FormFactor(FORM)2023-02-23 16:00Business Segments and Operations - FormFactor, Inc. operates in two reportable segments: Probe Cards and Systems, with sales from probe cards and analytical probes included in the Probe Cards segment, while probe stations, metrology systems, thermal systems, and cryogenic systems are included in the Systems segment[16]. - Manufacturing facilities are located in the United States and Germany, with additional operations in China and Japan, ensuring a broad production capability[41]. - The company maintains a global sales force and a network of representatives and distributors to enhance customer support and market reach[44]. Revenue and Financial Performance - Total revenues for fiscal 2022 were 769.7 million in fiscal 2021, with the Probe Cards segment generating 156.5 million[183]. - Net income for fiscal 2022 was 83.9 million in fiscal 2021, primarily due to decreased revenues and lower margins[165]. - Gross profit margin for fiscal 2022 was 39.6%, down from 41.9% in fiscal 2021, attributed to a less favorable product mix and lower factory utilization[182]. - The company experienced a net loss of 346.9 million and gross margins of 31.0%[166]. - The company anticipates continued negative impacts on revenues due to U.S. government export restrictions affecting trade with China[190]. Customer and Market Dynamics - As of December 31, 2022, Intel Corporation represented 16.5% of quarterly revenues, while SK hynix Inc. and Taiwan Semiconductor Manufacturing Co., LTD. contributed 10.7% and 10.7% respectively in the same quarter[35]. - Approximately 22% of the company's fiscal 2022 revenue was derived from sales to customers in China, which is subject to new export license requirements imposed by the U.S. government[49]. - A relatively small number of customers account for a significant portion of revenues, with two customers representing a combined 31.8% of total revenues in fiscal 2021[86]. - The company believes it competes favorably in the advanced probe card market, particularly for high signal integrity testing of wireless radio frequency devices used in 5G applications[53]. Research and Development - The company emphasizes the importance of innovation and investment in research and development to meet the evolving test and measurement requirements of its customers[83]. - Research and development expenses as a percentage of revenues increased to 14.6% in fiscal 2022 from 13.1% in fiscal 2021[182]. - The company has generated and maintains a substantial patent portfolio relevant to its products, which is intended to create a competitive advantage[63]. Strategic Acquisitions and Growth - The company has made several strategic acquisitions, including Astria Semiconductor Holdings, Cascade Microtech, and FRT GmbH, enhancing its market position and product offerings[15]. - Future acquisitions may strain resources and lead to ownership dilution, with integration challenges potentially affecting financial results[135]. - The company recorded significant goodwill and intangible assets from acquisitions, which may require impairment charges against earnings if their value declines[136][137]. Operational Risks and Challenges - The company faces risks from reliance on sole or limited source suppliers, which could lead to production delays and increased costs[103]. - The company lacks sufficient backlog of unfilled orders, making revenues difficult to forecast and dependent on customer orders received in the quarter[94]. - The company is exposed to risks from sole or limited source suppliers, which may disrupt operations and affect the supply of materials[114]. - The company faces significant risks from health crises, such as COVID-19, which have already negatively impacted operations and supply chains[111]. Financial Management and Capital Structure - The company repurchased a total of 365,479 shares of common stock in the fourth quarter of fiscal 2022, with an average price paid of 21.4 million, which will expire in May 2024[155]. - Cash and cash equivalents and marketable securities totaled approximately 276.1 million at December 25, 2021[210]. Market Conditions and Economic Factors - The semiconductor industry is characterized by cyclicality, with significant downturns impacting operating results, as seen in the second half of fiscal 2022 with a decline in demand for foundry & logic and DRAM products[93]. - The company has experienced increased costs due to inflation, particularly in labor, materials, and transportation, which may adversely affect profitability[117]. - Increased tariffs and trade barriers, particularly between the U.S. and China, may negatively affect future sales and operating results[124]. Corporate Governance and Compliance - The company has implemented robust workplace health and safety programs, particularly in response to the COVID-19 pandemic, to maintain high standards of employee protection[73]. - The company is subject to various environmental laws and regulations, which could lead to significant fines and liabilities if compliance is not maintained[131]. - Effective internal controls are necessary for reliable financial reporting; failures could harm the company's reputation and stock price[138].