FN - Earnings call transcript Q4 2020

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Operator

Good day ladies and gentlemen, welcome to Fabrinet's Financial Results Conference Call for the Fourth Quarter of Fiscal Year 2020. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions on how to participate will be provided at that time.

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 of June which XXXX, conference today's year financial fourth on the Thank XXXX. and results operating With Executive Chief and Chief Seamus Officer the me Csaba call on Officer. are Grady, today Financial Sverha, webcast a will our investor.fabrinet.com. be located call website on the This at and is available being of replay Investor’s section information, GAAP including Presentation, Please non-GAAP our Press refer for to Investor our our Release which important includes to website reconciliation. and earnings I to contain you on today's forward-looking that statements performance company. would financial remind like discussion about will the the future

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

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

would We call like call will from I remarks and to followed Seamus. begin by CEO, questions. for turn with Csaba, the Seamus Fabrinet's over time to Seamus Grady. the now

Seamus Grady

Thank you, Garo, and good afternoon everyone.

quarter and our or achieve results. expected and in the in our I $X and demand their contemplated team than Telecom severe efforts and monitor guidance helping while was guidance our to constraints million potential supply quarter of we ranges, of for above COVID-XX the During fourth employees, our strictly coupled driven stronger financial our guidance, these exceeded by range, Revenue enhanced business with targeted less XX% we the third measures XX.X%. very flexibility am anticipated, gross I'm fourth demonstrated from end the $XXX improved generated high fell continue the to impact of excellent that we of our proud the of model our our us as a results XX.X%, we profitability quarter mitigate quarter. observe margin end short the to quarter operations. the fourth of on but grateful at From at perspective, customers million as in

From Continued efficiency we that to gross returning mitigate efforts continue slight potential than [ph] see to target infection. in a we ship to offset committed to XX% the and for so more range of gains an headwind X% remain expect continue tight XX.X% margin to to during XXXX. COVID-XX just in perspective, under very of the revenue That to said, the coming fully expenses SG&A run we do quarter. fiscal operating with our from

to We a longer lever the SG&A expect continue to over operating margin term. be for expenses improvement

non-GAAP share. very flow. a substantial line in $XX the in million $XX per we the largely the cash ahead. flow As fourth to We resulting and fell flows income healthy upside fourth $X.XX cash million bottom operating we anticipate in quarter In of result, quarter revenue as free in that will net look remain produced a cash

share. revenues $X.XX free and $XXX cash record and flow $X.XX produced of of For non-GAAP $XXX cash we the full over million. was net record million Total the fiscal for income per a was year billion year flow operating

showed the in automotive details, anticipated the growth Looking at and markets revenue out Telecom sequential and some sequential both industrial of the lasers declines. played much while as with quarter Datacom,

total optical from QSFPXX end should million and from was at also the was of million increased our quarter. up the revenue last to continued one an at call. demand these on $XX $X in of we largely saw transceivers $XX third revenue. was ago to down to $X of the communications. technology, optical million. of over than revenue. Telecom of the $XXX Optical from be quarter quarter's business or grew to million, strong Datacom million revenue will correction $XXX $XX We slightly total As $XXX inventory XX% growth By QX anticipated silicon first combined XXX-gig of communications at also above year from sequentially revenue communications X% or million first of issues in was and sequentially. $XX million quarter By total fiscal in a impacted XX% the QSFPXX the fourth products Telecom Telecom growth contribute and quarter QX third inventory as Within XXX-gig XX% rated the third with dynamics, rate, million, million By Revenue revenue includes of at from from quarter. in that revenue more the from increase of the our grow we slight up X% the data up quarter. of XX% the to represented optical photonics-based coming XX% from third programs XX% and customers, result speeds quarter, communications, revenue This with when non-optical believe and grew a million from by communications $XXX impact discussed in which

We to rates remain faster XXX-gig while and strong, products from those data XXX-gig should continue revenue trend upward. to expect at

revenue automotive and Sensor million, $XX and quarter. quarter million with million prior the sequential from from $XX revenue million $XX in $X markets. the was fourth Industrial representing million automotive in industry was business anticipated million to decrease. revenue moderator Looking third $XX in revenue quarter, compared in compared third at the revenue $XX consistent million our was to million primarily million $X the and quarter laser $XX third expected a to non-optical $XXX of due revenue laser quarter declines the sequential communications other in as was the

expect automotive, non-optical reflecting in look to in the we As and softness continued communications market first quarter, we drivers industrial broader lasers conditions. to see

remain term settles at over down. longer COVID-XX optimistic in the opportunities these However, we markets about the impact

Velodyne sensor We automotive will also soon the LiDAR begin new believe markets. that the automotive traditional of from some as current to products ramps offset weakness in of such

ability product customers process, design our look capabilities help NPI be we new By to volume improve we quick and winning manufacture in Thailand, them can continue ahead, introduction and well provide important the services, or closer begin also in an for to for our factor services during U.S. now them will market, to partnering manufacturing. before as NPI turnaround to in in provide Valley, design we prototyping new as business. accelerate As with enable these We Silicon customers Israel. time

fourth as running, Our as is first qualified, and we XXXX shipments the being operation completed revenue Israel up and in ISO fully quarter. customers to our well

the optimistic in we demand Valley. serve this Silicon customers replicate remain the for trends All-in-all West the and that for we're in additional the traction expect and which see volume to we seeing good our Israel customers COVID-XX new to producing in we've we seen in markets We particular, products manufacturing at we are despite with success Thailand, on-ramp headwinds. excited are about the about Fabrinet

reflected of over revenue each year. represent increase revenue and of XX% Our compared optimism we had and sources. number one our annually. to our the is of to more represented XX% in total increased three from of measured XXXX the contributing Infinera, customer revenue, increased in penetration also which in in than for customers just and customers as diversity revenue XXXX, revenue the Acacia diversity XX% fiscal our XXXX major by disclosed just XX% We in Lumentum to

XX revenue. customers overall of top represented Our XX%

network ramp illustrated products quickly XXXX. transfer transfer Our and ability by to Infinera's of was complete in network successful systems our systems

end Chonburi at the We expect our the Cisco of transfer the evidence transfer currently to proven underway the be of further products our year. to remains capabilities track program success campus. of of on with at calendar demonstrated ramp This

continue campus. consequently monitor begun from of existing We in capacity the additional Pinehurst the have capacity for next to our expansion demand increase customers and

of our begun site. in manufacturing further at office existing order at that some capacity relocating the footprint enabling expand process existing space expand customers have We Pinehurst, to to

$XXX year. add the investments business, of to Pinehurst, We space at these balance current expect with cash fiscal growing When of million fiscal XX% capitalized generating flow anticipate in our manufacturing with this increase feet entering fiscal we end favorably the at manufacturing an square XXXX, campus. at are significant this Even our XXX,XXX in free approximately new from of footprint combined cash of again very record expansion nearly the XXXX. we

us We performance enabling we of We growing activity that shareholders. in additional board three that share summary, buy-back our the flows, to As by XXXX $XXX In to continuing with in invest delivered XX% share are fiscal quarter to up our stronger million. quarter. combination to best reflects above support revenue This deliver our generate growth. that entered significant up was underway to to a authorization demand, increased with we strong with customers our in with expectation with our already new ad and we our program first facility continue fourth expanded in to repurchase fiscal our and expand cash to contributing even we are an in Israel to term year manufacturing cash shareholders such, long the has now growth. record our step value our investments commitment return ended value footprint our will our can returning and repurchase guidance confident balances

While very we're of fiscal excellent we proud remain XXXX. in we results safe, delivered employees our vigilant in keeping the

ever demonstrates about optimistic strategy that our than is working we Our track and record are future. more the

for to Csaba first for the financial turn of the Csaba. and fiscal to like guidance quarter I'd over additional Now XXXX. our call details

Csaba Sverha

that details changes pleased was our and that guidance a year Upside grew Thank results you guidance demanded due exceeded that the financial deliver for the good very than you, quarter. Telecom the the of guidance to first afternoon COVID and financial smaller and everyone. for we fourth our faster the quarter will quarter. of provide We results end in our assumed with were than anticipated impact fiscal on Seamus to XXXX. quarter in towards our in I more quarter anticipated the

at revenue corrections end guidance the result line these largely at This behind with of result, a an customer, was $XX our which of includes was We million. us our believe in particular range impact correction above $XXX.X also are an expectations million. $X point. high this inventory at approximate million a at As

release P&L. you Now details earnings can on reconciliation of our which of website. turning presentation in measures our GAAP our A investor find to and the non-GAAP is press included to

and in their We the safe continue our employees families’ during customers, keep pandemic. facilities to strict procedures safety follow to our

revenue. fourth with XX% gross a to committed associated cost XX.X% of in XX.X% range of sequential the to X.X% or income Non-GAAP the XX.X% revenue, we in can that of to during were of range that we the to with operating this believe million from margin, and expense to in a during remain $XX.X improvement efficiency resulting to slight fiscal operating non-GAAP million was margins efficiencies are XXXX. in While or the return continued other efforts $XX.X We able quarter gross quarter. X.X% a drive heading

We expect well. share, net forward, generating $X.X reflected were quarter that third operating going largely tax the fourth the from effective Non-GAAP the improving margins. rate $XX margin was Taxes gross despite lower in will our primarily as gross quarter $X.XX improvements income and again normalized million our in margins million a to X.X%. improved $X.XX increase or due per of diluted revenue, be

billion, of XX.X% per the revenue X.X% non-GAAP share. or income $X.XX $XX gross For $X.XX basis, for expenses income in per and net fourth net were diluted GAAP operating million share. the diluted revenue, was $X.XX year On of a was was full resulting margin quarter non-GAAP

GAPP quarter our expense other to costs, share fourth compensation impairment a amortization the goodwill for In of based addition and results issuance included expenses. expenses, non-recurring debt

the flow cash from $XXX.X statement. was cash million million, of an cash, fourth last investments cash $XX.X in quarter. At balance the and the and end $XX.X approximately sheet free increase Operating million with quarter, flow flow a were the of of $XX and million cash was million $XX.X fourth record quarter. to Turning restricted CapEx

strong. the the we was remaining for year flow $XX.X cash fourth $XXX.X also end our cash flow repurchase We cash share were million quarter. the shares repurchase did not record free a Our million Operating of At $XXX.X full in program. and million. flow was had the years during

shares like risk XXX,XXX by balances working FX followed From million. capital us $XX.X of total disasters a unanticipated and priority prolonged hedging outlay risks a carry we maintaining an natural of $XX.XX, will average funds through repurchased which believe price total remains maintaining sufficient downturns. economic for cash we perspective, our at capital XXXX or fiscal For CapEx, includes and maintenance closely that mitigation, with first allocation a

well cash operational and current Our on safety as opportunistic balance covers this M&A. as our priorities, sufficiently locations for security

in generated to in We flows aggressively growth, expect we in by by years returning We strong to leverage continue to a cash way generate now also can value reinvesting balanced believe ahead. the cash shareholders. more

board from repurchase of to up As size remaining stock the million. authorization $XXX million our such, to the $XX.X current our has increased

our automatically, on retuning now to fiscal customers evaluate also ideally focused our mitigation, In maintaining will this including the periods stakeholders turn to while and overall operations market shareholders. market addition the us like even to and we our serves allocation that in program, open program capital is enable I all restricted. and quarter our during that for guidance been reinvesting employees, risk investors, share first to program has would to value growth to of the implementing XXbX-X repurchase open We year XXXX. of repurchase shares strategy, which believed

seeing in that more We we markets. are believe offset will current are softness the optical encouraged in by we other than growing demand communications trends

continue at the the of the to the We quarter saw end demand quarter. first stronger we fourth expect in that Telecom

to We revenue programs. industrial will advanced from we offset believe softness automotive expect and decrease Datacom continue, laser by traditional automotive slightly partially and growth revenue technology

revenue expect be to total the million $XXX million. first We in in range quarter to $XXX the of

ranges that $X perspective, in we range We be we GAAP income that increases typically and in record continued efficiencies the face non-GAAP From million to quarter our net year. the for very per share to of $X.XX fully to number can seasonal earnings we to margin, even are a full In pleased shares first quarter $X.XX with deliver to the diluted outstanding. fourth $X.XX conclusion, on approximately anticipate we in quarter. metrics income of cost an and in drive of net $XX.X key results gross in have guidance are exceeded per share the the first based for optimistic

demand deliver ahead. as we that to shareholders to stronger offset that confident to we we parts strong we We continue look in for business call than and open Telecom of are other could are the headwinds optimistic our trends more are can ready questions. Operator, value now in

Operator

[Operator Instructions]. you. Thank

Our comes first JPMorgan. from Chatterjee Samik with question

line Your is open. now

Samik Chatterjee

with customers Hey you're questions. here. your terms we off I CapEx If What communicating across bit – particularly and guys, your over thanks the taking quite for capacity outlook, fiscal ’XX strong a are outlook start a to over in capacity to and of relation here, pick-up the did seeing your businesses. my just strength additions additions required could in and you

increase looking I in the needed you to of CapEx are you – fiscal to for forward already ’XX cycled a – are So kind you and customers are primarily or CapEx you material have follow-up. Thank a more in have you. you passed additions your that

Seamus Grady

I hi Yeah, – think Samik.

I assessment. think a fair that will be

be building manufacturing that XXX,XXX square a we will like You of the adding adding office of the space capacity. one and capacity we're we’ve communicated feet then space effectively remarks, office the and as about converting existing we're and additional where saw into was of that we've feet additional manufacturing number relocating a you that and Pinehurst CapEx new prepared throughout spaces XXX,XXX space roughly our then increase location year into at campus been the building said, know square in

we've existing our you know want they part, to in previously really stay who are the for in As Pinehurst. Pinehurst the said customers that most campus,

relocate So than if business to try expands, our to to in customers we the somehow their force Chonburi. have rather to Pinehurst footprint expand

I so know you – demand we marketplace, would the perspective way the the at we is that situation demand about say seeing from COVID COVID into But increase the quite we're talk we – really So is let’s we're in is here. I that now, the optimistic capacity about say taken not the in seeing impact are were then, driving what's and really additions customers. think, new notwithstanding, it the it's aimed factored you're we now account seeing we've capacity in new-normal right for are Chonburi thinking quite our trends a about us

Samik Chatterjee

Got it.

the be to long-term Just expect here, fiscal back following-up to XX% XX.X% in here ’XX. you margins on did mention you that in range of gross

we go revenues think in help growth revenue, the But that mentioned most about the outside in ramp, year. of probably have we it quarter the should because sequential as outside kind be year, that me other you think COVID we’ll Just the itself. here, go – first I as the of through through impact are drivers what of the seeing cycling you of as past

So think what are get other the to drivers when back range? about you to that timing

Csaba Sverha

Hi Sam, this is Csaba.

So now. and in part of prepared year as our in obviously impact quarter, with to margin our mentioned is we for fiscal although the next projections the regards think we’d remarks, like existing our business becoming gross that COVID-XX to fiscal

up spending continue. making all expenses social are other the we that, distancing safety anticipate employee are which we So and cost we the than that on related to

anticipating that operational are We with offset to efficiencies.

If we look margins to improvement. from increase you were by about gross our able XX efficiency points QX, in our at basis performance continuous

So and headwind typically improvement efficiency of from those that and and automation rate in bit a all as actions those to the we are productivity foresee productivity hard diligently first obviously we COVID-XX, through. ongoing working expenses quarter such we that the operations offset from the driving see annual is improvements, and by increases

improve leverage, working and So efficiency. the revenue than are other hard operating to we the

during to think term longer again, to return be and in So we the gross like to offset can related are fiscal target our a XXXX. going margin COVID range headwinds we'd

Seamus Grady

carrying, with and way to the – COVID. that with a that all do now, do business Csaba headwinds Yeah, if headwinds I that that's protocols looking right just mention, headwind we of probably so additional the you we’re the headwinds, as the XX to just part are take tailwinds of our – basis that maybe if points the COVID we're add and XX the of the obvious normal, we’re costs to could normal now Samik, at

yearly. we the increase merit implement that Secondly, we have

are want COVID take we sure though care employees. in of great we So situation, a to even our we make

merit in containment headwind have our and And as we've very Csaba very this increases we cost in We under generate, cost So right frankly to able QX quarter. for then implemented that mentioned, a the that costs tight efficiency presents obviously control. improvements keep been again the employees mostly tailwinds, control. our

see I with too it's EMS of there many kind of that OpEx. don't X.X% for think our revenue. companies other OpEx; You'll example, are

to therefore margin company, So the grow the the incremental line. leverage know get as a we drops bottom lot the of we you gross

the get leverage we So there.

So again, in improve factor quite we that we the headwinds, margin place gross the we know managed can it, back feel that so factors, all and good about we know of them, sense a as the draw are those a in combination of you them go we we to the bulk vast we of in forward.

Samik Chatterjee

taking Thanks Okay, question. thank you. for my

Seamus Grady

Samik. Thank problem. you, No

Operator

Thank you.

question next Our Stifel. with John comes Marchetti from

Your is now line open.

John Marchetti

you much. that you could was kind than that if COVID or Curious I bit of very Telecom towards starting it really back come talk and bit wondering you out others little were was some saw, there strong came that any earlier about if geared maybe of that if across quarter. a Thanks was go know the of be end the helpful. demand color to you in Seamus, towards that the segments, provide a geographies little would can multiple

Seamus Grady

speeds, and also the like QX, of the rated correction QX I then with really last growth we that a that saw higher, we of and revenue know the we expected say did Telecom know would that inventory I back coming at products. quarter. had the coming And correction, prior as so demand was some the back higher say, growing higher you you in the quarter, the see into Yes, the inventory of effects have end have seen combination we of maybe some

And we Csaba, if – as that So the quite back. continue add coming to saw QX, being I’m into telecom we we, products do actually. we see to be strong higher anything look end you’d that. also

Csaba Sverha

pretty No, board. as it’s much you been the mentioned Seamus, across

Telecom feel John, the next and to tell continue particular and higher that about good was that’s demand demand hard a a we pretty particular Telecom data the in the in see Again, what it's rate customer So that trend geography the this whether so we saw programs strong uptick we seen. to in had it's expect that we or quarter.

John Marchetti

understood. talked supply chain on Yeah, was on supply the planed bit Seamus, you for. of and about little adequately quarter that challenges and And being a then last chain some side through that making quarter side the the the sure maybe

now. that getting that from like of Just curious the to feel your stands where sounds also and normal. is you remarks, supply the bulk behind like is It you chain back

I sure want read Just to that correctly. make that

Seamus Grady

I Yeah, chain, I because supply challenges you're about you John, the supply always paranoid we’re chain say ship. borderline you say that know know would missing if you resistor, can't last would

paranoid vigilant completely and always supply on we're very chain. remain very, So

team of get chain supply sure the it every We and start have did around parts in cases. We it challenges then think, a feel It’s the have quarter go for different always way not chain every those crack we the of are we go feel day fair would it's parts the just I say a on and and characterize every have we believe, going and we chain every some maybe prior, to share a I just, unfair the supply we the challenges, our little every you after I cases us. terms challenge. make are quarter, out, big that know John challenges with share quarter, this, in we I to after our best say to and some industry. in behind have on. day, our but We bit is we in what's would good wouldn't nut arms the allocation supply

which widespread, MLCC back more it go this you challenge. years you of around, At to a had a it's time ago, bit If a makes couple the more situation.

at a couple look of could ways. that You

do no We far, maybe one I more of [inaudible], see across table but really revenue challenges. still, there do on feel with the and are number say could and arms spread right commodity less our have note to it's now to is, with when leaving being we become to non-linear. going biggest and that’s the us, impact say You they output revenue we multiple would a commodities there’s a around

to So quarter. we’d than end can we be. be in fashion, so linear loaded like produce like We’d to a little produce we'd a the bit very more back that

look possible, certainly operations quarter. Not than impact our to on the to we an level that our always are flat and bit we on you like loaded, sense. makes but this at a production, little quarter If feel target so kind more for so be linearity, be more we of loaders bit backend little of loaders we actual output if

John Marchetti

Seamus. and you on to obviously with Yes, do has just little a on an are that of but customers you follow-up place mean customers, a I that a bit margins, impact orders asking see then you sure the it can bit so customers around your supply side. are that same have on way little you times, is pretty order know still lean just chain arms or behaving that much you make

Seamus Grady

know components when the to beyond customer supplies order hit we component you when you’ve components exactly get customers tight, are supplier the the make beyond lead We're what time. typically go sure end working doing. whoever whichever a parts. so commitment we're John. makes normal with the the That’s time component head In the will Yeah, to - nail is the to to on lead tight,

you we – like order once lead to that. with have beyond sure, customers underwrite our financially because time to we're we So know be we customers, that, responsible if for working make you sure that can't our make

a to our of place, we really understanding sure in a we're kind arrangements right now, make have that working that's what with So three on customers. is way

and them and component that You are placed able any the suppliers we lead causality know see then like times. that. lead time [ph] component value components beyond you of if the orders we see beyond honoring give value to underwriting, orders the They

that's through really that profits. right to So we share have and make now, secure to our work challenge the sure we all of

John Marchetti

Thanks Seamus. very much

Seamus Grady

John. you thank problem, No

Operator

Thank from Alex question Henderson Needham. with our you next and comes

is line open. now Your

Alex Henderson

Thank you very much.

it’s rate around mundane lot you some I because months going sense start to rate? what couple the your moving be give us FY’XX? I us some on the we you about what's of government talk exchange tax think off a moves with and Can should on could. Just Obviously, of for a with of if could discount. Could giving give using guidance some

Csaba Sverha

Hi this Csaba. is Alex,

around. So again rate down movements rate basically effective tax see, which slightly was XXXX, as year-on-year. slightly fiscal tax X.XX%, was In in you you if our mentioned came year at below our about last certain

So longer anticipate range, the low for term, to tax purposes, the around rate the in be modeling still we X%. in X%

Alex Henderson

X%, great, I Low coming ask, is poignant And then systems thanks. pipe. wanted nut a one the the around down it's big second Clearly the more business. pretty to

You the numbers. have potential customers two impacting

should a revenue customer out March an I and is had obviously quarter, that June be think we one do as December into about falls inventory to First be quarter. going in? a think How Should material the in metastasizing quarter. quarter, correction December falling out that the coming the but then contribution tethering that or a customer starting have in we sequentially, be don't as the until fully it's driver this December in quarter you additional from second about really those that and thinking

Seamus Grady

of actually this have out and into QX more and of actually revenue be on, and qualification’ not terms but QX we transfer do and and in that that's that quarter, actually. we've some of ramping started over transfer. ‘if activity of type some on, QX meaningful the we'll It's it's a that So activity transfer going going

I think it will become meaningful…

Alex Henderson

what relevant sure could, quarter? the you September If quarter, or this I'm it meant. June not what you Did quarter I not the mean is

Seamus Grady

quarter. the September mean I

Alex Henderson

you. Thank

Seamus Grady

you loop, revenue know the terms in and qualification meaningful. the know that a particularly of sense programs number in quarter. of you know the meaningful the process, in have in Meaningful it’s but part actually not Yes, not in you we qualification number actually particularly shipped and

the and June more mainly in really know quarter, yeah probably December quarter, December becomes know to that will become out start become, it's significant, well March think you think, you will I it into it it but quarter, the I meaningful. quite quite

corrections The have, they you going know still behind Fabrinet. have largely We just corrections our suppliers than that think you are perspective mentioned, inventory inventory you the other may they us. from have we but they understand know on, more customer may

that to end you then not business a who suppliers, from We're should around the around it's optical is optical us suppliers that then back we currently to gets you So other being handful neutral course the our the companies hopefully know become out growth know in companies, if you customers up, system that those really would let’s our system where companies, in the are start are the be world components those to quite good strategy. as for know optical those us of of they’ll and of there get were, we of we view. system networks Huawei business Huawei maybe to if sure. – other And of feel supplying we opportunity and world, trying our pick an we're space. kicked business, know are those you part quite other the and an Fabrinet level for important that they those affecting of fit but upside up for really should hopeful represent then it from not components even we can a every benefit say companies, target you companies you so company components point that come know And will there's to like and to end

Alex Henderson

to positive fine right offset the the about it December quarter to think seasonality. normal little sufficient quarter from of sequentially a way Is March it the the to magnitude that it? is Just into bit, tune so

Seamus Grady

think about that yeah. will a good be That I it, perfectly way will be think correct. to

Alex Henderson

much. very I’ll floor. recede you Thank the

Seamus Grady

problem. No Thanks Alex.

Operator

Instructions]. [Operator you. Thank

Northland question comes Savageaux next with Our from Capital. Tim

Your is open. line now

Tim Savageaux

Thanks, and afternoon. good

Seamus Grady

Tim! Hi

Tim Savageaux

the on Congratulations results.

you looks million know to about it a like like I it I You'd it's to up you mean know factors. – might where my been. the looks currently of Telecom combination business expectations decline expect and mentioned relative $XX have

You mentioned on two, couple to toward side the Telecom factors; accelerated less of quarter. a one, looks supply of the kind the of XXX-gig end demand. It XXX-gig, be headwind;

you here portion pretty the those quarter issues what increased range have kind via you at and you demand. am might was two upside It would and ended how how down. look you If the up, in of supply I a nicely entering versus it or expected less Telecom factors, the expected

Seamus Grady

impact we $XX impact $XX had in we COVID what the the So million smaller that. and That’s in the $XX I tune was the quarter. million us you probably million you had guidance anticipated into about $XX It was than thereabout. of much know that factored to know range think would actual to our million,

of So I number it's a a factors. think of combination

a we that's customer correction. think mentioned inventory the you big have I whom with factor. the as Also,

this part that self-corrected be. like past we and are back it most the to quarter where we For has would to

couple of as factors said, know a an then speed did the So a and we the few of there Telecom you higher a bandwidth, end so you see factors of in the higher impacting growth quarter, the products, towards couple demand there. uptick

Tim Savageaux

Yeah, very helpful.

module the guess COVID ecosystem the the we're kind guidance, based question IC kind that level. to strength on from in you given pretty Datacom of seeing know quantify cloud, both impact, XXX-gig of side. down So and across Datacom in I level results particular the broad some modules

on You the I surprising down here look June a a impacting that side. wonder could to that QSFP talk know you dynamics wonder outlook. Datacom see little down tick quarter. in in in what’s you We to is It could expect I the Datacom I flattish, like bit. context. the talk did about if if an think uptick you flat little about

Seamus Grady

things. couple Yeah, of so a

that’s you an seen, declines settle off specific now. maybe ramped customer, historically, of going transition product erosion erosion space have that the particular that's to a a of would program is at offsetting the the to the program beginning of hasn't think to, things program if of, us. going Datacom generation customer the existing So where do its in We historical tapering I normal of in we where price erosion first on I me. fully say say had for know but price you down would extent ending price pricing, is outside I that levels ramp, couple We're maybe all, to the the new that follow we back seen some kind had

see Datacom. Overall we going really we quite about say. that’s Datacom on So are what in I’d optimistic

as we going transition one It's that's for one a a, another We customer, I or anything that. like wraps lost haven't say any more we've down up. particular don't program ramping on share a is product – like of believe

Tim Savageaux

very Okay, thanks much.

Seamus Grady

No problem. Thank you, Tim.

Operator

this like questions Thank any the closing in I'd queue for turn I'm the Seamus back you time. showing to no at Grady call and to further remarks.

Seamus Grady

Thank call joining today you, Thank everyone. for our you operator.

are We pleased guidance quarter. fourth to have in the exceeded our

then, Our speaking next and track again time. optimistic never been our record of safe! stay Until we success demonstrates that about with We future. you our to have forward strategy is goodbye more working look and

Operator

does program thank conference. now your today's This gentlemen, for participation and your you and may disconnect. Ladies you on conclude

Fabrinet (FN) 17 Aug 202020 Q4 Earnings call transcript