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FORMFACTOR INC

FORMFACTOR INCFORMEarnings & Financial Report

Nasdaq

Formfactor, Inc. is a provider of test and measurement technologies for integrated circuits, with its headquarters in Livermore, California. It provides semiconductor companies with products to improve device performance and provide test and measurement technologies for integrated circuits.

What changed in FORMFACTOR INC's 10-K — 2023 vs 2024

Top changes in FORMFACTOR INC's 2024 10-K

195 paragraphs added · 203 removed · 164 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

44 edited+8 added−10 removed45 unchanged
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 information from a variety of semiconductor and electro-optical devices and integrated circuits from early research, through development, to high-volume production.
We provide a broad range of high-performance probe cards, analytical probes, probe stations, thermal systems, and cryogenic systems to both semiconductor companies and scientific institutions. Our products provide electrical and optical information from a variety of semiconductor and electro-optical devices and integrated circuits from early research, through development, to high-volume production.
We design our probe systems for semiconductor design engineers to capture and analyze more accurate data in a shorter amount of time and to be able to control and manage testing at temperatures from near absolute zero to hundreds of degrees centigrade.
We design our probe systems for semiconductor development engineers to capture and analyze more accurate data in a shorter amount of time and to be able to control and manage testing at temperatures from near absolute zero to hundreds of degrees centigrade.
Intellectual Property Our success depends in part upon our ability to continue to innovate and invest in research and development to meet the test and measurement requirements of our customers, to maintain and protect our proprietary technology, and to conduct our business 9 without infringing on the proprietary rights of others.
Intellectual Property Our success depends in part upon our ability to continue to innovate and invest in research and development to meet the test and measurement requirements of our customers, to maintain and protect our proprietary technology, and to conduct our business without infringing on the proprietary rights of others.
Competition The markets for our products are highly competitive, and we anticipate that these markets will continually evolve and be subject to rapid technological change. Our current and potential competitors are as below: 8 Probe Cards.
Competition The markets for our products are highly competitive, and we anticipate that these markets will continually evolve and be subject to rapid technological change. Our current and potential competitors are as below: Probe Cards.
For many advanced applications, our products must maintain tens of thousands of simultaneous high-fidelity low-impedance electrical contacts with the corresponding chip contacts on the wafer. Our present technologies enable probe cards with over 100,000 contact elements with spacings as small as 40 microns over geometries as large as an entire 300mm wafer.
For many advanced applications, our products must maintain tens of thousands of simultaneous high-fidelity low-impedance electrical contacts with the corresponding chip contacts on the wafer. Our present technologies enable probe cards with over 150,000 contact elements with spacings as small as 40 microns over geometries as large as an entire 300mm wafer.
We regularly assess and evaluate alternative sources of supply for all components and materials. Our primary manufacturing facilities are located in Livermore, Carlsbad, and Baldwin Park, California; Beaverton, Oregon; Boulder, Colorado; and Woburn, Massachusetts, all in the United States; and in Thiendorf and Munich, Germany. We also have smaller manufacturing operations in Suzhou, China and Yokohama, Japan.
We regularly assess and evaluate alternative sources of supply for all components and materials. Our primary manufacturing facilities are located in Livermore, Carlsbad, and Baldwin Park, California; Beaverton, Oregon; Boulder, Colorado; and Woburn, Massachusetts, all in the United States; and in Thiendorf and Munich, Germany. We also have smaller manufacturing operations in Yokohama, Japan.
Nearly all of our manufacturing employees are located in California, Oregon and Germany, where workplace safety and labor regulations support maintaining high standards of employee protection. 10 For our manufacturing activities, the speed at which we can recruit, train and deploy quality new and replacement personnel is an important part of our ability to ramp up and maintain our production capacity.
Nearly all of our manufacturing employees are located in California, Oregon and Germany, where workplace safety and labor regulations support maintaining high standards of employee protection. For our manufacturing activities, the speed at which we can recruit, train and deploy skilled new and replacement personnel is an important part of our ability to ramp up and maintain our production capacity.
Manufacturing Our probe cards are designed for each of our customers' unique designs, by modifying and adapting our product architectures to meet an individual customer’s chip layout and test requirements.
Manufacturing Our probe cards are designed for each of our customers' unique chip design, by modifying and adapting our product architectures to meet an individual customer’s chip layout and test requirements.
Our training initiatives promote the continuous improvement of our workforce to keep pace with an increasingly complex business and industry, and are designed to foster skills development and compliance and promote our company values.
Our learning and development initiatives promote the continuous improvement of our workforce to keep pace with an increasingly complex business and industry and are designed to foster skills development and compliance and promote our company values.
Item 1: Business General FormFactor, Inc. 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.
Item 1: Business General FormFactor, Inc. is a leading provider of electrical and optical test and measurement technologies along the full semiconductor product lifecycle - from characterization, modeling, reliability, and design de-bug, to qualification and production test.
We believe that we comply in all material respects with the environmental laws and regulations that apply to us as of December 30, 2023. There are no matters pending that we currently believe are reasonably possible of having a material impact to our business, consolidated financial condition, results of operations or cash flows.
We believe that we comply in all material respects with the environmental laws and regulations that apply to us as of December 28, 2024. There are no matters pending that we currently believe are reasonably possible of having a material impact to our business, consolidated financial condition, results of operations or cash flows.
These include advanced cryogenic probe systems to test complete wafers or singulated die, as well as Dilution Refrigerator (DR) and Adiabatic Demagnetization Refrigerator (ADR) cryostats used in various applications at temperatures close to absolute zero, including quantum and superconducting computing applications, astronomy, and other situations where cryogenic temperature management is required.
These include advanced cryogenic probe systems to test complete wafers or singulated die, as well as dilution refrigerator cryostats used in various applications at temperatures close to absolute zero, including quantum and superconducting computing applications, astronomy, and other situations where cryogenic temperature management is required.
Approximately 14% of our fiscal 2023 revenue and 22% of our fiscal 2022 revenue was derived from sales to customers in China, which were subject to the expanded export license requirements imposed by the United States government.
Approximately 14% of our fiscal 2024 revenue and 14% of our fiscal 2023 revenue was derived from sales to customers in China, which were subject to the expanded export license requirements imposed by the United States government.
In the market for thermal subsystems, we compete principally against ERS Electronic GmbH, Espec Corp, and Temptronic Corporation. In addition, many of our probe station competitors develop and produce their own thermal subsystems for use in their products. We believe the primary competitive factors in this market are thermal performance, reliability, flexibility and completeness of product offerings.
In the market for thermal subsystems, we compete principally against AEM Singapore Pte., ERS Electronic GmbH, and Temptronic Corporation. In addition, many of our probe station competitors develop and produce their own thermal subsystems for use in their products. We believe the primary competitive factors in this market are thermal performance, reliability, flexibility and completeness of product offerings.
As of December 30, 2023, 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.
As of December 28, 2024, 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, thermal systems and cryogenic systems are included in the Systems segment.
Our proprietary manufacturing processes for our probe cards include a complex interconnection system-level design process; a front-end process, which may include wire bonding, photolithography, plating and metallurgical processes, dry and electro-deposition, and pick and place assembly; and a back-end process, which includes general assembly and test.
The manufacturing process includes a complex interconnection system-level design process; a front-end process, which may include wire bonding, photolithography, plating and metallurgical processes, dry and electro-deposition, and pick and place assembly; and a back-end process, which includes general assembly and test.
We offer probe cards to test a variety of semiconductor device types, including systems on a chip (SoCs), mobile application processors, microprocessors, quantum processors, microcontrollers, graphic processors, radio frequency, analog, mixed signal, image sensors, electro-optical, DRAM memory (including high-bandwidth memory, or “HBM”), NAND flash memory, NOR flash memory, and quantum computer processor devices.
We offer probe cards to test a variety of semiconductor device types, including systems on a chip (SoCs), mobile application processors, microprocessors, microcontrollers, graphic processors, network and digital signal processing integrated circuits (ICs), radio frequency amplifiers, filters and antenna in package devices, analog, mixed signal, image sensors, electro-optical, DRAM memory (including high-bandwidth memory, or “HBM”), NAND flash memory, NOR flash memory, and quantum computer processor devices.
Our primary competitors are AMST Co., Ltd., Chungwa Precision Technology, Feinmetall GmbH, Japan Electronic Materials Corporation, Korea Instrument Co., Ltd., M2N Co., Ltd., Microfriend Inc., Micronics Japan Co., Ltd., MPI Corporation, Micro Square Technology Inc., NHK Spring Co., Ltd., Soulbrain Engineering, Nidec SV TCL, Synergie CAD, TechnoProbe S.p.A, TSE Co., Ltd., WinWay Technology Co., Ltd., WILL-Technology Co., Ltd., and Yokowo, among others.
Our primary competitors are Chungwa Precision Technology, Feinmetall GmbH, Japan Electronic Materials Corporation, Korea Instrument Co., Ltd., Microfriend Inc., Micronics Japan Co., Ltd., MPI Corporation, Soulbrain Engineering, STAr Technologies, Inc., Max One, Nidec SV TCL, Synergie CAD, Technoprobe S.p.A, TSE Co., Ltd., WinWay Technology Co., Ltd., WILL-Technology Co., Ltd., and Yokowo, among others.
We have generated, and continue to generate and maintain, patents and other intellectual property rights covering innovations that are intended to create a competitive advantage, and to support the protection of our investments in research and development. We believe that we possess one of the most substantial patent portfolios relevant to our products.
We have generated, and continue to generate and maintain, patents and other intellectual property rights covering innovations that are intended to create a competitive advantage, and to support the protection of our investments in research and development.
On an annual basis, we conduct a talent review process with our Chief Executive Officer and leaders of our business units and functions that is focused on performance, potential, diversity, and succession for critical roles. Our commitment to diversity and inclusion is a significant part of our people development programs.
On an annual basis, we conduct a talent review process with our Chief Executive Officer and leaders of our business units and functions that is focused on performance, potential, and succession for critical roles.
Although we believe that our patents and other intellectual property rights have significant value for each of our segments, we do not believe that maintaining or growing our business is materially dependent on any single patent.
We believe that we possess one of the most substantial patent portfolios relevant to our products. 9 Although we believe that our patents and other intellectual property rights have significant value for each of our segments, we do not believe that maintaining or growing our business is materially dependent on any single patent.
Products We design, manufacture and sell multiple product lines, including probe cards, analytical probes, probe stations, metrology systems, thermal systems, cryogenic systems, and related services. On November 1, 2023, we completed the sale of our FRT Metrology business. Probe Cards. Our probe cards utilize a variety of technologies and product architectures, including micro-electromechanical systems (MEMS) technologies.
Products We design, manufacture and sell multiple product lines, including probe cards, analytical probes, probe stations, thermal systems, cryogenic systems, and related services. Probe Cards. Our probe cards utilize a variety of technologies and product architectures, including micro-electromechanical systems (MEMS) technologies.
We engage sales representatives to act as independent third parties that agree to promote our products, at our prices and on terms set by us, in return for a commission based on sales.
We also have a network of representatives and distributors across the globe to broaden our reach. We engage sales representatives to act as independent third parties that agree to promote our products, at our prices and on terms set by us, in return for a commission based on sales.
In addition, restrictions on immigration and skilled-worker visas in a variety of jurisdictions impacts the ease and flexibility with which we can develop these resources. As of December 30, 2023, we had 2,115 regular full-time employees, including 1,225 in operations, 425 in research and development, 276 in sales and marketing and 189 in general and administrative functions.
In addition, restrictions on immigration and skilled-worker visas in a variety of jurisdictions impacts the ease and flexibility with which we can develop these resources. 10 As of December 28, 2024, we had 2,238 regular full-time employees, including 1,352 in operations, 424 in research and development, 268 in sales and marketing and 194 in general and administrative functions.
We assist our customers in the selection, integration and use of our products through application engineering support. We also provide worldwide on-site probe card maintenance and service training, seminars and telephone support. In certain geographic regions, and for selected products, our manufacturers’ representatives and distributors provide additional service and support.
We also provide worldwide on-site probe card maintenance and service training, seminars and telephone support. In certain geographic regions, and for selected products, our manufacturers’ representatives and distributors provide additional service and support.
We believe that the primary competitive factors in the production probe card market depend upon the type of integrated circuit being tested, and include customer service, knowledge of measurement techniques, delivery time, price, probe card lifetime, chip damage prevention, probe tip touch-down accuracy, electrical signal speed and current carrying capability of the probe card, number of chips contacted in parallel, number of probe tips and their layout and pitch, signal integrity, and frequency and effectiveness of any required cleaning.
These factors include customer service, knowledge of measurement techniques, custom design success, delivery time, price, probe card lifetime, chip damage prevention, probe tip touch-down accuracy, electrical signal speed and current carrying capability, number of chips contacted in parallel, number of probe tips and their layout and pitch, signal integrity, and the frequency and effectiveness of any required cleaning.
The following customers represented 10% or more of our quarterly revenues for the quarters indicated: Fiscal Quarters Ended Dec. 30, 2023 Sep. 30, 2023 Jul. 1, 2023 Apr. 1, 2023 Dec. 31, 2022 Sep. 24, 2022 Jun. 25, 2022 Mar. 26, 2022 Intel Corporation 16.7 % 17.1 % 14.2 % 20.0 % 16.5 % 17.0 % 20.9 % 20.8 % SK hynix Inc. 10.7 % * * * * 10.7 % * * Samsung Electronics Co., LTD. * 11.2 % * * * * * * Taiwan Semiconductor Manufacturing Co., LTD. * * * * * * * 10.7 % 27.4 % 28.3 % 14.2 % 20.0 % 16.5 % 27.7 % 20.9 % 31.5 % * Less than 10% of revenues.
The following customers represented 10% or more of our quarterly revenues for the quarters indicated: Fiscal Quarters Ended Dec. 28, 2024 Sep. 28, 2024 Jun. 29, 2024 Mar. 30, 2024 Dec. 30, 2023 Sep. 30, 2023 Jul. 1, 2023 Apr. 1, 2023 SK hynix Inc. 22.0 % 18.1 % 19.5 % 15.5 % 10.7 % * * * Intel Corporation * 17.1 % 16.7 % 15.7 % 16.7 % 17.1 % 14.2 % 20.0 % Samsung Electronics Co., LTD. * * * 12.4 % * 11.2 % * * 22.0 % 35.2 % 36.2 % 43.6 % 27.4 % 28.3 % 14.2 % 20.0 % * Less than 10% of revenues.
By region, 1,469 of our employees were in North America, 391 in Asia, and 255 in Europe. As of December 30, 2023, our Probe Cards Segment had 1,565 regular full-time employees, our Systems Segment had 362 regular full-time employees, plus we had 188 regular full-time employees in corporate functions. Available Information We maintain a website at http://www.formfactor.com .
By region, 1,663 of our employees were in North America, 314 in Asia, and 261 in Europe. As of December 28, 2024, our Probe Cards Segment had 1,674 regular full-time employees, our Systems Segment had 372 regular full-time employees, plus we had 192 regular full-time employees in corporate functions. Available Information We maintain a website at http://www.formfactor.com .
Our thermal subsystems include thermal chucks and other test systems used in probe stations and other applications where precise temperature management is required. Thermal chuck systems enable the testing of devices at precise temperatures or across a range of temperatures. These systems are both marketed externally and allow for vertical integration with our probe stations. Cryogenic Systems.
Thermal chuck systems enable the testing of devices at precise temperatures or across a range of temperatures. These systems are both marketed externally and allow for vertical integration with our probe stations. Cryogenic Systems. Our cryogenic systems include the manufacture of precision cryogenic instruments and semiconductor test and measurement systems.
Analytical Probes. Our primary competitors in the analytical probe market are GGB Industries Inc. and MPI Corporation. We believe that the primary competitive factors in this market are breadth of probe types, probe frequency and electrical signal integrity, contact integrity and the related cleaning required, knowledge of measurement techniques, calibration support, delivery time and price.
We believe that the primary competitive factors in this market are breadth of probe types, probe frequency and electrical signal integrity, contact integrity and the related cleaning required, knowledge of measurement techniques, calibration support, delivery time and price. We believe that we compete favorably with respect to these factors. Probe Stations.
We believe that we compete favorably with respect to these factors. Cryogenic Systems. In the market for cryogenic systems, we compete principally against Bluefors Oy, Entropy, Leiden Cryogenics B.V., Montana Instruments, Nagase Techno-Engineering Co., Oxford Instruments, and STAR Cryoelectronics. We believe the primary competitive factors in this market are cryogenic performance, reliability, throughput and application expertise.
We believe that we compete favorably with respect to these factors. Cryogenic Systems. In the market for cryogenic systems, we compete principally against Bluefors Oy, Lake Shore Cryotronics, Inc, Maybell Quantum Industries Inc., Montana Instruments, and Oxford Instruments. We believe the primary competitive factors in this market are cryogenic performance, reliability, throughput and application expertise.
Our compensation programs help attract and retain key talent and are designed for our employees to share in our company’s success. These programs focus on compensation that we believe is market-competitive, reflects company performance, and aligns with drivers of stockholder value with differentiation based on performance, skills, geographic location, and tenure.
These programs focus on compensation that we believe is market-competitive, reflects company performance, and aligns with drivers of stockholder value with differentiation based on performance, skills, geographic location, and tenure.
The high capital investment and other costs associated with the development of MEMS probe cards and the time and high cost of the customer evaluation process represent significant barriers to entry for this type of technology.
The high capital investment and other costs associated with the 8 development of MEMS probe cards and the time and high cost of the customer evaluation process represent significant barriers to entry for this type of technology. We believe that the primary competitive factors in the production probe card market depend upon the type of integrated circuit being tested.
For example, our probe card products require that we develop custom designs for our customers’ new product designs. We face strong competition from companies in a variety of technology fields to secure the engineering talent that we require.
We face strong competition from companies in a variety of technology fields to secure the engineering talent that we require.
We offer pre-configured and customized measurement systems for production testing, power device characterization, vacuum probing, cryogenic probing, high-pressure probing, photonics testing, and a variety of other specific applications. Metrology Systems. Until the sale of FRT in November 2023, we offered surface metrology systems for various applications including the development, production and quality control of semiconductor products.
We offer pre-configured and customized measurement systems for production testing, power device characterization, vacuum probing, cryogenic probing, high-pressure probing, photonics testing, and a variety of other specific applications.
We rely upon both employees and resources from staffing firms to meet our needs for direct labor. Speed, accuracy and agility in this process is important to our business. Similarly, it is important to our business that we are able to regularly recruit and train quality new and replacement design and engineering staff.
We rely upon both employees and resources from staffing firms to meet our manufacturing labor needs. Similarly, it is important to our business that we are able to regularly recruit and train engineering staff. For example, our probe card products require that we develop custom designs for our customers’ new product designs.
Our customers use our products 6 to test nearly all semiconductor device types, including SoCs, mobile application processors, microprocessors, quantum processors, microcontrollers, graphic processors, radio frequency, analog, mixed signal, image sensors, electro-optical, DRAM memory (including HBM), NAND flash memory, NOR flash memory, and quantum computer processor devices.
Our customers use our products to test nearly all semiconductor device types, including SoCs, mobile application processors, microprocessors, microcontrollers, graphic processors, network and digital signal processing integrated circuits (ICs), radio frequency amplifiers, filters and antenna in package devices, analog, mixed signal, image sensors, electro-optical, DRAM memory (including HBM), NAND flash memory, NOR flash memory, and quantum computer processor devices. 6 Fabless semiconductor suppliers do not manufacture their own semiconductors, but they purchase our analytical probes, probe stations, and other System segment products for research and development, and device characterization.
We believe our customers consider timely service and support to be an important aspect of our relationship as our products are critical elements of high-volume manufacturing and design-specific product ramps. Our probe stations are installed at customer sites either by us, our manufacturers’ representatives or our distributors, depending on the complexity of the installation and the customer’s geographic location.
Our probe stations are installed at customer sites either by us, our manufacturers’ representatives or our distributors, depending on the complexity of the installation and the customer’s geographic location. We assist our customers in the selection, integration and use of our products through application engineering support.
We allocate significant resources to these efforts and prioritize those resources to prepare for our customers’ next generation electrical test and measurement challenges. We also increasingly seek to deploy our resources to solve fundamental challenges that are both common to, and provide competitive advantage across, our probe card and system product offerings and roadmaps.
We also increasingly seek to deploy our resources to solve fundamental challenges that are both common to, and provide competitive advantage across, our probe card and system product offerings and roadmaps. Sales and Marketing We sell our products worldwide through a global direct sales force and through a combination of manufacturers’ representatives and distributors.
We maintain repair and service capabilities in Livermore, Carlsbad, and Baldwin Park, California and Beaverton, Oregon, United States; Thiendorf, Dresden and Munich Germany; Bundang, South Korea; Yokohama and Hiroshima, Japan; Suzhou and Shanghai, China; Hsinchu, Taiwan; and Singapore. 7 In February 2024, we entered into an agreement with Grand Junction Semiconductor Pte.
We maintain repair and service capabilities in Livermore, Carlsbad, and Baldwin Park, California and Beaverton, Oregon, United States; Thiendorf, Dresden and Munich Germany; Bundang, South Korea; Yokohama, Japan; Hsinchu, Taiwan; and Singapore. Research, Development and Engineering The semiconductor industry is subject to rapid technological change with a continuous stream of new product introductions and technology enhancements.
They work closely with customers in the effort to understand their businesses, anticipate trends and define products that will provide significant technical and economic advantages to our customers. We employ a highly skilled team of application and customer support engineers that support our customers as they integrate our products into their research, development and manufacturing processes.
We employ a highly skilled team of application and customer support engineers that support our customers as they integrate our products into their research, development and manufacturing processes. Through these customer relationships, we seek to develop a strong understanding of customer and product requirements to align our capabilities with our customers’ roadmaps and production ramps.
We believe that we compete favorably with respect to these factors. Probe Stations. Our primary competitors in the probe station market are HiSOL, Inc., LTD/Accretech, The Micromanipulator Company Inc., MPI Corporation, Semiprobe, Signatone Corporation, Tokyo Electron (“TEL”), Tokyo Seimitsu Co., and Wentworth Laboratories Inc.
Our primary competitors in the probe station market are MPI Corporation, Shenzhen Senmeixieer Technology Co., Ltd (“Semishare”), STAr Technologies, Inc., Tokyo Electron Limited (“TEL”), and Wentworth Laboratories, Inc.
Research, Development and Engineering The semiconductor industry is subject to rapid technological change with a continuous stream of new product introductions and technology enhancements. We believe that our continued commitment to research and development and our timely introduction of new and enhanced products and technologies are integral to maintaining and enhancing our competitive position.
We believe that our continued commitment to research and development and our timely introduction of new and enhanced products and technologies are integral to maintaining and enhancing our competitive position. We allocate 7 significant resources to these efforts and prioritize those resources to prepare for our customers’ next generation electrical test and measurement challenges.
Sales and Marketing We sell our products worldwide through a global direct sales force and through a combination of manufacturers’ representatives and distributors. Our direct sales and marketing staff is located in the United States, China (pending the close of the China Transaction), France, Germany, Italy, United Kingdom, Japan, Singapore, South Korea, and Taiwan.
Our direct sales and marketing staff is located in the United States, France, Germany, Italy, United Kingdom, Japan, Singapore, South Korea, and Taiwan. They work closely with customers in the effort to understand their businesses, anticipate trends and define products that will provide significant technical and economic advantages to our customers.
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With resolution down to nanometer scales, these systems measured topography, structure, step height, roughness, wear, thickness variation, film thickness and other parameters. The modular architecture of the systems allowed for the sensor configuration to be customized for the application while leveraging a common platform.
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We are in the early stages of collaborating with certain customers to transition from the lab to the fab with co-packaged optics, which is poised to revolutionize chip-to-chip communication in the data center by significantly reducing power consumption at high data rates.
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These systems integrated hybrid metrology capabilities and proprietary software to enable non-destructive and rapid measurement of multiple features and parameters simultaneously, which had multiple applications but is particularly useful in the growing space of advanced packaging, Silicon Carbide (SiC) power, Silicon Photonics, and MEMS applications. Thermal Subsystems.
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As silicon photonics matures and moves to high-volume-production in the coming years, we expect that our leadership positions in combined electrical and optical test will provide new growth. Thermal Subsystems. Our thermal subsystems include thermal chucks and other test systems used in probe stations and other applications where precise temperature management is required.
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Our cryogenic systems include the manufacture of precision cryogenic instruments and semiconductor test and measurement systems.
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They also purchase, or direct their foundries or wafer test facilities to purchase, our probe cards to test wafers manufactured for them. We believe our customers consider timely service and support to be an important aspect of our relationship as our products are critical elements of high-volume manufacturing and design-specific product ramps.
Removed
Fabless semiconductor suppliers do not manufacture their own semiconductors, but they purchase our analytical probes, probe stations, and other System segment products for research and development, and device characterization. They also purchase, or direct their foundries or wafer test facilities to purchase, our probe cards to test wafers manufactured for them.
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We believe that this high-frequency capability also enables us to compete favorably in high bandwidth memory (“HBM”) testing, which is a stack of eight, twelve, or even sixteen individual DRAM die assembled with advanced packaging processes like through-silcon-vias and thermo-compression bonding. Analytical Probes. Our primary competitors in the analytical probe market are GGB Industries Inc. and MPI Corporation.
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Ltd. to divest our operations in China and establish an exclusive distribution and partnership agreement to continue sales and support of our products in the region (the “China Transaction”). The China Transaction is expected to close in the first half of 2024.
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Our People We are committed to a set of core values that define our company culture, represent what we believe, and guide our actions. We cultivate our culture through our people development programs that enhance talent acquisition, retention, and employee engagement.
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Through these customer relationships, we seek to develop a strong understanding of customer and product requirements to align our capabilities with our customers’ roadmaps and production ramps. We also have a network of representatives and distributors across the globe to broaden our reach.
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These initiatives include thoughtfully designed compensation programs across all levels, learning and development opportunities, diversity and inclusion programs, and various other initiatives. Our compensation programs help attract and retain key talent and are designed for our employees to share in our company’s success.
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The revenue derived from large multinational customers with a presence in China represented 5% of fiscal 2023 revenue, with the remaining 9% representing regional customers in China. As noted above, we have entered into an agreement to divest our China operations, which is expected to close in the first half of 2024.
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We are continuing to build and sustain a culture of diversity and inclusion where our people can be their authentic selves and are encouraged to reach their full potential. As a global technology company, we believe that a diverse employee population makes FormFactor stronger, more innovative, and a more engaging place to work.
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Our People We believe that each employee contributes to our culture of integrity, innovation, and teamwork. We reinforce this culture through our people development programs that drive talent acquisition, retention and employee engagement. These programs include carefully designed compensation programs across all levels, a variety of training, diversity and inclusion programs, and other initiatives.
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We are always striving to attract talented individuals from a global candidate pool. We are committed to providing a safe and healthy workplace for all employees. Our workplace health and safety programs include policies, procedures, training programs, and self-audits.
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We believe that the recruitment, retention and promotion of a balanced workforce is an important driver of company performance. We support these values through sponsored events, networking groups, and management objectives. As an equal opportunity employer, we develop and implement an annual and targeted affirmative action plan.
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We also inspire employee engagement through our commitment to corporate social responsibility, including in defined focus areas of sustainable technology, health and safety, labor and human rights, energy and climate change, supply chain responsibility, and waste and chemical management. Our workplace health and safety programs include policies, procedures, training programs, and self-audits.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

47 edited+4 added−4 removed124 unchanged
Any errors or defects could: 14 • cause lower than anticipated yields and lengthen delivery schedules; • cause delays in product shipments; • cause delays in new product introductions; • cause us to incur warranty expenses; • result in increased costs and diversion of development resources; • cause us to incur increased charges due to unusable inventory; • require design modifications; • have implications for timing of revenue recognition and associated costs; or • decrease market acceptance or customer satisfaction with these products.
Any errors or defects could: • cause lower than anticipated yields and lengthen delivery schedules; • cause delays in product shipments; • cause delays in new product introductions; • cause us to incur warranty expenses; • result in increased costs and diversion of development resources; • cause us to incur increased charges due to unusable inventory; • require design modifications; • have implications for timing of revenue recognition and associated costs; or 14 • decrease market acceptance or customer satisfaction with these products.
Factors affecting the trading price of our common stock could include: • variations in our operating results; • our forecasts and financial guidance for future periods; • announcements of technological innovations, new products or product enhancements, new product adoptions at semiconductor customers or significant agreements by us or by our competitors; • reports regarding our ability to bring new products into volume production efficiently; • the gain or loss of significant orders or customers; • changes in the estimates of our operating results or changes in recommendations by any securities analysts that elect to follow our common stock; • rulings on litigation and proceedings; • seasonality, principally due to our customers' purchasing cycles; • market and competitive conditions in our industry, the entire semiconductor industry and the economy as a whole; • recruitment or departure of key personnel; 20 • announcements of mergers and acquisition transactions and the ability to successfully integrate the business activities of the acquired/merged company; and • political and global economic instability, including as a result of trade barriers, natural disasters, epidemics and pandemics, military conflicts, climate change, and other factors acting alone or in combination.
Factors affecting the trading price of our common stock could include: • variations in our operating results; • our forecasts and financial guidance for future periods; • announcements of technological innovations, new products or product enhancements, new product adoptions at semiconductor customers or significant agreements by us or by our competitors; • reports regarding our ability to bring new products into volume production efficiently; • the gain or loss of significant orders or customers; • changes in the estimates of our operating results or changes in recommendations by any securities analysts that elect to follow our common stock; • rulings on litigation and proceedings; 20 • seasonality, principally due to our customers' purchasing cycles; • market and competitive conditions in our industry, the entire semiconductor industry and the economy as a whole; • recruitment or departure of key personnel; • announcements of mergers and acquisition transactions and the ability to successfully integrate the business activities of the acquired/merged company; and • political and global economic instability, including as a result of trade barriers, natural disasters, epidemics and pandemics, military conflicts, climate change, and other factors acting alone or in combination.
Successful product design, development and introduction on a timely basis require that we: • collaborate with customers to understand their future requirements; • design innovative and performance-enhancing product architectures, technologies and features that differentiate our products from those of our competitors; • in some cases, engage with third parties who have particular expertise in order to complete one or more aspects of the design and manufacturing process; • qualify with customers new products, or an existing product incorporating new technology; • transition our products to new manufacturing technologies, as necessary; • offer our products for sale at competitive price levels while maintaining our gross margins within our financial model; • identify emerging technological trends in our target markets; • maintain effective marketing strategies; • obtain and maintain intellectual property rights where necessary; • hire and retain high performing engineering personnel; • respond effectively to technological changes or product announcements by others; and • adjust to changing market conditions quickly and cost-effectively.
Successful product design, development and introduction on a timely basis require that we: 11 • collaborate with customers to understand their future requirements; • design innovative and performance-enhancing product architectures, technologies and features that differentiate our products from those of our competitors; • in some cases, engage with third parties who have particular expertise in order to complete one or more aspects of the design and manufacturing process; • qualify with customers new products, or an existing product incorporating new technology; • transition our products to new manufacturing technologies, as necessary; • offer our products for sale at competitive price levels while maintaining our gross margins within our financial model; • identify emerging technological trends in our target markets; • maintain effective marketing strategies; • obtain and maintain intellectual property rights where necessary; • hire and retain high performing engineering personnel; • respond effectively to technological changes or product announcements by others; and • adjust to changing market conditions quickly and cost-effectively.
During industry downturns, semiconductor manufacturers sharply curtail their spending, including their spending on our products, which may adversely impact our revenues, gross margins and results of operations. Further, a 13 protracted downturn could cause one or more of our customers to become insolvent, resulting in a loss of revenue and impacting our ability to collect on accounts receivable.
During industry downturns, semiconductor manufacturers sharply curtail their spending, including their spending on our products, which may adversely impact our revenues, gross margins and results of operations. Further, a protracted downturn could cause one or more of our customers to become insolvent, resulting in a loss of revenue and impacting our ability to collect on accounts receivable.
Our efforts to mitigate the effects on us from interruptions in the availability of electric power, or other infrastructure, may not adequately prevent materially negative impacts on our operations, and in turn our financial results. Climate change, or legal, regulatory or market measures to address climate change, may negatively affect our business and operations.
Our efforts to mitigate the effects on us from interruptions in the 15 availability of electric power, or other infrastructure, may not adequately prevent materially negative impacts on our operations, and in turn our financial results. Climate change, or legal, regulatory or market measures to address climate change, may negatively affect our business and operations.
We have generally been able to offset increases in these costs through various productivity improvement and cost reduction initiatives, as well as by adjusting our selling prices to pass through some of these higher costs to our customers; however, our ability to raise our selling prices depends on market conditions and 16 competitive dynamics.
We have generally been able to offset increases in these costs through various productivity improvement and cost reduction initiatives, as well as by adjusting our selling prices to pass through some of these higher costs to our customers; however, our ability to raise our selling prices depends on market conditions and competitive dynamics.
We derive the majority of our revenues from the sale of our probe card products, primarily to manufacturers of microprocessors, foundry & logic and memory devices, despite progress in diversifying our product offerings. We anticipate that sales of probe cards will represent a substantial majority of our revenues for the foreseeable future.
We derive the majority of our revenues from the sale of our probe card products, primarily to manufacturers of foundry & logic and memory devices, despite progress in diversifying our product offerings. We anticipate that sales of probe cards will represent a substantial majority of our revenues for the foreseeable future.
For example, China has restricted U.S. access to certain minerals and has blocked certain companies that provide products to Taiwan's military from selling products in China. Also, in China, we are already observing stronger preferences for non-U.S. suppliers in general, and in favor of new and existing local suppliers in particular.
For example, China has restricted U.S. access to certain minerals and has blocked certain companies that provide products to Taiwan's military from selling products in China. Also, in China, we are observing stronger preferences for non-U.S. suppliers in general, and in favor of new and existing local suppliers in particular.
Our future growth depends, in significant part, upon our ability to work effectively with and anticipate the future technical and operational needs of our customers and to develop and support new 11 products and product enhancements to meet those needs on a timely and cost-effective basis.
Our future growth depends, in significant part, upon our ability to work effectively with and anticipate the future technical and operational needs of our customers and to develop and support new products and product enhancements to meet those needs on a timely and cost-effective basis.
Because our expense levels are based in part on our expectations as to future revenues and to a large extent are fixed in the short term, we might be unable to adjust spending in time to compensate for any unexpected shortfall in revenues.
Because our expense levels are based in part on 13 our expectations as to future revenues and to a large extent are fixed in the short term, we might be unable to adjust spending in time to compensate for any unexpected shortfall in revenues.
Our customers’ needs are becoming more challenging as the semiconductor industry continues to experience rapid technological change driven by the demand for complex circuits that are shrinking in size, are increasing in speed and functionality, and are produced on shorter cycle times and at reduced unit cost.
Our customers’ needs are becoming more challenging as the semiconductor industry continues to experience rapid technological change driven by the demand for complex circuits that are shrinking in size, are increasing in speed and functionality, have more complex layouts, and are produced on shorter cycle times and at reduced unit cost.
For example, the COVID-19 pandemic has shown the extent to which new pathogens are capable of disrupting business operations and economic activity locally and worldwide. Health crises can severely disrupt global supply chains, including for parts and materials that we use to manufacture our products, and affect economic conditions in the markets for our products.
For example, the COVID-19 pandemic showed the extent to which new pathogens are capable of disrupting business operations and economic activity locally and worldwide. Health crises can severely disrupt global supply chains, including for parts and materials that we use to manufacture our products, and affect economic conditions in the markets for our products.
Cancellations, reductions, deferrals or non-payment of invoices could result from downturns in the semiconductor industry, including the cyclical downturn we are now experiencing, manufacturing delays, quality or reliability issues with our products, or from interruptions to our customers’ operations due to fire, natural disasters or other events, or other issues with the financial stability of our customers.
Cancellations, reductions, deferrals or non-payment of invoices could result from downturns in the semiconductor industry, including the cyclical downturn we have been experiencing, manufacturing delays, quality or reliability issues with our products, or from interruptions to our customers’ operations due to fire, natural disasters or other events, or other issues with the financial stability of our customers.
This could be exacerbated by certain events outside the control of either the supplier or us, such as global, regional or national health crises, armed conflicts, regional tensions or other adverse global, regional and national events. The occurrence of any of these risks could adversely impact our business, results of operations and financial condition.
This could be exacerbated by certain events outside the control of either the supplier or us, such as global, regional or national health crises, armed conflicts, increased tariffs and trade barriers, regional tensions or other adverse global, regional and national events. The occurrence of any of these risks could adversely impact our business, results of operations and financial condition.
Our international sales as a percentage of our revenues were 74%, 83% and 84% for fiscal 2023, 2022 and 2021, respectively. Certain of our non-U.S. based customers also purchase through their subsidiaries in the United States. In the future we expect international sales to continue to account for a significant percentage of our revenues.
Our international sales as a percentage of our revenues were 76%, 74% and 83% for fiscal 2024, 2023 and 2022, respectively. Certain of our non-U.S. based customers also purchase through their subsidiaries in the United States. In the future we expect international sales to continue to account for a significant percentage of our revenues.
Global economic stability can be negatively affected by a variety of factors and interrelationships, including the impacts of epidemics and pandemics, military conflicts or regional tensions, climate change, trade barriers (such as the U.S.-China trade restrictions implemented since fiscal 2022) and other factors acting alone or in combination.
Global economic stability can be negatively affected by a variety of factors and interrelationships, including the impacts of epidemics and pandemics, military conflicts or regional tensions, climate change, trade tensions, barriers and conflicts (such as the U.S.-China trade restrictions implemented since fiscal 2022 and those proposed to be implemented by the new U.S. presidential administration) and other factors acting alone or in combination.
These provisions: • establish a transition from a classified board of directors to a declassified board of directors, such that, until the annual shareholder meeting in 2024, not all members of our board are elected at one time; • provide that directors may only be removed “for cause” and only with the approval of 66.7% of our stockholders; • require super-majority voting to amend some provisions in our certificate of incorporation and bylaws; • authorize the issuance of “blank check” preferred stock that our board could issue to increase the number of outstanding shares and to discourage a takeover attempt; • limit the ability of our stockholders to call special meetings of stockholders; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and • establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at stockholder meetings.
These provisions: • provide that directors may only be removed with the approval of 66.7% of our stockholders; • require super-majority voting to amend some provisions in our certificate of incorporation and bylaws; • authorize the issuance of “blank check” preferred stock that our board could issue to increase the number of outstanding shares and to discourage a takeover attempt; • limit the ability of our stockholders to call special meetings of stockholders; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and • establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at stockholder meetings.
Geopolitical and trade tensions between the United States and China, one of our largest markets, have led to increased tariffs and trade restrictions and have affected customer ordering patterns, and this dynamic between the countries may persist or increase for the foreseeable future. For example, the U.S.
Geopolitical and trade tensions between the United States and China, one of our largest markets, have led to increased tariffs and trade restrictions and have affected customer ordering patterns, and this dynamic between the countries may persist or increase for the foreseeable future. For example, the U.S. Department of Commerce, Bureau of Industry and Security (“BIS”), has amended the U.S.
A relatively small number of customers account for a significant portion of our revenues. One customer represented 17.1% of total revenues in fiscal 2023, one customer represented 19.0% of total revenues in fiscal 2022 and two customers represented a combined 31.8% of total revenues in fiscal 2021.
A relatively small number of customers account for a significant portion of our revenues. Two customers represented a combined 33.5% of total revenues in fiscal 2024, one customer represented 17.1% of total revenues in fiscal 2023 and one customer represented 19.0% of total revenues in fiscal 2022.
There has also been consolidation within the semiconductor test equipment market. This consolidation trend could change our interactions and relationships with complementary tester, instrument, and probe card suppliers, and negatively impact our revenue and operating results. Changes in customers’ test strategies, equipment and processes could decrease customer demand for our products.
This consolidation trend could change our interactions and relationships with complementary tester, instrument, and probe card suppliers, and negatively impact our revenue and operating results. Changes in customers’ test strategies, equipment and processes could decrease customer demand for our products.
Any such adverse events may result in global, regional or national economic slowdowns or other economic downturns. Such downturns could curtail or delay spending by businesses and consumers which may ultimately result in reductions in the demand for our products, greater volatility in demand and supply conditions and other adverse impacts.
Such disruption or downturns could curtail or delay spending by businesses and consumers which may ultimately result in reductions in the demand for our products, greater volatility in demand and supply conditions and other adverse impacts.
In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of our company.
In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of our company. Item 1B: Unresolved Staff Comments None.
Furthermore, because our probe cards are custom products designed for our customers’ unique wafer designs, any cancellations, reductions or delays can result in significant non-recoverable costs, including but not limited to the potential for impairment of inventories.
Furthermore, because our probe cards are custom products designed for our customers’ unique wafer designs, any cancellations, reductions or delays can result in significant non-recoverable costs, including but not limited to the potential for impairment of inventories. In some situations, our customers might be able to cancel or reduce orders without a significant penalty.
The circumstances which give rise to epidemics and pandemics from new or existing pathogens with similar impacts are expected to persist indefinitely. 15 Another example of events outside of our control arises from our manufacturing facilities being located in seismically active areas in California and Oregon.
The circumstances which give rise to epidemics and pandemics from new or existing pathogens with similar impacts are expected to persist indefinitely. Another example of events outside of our control arises from our manufacturing facilities being located in seismically active areas in California and Oregon. The manufacturing equipment and processes that we use can be severely disrupted by seismic activity.
The manufacturing equipment and processes that we use can be severely disrupted by seismic activity. A significant seismic event in an area of our operations could have a materially negative impact on our operations, financial results or financial condition. Much of the infrastructure on which we rely for our operations is outside of our control, such as electric power infrastructure.
A significant seismic event in an area of our operations could have a materially negative impact on our operations, financial results or financial condition. Much of the infrastructure on which we rely for our operations is outside of our control, such as electric power infrastructure.
Provisions of our certificate of incorporation and bylaws or Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.
This could have an adverse impact on our business, results of operations and financial condition. Provisions of our certificate of incorporation and bylaws or Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.
This may become more difficult to do as the semiconductor industry innovates to address demand for AI-related products, which may develop more slowly than we anticipate or change from one period to another.
This may become more difficult to do as the semiconductor industry innovates to address demand for AI-related products, which may develop more slowly than we anticipate or change rapidly from one period to another for a variety of reasons, including industry-wide shifts in expectations and technological developments.
During fiscal 2023, our stock price (Nasdaq Global Market close price) ranged from $21.92 per share to $42.01 per share. The trading price of our common stock is likely to continue to be subject to wide fluctuations.
During fiscal 2024, our stock price (Nasdaq Global Select Market close price) ranged from $37.66 per share to $62.22 per share. The trading price of our common stock is likely to continue to be subject to wide fluctuations.
For example, the semiconductor industry has been experiencing a cyclical downturn since the second half of fiscal 2022, which has extended through fiscal 2023, resulting in a significant decline in demand for foundry & logic and DRAM products over the same period.
For example, the semiconductor industry in general experienced a cyclical downturn beginning the second half of fiscal 2022 that extended through at least fiscal 2024, resulting in a significant decline in demand for foundry & logic and DRAM products over the same period.
Many of our customers are large companies that place significant orders with us, and the consequences of deterioration in our relationship with any of these companies could be significant due to the competitiveness of our industry and the significant influence that these companies exert in our market.
Many of our customers are large companies that place significant orders with us, and the consequences of deterioration in our relationship with any of these companies could be significant due to the competitiveness of our industry and the significant influence that these companies exert in our market. 12 Consolidation in the semiconductor industry and within the semiconductor test equipment market could adversely affect the market for our products and negatively impact our ability to compete.
Our acquisitions or investments may subject us to new or heightened risks. Integrating any newly acquired businesses, products or technologies into our company draws upon our resources in ways that can be expensive and time consuming. These activities can substantially affect our financial resources, could cause delays in product delivery and might not be successful.
Our acquisitions or investments may subject us to new or heightened risks. Integrating any newly acquired businesses, products or technologies into our company draws upon our resources in ways that can be expensive and time consuming, particularly when we conduct these activities internationally.
Increasingly restrictive export regulations and other trade barriers may materially harm our business. Sales of our products to customers outside of the United States represent a significant part of our past and anticipated revenues, including sales involving exports from the United States to China.
Sales of our products to customers outside of the United States represent a significant part of our past and anticipated revenues, including sales involving exports from the United States to China.
With consolidation, the number of actual and potential customers for our products has decreased in recent years. Consolidation may lead to relatively fewer opportunities to sell our products if we are not chosen as a supplier by any given prospective customer, and may lead to increased pricing pressures from customers that have greater volume purchasing power.
Consolidation may lead to relatively fewer opportunities to sell our products if we are not chosen as a supplier by any given prospective customer, and may lead to increased pricing pressures from customers that have greater volume purchasing power. There has also been consolidation within the semiconductor test equipment market.
In some situations, our customers might be able to cancel or reduce orders without a significant penalty. 12 If our relationships with our customers deteriorate, our product development activities could be harmed. The success of our product development efforts depends upon our ability to anticipate market trends and to collaborate closely with our customers.
If our relationships with our customers deteriorate, our product development activities could be harmed. The success of our product development efforts depends upon our ability to anticipate market trends and to collaborate closely with our customers.
Investments that we make may not result in a return consistent with our projections upon which such investments are made, or may require additional investment that we did not originally anticipate.
We might not be successful in integrating any acquired businesses, products or technologies, and might not achieve anticipated revenues and cost benefits. Investments that we make may not result in a return consistent with our projections upon which such investments are made, or may require additional investment that we did not originally anticipate.
Acquisitions and investments can divert management’s attention and expose our business to new liabilities or risks associated with entering into new business activities. In addition, we might lose key employees while integrating new organizations. We might not be successful in integrating any acquired businesses, products or technologies, and might not achieve anticipated revenues and cost benefits.
These activities can substantially affect our financial resources, could cause delays in product delivery and might not be successful. Acquisitions and investments can divert management’s attention and expose our business to new liabilities or risks associated with entering into new business activities. In addition, we might lose key employees while integrating new organizations.
There is no assurance that we will obtain any export licenses on a timely basis or at all. There also remains considerable uncertainty regarding the interpretation and implementation of new regulations.
The BIS has also broadened the application of U.S. export controls to certain items which may be subject to Foreign Direct Product Rules (“FDPR”). There is no assurance that we will obtain any export licenses on a timely basis or at all. There also remains considerable uncertainty regarding the interpretation and implementation of new regulations.
In addition, certain of our customer contracts contain provisions that require us to defend or indemnify our customers for third 18 party intellectual property infringement claims, which could increase the costs and negative impacts of intellectual property claims.
In addition, certain of our customer contracts contain provisions that require us to defend or indemnify our customers for third party intellectual property infringement claims, which could increase the costs and negative impacts of intellectual property claims. 18 We have recorded restructuring, inventory write-offs and asset impairment charges in the past, and may do so again in the future, which could have a material negative impact on our business.
We rely on the security and integrity of our electronic data systems, managed both internally and by third parties, for our business requirements, and our business can be damaged by disruptions, security breaches or compromises of these systems.
Given the timing of our actions compared to the timing of these inflationary pressures, there may be periods during which we are unable to fully recover the increases in our costs. 16 We rely on the security and integrity of our electronic data systems, managed both internally and by third parties, for our business requirements, and our business can be damaged by disruptions, security breaches or compromises of these systems.
Significant fluctuations in exchange rates between the U.S. dollar and foreign currencies may adversely affect our revenues and earnings, despite our hedging of a portion of our international currency exposures. Additionally, hedging programs are inherently risky and could expose us to additional costs and risks that could adversely affect our financial condition and results of operations.
We, therefore, face exposure to fluctuations in currency exchange rates. Significant fluctuations in exchange rates between the U.S. dollar and foreign currencies may adversely affect our revenues and earnings, despite our hedging of a portion of our international 17 currency exposures.
Consolidation in the semiconductor industry and within the semiconductor test equipment market could adversely affect the market for our products and negatively impact our ability to compete. Consolidation in the semiconductor industry may reduce our customer base and could adversely affect the market for our products, which could negatively impact our revenues.
Consolidation in the semiconductor industry may reduce our customer base and could adversely affect the market for our products, which could negatively impact our revenues. With consolidation, the number of actual and potential customers for our products has decreased in recent years.
These rules expand export license requirements on a broader set of items from the U.S., including many of our products, and for a broader set of customers in China and elsewhere. The BIS has also broadened the application of U.S. export controls to certain items which may be subject to Foreign Direct Product Rules (“FDPR”).
Export Administration Regulations to expand license requirements on exports to entities in China that may support military end uses. These rules expand export license requirements on a broader set of items from the U.S., including many of our products, and for a broader set of customers in China and elsewhere.
While we report our financial results in U.S. dollars, we incur certain costs in other currencies, and have certain foreign currency denominated assets and liabilities. We, therefore, face 17 exposure to fluctuations in currency exchange rates.
Our international operations are significant to our revenues and net income, and we plan to continue to grow internationally. We have significant business operations located in Germany. While we report our financial results in U.S. dollars, we incur certain costs in other currencies, and have certain foreign currency denominated assets and liabilities.
These events or perceptions may expose us to additional reputational and operational risks. 19 Risks Relating to Our Acquisitions We have made acquisitions, and may make additional acquisitions or investments in the future, which could put a strain on our resources, cause ownership dilution to our stockholders, or adversely affect our financial results.
We have been and may again be subject to negative responses from certain stakeholders regarding our selection of certain goals and our strategic choices regarding related matters due to anti-ESG sentiment, which could negatively impact our reputation, business and financial results. 19 Risks Relating to Our Acquisitions We have made acquisitions and investments, and may make additional acquisitions or investments in the future, which could put a strain on our resources, cause ownership dilution to our stockholders, or adversely affect our financial results.
In fiscal 2023, we observed a continuing trend of increasing risks and challenges in the conduct of our international business activities, including expanded tariffs and other trade barriers affecting the United States and China. Additionally, we are required to comply with foreign import and export requirements, customs and value added tax standards that can be unclear or complex.
In fiscal 2024 and 2023, we observed a continuing trend of increasing risks and challenges in the conduct of our international business activities, including expanded tariffs and other trade barriers affecting the United States and China, and currently there are rising trade tensions and conflicts (including proposed tariffs) between the United States and other countries, such as China.
Our failure to meet these requirements and standards could negatively impact our business operations. Our foreign operations expose us to additional risks relating to currency fluctuations. Our international operations are significant to our revenues and net income, and we plan to continue to grow internationally. We have significant business operations located in Germany.
Additionally, we are required to comply with foreign import and export requirements, customs and value added tax standards that can be unclear or complex. Our failure to meet these requirements and standards could negatively impact our business operations. Our foreign operations expose us to additional risks relating to currency fluctuations.
We may fail, or be perceived to fail, in attaining or maintaining our ESG-related initiatives. The topics on which we focus may not be popular with our stakeholders.
We may fail, or be perceived to fail, in attaining or maintaining our ESG-related initiatives. These events or perceptions may expose us to additional reputational and operational risks. Additionally, anti-ESG sentiment exists among certain stakeholders.
Removed
Given the timing of our actions compared to the timing of these inflationary pressures, there may be periods during which we are unable to fully recover the increases in our costs.
Added
Recent political changes have created an environment of tension and uncertainty in economic matters, particularly with regard to tariffs and international trade. Any such adverse events may result in global, regional or national economic slowdowns or other economic disruptions or downturns.
Removed
Department of Commerce, Bureau of Industry and Security (“BIS”), has recently amended the U.S. Export Administration Regulations to expand license requirements on exports to entities in China that may support military end uses.
Added
Additionally, hedging programs are inherently risky and could expose us to additional costs and risks that could adversely affect our financial condition and results of operations. Increasingly restrictive export regulations and other trade barriers may materially harm our business.
Removed
We have recorded restructuring, inventory write-offs and asset impairment charges in the past, and may do so again in the future, which could have a material negative impact on our business.
Added
In the case where we hold a minority equity interest in a company, we may not have the ability to exert control over the entity and therefore may be subject to additional risks that could adversely impact our reputation, business, financial performance and growth.
Removed
Also, each of our named executive officers and certain other executives of the company have entered into change of control severance agreements, which were approved by our Compensation Committee, which could increase the costs associated with a change of control and thus potentially deter such a transaction. Item 1B: Unresolved Staff Comments None.
Added
In addition, in the past, following periods of volatility in the overall market and the market prices of a particular company’s securities, securities class action litigation has often been instituted against that company. Securities litigation, if instituted against us, could result in substantial costs and divert our management’s attention and resources from our business.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Our approach includes, among other things: 21 • conducting regular network and endpoint monitoring, vulnerability assessments, and penetration testing to improve our information systems; • regular cybersecurity training for employees, including management, and conducting regular cybersecurity management and incident training for employees involved in execution of our incident response plan; • comparing our processes to standards set by the National Institute of Standards and Technology (“NIST”); • leveraging the NIST incident handling framework to help us identify, protect, detect, respond, and recover when there is an actual or potential cybersecurity incident; • operating threat intelligence processes designed to model and research our adversaries; • monitoring emerging data protection laws and implementing changes to our processes designed to comply; • conducting regular phishing email simulations for all employees and all contractors with access to corporate email systems to enhance awareness and responsiveness to such possible threats; • through policy, practice and contract (as applicable) requiring employees, as well as third-parties who provide services on our behalf, to treat customer information and data with care; • carrying information security risk insurance that provides protection against the potential losses arising from a cybersecurity incident; and • leveraging third-party score cards within our supply chain to regularly evaluate and report on our cybersecurity environment, including by integrating certain metrics into our corporate goal setting processes.
Our approach includes, among other things: • conducting regular network and endpoint monitoring, vulnerability assessments, and penetration testing to improve our information systems; • regular cybersecurity training for employees, including management, and conducting regular cybersecurity management and incident training for employees involved in execution of our incident response plan; • comparing our processes to standards set by the National Institute of Standards and Technology (“NIST”); • leveraging the NIST incident handling framework to help us identify, protect, detect, respond, and recover when there is an actual or potential cybersecurity incident; • operating threat intelligence processes designed to model and research our adversaries; • monitoring emerging data protection laws and implementing changes to our processes designed to comply; • conducting regular phishing email simulations for all employees and all contractors with access to corporate email systems to enhance awareness and responsiveness to such possible threats; • through policy, practice and contract (as applicable) requiring employees, as well as third-parties who provide services on our behalf, to treat customer information and data with care; • carrying information security risk insurance that provides protection against the potential losses arising from a cybersecurity incident; and • leveraging third-party score cards within our supply chain to regularly evaluate and report on our cybersecurity environment, including by integrating certain metrics into our corporate goal setting processes.
These briefings encompass a broad range of topics as discussed in Reporting to Board of Directors below. In addition, the IT team maintains an ongoing dialog with our management team regarding emerging or potential cybersecurity risks. The management team receives updates on any significant developments in the cybersecurity domain, ensuring oversight is proactive and responsive.
These briefings encompass a broad range of topics as discussed in Reporting to Board of Directors below. In addition, the IT team maintains an ongoing dialog with our management team regarding emerging or potential cybersecurity risks. The management team receives updates on any significant developments in the cybersecurity domain, ensuring oversight 22 is proactive and responsive.
This involvement ensures that cybersecurity considerations are integrated into our broader strategic objectives. 22 Risk Management Personnel Our Chief Information Officer is primarily responsible for the overall assessment, monitoring, and management of our cybersecurity risks. Our Chief Information Officer has over 20 years of experience in information technology and holds a B.S. in accounting and management information systems.
This involvement ensures that cybersecurity considerations are integrated into our broader strategic objectives. Risk Management Personnel Our Chief Information Officer is primarily responsible for the overall assessment, monitoring, and management of our cybersecurity risks. Our Chief Information Officer has over 20 years of experience in information technology and holds a B.S. in accounting and management information systems.
We have implemented several cybersecurity processes, technologies, and controls to aid in our efforts to identify, assess, and manage material risks, as well as to test and improve our incident response plan.
We have implemented several cybersecurity 21 processes, technologies, and controls to aid in our efforts to identify, assess, and manage material risks, as well as to test and improve our incident response plan.

Item 2. Properties

Properties — owned and leased real estate

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We believe that our existing and planned facilities are suitable for our current needs. 23 Information concerning our properties as of December 30, 2023 is set forth below: Location Principal Use Segment Square Footage Ownership Livermore, California, United States Manufacturing Probe Cards 90,508 Owned Livermore, California, United States Corporate headquarters, sales, marketing, administration, product design, manufacturing, service and repair, distribution, research and development All 168,636 Leased Thiendorf, Germany Sales, marketing, administration, manufacturing, service and repair, distribution, research and development Systems 101,291 Leased Beaverton, Oregon, United States Sales, marketing, administration, product design, manufacturing, service and repair, distribution, research and development Probe Cards 101,205 Leased Baldwin Park, California, United States Manufacturing, service and repair, distribution, research and development Probe Cards 44,000 Leased Boulder, Colorado, United States Sales, marketing, administration, manufacturing, distribution, research and development Systems 34,133 Leased Carlsbad, California, United States Sales, product design, administration, manufacturing, service and repair, distribution, research and development Probe Cards 42,080 Leased Woburn, Massachusetts, United States Sales, marketing, administration, manufacturing, distribution, research and development Systems 26,070 Leased Jubei City, Hsinchu, Taiwan Sales, administration, product design, field service and repair center All 25,631 Leased Singapore Sales, administration, product design, service, and field service All 24,413 Leased Suzhou, China (1) Sales, marketing, administration, product design, manufacturing, service and repair, distribution, research and development All 22,777 Leased San Jose, California, United States Sales, marketing, and distribution Systems 21,489 Leased Bundang, South Korea Sales, administration, product design, field service, and repair center All 17,161 Leased Yokohama City, Japan Sales, marketing, administration, product design, manufacturing, service and repair, distribution, research and development All 16,150 Leased Munich, Germany Sales, manufacturing, administration, service and repair, distribution, research and development Systems 18,786 Leased Shanghai, China (1) Sales and service All 3,348 Leased Dresden, Germany Sales and service All 2,960 Leased Hiroshima, Japan Repair center Probe Cards 1,007 Leased (1) On February 7, 2024, the Company signed an agreement with Grand Junction Semiconductor Pte.
We believe that our existing and planned facilities are suitable for our current needs. 23 Information concerning our properties as of December 28, 2024 is set forth below: Location Principal Use Segment Square Footage Ownership Livermore, California, United States Manufacturing Probe Cards 90,508 Owned Livermore, California, United States Corporate headquarters, sales, marketing, administration, product design, manufacturing, service and repair, distribution, research and development All 168,636 Leased Thiendorf, Germany Sales, marketing, administration, manufacturing, service and repair, distribution, research and development Systems 101,291 Leased Beaverton, Oregon, United States Sales, marketing, administration, product design, manufacturing, service and repair, distribution, research and development Probe Cards 101,205 Leased Baldwin Park, California, United States Manufacturing, service and repair, distribution, research and development Probe Cards 44,000 Leased Boulder, Colorado, United States Sales, marketing, administration, manufacturing, distribution, research and development Systems 34,133 Leased Carlsbad, California, United States Sales, product design, administration, manufacturing, service and repair, distribution, research and development Probe Cards 42,080 Leased Woburn, Massachusetts, United States Sales, marketing, administration, manufacturing, distribution, research and development Systems 26,070 Leased Zhubei City, Hsinchu, Taiwan Sales, administration, product design, field service and repair center All 34,892 Leased Singapore Sales, administration, product design, service, and field service All 24,413 Leased San Jose, California, United States Sales, marketing, and distribution Systems 21,489 Leased Bundang, South Korea Sales, administration, product design, field service, and repair center All 17,161 Leased Yokohama City, Japan Sales, marketing, administration, product design, manufacturing, service and repair, distribution, research and development All 16,150 Leased Munich, Germany Sales, manufacturing, administration, service and repair, distribution, research and development Systems 18,786 Leased Dresden, Germany Sales and service All 2,960 Leased
Removed
Ltd. to divest its China operations. These leased locations are to be included as part of the divestiture. See Note 19 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further details. 24

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 3: Legal Proceedings Information with respect to this item may be found under the caption “Legal Matters” in Note 12, Commitments and Contingencies, to our consolidated financial statements included herein, which information is incorporated into this Item 3 by reference. Item 4: Mine Safety Disclosures Not applicable. PART II
Item 3: Legal Proceedings Information with respect to this item may be found under the caption “Legal Matters” in Note 11, Commitments and Contingencies, to our consolidated financial statements included herein, which information is incorporated into this Item 3 by reference. Item 4: Mine Safety Disclosures Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among FormFactor, Inc., the S&P 500 Index, and the S&P Semiconductors Select Industry Index *$100 invested on December 29, 2018 in stock or index, including reinvestment of dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among FormFactor, Inc., the S&P 500 Index, and the S&P Semiconductors Select Industry Index *$100 invested on December 28, 2019 in stock or index, including reinvestment of dividends.
The following table provides information as of December 30, 2023 with respect to the shares of common stock repurchased during the fourth quarter of fiscal 2023 pursuant to the foregoing Board authorization.
The following table provides information as of December 28, 2024 with respect to the shares of common stock repurchased during the fourth quarter of fiscal 2024 pursuant to the foregoing Board authorization.
The pace of repurchase activity will depend on levels of cash generation, the Company's current stock price, and other factors. The program may be modified or discontinued at any time. The current share repurchase program will expire October 2025.
Under the stock repurchase 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, the Company's current stock price, and other factors. The program may be modified or discontinued at any time. The current share repurchase program will expire October 2025.
Item 5: Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Stock Information Our common stock is listed on The Nasdaq Global Market under the symbol “FORM.” As of February 16, 2024, there were 115 registered holders of record of our common stock, which does not include beneficial owners of stock held in street name (i.e., through a brokerage firm, bank, broker-dealer, trust or other similar organization).
Item 5: Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Stock Information Our common stock is listed on The Nasdaq Global Select Market under the symbol “FORM.” As of February 14, 2025, there were 105 registered holders of record of our common stock, which does not include beneficial owners of stock held in street name (i.e., through a brokerage firm, bank, broker-dealer, trust or other similar organization). 24 Dividends No cash dividends have been declared on shares of our common stock, and the Company currently does not intend to pay dividends in the future.
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 Maximum Amount that May Yet Be Purchased Under the Plans or Programs October 1, 2023 - October 28, 2023 — $ — — $ 93,634,446 October 29, 2023 - November 25, 2023 184,464 36.77 184,464 86,851,705 November 26, 2023 - December 30, 2023 351,908 36.99 351,908 73,834,628 536,372 $ 36.92 536,372 25 Stock Price Performance Graph The following graph shows the total stockholder return of an investment of $100 in cash on December 29, 2018 through December 30, 2023 for (1) our common stock, (2) the S&P 500 Index, and (3) the S&P Semiconductors Select Industry Index.
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 Maximum Amount that May Yet Be Purchased Under the Plans or Programs September 29, 2024 - October 26, 2024 — $ — — $ 36,623,543 October 27, 2024 - November 23, 2024 419,952 38.50 419,952 20,455,378 November 24, 2024 - December 28, 2024 — — — 20,455,378 419,952 $ 38.50 419,952 25 Stock Price Performance Graph The following graph shows the total stockholder return of an investment of $100 in cash on December 28, 2019 through December 28, 2024 for (1) our common stock, (2) the S&P 500 Index, and (3) the S&P Semiconductors Select Industry Index.
Cumulative Total Return December 29, 2018 December 28, 2019 December 26, 2020 December 25, 2021 December 31, 2022 December 30, 2023 FormFactor, Inc. $ 100.00 $ 185.87 $ 303.93 $ 317.70 $ 158.67 $ 297.72 S&P 500 Index 100.00 131.49 155.68 200.37 164.08 207.21 S&P Semiconductors Select Industry Index 100.00 165.23 268.27 383.86 265.98 359.96 Item 6: [Reserved]
Cumulative Total Return December 28, 2019 December 26, 2020 December 25, 2021 December 31, 2022 December 30, 2023 December 28, 2024 FormFactor, Inc. $ 100.00 $ 163.52 $ 170.93 $ 85.37 $ 160.18 $ 176.34 S&P 500 Index 100.00 118.40 152.39 124.79 157.59 197.02 S&P Semiconductors Select Industry Index 100.00 162.36 232.31 160.97 217.85 242.18 Item 6: [Reserved]
Removed
Dividends No cash dividends have been declared on shares of our common stock, and the Company currently does not intend to pay dividends in the future.
Removed
This authorization was in addition to the program authorized in May 2022 to repurchase up to $75.0 million of outstanding common stock that was fully utilized as of December 30, 2023. Under the current stock repurchase program, we may repurchase shares from time to time on the open market.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Cost of Revenues and Gross Margins Cost of revenues consists primarily of manufacturing materials, compensation and benefits, shipping and handling costs, manufacturing-related overhead (including equipment costs, related occupancy, and computer services), warranty adjustments, inventory adjustments (including write-downs for inventory obsolescence), and amortization of certain intangible assets.
Cost of Revenues and Gross Margins Cost of revenues consists primarily of manufacturing materials, compensation and benefits, shipping and handling costs, manufacturing-related overhead (including equipment costs, related occupancy, and computer services), warranty cost, inventory adjustments (including write-downs for inventory obsolescence), and amortization of certain intangible assets.
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 information from a variety of semiconductor and electro-optical devices and integrated circuits from early research, through development, to high-volume production.
We provide a broad range of high-performance probe cards, analytical probes, probe stations, thermal systems, and cryogenic systems to both semiconductor companies and scientific institutions. Our products provide electrical and optical information from a variety of semiconductor and electro-optical devices and integrated circuits from early research, through development, to high-volume production.
Installation services are a distinct performance obligation apart from the systems and are recognized in the period they are performed. Service contracts, which include repair and maintenance service contracts, and extended warranty contracts are also distinct performance obligations and are recognized over the contractual service period, which ranges from one to three years.
Installation services are a distinct performance obligation apart from the systems and are recognized in the period they are performed. Service contracts, which include repair 28 and maintenance service contracts, and extended warranty contracts are also distinct performance obligations and are recognized over the contractual service period, which ranges from one to three years.
Sales incentives and other programs that we may make available to 28 our customers are considered to be a form of variable consideration, which is estimated in determining the contract’s transaction price to be allocated to the performance obligations.
Sales incentives and other programs that we may make available to our customers are considered to be a form of variable consideration, which is estimated in determining the contract’s transaction price to be allocated to the performance obligations.
Apart from this gain, the semiconductor industry weakness that began in the third quarter of fiscal 2022 continued into fiscal 2023, impacting our Probe Cards segment with a $93.5 million reduction in revenue and the associated decline in gross margins as a result of the lower operating levels.
Apart from this gain, the semiconductor industry weakness that began in the third quarter of fiscal 2022 continued into fiscal 2023, impacting our Probe Cards segment with a $93.5 million reduction in revenue and the associated decline in gross margins from the lower operating levels.
On May 19, 2023, we amended the Building Term Loan, replacing the benchmark reference rate LIBOR with SOFR, with no change to the amount or timing of contractual cash flows. The Building Term Loan bears interest at a rate equal to the applicable SOFR rate, plus 0.1148%, plus 1.75% per annum.
On May 19, 2023, we amended the Building Term Loan, replacing the benchmark reference rate LIBOR with SOFR, with no change to the amount or timing of contractual cash flows. The Building Term Loan bears interest at a rate equal to the applicable SOFR rate, plus 0.1145%, plus 1.75% per annum.
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 U.S.
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 United States.
Corporate and Other — Corporate and Other includes unallocated expenses relating to amortization of intangible assets, inventory, fixed asset, and deferred revenue fair value adjustments due to acquisitions, stock-based compensation, and restructuring charges, net, which are not used in evaluating the results of, or in allocating resources to, our reportable segments.
Corporate and Other — Corporate and Other includes unallocated expenses relating to stock-based compensation expense, amortization of intangible assets, inventory and fixed asset fair value adjustments due to acquisitions, and restructuring charges, net, which are not used in evaluating the results of, or in allocating resources to, our reportable segments.
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.
Overview FormFactor, Inc., headquartered in Livermore, California, is a leading provider of electrical and optical test and measurement technologies along the full semiconductor product lifecycle - from characterization, modeling, reliability, and design de-bug, to qualification and production test.
At least a portion of our future capital expenditures and research and development costs will qualify for this credit, which benefits us by allowing us to net the credit received against our costs.
At least a portion of our future capital expenditures will qualify for this credit, which benefits us by allowing us to net the credit received against our costs.
For a discussion of the year ended December 31, 2022 compared to the year ended December 25, 2021, please refer to Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.
For a discussion of the year ended December 30, 2023 compared to the year ended December 31, 2022, please refer to Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 30, 2023.
Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Interest payments are payable in monthly installments over a fifteen-year period. The interest rate at December 30, 2023, before consideration of the interest rate swap, was 7.20%. On March 17, 2020, we entered into an interest rate swap agreement with Union Bank to hedge the interest payments on the Building Term Loan for the notional amount of $18.0 million.
Interest payments are payable in monthly installments over a fifteen-year period. The interest rate at December 28, 2024, before consideration of the interest rate swap, was 6.42%. On March 17, 2020, we entered into an interest rate swap agreement with Union Bank to hedge the interest payments on the Building Term Loan for the notional amount of $18.0 million.
We have not had any material requests for indemnification under these arrangements. We have not recorded any liabilities for these indemnification arrangements on our Consolidated Balance Sheets as of December 30, 2023 or December 31, 2022. New Accounting Pronouncements See Note 18, New Accounting Pronouncements , of Notes to Consolidated Financial Statements.
We have not had any material requests for indemnification under these arrangements. We have not recorded any liabilities for these indemnification arrangements on our Consolidated Balance Sheets as of December 28, 2024 or December 30, 2023. New Accounting Pronouncements See Note 17, Recent Accounting Pronouncements , of Notes to Consolidated Financial Statements.
Changes in revenue by geographic region in fiscal 2023 compared to fiscal 2022 were primarily attributable to changes in customer demand, shifts in customer regional manufacturing strategies, particularly with our large multinational customers, and product sales mix.
Changes in revenue by geographic region in fiscal 2024 compared to fiscal 2023 were primarily attributable to changes in customer demand, shifts in customer regional manufacturing strategies, particularly with our large multinational customers, product sales mix, and impacts from trade restrictions.
During fiscal 2021 and 2022, we repurchased and retired 622,400 shares of common stock for $24.0 million and 676,408 shares of common stock for $26.0 million, respectively, utilizing the remaining shares available for repurchase under the program.
During fiscal 2022, we repurchased and retired 676,408 shares of common stock for $26.0 million, utilizing the remaining shares available for repurchase under the program.
The table above excludes our gross liability for unrecognized tax benefits and our deferred grant. The gross liability for unrecognized tax benefits was $45.6 million as of December 30, 2023. The timing of any payments which could result from these unrecognized tax benefits will depend upon a number of factors and, accordingly, the timing of payment cannot be estimated.
The table above excludes our gross liability for unrecognized tax benefits and our deferred grant. The gross liability for unrecognized tax benefits was $48.4 million as of December 28, 2024. The timing of any payments which could result from these unrecognized tax benefits will depend upon a number of factors and, accordingly, the timing of payment cannot be estimated.
Indemnification Arrangements We have entered, and may from time to time in the ordinary course of our business enter, into contractual arrangements with third parties that include indemnification obligations. Under these contractual arrangements, we have agreed to defend, indemnify and/or hold the third party harmless from and against certain liabilities.
Accordingly, the timing of any repayment cannot be estimated. 37 Indemnification Arrangements We have entered, and may from time to time in the ordinary course of our business enter, into contractual arrangements with third parties that include indemnification obligations. Under these contractual arrangements, we have agreed to defend, indemnify and/or hold the third party harmless from and against certain liabilities.
Results of Operations In this section, we discuss the results of our operations for the year ended December 30, 2023 compared to the year ended December 31, 2022.
Results of Operations In this section, we discuss the results of our operations for the year ended December 28, 2024 compared to the year ended December 30, 2023.
After the amendment, the interest rate swap continues to convert our floating-rate interest into a fixed-rate of 2.75%. As of December 30, 2023, the notional amount of the loan that is subject to this interest rate swap was $14.4 million. See Note 10, Fair Value , for additional information.
After the amendment, the interest rate swap continues to convert our floating-rate interest into a fixed-rate of 2.75%. As of December 28, 2024, the notional amount of the loan that is subject to this interest rate swap was $13.4 million. See Note 9, Fair Value , for additional information.
The following table sets forth our operating results as a percentage of revenues: Fiscal 2023 Fiscal 2022 Fiscal 2021 Revenues 100.0 % 100.0 % 100.0 % Cost of revenues 61.0 60.4 58.1 Gross profit 39.0 39.6 41.9 Operating expenses: Research and development 17.5 14.6 13.1 Selling, general and administrative 20.1 17.6 16.1 Total operating expenses 37.6 32.2 29.2 Gain on sale of business 11.0 — — Operating income 12.4 7.4 12.7 Interest income 1.1 0.3 0.1 Interest expense (0.1) (0.1) (0.1) Other income (expense), net — 0.2 0.1 Income before income taxes 13.4 7.8 12.8 Provision for income taxes 1.0 1.0 1.9 Net income 12.4 % 6.8 % 10.9 % Revenues by Segment Fiscal 2023 Fiscal 2022 Fiscal 2021 (In thousands) Probe Cards $ 497,903 $ 591,422 $ 633,281 Systems (1) 165,199 156,515 136,393 Total $ 663,102 $ 747,937 $ 769,674 (1) During the fourth quarter of fiscal 2023, we completed the sale of our FRT business.
The following table sets forth our operating results as a percentage of revenues: Fiscal 2024 Fiscal 2023 Fiscal 2022 Revenues 100.0 % 100.0 % 100.0 % Cost of revenues 59.7 61.0 60.4 Gross profit 40.3 39.0 39.6 Operating expenses: Research and development 16.0 17.5 14.6 Selling, general and administrative 18.5 20.1 17.6 Total operating expenses 34.5 37.6 32.2 Gain on sale of business 2.7 11.0 — Operating income 8.5 12.4 7.4 Interest income 1.8 1.1 0.3 Interest expense — (0.1) (0.1) Other income (expense), net 0.1 — 0.2 Income before income taxes 10.4 13.4 7.8 Provision for income taxes 1.3 1.0 1.0 Net income 9.1 % 12.4 % 6.8 % Revenues by Segment Fiscal 2024 Fiscal 2023 Fiscal 2022 (In thousands) Probe Cards $ 625,960 $ 497,903 $ 591,422 Systems (1) 137,639 165,199 156,515 Total $ 763,599 $ 663,102 $ 747,937 (1) During the fourth quarter of fiscal 2023, we completed the sale of our FRT business.
Financing Activities Net cash used in financing activities in fiscal 2023 primarily related to $19.8 million used to purchase common stock under our stock repurchase program, $10.7 million used to pay tax withholdings for net share settlements of employee equity awards, and $1.0 million of principal payments made towards the repayment of our term loan, partially offset by $8.8 million of proceeds received from issuances of common stock under our stock incentive plans.
Financing Activities Net cash used in financing activities in fiscal 2024 primarily related to $53.3 million used to purchase common stock under our stock repurchase program, $20.0 million used to pay tax withholdings for net share settlements of employee equity awards, and $1.1 million of principal payments made towards the repayment of our term loan, partially offset by $9.7 million of proceeds received from issuances of common stock under our employee stock purchase plan.
Provision for income taxes Fiscal Year Ended December 30, 2023 December 31, 2022 December 25, 2021 (Dollars in thousands) Provision for income taxes $ 6,880 $ 7,132 $ 14,576 Effective tax rate 7.7 % 12.3 % 14.8 % Provision for income taxes reflects the tax provision on our operations in foreign and U.S. jurisdictions, offset by tax benefits from tax credits and the foreign-derived intangible income (“FDII”) deduction.
Provision for income taxes Fiscal Year Ended December 28, 2024 December 30, 2023 December 31, 2022 (Dollars in thousands) Provision for income taxes $ 9,798 $ 6,880 $ 7,132 Effective tax rate 12.3 % 7.7 % 12.3 % 34 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 deduction.
The decrease in our effective tax rate for the fiscal year ended December 30, 2023, when compared to the corresponding period in the prior year, was primarily driven by the sale of our FRT business and the related capital gain exclusion for German tax purposes.
The increase in our effective tax rate for fiscal 2024, when compared to the corresponding period in the prior year, was primarily driven by the sale of our FRT business and the related capital gain exclusion for German tax purposes that impacted fiscal year ended December 30, 2023, that did not repeat in the current year.
The decrease in Other income (expense), net, in fiscal 2023 compared to fiscal 2022 was primarily attributable to an other than temporary impairment on a debt receivable for $1.1 million and a decrease in foreign exchange gains. Foreign exchange gains for fiscal 2023 were $0.6 million.
The increase in Other income (expense), net, in fiscal 2024 compared to fiscal 2023 was primarily attributable to an other than temporary impairment on a debt receivable for $1.1 million in fiscal 2023 that did not recur in fiscal 2024 and an increase in foreign exchange gains.
As a result of the transaction, we received aggregate net consideration of $99.8 million and the transaction resulted in a gain of $73.0 million. The increase in net income in fiscal 2023 compared to fiscal 2022 was primarily due to the $73.0 million gain recognized from the sale of our FRT business.
The increase in net income in fiscal 2023 compared to fiscal 2022 was primarily due to a gain recognized from the sale of our FRT business of $73.0 million.
Changes in our tax provisions or an increase in our tax liabilities, whether due to changes in applicable laws and regulations, the interpretation or application thereof, or a final determination of tax audits or litigation or agreements, could have a material adverse effect on our financial position, results of operations and/or cash flows. 34 Liquidity and Capital Resources Capital Resources Our working capital increased to $442.7 million at December 30, 2023 compared to $324.9 million at December 31, 2022.
Changes in our tax provisions or an increase in our tax liabilities, whether due to changes in applicable laws and regulations, the interpretation or application thereof, or a final determination of tax audits or litigation or agreements, could have a material adverse effect on our financial position, results of operations and/or cash flows.
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 $328.3 million at December 30, 2023 compared to $238.1 million at December 31, 2022.
We typically invest in highly-rated securities with low probabilities of default. Our investment policy requires investments to be rated single A or better, and limits the types of acceptable investments, issuer concentration and duration of the investment. Our cash, cash equivalents and marketable securities totaled approximately $360.0 million at December 28, 2024 compared to $328.3 million at December 30, 2023.
Actual results may differ from these estimates under different assumptions or conditions. 27 Critical Accounting Policies Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles (“GAAP”).
Critical Accounting Policies Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).
The increase in interest income in fiscal 2023 compared to fiscal 2022 was attributable to an increase in investment yields due to the higher interest rate environment as well as an increased average invested balance. Interest expense primarily includes interest on our term loan, interest rate swap derivative contract, and term loan issuance costs amortization charges.
The increase in interest income in fiscal 2024 compared to fiscal 2023 was attributable to higher invested balances and higher weighted average yield on cash and investments. Interest expense primarily includes interest on our term loan, interest rate swap derivative contract, and term loan issuance costs amortization charges.
Systems — The increase in Systems product revenue in fiscal 2023 compared to fiscal 2022 was driven by increased sales of probe stations and thermal systems, partially offset by decreased sales of our metrology systems. 30 Revenues by Geographic Region Fiscal 2023 % of Revenues Fiscal 2022 % of Revenues Fiscal 2021 % of Revenues (In thousands, except percentages) United States $ 171,781 25.9 % $ 127,730 17.1 % $ 122,147 15.9 % Taiwan 147,842 22.3 169,789 22.7 185,925 24.2 South Korea 117,747 17.8 111,419 14.9 123,463 16.0 China 91,736 13.8 160,668 21.5 163,069 21.2 Europe 38,858 5.9 39,246 5.2 43,705 5.7 Japan 36,791 5.5 38,419 5.1 36,504 4.7 Malaysia 26,601 4.0 50,067 6.7 49,485 6.4 Singapore 18,335 2.8 39,388 5.3 36,197 4.7 Rest of World 13,411 2.0 11,211 1.5 9,179 1.2 Total Revenues $ 663,102 100.0 % $ 747,937 100.0 % $ 769,674 100.0 % Geographic revenue information is based on the location to which we ship the product.
Excluding the impact of the sale of our FRT Metrology business, Systems revenue decreased by $6.3 million, or 4.4%, primarily due to a decline in sales of thermal systems and probe stations. 30 Revenues by Geographic Region Fiscal 2024 % of Revenues Fiscal 2023 % of Revenues Fiscal 2022 % of Revenues (In thousands, except percentages) South Korea $ 184,528 24.2 % $ 117,747 17.8 % $ 111,419 14.9 % United States 183,716 24.1 171,781 25.9 127,730 17.1 Taiwan 173,515 22.7 147,842 22.3 169,789 22.7 China 102,982 13.5 91,736 13.8 160,668 21.5 Europe 34,803 4.6 38,858 5.9 39,246 5.2 Japan 33,946 4.4 36,791 5.5 38,419 5.1 Singapore 20,186 2.6 18,335 2.8 39,388 5.3 Malaysia 18,240 2.4 26,601 4.0 50,067 6.7 Rest of World 11,683 1.5 13,411 2.0 11,211 1.5 Total revenues $ 763,599 100.0 % $ 663,102 100.0 % $ 747,937 100.0 % Geographic revenue information is based on the location to which we ship the product.
The years ended December 31, 2022 and December 25, 2021 include Metrology Systems revenue of $29.0 million and $23.7 million, respectively. 29 Revenues by Market Fiscal % of Fiscal % of Change 2023 Revenues 2022 Revenues $ % (In thousands, except percentages) Probe Cards Markets: Foundry & Logic $ 363,539 54.8 % $ 409,196 54.7 % $ (45,657) (11.2) % DRAM 113,779 17.2 133,446 17.8 (19,667) (14.7) Flash 20,585 3.1 48,780 6.5 (28,195) (57.8) Systems Market: Systems (1) 165,199 24.9 156,515 21.0 8,684 5.5 Total revenues $ 663,102 100.0 % $ 747,937 100.0 % $ (84,835) (11.3) % Fiscal % of Fiscal % of Change 2022 Revenues 2021 Revenues $ % (In thousands, except percentages) Probe Cards Markets: Foundry & Logic $ 409,196 54.7 % $ 435,812 56.6 % $ (26,616) (6.1) % DRAM 133,446 17.8 156,049 20.3 (22,603) (14.5) Flash 48,780 6.5 41,420 5.4 7,360 17.8 Systems Market: Systems 156,515 21.0 136,393 17.7 20,122 14.8 Total revenues $ 747,937 100.0 % $ 769,674 100.0 % $ (21,737) (2.8) % (1) During the fourth quarter of fiscal 2023, we completed the sale of our FRT business.
As a result, we generated no metrology systems revenue during fiscal 2024, compared to $21.2 million and $29.0 million, during fiscal 2023 and fiscal 2022, respectively. 29 Revenues by Market Fiscal % of Fiscal % of Change 2024 Revenues 2023 Revenues $ % (In thousands, except percentages) Probe Cards Markets: Foundry & Logic $ 381,182 49.9 % $ 363,539 54.8 % $ 17,643 4.9 % DRAM 227,422 29.8 113,779 17.2 113,643 99.9 Flash 17,356 2.3 20,585 3.1 (3,229) (15.7) Systems Market: Systems (1) 137,639 18.0 165,199 24.9 (27,560) (16.7) Total revenues $ 763,599 100.0 % $ 663,102 100.0 % $ 100,497 15.2 % Fiscal % of Fiscal % of Change 2023 Revenues 2022 Revenues $ % (In thousands, except percentages) Probe Cards Markets: Foundry & Logic $ 363,539 54.8 % $ 409,196 54.7 % $ (45,657) (11.2) % DRAM 113,779 17.2 133,446 17.8 (19,667) (14.7) Flash 20,585 3.1 48,780 6.5 (28,195) (57.8) Systems Market: Systems (1) 165,199 24.9 156,515 21.0 8,684 5.5 Total revenues $ 663,102 100.0 % $ 747,937 100.0 % $ (84,835) (11.3) % (1) During the fourth quarter of fiscal 2023, we completed the sale of our FRT business.
Cash Flows Fiscal Year Ended December 30, 2023 December 31, 2022 December 25, 2021 (Dollars in thousands) Net cash provided by operating activities $ 64,602 $ 131,786 $ 139,364 Net cash provided by (used in) investing activities 29,049 (75,704) (124,741) Net cash used in financing activities (22,711) (95,932) (47,199) Operating Activities Net cash provided by operating activities consists of net income for the period adjusted for certain non-cash items and changes in certain operating assets and liabilities.
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. 35 Cash Flows Fiscal Year Ended December 28, 2024 December 30, 2023 December 31, 2022 (Dollars in thousands) Net cash provided by operating activities $ 117,534 $ 64,602 $ 131,786 Net cash provided by (used in) investing activities (33,480) 29,049 (75,704) Net cash used in financing activities (64,612) (22,711) (95,932) Operating Activities Net cash provided by operating activities consists of net income for the period, adjusted for certain non-cash items and changes in certain operating assets and liabilities.
Selling, General and Administrative Fiscal Year Ended December 30, 2023 December 31, 2022 $ Change % Change (Dollars in thousands) Selling, general and administrative $ 133,012 $ 131,875 $ 1,137 0.9 % % of revenues 20.1 % 17.6 % Fiscal Year Ended December 31, 2022 December 25, 2021 $ Change % Change (Dollars in thousands) Selling, general and administrative $ 131,875 $ 123,792 $ 8,083 6.5 % % of revenues 17.6 % 16.1 % The increase in selling, general and administrative expense in fiscal 2023 compared to fiscal 2022 was primarily driven by increased general operating expenses, increased costs from the sale of our FRT business, higher stock-based compensation expense, and higher consulting costs, partially offset by lower employee compensation from decreased headcount and lower performance-based compensation, lower amortization of intangibles, and lower restructuring charges.
Selling, General and Administrative Fiscal Year Ended December 28, 2024 December 30, 2023 $ Change % Change (Dollars in thousands) Selling, general and administrative $ 141,786 $ 133,012 $ 8,774 6.6 % % of revenues 18.5 % 20.1 % Fiscal Year Ended December 30, 2023 December 31, 2022 $ Change % Change (Dollars in thousands) Selling, general and administrative $ 133,012 $ 131,875 $ 1,137 0.9 % % of revenues 20.1 % 17.6 % The increase in selling, general and administrative expense in fiscal 2024 compared to fiscal 2023 was primarily driven by increased employee compensation from higher performance-based compensation and increased commissions expense from increased revenues, partially offset by lower amortization of intangibles. 33 The components of this overall increase were as follows (in thousands): Fiscal 2024 compared to Fiscal 2023 Employee compensation costs $ 8,303 Amortization of intangibles (3,005) Commission expenses 2,431 Consulting fees 753 Stock-based compensation expense 194 General operating expenses 98 $ 8,774 Stock-based compensation expense included within selling, general and administrative in fiscal 2024 and 2023 was $21.3 million and $21.1 million, respectively.
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.
As of December 28, 2024, the balance outstanding pursuant to the Building Term Loan was $13.4 million, and we were in compliance with all covenants under the agreement. 36 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.
Gross profit and gross margin by segment were as follows (dollars in thousands): Fiscal 2023 Probe Cards Systems Corporate and Other Total Gross profit $ 185,392 $ 84,735 $ (11,547) $ 258,580 Gross margin 37.2 % 51.3 % 39.0 % Fiscal 2022 Probe Cards Systems Corporate and Other Total Gross profit $ 235,562 $ 80,937 $ (20,490) $ 296,009 Gross margin 39.8 % 51.7 % 39.6 % 31 Fiscal 2021 Probe Cards Systems Corporate and Other Total Gross profit $ 279,873 $ 65,834 $ (22,940) $ 322,767 Gross margin 44.2 % 48.3 % 41.9 % Probe Cards — Gross profit and gross margin in the Probe Cards segment decreased in fiscal 2023 compared to fiscal 2022, primarily due to lower revenues and unfavorable absorption of costs on these lower production volumes, partially offset by lower inventory excess and obsolescence reserves.
We expense all warranty costs, inventory provisions and amortization of certain intangible assets as cost of revenues. 31 Gross profit and gross margin by segment were as follows (dollars in thousands): Fiscal 2024 Probe Cards Systems Corporate and Other Total Gross profit $ 259,007 $ 59,511 $ (10,595) $ 307,923 Gross margin 41.4 % 43.2 % 40.3 % Fiscal 2023 Probe Cards Systems Corporate and Other Total Gross profit $ 185,392 $ 84,735 $ (11,547) $ 258,580 Gross margin 37.2 % 51.3 % 39.0 % Fiscal 2022 Probe Cards Systems Corporate and Other Total Gross profit $ 235,562 $ 80,937 $ (20,490) $ 296,009 Gross margin 39.8 % 51.7 % 39.6 % Probe Cards — Gross profit and gross margin in the Probe Cards segment increased in fiscal 2024 compared to fiscal 2023, primarily due to greater revenues and more favorable absorption of costs on higher production volumes.
For fiscal 2023 compared to fiscal 2022, gross profit and gross margins have decreased on lower revenue levels and unfavorable absorption of costs on lower production volumes, partially offset by a reduction of restructuring charges. Stock-based compensation expense included in cost of revenues for fiscal 2023 and 2022 was $6.9 million and $3.8 million, respectively.
For fiscal 2024 compared to fiscal 2023, gross profit and gross margins have increased primarily as a result of more favorable absorption of costs on higher revenues, partially offset by an unfavorable product mix, as described above. Stock-based compensation expense included in cost of revenues for fiscal 2024 and 2023 was $7.7 million and $6.9 million, respectively.
Flash — The decrease in Flash product revenue in fiscal 2023 compared to fiscal 2022 was driven by lower customer production activity and demand for our products in light of worldwide excess supply, a result of weaker demand in the overall semiconductor industry, as discussed above, and Flash market weakness.
Flash — The decrease in Flash product revenue in fiscal 2024 compared to fiscal 2023 was driven by lower customer production activity and demand for our products.
Use of Estimates Preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.
The fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022 included 52 weeks, 52 weeks, and 53 weeks (with 14 weeks in the fourth quarter), respectively. 27 Use of Estimates Preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.
These increases were partially offset by lower performance-based compensation and restructuring charges. 32 The components of this increase were as follows (in thousands): Fiscal 2023 compared to Fiscal 2022 Employee compensation costs $ 3,861 Stock-based compensation 2,435 Depreciation 892 General operational costs 562 Restructuring charges (1,207) $ 6,543 Stock-based compensation expense included within research and development in fiscal 2023 and 2022 was $10.7 million and $8.2 million, respectively.
The components of this increase were as follows (in thousands): Fiscal 2024 compared to Fiscal 2023 Employee compensation costs $ 3,956 General operational costs 2,169 Depreciation (380) Project material costs 359 Stock-based compensation expense 69 $ 6,173 Stock-based compensation expense included within research and development in fiscal 2024 and 2023 was relatively flat at $10.7 million in both periods.
We generated net income of $82.4 million in fiscal 2023 compared to net income of $50.7 million in fiscal 2022 and net income of $83.9 million in fiscal 2021. On November 1, 2023, we completed the sale of our FRT Metrology (“FRT”) business.
We generated net income of $69.6 million in fiscal 2024 compared to net income of $82.4 million in fiscal 2023 and net income of $50.7 million in fiscal 2022.
The deferred grant was $18.0 million as of December 30, 2023. The timing of any potential repayments is dependent upon a number of factors, including the number of employees and capital investments. Accordingly, the timing of any repayment cannot be estimated.
The deferred grant was $18.0 million as of December 28, 2024, and consists of cash received from a California Competes Grant awarded from the California Governor's Office of Business and Economic Development. The timing of any potential repayments is dependent upon a number of factors, including the number of employees and capital investments within California over the 5-year term.
Fiscal Year We operate on a 52/53 week fiscal year, whereby the fiscal year ends on the last Saturday of December. The fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021 included 52 weeks, 53 weeks (with 14 weeks in the fourth quarter) and 52 weeks, respectively.
Fiscal Year We operate on a 52/53 week fiscal year, whereby the fiscal year ends on the last Saturday of December.
The decrease in interest expense in fiscal 2023 compared to fiscal 2022 was primarily due to lower outstanding debt balances. Other income (expense), net Other income (expense), net, includes the effects of foreign currency and various other gains and losses.
The interest expense for fiscal 2024 compared to fiscal 2023 was relatively flat. This stability is due to our interest rate swap, which converted the interest rate on our long-term debt to a fixed rate. Other income (expense), net Other income (expense), net, includes the effects of foreign currency and various other gains and losses.
Research and Development Fiscal Year Ended December 30, 2023 December 31, 2022 $ Change % Change (Dollars in thousands) Research and development $ 115,765 $ 109,222 $ 6,543 6.0 % % of revenues 17.5 % 14.6 % Fiscal Year Ended December 31, 2022 December 25, 2021 $ Change % Change (Dollars in thousands) Research and development $ 109,222 $ 100,937 $ 8,285 8.2 % % of revenues 14.6 % 13.1 % The increase in research and development expense in fiscal 2023 compared to fiscal 2022 was primarily driven by an increase in headcount designed to support our continued investment in technology leadership.
The increase of stock-based compensation in fiscal 2024 compared to fiscal 2023 was driven by an increase in weighted average fair value of awards outstanding. 32 Research and Development Fiscal Year Ended December 28, 2024 December 30, 2023 $ Change % Change (Dollars in thousands) Research and development $ 121,938 $ 115,765 $ 6,173 5.3 % % of revenues 16.0 % 17.5 % Fiscal Year Ended December 30, 2023 December 31, 2022 $ Change % Change (Dollars in thousands) Research and development $ 115,765 $ 109,222 $ 6,543 6.0 % % of revenues 17.5 % 14.6 % The increase in research and development expense in fiscal 2024 compared to fiscal 2023 was primarily driven by an increase in employee compensation costs from higher performance-based compensation and general operational costs.
During fiscal 2023, we repurchased and retired 32,020 shares of common stock for $1.2 million and as of December 30, 2023 $73.8 million remained available for future repurchases. 36 Contractual Obligations and Commitments The following table summarizes our significant contractual commitments to make future payments in cash under contractual obligations as of December 30, 2023 (in thousands): Payments Due In Fiscal Year 2024 2025 2026 2027 2028 2029 and thereafter Total Operating leases $ 9,337 $ 9,215 $ 7,586 $ 7,154 $ 3,870 $ 1,432 $ 38,594 Term loan - principal payments 1,080 1,111 1,142 1,175 1,208 8,732 14,448 Term loan - interest payments (1) 1,025 937 857 773 688 2,163 6,443 Total $ 11,442 $ 11,263 $ 9,585 $ 9,102 $ 5,766 $ 12,327 $ 59,485 (1) Represents our minimum interest payment commitments at 7.20% per annum, excluding the interest rate swap described in Debt, above.
Contractual Obligations and Commitments The following table summarizes our significant contractual commitments to make future payments in cash under contractual obligations as of December 28, 2024 (in thousands): Payments Due In Fiscal Year 2025 2026 2027 2028 2029 2030 and thereafter Total Operating leases $ 9,080 $ 7,610 $ 7,181 $ 3,872 $ 232 $ 1,118 $ 29,093 Term loan - principal payments 1,111 1,142 1,175 1,208 1,242 7,490 13,368 Term loan - interest payments (1) 835 764 688 613 534 1,393 4,827 Total $ 11,026 $ 9,516 $ 9,044 $ 5,693 $ 2,008 $ 10,001 $ 47,288 (1) Represents our minimum interest payment commitments at 6.42% per annum, excluding the interest rate swap described in Debt, above.
Cash and cash equivalents primarily consist of deposits held at banks, money market funds, and U.S. treasuries. Marketable securities primarily consist of corporate bonds, U.S. treasuries and agency securities, and commercial paper. We typically invest in highly-rated securities with low probabilities of default.
Liquidity and Capital Resources Capital Resources Our working capital increased to $473.8 million at December 28, 2024 compared to $442.7 million at December 30, 2023. Cash and cash equivalents primarily consist of deposits held at banks and money market funds. Marketable securities primarily consist of corporate bonds, U.S. treasuries and agency securities, and commercial paper.
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.
Sales of our probe cards and analytical probes are included in the Probe Cards segment, while sales of our probe stations, thermal systems and cryogenic systems are included in the Systems segment. Our fiscal 2024 financial results reflected our strengthening momentum driven by increasing demand for high bandwidth memory (“HBM”) chips utilized in generative artificial intelligence applications.
This significant benefit was offset by other items impacting the effective tax rate at a different percentage amount than the prior year due to increased income before taxes in fiscal 2023. The Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 (the “CHIPS Act”) was signed into law on August 9, 2022.
The Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 (the “CHIPS Act”) was signed into law on August 9, 2022.
Systems — Gross profit and gross margin in the Systems segment remained relatively flat in fiscal 2023 compared to fiscal 2022, despite the increase in revenue primarily as a result of less favorable product mix.
Systems — Gross profit and gross margin in the Systems segment decreased fiscal 2024 compared to fiscal 2023, primarily as a result of lower revenues, less favorable absorption of costs on lower production volumes, and a less favorable product mix, in part related to the divestiture of the FRT Metrology business, which was completed during the fourth quarter of fiscal 2023.
Net cash provided by operating activities in fiscal 2023 was primarily attributable to net income of $82.4 million and net non-cash items of $14.4 million, which include depreciation, amortization, stock-based compensation, and the provision for excess and obsolete inventories, partially offset by the adjustment for the $73.0 million gain from the sale of our FRT business.
The non-cash expenses consisted of depreciation, amortization, stock-based compensation, and the provision for excess and obsolete inventories, partially offset by the $20.6 million gain on sale of business and deferred income tax benefits.
Ltd. to divest our China operations and establish an exclusive distribution and partnership agreement to continue sales and support of our products in the region (the “China Transaction”). The China Transaction is expected to close in the first half of 2024.
On February 26, 2024, we completed the sale of our China operations, resulting in net consideration received of $21.4 million and a pre-tax gain of $20.3 million. With this transaction, we established an exclusive distribution and partnership agreement to continue sales and support of our products in the region (the “China Transaction”).
Net working capital resulted in an outflow of $32.2 million, primarily related to an increase in accounts receivable of $23.3 million, a decrease in deferred revenues of $10.2 million, an increase in inventories of $9.5 million, and a reduction in operating lease liabilities of $7.6 million, partially offset by an increase from a deferred grant of $18.0 million. 35 Investing Activities Net cash provided by investing activities in fiscal 2023 primarily related to $101.8 million cash provided by the sale of our FRT business, partially offset by $56.0 million of cash used in the acquisition of property, plant and equipment and $16.7 million used for the purchase of marketable securities, net of maturities.
The cash used in net working capital is related to an increase of inventories of $8.3 million, a decrease in accounts payable of $8.2 million, and decreased operating lease liabilities of $7.3 million, partially offset by an increase of other liabilities of $9.8 million, accrued liabilities of $3.7 million, and deferred revenue of $2.7 million.
The decrease in revenues for China was also impacted by lowered demand from a large Chinese DRAM integrated device manufacturer and the impact of expanded export license requirements imposed by the U.S. government beginning the fourth quarter of fiscal 2022 for exporting advanced U.S. semiconductor technology to China.
Specifically, the changes in revenue by geographic region was attributable to the following: • Increased demand for our DRAM probe card products, including those for HBM, contributed to the increase in revenue for South Korea in fiscal 2024 compared to fiscal 2023. • A single large U.S.-based company shifted shipments from Malaysia and China to the United States that contributed to the fluctuations in revenue for those regions in fiscal 2024 compared to fiscal 2023. • Increased demand from a large Chinese DRAM integrated device manufacturer contributed to the increase in revenue for China in fiscal 2024 compared to fiscal 2023. • Expanded export license requirements for the export of advanced U.S. semiconductor technology to China that was imposed by the U.S. government beginning the fourth quarter of fiscal 2022 have caused volatility in the Chinese region over the last two fiscal years, negatively impacting our revenue compared to fiscal 2022.
Despite the overall semiconductor industry weakness that impacted the Probe Cards segment, the Systems segment continued to show strength with revenue increasing $8.7 million, or about 5.6% in fiscal 2022, since customer spending for products in this segment is driven by research and development of next-generation innovation.
Systems segment showed strength in fiscal 2023 with revenue increasing $8.7 million, or about 5.6%, compared to fiscal 2022, driven by our customers' spending on research and development of next-generation innovation. Recent Development In February 2025, we, together with MBK Partners, a private equity firm, acquired FICT Limited (“FICT”) from Advantage Partners Inc.
The increase of stock-based compensation in fiscal 2023 compared to fiscal 2022 was driven by an increase in weighted average fair value of awards outstanding and the timing of awards. 33 Gain on sale of business Gain on sale of business represents the gain on the sale of our FRT business of $73.0 million during the fourth quarter of fiscal 2023.
Gain on sale of business Gain on sale of business represents the gain on the sale of our China operations for $20.3 million during fiscal 2024 and the gain on the sale of our FRT business for $73.3 million, of which $73.0 million was recognized during fiscal 2023 and $0.3 million was recognized during fiscal 2024.
The Building Term Loan contains covenants customary for financing of this type. As of December 30, 2023, the balance outstanding pursuant to the Building Term Loan was $14.4 million, and we were in compliance with all covenants under the agreement.
The Building Term Loan contains covenants customary for financing of this type.
Removed
The decrease in net income in fiscal 2022 compared to fiscal 2021 was primarily due to decreased revenues, lower margins driven primarily by a less favorable product mix and lower factory utilization, and increased restructuring charges. This was partially offset by a reduction in the amortization of intangibles and in the annual effective tax rate.
Added
The decrease in net income in fiscal 2024 compared to fiscal 2023 was primarily due to a reduced gain on sale of business with the fiscal 2024 gain from the China Transaction being less than the fiscal 2023 gain from the sale of our FRT business further described below.
Removed
The first half of fiscal 2022 was strong, producing net income of $60.1 million with $401.1 million in revenue at 47.0% gross margins. In the second half of fiscal 2022, revenues declined, mainly within the Probe Cards segment, and mix became less favorable, resulting in a net loss of $9.4 million with $346.9 million in revenue at 31.0% gross margins.
Added
Excluding the impact of gains in each period, our financial performance was driven by the strengthening of certain areas of the semiconductor industry, which increased demand in some markets within our Probe Cards segment, particularly with demand for HBM chips utilized in generative artificial intelligence applications and the ramp of new mobile application processor designs.
Removed
Despite the decline in total revenues in the second half of fiscal 2022, the Systems segment recognized record revenue levels in the third and fourth quarters of fiscal 2022. Recent Development On February 7, 2024, we signed an agreement with Grand Junction Semiconductor Pte.
Added
While we experienced growth in total revenues year over year, the Systems segment was negatively impacted due to the absence of metrology system sales as a result of the sale of our FRT Metrology business in the fourth quarter of fiscal 2023.
Removed
As a result, Metrology Systems revenue will not recur in future periods. The year ended December 30, 2023 includes Metrology Systems revenue of $21.2 million.
Added
In connection with the acquisition, we obtained a 20% equity interest in FICT, in exchange for funding $59.6 million of the purchase price. Headquartered in Nagano, Japan, FICT is a provider of semiconductor test and high-performance computing industries with complex multi-layer organic substrates, printed circuit boards, and related leading-edge technologies and services.
Removed
As a result, Metrology Systems revenue will not recur in future periods. The year ended December 30, 2023 includes Metrology Systems revenue of $21.2 million. The years ended December 31, 2022 and December 25, 2021 include Metrology Systems revenue of $29.0 million million and $23.7 million, respectively.
Added
Under the equity method, upon closing this investment, the investment will be included as a separate item in our Consolidated Balance Sheets and we will record our proportionate share of FICT’s net income or loss as a separate item in our Consolidated Statements of Operations.
Removed
Foundry & Logic — The decrease in Foundry & Logic product revenue in fiscal 2023 compared to fiscal 2022 was driven by the weakening demand in the semiconductor industry, especially in the personal computer and mobile sectors, that began in the third quarter of fiscal 2022 and continued into fiscal 2023, resulting in decreased unit sales across several of our major customers for both us and our competitors.
Added
As a result, we generated no metrology systems revenue during fiscal 2024, compared to $21.2 million and $29.0 million, during fiscal 2023 and fiscal 2022, respectively. Foundry & Logic — The increase in Foundry & Logic product revenue in fiscal 2024 compared to fiscal 2023 was driven by the ramp of new mobile application processor designs.
Removed
DRAM — The decrease in DRAM product revenues in fiscal 2023 compared to fiscal 2022 was driven by lower customer production activity and demand for our products in light of worldwide excess supply of DRAM chips, along with weaker demand in the overall semiconductor industry, as discussed above.
Added
DRAM — The increase in DRAM product revenues in fiscal 2024 compared to fiscal 2023 was driven by increased demand for HBM designs utilized in generative artificial intelligence applications as well as increased demand for other non-HBM DRAM designs, particularly DDR5.
Removed
These declines were partially offset due to increased demand for HBM chips utilized in generative artificial intelligence applications.
Added
Systems — The decrease in Systems product revenue in fiscal 2024 compared to fiscal 2023 was primarily driven by the absence of metrology systems revenue due to the sale of our FRT Metrology business during the fourth quarter of fiscal 2023.
Removed
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 these regions that shifted shipments from these regions to the United States.
Added
These requirements have restricted our ability to ship products to the region, decreasing demand from domestic China customers. Additionally, these requirements have caused, and continue to drive, some of our multinational customers to concentrate operations in regions other than China, lowering overall demand for those customers within the region.
Removed
We expect the trade restrictions to continue to drive multinational customers to concentrate operations in regions other than China, impacting our geographical mix.
Added
We anticipate a further reduction in demand in fiscal 2025 due to additional tightening of export controls, which will limit our ability to ship advanced probe cards in the region.
Removed
These uncertain trade barriers affecting exports and imports between the United States and China contributed to the Company's decision to proceed with the China Transaction.
Added
These increases were partially offset by an unfavorable product mix with a higher concentration of lower-margin DRAM product sales and a lower concentration of higher-margin Foundry & Logic product sales.
Removed
We expense all warranty costs, inventory provisions and amortization of certain intangible assets as cost of revenues.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed4 unchanged
Our exposure to interest rate risk arising from our Term Loan (see Note 6, Debt , of Notes to Consolidated Financial Statements) is insignificant as a result of the interest-rate swap agreement (see Note 9, Derivative Financial Instruments , of Notes to Consolidated Financial Statements) that we entered into with Union Bank to hedge the interest payments on our Building Term Loan.
Our exposure to interest rate risk arising from our Term Loan (see Note 6, Debt , of Notes to Consolidated Financial Statements) is insignificant as a result of the interest-rate swap agreement (see Note 8, Derivative Financial Instruments , of Notes to Consolidated Financial Statements) that we entered into with Union Bank to hedge the interest payments on our Building Term Loan.
We do not use derivative financial instruments for trading or speculative purposes. 37 We recognized a net gain from foreign exchange of $0.6 million, $1.1 million, and zero in fiscal 2023, 2022, and 2021, respectively. Interest Rate Sensitivity Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio.
We do not use derivative financial instruments for trading or speculative purposes. We recognized a net gain from foreign exchange of $1.0 million, $0.6 million, and $1.1 million in fiscal 2024, 2023, and 2022, respectively. Interest Rate Sensitivity Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio.
Because the effect of movements in currency exchange rates on the currency forward exchange contracts generally offsets the related effect on the underlying items being hedged, these financial instruments are not expected to subject us to risks that would otherwise result from changes in currency exchange rates as of December 30, 2023.
Because the effect of movements in currency exchange rates on the currency forward exchange contracts generally offsets the related effect on the underlying items being hedged, these financial instruments are not expected to subject us to risks that would otherwise result from changes in currency exchange rates as of December 28, 2024.
A hypothetical 100 basis-point (one percentage point) increase or decrease in interest rates compared to rates at December 30, 2023 and December 31, 2022 would have affected the fair value of our investment portfolio by $2.5 million and $2.1 million, respectively.
A hypothetical 100 basis-point (one percentage point) increase or decrease in interest rates compared to rates at December 28, 2024 and December 30, 2023 would have affected the fair value of our investment portfolio by $3.4 million and $2.5 million, respectively. 38

Other FORM 10-K year-over-year comparisons