FormFactor (FORM) Presentation at 19th Annual Citi Technology Conference September 6, 2012 8:45 a.m. ET Executives Tom St. Dennis - CEO Mike Ludwig - CFO Analysts Presentation Citi Representative
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Their growth has been significant. We’ve got a summary slide on that for the last several years, but in 2011 they had another year of real strong growth, over 40%, and they’ve had strong earnings through the last several years.The product portfolio, as I said, is broad, but their focus area has been in the flip chip area. These are products that are flipped into ball grid array type packages. So it’s the world of CPUs, of mobile application processors, of graphical processors. And that space is growing rapidly with smartphones, tablets, and with continued PC growth. So really very well positioned, and with a great product portfolio. If you look at revenues over the last four years, you can see strong growth and really outstanding performance in terms of EBITDA and earnings for the company. They’ve been able to be cash flow positive as they’ve gotten into this in the last year, year and a half, funding their business. So a very healthy business overall. So just the, I think, key takeaways, if you will, for what the two companies together represent. Currently FormFactor does supply a portion of the SOC business with our MEMS technology. This is not an area that overlaps with what MicroProbe has today. The combination of the two put us in a position now to be the leading supplier in that SOC market, across the entire market. The combination of the two technologies, they’ve been using two-dimensional MEMS technology for a portion of their product portfolio. Complements very well with the MEMS technology that FormFactor has, as kind of a core technology or IP base. We think that there’s opportunities for us to bring those two technologies together to help MicroProbe move ahead even faster in the space. And there’s a chance for some synergies in our manufacturing area, which will over time help out on the COGS side of the equation. And the nature of the transaction is such that it’s immediately accretive to our overall financial performance. Again, strong EBITDA performance for them, and good cash flows.
Structure on the deal was that it was $116.8 million, a combination of cash and stock, $100 million in cash, $16.8 million of FormFactor stock. It’s a little bit over 3 million shares of FormFactor stock with currently about 50 million shares outstanding.So if you look at just a perspective of where the combined company sits now against other portions of the semiconductor industry in terms of growth opportunities, on the right is the wafer fab equipment. There’s packaging and assembly. There’s the automated test equipment here. Companies like Teradyne and Advantest. And then these advanced probe cards that the combined company of MicroProbe and FormFactor will now serve in a leading way is the highest growth opportunity out there based on VLSI, Gartner data. Really, I think, a very compatible, synergistic, efficient combination of these two companies as we get the merger complete. Just to give you a sense of that growth in the markets and then the growth by the different segments in the market, and also kind of where the position of both companies are. On the left-hand side there, in the upper left, you see that today FormFactor has about 7% of this market, or a relatively insignificant portion of it. MicroProbe, for 2011, was 20% of that market. So, on a combined basis, we’ve got scale and a good footprint in that market. On the DRAM side, you can see FormFactor here with about 40% of that business. Flash continues to be opportunistic for us. It hasn’t been an area that we’ve made significant investments in. We really are, as I said, opportunistic about taking business in that particular space. What’s exciting about this combination is that you can see the growth that is forecasted here on the SOC portion of the market. It’s dramatic, it’s driven, again, by the world of mobile devices, mobile-connected devices, tablets, smartphones, and certainly personal computers. And it is forecasted to grow at double digit rates over this period of time, 2011 to 2016. Read the rest of this transcript for free on seekingalpha.com