FN - Earnings call transcript Q3 2021

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Operator

Good afternoon. Welcome to Fabrinet's Financial Results Conference Call for the Third Quarter of Fiscal Year 2021. [Operator Instructions] As a reminder, today's call is being recorded. I'd now like to turn the call over to your host, Garo Toomajanian, Investor Relations. Thank you. ahead. go Please

Garo Toomajanian

year and us operator, financial investor.fabrinet.com. the everyone. you of Thank are operating XXXX. the March replay Thank me a at With Chief today's good website conference joining fiscal quarter third on for Fabrinet's will available which on call for ended Seamus on section results XX, Executive you, the afternoon, XXXX, to and Sverha, of Csaba located and and call being Officer. Financial webcast, today Investors our Chief This Grady, Officer; call is be discuss

non-GAAP will about During and I this release the information, the remind to call, statements non-GAAP both today's would we for company. of our to including present investor refer presentation, measures. will like our important reconciliation. website contain that financial forward-looking to you future Please which press and discussion performance include earnings financial GAAP GAAP our

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

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

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

Seamus Grady

we row share, of in total our With revenue our quarter, had We and which also that a deliver the results while Non-GAAP earnings third was track, share. growth per afternoon, level strong both you, for non-GAAP positioning Thank good record revenue Garo, X these sequential of quarter million. QX. $X.XX We markets are and a and in record and another earnings end representing exceeded can we all per of guidance. record X.X% of everyone. highest were the optimistic continued in quarter growth, margins at helped generated operating of in we $XXX.X years produce ourselves that very

revenue at of record, revenue. Looking by new Optical primarily driven communications highlights the telecom a record the reached quarter. some of

Cisco a in business systems newer supply to X chain generate to this existing incremental having to transfer systems which on recent this our that on earlier contributed than unique have as value Based of impact are our strong full proposition looking Our other transfer complete margins been expenses. manufacturers operating completed performance. the we by in efficiently. we success systems with were us optical X this about position manufacturing are system reaching run the as This Notably, revenue customers to believe quarter, additional leverage who transport program, anticipated. strong network new positive third programs discussing was on as calls, in a more well we to close operating rate these program their win outsourcing its from originally transfer, quarter puts able

row. from category nonoptical markets, record in for revenue nonoptical reaching representing We sequentially level in with also a achieved Revenue the the nonoptical record grew new quarter communications third QX. largest a automotive and revenue all

that have automotive quarter In summary, Newer technologies biggest are results the growth we were third strong exceeded quarter. delivered the record guidance. in our driving to our factors automotive pleased

stronger deliver all an with and be even that about the end fourth able to efficient in that we continued optimistic our best are resulting ever. quarter, execution, We year we'll serve markets believe

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

Csaba Sverha

Thank everyone. afternoon, Seamus, you, and good

our earnings. our about record Revenue range, guidance produced non-GAAP non-GAAP which and guidance. the exceeded $X.XX our was and revenue above also quarter, excited third of earnings million performance in are of We $XXX.X

growth or from $XXX.X from Revenue revenue X% from Optical X% Nonoptical million revenue $XXX.X of to up of from but QX. increased detail. levels up total in million communications optical million or data revenue remains remains products up sequentially peak communications, continues revenue, rate telecom total products at million, XX% as increased revenue X% from XXX-gig faster below of In from to more communications was $XXX.X continue. driver $XXX.X quarter. accelerate. $XX.X QX. up or growth revenue we faster at X% and last more year was important XX% to expect Silicon from from was ago. QX, Datacom was optical sequentially. total Looking was $XXX.X revenue million, X% communications Revenue Within a X% million, triple an revenue QX. XXX-gig from XX% trend million, photonics XX% last and than and up quarter $XXX.X

$XX.X and nonoptical quarter, again nonoptical revenue in laser from was up growth by the XX% Automotive in the quarter to up generate million, Sensor nonoptical programs. from revenue XX% $XX.X million. We other and automotive new fourth primarily row strength quarter. third category our driven at communications as remain ahead. will communications these QX. Looking grown sequential third combination up a growth the to was believe laser sequentially, communications new business. in optimistic record programs become revenue the has was for revenue of X% million look of largest about We we Industrial for automotive the $XX.X automotive $X.X with million,

years. of presentation, in revenue Unless a to GAAP our can XX.X%, tax margin Now of XX.X%. Operating metrics range target income operating Gross X noted, in reflecting in expenses. XX.X% non-GAAP our you $XX.X P&L. was is of meaningful and of produced A basis. turning the was website. find line to are in highest rate X.X% with which normalized investor million our from quarter expenses X.X% were increases in the XX% effective our Taxes X%. record or were $XX.X details included third without reconciliation million up in This QX press quarter million, revenue, grow $X.X profitability the earnings our our in ability non-GAAP to the measures revenue, and on to and level or otherwise of in of operating release

continue anticipate tax was $XX.X for a per effective about record $XX.X basis, On or income $X income a or was diluted million year. X% diluted We at share. net of to a $X.XX at GAAP rate net Non-GAAP share. million an record also per the

$XXX.X cash was sheet cash, $XX.X was cash balance the quarter, flow With end to a Operating million investments the free $X.X flow quarter. strong in the million. of CapEx third $XX.X Turning flow and cash statement. At cash restricted were million, and million. the of third

fiscal for an XXXX. $X.X of of now fourth our XX,XXX cash $XX.XX turn approximately I outlay average year to price guidance a at total repurchased we quarter, quarter the During million. would the to shares for of like

continue be another our about and optimistic revenue and We anticipate quarter record to QX. business profitability very for in

million EPS for performance QX expect the track summary, to of million be to call now well ahead. We best the $XXX be continue between the and revenue success share. and are to to positioned in our as $XXX are record quarter our fourth and In ready open range diluted in of had $X.XX ever to look questions. we Operator, in total we we $X.XX per

Operator

question Marchetti first our from comes of from Stifel. show I Instructions] the [Operator line John

John Marchetti

be to fiscal there correct have you quarter? expect exiting make you when are you I Or do and that. wanted the were in quarter? something run your just we rate heard business the now fiscal in to you sure the I talking full to that that on fourth Is Cisco at just prepared I mentioned clarify third I want correctly -- about Seamus, remarks.

Seamus Grady

about John, quarter run a I at ramped ahead rate full We schedule. of think we're the quarter. the exiting

we rate to the think say think -- full end the I at the at of it's quarter. I safe we're run

been to some we give meaningful don't customer-by-customer uptick. of don't there's the quarter. that at for the part on better the basis. going run I But So guide And course, be impression and to rate we're a want the of have

John Marchetti

it. swirling know seeing on lot points if where data maybe spend Obviously, you're chain then it's Got supply about incorporated could perspective. was chain from just different a a you of the what there but out within around moment guidance, stands. wondering a And I supply the I

be demand half any that's if curious maybe into shortages you're thinking get about weighing seeing your material and Just year. calendar the how we of that changing this the second may or if as on you're profile of even any outlook

Seamus Grady

There's yes, customers work job industry. stay -- of just Yes, us. makes to the else into factored for sure. past in QX, so that see crisis part anticipate it's on it's always behind use if continue to amount sense. of to crisis we It's some sure our There can very the is. they make quarter. shortages the customers positioned and like the an and We and been just shortage close the immune that everybody component normal in just impacted our anticipate just impacted us proactively before in just of that -- it's ahead have suppliers they'll or But customers us component that to not But passives certain it think always business. we get what be more some so seems suppliers, visibility shortage team these We're a like always We of either we not had or our and that us. these management the component that's shortage us we to some just did of to to seems the We And days, we our seen them. close -- QX. has to semiconductor demand. capacitors as try and and component need our we our to stay better excuse, we're now situation support that whole And it's the the issues then as shortages able right part now. of part It's are give there's a we behind ahead outlook.

learned just we've that, I So guess. with to live

John Marchetti

situation -- some opposed more, impacting if then several over just what some should Just you of limit that, on it a tightness, need following just surprise is have to trying curious a ability started they quarter how From Seamus, demand? it quarters. one get your may ask little planned ahead give meet customers we as short next that. few a Does up that or of you quarters in the can bit to chain sense meet to about from to it upside more business supply a the visibility give I where more think of a And out? maybe

Seamus Grady

Yes.

John. you're think I right,

our We getting as component best that can to us that they're beyond they far the would inventory. allow position now us, visibility going more The to give are in us order visibility. as customers visibility give normal

and would beyond a customers can say, so that one But the with have component be their and mean situation. examples continue we at in visibility the with we the are inside doesn't that component meet still because situation, even I course, our better upside already an in Of have giving better quarter needs us suppliers we'll forecast. in -- we our well our that had making forecasting where lead we visibility, come give customers revenue sure time their meet upsides time current tightened as --

visibility from all customers us better the doesn't and supply to the go to problem, it turn our from in around So make alleviate then us but helps away. it base

Operator

I comes JPMorgan. of the from Samik next show our line question Chatterjee from

Samik Chatterjee

saw guess, And if sequentially the about in the on lower that you the you off segment. you than start what remarks prepared I I was heard Seamus, correctly, XXX-gig. X% to growth optical mentioned XXX-gig wanted with I

back clarify telco that the wanted of more I optical coming calendar in the And it what there. the and revenues, ramp driver of we're we're So seeing landscape, given seeing rest to generally, heard half aligned expectation telecom of to an the what's I also, correctly a of from just kind year of customers. particularly demand

a just given sequential So Any calendar would now year? of to half into have calendar have to seeing. thoughts go your through just the that you back the more I well. the rest I get you of wanted helpful. mentioned of what as ramp expecting you as of follow-up be you're more And visibility the that insights year, a Are you

Seamus Grady

Yes.

really like it So us will growth detail yes, is give to the using to XXX-gig allowing the demand mentioned on earlier, revenue in then XXX-gig. versus there. or the I'll support second the forecast you to anything the I the versus of will -- position answer XXX-gig more Csaba us, half out supply Csaba the question of I a not component in the of XXX-gig We're And that's had moment. visibility year that. customers on the point allowing let Samik, from have the we as in from let view But I the

Csaba Sverha

Samik, this is Csaba. Yes.

ramping. XXX-gig increase. So in The about $XXX revenue. in in shipped a had is still XXX-gig, so We still our data was XXX-gig, our rate that saw million higher X%. growth we little sequential record sequential we indeed bit Obviously,

highest XXX-gig at lagging $XXX year our was a However, million. ago category, that's still behind revenue the which in about

don't So obviously, ramp really more and of is ramp a optimistic continue decline to XXX-gig to we crystal happen. to is to XXX-gig going But accelerate have medium the of ball going we term, rapidly. how the this remain long XXX-gig that

a So I would quarter and a into I there much definitely one kind say shift dynamic too sequential between wouldn't decrease. or it's of increase and XXX-gig. is XXX-gig situation, read in Therefore,

on taper and see take of XXX quarters I to XXX play the off to couple So think to it's going a true going is and picture how out.

Samik Chatterjee

-- can the the just as well. if just then it. quickly on segment ask automotive to it. Got you guys on wanted And focus Got I

strong had growth You there.

terms that the -- use the have any growth. mentioned much about that driving of be LIDAR, have differentiation traditional you differentiation manufacturer do I also, LIDAR given evolving that similar a in thinking automotive cases being think supporting. industry manufacturing to your the to differentiation customers might some think already versus just more you're see are of I competitive being how in think, the the lower contract Or launching for competitive the I differentiation industry? that Valeo new the your I that supported get And you optical? you -- with, wanted the very the are or some customers Should of insight. How higher you like is being about when platforms is the in there, of in competitive

Seamus Grady

Yes.

there. So questions I think so other many

programs. that the programs, the, automotive newer the we traditional all, growth vast of on is first newer automotive we're of split the majority the seeing on say, So automotive call what let's between and our

same electric the it doesn't growth. but So and the have LIDAR level platforms vehicle on traditional business, and the the business good like, it's of

maybe it's these flat say more a than little automotive bit Let's programs. new

bulk new the the So on automotive is growth the of seeing programs. vast we're

that very terms of It's us, absolutely. and I their In feel something our suited They're not the tell very -- guess to We is differentiation, our customers first something we it's needs. -- it's manufacturing just are capability well yes, feel. -- capabilities the of in optical of difficulty, the go in space of in in together, all, they're complementary some same very together, to terms of doing how same products the what we're these level products putting the processes say, together. putting products let's these

is in want developing we're to all We the reputation LIDAR you really if the in same same space. be products. So the want LIDAR years that products what these complementary very LIDAR that, the supplier, good. think that like, go-to space, and we've way we a feel we customers in together we're putting optical being that. we learned reputation develop -- us the And over that tell customers to developing they our we're the optical and among discerning us And to these tell for

set a to complementary very capabilities. of so optical yes, capabilities, much our complementary So

Operator

I our from line comes the Henderson question from show Needham. Alex next of

Alex Henderson

terms you that at great was guide. First you the negative a laser good what on that ownership? implications you to larger of think of ownership and neutral one one for way mechanics think industrial and off, or or Do I the of quarter of to players. extent I'm thanks the the And has positive, a the of another? an trying impact in change do change it's business, understand looking in

Seamus Grady

tended that situation Alex. But not companies stage. all some But significant days, industry historically, notice involved that early have I in public through a to benefit we I days. put the they've did let's of -- really statements, tell find. pretty II-VI of to way. this lost far, that at hard it have also guess all that announced And business customer industry It's were there. guess So consolidation, from is needing consolidation. so it's we synergies typically, in We early well, they're Coherent their And to as the is it's Fabrinet,

help we find those to what like synergies. them can we'd to So do

course, we Of those them we can find help synergies. think

everybody. working So at early right. deal -- we're time I approval we'll is for certainly, got it. the But acquired. We're the It's They time we're with yet. never to work them the to haven't right. be excited We're to is been as looking company engaging about when for would and when don't we us with forward preference we -- guess had have stage. too a But this happy to have which have better

Alex Henderson

a probably that transaction brings business as more result. to it you Positive for you

Seamus Grady

of I your missed part there. Alex. the question first Sorry,

Alex Henderson

general So as will it's probably more for a think result? in a bring it business transaction you to you? You positive

Seamus Grady

As stage, don't We help But II-VI. too synergies trying be to this to early at positive, do neutral predict certainly I say. they very days realize, for can know. We'd think said, part It's we to yet be realize optimistic. but us. to them we -- or we're it's it's need early help to we whether to the really happy negative our

Alex Henderson

most again, of the magnitude [indiscernible] [indiscernible]. thinking in people impact [indiscernible] the

Seamus Grady

Alex, you're dial a you you. different out, We cutting having of right at the in line, hear in then end hearing and just -- can't that's okay. you in if if we'll to difficulty could question, you from back want the you jump next now. Maybe back We're Alex. if

Operator

the of from next B. in from question line Dave show comes the Kang queue the I Riley.

Danny Cheng

quarter. I or that how next are you as for regions. are as well any I was guys NeoPhotonics you demand from seeing muted noted that. more might about the Congrats you was impact that North and just certain be Dave. provide on quarter. -- guys on Danny America there thinking from China yes, wondering wondering demand thinking guys And is the color I'm if on and Yes. for This if from could

Seamus Grady

Yes.

where on they to So for, usually then great we but customers always ship we some to because maybe our ship on -- then we don't and they're ship customers. and to products our great say, it have visibility we our visibility who into, end destined as let's don't cases, can something we it in ship to, on ultimately, where customers appreciate, for ship it their do we you ship the product or, customers with to who actually their know the competitors have

for ship to great So we that. great into we the products don't where have We the feel have we markets, and visibility disclose you don't But know a like. if end the afraid. markets, that, end I'm we

Danny Cheng

And guys program Got Okay. Cisco I you guess customers? or was for are potential the for ramp, the you of having that I are Cisco just I with other it. expansion. any conversations on late encouraging mentioned, expansions particularly guess, --

Seamus Grady

Yes.

I deliver to the simplification Cisco-like example of, and other are do savings the There other was we about we of customers, is then I our lots vein. think for. Cisco it, an before as in if of to type talked for realize think maybe opportunity companies, job we're of Infinera And supply obviously what a similar the that was there could feel that and we able transfers customers we customers. a fast like, for the we're similar execution able with our mentioned out you the maybe chain

Of course, about customers, all relationship. in the Cisco, discussions we're of always including expanding with our

very has transport We're that. happy the well. wood, very know We done touch optical happy far, of that. so business very with Cisco's the And transfer very, with

we'll looking business our capitalize really be other on but Cisco with customers. best can that with also we and to So grow as

Operator

the line question Instructions] [Operator comes of from our show next Henderson. Alex I

Alex Henderson

this miss they the are the absorbing you supply upside we've better had the clear a some Could supply didn't it a go quarter Why XQ job the happened Great. Yes, of to to worse hoping potentially was and constraining whether was in a can it, EPS a into talk supply given second were last get quarter. chain I I me almost mix but XQ? now that over you a to EPS the end the always redialing the then in bit is XQ. chain within could supply the you mechanics first the and back are seeing that in the I sequential would hear But the the that band has exogenous I it change you you other me in. you're while than you constraints quarter first to and is in typical you're a almost describe that absorbing through supply it below you you And the course I in hope little suggested a the I seems explain is hope about pattern? at simply Obviously, similar quarter Or to have sequentially the what talked have everybody low hope CY question And the conditions. XQ? time. the just of impact to current function impact? managing that chain reported built larger of pressures numbers? how pretty down from of of or element you CY have up that's function Is of in

Seamus Grady

Alex. Thanks,

moment is the So Csaba in say really constraints, And everybody or get QX. I in constraints talk calendar think supply just did else experiencing would yes, experiencing. worse EPS I supply on I'll about we're the outlook. But same it the let a that QX

managing become our seem type adept, customers we've One pretty constraints it good think, to and with suppliers. of situations, of time, pretty with we're And through is time that hit factoring also, at things. guidance. at by to working think those those type into supply our I working X from our I us

there judgment when best go years, see That's if did, That's ago break what years in. guidance take component our we don't constraints X.X separately. MLCC in agree, I everyone we QX. back account, were it as were use now, think to it really set certainly, We So is the factor all what these we it it would for constraints, out be into our constraints. the role for set But did X what supplied situation into account when that's it right you taken had guidance. into not we and to account, think demand we our these doing the we for QX. We've not we're the is I shortages, than more there can when shortage it

Csaba Sverha

Okay.

Alex, So the clarify me let on EPS.

is -- We $X.XX So indeed $X.XX actually, the exchange lower for We in had is we posted end. guide typically in it's had than low we QX put our the rates foreign numbers, tailwind number actual don't -- what QX. had which the about from fiscal in the guide.

about also, So $XXX guide. revenue from $X.XX band million of $XXX that finished explains we the is And guide the the million. lower and that

sequential $X.XX about that's So from improvement.

Alex Henderson

Is But again, something the seasonally Csaba, calendar never on is sequentially seasonally weakest the normally, quarter quarter. are constraints? down supply that a first -- going stronger of that you second function to from there

Csaba Sverha

part constraints to baked the our the numbers, FX numbers $X.XX. but QX, are about actual basically is the of in supply biggest do The into strong again, which was with

Operator

remarks. would like Q&A our to turn the time, Seamus Grady, for I over call closing concludes Mr. At to this CEO, session. That

Seamus Grady

thanks, you, Thank ever. we expect very produce culminating to help QX, quarter our fiscal positive continue and strong we for joining operator, a continued positive in and trends our third EPS, We another with revenue quarter demand year demand to delivered trends everyone, expect record and us record -- call in best today.

forward speaking to soon. our strategy, on you to continue again longer continue with positive We we look execute remains the believe business our delivering results well to we term. positioned Goodbye. over As

Operator

conference call. for This concludes Thank participating. you you. Thank today's

You disconnect. now may

Fabrinet (FN) 4 May 212021 Q3 Earnings call transcript