ended
March 26,
2022
March 27,
2021
$ Change% ChangeJune 25,
2022
June 26,
2021
$ Change% Change
(Dollars in thousands)(Dollars in thousands)
Selling, general and administrativeSelling, general and administrative$32,906 $30,015 $2,891 9.6 %Selling, general and administrative$33,406 $30,479 $2,927 9.6 %
% of revenues% of revenues16.7 %16.1 %% of revenues16.4 %16.2 %
Six Months Ended
June 25,
2022
June 26,
2021
$ Change% Change
(Dollars in thousands)
Selling, general and administrativeSelling, general and administrative$66,312 $60,494 $5,818 9.6 %
% of revenues% of revenues16.5 %16.1 %

28


The increase in selling, general and administrative expenses in the three and six months ended March 26,June 25, 2022 when compared to the corresponding period in the prior year was primarily driven by increased headcount, annual salary adjustments, increased travel related costs as restrictions related to COVID-19 relaxed, and higher stock-based compensation. We expect travel costs to continue to return to previous levels assuming travel restrictions continue to ease. These increases were partially offset by lower amortization of intangibles.

A detail of the changes is as follows (in thousands):
Three Months Ended March 26, 2022 compared to Three Months Ended March 27, 2021
Employee compensation costs$1,385 
General operating expenses602 
Travel related costs656 
Stock-based compensation403 
Amortization of intangibles(155)
$2,891 
Three Months Ended June 25, 2022 compared to Three Months Ended June 26, 2021Six Months Ended June 25, 2022 compared to Six Months Ended June 26, 2021
Employee compensation costs$1,249 $2,632 
General operating expenses831 1,465 
Travel related costs809 1,436 
Stock-based compensation83 486 
Amortization of intangibles(45)(201)
$2,927 $5,818 

Selling, general and administrative included stock-based compensation expense as follows (in thousands):
Three Months Ended
March 26,
2022
March 27,
2021
Stock-based compensation$4,456 $4,053 
Three Months EndedSix Months Ended
June 25,
2022
June 26,
2021
June 25,
2022
June 26,
2021
Stock-based compensation$3,929 $3,846 $8,385 $7,899 

24


Interest Income and Interest Expense
Interest income is earned on our cash, cash equivalents, restricted cash and marketable securities. The decreaseincrease in interest income for the three and six months ended March 26,June 25, 2022 compared with the corresponding period of the prior year was attributable to lowera slight increase in investment yields due to the lowhigher interest rate environment despiteon higher invested balances.

Interest expense primarily includes interest on our term loans, interest rate swap derivative contracts, and term loan issuance costs amortization charges. The interest expense for the three and six months ended March 26,June 25, 2022 compared to the same period of the prior year increased slightly primarilyremained consistent despite a lower outstanding debt due to increased average interest rates on the outstanding debt.

Other Income (Expense), Net
Other income (expense), net, primarily includes the effects of foreign currency impact and various other gains and losses.

Provision for Income Taxes
Three Months Ended Three Months EndedSix Months Ended
March 26,
2022
March 27,
2021
June 25,
2022
June 26,
2021
June 25,
2022
June 26,
2021
(In thousands, except percentages) (In thousands, except percentages)
Provision for income taxesProvision for income taxes$4,450 $3,206 Provision for income taxes$3,136 $2,283 $7,586 $5,489 
Effective tax rateEffective tax rate13.0 %14.0 %Effective tax rate9.4 %11.3 %11.2 %12.8 %

Provision for income taxes reflects the tax provision on our operations in foreign and U.S. jurisdictions, offset by tax benefits from tax credits and the foreign-derived intangible income (“FDII”) deduction. Our effective tax rate may vary from period to period based on changes in estimated taxable income or loss by jurisdiction, changes to the valuation allowance, changes to U.S. federal, state or foreign tax laws, changes in ASC 718 stock-based compensation expense/benefit, future expansion into areas with varying country, state, and local income tax rates, and deductibility of certain costs and expenses by jurisdiction.

We have utilized our previous net operating loss carryforwards, and expect the FDII deduction and corresponding benefit to be available, resulting in a decrease from the U.S. statutory rate and included in our worldwide effective tax rate for the year ending December 31, 2022.

The decrease in the effective tax rate in the three months ended March 26,June 25, 2022 when compared to the corresponding period in the prior year was primarily driven by an increased tax deduction from foreign derived intangible income, offset by a reduction in stock-based compensation tax benefits.FDII.
29



As of January 1, 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and experimental expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years in the U.S. and fifteen years in foreign jurisdictions. While it is possible that Congress may defer, modify, or repeal this provision, potentially with retroactive effect, we have no assurance that this provision will be deferred, modified, or repealed. If this provision is not deferred, modified, or repealed with retroactive effect to January 1, 2022, we expect our cash taxes to slowly increase over the next few years until we have fully utilized our Federal research and development credits to offset our Federal tax liability to the extent allowed by law.


Liquidity and Capital Resources

Capital Resources
Our working capital was $401.5$377.5 million at March 26,June 25, 2022, compared to $375.3 million at December 25, 2021.

Cash and cash equivalents primarily consist of deposits held at banks, money market funds, U.S. treasuries and commercial paper. Marketable securities primarily consist of U.S. treasuries, corporate bonds, and commercial paper. We typically invest in highly-rated securities with low probabilities of default. Our investment policy requires investments to be rated single A or better, and limits the types of acceptable investments, issuer concentration and duration of the investment.

Our cash, cash equivalents and marketable securities totaled approximately $296.4$266.3 million at March 26,June 25, 2022, compared to $276.1 million at December 25, 2021. Based on our historical results of operations, we expect that our cash, cash equivalents, and marketable securities on hand, and the cash we expect to generate from operations, will be sufficient to fund our short-term and long-term liquidity requirements primarily arising from: research and development, capital expenditures, working capital, outstanding commitments, and other liquidity requirements associated with existing operations. However, we cannot be certain that our cash, cash equivalents, and marketable securities on hand, and cash generated from operations, will be available in the
25


future to fund all of our capital and operating requirements. In addition, any future strategic investments and significant acquisitions may require additional cash and capital resources. To the extent necessary, we may consider entering into short and long-term debt obligations, raising cash through a stock issuance, or obtaining new financing facilities, which may not be available on terms favorable to us. If we are unable to obtain sufficient cash or capital to meet our needs on a timely basis and on favorable terms, our business and operations could be materially and adversely affected.

If we are unsuccessful in maintaining or growing our revenues, maintaining or reducing our cost structure (in response to a potential reduction in demand due to an industry downturn, COVID-19, developments related to Ukraine and Russia, or other event), or increasing our available cash through debt or equity financings, our cash, cash equivalents and marketable securities may decline.

We utilize a variety of tax planning and financing strategies to manage our worldwide cash and deploy funds to locations where needed. As part of these strategies, we indefinitely reinvest a portion of our foreign earnings. Should we require additional capital in the United States, we may elect to repatriate indefinitely-reinvested foreign funds or raise capital in the United States.

Cash Flows
The following table sets forth our net cash flows from operating, investing and financing activities:
Three Months EndedSix Months Ended
March 26,
2022
March 27,
2021
June 25,
2022
June 26,
2021
(In thousands)(In thousands)
Net cash provided by operating activitiesNet cash provided by operating activities$44,155 $32,356 Net cash provided by operating activities$86,801 $66,155 
Net cash used in investing activitiesNet cash used in investing activities$(21,078)$(39,922)Net cash used in investing activities$(41,111)$(59,813)
Net cash used in financing activitiesNet cash used in financing activities$(6,016)$(3,768)Net cash used in financing activities$(57,263)$(31,916)

Operating Activities 
Net cash provided by operating activities for the threesix months ended March 26,June 25, 2022 was primarily attributable to net income of $29.9$60.1 million and net non-cash expenses of $22.0$42.0 million, which includes depreciation, amortization, stock-based compensation, and the provision for excess and obsolete inventories. These inflows were partially offset by net changes in working capital of $7.7$15.3 million, primarily related to cash paid for inventories of $17.1$32.3 million, partially offset by cash provided by an increase in accounts payable of $7.5 million, an increase in accrued liabilities for $10.2$4.1 million, and a reduction in accounts receivable of $5.5 million.

30


Investing Activities
Net cash used in investing activities for the threesix months ended March 26,June 25, 2022 was primarily related to $15.6$30.1 million property, plant and equipment acquisitions and $5.5purchases, $6.9 million net cash used to purchase marketable securities.securities, and $3.1 million for acquisition of a business.

Financing Activities
Net cash used in financing activities for the threesix months ended March 26,June 25, 2022 primarily related to $9.4$54.3 million used to purchase common stock under our stock repurchase program and $2.2programs, $4.4 million of principal payments made towards the repayment of our term loans, and $4.2 million related to tax withholdings associated with the net share settlements of our equity awards, partially offset by $5.7 million of proceeds received from issuances of common stock under our employee stock purchase plan and stock option plans.plan.

Debt

FRT Term Loan
On October 25, 2019, we entered into a $23.4 million three-year credit facility loan agreement (the “FRT Term Loan”), to fund the acquisition of FRT GmbH, which we acquired on October 9, 2019.

The FRT Term Loan bears interest at a rate equal to the Euro Interbank Offered Rate (“EURIBOR”) plus 1.75% per annum and will be repaid in quarterly installments of approximately $2.0$1.8 million plus interest. The interest rate at March 26,June 25, 2022 was 1.20%1.29%. As of March 26,June 25, 2022, the balance outstanding pursuant to the FRT term loan was $5.8$3.7 million. The FRT Term Loan is expected to be fully paid as of October 25, 2022.

Building Term Loan
On June 22, 2020, we entered into an $18.0 million 15-year credit facility loan agreement (the “Building Term Loan”). The proceeds of the Building Term Loan were used to finance the purchase of a building adjacent to our leased facilities in Livermore, California.
26



The Building Term Loan bears interest at a rate equal to the applicable LIBOR rate plus 1.75% per annum. Interest payments are payable in monthly installments over a fifteen-year period. The interest rate at March 26,June 25, 2022 was 1.98%2.81%. As of March 26,June 25, 2022, the balance outstanding pursuant to the Building Term Loan was $16.3$16.0 million.

On March 17, 2020, we entered into a forward starting interest rate swap agreement to hedge the interest payments on the Building Term Loan for the notional amount of $18.0 million, and an amortization period that matches the debt. As future levels of LIBOR over the life of the loan are 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 interest rate interest atof one-month LIBOR plus 1.75% into a fixed interest rate interest atof 2.75%. As of March 26,June 25, 2022, the notional amount of the loan that is subject to this interest rate swap is $16.3$16.0 million.

Stock Repurchase ProgramPrograms

InOn October 26, 2020, our Board of Directors authorized a two-year program to repurchase up to $50.0$50 million of outstanding common stock to offset potential dilution from issuances of common stock under our stock-based compensation plans. The share repurchase program will expire on October 28, 2022.programs. During the three months ended March 26, 2022, we repurchased 240,548 shares of common stock for $9.4 million. Duringfiscal 2021 we repurchased and retired 622,400 shares of common stock for $24.0 million. During the six months ended June 25, 2022, we repurchased and retired 676,408 shares of common stock for $26.0 million, utilizing the remaining funds available for repurchase.

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 three months ended June 25, 2022, we repurchased and retired 767,083 shares of common stock for $28.4 million under this program. As of March 26,June 25, 2022, $16.6$46.6 million remained available for future repurchases.

31


Contractual Obligations and Commitments

The following table summarizes our significant contractual commitments to make future payments in cash under contractual obligations as of March 26,June 25, 2022:
Payments Due In Fiscal YearPayments Due In Fiscal Year
Remainder
 2022
2023202420252026ThereafterTotalRemainder
 2022
2023202420252026ThereafterTotal
Operating leasesOperating leases$6,589 $7,680 $7,317 $7,270 $6,532 $9,195 $44,583 Operating leases$4,319 $7,564 $7,224 $7,187 $6,505 $9,143 $41,942 
Term loans - principal paymentsTerm loans - principal payments6,535 1,050 1,080 1,111 1,142 11,116 22,034 Term loans - principal payments4,208 1,050 1,080 1,111 1,142 11,116 19,707 
Term loans - interest payments (1)
Term loans - interest payments (1)
276 302 282 258 236 996 2,350 
Term loans - interest payments (1)
244 428 400 366 335 1,415 3,188 
TotalTotal$13,400 $9,032 $8,679 $8,639 $7,910 $21,307 $68,967 Total$8,771 $9,042 $8,704 $8,664 $7,982 $21,674 $64,837 

(1) Represents our minimum interest payment commitments at 1.98%2.81% per annum for the Building Term Loan and 1.20%1.29% per annum for the FRT Term Loan. This also excludes any amounts related to our interest rate swap.

Off-Balance Sheet Arrangements
 
Historically, we have not participated in transactions that have generated relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of March 26,June 25, 2022, we were not involved in any such off-balance sheet arrangements.

Recent Accounting Pronouncements

See Note 1, Basis of Presentation and New Accounting Pronouncements, of Notes to Condensed Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk
 
For financial market risks related to changes in interest rates and foreign currency exchange rates, reference is made to Item 7A “Quantitative and Qualitative Disclosures about Market Risk” contained in Part II of our Annual Report on Form 10-K for the fiscal year ended December 25, 2021. Our exposure to market risk has not changed materially since December 25, 2021.

27


Item 4. Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures
 
Based on our management’s evaluation (with the participation of our principal executive officer and principal financial officer), as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting
 
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls
 
Control systems, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems’ objectives are being met. Further, the design of any control systems must reflect the fact that there are resource constraints, and the benefits of all controls must be considered relative to their costs. Because of the inherent limitations in all
32


control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or mistake. Control systems can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based, in part, on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

CEO and CFO Certifications
 
We have attached as exhibits to this Quarterly Report on Form 10-Q the certifications of our Chief Executive Officer and Chief Financial Officer, which are required in accordance with the Exchange Act. We recommend that this Item 4 be read in conjunction with the certifications for a more complete understanding of the subject matter presented. 

PART II - OTHER INFORMATION
 
Item 1A. Risk Factors

There have been no material changes during the threesix months ended March 26,June 25, 2022 to the risk factors discussed in our Annual Report on Form 10-K for the year ended December 25, 2021. If any of the identified risks actually occur, our business, financial condition and results of operations could suffer. The trading price of our common stock could decline and you may lose all or part of your investment in our common stock. The risks and uncertainties described in our Annual Report on Form 10-K for the year ended December 25, 2021 are not the only ones we face. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business operations.

28


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Repurchase of Common Stock

The following table summarizes our repurchases of outstanding common stock for the three months ended March 26,June 25, 2022:
Period (fiscal months)Total Number of Shares PurchasedAverage Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)
Maximum Amount that May Yet Be Purchased Under the Plans or Programs
December 26, 2021 - January 22, 2022— $— — $25,962,818 
January 23, 2022 - February 19, 202298,000 39.94 98,000 22,049,181 
February 20, 2022 - March 26, 2022142,548 38.47 142,548 16,565,655 
240,548 $39.07 240,548 
Period (fiscal months)Total Number of Shares PurchasedAverage Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)
Maximum Amount that May Yet Be Purchased Under the Plans or Programs
March 27, 2022 - April 23, 202276,052 $35.93 76,052 $13,833,084 
April 24, 2022 - May 21, 2022242,975 37.49 242,975 4,723,942 
May 22, 2022 - June 25, 2022883,916 37.43 883,916 46,634,889 
1,202,943 $37.35 1,202,943 

1 In October 2020,May, our Board of Directors authorized a program to repurchase up to $50.0$75.0 million of outstanding common stock to offset potential dilution from issuances of our common stock under our employee stock purchase plan and equity incentive plan. This authorization is in addition to the program authorized to repurchase up to $50.0 million of outstanding common stock that expires October 28, 2022. Under the authorized stock repurchase program,programs, we may repurchase shares from time to time on the open market. The pace of repurchase activity will depend on levels of cash generation, current stock price and other factors. The programprograms may be modified or discontinued at any time. TheThis new share repurchase program will expire on October 28, 2022.May 20, 2024.

2933


Item 6. Exhibits

The following exhibits are filed herewith and this list constitutes the exhibit index.
ExhibitExhibit Incorporated by Reference FiledExhibit Incorporated by Reference Filed
NumberNumberExhibit DescriptionFormDate Number HerewithNumberExhibit DescriptionFormDate Number Herewith
3.13.1

S-1October 20, 20033.013.18-KJune 3, 20223.01
3.23.2

8-KJuly 22, 20163.23.28-KJune 3, 20223.02
3.33.38-KJune 3, 20223.03
10.110.1X
31.0131.01     X31.01     X
31.0231.02     X31.02     X
32.0132.01     *32.01     *
101101The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 26, 2022, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tagsX101The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 25, 2022, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tagsX
101.INS101.INSXBRL Instance Document     X101.INSXBRL Instance Document     X
101.SCH101.SCHXBRL Taxonomy Extension Schema Document     X101.SCHXBRL Taxonomy Extension Schema Document     X
101.CAL101.CALXBRL Taxonomy Extension Calculation Linkbase Document     X101.CALXBRL Taxonomy Extension Calculation Linkbase Document     X
101.DEF101.DEFXBRL Taxonomy Extension Definition Linkbase Document     X101.DEFXBRL Taxonomy Extension Definition Linkbase Document     X
101.LAB101.LABXBRL Taxonomy Extension Label Linkbase Document     X101.LABXBRL Taxonomy Extension Label Linkbase Document     X
101.PRE101.PREXBRL Taxonomy Extension Presentation Linkbase Document     X101.PREXBRL Taxonomy Extension Presentation Linkbase Document     X
104104The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 26, 2022, formatted in Inline XBRL (included as Exhibit 101)X104The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 25, 2022, formatted in Inline XBRL (included as Exhibit 101)X
 ______________________________________
*    This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

3034


SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 FormFactor, Inc.
   
Date:May 3,August 2, 2022By:/s/ SHAI SHAHAR
   
  Shai Shahar
  Chief Financial Officer
  (Duly Authorized Officer, Principal Financial Officer, and Principal Accounting Officer)

3135