FN - Earnings call transcript Q2 2021

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Operator

Welcome to Fabrinet's Financial Results Conference Call for the Second Quarter of Fiscal Year 2021. 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.

Garo Toomajanian

good and operator, you, afternoon everyone. Thank XX, for discuss Fabrinet's you quarter fiscal ended joining for us to call of December which XXXX, conference today's year financial second 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 Investors section information, GAAP including presentation, Please non-GAAP our press refer for to investor our our release which important include to website reconciliation. and earnings I to contain you of 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 opinions 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 November 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 QX you, another results Garo and had and our with good optimism. longer-term afternoon that quarter guidance record everyone. We support exceeded our

efficiencies, over as our generate QX on we sequential well was focused deliver in areas margins their are million, record quarter outlook, were representing year. based Revenue current across helped driving with levels our at remain We strength year-over-year highest a that in fact, all record in second In on the positioned business. a quarter growth. which of to another as $XXX.X key

our details our today's result, EPS drove and focus I financial provide broader more guidance. will Csaba our call, comments On a and a $X.XX. on themes on to performance that outlook also and strong and will the my As record support sequentially year-over-year increased results

second programs, an anticipated largely played the driver combined from surprise automotive represented quarter which most in out significant with Our upside as the quarter. unexpected positive of

grew the first doubled XX% In quarter fact, from than and than year a ago. automotive revenue more from more

see from and automotive from automotive programs customers continued such new more traditional to our which a growth to are contribute stronger as even recovery a LIDAR, meaningful We growth in way. to beginning

approximately momentum that continue are We expected. better in Revenue into automotive was than slightly revenue. this quarter will was optimistic the flat space the from industrial third and lasers

revenue we longer-term deployed continuing We offset industrial inside communications, datacom third potential the expect laser telecom continued remain from the products that market. from this softness and to anticipated for in improve increased we would optimistic about outsourcing center. strength optical quarter the that data had are In

quarter. in second Datacom fact, communications In did growth anticipated. optical as in saw revenue the we modest revenue moderate we

However, offset this stronger revenue. more was telecom than by

to X our we broke our customers, discussed also believe manufacturing very plans twice on expectations. and ahead This million We expand our This are quarter end growth transport we full campus by the in ramp, datacom business X in a footprint revenue in anticipated is an the our quarter Part ramp both growth approximately building Thailand. been of optimism size of continuing by contribute We in our optical anticipating had square largely This increase reflecting be of in a combination Chonburi, sequentially. on past is anticipated confidence and scale million further our our that recently execute foot our quarter. we complete to and to telecom driven triple ahead optimistic expansion providing that datacom of our plan. footprint. the the serve the footprint new Cisco, with communications and from well in systems Chonburi quarter to advancing transfer third our improvement to of which third our contemplated we would to Cisco over strategy, automotive revenue by of at We and revenue now increase telecom will will expansion our square XX% fourth as have the was the program originally at us and optical global has are considerable our ability are earlier our should feet, the will been faster growth show ground Due new progressing longer-term. we transfer roughly will calls. growth. nearly capacity This that on

We expect construction in with revenue we to summarize, that from pleased record approximately two see results revenue quarter very earnings to are To again start could take years. second facility means approximately X.X and guidance. we years, once our represented exceeded which our that this

efficiency improvements produce operating focus margin Our on margin continual quarter. helped in gross the in and

record-breaking market another the be for company we products that we ahead. optimistic new our will demonstrate programs that leadership, from continue to QX we continue of strategy our expand growth and look As are we on quarter growth believe and success the to will as

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

Csaba Sverha

optical XX% from from or record a sequentially. above revenue revenue We $XX range. our This $XX.X from and revenue guidance $XXX.X $XXX high-end revenue, down million, QX. excited million revenue $XXX.X Optical million everyone. afternoon years exceeded our ranges. up X% XX% or was total million, in good the and communications, new was Non-optical Seamus million communications beat total million quarter. was of telecom Datacom that last increased X% XX% record. our of of to was guidance a communications two were performance up revenue you, $XXX.X Revenue was Within of nearly QX. was Thank and deliver XX% strongest

While as pleased telecom this growth datacom revenue were than we offset declined in see in more to expected, QX.

up photonics from revenue third year a XX% million $XXX.X rate was down from QX XXX-gig strong a doubled from than faster more Revenue data saw quarter while from Silicon year ago. also datacom significant revenue faster last decline products a X% growth and quarter. XX% XXX-gig down QX, We from optimistic of in that are will from to return revenue growth. million, $XXX.X products XX% but the XXX-gig ago. as saw up from was a revenue very million, was and $XXX.X very

from automotive sequentially Looking of XX% to become the at communications second more record our ago. a million non-optical quarter, than the has year revenue business, in category grown largest up with and XXX% $XX

new As from was QX. programs to stable million, was at $XX.X X% up revenue laser saw percentage which strong LIDAR continue in revenue market. about communications X million and Sensor $X.X other point non-optical this million. was we include Industrial Seamus growth optimistic to be and mentioned, $XX.X automotive revenue down

tax Gross on XX% Unless press or profitability investor were can Now the efficiencies margin were in now million operating million which was the A revenue. a second metrics otherwise record expect which for income turning incentives we ongoing are net release $XX.X was our reductions. our Non-GAAP our $X.XX our manufacturing rate to also reconciliation and our result expenses of GAAP This non-GAAP year. growing in was profit, our of was share. GAAP Operating effective presentation, quarter portion in non-GAAP the cost up to net in basis. per of XX.X%, the produced a a normalized This or from you $XX.X million P&L. find $XX.X represents and be focus revenue. quarter. quarter income facility, or million of X.X% the on prior Taxes at $X and to X.X% Due at improvement our rate $X.XX of included details tax earnings measures was the of or share. website. noted, our tax effective basis, about per on X% $XX.X is record of diluted Chonburi to income X%. a million On

end quarter sheet and restricted $XX.X Turning million statement. an strong flow cash investments growth. million. to was support decrease of prior were $X.X balance outflow a inflow flow the increased the to of free the CapEx the $X.X quarter, cash was primarily of flow million, cash, cash and in capital due cash in Operating second the quarter. of of $XXX.X an million, working our second revenue With from At

ground our campus. we a Chonburi have mentioned, broken at on Seamus As new building already

CapEx growth. longer-term an in construction our X.X-year estimated This with investment expect in period. invest approximately incremental alignment is over our of to $XX million capital We allocation strategy

XX we of had our quarter, XXXX. repurchased fiscal $XX.XX our of at approximately the we XXX,XXX third million. in program. quarter, $X.X I remaining also At an consistent During outlay are average the for price of turn [ph] to capital cash like strategy. now shares a allocation repurchases year total million of quarter with to the end our would share guidance These the for repurchase

all revenue have been we and are the in categories. key optimistic third expect will that trends across quarter we the positive We experiencing continue growth

at expect products We grow demand our growth sequentially. Telecom the communication higher continued of to optical program. data expected Cisco by being ramping than rate combined earlier transfer is with driven

that trends also non-optical in In growth. communications, also we sequential and area. We this datacom anticipate modest becoming more are believe positive we growth anticipate

have We new automotive programs seen continue third the expect in quarter. with trends we will

We also anticipate industrial as sequentially increase well. to laser revenue

produce and quarter we that $XXX deliver quarter third $X.XX record be per and optimistic second total another $X.XX performance. are million EPS of share. to are In between in to the third We pleased range record in summary, will quarter $XXX million revenue expect diluted and be the the to a to result

We programs are ability excited with expand from new our to margins. in multiple with coupled growth the areas

shareholder that to aggressively revenue ready to enhance long-term and will are further driving value. profitability the call new and position opportunities Operator, we for and continue questions. growing now We open pursue our

Operator

question Instructions] [Operator Henderson with you. Needham. Thank from is Our first Alex

please. question Your

Alex Henderson

Thanks, guys.

of questions. couple a So

of So SolarWinds have I penetrated as any with sure and SolarWinds? did didn't just to experienced any any hack wanted lateral getting issues you a of subject. with or that your you a off make have result issues little customers

Seamus Grady

not we have to hit were Alex, this SolarWinds the quite aware fortunate our did customers. No, is Seamus. any to be We're We any not issues. issue. by impact Hi of not

We controls, very, So think quite do is but tight I an fortune very there we've element as good well. obviously have fortunate. been of

impacted. we thankfully, So, haven't been

Alex Henderson

Thanks to glad answering for that that. one. hear I'm

the to question tax what really couldn't comment ask you rate was I gave you me second just you I guide. tax was understand the could The wanted when tell because

Csaba Sverha

is Alex, Csaba. Hi this

we have commenting we coming are what tax Chonburi rate, tax more incentives. campus our anticipating are where basically more our and profit So from we on

So down. driving our tax rate that's obviously

Alex Henderson

Yes, I hear gave I but just know, the a number. you couldn't guidance,

Csaba Sverha

[Indiscernible].

it. about That's about X%. Sorry

Alex Henderson

About X%, thanks.

question looks any get ask it's all? that like to closure, Acacia it your you merger obviously is and would given I change going have The Cisco to and done. that on Does second wanted trajectory at impact

Seamus Grady

Yes, so relationship. good that we about feel far

we've we strong didn't or went one through, deal go deal other. I the if said through the way really think didn't past frankly in the if have or views the

think we our both and good through, we're go happy relationship with again for there both very it's obviously companies So Cisco. see now with to happy the deal we're with companies,

major from So view. point no our impact of

Alex Henderson

acquisition how to the And or announced. that the from impact way Any you one Lumentum that about other? was

Seamus Grady

Yes.

So obviously, our is work Coherent our also strong customer with we Coherent with had a -- has some than been for are are they focused industrial many a Lumentum with years and for the They on XX% a side. largest and less but ours. customer customer they time of were a and of laser both customer, relationship ours

sweet it's spot. kind our in So of

know, tell. time say, very You it's to early will

conversations the we're related with stage to actually at either We any haven't optimistic. this company but acquisition, had

and benefit the relationship any but stages yet. very to historically us impact our these that early optimistic from negatively both long-standing business with companies, impact tended we've combination type we're of combinations, it's from would not Given

Alex Henderson

synergies seems understand, -- into for From moving from Thailand. benefits you their that extremely as therefore coming considerable rationalizing is Coherent that do. manufacturing footprint are I Lumentum fast you said assume said to the distributed what of because XX% that Rofin's to XX% inside Coherent that, a company their as footprint was of of Lumentum that intend I positive should obviously and means be and not

Seamus Grady

too. to Well, manufacturer have in We're facility course, and take we're own only Thailand. but Lumentum I'd only the we'd of in certainly that, Lumentum's not their manufacturer not like Thailand point out

behalf, want win share and wouldn't to doing but can on certainly to I try we everything speak that business. So we'll Lumentum's be of our

Alex Henderson

faster, I if finally, just question. happening Cisco see. I to back And just a could go the last then comments on

forward year fast having anticipate does the mean you? into we we or that as against impact half therefore that back move think and them coming as the as growth on of move to those you to is and move So should faster comps continue going move production get the less and do more incent to actually we over to that that

Seamus Grady

about by our what in just assumption pulled about everything first It's your the necessarily means sense. is, quarter think result is from has but it's going I business really ahead is we've quarter, moved a but revenue competitor a of business growth that that a in schedule, know, Chonburi. to the that No, not the makes correct. but you that's more That's if transfer it's accelerated, it it in

Alex Henderson

Great, thank your you. I appreciate answers.

Seamus Grady

Alex. No problem. Thanks,

Operator

you. Thank

question Our comes next with John Stifel. from Marchetti

Your please. question

John Marchetti

just Thanks process very of it's that really new pulled schedule building a a Seamus, from function little you Chonburi. of the you've ground it if of got or announcement breaking curious in for much. on completed alluded the the like that's some I'm to. business forward transfer being if little ahead and sounds new Cisco LIDAR bit this the the bit of It a strength

quarter from we fairly big a a Just were because curious just like does ago? it departure even seem where

Seamus Grady

just -- in is always the one from never while. know growth growth the in we've adding next we from wait you while the has of trigger the come where Chonburi. has works been until on I been new last pull We're come in think and that the going of anticipation consideration for customers a previous about into factory the it's lot say been a in and you it's Well, to if suppose We full.

Chonburi. and have a So laser Berlin we one, of others a particular big the of to our new few gone transferred transfer Chonburi business from is programs in big automotive Infinera the and of lot went Cisco in chunk course, to lighting LIDAR, a a

point pull So, the to getting we've building. where next to the quite Chonburi it's right the and trigger we're busy on time the in got

news be we're next for planning until it might I it's we like really do don't to hadn't but when big So precisely surprise last when a us, really indicating suppose really -- from it's to like a John, do we you build so -- would we or going indicate we it, been look don't if quarter, it we building.

as see and on indication we're you building. growth it we that it be So a will bigger good than last it's optimism the our in know, much footprint a, of a the trajectory

John Marchetti

out bit about I And the I'm risk is up, it revenue recently point little XXX-gig some It transition. rate been going of talking curious that is pretty to inflection but it. then, split. seemed a think I in that, you at XXX-gig, just that just We've quarters there quarter. we're continues expectation forward, that now Do much how that challenges looking behind the had XXX-gig last of datacom on of Got just like the strongly and as that of the that plus kind XXX-gig hit if sort is you've scale continues because these about think the we several saw? guess side decline this you to

Seamus Grady

interesting Yes, an it's one.

revenue, I on we're think about we talked datacom our guiding that. up

[ph] bit to just the expect inside in that's, talking a center. QX. we're data increase remind, to it We And

data the [ph] are categorize we biz Outside in interconnect and telecom. inside datacom the us, is for center. center So data

a I from fairly We and to XXX-gig XXX-gig say strong products let's data transition would XXX-gig center. the say have inside seen,

It few XXX-gig from XXX-gig We really a would price who and that are are volume. more to pricing to and in anticipated like, the in if they in past. two growth have past trends beginning I there really more, have than that and demand or the started transitioning. customers the accelerate in the customers quarters comes who datacom between think now we talked equilibrium were about transitioned sequential trade-off ago you our also, And and those say We it's now products.

up datacom the now. business see going we So,

or higher center inflection think kind this we're start point. it's point of, slightly now. at ramp in maybe data of see it us rates yes, So should We we data behind those is kind that to products

John Marchetti

And question it. all. then, one Got last for you

that constraints, the of auto in forward, it strength some certainly how talking recently about been Given particularly some and about supply you're hearing within showed you've going that vertical. we've market then

through there Just continuing -- as to looking aware year. have or of the be be at is about we that strength something that go curious we if as thinking business that's we're

Seamus Grady

Yes.

our chain operating sure make partners with seems how some if and you supply our parks. of like, two and of has our it's us share there's the and figure standard us -- work it supply critical X.X think for to our, industry fair in get every procedure challenges out we pattern share seems a to to big these supply constraint become a secure always for that parts. and to I some always customers We to be closely our hits own identify all that be just hopefully our it us part years, to the very

want We just longer is we to our automotive related to with wouldn't continue have think guidance spoken with said, lead but I of this our our we that we to and so. it. make an the factored factored into to guidance. have but times customers, have sure business, this do others to and seen too the make like have we secure suppliers have about, parts seen sure make like work will we It we -- the issue, parts, secure into the We work I we much mostly

John Marchetti

thanks Great, much. very

Seamus Grady

John. Thanks,

Operator

you. Thank

comes question Morgan. Samik with next from J.P. Chatterjee Our

Your question please.

Joe Cardoso

is for on guys, Samik. Hi Cardoso this Joe

this Any be Is demand would has there LIDAR and days helpful? of really ago for well by degree going vehicles? primary to it sounds into what's is driving just follow-up guys that automotive question the caught to compare I this it our if asked. on expectation, question automotive or to first expectations business. guess like surprise we color my you like guess as like the outperform lesser ago, XX to demand a then So specifically. LIDAR and kind traditional was continues production relative drivers I the and a days XXX this

Seamus Grady

automotive growth the come from a of correctly has LIDAR. you areas. out, in us, couple so traditional automotive It's point but more for So, as

XX-week We don't unfortunately You specific for applications Joe, modules necessarily producing we rolling know, we -- have don't and that we're customers' our go by our into those customers are what LIDAR forecast. shipping. visibility planning

better strengths our lot So customers, contract in us to do happy but wouldn't supply have the position afraid. specific to space, we the just directed that in the it's it, a feel chain. capitalize We behind very on manufacturer participating be will probably well LIDAR We of believe question the but a explosive we that we're answer be very very that hopefully well that see world that sure strongest your are in business. growth question, so positioned. applications We're we're to to I'm

Joe Cardoso

Got believe it. past, I to of more revenue million the to No, the is clarification roughly that that's one question fair. or you've total And in my this equates plant feet square XXX,XXX a build then second the out. past, disclosed confirmation. or In is opportunity. of related Chonburi $XXX

new the So will it billion to think is building for account $X correct of roughly revenue?

Seamus Grady

XXX,XXX about transceiver does the a but physically feet, a big they densely if be versus I populated be it XX,XXX the roughly ballpark very lot different, very the depends we've in square numbers given producing capacity. would the math small, you're small it, system mix. on the that revenue past, Yes, would but billion yes, air in If would square be correct, and feet a used a mean is of depend $X.X mix for revenue are it really has

at the that's So this assumption correct yes, point.

Joe Cardoso

guys. the the Appreciate quarter. on it. insight, Got Congrats

Seamus Grady

Thank you, it. Joe. Appreciate

Operator

with Tim is question from you. Instructions] Northland Our Capital. [Operator Thank Savageaux next

Your question please.

Tim Savageaux

afternoon and on congrats good results. the Hi,

Seamus Grady

Thank you, Tim.

Tim Savageaux

the telegraphed you capacity wanted All it of upfront, I to realizing right, the timing put may you of have question way because ground. of not kind the of that kind follow-up breaking addition on

it mention was. plan the was original twice did You what

that original So why developed change plan I it and did did recently guess was it and change? how when

Seamus Grady

the guess that called original high exciting I see I always we without a you but cost size I convention, at had envisaged had there's decision, X We got it would to don't Chonburi, if plan, always always we per again Building we trade-off it as and then making the X of given square having Well, building copy X. level very be, when closer then And Eight thought. the a the Building mean the Building a like, between envisaged a in carbon have naming much that Building foot. we

the bigger the build the obviously, the square lower the building, foot So to building. per cost

really. that So the was trade-off,

felt a time a of investment bigger on lot right relative just room high time space will bring our contract take make to a to we amount be the operations So, other of manufacturers in for. that and get was like there to and and disproportionately clean ready capacity again, does

So to at. an a this iterative us more wasn't decision. drove There like, process. that you it's looked event as bang if an big It of was -- process iterative we been

have land. We ample

to We last long, time. for us have a long land enough

of wanted size was So how was the more capabilities. the taking land the about building to the It latter growth for going expansion parking to account -- employees a never big into build and and be constraint. space future we

I So hope that answers question, Tim. your

Tim Savageaux

number but a me move you of of a more quite, one ramping driving more which not I to it's kind larger imagine. in Not then thing at would ramping on Cisco mentioned capacity questions I'll factors let couple current Chonburi. but faster, magnitude, is detailed and try is, of

what I you of think that's said. kind

of correct use quarter or have with happening for that So in contribution if capacity? in I'm of I last the but parking to in assuming that still terms guess spaces, quicker, can might a I'm that arisen of given about that sort two, of outside is anything expectations. just greater you have Are opportunities its looking could may what you there is make overall sense point line you Cisco

Seamus Grady

company what make Cisco. transferring it we we've hard additional and specific scale that to but we're sure large of we'd we from the program, sure very that line make ramping that Maybe the determined is won it continue that course, of business to is very, we expand it's and to but the terms in I we be Cisco relationship. business, in of very expectations our a well, with Cisco program that Sure, win had when be mentioned, opportunity certainly size very that is working

other opportunities are think one Then of but success other Infinera are with Cisco, be that a the system considerable pursuing. out companies We've pursuing. lot had of that's is, a there there lot we'll we we're also So that some there with other opportunity. and

is be LIDAR we a becoming terms industry make to of of In we to that want have addition, capacity think inevitable sure in is and share also, able we the business for growing is increased move laser our again, automotive under-penetrated and in very the outsourcing automotive market industrial business bigger the towards because that, then outsourcing.

So existing it's really to in position ourselves the have business we works. the to be pipeline able that the to of new and fulfill business

Tim Savageaux

while that Got Cisco assume there's I clear. in you but could than in adding the to XX% the of it. terms that you indicated second magnitude you'd case expect QX ramped And you mean would half possibly can a probably say, Crystal on that, we're the second sometime XX% logos expected. list? any of or kind that quarter, not quicker the the it's realizing, in have new year customers limited where amount additional to be have I of in

Seamus Grady

disclose I the XX% we think end at year. the of the

-- talked think XX% we're XX% the that. and Infinera Cisco I on customer track will We about be we'll past think have in be optimistic still a becoming I'd customer. believe I a for we've

wouldn't like to I that, Beyond speculate.

Tim Savageaux

to revenue data decline a silicon very which last of least at in Fair in headwind side silicon see the the you some enough. other datacom that, telecom? photonics seems from rates a Should more quarters to couple the question sequentially, after datacom. your versus of came we did in in And up photonic degree strong applications assume with quarter from me, decline growth, and marry that higher

Csaba Sverha

assumption. that's much bottomed fair have the that do Hi, Tim, datacom pretty Yes, a this is believe Csaba. We out.

been trend come impacted downward datacom we the going photonics growth anticipate silicon [ph]. in to that is had QX the and in also So with back

Tim Savageaux

again. much, Great, thanks and very congrats

Seamus Grady

Thank you, Tim.

Operator

you. Thank

next Kang comes with from Riley. B. question Dave Our

question Your please.

Dave Kang

Good is XXX-gig. question My XXX-gig and regarding you. afternoon. Thank first

Just some wanted additional color.

XXX-gig you sequentially. sequentially declined think XX% increased that I [ph] correct? whereas said Is XX% plus XXX-gig So

Seamus Grady

Yes, that's correct.

Dave Kang

can you you and some datacom provide both are, if between there and just you telecom? are color Now, then lumping telecom and datacom

Csaba Sverha

by not Yes, datacom do categories. business. we telecom break datacom usually combined data in our have and out both telecom and rate We

are However, bigger take little the datacom a we XXX-G XXX-G share did space, from the revenue. in mention and we that bit anticipating the market

this However that's at not is meaningful. point

a our And is was a growth the category, is in driver in categorized XXX-G that on there. telecom our as also reminder, strong center So primarily segment. interconnect data which

Dave Kang

bucket, XXX-gig Got that versus regarding you XXX-gig? and XXX-gig can any color it. And XXX-gig provide then of

Csaba Sverha

beyond we break No, don't out that.

a So at and amount is yet. this at point a not of substantial and It's above. combination it's XXX-gig XXX-gig XXX-gig stage this XXX-gig.

So and combination it's going to of be XXX-gig XXX-gig. a

Dave Kang

Got level about, I nine, looking -- think model at the get datacom we last the was that should it million. and have how was 'XX seems quarter that it. about can you to peak And $XXX back then, mean or mean, cycle? we about this the think quarters I bottomed. I fiscal mentioned first was what to I XX ago, think it next

Csaba Sverha

been since strong revenue is significant been price that in which think have have think time I a main volumes reason why what erosion, I decline, is datacom the our seeing pretty we again, So, a space. of

look factor don't higher of return out ASPs. wouldn't comments any beyond starting driven really [ph] in we of At this is one make so. like going future, rate, quarter we XXXG the and whether So point, not ASP. was lower or and a obviously erosion price When driving by speculate that which to again or the XXXG primarily to to number I ramp, it's XXXG to is but -- that revenue

to pricing it continue would say last been as fair should the cyclical be trend, that I it months. that say XX has in So it will a

Dave Kang

versus mix then, auto. it. the Got And -- I on traditional? between lastly mean, rough LIDAR what's mix the

Csaba Sverha

in break LIDAR. out particularly on don't that and not We of terms traditional usually LIDAR,

newer about as well and and we for automotive, related laser as e-vehicle when talk LIDAR other does programs newer So business it example, automotive well. lightings include

in past not and traditional came So from breaking products. the quarter are out growth but we both newer automotive strong from stronger the it traditional,

Dave Kang

it. Thank you. Got

Seamus Grady

Dave. you, Thank

Csaba Sverha

You're welcome.

Operator

you. Thank

Our next question…

Seamus Grady

Operator, are line? you still on the

Operator

our And next Needham. Alex Henderson question with comes from

question Your please.

Alex Henderson

of concentrated that Great, few revenue distributed that of the follow-up look is segment, it at manufacturers? it we bulk questions. When automotive a names are in Couple multiple the across is thank you. or achieving

Seamus Grady

them mean huge Valeo. a automotive we It's automotive not few one And traditional XX% well, others would traditional in business, are in names, Valeo brought in but then to there was we've the -- or I the them on as They traditional -- were then major Valeo's Velodyne our business, quarter -- think number transferred not maybe be quarter Bangkok. bigger traditional we And automotive. automotive have a We that's call in didn't business, automotive as of are I them until biggest agreement, customer with us newer then able about into the names. our the before customer newer on what have we significant customer originally, our Fabrinet name a a West our but one name customer -- we talked them. a past. the they when for automotive last our in brought business. it customer them We

good other a to We quite state -- solid I LIDAR of to lot naming LIDAR sensitive ADAS best pipeline a they're the today. that with couple us, we in a we're as sure is pipeline laser working but LIDAR strong all of some about the of believe business of side on there other, companies. that companies, ones then until lighting they for pipeline ready call, the companies won't we would customers electric make say, us LIDAR automotive you new all type with, chance companies and of newer vehicle that, but we're I Obviously, other out and have the want have we communicate companies almost say of just automotive new a success. on, I who have There's them business the know succeed, companies, -- bringing well would automotive customers are

good companies, a have we So pipeline not where this to able ones LIDAR stage. we'd of but be at name

Alex Henderson

Right.

So the these auto who people to are then opposed as selling directly large companies predominantly auto to themselves? are companies the to

Seamus Grady

correct. That's

Alex Henderson

Okay.

you relative of turn we point way a hit had, gross into point Is to modest the It's should it? the margins. basis the when do question to fairly impact you plant the kind pressure manufacturing this Second for think gross I XX that about anticipate plant basis production, kick when still. on to right margins XX to same

Csaba Sverha

of be depreciation will there the obviously, more facility. of So expense

So as offset, driving than as will more stay we the to we have our expense the to gross depreciation put margin the pressure our but margin. so we within the in absorption been always headwinds that initially the past, obviously make we facility, Nevertheless, the offset as gross range. on run sure efficiencies continue anything, to should will do

Alex Henderson

this twice about last because point point recall size twice be be, The or new that up kind you the it's XX still basis a question facility, time it should it XX the that magnitude? I is to was turned basis hit. would of

Csaba Sverha

what do Well, stage, math, if think that's but this expense you about about haven't I of at done million depreciation a you the margin terms investment, the you gross think exact if should $XX of it, the headwind. match in

Alex Henderson

what to for interest Okay. co-packaging in extent And to then OEMs launched I finally the space in growth more a networking a creating vector new of you product. and that see you? the noticed co-packaged Are is starting one

Seamus Grady

are We networking inevitable bandwidth in for co-packaged the optics think speed from the I silicon. given increase and is us and

And to a probably the over us, photonics on but of couple we're we've last it's working say, been of with silicon that. years let's out doing know us co-packaged customers for regard an optics is for before You years. becomes, several with from it our evolution more what very firmly mainstream,

the So the but we're is co-packaged being optics. for it us become, inevitable seeing in move imminent, know, you a it coming years. will driver certainly to Nothing it's

Alex Henderson

then year, can what expect to hedging I hedged from in do and strengthened last over any the you how the fairly obviously, finally, was it course stable Can extent variance baht, us about program? last are you quarter. but think that of you remind And you the it talk

Csaba Sverha

So basically, situation there are baht exchange two rate aspects of the overall situation. and

If $X.XX That in which weakening you look about had a been with $XXX,XXX the statement, prior of the is our in approximately but effects, quarter. have the we couple Obviously, loss at a is small for headwind look there the dollar trends, last in representing we strengthening quarter us. last baht months. two headwinds, when broader is at gain income are FX appreciating, has U.S. dollar U.S. represents primarily

hedging is layer hedge. in program have a we So place the

for following out. XX% the are the three hedged about quarter, quarters We next XX% for hedged and XXX% quarter, hedged

quarter, market market in the reflected be go at look trends, as you future, future pretty if the current in we a So, on results. have current the we situation but for the predictable estimate will our

QX, that, really we in baht the didn't because impact because of So from have a significant the program. of hedging

out the that baked gross on to is strengthened our you somewhat impact and QX start our at in look QX, putting have to margins, going guidance in months baht point. pressure three, which is this as the the However, four last

Alex Henderson

Go further have Would been otherwise. or ahead. improving

Csaba Sverha

correct. is That

and because -- to headwind that margin make will that we So for up the efficiencies. improve have our expansion

Alex Henderson

All right.

Okay, I that's had. all Thanks.

Seamus Grady

Thanks, Alex.

Csaba Sverha

Thank you.

Operator

for Grady back to Seamus And I you. his remarks. call for turn love our today. this Q&A to concludes final would Thank the

Seamus Grady

Thank you our joining call for today.

pleased another We We're coming you are guidance record strategy in our and our again will optimistic illustrating exceeded look that revenues forward that EPS and the second to soon. performance you. thank to is have quarter. record working. We with quarter represent with the Goodbye, speaking

Operator

This conference Thank gentlemen. participation, disconnect. and your now ladies for and you, concludes Thank may you today's call. you

Fabrinet (FN) 2 Feb 212021 Q2 Earnings call transcript