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 ~~June 25,~~September 24, 2022

☐ 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 class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $0.001 par value

FORM

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 Filer

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging 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 ~~July~~October 27, 2022, ~~77,132,681~~77,025,103 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 ~~JUNE 25,~~SEPTEMBER 24, 2022

INDEX


Part I.	Financial Information

Item 1.	Financial Statements (Unaudited):

	Condensed Consolidated Balance Sheets as of ~~June~~September 2 54 , 2022 and December 25, 2021	3

	Condensed Consolidated Statements of Income for the three and anine ~~nd six~~ months ended ~~June~~September 2 54 , 2022 and ~~June 26~~September 2 5 , 2021	4

	Condensed Consolidated Statements of Comprehensive Income for the three and annine ~~d si~~x months ended ~~June~~September 2 54 , 2022 and ~~June~~ September 2 65 , 2021	5

	Condensed Consolidated Statement of Stockholders' Equity for the three and ~~and six~~nine months ended ~~June~~Septem ber 2 54 , 2022 and ~~June~~ September 2 65 , 2021	6

	Condensed Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 2 54 , 2022 and ~~June~~September 2 65 , 2021	8

	Notes to Condensed Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4.	Controls and Procedures	32

Part II.	Other Information	33



Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and use of proceeds	33







Item 6.	Exhibits	34

Signatures		35

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

FORMFACTOR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)


		June 25, 2022		December 25, 2021			September 24, 2022		December 25, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	136,395	$	151,010	Cash and cash equivalents	$	120,602	$	151,010
Marketable securities	Marketable securities	129,919		125,055		Marketable securities	130,991		125,055
Accounts receivable, net of allowance for credit losses of $193 and $195		107,726		115,541
Accounts receivable, net of allowance for credit losses of $190 and $195						Accounts receivable, net of allowance for credit losses of $190 and $195	110,497		115,541
Inventories, net	Inventories, net	143,475		111,548		Inventories, net	132,029		111,548
Restricted cash	Restricted cash	2,102		2,233		Restricted cash	1,263		2,233
Prepaid expenses and other current assets	Prepaid expenses and other current assets	17,447		18,652		Prepaid expenses and other current assets	20,932		18,652
Total current assets	Total current assets	537,064		524,039		Total current assets	516,314		524,039
Restricted cash	Restricted cash	1,802		2,099		Restricted cash	1,840		2,099
Operating lease, right-of-use-assets	Operating lease, right-of-use-assets	33,499		35,210		Operating lease, right-of-use-assets	31,508		35,210
Property, plant and equipment, net of accumulated depreciation	Property, plant and equipment, net of accumulated depreciation	157,814		146,555		Property, plant and equipment, net of accumulated depreciation	163,384		146,555
Goodwill	Goodwill	212,357		212,299		Goodwill	209,105		212,299
Intangibles, net	Intangibles, net	30,872		36,342		Intangibles, net	28,208		36,342
Deferred tax assets	Deferred tax assets	65,059		61,995		Deferred tax assets	67,775		61,995
Other assets	Other assets	3,980		1,981		Other assets	4,229		1,981
Total assets	Total assets	$	1,042,447	$	1,020,520	Total assets	$	1,022,363	$	1,020,520

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	60,927	$	57,862	Accounts payable	$	75,021	$	57,862
Accrued liabilities	Accrued liabilities	54,835		50,836		Accrued liabilities	46,328		50,836
Current portion of term loans, net of unamortized issuance costs	Current portion of term loans, net of unamortized issuance costs	4,725		8,931		Current portion of term loans, net of unamortized issuance costs	2,734		8,931
Deferred revenue	Deferred revenue	31,255		23,224		Deferred revenue	31,974		23,224
Operating lease liabilities	Operating lease liabilities	7,843		7,901		Operating lease liabilities	7,699		7,901
Total current liabilities	Total current liabilities	159,585		148,754		Total current liabilities	163,756		148,754
Term loans, less current portion, net of unamortized issuance costs	Term loans, less current portion, net of unamortized issuance costs	14,915		15,434		Term loans, less current portion, net of unamortized issuance costs	14,653		15,434
Deferred tax liabilities	Deferred tax liabilities	2,909		3,623		Deferred tax liabilities	2,232		3,623
Long-term operating lease liabilities	Long-term operating lease liabilities	29,511		31,009		Long-term operating lease liabilities	27,858		31,009
Other liabilities	Other liabilities	5,542		5,920		Other liabilities	5,562		5,920
Total liabilities	Total liabilities	212,462		204,740		Total liabilities	214,061		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; 77,194,733 and 78,240,506 shares issued and outstanding		77		78
250,000,000 shares authorized; 77,265,099 and 78,240,506 shares issued and outstanding						250,000,000 shares authorized; 77,265,099 and 78,240,506 shares issued and outstanding	77		78

Additional paid-in capital	Additional paid-in capital	860,584		898,945		Additional paid-in capital	843,453		898,945
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(8,996)		(1,449)		Accumulated other comprehensive loss	(17,899)		(1,449)
Accumulated deficit	Accumulated deficit	(21,680)		(81,794)		Accumulated deficit	(17,329)		(81,794)
Total stockholders’ equity	Total stockholders’ equity	829,985		815,780		Total stockholders’ equity	808,302		815,780
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,042,447	$	1,020,520	Total liabilities and stockholders’ equity	$	1,022,363	$	1,020,520

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

FORMFACTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		June 25, 2022		June 26, 2021		June 25, 2022		June 26, 2021			September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Revenues	Revenues	$	203,907	$	188,076	$	401,081	$	374,712	Revenues	$	180,869	$	189,964	$	581,950	$	564,676
Cost of revenues	Cost of revenues	109,538		111,793		212,488		221,723		Cost of revenues	118,656		109,745		331,144		331,468
Gross profit	Gross profit	94,369		76,283		188,593		152,989		Gross profit	62,213		80,219		250,806		233,208
Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	28,317		25,454		55,451		49,500		Research and development	26,549		26,026		82,000		75,526
Selling, general and administrative	Selling, general and administrative	33,406		30,479		66,312		60,494		Selling, general and administrative	31,637		30,940		97,949		91,434
Total operating expenses	Total operating expenses	61,723		55,933		121,763		109,994		Total operating expenses	58,186		56,966		179,949		166,960
Operating income	Operating income	32,646		20,350		66,830		42,995		Operating income	4,027		23,253		70,857		66,248
Interest income	Interest income	300		148		438		342		Interest income	709		121		1,147		463
Interest expense	Interest expense	(119)		(116)		(311)		(296)		Interest expense	(152)		(151)		(463)		(447)
Other income (expense), net		551		(194)		743		(22)
Other income, net										Other income, net	1,041		58		1,784		36
Income before income taxes	Income before income taxes	33,378		20,188		67,700		43,019		Income before income taxes	5,625		23,281		73,325		66,300
Provision for income taxes	Provision for income taxes	3,136		2,283		7,586		5,489		Provision for income taxes	1,274		2,784		8,860		8,273
Net income	Net income	$	30,242	$	17,905	$	60,114	$	37,530	Net income	$	4,351	$	20,497	$	64,465	$	58,027
Net income per share:	Net income per share:									Net income per share:
Basic	Basic	$	0.39	$	0.23	$	0.77	$	0.48	Basic	$	0.06	$	0.26	$	0.83	$	0.75
Diluted	Diluted	$	0.38	$	0.23	$	0.76	$	0.47	Diluted	$	0.06	$	0.26	$	0.82	$	0.73
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:
Basic	Basic	77,897		77,463		78,071		77,530		Basic	77,245		77,869		77,796		77,643
Diluted	Diluted	79,210		79,466		79,423		79,621		Diluted	77,688		79,029		78,492		79,190

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

FORMFACTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)
Three Months Ended Six Months Ended
June 25,
2022 June 26,
2021 June 25,
2022 June 26,
2021
Net income $ 30,242 $ 17,905 $ 60,114 $ 37,530
Other comprehensive income (loss), net of tax:
Translation adjustments and other (3,856) 632 (6,554) (1,747)
Unrealized losses on available-for-sale marketable securities (547) (97) (1,751) (228)
Unrealized gains (losses) on derivative instruments (116) (89) 758 (315)
Other comprehensive income (loss), net of tax (4,519) 446 (7,547) (2,290)
Comprehensive income $ 25,723 $ 18,351 $ 52,567 $ 35,240


	Three Months Ended				Nine Months Ended
	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Net income	$	4,351	$	20,497	$	64,465	$	58,027
Other comprehensive loss, net of tax:
Translation adjustments	(7,348)		(1,511)		(13,902)		(3,258)
Unrealized losses on available-for-sale marketable securities	(674)		(62)		(2,425)		(290)
Unrealized losses on derivative instruments	(881)		(323)		(123)		(638)
Other comprehensive loss, net of tax:	(8,903)		(1,896)		(16,450)		(4,186)
Comprehensive income (loss)	$	(4,552)	$	18,601	$	48,015	$	53,841

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

FORMFACTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except shares)

(Unaudited)


		Shares of Common Stock	Common 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

		Six Months Ended June 25, 2022							Nine Months Ended September 24, 2022
Balances, December 25, 2021	Balances, December 25, 2021	78,240,506	$	78	$	898,945	$	(1,449)		$	(81,794)	$	815,780	Balances, December 25, 2021	78,240,506	$	78	$	898,945	$	(1,449)	$	(81,794)	$	815,780
Issuance of common stock under the Employee Stock Purchase Plan	Issuance of common stock under the Employee Stock Purchase Plan	157,642	—		5,645		—			—		5,645		Issuance of common stock under the Employee Stock Purchase Plan	316,861	—		10,457		—		—		10,457
Issuance of common stock pursuant to exercise of options	Issuance of common stock pursuant to exercise of options	6,000	—		42		—			—		42		Issuance of common stock pursuant to exercise of options	6,000	—		42		—		—		42
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax	Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax	234,076	—		(4,243)		—			—		(4,243)		Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax	713,554	1		(15,564)		—		—		(15,563)
Purchase and retirement of common stock through repurchase program	Purchase and retirement of common stock through repurchase program	(1,443,491)	(1)		(54,327)		—			—		(54,328)		Purchase and retirement of common stock through repurchase program	(2,011,822)	(2)		(73,476)		—		—		(73,478)
Stock-based compensation	Stock-based compensation	—	—		14,522		—			—		14,522		Stock-based compensation	—	—		23,049		—		—		23,049
Other comprehensive loss	Other comprehensive loss	—	—		—		(7,547)			—		(7,547)		Other comprehensive loss	—	—		—		(16,450)		—		(16,450)
Net income	Net income	—	—		—		—			60,114		60,114		Net income	—	—		—		—		64,465		64,465
Balances, June 25, 2022		77,194,733	$	77	$	860,584	$	(8,996)		$	(21,680)	$	829,985
Balances, September 24, 2022														Balances, September 24, 2022	77,265,099	$	77	$	843,453	$	(17,899)	$	(17,329)	$	808,302

		Three Months Ended June 25, 2022							Three Months Ended September 24, 2022
Balances, March 26, 2022		78,166,212	$	78	$	902,994	$	(4,477)		$	(51,922)	$	846,673

Balances, June 25, 2022														Balances, June 25, 2022	77,194,733	$	77	$	860,584	$	(8,996)	$	(21,680)	$	829,985
Issuance of common stock under the Employee Stock Purchase Plan														Issuance of common stock under the Employee Stock Purchase Plan	159,219	—		4,812		—		—		4,812

Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax	Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax	231,464	—		(4,171)		—			—		(4,171)		Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax	479,478	1		(11,321)		—		—		(11,320)
Purchase and retirement of common stock through repurchase program	Purchase and retirement of common stock through repurchase program	(1,202,943)	(1)		(44,930)		—			—		(44,931)		Purchase and retirement of common stock through repurchase program	(568,331)	(1)		(19,149)		—		—		(19,150)
Stock-based compensation	Stock-based compensation	—	—		6,691		—			—		6,691		Stock-based compensation	—	—		8,527		—		—		8,527
Other comprehensive loss	Other comprehensive loss	—	—		—		(4,519)			—		(4,519)		Other comprehensive loss	—	—		—		(8,903)		—		(8,903)
Net income	Net income	—	—		—		—			30,242		30,242		Net income	—	—		—		—		4,351		4,351
Balances, June 25, 2022		77,194,733	$	77	$	860,584	$	(8,996)		$	(21,680)	$	829,985
Balances, September 24, 2022														Balances, September 24, 2022	77,265,099	$	77	$	843,453	$	(17,899)	$	(17,329)	$	808,302

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

FORMFACTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except shares)

(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			Shares of Common Stock	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total

		Six Months Ended June 26, 2021															Nine Months Ended September 25, 2021
Balances, December 26, 2020	Balances, December 26, 2020	77,437,997	$	78	—	$	—	$	903,838	$	5,886	$	(165,718)	$	744,084	Balances, December 26, 2020	77,437,997	$	78	$	903,838	$	5,886	$	(165,718)	$	744,084
Issuance of common stock under the Employee Stock Purchase Plan	Issuance of common stock under the Employee Stock Purchase Plan	228,784	—		—	—		5,065		—		—		5,065		Issuance of common stock under the Employee Stock Purchase Plan	378,584	—		9,809		—		—		9,809
Issuance of common stock pursuant to exercise of options	Issuance of common stock pursuant to exercise of options	100,000	—		—	—		844		—		—		844		Issuance of common stock pursuant to exercise of options	100,000	—		844		—		—		844
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax	Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax	308,219	—		—	—		(5,261)		—		—		(5,261)		Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax	910,838	1		(19,602)		—		—		(19,601)
Purchase and retirement of common stock through repurchase program	Purchase and retirement of common stock through repurchase program	(620,200)	(1)		—	—		(23,950)		—		—		(23,951)		Purchase and retirement of common stock through repurchase program	(620,200)	(1)		(23,950)		—		—		(23,951)
Stock-based compensation	Stock-based compensation	—	—		—	—		13,526		—		—		13,526		Stock-based compensation	—	—		21,364		—		—		21,364
Other comprehensive loss	Other comprehensive loss	—	—		—	—		—		(2,290)		—		(2,290)		Other comprehensive loss	—	—		—		(4,186)		—		(4,186)
Net income	Net income	—	—		—	—		—		—		37,530		37,530		Net income	—	—		—		—		58,027		58,027
Balances, June 26, 2021		77,454,800	$	77	—	$	—	$	894,062	$	3,596	$	(128,188)	$	769,547
Balances, September 25, 2021																Balances, September 25, 2021	78,207,219	$	78	$	892,303	$	1,700	$	(107,691)	$	786,390

		Three Months Ended June 26, 2021															Three Months Ended September 25, 2021
Balances, March 27, 2021		77,758,530	$	78	(136,402)	$	(5,738)	$	915,136	$	3,150	$	(146,093)	$	766,533
Balances, June 26, 2021																Balances, June 26, 2021	77,454,800	$	77	$	894,062	$	3,596	$	(128,188)	$	769,547
Issuance of common stock under the Employee Stock Purchase Plan																Issuance of common stock under the Employee Stock Purchase Plan	149,800	—		4,744		—		—		4,744

Issuance of common stock pursuant to exercise of options		50,000	—		—	—		422		—		—		422
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax	Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax	266,470	—		—	—		(4,120)		—		—		(4,120)		Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax	602,619	1		(14,341)		—		—		(14,340)
Purchase and retirement of common stock through repurchase program		(620,200)	(1)		136,402	5,738		(23,950)		—		—		(18,213)

Stock-based compensation	Stock-based compensation	—	—		—	—		6,574		—		—		6,574		Stock-based compensation	—	—		7,838		—		—		7,838
Other comprehensive income	Other comprehensive income	—	—		—	—		—		446		—		446		Other comprehensive income	—	—		—		(1,896)		—		(1,896)
Net income	Net income	—	—		—	—		—		—		17,905		17,905		Net income	—	—		—		—		20,497		20,497
Balances, June 26, 2021		77,454,800	$	77	—	$	—	$	894,062	$	3,596	$	(128,188)	$	769,547
Balances, September 25, 2021																Balances, September 25, 2021	78,207,219	$	78	$	892,303	$	1,700	$	(107,691)	$	786,390

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

FORMFACTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Six Months Ended					Nine Months Ended
		June 25, 2022		June 26, 2021			September 24, 2022		September 25, 2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	60,114	$	37,530	Net income	$	64,465	$	58,027
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	Depreciation	14,146		12,678		Depreciation	21,189		19,256
Amortization	Amortization	4,702		13,900		Amortization	7,056		16,362
Reduction in the carrying amount of right-of-use assets	Reduction in the carrying amount of right-of-use assets	4,414		3,652		Reduction in the carrying amount of right-of-use assets	5,900		5,412
Stock-based compensation expense	Stock-based compensation expense	13,878		13,665		Stock-based compensation expense	21,873		21,585

Deferred income tax benefit						Deferred income tax benefit	(6,881)		(873)
Provision for excess and obsolete inventories	Provision for excess and obsolete inventories	4,726		6,898		Provision for excess and obsolete inventories	16,078		11,621
Non-cash restructuring charges	Non-cash restructuring charges	710		—		Non-cash restructuring charges	710		1,592
Gain on contingent consideration	Gain on contingent consideration	—		(95)		Gain on contingent consideration	—		(95)
Other adjustments to reconcile net income to net cash provided by operating activities	Other adjustments to reconcile net income to net cash provided by operating activities	(567)		1,211		Other adjustments to reconcile net income to net cash provided by operating activities	3,356		2,500
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable	Accounts receivable	5,530		(1,194)		Accounts receivable	1,654		1,157
Inventories	Inventories	(32,268)		(20,388)		Inventories	(33,023)		(30,335)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	1,295		3,179		Prepaid expenses and other current assets	(2,016)		3,631
Other assets	Other assets	(40)		(344)		Other assets	(117)		(333)
Accounts payable	Accounts payable	7,521		(2,028)		Accounts payable	17,613		1,488
Accrued liabilities	Accrued liabilities	4,102		(235)		Accrued liabilities	(5,035)		(6,951)
Other liabilities	Other liabilities	73		184		Other liabilities	276		47
Deferred revenues	Deferred revenues	2,727		1,522		Deferred revenues	3,776		2,000
Operating lease liabilities	Operating lease liabilities	(4,262)		(3,980)		Operating lease liabilities	(5,826)		(5,654)
Net cash provided by operating activities	Net cash provided by operating activities	86,801		66,155		Net cash provided by operating activities	111,048		100,437
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Acquisition of property, plant and equipment	Acquisition of property, plant and equipment	(30,116)		(31,322)		Acquisition of property, plant and equipment	(39,024)		(51,353)
Acquisition of business	Acquisition of business	(3,121)		—		Acquisition of business	(3,350)		—
Purchases of marketable securities	Purchases of marketable securities	(52,344)		(71,186)		Purchases of marketable securities	(80,249)		(114,898)
Purchase of promissory note receivable	Purchase of promissory note receivable	(1,000)		—		Purchase of promissory note receivable	(1,000)		—
Proceeds from maturities and sales of marketable securities	Proceeds from maturities and sales of marketable securities	45,470		42,695		Proceeds from maturities and sales of marketable securities	71,610		71,275
Net cash used in investing activities	Net cash used in investing activities	(41,111)		(59,813)		Net cash used in investing activities	(52,013)		(94,976)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from issuances of common stock	Proceeds from issuances of common stock	5,687		5,909		Proceeds from issuances of common stock	10,499		10,647
Purchase of common stock through stock repurchase program	Purchase of common stock through stock repurchase program	(54,328)		(23,951)		Purchase of common stock through stock repurchase program	(73,478)		(23,951)
Tax withholdings related to net share settlements of equity awards	Tax withholdings related to net share settlements of equity awards	(4,243)		(5,261)		Tax withholdings related to net share settlements of equity awards	(15,564)		(12,643)
Payment of contingent consideration	Payment of contingent consideration	—		(3,873)		Payment of contingent consideration	—		(3,873)

Principal repayments on term loans	Principal repayments on term loans	(4,379)		(4,740)		Principal repayments on term loans	(6,421)		(7,049)

Net cash used in financing activities	Net cash used in financing activities	(57,263)		(31,916)		Net cash used in financing activities	(84,964)		(36,869)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(3,470)		(1,558)		Effect of exchange rate changes on cash, cash equivalents and restricted cash	(5,708)		(2,216)
Net decrease in cash, cash equivalents and restricted cash	Net decrease in cash, cash equivalents and restricted cash	(15,043)		(27,132)		Net decrease in cash, cash equivalents and restricted cash	(31,637)		(33,624)
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	155,342		191,098		Cash, cash equivalents and restricted cash, beginning of period	155,342		191,098
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	140,299	$	163,966	Cash, cash equivalents and restricted cash, end of period	$	123,705	$	157,474

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

FORMFACTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Six Months Ended					Nine Months Ended
		June 25, 2022		June 26, 2021			September 24, 2022		September 25, 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 purchases		$	(4,165)	$	2,906

Increase in accounts payable and accrued liabilities related to property, plant and equipment purchases						Increase in accounts payable and accrued liabilities related to property, plant and equipment purchases	$	341	$	4,684
Increase in accrued liabilities related to tax withholdings related to net share settlements of equity awards						Increase in accrued liabilities related to tax withholdings related to net share settlements of equity awards	—		6,952
Operating lease, right-of-use assets obtained in exchange for lease obligations	Operating lease, right-of-use assets obtained in exchange for lease obligations	3,438		11,629		Operating lease, right-of-use assets obtained in exchange for lease obligations	3,457		11,699

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid for income taxes, net	Cash paid for income taxes, net	$	6,473	$	4,559	Cash paid for income taxes, net	$	9,911	$	6,795
Cash paid for interest	Cash paid for interest	294		339		Cash paid for interest	455		496
Operating cash outflows from operating leases	Operating cash outflows from operating leases	4,379		4,352		Operating cash outflows from operating leases	6,670		6,553

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 equivalents	Cash and cash equivalents	$	136,395	$	160,273	Cash and cash equivalents	$	120,602	$	153,781
Restricted cash, current	Restricted cash, current	2,102		1,857		Restricted cash, current	1,263		2,019
Restricted cash, non-current	Restricted cash, non-current	1,802		1,836		Restricted cash, non-current	1,840		1,674
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	140,299	$	163,966	Total cash, cash equivalents and restricted cash	$	123,705	$	157,474

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

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 ~~six~~nine months ended ~~June 25,~~September 24, 2022 and ~~June 26,~~September 25, 2021 each contained 2639 weeks. Fiscal 2022 will end on December 31, 2022.

Significant Accounting Policies

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

Reclassifications

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

New Accounting Pronouncements

~~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 from Contracts with Customers,” as if it had originated the contracts. The Company elected to early adopt on a prospective basis during the second quarter of fiscal 2022. The adoption did not have a material effect on the Company's Consolidated Financial Statements.

Note 2 — Concentration of Credit and Other Risks

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


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		June 25, 2022		June 26, 2021		June 25, 2022		June 26, 2021			September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Intel Corporation	Intel Corporation	20.9	%	16.2	%	20.9	%	22.1	%	Intel Corporation	17.0	%	20.8	%	19.7	%	21.7	%
Samsung Electronics., LTD.		*		14.7	%	*		*
Taiwan Semiconductor Manufacturing Co., LTD.		*		11.0	%	*		11.2	%
SK Hynix Inc.										SK Hynix Inc.	10.7		*		*		*

Samsung Electronics., LTD.										Samsung Electronics., LTD.	*		12.9	%	*		10.5	%
		20.9	%	41.9	%	20.9	%	33.3	%		27.7	%	33.7	%	19.7	%	32.2	%

At ~~June 25,~~September 24, 2022, one customer accounted for ~~20.0%~~18.1% 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):


		June 25, 2022		December 25, 2021			September 24, 2022		December 25, 2021
Raw materials	Raw materials	$	68,247	$	57,673	Raw materials	$	61,312	$	57,673
Work-in-progress	Work-in-progress	52,619		35,935		Work-in-progress	48,439		35,935
Finished goods	Finished goods	22,609		17,940		Finished goods	22,278		17,940
		$	143,475	$	111,548		$	132,029	$	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~~$3.4 million. This acquisition adds cryogen-free dilution refrigerators capable of cooling to sub-10 millikelvin to our product portfolio, which is required for operation of superconducting quantum computers.

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 ultimatelyThe acquisition price was allocated to ~~developed technologies, but at this time we do not have an estimate of~~ the ~~allocation of value between amortizing~~tangible and ~~non-amortizing~~identified 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~~

~~liabilities assumed are finalized.~~closing date of the acquisition based upon their respective fair values. The ~~total estimated purchase price has been provisionally allocated~~fair values assigned to ~~the underlying~~ assets acquired and liabilities assumed were based on management’s assumptions as of the reporting date. Goodwill represents the excess of purchase price over the fair value assigned to the assets acquired and liabilities assumed and is allocated to the HPD reporting unit within the Systems reportable segment. The identified intangible asset, developed technology, has a useful life of three years.

Our purchase accounting remains open as of the reporting date, with the purchase price preliminarily allocated to acquired assets and liabilities assumed that are subject to change as more information becomes available. The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of inventories, developed technology intangible asset, and residual goodwill. The preliminary fair value of assets acquired, including goodwill and intangibles, and liabilities assumed for the purchase as follows (in thousands):


	Amount
Accounts receivable	$	178
Inventories	~~6,064~~7,041
Property, plant and equipment	479
Prepaid expenses and other current assets	117
Other assets	28
Tangible assets acquired	~~6,866~~7,843
Deferred revenue	(5,513)
Accounts payable and accrued liabilities	(30)
Total tangible assets acquired and liabilities assumed	~~1,323~~2,300
Developed technology intangible asset	500
Goodwill	~~1,798~~550
Net ~~Assets Acquired~~assets acquired	$	~~3,121~~3,350

Note 5 — Goodwill and Intangible Assets

Goodwill by reportable segment was as follows (in thousands):


		Probe Cards		Systems		Total			Probe Cards		Systems		Total
Goodwill, as of December 26, 2020	Goodwill, 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 Acquisition	Addition - Baldwin Park Acquisition	352		—		352		Addition - Baldwin Park Acquisition	352		—		352
Addition - HPD Acquisition	Addition - HPD Acquisition	—		1,254		1,254		Addition - HPD Acquisition	—		1,254		1,254
Foreign currency translation	Foreign currency translation	—		(2,068)		(2,068)		Foreign currency translation	—		(2,068)		(2,068)
Goodwill, as of December 25, 2021	Goodwill, as of December 25, 2021	178,424		33,875		212,299		Goodwill, as of December 25, 2021	178,424		33,875		212,299

Addition - Woburn Acquisition	Addition - Woburn Acquisition	—		1,798		1,798		Addition - Woburn Acquisition	—		550		550
Foreign currency translation	Foreign currency translation	—		(1,740)		(1,740)		Foreign currency translation	—		(3,744)		(3,744)
Goodwill, as of June 25, 2022	Goodwill, as of June 25, 2022	$	178,424	$	33,933	$	212,357	Goodwill, as of June 25, 2022	$	178,424	$	30,681	$	209,105

We have not recorded goodwill impairments for the ~~six~~nine months ended ~~June 25,~~September 24, 2022.

Intangible assets were as follows (in thousands):


		June 25, 2022						December 25, 2021							September 24, 2022						December 25, 2021
Intangible Assets	Intangible Assets	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net		Intangible Assets	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Existing developed technologies	Existing developed technologies	$	170,627	$	149,338	$	21,289	$	172,259	$	148,784	$	23,475	Existing developed technologies	$	169,246	$	148,916	$	20,330	$	172,259	$	148,784	$	23,475
Customer relationships	Customer relationships	50,827		41,966		8,861		51,270		39,254		12,016		Customer relationships	50,316		43,094		7,222		51,270		39,254		12,016
Trade name	Trade name	7,952		7,630		322		8,054		7,603		451		Trade name	7,835		7,579		256		8,054		7,603		451
Backlog	Backlog	—		—		—		1,896		1,896		—		Backlog	—		—		—		1,896		1,896		—
In-process research and development	In-process research and development	400		—		400		400		—		400		In-process research and development	400		—		400		400		—		400
		$	229,806	$	198,934	$	30,872	$	233,879	$	197,537	$	36,342		$	227,797	$	199,589	$	28,208	$	233,879	$	197,537	$	36,342

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


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		June 25, 2022		June 26, 2021		June 25, 2022		June 26, 2021			September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Cost of revenues	Cost of revenues	$	788	$	5,505	$	1,596	$	10,595	Cost of revenues	$	824	$	858	$	2,420	$	11,453
Selling, general and administrative	Selling, general and administrative	1,545		1,590		3,106		3,305		Selling, general and administrative	1,530		1,604		4,636		4,909
		$	2,333	$	7,095	$	4,702	$	13,900		$	2,354	$	2,462	$	7,056	$	16,362

The estimated future amortization of definite-lived intangible assets, excluding in-process research and development, is as follows (in thousands):


Fiscal Year	Fiscal Year	Amount		Fiscal Year	Amount
Remainder of 2022	Remainder of 2022	$	4,650	Remainder of 2022	$	2,307
2023	2023	6,968		2023	6,944
2024	2024	4,390		2024	4,393
2025	2025	4,142		2025	4,062
2026	2026	3,134		2026	3,011
Thereafter	Thereafter	7,188		Thereafter	7,091
		$	30,472		$	27,808

Note 6 — Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):


		June 25, 2022		December 25, 2021			September 24, 2022		December 25, 2021
Accrued compensation and benefits	Accrued compensation and benefits	$	32,001	$	29,706	Accrued compensation and benefits	$	23,398	$	29,706
Accrued income and other taxes	Accrued income and other taxes	9,468		8,086		Accrued income and other taxes	11,835		8,086
Accrued warranty	Accrued warranty	3,978		2,805		Accrued warranty	3,806		2,805
Employee stock purchase plan contributions withheld	Employee stock purchase plan contributions withheld	4,789		4,693		Employee stock purchase plan contributions withheld	1,979		4,693
Accrued restructuring charges	Accrued restructuring charges	592		2,478		Accrued restructuring charges	—		2,478
Other accrued expenses	Other accrued expenses	4,007		3,068		Other accrued expenses	5,310		3,068
		$	54,835	$	50,836		$	46,328	$	50,836

Note 7 — 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 included plans to consolidate or relocate certain leased locations in the United States to other locations in the United States, Germany and Asia. As a result of these changes to certain work locations, we have incurred ~~and expect to incur, personnel related~~personnel-related costs to sever, relocate, or retain select employees. Additionally, this included plans to adjust capacity for certain product offerings, which resulted in contract termination costs and receipt of inventories ultimately deemed to be impaired to satisfy contract obligations. We expect the actions defined under these plans will be largely completed by the end of December 2022, except facilities charges which may extend beyond that time.

These plans are expected to result in FormFactor recording restructuring and other charges in the aggregate amount of approximately ~~$5.0~~$10.5 million to ~~$8.5~~$12.6 million, estimated to be comprised primarily of $1.0 million to ~~$2.0~~$1.2 million of severance and employee-related costs, $1.5 million to ~~$2.5~~$1.9 million in contract and lease termination costs, ~~$2.0~~$7.5 million to ~~$3.0~~$8.5 million in inventory impairments, and $0.5 million to $1.0 million of cost related to impairment of leasehold improvements, facility exits, and other costs. Approximately ~~$2.5~~$8.7 million to ~~$4.5~~$9.7 million is expected within ~~each of~~ the Probe Cards segment and $1.8 million to $2.9 million is expected within the Systems ~~segments, respectively.~~segments.

The Company has recognized ~~to date~~ restructuring and other charges to date in the aggregate amount of ~~$5.0~~$11.2 million, comprised of $1.2 million of severance and employee-related costs, $1.5 million in contract and lease termination costs, ~~$2.0~~$8.0 million in inventory impairments, and ~~$0.3~~$0.6 million of cost related to impairment of leasehold improvements, facility exits and other costs.

During the three months ended September 24, 2022 we reassessed the estimate for excess inventory received to satisfy our contract obligations from our adjustment of certain product offerings. As a result of receiving additional clarity regarding future customer demand, we recorded an additional $5.9 million inventory impairment not included in our original estimate of restructuring charges.

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


		Three Months Ended						Six Months Ended							Three Months Ended
		June 25, 2022						June 25, 2022							September 24, 2022						September 25, 2021
		Probe Cards		Systems		Total		Probe Cards		Systems		Total			Probe Cards		Systems		Total		Probe Cards		Systems		Total
Cost of revenues	Cost of revenues	$	227	$	227	$	454	$	266	$	327	$	593	Cost of revenues	$	5,928	$	132	$	6,060	$	4,070	$	252	$	4,322
Research and development	Research and development	—		53		53		—		199		199		Research and development	38		29		67		—		289		289
Selling, general and administrative	Selling, general and administrative	—		74		74		3		99		102		Selling, general and administrative	—		47		47		—		22		22
		$	227	$	354	$	581	$	269	$	625	$	894		$	5,966	$	208	$	6,174	$	4,070	$	563	$	4,633


	Nine Months Ended
	September 24, 2022						September 25, 2021
	Probe Cards		Systems		Total		Probe Cards		Systems		Total
Cost of revenues	$	6,194	$	459	$	6,653	$	4,070	$	420	$	4,490
Research and development	38		228		266		—		694		694
Selling, general and administrative	3		146		149		—		83		83
	$	6,235	$	833	$	7,068	$	4,070	$	1,197	$	5,267

Changes to the restructuring accrual in the ~~six~~nine months ended ~~June 25,~~September 24, 2022 were as follows (in thousands):


		Employee Severance and Benefits		Inventory Impairments		Contract Termination Costs		Total			Employee Severance and Benefits		Inventory Impairments		Property and Equipment Impairments and Move Costs		Contract Termination Costs		Total
December 25, 2021	December 25, 2021	$	1,028	$	—	$	1,450	$	2,478	December 25, 2021	$	1,028	$	—	$	—	$	1,450	$	2,478
Restructuring charges	Restructuring charges	185		646		—		894		Restructuring charges	152		6,580		292		44		7,068
Cash payments	Cash payments	(621)		—		(1,450)		(2,071)		Cash payments	(1,180)		(31)		(228)		(1,494)		(2,933)

Non-cash settlement	Non-cash settlement	—		(646)		—		(709)		Non-cash settlement	—		(6,549)		(64)		—		(6,613)
June 25, 2022		$	592	$	—	$	—	$	592
September 24, 2022										September 24, 2022	$	—	$	—	$	—	$	—	$	—

Note 8 — 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~~nine months ended ~~June 25,~~September 24, 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, and 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 ~~six~~nine months of fiscal 2022.

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):


June 25, 2022		Level 1		Level 2		Level 3		Total
September 24, 2022										September 24, 2022	Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Cash equivalents:	Cash equivalents:									Cash equivalents:
Money market funds	Money market funds	$	39,228	$	—	$	—	$	39,228	Money market funds	$	27,581	$	—	$	—	$	27,581
Commercial paper	Commercial paper	—		3,393		—		3,393		Commercial paper	—		1,398		—		1,398
U.S. agency securities		—		2,558		—		2,558
U.S. treasuries		1,995		—		—		1,995

Corporate bonds										Corporate bonds	—		2,995		—		2,995

		41,223		5,951		—		47,174			27,581		4,393		—		31,974
Marketable securities:	Marketable securities:									Marketable securities:
Corporate bonds	Corporate bonds	—		64,930		—		64,930		Corporate bonds	—		69,548		—		69,548
U.S. treasuries	U.S. treasuries	35,894		—		—		35,894		U.S. treasuries	32,820		—		—		32,820
Commercial paper	Commercial paper	—		22,480		—		22,480		Commercial paper	—		16,881		—		16,881
U.S. agency securities	U.S. agency securities	—		5,912		—		5,912		U.S. agency securities	—		11,041		—		11,041
Certificates of deposit	Certificates of deposit	—		703		—		703		Certificates of deposit	—		701		—		701
		35,894		94,025		—		129,919			32,820		98,171		—		130,991

Promissory note receivable	Promissory note receivable	—		—		1,007		1,007		Promissory note receivable	—		—		1,019		1,019
Interest rate swap derivative contracts	Interest rate swap derivative contracts	—		1,990		—		1,990		Interest rate swap derivative contracts	—		2,420		—		2,420
Total assets	Total assets	$	77,117	$	101,966	$	1,007	$	180,090	Total assets	$	60,401	$	104,984	$	1,019	$	166,404
Liabilities:	Liabilities:									Liabilities:
Foreign exchange derivative contracts	Foreign exchange derivative contracts	$	—	$	(1,146)	$	—	$	(1,146)	Foreign exchange derivative contracts	$	—	$	(2,457)	$	—	$	(2,457)


December 25, 2021	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	9,526	$	—	$	—	$	9,526
U.S. agency securities	—		5,556		—		5,556
U.S. treasuries	2,500		—		—		2,500
Commercial paper	—		1,000		—		1,000
	12,026		6,556		—		18,582
Marketable securities:
Corporate bonds	—		52,709		—		52,709
U.S. treasuries	38,985		—		—		38,985

Commercial paper	—		32,162		—		32,162
Certificates of deposit	—		1,199		—		1,199
	38,985		86,070		—		125,055

Interest rate swap derivative contracts	—		629		—		629
Total assets	$	51,011	$	93,255	$	—	$	144,266
Liabilities:
Foreign exchange derivative contracts	$	—	$	(489)	$	—	$	(489)
Interest rate swap derivative contracts	—		(55)		—		(55)
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

priced by pricing vendors who provide observable inputs for their pricing without applying significant judgment. Broker pricing is used mainly when a quoted price is not available, the investment is not priced by our pricing vendors or when a broker price

is more reflective of fair value. Our broker-priced investments are categorized as Level 2 investments because fair value is based on similar assets without applying significant judgments. 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 loss 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 ~~June 25,~~September 24, 2022 will mature by the ~~second~~third quarter of fiscal 2023.

The following table provides information about our foreign currency forward contracts outstanding as of ~~June 25,~~September 24, 2022 (in thousands):


Currency	Currency	Contract Position	Contract Amount (Local Currency)	Contract Amount (U.S. Dollars)		Currency	Contract Position	Contract Amount (Local Currency)	Contract Amount (U.S. Dollars)
Euro Dollar	Euro Dollar	Buy	(21,445)	$	(24,117)	Euro Dollar	Buy	(29,215)	$	(31,087)

Japanese Yen	Japanese Yen	Sell	2,247,411	16,633		Japanese Yen	Sell	2,145,851	14,995
Korean Won	Korean Won	Buy	(1,010,988)	(779)		Korean Won	Buy	(847,855)	(603)
Taiwan Dollar	Taiwan Dollar	Sell	28,890	974		Taiwan Dollar	Sell	27,157	857

Total USD notional amount of outstanding foreign exchange contracts	Total USD notional amount of outstanding foreign exchange contracts			$	(7,289)	Total USD notional amount of outstanding foreign exchange contracts			$	(15,838)

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

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

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

acquisition. Other than as discussed in Note 4, ~~Acquisition~~,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~~nine months ended ~~June 25,~~September 24, 2022 or ~~June 26,~~September 25, 2021.

Note 9 — 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):


		Six Months Ended					Nine Months Ended
		June 25, 2022		June 26, 2021			September 24, 2022		September 25, 2021
Balance at beginning of period	Balance at beginning of period	$	2,805	$	3,918	Balance at beginning of period	$	2,805	$	3,918
Accruals	Accruals	3,846		3,472		Accruals	5,653		4,688
Settlements	Settlements	(2,673)		(3,132)		Settlements	(4,652)		(5,803)
Balance at end of period	Balance at end of period	$	3,978	$	4,258	Balance at end of period	$	3,806	$	2,803

Note 10 — Property, Plant and Equipment, net

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


		June 25, 2022		December 25, 2021			September 24, 2022		December 25, 2021
Land	Land	$	4,751	$	4,751	Land	$	4,751	$	4,751
Building and building improvements	Building and building improvements	44,429		41,722		Building and building improvements	44,447		41,722
Machinery and equipment	Machinery and equipment	263,851		252,632		Machinery and equipment	267,612		252,632
Computer equipment and software	Computer equipment and software	45,727		44,667		Computer equipment and software	45,533		44,667
Furniture and fixtures	Furniture and fixtures	7,434		7,293		Furniture and fixtures	7,375		7,293
Leasehold improvements	Leasehold improvements	83,127		82,266		Leasehold improvements	83,682		82,266
Sub-total	Sub-total	449,319		433,331		Sub-total	453,400		433,331
Less: Accumulated depreciation and amortization	Less: Accumulated depreciation and amortization	(323,779)		(312,700)		Less: Accumulated depreciation and amortization	(327,884)		(312,700)
Net, property, plant and equipment	Net, property, plant and equipment	125,540		120,631		Net, property, plant and equipment	125,516		120,631
Construction-in-process	Construction-in-process	32,274		25,924		Construction-in-process	37,868		25,924
Total	Total	$	157,814	$	146,555	Total	$	163,384	$	146,555

Note 11 — Stockholders’ Equity and Stock-Based Compensation

Common Stock Repurchase Programs

On October 26, 2020, our Board of Directors authorized a two-year program to repurchase up to $50 million of outstanding common stock to offset potential dilution from issuances of common stock under our stock-based compensation programs. During fiscal 2021 we repurchased and retired 622,400 shares of common stock for $24.0 million. During the ~~six~~nine months ended ~~June 25,~~September 24, 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~~nine months ended ~~June 25,~~September 24, 2022, we repurchased and retired ~~767,083~~1,335,414 shares of common stock for ~~$28.4~~$47.5 million under the program. As of ~~June 25,~~September 24, 2022, ~~$46.6~~$27.5 million remained available for future repurchases.

Our policy related to repurchases of our common stock is to charge the excess of cost over par value to additional paid-in capital once the shares are retired. All repurchases were made in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended.

Restricted Stock Units

Restricted stock unit (“RSU”) activity under our equity incentive plan was as follows:


		Units	Weighted Average Grant Date Fair Value			Units	Weighted Average Grant Date Fair Value
RSUs at December 25, 2021	RSUs at December 25, 2021	2,166,934	$	28.63	RSUs at December 25, 2021	2,166,934	$	28.63
Awards granted	Awards granted	63,697	41.25		Awards granted	1,338,278	34.95
Awards vested	Awards vested	(338,825)	16.73		Awards vested	(1,133,782)	22.45
Awards forfeited	Awards forfeited	(51,941)	30.23		Awards forfeited	(66,279)	31.07
RSUs at June 25, 2022		1,839,865	31.22
RSUs at September 24, 2022					RSUs at September 24, 2022	2,305,151	35.27

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~~

On August 1, 2022, we granted 204,903 PRSUs to certain senior executives for a total grant date fair value of $8.6 million which will be recognized ratably over the requisite service period. The performance criteria are based on Total Shareholder Returns (“TSR”) for the period of July 1, 2022 - June 30, 2025, relative to the TSR of the companies identified as being part of the S&P Semiconductors Select Industry Index (FormFactor peer companies) as of the grant date.

Of the 273,000 PRSUs granted ~~during~~in fiscal 2019, 36,000 shares were forfeited, resulting in 237,000 shares vesting in 2022. These shares achieved 147% TSR performance, which resulted in an additional 110,605 shares issued in fiscal 2022 related to the ~~six months ended June 25, 2022.~~ fiscal 2019 PRSU grant.

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:


	~~Six~~Nine Months Ended
	~~June 25,~~September 24, 2022
Shares issued	~~157,642~~316,861
Weighted average per share purchase price	$	~~35.81~~33.00
Weighted average per share discount from the fair value of our common stock on the date of issuance	$	~~(6.93)~~(6.13)

Stock-Based Compensation

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


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		June 25, 2022		June 26, 2021		June 25, 2022		June 26, 2021			September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Cost of revenues	Cost of revenues	$	734	$	1,079	$	1,812	$	2,414	Cost of revenues	$	1,022	$	1,392	$	2,834	$	3,806
Research and development	Research and development	1,695		1,663		3,681		3,352		Research and development	2,027		2,010		5,708		5,362
Selling, general and administrative	Selling, general and administrative	3,929		3,846		8,385		7,899		Selling, general and administrative	4,946		4,518		13,331		12,417
Total stock-based compensation	Total stock-based compensation	$	6,358	$	6,588	$	13,878	$	13,665	Total stock-based compensation	$	7,995	$	7,920	$	21,873	$	21,585

Unrecognized Compensation Costs

At ~~June 25,~~September 24, 2022, the unrecognized stock-based compensation was as follows (dollars in thousands):


		Unrecognized Expense		Average Expected Recognition Period in Years		Unrecognized Expense		Average Expected Recognition Period in Years
Restricted stock units	Restricted stock units	$	27,430	1.80	Restricted stock units	$	54,872	2.31
Performance restricted stock units	Performance restricted stock units	7,202		1.74	Performance restricted stock units	14,239		2.25
Employee stock purchase plan	Employee stock purchase plan	285		0.61	Employee stock purchase plan	1,694		0.36
Total unrecognized stock-based compensation expense	Total unrecognized stock-based compensation expense	$	34,917	1.77	Total unrecognized stock-based compensation expense	$	70,805	2.25

Note 12 — 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 Ended		Six Months Ended			Three Months Ended		Nine Months Ended
		June 25, 2022	June 26, 2021	June 25, 2022	June 26, 2021		September 24, 2022	September 25, 2021	September 24, 2022	September 25, 2021

Weighted-average shares used in computing basic net income per share	Weighted-average shares used in computing basic net income per share	77,897	77,463	78,071	77,530	Weighted-average shares used in computing basic net income per share	77,245	77,869	77,796	77,643
Add potentially dilutive securities	Add potentially dilutive securities	1,313	2,003	1,352	2,091	Add potentially dilutive securities	443	1,160	696	1,547
Weighted-average shares used in computing diluted net income per share	Weighted-average shares used in computing diluted net income per share	79,210	79,466	79,423	79,621	Weighted-average shares used in computing diluted net income per share	77,688	79,029	78,492	79,190

Securities not included as they would have been antidilutive	Securities not included as they would have been antidilutive	23	128	—	118	Securities not included as they would have been antidilutive	897	121	266	109

Note 13 — Commitments and Contingencies

Leases

See Note 14, Leases.

Contractual Obligations and Commitments

Our contractual obligations and commitments have not materially changed as of ~~June 25,~~September 24, 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 ~~June 25,~~September 24, 2022, and as of the filing of this Quarterly Report on Form 10-Q, we were not involved in any material legal proceedings.

Note 14 — 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 76 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 65 years as of ~~June 25,~~September 24, 2022 and the weighted-average discount rate was ~~3.69%~~3.75%.

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


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		June 25, 2022		June 26, 2021		June 25, 2022		June 26, 2021			September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Lease expense:	Lease expense:									Lease expense:
Operating lease expense	Operating lease expense	$	2,183	$	2,048	$	4,404	$	4,171	Operating lease expense	$	2,118	$	2,167	$	6,522	$	6,338
Short-term lease expense	Short-term lease expense	76		45		116		82		Short-term lease expense	135		51		251		133
Variable lease expense	Variable lease expense	677		426		1,135		963		Variable lease expense	590		461		1,725		1,424
		$	2,936	$	2,519	$	5,655	$	5,216		$	2,843	$	2,679	$	8,498	$	7,895

Future minimum payments under our non-cancelable operating leases were as follows as of ~~June 25,~~September 24, 2022 (in thousands):


Fiscal Year	Fiscal Year	Amount		Fiscal Year	Amount
Remainder of 2022	Remainder of 2022	$	4,319	Remainder of 2022	$	4,275
2023	2023	7,564		2023	7,545
2024	2024	7,224		2024	7,236
2025	2025	7,187		2025	7,170
2026	2026	6,505		2026	6,450
Thereafter	Thereafter	9,143		Thereafter	9,042
Total minimum lease payments	Total minimum lease payments	41,942		Total minimum lease payments	41,718
Less: interest	Less: interest	(4,588)		Less: interest	(6,161)
Present value of net minimum lease payments	Present value of net minimum lease payments	37,354		Present value of net minimum lease payments	35,557
Less: current portion	Less: current portion	(7,843)		Less: current portion	(7,699)
Total long-term operating lease liabilities	Total long-term operating lease liabilities	$	29,511	Total long-term operating lease liabilities	$	27,858

Note 15 — Revenue

Transaction price allocated to the remaining performance obligations: On ~~June 25,~~September 24, 2022, we had ~~$9.7~~$8.3 million of remaining performance obligations, which were comprised of deferred service contracts and extended warranty contracts and contracts with overtime revenue recognition that are not yet delivered. We expect to recognize approximately ~~66.9%~~40.0% of our remaining performance obligations as revenue in the remainder of fiscal 2022, approximately ~~27.7%~~49.8% in fiscal 2023, and approximately ~~5.4%~~10.2% 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 ~~June 25,~~September 24, 2022 and December 25, 2021 were ~~$2.0~~$3.0 million and $0.9 million, respectively, and are reported on the Condensed Consolidated Balance Sheets as a component of Prepaid expenses and other current assets.

Contract 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 ~~June 25,~~September 24, 2022 and December 25, 2021 were ~~$32.2~~$33.1 million and $24.2 million, respectively. During the ~~six~~nine months ended ~~June 25,~~September 24, 2022, we recognized ~~$16.5~~$19.0 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 16, Operating Segments and Enterprise-Wide Information, for further details.

Note 16 — 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 2two reportable segments consisting

of the Probe Cards segment and the Systems segment. The following table summarizes the operating results by reportable segment (dollars in thousands):


		Three Months Ended																							Three Months Ended
		June 25, 2022											June 26, 2021												September 24, 2022											September 25, 2021
		Probe Cards			Systems			Corporate and Other		Total			Probe Cards			Systems			Corporate and Other		Total				Probe Cards			Systems			Corporate and Other		Total			Probe Cards			Systems			Corporate and Other		Total
Revenues	Revenues	$	167,708		$	36,199		$	—	$	203,907		$	153,641		$	34,435		$	—	$	188,076		Revenues	$	139,365		$	41,504		$	—	$	180,869		$	154,850		$	35,114		$	—	$	189,964
Gross profit	Gross profit	78,420			18,276			(2,327)		94,369			66,600			16,907			(7,224)		76,283			Gross profit	48,252			22,284			(8,323)		62,213			69,868			17,553			(7,202)		80,219
Gross margin	Gross margin	46.8		%	50.5		%	0		46.3		%	43.3		%	49.1		%	0		40.6		%	Gross margin	34.6		%	53.7		%			34.4		%	45.1		%	50.0		%			42.2		%

		Six Months Ended																							Nine Months Ended
		June 25, 2022											June 26, 2021												September 24, 2022											September 25, 2021
		Probe Cards			Systems			Corporate and Other		Total			Probe Cards			Systems			Corporate and Other		Total				Probe Cards			Systems			Corporate and Other		Total			Probe Cards			Systems			Corporate and Other		Total
Revenues	Revenues	$	327,691		$	73,390		$	—	$	401,081		$	312,539		$	62,173		$	—	$	374,712		Revenues	$	467,056		$	114,894		$	—	$	581,950		$	467,389		$	97,287		$	—	$	564,676
Gross profit	Gross profit	$	155,622		$	37,683		$	(4,712)	$	188,593		$	136,915		$	30,506		$	(14,432)	$	152,989		Gross profit	203,874			59,967			(13,035)		250,806			206,783			48,059			(21,634)		233,208
Gross margin	Gross margin	47.5		%	51.3		%	0		47.0		%	43.8		%	49.1		%	0		40.8		%	Gross margin	43.7		%	52.2		%			43.1		%	44.2		%	49.4		%			41.3		%

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 Ended													Three Months Ended
		June 25, 2022						June 26, 2021							September 24, 2022						September 25, 2021
		Probe Cards		Systems		Total		Probe Cards		Systems		Total			Probe Cards		Systems		Total		Probe Cards		Systems		Total
Market:	Market:													Market:
Foundry & Logic	Foundry & Logic	$	122,380	$	—	$	122,380	$	103,726	$	—	$	103,726	Foundry & Logic	$	90,605	$	—	$	90,605	$	104,640	$	—	$	104,640
DRAM	DRAM	36,843		—		36,843		42,088		—		42,088		DRAM	34,922		—		34,922		39,816		—		39,816
Flash	Flash	8,485		—		8,485		7,827		—		7,827		Flash	13,838		—		13,838		10,394		—		10,394
Systems	Systems	—		36,199		36,199		—		34,435		34,435		Systems	—		41,504		41,504		—		35,114		35,114
Total	Total	$	167,708	$	36,199	$	203,907	$	153,641	$	34,435	$	188,076	Total	$	139,365	$	41,504	$	180,869	$	154,850	$	35,114	$	189,964
Timing of revenue recognition:	Timing of revenue recognition:													Timing of revenue recognition:
Products transferred at a point in time	Products transferred at a point in time	$	166,701	$	33,081	$	199,782	$	153,129	$	30,884	$	184,013	Products transferred at a point in time	$	138,602	$	37,842	$	176,444	$	154,217	$	33,564	$	187,781
Products and services transferred over time	Products and services transferred over time	1,007		3,118		4,125		512		3,551		4,063		Products and services transferred over time	763		3,662		4,425		633		1,550		2,183
Total	Total	$	167,708	$	36,199	$	203,907	$	153,641	$	34,435	$	188,076	Total	$	139,365	$	41,504	$	180,869	$	154,850	$	35,114	$	189,964
Geographical region:	Geographical region:													Geographical region:
United States														United States	$	25,909	$	12,180	$	38,089	$	18,530	$	6,938	$	25,468
Taiwan	Taiwan	$	45,188	$	4,832	$	50,020	$	46,737	$	5,147	$	51,884	Taiwan	32,227		4,611		36,838		34,100		7,474		41,574
China	China	40,578		9,157		49,735		23,996		7,831		31,827		China	27,973		8,755		36,728		46,011		5,036		51,047
United States		21,539		9,703		31,242		24,174		8,476		32,650
South Korea	South Korea	27,418		1,337		28,755		35,426		751		36,177		South Korea	28,118		819		28,937		27,895		1,077		28,972
Malaysia		16,157		87		16,244		3,034		161		3,195
Japan		6,716		3,221		9,937		3,477		4,227		7,704
Europe	Europe	3,824		4,267		8,091		6,466		5,544		12,010		Europe	3,682		8,116		11,798		3,595		6,891		10,486
Singapore	Singapore	5,131		1,977		7,108		8,602		1,360		9,962		Singapore	7,983		2,374		10,357		6,841		711		7,552
Japan														Japan	4,533		3,159		7,692		5,767		4,961		10,728
Malaysia														Malaysia	6,272		237		6,509		11,353		280		11,633
Rest of the world	Rest of the world	1,157		1,618		2,775		1,729		938		2,667		Rest of the world	2,668		1,253		3,921		758		1,746		2,504
Total	Total	$	167,708	$	36,199	$	203,907	$	153,641	$	34,435	$	188,076	Total	$	139,365	$	41,504	$	180,869	$	154,850	$	35,114	$	189,964


		Six Months Ended													Nine Months Ended
		June 25, 2022						June 26, 2021							September 24, 2022						September 25, 2021
		Probe Cards		Systems		Total		Probe Cards		Systems		Total			Probe Cards		Systems		Total		Probe Cards		Systems		Total
Market:	Market:													Market:
Foundry & Logic	Foundry & Logic	$	236,501	$	—	$	236,501	$	217,136	$	—	$	217,136	Foundry & Logic	$	327,106	$	—	$	327,106	$	321,776	$	—	$	321,776
DRAM	DRAM	71,280		—		71,280		75,986		—		75,986		DRAM	106,202		—		106,202		115,802		—		115,802
Flash	Flash	19,910		—		19,910		19,417		—		19,417		Flash	33,748		—		33,748		29,811		—		29,811
Systems	Systems	—		73,390		73,390		—		62,173		62,173		Systems	—		114,894		114,894		—		97,287		97,287
Total	Total	$	327,691	$	73,390	$	401,081	$	312,539	$	62,173	$	374,712	Total	$	467,056	$	114,894	$	581,950	$	467,389	$	97,287	$	564,676
Timing of revenue recognition:	Timing of revenue recognition:													Timing of revenue recognition:
Products transferred at a point in time	Products transferred at a point in time	$	325,537	$	68,497	$	394,034	$	311,605	$	55,555	$	367,160	Products transferred at a point in time	$	464,139	$	106,339	$	570,478	$	465,822	$	89,119	$	554,941
Products and services transferred over time	Products and services transferred over time	2,154		4,893		7,047		934		6,618		7,552		Products and services transferred over time	2,917		8,555		11,472		1,567		8,168		9,735
Total	Total	$	327,691	$	73,390	$	401,081	$	312,539	$	62,173	$	374,712	Total	$	467,056	$	114,894	$	581,950	$	467,389	$	97,287	$	564,676
Geographical region:	Geographical region:													Geographical region:
Taiwan	Taiwan	$	87,710	$	15,379	$	103,089	$	91,471	$	5,993	$	97,464	Taiwan	$	119,937	$	19,990	$	139,927	$	125,571	$	13,467	$	139,038
China	China	73,369		14,765		88,134		61,827		12,625		74,452		China	101,342		23,520		124,862		107,838		17,661		125,499
United States	United States	41,515		15,374		56,889		45,482		16,654		62,136		United States	67,424		27,554		94,978		64,012		23,592		87,604
South Korea	South Korea	52,299		3,957		56,256		53,427		1,835		55,262		South Korea	80,417		4,776		85,193		81,322		2,912		84,234
Malaysia	Malaysia	37,674		769		38,443		22,922		203		23,125		Malaysia	43,946		1,006		44,952		34,275		483		34,758
Japan		11,501		7,818		19,319		8,726		8,299		17,025
Singapore	Singapore	15,415		2,589		18,004		16,229		2,291		18,520		Singapore	23,398		4,963		28,361		23,070		3,002		26,072
Europe	Europe	6,206		10,280		16,486		9,299		12,710		22,009		Europe	9,888		18,396		28,284		12,894		19,601		32,495
Japan														Japan	16,034		10,977		27,011		14,493		13,260		27,753
Rest of the world	Rest of the world	2,002		2,459		4,461		3,156		1,563		4,719		Rest of the world	4,670		3,712		8,382		3,914		3,309		7,223
Total	Total	$	327,691	$	73,390	$	401,081	$	312,539	$	62,173	$	374,712	Total	$	467,056	$	114,894	$	581,950	$	467,389	$	97,287	$	564,676

Note 17 — Subsequent Events

On October 25, 2022, we adopted a restructuring plan to align our cost structure with reduced demand levels within the Probe Cards segment by streamlining and improving the efficiency and business effectiveness of our operations. The plan includes lowering headcount by approximately 13% of our workforce, which is expected to result in recognizing restructuring charges of approximately $6.6 million in cash, consisting of severance and employee-related costs. We expect the actions defined under this plan will be largely completed by the end of the fourth quarter of fiscal 2022. Upon completion, this action is expected to reduce our cost structure by approximately $25 to $30 million on an annualized basis.

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.

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 other global, regional or national public health-related crises and the impact of our responses to ~~it,~~them, the interpretation and impacts of changes in export controls and other trade barriers, military conflicts, political volatility and similar factors, 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

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 ~~$60.1~~$64.5 million in the first ~~six~~nine months of fiscal 2022 as compared to ~~$37.5~~$58.0 million in the first ~~six~~nine 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~~due to significant intangibles becoming fully amortized, partially offset by higher operating expenses. The first half of fiscal 2022 was strong, realizing $60.1 million of the $64.5 million net income in the first nine months of fiscal 2022 with $401.1 million in revenue and 47.0% gross margins. For the third quarter of fiscal 2022, we generated net income of $4.4 million with $180.9 million in revenue and 34.4% gross margins, which was a significant decline in results after a strong first half.

~~Impact~~In October 2022, the United States government imposed new controls, including expanded export license requirements that significantly impact trade with China for advanced U.S. semiconductor technology sold in China. The 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 impactsthis on our business is still being evaluated and ~~financial results. The semiconductor industry~~updated guidance is ~~experiencing various supply constraints due~~being provided by the U.S. Government on an ongoing basis and subject to ~~the pandemic. While we are working with our global supply chain partners to mitigate this risk, the duration and extent~~change. We expect these regulatory conditions, on top of the ~~supply chain disruptions remain~~slowing business environment seen in the third quarter of fiscal 2022, to negatively impact our financial results over the next few quarters. Given the rapidly evolving situation, the impacts beyond that time frame are 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.

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 ~~six~~nine months ended ~~June 25,~~September 24, 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.

Results of Operations

The following table sets forth our operating results as a percentage of revenues for the periods indicated:


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		June 25, 2022		June 26, 2021		June 25, 2022		June 26, 2021			September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Revenues	Revenues	100.0	%	100.0	%	100.0	%	100.0	%	Revenues	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenues	Cost of revenues	53.7		59.4		53.0		59.2		Cost of revenues	65.6		57.8		56.9		58.7
Gross profit	Gross profit	46.3		40.6		47.0		40.8		Gross profit	34.4		42.2		43.1		41.3
Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	13.9		13.5		13.8		13.2		Research and development	14.7		13.7		14.1		13.4
Selling, general and administrative	Selling, general and administrative	16.4		16.2		16.5		16.1		Selling, general and administrative	17.5		16.3		16.8		16.2

Total operating expenses	Total operating expenses	30.3		29.7		30.3		29.3		Total operating expenses	32.2		30.0		30.9		29.6
Operating income	Operating income	16.0		10.9		16.7		11.5		Operating income	2.2		12.2		12.2		11.7
Interest income	Interest income	0.1		0.1		0.1		0.1		Interest income	0.4		0.1		0.2		0.1
Interest expense	Interest expense	(0.1)		(0.1)		(0.1)		(0.1)		Interest expense	(0.1)		(0.1)		(0.1)		(0.1)
Other income (expense), net		0.3		(0.1)		0.2		—
Other income, net										Other income, net	0.6		0.1		0.3		—
Income before income taxes	Income before income taxes	16.3		10.8		16.9		11.5		Income before income taxes	3.1		12.3		12.6		11.7
Provision for income taxes	Provision for income taxes	1.5		1.2		1.9		1.5		Provision for income taxes	0.7		1.5		1.5		1.4
Net income	Net income	14.8	%	9.6	%	15.0	%	10.0	%	Net income	2.4	%	10.8	%	11.1	%	10.3	%

Revenues by Segment and Market


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		June 25, 2022		June 26, 2021		June 25, 2022		June 26, 2021			September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021

		(In thousands)									(In thousands)
Probe Cards	Probe Cards	$	167,708	$	153,641	$	327,691	$	312,539	Probe Cards	$	139,365	$	154,850	$	467,056	$	467,389
Systems	Systems	36,199		34,435		73,390		62,173		Systems	41,504		35,114		114,894		97,287
		$	203,907	$	188,076	$	401,081	$	374,712		$	180,869	$	189,964	$	581,950	$	564,676


		Three Months Ended													Three Months Ended
		June 25, 2022		% of Revenues		June 26, 2021		% of Revenues		$ Change		% Change			September 24, 2022		% of Revenues		September 25, 2021		% of Revenues		$ Change		% Change

		(Dollars in thousands)													(Dollars in thousands)
Probe Cards Markets:	Probe Cards Markets:													Probe Cards Markets:
Foundry & Logic	Foundry & Logic	$	122,380	60.0	%	$	103,726	55.1	%	$	18,654	18.0	%	Foundry & Logic	$	90,605	50.1	%	$	104,640	55.1	%	$	(14,035)	(13.4)	%
DRAM	DRAM	36,843		18.0		42,088		22.4		(5,245)		(12.5)		DRAM	34,922		19.3		39,816		20.9		(4,894)		(12.3)
Flash	Flash	8,485		4.2		7,827		4.2		658		8.4		Flash	13,838		7.7		10,394		5.5		3,444		33.1
Systems Market:	Systems Market:													Systems Market:
Systems	Systems	36,199		17.8		34,435		18.3		1,764		5.1		Systems	41,504		22.9		35,114		18.5		6,390		18.2
Total revenues	Total revenues	$	203,907	100.0	%	$	188,076	100.0	%	$	15,831	8.4	%	Total revenues	$	180,869	100.0	%	$	189,964	100.0	%	$	(9,095)	(4.8)	%

		Six Months Ended													Nine Months Ended
		June 25, 2022		% of Revenues		June 26, 2021		% of Revenues		$ Change		% Change			September 24, 2022		% of Revenues		September 25, 2021		% of Revenues		$ Change		% Change

		(Dollars in thousands)													(Dollars in thousands)
Probe Cards Markets:	Probe Cards Markets:													Probe Cards Markets:
Foundry & Logic	Foundry & Logic	$	236,501	58.9	%	$	217,136	57.9	%	$	19,365	8.9	%	Foundry & Logic	$	327,106	56.3	%	$	321,776	57.0	%	$	5,330	1.7	%
DRAM	DRAM	71,280		17.8		75,986		20.3		(4,706)		(6.2)		DRAM	106,202		18.2		115,802		20.5		(9,600)		(8.3)
Flash	Flash	19,910		5.0		19,417		5.2		493		2.5		Flash	33,748		5.8		29,811		5.3		3,937		13.2
Systems Market:	Systems Market:													Systems Market:
Systems	Systems	73,390		18.3		62,173		16.6		11,217		18.0		Systems	114,894		19.7		97,287		17.2		17,607		18.1
Total revenues	Total revenues	$	401,081	100.0	%	$	374,712	100.0	%	$	26,369	7.0	%	Total revenues	$	581,950	100.0	%	$	564,676	100.0	%	$	17,274	3.1	%

Foundry & Logic

The ~~increase~~decrease in Foundry & Logic product revenue for the three ~~and six~~ months ended ~~June 25,~~September 24, 2022, compared to the three ~~and six~~ months ended ~~June 26,~~September 25, 2021, was driven principally by softening demand for the ~~increased demand and increased~~second half of fiscal 2022 causing decreased unit sales to ~~other~~integrated device manufacturers, offset slightly by increased demand at large semiconductor ~~foundries and integrated device manufacturers.~~foundries.

Foundry & Logic product revenue increased slightly for the nine months ended September 24, 2022, compared to the nine months ended September 25, 2021. Although a slight increase year-over-year, demand has weakened from the slowdown in the semiconductor industry for the second half of fiscal 2022, and as previously described within the Overview.

DRAM

The decrease in DRAM product revenue for the three and ~~six~~nine months ended ~~June 25,~~September 24, 2022, compared to the three and ~~six~~nine months ended ~~June 26,~~September 25, 2021, was driven by decreased design wins and customer demand.

Flash

The increase in Flash product revenue for the three and ~~six~~nine months ended ~~June 25,~~September 24, 2022, compared to the three and ~~six~~nine months ended ~~June 26,~~September 25, 2021, was driven by increased customer demand.

Systems

The increase in Systems market revenue for the three months ended September 24, 2022, compared to the three months ended September 25, 2021, was driven by increased sales of our 200 and 300 millimeter probe stations and cryogenic systems.

The increase in Systems market revenue for the ~~three and six~~nine months ended ~~June 25,~~September 24, 2022, compared to the ~~three and six~~nine months ended ~~June 26,~~September 25, 2021, was driven by ~~both~~ increased sales of ~~metrology systems and~~ our 200 and 300 millimeter probe ~~stations.~~stations and metrology systems.

Revenues by Geographic Region


		Three Months Ended								Six Months Ended									Three Months Ended								Nine Months Ended
		June 25, 2022		% of Revenue		June 26, 2021		% of Revenue		June 25, 2022		% of Revenue		June 26, 2021		% of Revenue			September 24, 2022		% of Revenue		September 25, 2021		% of Revenue		September 24, 2022		% of Revenue		September 25, 2021		% of Revenue

		(Dollars in thousands)																	(Dollars in thousands)
Taiwan	Taiwan	$	50,020	24.5	%	$	51,884	27.6	%	$	103,089	25.7	%	$	97,464	26.0	%	Taiwan	$	36,838	20.4	%	$	41,574	21.9	%	$	139,927	24.0	%	$	139,038	24.6	%
China	China	49,735		24.4		31,827		16.9		88,134		22.0		74,452		19.9		China	36,728		20.3		51,047		26.8		124,862		21.5		125,499		22.2
United States	United States	31,242		15.3		32,650		17.4		56,889		14.2		62,136		16.6		United States	38,089		21.1		25,468		13.4		94,978		16.3		87,604		15.5
South Korea	South Korea	28,755		14.1		36,177		19.2		56,256		14.0		55,262		14.7		South Korea	28,937		16.0		28,972		15.3		85,193		14.6		84,234		14.9
Malaysia	Malaysia	16,244		8.0		3,195		1.7		38,443		9.6		23,125		6.2		Malaysia	6,509		3.6		11,633		6.1		44,952		7.7		34,758		6.2
Singapore																		Singapore	10,357		5.7		7,552		4.0		28,361		4.9		26,072		4.6
Europe																		Europe	11,798		6.5		10,486		5.5		28,284		4.9		32,495		5.8
Japan	Japan	9,937		4.9		7,704		4.1		19,319		4.8		17,025		4.5		Japan	7,692		4.3		10,728		5.6		27,011		4.6		27,753		4.9
Europe		8,091		4.0		12,010		6.4		16,486		4.1		22,009		5.9
Singapore		7,108		3.5		9,962		5.3		18,004		4.5		18,520		4.9
Rest of the world	Rest of the world	2,775		1.3		2,667		1.4		4,461		1.1		4,719		1.3		Rest of the world	3,921		2.1		2,504		1.4		8,382		1.5		7,223		1.3
Total revenues	Total revenues	$	203,907	100.0	%	$	188,076	100.0	%	$	401,081	100.0	%	$	374,712	100.0	%	Total revenues	$	180,869	100.0	%	$	189,964	100.0	%	$	581,950	100.0	%	$	564,676	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~~nine months ended ~~June 25,~~September 24, 2022, compared to the three and ~~six~~nine months ended ~~June 26,~~September 25, 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 the United States, and decreases 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~~these regions. The decrease in China ~~were driven~~mentioned previously was partially offset 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
		June 25, 2022			June 26, 2021			$ Change		% Change			September 24, 2022			September 25, 2021			$ Change		% Change
Gross profit	Gross profit	$	94,369		$	76,283		$	18,086	23.7	%	Gross profit	$	62,213		$	80,219		$	(18,006)	(22.4)	%
Gross margin	Gross margin	46.3		%	40.6		%					Gross margin	34.4		%	42.2		%

		Six Months Ended											Nine Months Ended
		June 25, 2022			June 26, 2021			$ Change		% Change			September 24, 2022			September 25, 2021			$ Change		% Change
Gross profit	Gross profit	$	188,593		$	152,989		$	35,604	23.3	%	Gross profit	$	250,806		$	233,208		$	17,598	7.5	%
Gross margin	Gross margin	47.0		%	40.8		%					Gross margin	43.1		%	41.3		%

Our gross profit and gross margin by segment were as follows (dollars in thousands):


		Three Months Ended																							Three Months Ended
		June 25, 2022											June 26, 2021												September 24, 2022											September 25, 2021
		Probe Cards			Systems			Corporate and Other		Total			Probe Cards			Systems			Corporate and Other		Total				Probe Cards			Systems			Corporate and Other		Total			Probe Cards			Systems			Corporate and Other		Total
Gross profit	Gross profit	$	78,420		$	18,276		$	(2,327)	$	94,369		$	66,600		$	16,907		$	(7,224)	$	76,283		Gross profit	$	48,252		$	22,284		$	(8,323)	$	62,213		$	69,868		$	17,553		$	(7,202)	$	80,219
Gross margin	Gross margin	46.8		%	50.5		%			46.3		%	43.3		%	49.1		%			40.6		%	Gross margin	34.6		%	53.7		%			34.4		%	45.1		%	50.0		%			42.2		%

		Six Months Ended																							Nine Months Ended
		June 25, 2022											June 26, 2021												September 24, 2022											September 25, 2021
		Probe Cards			Systems			Corporate and Other		Total			Probe Cards			Systems			Corporate and Other		Total				Probe Cards			Systems			Corporate and Other		Total			Probe Cards			Systems			Corporate and Other		Total
Gross profit	Gross profit	$155,622			$	37,683		$	(4,712)	$	188,593		$136,915			$	30,506		$	(14,432)	$	152,989		Gross profit	$	203,874		$	59,967		$	(13,035)	$	250,806		$	206,783		$	48,059		$	(21,634)	$	233,208
Gross margin	Gross margin	47.5		%	51.3		%			47.0		%	43.8		%	49.1		%			40.8		%	Gross margin	43.7		%	52.2		%			43.1		%	44.2		%	49.4		%			41.3		%

Probe Cards

For the three ~~and six~~ months ended ~~June~~September 24, 2022, gross margins decreased compared to the three months ended September 25, 2021, primarily due to greater inventory excess and obsolescence reserves, higher net manufacturing spending driven by higher labor and overhead costs, and lower standard margins related to a less favorable product mix. For the nine months ended September 24, 2022, gross margins decreased compared to the nine months ended September 25, 2021, primarily due to higher net manufacturing spending driven by higher labor and overhead costs, partially offset by improved standard margins related to a more favorable product mix.

Systems

For the three and nine months ended September 24, 2022, gross margins increased compared to the three and ~~six~~nine months ended June 26, 2021, primarily due to higher revenues and improved standard margins related to favorable product mix, partially offset by higher net manufacturing spending driven by higher material and labor costs, and — for the three month periods — unfavorable absorption of costs despite higher production volumes.

~~Systems~~

~~For the three and six months ended June~~September 25, ~~2022, gross margins increased compared to the three and six months ended June 26,~~ 2021, primarily as a result of a more favorable product mix ~~primarily driven by increased sales of metrology tools at favorable margins,~~ and improved leverage on fixed costs at ~~these~~ higher ~~volumes.~~revenues.

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~~increase in Corporate and Other for the three ~~and six~~ months ended ~~June 25,~~September 24, 2022 compared to the three ~~and six~~ months ended ~~June 26,~~September 25, 2021 is primarily due to increased restructuring charges arising from a change in estimate of excess and obsolete inventories related to our third quarter of fiscal 2021 plan to adjust capacity for certain product offerings, partially offset by a reduction in the amortization of intangibles resulting from significant intangibles becoming fully amortized.

The decrease in Corporate and Other for the nine months ended September 24, 2022 compared to the nine months ended September 25, 2021 is primarily due to a reduction in the amortization of intangibles resulting from significant intangibles becoming fully amortized, partially offset by increased ~~share-based compensation driven by increases~~restructuring charges in ~~headcount~~the third quarter of fiscal 2022 arising from a change in estimate of excess and obsolete inventories related to ~~support~~ our ~~growth.~~fiscal 2021 plan to adjust capacity for certain product offerings.

Overall

Gross profit and gross margins fluctuate with revenue levels, product mix, selling prices, factory loading, labor costs, and material costs. For the three ~~and six~~ months ended ~~June 25,~~September 24, 2022, compared to the three ~~and six~~ months ended ~~June 26,~~September 25, 2021, gross profit and gross margins have decreased on lower revenue levels, a less favorable Probe Cards segment product mix, increased labor, overhead, and inventory excess and obsolescence reserves, and less amortization of intangibles. For the nine months ended September 24, 2022, compared to the nine months ended September 25, 2021, gross profit and gross margins have increased on higher revenue levels, ~~favorable~~improved product mix, and less amortization of ~~intangibles.~~intangibles, partially offset by higher labor and overhead costs.

Cost of revenues included stock-based compensation expense as follows (in thousands):

Three Months Ended Six Months Ended
June 25,
2022 June 26,
2021 June 25,
2022 June 26,
2021
Stock-based compensation $ 734 $ 1,079 $ 1,812 $ 2,414


	Three Months Ended				Nine Months Ended
	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Stock-based compensation	$	1,022	$	1,392	$	2,834	$	3,806

Research and Development


		Three Months Ended											Three Months Ended
		June 25, 2022			June 26, 2021			$ Change		% Change			September 24, 2022			September 25, 2021			$ Change		% Change

		(Dollars in thousands)											(Dollars in thousands)
Research and development	Research and development	$	28,317		$	25,454		$	2,863	11.2	%	Research and development	$	26,549		$	26,026		$	523	2.0	%
% of revenues	% of revenues	13.9		%	13.5		%					% of revenues	14.7		%	13.7		%

		Six Months Ended											Nine Months Ended
		June 25, 2022			June 26, 2021			$ Change		% Change			September 24, 2022			September 25, 2021			$ Change		% Change

		(Dollars in thousands)											(Dollars in thousands)
Research and development	Research and development	$	55,451		$	49,500		$	5,951	12.0	%	Research and development	$	82,000		$	75,526		$	6,474	8.6	%
% of revenues	% of revenues	13.8		%	13.2		%					% of revenues	14.1		%	13.4		%

~~The increase in research~~Research and development expenses in the three ~~and six~~ months ended ~~June 25,~~September 24, 2022 increased slightly when compared to the corresponding period in the prior year primarily due to an increase in headcount, which increased allocated costs within Other general operations. This increase was partially offset by a net decrease in employee compensation due to a decrease in performance based compensation, net of an increase in employee compensation due to annual salary adjustments. For the nine months ended September 24, 2022 when compared to the corresponding period in the prior year there was an increase in research and development expenses primarily driven by an increase in headcount which is to support 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.

A detail of the changes is as follows (in thousands):


		Three Months Ended June 25, 2022 compared to Three Months Ended June 26, 2021		Six Months Ended June 25, 2022 compared to Six Months Ended June 26, 2021			Three Months Ended September 24, 2022 compared to Three Months Ended September 25, 2021		Nine Months Ended September 24, 2022 compared to Nine Months Ended September 25, 2021
Other general operations						Other general operations	$	1,700	$	4,168
Project material costs						Project material costs	249		850
Depreciation						Depreciation	70		(9)
Stock-based compensation						Stock-based compensation	17		346
Restructuring charges						Restructuring charges	(222)		(428)
Employee compensation costs	Employee compensation costs	$	1,006	$	2,612	Employee compensation costs	(1,291)		1,547
Other general operations		1,421		2,387
							$	523	$	6,474
Stock-based compensation		32		329

Project material costs		404		623
		$	2,863	$	5,951

Research and development included stock-based compensation expense as follows (in thousands):

Three Months Ended Six 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 Ended
June 25,
2022 June 26,
2021 $ Change % Change
(Dollars in thousands)
Selling, general and administrative $ 33,406 $ 30,479 $ 2,927 9.6 %
% of revenues 16.4 % 16.2 %
Six Months Ended
June 25,
2022 June 26,
2021 $ Change % Change
(Dollars in thousands)
Selling, general and administrative $ 66,312 $ 60,494 $ 5,818 9.6 %
% of revenues 16.5 % 16.1 %


	Three Months Ended				Nine Months Ended
	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Stock-based compensation	$	2,027	$	2,010	$	5,708	$	5,362

~~The increase in selling,~~Selling, General and Administrative


	Three Months Ended
	September 24, 2022			September 25, 2021			$ Change		% Change

	(Dollars in thousands)
Selling, general and administrative	$	31,637		$	30,940		$	697	2.3	%
% of revenues	17.5		%	16.3		%

	Nine Months Ended
	September 24, 2022			September 25, 2021			$ Change		% Change

	(Dollars in thousands)
Selling, general and administrative	$	97,949		$	91,434		$	6,515	7.1	%
% of revenues	16.8		%	16.2		%

Selling, general and administrative expenses increased in the three and ~~six~~nine months ended ~~June 25,~~September 24, 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~~Furthermore, the increase for the three months ended September 24, 2022 when compared to ~~continue to return to previous levels assuming travel restrictions continue to ease. These increases were~~the corresponding period in the prior year was partially offset by lower ~~amortization of intangibles.~~performance based compensation.

A detail of the changes is as follows (in thousands):


		Three Months Ended June 25, 2022 compared to Three Months Ended June 26, 2021		Six Months Ended June 25, 2022 compared to Six Months Ended June 26, 2021			Three Months Ended September 24, 2022 compared to Three Months Ended September 25, 2021		Nine Months Ended September 24, 2022 compared to Nine Months Ended September 25, 2021
Travel related costs						Travel related costs	$	583	$	2,257
General operating expenses						General operating expenses	576		2,046
Stock-based compensation						Stock-based compensation	428		914
Restructure						Restructure	25		66
Consulting fees						Consulting fees	19		(319)
Amortization of intangibles						Amortization of intangibles	(73)		(273)
Employee compensation costs	Employee compensation costs	$	1,249	$	2,632	Employee compensation costs	(861)		1,824
							$	697	$	6,515
General operating expenses		831		1,465
Travel related costs		809		1,436
Stock-based compensation		83		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 Six 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


	Three Months Ended				Nine Months Ended
	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Stock-based compensation	$	4,946	$	4,518	$	13,331	$	12,417

Interest Income and Interest Expense

Interest income is earned on our cash, cash equivalents, restricted cash and marketable securities. The increase in interest income for the three and ~~six~~nine months ended ~~June 25,~~September 24, 2022 compared with the corresponding period of the prior year was attributable to ~~a slight~~an increase in investment yields due to the higher interest rate ~~environment on higher invested balances.~~environment.

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~~nine months ended ~~June 25,~~September 24, 2022 compared to the same period of the prior year remained 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. We partially mitigate our risks from currency movements by hedging certain balance sheet exposures, which minimizes the impacts during periods of foreign exchange volatility.

Provision for Income Taxes


		Three Months Ended						Six Months Ended							Three Months Ended						Nine Months Ended
		June 25, 2022			June 26, 2021			June 25, 2022			June 26, 2021				September 24, 2022			September 25, 2021			September 24, 2022			September 25, 2021

		(In thousands, except percentages)													(In thousands, except percentages)
Provision for income taxes	Provision for income taxes	$	3,136		$	2,283		$	7,586		$	5,489		Provision for income taxes	$	1,274		$	2,784		$	8,860		$	8,273
Effective tax rate	Effective tax rate	9.4		%	11.3		%	11.2		%	12.8		%	Effective tax rate	22.6		%	12.0		%	12.1		%	12.5		%

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 for the year ending December 31, 2022.

The ~~decrease~~increase in the effective tax rate in the three months ended ~~June 25,~~September 24, 2022 when compared to the corresponding period in the prior year was primarily driven by ~~an increased tax deduction~~a change within the third quarter of fiscal 2022 to the estimated annual taxable income, including by jurisdiction, and lower discrete benefits from ~~FDII.~~

stock-based compensation.

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 ~~$377.5~~$352.6 million at ~~June 25,~~September 24, 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~~corporate bonds, and commercial paper. Marketable securities primarily consist of U.S. treasuries, corporate bonds, and commercial paper. We typically invest in ~~highly-rated~~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 ~~$266.3~~$251.6 million at ~~June 25,~~September 24, 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 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, 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:


		Six Months Ended					Nine Months Ended
		June 25, 2022		June 26, 2021			September 24, 2022		September 25, 2021

		(In thousands)					(In thousands)
Net cash provided by operating activities	Net cash provided by operating activities	$	86,801	$	66,155	Net cash provided by operating activities	$	111,048	$	100,437
Net cash used in investing activities	Net cash used in investing activities	$	(41,111)	$	(59,813)	Net cash used in investing activities	$	(52,013)	$	(94,976)
Net cash used in financing activities	Net cash used in financing activities	$	(57,263)	$	(31,916)	Net cash used in financing activities	$	(84,964)	$	(36,869)

Operating Activities

Net cash provided by operating activities for the ~~six~~nine months ended ~~June 25,~~September 24, 2022 was primarily attributable to net income of ~~$60.1~~$64.5 million and net non-cash expenses of ~~$42.0~~$69.3 million, which includes depreciation, amortization, stock-based compensation, and the provision for excess and obsolete inventories. ~~These inflows were~~This was partially offset by an increase in net ~~changes in~~ working capital of ~~$15.3~~$22.7 million, primarily related to cash paid for inventories of ~~$32.3~~$33.0 million and a decrease in accrued liabilities for $5.0 million, partially offset by cash provided by an increase in accounts payable of ~~$7.5 million, an increase in accrued liabilities for $4.1 million, and a reduction in accounts receivable of $5.5~~$17.6 million.

Investing Activities

Net cash used in investing activities for the ~~six~~nine months ended ~~June 25,~~September 24, 2022 was primarily related to ~~$30.1~~$39.0 million property, plant and equipment purchases, ~~$6.9~~$8.6 million of net cash used to purchase marketable securities, and ~~$3.1~~$3.4 million used for acquisition of a business.

Financing Activities

Net cash used in financing activities for the ~~six~~nine months ended ~~June 25,~~September 24, 2022 primarily related to ~~$54.3~~$73.5 million used to purchase common stock under our stock repurchase programs, ~~$4.4~~$6.4 million of principal payments made towards the repayment of our term loans, and ~~$4.2~~$15.6 million related to tax withholdings associated with the net share settlements of our equity awards, partially offset by ~~$5.7~~$10.5 million of proceeds received from issuances of common stock under our employee stock purchase 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 $1.8 million plus interest. The interest rate at ~~June 25,~~September 24, 2022 was ~~1.29%~~1.90%. As of ~~June 25,~~September 24, 2022, the balance outstanding pursuant to the FRT term loan was ~~$3.7~~$1.7 million. The FRT Term Loan ~~is expected to be~~was 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.

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 ~~June 25,~~September 24, 2022 was ~~2.81%~~4.31%. As of ~~June 25,~~September 24, 2022, the balance outstanding pursuant to the Building Term Loan was ~~$16.0~~$15.8 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 of one-month LIBOR plus 1.75% into a fixed interest rate of 2.75%. As of ~~June 25,~~September 24, 2022, the notional amount of the loan that is subject to this interest rate swap is ~~$16.0~~$15.8 million.

Stock Repurchase Programs

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~~of offsetting 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~~nine months ended ~~June 25,~~September 24, 2022, we repurchased and retired ~~767,083~~1,335,414 shares of common stock for ~~$28.4~~$47.5 million under this program. As of ~~June 25,~~September 24, 2022, ~~$46.6~~$27.5 million remained available for future repurchases.

Contractual Obligations and Commitments

The following table summarizes our significant contractual commitments to make future payments in cash under contractual obligations as of ~~June 25,~~September 24, 2022:


		Payments Due In Fiscal Year															Payments Due In Fiscal Year
		Remainder 2022		2023		2024		2025		2026		Thereafter		Total			Remainder 2022		2023		2024		2025		2026		Thereafter		Total
Operating leases	Operating leases	$	4,319	$	7,564	$	7,224	$	7,187	$	6,505	$	9,143	$	41,942	Operating leases	$	4,275	$	7,545	$	7,236	$	7,170	$	6,450	$	9,042	$	41,718
Term loans - principal payments	Term loans - principal payments	4,208		1,050		1,080		1,111		1,142		11,116		19,707		Term loans - principal payments	1,953		1,050		1,080		1,111		1,142		11,116		17,452
Term loans - interest payments (1)	Term loans - interest payments (1)	244		428		400		366		335		1,415		3,188		Term loans - interest payments (1)	179		657		614		561		513		2,170		4,694
Total	Total	$	8,771	$	9,042	$	8,704	$	8,664	$	7,982	$	21,674	$	64,837	Total	$	6,407	$	9,252	$	8,930	$	8,842	$	8,105	$	22,328	$	63,864

(1) Represents our minimum interest payment commitments at ~~2.81%~~4.31% per annum for the Building Term Loan and ~~1.29%~~1.90% 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 ~~June 25,~~September 24, 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.

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

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 ~~six~~nine months ended ~~June 25,~~September 24, 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.

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 ~~June 25,~~September 24, 2022:

Period (fiscal months) Total Number of Shares Purchased Average 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, 2022 76,052 $ 35.93 76,052 $ 13,833,084
April 24, 2022 - May 21, 2022 242,975 37.49 242,975 4,723,942
May 22, 2022 - June 25, 2022 883,916 37.43 883,916 46,634,889
1,202,943 $ 37.35 1,202,943


Period (fiscal months)	Total Number of Shares Purchased	Average 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
June 26, 2022 - July 23, 2022	256,084	$	36.48	256,084	$	37,292,828
July 24, 2022 - August 20, 2022	34,172	33.16		34,172	36,159,555
August 21, 2022 - September 24, 2022	278,075	31.20		278,075	27,484,925
	568,331	$	33.70	568,331

1 In May 2022, our Board of Directors authorized a program to repurchase up to $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~~was fully utilized through June 2022 and expired October ~~28,~~ 2022. Under the authorized stock repurchase ~~programs,~~program, 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 ~~programs~~program may be modified or discontinued at any time. This new share repurchase program will expire May ~~20,~~ 2024.

Item 6. Exhibits

The following exhibits are filed herewith and this list constitutes the exhibit index.

Exhibit

Incorporated by Reference

Filed

Exhibit

Incorporated by Reference

Filed

Number

Exhibit Description

Form

Date

Number

Herewith

Number

Exhibit Description

Form

Date

Number

Herewith

3.1

Certificate of Amendment of Amended and Restated Certificate of Incorporation of FormFactor, Inc.

8-K

June 3, 2022

3.01

3.1

Certificate of Amendment of Amended and Restated Certificate of Incorporation of FormFactor, Inc.

8-K

June 3, 2022

3.01

3.2

Restated Certificate of Incorporation of FormFactor, Inc.

8-K

June 3, 2022

3.02

3.2

Restated Certificate of Incorporation of FormFactor, Inc.

8-K

June 3, 2022

3.02

3.3

Amended and Restated By-laws of FormFactor, Inc.

8-K

June 3, 2022

3.03

3.3

Amended and Restated By-laws of FormFactor, Inc.

8-K

June 3, 2022

3.03

10.1

First Amendment to FormFactor, Inc. Employee Stock Purchase Plan

31.01

Certification of Chief Executive Officer pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.01

Certification of Chief Executive Officer pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.02

Certification of Chief Financial Officer pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.02

Certification of Chief Financial Officer pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.01

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.01

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101

The 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 tags

101

The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 24, 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 tags

101.INS

XBRL Instance Document

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

104

The 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)

104

The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 24, 2022, formatted in Inline XBRL (included as Exhibit 101)

______________________________________

* 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.

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:	~~August 2,~~November 1, 2022	By:	/s/ SHAI SHAHAR

			Shai Shahar
			Chief Financial Officer
			(Duly Authorized Officer, Principal Financial Officer, and Principal Accounting Officer)