Formfactor, Inc. · NASDAQ:FORM
Formfactor — Investor Day (June 2017)
26 slides from Formfactor's investor day presentation, Jun 28, 2017
Slide 1: Analyst Call: Company Strategy & Target Model Update
Analyst Call: Company Strategy & Target Model Update June 28, 2017
Slide 2: Forward-looking statements
This presentation contains forward - looking statements that are based on our current expectations, forecasts and assumptions, and that involve risks and uncertainties. These statements include, but are not limited to, statements regarding our future performance (such as our projected operating resu
Slide 3: Mike Slessor, Chief Executive Officer
3 Mike Slessor, Chief Executive Officer
Slide 4: Investment Themes
Largest supplier of semiconductor probe cards and engineering systems from R&D to production - serving a $1.3 billion growing market Investment Themes 4 Aligned with technology trends in data centers, mobile, and automotive end markets Technology leadership enables customers’ most critical roadmap a
Slide 5: Proven Track Record
$- $5 $10 $15 2012 2013 2014 2015 2016 2017 Proven Track Record 5 * Source: VLSI Research 2016 Probe Card Report VLSI Customer Satisfaction Award: 4 Consecutive Years # 1 June 2016 : Cascade Microtech Acquisition October 2012 : Microprobe Acquisition Advanced Probe Card Supplier # 1 LARGEST R&D Inve
Slide 6: Delivering Strong Financial Results
Delivering Strong Financial Results 6 Growing and diversifying revenue Expanding earnings per share * Please see the Supplemental Information for reconciliations of non - GAAP financial measures to the most directly comparable GAA P financial measures, and for other information relating to non - GAA
Slide 7: Aligned with High Growth Semiconductor Technology Trends
DATA CENTER • High Performance Micro - processor • Server DRAM • NAND Flash 8% End Market Growth MOBILE • Application Processors • Mobile DRAM • NAND Flash • Filters (BAW & SAW) 6% End Market Growth AUTOMOTIVE • Stringent test requirements • Infotainment • Sensors • Micro - controllers (drive trains
Slide 8: Selected Line of Sight Growth Opportunities
Sources: IC Insights, VLSI Research 2016, Gartner Semiconductor and Electronics Market Outlook 2017, company estimates For mFactor Customers’ End Markets Data Center Mobile Automotive Market CAGR (2016 - 2020) 8% 6% 14% FormFactor Products Engineering Systems 3% Probe Cards Foundry & Logic 7% DRAM F
Slide 9: Advanced Packaging: Higher Wafer Test Intensity Requires More High-Performance Probe Cards
Advanced Packaging: Higher Wafer Test Intensity Requires More High - Performance Probe Cards 9 * Advanced Packaging Trends, TechSearch Int’l 2016 ** Teradyne Q1’17 Earnings Call, May 2017 *** Quality/Reliability Requirements for Bare Die, Micron TN0014 THE MARKET OPPORTUNITY • Heterogeneous die inte
Slide 10: Mobile Data: Explosion of Data Traffic Drives RF Semi Content and Technology
Mobile Data: Explosion of Data Traffic Packed into Narrow Spectrum Drives RF Semi Content and Technology 10 * Cisco VNI Forecast, February 2017 ** RF FE modules and components for cellphones, Yole 2017 THE MARKET OPPORTUNITY • Mobile data traffic growing 7x 2016 - 2021* over increasingly crowded spe
Slide 11: Automotive ICs: Rapidly-Growing Semiconductor End Market
Automotive ICs: Rapidly - Growing Semiconductor End Market with Stringent Quality and Test Requirements 11 * IC Market Drivers 2017 Update, IC Insights ** Spotlight on Automotive, PwC Semiconductor Report 2013 THE MARKET OPPORTUNITY • ICs & sensors improve both performance & safety on the path to au
Slide 12: MicroLED Testing: An Emerging Example of Next-Generation Opportunities
MicroLED Testing: An Emerging Example of Our Next - Generation Opportunities 12 * MicroLED Displays 2017 Report, Yole 2017 THE MARKET OPPORTUNITY • Projected growth to 330 million display units in 2025 from near - zero today* • GaN technology offers improved brightness and energy efficiency over OLE
Slide 13: Gaining Share in Growing Markets
Gaining Share in Growing Markets 13 13 $0.9B SERVED AVAILABLE MARKET ADVANCED PROBE CARDS $1.7B SERVED AVAILABLE MARKET ADVANCED PROBE CARDS & ENGINEERING SYSTEMS 20% ~40% $1.3B SERVED AVAILABLE MARKET ADVANCED PROBE CARDS & ENGINEERING SYSTEMS 29% Target model assumptions: Advanced probe cards serv
Slide 14: Mike Ludwig, Chief Financial Officer
14 Mike Ludwig, Chief Financial Officer
Slide 15: Driving Profitability through Strategic Use of Balance Sheet
Driving Profitability through Strategic Use of Balance Sheet 15 Increased Profitability & Free Cash Flow Increased Diversification & Leverage of Increased Scale Strategic M&A: 2012 & 2016 Strong Cash Balance * Please see the Supplemental Information for reconciliations of non - GAAP financial measur
Slide 16: Diversification Improves Mix and Drives Profitability
Diversification Improves Mix and Drives Profitability 16 16 Source: Company filings and reports Target model assumptions: Advanced probe cards served available market of $1.4B in 2019/2020 (Source – VLSI Research 2016) Engineering systems served available market of $0.3B (Company’s internal estimate
Slide 17: Continuing to Leverage Our Operating Structure
Continuing to Leverage Our Operating Structure 17 • Leverage factory utilization and product mix to drive gross margin expansion • Capitalize on scale to leverage our operating expense infrastructure • Continue significant R&D investment to execute on organic growth opportunities SG&A Target Model *
Slide 18: Target Model Represents Significant Increase in Profitability and Free Cash Flow
Target Model Represents Significant Increase in Profitability and Free Cash Flow 18 18 2016 Actuals Target Model Revenue $385M $650M* No n - GAAP Gross Margin 38% 46% Non - GAAP Operating Income 10% 19% Non - GAAP Effective Tax Rate 6.7% 6.0% Non - GAAP Diluted Earnings Per Share $0.49 $1.50 Free Ca
Slide 19: Strategic Capital Allocation: Strengthen Balance Sheet & Drive Future Growth
Strategic Capital Allocation: Strengthen Balance Sheet & Drive Future Growth 19 Capital Allocation Purpose De - levering • Strengthen balance sheet • Net cash positive by Q2 2017 Growth through acquisitions • Greater scale • Increased diversification • Revenue & EPS growth Target model assumptions:
Slide 20: Mike Slessor, CEO: Summary
20 Mike Slessor, CEO: Summary
Slide 21: Strategic Focus Areas
LEADERSHIP IN CORE MARKERS • Continue share gains in advanced probe card market segment & engineering systems • Leverage existing key roadmap technologies and investments across all markets ENTER ADJACENT MARKETS • Continued long term diversification of revenue stream and customer mix through M&A in
Slide 22: Q&A Session
22 Q&A Session
Slide 23: Appendix
23 Appendix
Slide 24: FY 2016 GAAP to Non-GAAP Reconciliation
FY 2016 GAAP to Non - GAAP Reconciliation 24 in thousands GAAP Non-GAAP Twelve months ended Dec. 31, 2016 Stock-based Compensation Restructuring & Impairment Amortization of Intangibles Acquisition & Integration Recovery Loss Contingency Deferred Revenue Valuation Allowance Twelve months ended Dec.
Slide 25: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation 25 in thousands 2011 2012 2013 2014 2015 2016 Net cash provided by (used in) operating activities: (29,343)$ (26,228)$ (5,802)$ 17,659$ 36,122$ $ 17,423 Add: cash paid for interest - - - - - 2,110 Add: cash paid for acquisition related expenses - - - - - 15,446 Less: ca
Slide 26: Non-GAAP financial measures note
We believe that the presentation of non - GAAP earnings per fully - diluted share, free cash flow and other non - GAAP measures in thi s presentation provides supplemental information that is important to understanding financial and business trends and other factors relating to our financial conditi