FN - Earnings call transcript Q2 2020

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Operator

Good day, ladies and gentlemen. Welcome to Fabrinet’s Financial Results Conference Call for the Second Quarter of Fiscal Year 2020. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, today’s call is being recorded. I would now like to turn the call over to your host, Garo Toomajanian, Investor Relations.

Garo Toomajanian

good and operator you, afternoon everyone. Thank XX, for discuss Fabrinet’s you quarter fiscal ended joining for us to call and December which XXXX conference today’s year financial second on the Thank XXXX. and results operating

With Vice Executive Please Financial our TS available release our Chief refer the Seamus and Officer, which is Operations, investor.fabrinet.com. of replay the section Finance me to Csaba located be including designate. Ng, and press reconciliation. a GAAP Sverha, non-GAAP presentation to being This of for call call on and earnings are website Grady, today Officer, information, on President Chief and will CFO investor important include website our at Investors our webcast the

today’s the statements contain that I discussion will future performance company. would about like the of forward-looking remind financial to you

statements to Forward-looking revise and expectations. only light actual events the this date that results management’s could of them statements of differ uncertainties except as reflect future cause information and current obligation materially new by to our undertake opinions law. no required from the These subject to as or in risks of we are presentation

recent the our our description factors filings a risk to filed on that SEC XX-Q section Form particular our may please XXXX. For in captioned the Risk refer in affect of results, Factors X, November

Seamus, remarks will and Csaba, TS We by the followed for the from call begin time questions. with

over the Fabrinet’s Seamus? turn I Seamus call to would to like now CEO, Grady.

Seamus Grady

third income With in all stabilizing, was record areas demand quarterly see expect Revenue of with million, quarter guidance the including of quarter above upside sequential Thank we We growth This second guidance the a the be exceeded target in was which continue continued line, financial $X Revenue net our performance also up for first of and you, we had largely from to $XXX end-market per a non-GAAP the was and quarter range strong anticipate bottom XX.X% results was the year-over-year the to nearly very full our with to from and our to that end of to of fell business. XX% non-GAAP XX.X% growth quarter. driven gross range. margins share X% our Gross in X% Garo second top all everyone. year. margin year good within metrics by revenue. ago. afternoon

our communications, $XXX consistent total quarter. markets, at first of first optical $XXX million, revenue was ago up XX% This first of XX% XX% end business by X% telecom communications with revenue was from optical represented and up revenue and million, from X% a represented optical Within the revenue. the Looking quarter. year the from quarter

growth, communications quarter communications increased a the $XX optical communications optical from above the and $X growth slight from the stabilize. trends represented from quarter. as of silicon transfer second by rated rate, anticipated. had first technology, to telecom Our XX% for the the increase photonics-based represented from optical again to program as By at these to XX% the revenue. and XXX-gig data was of first demand revenue quarter million the QSFPXX to and program ramped QX, which anticipated quarter continued XXX-gig quarter programs XX% at up By transceivers continued up million products represented XX% communications was of better $XX optical revenue. of million. X% first Datacom million, than rapid speeds $XXX revenue and from products we was at million $XX QSFPXX Revenue see with Berlin fully contributed in was end and Infinera of million, revenue Datacom $XX our to

compared see better will than the revenue globally in demand we at increasingly which and products pleased Looking to the first quarter, the term up market to for also as outsourcing revenue in We lasers in was We as longer to non-optical business, expected these better are leverage to at over $XXX $XX than from industrial million was manufacturers $XX believe $XX a competitive of for first serving million our million uniquely we improve. also And a communications were this was the result, opportunity million quarter. remain remain laser that positioned be industrial leader optimistic the evolves. expected.

we to expect in Automotive million. third revenue quarter-to-quarter slightly variability increased to generation growth and programs from reflecting million normal revenue the to quarter. $X.X from $XX moderated Sensor next automotive $X.X return to million which

Fabrinet XX% to from applications generated from revenue sequentially other mainly $XX million Finally, West. grew non-optical

programs we to During continue the their grow. of at Bangkok, additional our new introduction illustration another This product where we of to transfer West the success Fabrinet anticipate program which extend will quarter, to to volumes up leverage is model, will and complete with to production build saw continue our in demonstrates success Santa that Israel ramped had while economic our time, the same offering are Clara network to customers. our advantages coming gearing months. we Infinera systems of the to ability At we in

our be opportunities Cisco, the and awarded pleased while close system we project were these announce to the have of I’m we up that to successful new to our that will opportunities. We business the build to the And significant customers, today, could the partnership. a us level there pursuing level simplifying by for on additional provide which second Fabrinet further been quarter, after actively can component believe from supply chain vertically additional integrate for

in forward as program While believe revenue for this if Cisco sharing it We to it this that is as Fabrinet XX% ramps more look of that more we days, represent XXXX. anticipated progresses. on still program fiscal early or could

and Csaba more new retire. after initially external that intention February nearly a year after effective role Finally, are to internal our candidates, Officer, announced TS we evaluating of than down Financial Chief also his XX from as today stepping XX welcome with we pleased the announcing to Sverha months

his to a will be during for had years a almost TS He for a I to me him Operations, collaboration as of now, for wish I of Fabrinet’s the dedication role commitment Csaba a to all, the Fabrinet past and years in our play are characteristics to best confident and that past. hand over Special the will Csaba period. working all two at EVP, Finance, grateful get smooth of and the his including His had level contributions we success to TS displays and been Fabrinet pleasure this extremely to are have directly Projects, positive that transition. We well-deserved Csaba President with reporting in the integrity, ensuring model has transition retirement. commitment Vice us have success. helping in attitude for his meaningful leading in Fabrinet next and am performance.

and would Csaba, that like Before the to I’m Coronavirus you’re concerned all outbreak turn to the call address I TS about. sure I over

guidance providing While Coronavirus from seasonal anticipated for also quarter the we to shutdowns our outbreak. third extended impact are a quarter third includes in results downtick, that small the often reflect the due China

our Lunar which custom Specifically, XX. to facility extended the at February optics week weeks China, Fuzhou, week-long components, Year manufactures in Casix X ending New shutdown been from has X

third-party we for expectations quarter. the are impact on providing bottom shutdowns. in our direct has are of and top some line China the guidance by addition, our third and impacted a also considered In suppliers is This in

continue is News keep to top to and related the situation. is will the our coronavirus evolving we employees monitor to rapidly and priority safe our

in stronger-than-expected pleased and our quarter, summary, activity. about with In are our new are second excited we performance the business we

business extend the we well our in believe I will While leadership positioned we the remain to result decline anticipate coronavirus in sequential revenue outbreak as look market success we larger-than-normal a quarter, ahead. third and

to over the TS discuss turn details quarter Now, our performance and call TS? let and Csaba our me second of the to outlook.

TS Ng

congratulate his sure like and transition smooth. committed appointment the Thank I words, on to his for afternoon, kind everyone. the Csaba and to you position good making Seamus CFO I’m is would to

and our I Now even of quarterly million above approximately of Non-GAAP year year also foreign and $XXX.X more income provide and guidance Total headwinds results upper the quarters guidance $X.XX we turning will our share, fiscal after in $X end the record. to $X quarter net was of for range Csaba of was second on or third introduce above revenue provide the our a our quarter share. XXXX million, then per range to XXXX. per will second exchange for was financial you our fiscal results, guidance details the

quarter of which Now our reconciliation P&L, turning our second GAAP was measures to our margin non-GAAP the XX.X%. is can gross Non-GAAP you earnings, a presentation, included in to on investor website. details the of release in and find press

gross operating was expense continue million for year. margin in second quarter. be to Non-GAAP the range target expect to our the within $X.X We

was quarter and less X%. was was $XX.X million and our result, effective operating X%. tax normalized rate non-GAAP in income a Tax margin million $X the As operating than was non-GAAP

full share, earlier. of was a or quarter expenses $XX.X the per We includes million income issuance X% compensation year. GAAP million to continue $X share second the which be effective On was as above expect in amortization per our of end $XX.X for quarter, X% the at Non-GAAP income rate second and share-based net our high diluted above to also basis, to the costs, net $X.XX indicated our debt tax I guidance diluted range for guidance.

$XX of at million, Turning restricted cash, flow with and million, cash the the million, $XXX.X million balance CapEx compared $X.X million of and the $XXX.X quarter to the quarter. $XX.X cash the investments to flow in quarter. end flow end statements, free was were second the sheet in was and quarter, cash second first of Operating cash at

inventory share working $XX.X during During as returned in our consuming level transferred remain repurchase receivables. the the collecting the not quarter, program. our repurchase did share we We to quarter. any neutral capital million began and

to when to continue condition will share We opportunistically possible. purchase market evaluate

I the provide sell to the to wish have investors side all the the you your take analysts side and thank our for support enjoyed with you I the quarter to work buy Before have working years. guidance, of Csaba all like all professionalism I appreciate our nothing but turn your on I best. call third and opportunity over you. all this and to done would our

our now will FQX to I invite Csaba give guidance.

Csaba Sverha

including I listening and those the transition, like looking attending forward you that and of TS you now Fabrinet. forward of our as next at good other to been I getting the a Thank to you, coming looking aim in guidance of to a CFO up investors to TS to fiscal transparent has for XXXX. I call. OFC stepping turn to open of TS is those good in with quarter my am our level maintain investor know the and to to dialog events March great as third had. would afternoon or am mentor months. has year

seasonal year-over-year impact quarterly revenue our to We in record revenue third the outbreak that will a maintain performance growth usual quarter of as third than the moderate more After China. we quarter. in in expect result the QX, coronavirus the anticipate

to third on share GAAP $X.XX shares net $XXX quarter, approximately the be share EPS an anticipate anticipate perspective, million. to income in to range outstanding. From to million $XXX we in based the $X.XX third per quarter For $X.XX be revenue between $X.XXand million fully non-GAAP per and the XX.X of income net of diluted we

we are strong conclusion, the performance our with pleased In quarter. in

coronavirus the We And business optimistic momentum. call small about ready despite shareholder can questions. now remain outbreak, we we excited are Operator, that to our are we the open longer of to build value over term. the for near-term continue impact

Operator

question comes of [Operator Henderson Instructions] Alex First Needham. you. Thank from

please. question, Your

Alex Henderson

with appreciate all get very did company’s finance running really us in much Well, professionalism you the thank for have a before job into question, put we and the and TS, operations? superb you there your work you I

TS Ng

Alex. you, Thank

Alex Henderson

And welcome replacement. to your

Csaba Sverha

you, Thank Alex.

Alex Henderson

the question before. tourism was the I Obviously, has event mean, in side the a you your first very forward of the other corona that of wanted baht sharp baht in occurred. pressure to expecting hedge from some obviously was the I Thailand the and So, quarter, were falloff ask the correction strong

in it is one will Now you corrected, of way your think half, the any are handle do steps or lesser lower you in fully, these I that where of your you back then and half? do you you lock changing the typically you how rates hedging think policies terms Will in quarter it’s hedge it? quarters two

TS Ng

Yes. let try that. Alex, to me answer

Okay, our change we policy did hedging. of not

for That’s XX% out-quarter. For what is XX% did for document looking it then interest out-quarter the a only for example, further for swap to you hedge. we quarter, and flow we contracts. cash at are as exactly say, XXX% rate what the current the The thing the

all it’s quarter, roll the mark-to-market and – this all mark-to-market, are interest comprehensive income, As over through of interest swap going OCI, the out less rates other then rate time. equity you

PWC on get same the thing going hedge. we done approval, this next flow do we quarter, cash for or So next for but quarter, to it done. we our sure quarter might are Depending it get maybe

loss, what of we then will gain So before have I and in that advised equity. into the all case, the go think

Alex Henderson

be by – the up plan really and was of to rate pressuring to in just implications longer gross away though in baht? that pressure the strength clear now exchange that been removed and case the So issue all, margins I goes correction, the can talking that in at we about corona lock end you do you the rebound has so with term

TS Ng

now, Yes. rebound has forecast The totally is yet. a okay. baht short-term XX.X. the not Right really see We weakening,

mark-to-market been have at XX.X quarter. We last

under continue the baht in that run, again, So to to be will long strengthened. we believe pressure be

in will sell be wouldn’t to Thai make that. they to that hedge. do we XX% then down will the obviously properly I perfect, hedge be the baht, If and hedge sure we can best but natural me industry allow So just think is

So, pressure baht really we into continues the fact do. the in release gross bit, you and long strengthen, some run, very closely. OCI if Again it’s At baht increased had bullet. pressure the face the but got to the will then continues that much a you Thai time, the point costs immediate nothing watching margin. are if yes, to to And little in for we taking to on can bite strengthen,

Alex Henderson

I question, in over have Cisco, made you Otherwise, are including if ask you the XX% assuming I the of would acquisition comments So I Acacia am either think one numbers. been not could way. you that those more about

does this XX% that I modest prior it it that? XX% What going and Is increase, Cisco could just your Cisco? about Is acquisition doing? characterization? are scale increase, with significant you project what improvement talking you of that to compared business of you So assume that business in your to this with is are doubling currently quantify a or to a in some terms is Cisco

Seamus Grady

Alex. Thanks,

you all, which say I of business, numbers let’s It think would are first significant its about we alone. Cisco of on own. are Acacia the the talked doesn’t include course correct the be

us. it So of in our a I looking our at award piece is mean spot. it’s – this wheelhouse, important would very I very for It’s a new and business business for significant as significant I Cisco, in sweet suppose a right us, characterize because it’s – large in

some these shows meetings We maybe about investor We for us at companies the have system the talked some lot of of the components the importance and go level the from penetrating of into of road products. component up. produce a that

sense sense it So time to at us while after same to the to order ourselves. make type the chain It seemed simplify this business go business. the supply of customers make growing for to seems our in for

I one. vertical We have It��s what would up been this a call deal. with vertical, fortunate a

with whole, the hope is as supply certainly, business we and piece a which level will is up. XX% through say, Cisco it’s and streamlines a the the significant – be the customers. Cisco Yes, we its business. So metric component from Acacia, goes expect but the a simplifies chain Acacia Like for it own I when combination of on the of deal for

Alex Henderson

breadbox is in kind can us So got it? is you bigger from that? is increase the smaller us it of some it of I to than you a than systems the give off can mean, Infinera frame size similar – or comment, have you help it business

Seamus Grady

I programs. it’s We don’t of win say business put don’t callout mean, it number all would piece but of now, the range. a I time. kind significant right generally specific in on it’s we We to a want similar the business.

business. fact it’s a calling means the piece significant of it out we are that So

of will similar a of scale. it I be – suppose a So,

Alex Henderson

question then last I guidance? and for see Can will Thanks. floor. upcoming breakout you the one in your expectation the and Okay, datacom telecom

Seamus Grady

In the upcoming guidance?

TS Ng

FQX, – a for we up past the be virus, the flat quarter I but think the of will this to momentum again and continue. quarter but expect we coronavirus doesn’t kind little reasons. a telecom we strength help down The we and datacom. of see mean, us, is I bit down, see couple on

China, guys datacom the outside of most are okay. think lucky, I So

the So, China’s most multi-telecom. of are

So we be to expect telecom down.

Alex Henderson

Thank very you much. Great.

Seamus Grady

Thanks, Alex.

Operator

Thank you.

of comes Troy Piper question Jensen next Our Sandler. from

open. line Your is

Troy Jensen

nice enjoyed luck, and all we gentlemen. Hey, the I definitely over the working wish on results you the Congrats with best. TS, years good you and

TS Ng

much. Thank you so

Troy Jensen

coronavirus. could Gentlemen, hit dive the guys you you on in and

I whole going just and chain forward China So of right I is the expectations an on it for just you guess so virus am curious the could are resilient if kind how your your impact just quantify of that to too much is, how speak? and what curious, now supply thoughts being

Seamus Grady

not coronavirus driven I the a the of on our outbreak many range the number it’s fact in additional many If meant I Casix first mandated say, Lunar it, itself, of with it’s facilities, And shutdown Year, by quarter week and New outbreak of the $XX suppliers. China coronavirus largely coincided it’s own which million have of as the impact the in for component $X that and million an the our – would a many were Fuzhou already government that So to the huge the was week. for in impact. to shutdowns put facilities

February Fuzhou, X government got in we and For because pushed be our of operation out on own February that operation had plans XX. Casix example, the back mandated in to shutdown to the

shutdown So, the to a I the in of extended $XX to our Like about million And be quarter. impact we situation. lose production. several week’s same for million we the estimate said, $X are of suppliers this

fiscal say QX, which So roughly would better been have for us, seasonally sequentially, QX a in maybe be little effect, have in down calendar us. flat or with than line let’s will which would guidance been for our seasonal QX,

would to flat we answer kind $X question, about say, I have an million so been to your So impact. of would without to slightly $XX million direct coronavirus up, impact, this

Troy Jensen

or about there thoughts supply you good or gotten more now for is right just on just visibility concerned you thoughts of has or And chain have just much like just – your couple recent How been and supply? the you week days how have more guys? the resilient on so, conversations do on

Seamus Grady

conservative think conservative we it’s underestimated here estimated quarter really know resilient. or course none we now could of were when say. could think enough It’s we And from to find the very impact ourselves too pretty we saying we we over ourselves of weren’t We and and difficult us the impact. saying find a

sure is as working – who work if I to that operation impact I from it’s obviously – suppliers for is think Similarly, mean, campus. something that are is visitors It’s back both we that a I everyone we and all Casix, XX. are it’s welfare own assumption If a our think affected employees have precautions make imagine, week so we the our our to be on but February were also as in in all happens then health who could a person changes, primary taking our well week, well not Thailand. can the through. we lot XX,XXX – concern get the you our as this and large And our operation in of in come great today of greater. campus

lot of through people We have a there. come who

well. to safe precautions everyone great taking and are we make So is sure

keep from is. get So our should think be sure, eye actually week a very But a on close back chain it operation And But to first nevertheless, quite we’re if today, we everyone going the businesses very, resilient. that’s okay. supply concern. as for we into is

Troy Jensen

Yes, will floor. cede one question, understood. the And I last this

know, is better, that some these guys you been Just wins strength, on or your is laser talking? to existing design of curious getting that programs new industrial comments

Seamus Grady

actually. a It’s both, combination of

quarter of say penetrate there But existing the number to mostly customers, that business strength existing with win and I continue companies. would the a with market was We programs. in

Troy Jensen

down TS, San hope congrats Diego, guys Understood. in to see but it

TS Ng

okay, sure. Thank Yes, for you.

Seamus Grady

Thank you, Troy.

Operator

Thank you.

Chatterjee next from of Our Samik question comes JPMorgan.

Your please. question

Samik Chatterjee

kind demand just the geographies, signs I my deployment a saw supply for before telecom the to of comments taking couple because the appreciate side thanks understand players industry different China. the well, we side your there. even wanted sign of I the thinking think I on warning Hi, coronavirus about impact how network and about you’re XG in as question. including

about the or would how long there on So And wanted orders? I demand up understand thinking is in show it you’re that take beyond if supply chain to so supply the helpful. a insights would constraints, be demand to any in slowdown, level how just your

Seamus Grady

Yes.

the So telecom that the the demand was supply focused than demand the sorry, TS more – about on talked demand side. side

it’s a quarter. greater seasonal again, So We softness. some this see seeing great slowdown huge slowdown bit what any to do insights, have I we would would we nothing see seasonal that and of any normal us, for we in than softness don’t see, we or – from – see we are what a than but quarter. say the would other the certainly industry we this But don’t change claim normally a represent little – as

say The we of other – there’s don’t many I have announced our would But speaking the like what be than seasonal believe slowdown. we – thing do to normal want to say, I TS, don’t think? not don’t for yet, as I other anything is, – you customers them. be seem

TS Ng

Seamus essentially well say one – quarters. two But coming quarter, I the really said. – exactly what cannot we we or for beyond think

Samik Chatterjee

are just Okay, thinking as products? on – right XX% looking got now, above had, year, XXX-gig that which you could XXX-gig growth rate off base. is the How small growth products, about is think of growth the and XXX-gig, I end that the on you pretty a do follow-up you the sustainable And the it. if through the you’re strong, growth is

Seamus Grady

see we do to quite rest and above business. we of growing and It’s certainly beyond above. guide quite together continuing We growth demand with of outpace don’t some the one grouped XXX-gig At strong. but see granular continuing quarter, so for more point, bit do but We the right that may that, be Yes. that to get we strongly XXX-gig the we now a us. for

Samik Chatterjee

Great, thank you.

Seamus Grady

Samik. Thank you,

Operator

of from comes of next Our the Instructions] Marchetti line question Stifel. John [Operator

question, please. Your

Unidentified Analyst

again. John. is a Scott great you, quarter Congrats on for TS, guys. thank Hey, and on This

margins the how you On you maybe affects could opportunity touch systems discussed, forward? that going on

Seamus Grady

something are out. happy breakout we customers to be that to with am I we would break say not a happy customer start that would not doing of don’t we done I we not going business it’s our have we’re and It Yes, sure is plan program. about. to margins obviously started this by piece if now. too very

We the be are our prepared and Cisco. are relationship not margins very about But that program. to to partnership our on talk proud expanding really with we

Unidentified Analyst

So, not margins? necessarily on the Cisco one specifically, on kind, but that as you of move how forward that impact and could overall look some for more color opportunities give you should

Seamus Grady

Yes, – of expanding into would to of significant after we the go able I and in which say our we we’re of the business piece suppose being wins think as we’re at somewhat look selective the under position be couple have system about fortunate business a I space. that we belts, particular I in

opportunity chasing chasing So we’re or customer. every customer, chasing not we’re every we’re not every not every product – chasing we’re not every with everybody,

products to they having than – where customer they it a build if to are the way We us with several a the And it that first just with us are can also help very our supply one for in those are have – – rather supply It being we shop, to some eliminate making our the That helps suppliers. optical allows the for to simplifies seal chain stacked supplier we And the selective. deal of components chain. their really if one customers. us component with deal have – of a margin that to stack They sense one-stop systems. bomb optical already can where lot in makes that already all, of be, the for competitive also for is customers. the

So suppliers. to we’re save of deal allows and they a lot that flattening with with the way allows have in respectable they a eliminate to stack happy use multiple they lot the a us we’re to of the money margin if that margin customer really supply because chain a make that

we secret at you’d sauce, but if stack So and that’s acceptable products is that eliminate really margin for produce way like, a that is us. it are to we the the, price to margin we a the in able that the at do customers, a

Unidentified Analyst

That’s great. Thank you so much.

Seamus Grady

No problem.

TS Ng

Thank you.

Operator

you. Thank

comes Alex of next Needham. Our question from Henderson

Your line open. is

Alex Henderson

going any new say with questions was business program. coming to the fairly of now, has the let Have been fully a you it’s obviously, in bit little only about couple numbers that’s I you you talk get Wanted in, a off tonight. – to production startup or will not there just a Infinera that move or would of commentary fourth any as be the issues that the result a any in costs aware with calendar other helpful? out perturbed quarter be issues around it should that during Did we of? numbers the that fall ramp-up or additional

Seamus Grady

that say transferred. all I we products fully are the in sense of would ramped the are

to As you Bangkok. to can appreciate, from Berlin Alex, it’s not a simple thing transfer an factory entire

we’re yields acceptable transferred, capacity the to We we that the fully installed. are at up the all an are speed, are level, fully sense ramped products have in

think not the them next it demand, Infinera let’s that As demand the I announced few might within regards intra-quarter know let we’ll variability our next But say really I all how with place so that. demand is like. exist really It’s gone. there, week, I the say program days, the talk profile has would about to we’re talk about what happy looks the very

Infinera. We’re very happy relationship with the with

and We’re programs and for transfer the sure gone has just very well. making programs very we’re building excited the be Infinera, to right the new very,

Alex Henderson

that should issue be or aware no margins, that sort bringing it that bit little gross production of? we a the fourth the of there So quarter anything down impacted was calendar in

Seamus Grady

XX.X% related or an just XX.X%, mix. anything it’s overall like No, very the mix, really that gross an the overall really delays margin – product not significant. between the to XX.X% alone. Infinera a But was – it and mix. difference And with again Certainly was nothing

Alex Henderson

numbers? Cisco might the when that back think start you Going into the to do to matriculate announcement, that

Seamus Grady

early I say. to think it’s

our I the think track I end these at is day, pace we’ve fast by past But customer the suppose shown in of essentially record, go the to from very these we’re set the transfer able quickly. – cases. very and programs

pace a the at with. customer go have that We is to comfortable

So we closed it’s actually win. since the recent business very a we the quarter. – won It’s

right really So together throes timelines of in we’re putting with on the now just the transfer customer plan. the agreeing the and

So when might to Alex, the hit, too early revenue really say, it’s but I...

Alex Henderson

that the Pinehurst? to Is facility, going into the opposed in as new

Seamus Grady

Yes.

Alex Henderson

and are on utilization programs? any you And commentary rates those doing about all how

Seamus Grady

break A successful which so break not was used Yes, we’ve meaningful We we the of and to I the did it’s quarters we out really because – doing space been actually, stopped out. occupied because to couple in not as that meaningful spoken ago, it’s for. a Pinehurst. anything degree think indicator expanding Chonburi of

We don’t metric to because we win about we continue operation continue that find the destined be and expand manufacturing Pinehurst. for anymore So not meaningful. again, footprint Chonburi space new in will more and all business – obviously, this do really it’s really the talk

building in about know buildings million feet about about Chonburi the grow would each So course to to – we next trigger have the million. we the for to same. of and business. ready of we X.X pull probably need and And then ability another on Again $XXX we’re of need revenue expand always concerns our the and building, square have it’s have five room to capacity

room expand So we have Chonburi. ample in to

Alex Henderson

a that bigger is on terms in Casix gets get back? one short pressuring highest – you’ll delays the term Is a that that but probably not gross think little sure I Casix mix in the think. the your pretty on also the business, that would then that of revenues bit just and to extent margin to On the of delayed, it very over has margins reasonable margin the re-ramping, that’s impact, the

Seamus Grady

That’s – products is they’re about It’s the components, profile electronic these higher products, a more Alex. margin Yes, let’s Certainly given to component of fair EMS-type products. think a say a quite it, Obviously than nature like different. typical jewels bit. the little optical way than margin product.

So seen you on than the yes, delay of as right, of well every we out if impact We is margin get dollar But Casix. of – more you’re as a like. don’t again a higher revenue. haven’t cancellation,

quarter. that lose XX But get to of If the capacity, it week hard was days you capacity, then to or it’s back. next pushed a

Alex Henderson

of line the start success could, full ought results. expect get already if $XX we a in up the Is ramp accelerate? the ramping fall-off in shape that other million, and therefore up it line products other will one that of Thailand, or anticipating So, to with should I strong moved, and West’s and into we the a be production we the XX%. question as pretty It’s continuing move that’s therefore line to Fabrinet to other production more see to that curve? of see, What’s

Seamus Grady

be combination in Fabrinet or Fabrinet be West, So but programs of $XX previously Thailand. a Fabrinet maybe It in the combination. just that are That’s West million $XX were of will million other, ramped now that also not West. will that ramping

like hard Bangkok, backfill customers we West uptick with As meaningful transfer in transfer see to to will when And production, we we areas. re-categorized our ramp then Bangkok, into if start to other business in West. that grows, business into grows the new we a category it other. you work that nice new one yes, becomes and of the other more should and get Fabrinet in it and Fabrinet as business as But may

Alex Henderson

Right.

to and already So been from is it Fabrinet just Thailand moved already It’s the production West? moved ramping.

Seamus Grady

Correct, correct.

Alex Henderson

third in you was Okay. thought the quarter. it to going were moved be I saying

Seamus Grady

combination the through West. constant flow there a What I would say, is Fabrinet does,

will with ramped that of Fabrinet transferred, in if we us West mix already at is and in a So revenue it transfer of we is And success an but have is entire our bit success that for the is, being for – volatile Fabrinet West to Fabrinet being Bangkok. really Fabrinet we to Fabrinet is program it up any convincing success West an as being and end and it to means And transfer to entry successful counterintuitive that point for in business, new Bangkok. a West backfill customers at time, is transferred. in has feel is a you measure us everything a West because bit means having business, business are

Alex Henderson

it. Okay, Thanks. I got

Seamus Grady

Alex. Thanks,

Operator

Thank you.

question Fahad comes from Najam next Cowen. Our of

Your line open. is

Fahad Najam

for my question. you Thank taking

the a you. your working years. First, pleasure for wanted It your to support with I thank all TS over Enjoy was retirement.

TS Ng

Fahad. you, Thank

Fahad Najam

for seems is account My Can of If to revenue it’s math along It question XX% another right. four the revenue, speak may diversification? your the three, if I Cisco momentum. you like total XX% get be going my goes with to greater announcement, customers top customer to on than diversification. your

am me help just I the understand it right So about if thinking way.

Seamus Grady

have Yes, successful customers. we when one go are current basis few had our with look have years, we a XX% from on course If last Again, customer. we back. XX% had historically three full to we – customer we plans, we of the – the so one having one XX% we report year customers

one a So the same the there and at any do need customer course scale Fahad, correctly sufficient concentrated, being to property. but always of with is over you time, between trade-off, customer serve

I with able trajectory we we new in the – for opportunity that for chain. been way penetrate their show value supply new us to us, are have happy on, can customer and very suppose really markets bring are we simplifying we some So value the the the

and three customers in see back we – as have we we we FY look So ‘XX. as it – win-win a as XX% real will certainly hopefully three

TS Ng

And these about whatever. quality not are all worried am before there credit their I customers.

Seamus Grady

Yes. They high quality customers. are

feel... we So

Fahad Najam

Can of the photonics get number the diversification us is you I think just three remind you beyond that silicon of sense trying guys number customers? growing, to a the top have? customers

Seamus Grady

Yes, we silicon or have X customers. X photonics

X will silicon also X is so them Some names, big as in total. type of household there in startup smaller customers there but some or well, be photonics

Fahad Najam

very congratulations you much answer. TS. Thank and the appreciate Yes, again,

TS Ng

you. Thank

Seamus Grady

Fahad. you, Thank

Operator

Grady, call remarks. Thank Seamus you. would the closing for Sir? time, like At to over I to turn back CEO, this

Seamus Grady

Thank you.

you thank for today So, joining call everyone. our

in positioned quarter in the are for second are exceed guidance deliver another to to QX. and strong EPS revenue again We we well performance pleased and our

you those who at and our We events, of goodbye. are then forward other you. will Thank Q&A be at looking session until attending seeing OFC to

Operator

gentlemen, and participating. Ladies this Thank concludes call. today’s you conference for

disconnect. You now may

Fabrinet (FN) 3 Feb 202020 Q2 Earnings call transcript