FN - Earnings call transcript Q4 2021

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Operator

Good afternoon. Welcome to Fabrinet’s Financial Results Conference Call for the Fourth Quarter of Fiscal Year 2021. At this time all participants are in a listen-only mode. [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.

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 Investors section

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

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

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

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

Seamus Grady

in of time above was range robust an well for continuing our quarter. billion on a million. team, fourth business our first finish Thank we demand combined our conference you, Revenue execution quarter Garo. with Good delivered had the $X.X with thank across $XXX.X the a fiscal joining and everyone, at guidance number exceeded excellent afternoon excellent records by trends year strong today’s for and call. We you us to

per share record in all-time fourth the of margins operating earnings quarter. to high of $X.XX delivered also revenue, an addition X.X%, resulting non-GAAP in In we record non-GAAP

growth fiscal flow from $X.XX revenue prior we and Non-GAAP full $XX.X industry-leading was year. for of XX% produced was cash billion, representing Total flow was year cash the the record million the $XXX.X operating income For free year, million. per share. of $X.XX net

highlights QX. some at revenue quarter. record, another fourth the by of demand. communications reached revenue of strong Optical the another Looking new communications telecom in record also driven Non-optical reached

to we demand continue trends to this impact $XX constraints ahead, grow a and million, QX across expect as that million $XX we lines by Looking component and see to to continue revenue navigate fourth our anticipate are Despite we outline new We supply a will record moment. revenue impacted in that supplies. to encouraged similar healthy as in Csaba by approximately business will experiencing of successfully sequentially all a the quarter estimate remain we manage in headwind, QX. we

We’re a also in to QX, we net profitability That headwinds standpoint. small a income. optimistic non-recurring said, from anticipate

have seen been along number you with cases. In countries primarily measures and gatherings. lockdowns of social have Southeast recently response, COVID-XX rapidly imposed, Thailand, heard, has Asia growing As may in other a which impact other

positive with but a and This we for past the protect increased our half safeguards home in are to doing been if facilities staffs. have and pay, operational, have they manufacturing for COVID-XX. additional testing Our we what year people sending fully order beyond implemented includes test

expense. our by been to weeks the addition, for Thai and the granted initiative vaccinate out our employees carrying government past at permission been In have we several have this

our month, the fully Thailand XX% vaccinated. end that of approximately at the We considered vast that of very employees have employees our majority pleased second this doses, such time of already will their this in are received be by

also while employer both very has to an to enhance believe be excellent social proud our reputation further being Thailand. favorable and good business, carry a our for out this that are effort in very as able it impact, We we positive will

this at and As about expect be earlier Construction we broken Chonburi we is year. one new one building our foot to communicated we have campus. the a building year, progressing complete square million ground in on

We also feet manufacturing our previously approximately of campus. space intention discussed our add at XXX,XXX to Pinehurst square

non-manufacturing Just size after land the become facility. activities of the fourth us campus, will which will current the relocate the within acres allow end enable existing Pinehurst to completed adjacent increase buildings. of quarter, us of our our manufacturing This XX available had acquisition to to we that some our footprint from

we we are that very are capacity we growing record confident In had summary, ample to have As a strong satisfy result, to the a finish experiencing. will continue year. to demand we customer a

We are deliver all continue results and well from markets we to serve trends longer the we positioned excellent the optimistic about are demand term. over to

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

Csaba Sverha

finish Seamus, everyone. million, QX XX% a record with strong had non-GAAP and a $XXX.X from We and of from afternoon ago, to year above revenue Revenue was Thank range. good X% guidance earnings. you, a and record and up year our

also hit executed four gross non-GAAP exceeded margin our in well, also produce to our years, of per earnings operating margins $X.XX highest share, guidance. We and very record which

total made products quarter. continue. XXX revenue This million, QX, to the quarter. of we higher of or up up fourth expect XX% $XXX.X revenue from Revenue Optical from offset was total growth products speeds was than XXX Datacom decline million, up revenue, X% $XX.X telecom of By of silicon photonics communications in million or million, prior gig Looking at trend XX% X% communications communications, of modestly increased QX. a optical at from Within detail. rated was $XXX.X technology, $XXX.X gig or from from products In was revenue, quarter. QX. revenue $XXX.X X% from million the more XX% the sequential last $XXX.X XX% up $XXX.X million or million, very revenue revenue to up XX% optical Non-optical from down in and QX. more total was communications QX. X%

at revenue this laser $X.X to XX% up Looking million more quarter from [ph] third record million, $XX.X the business. offset million, revenue up non-optical Automotive our decline was Sensor other and was non-optical results. XX% was revenue quarter. million. $XX.X communications a revenue than our Industrial communications $XX.X third from slight at

turning of you to XX.X%, the release our our to presentation, basis. press details included of operating leverage, operating million four Now highest of company. XX a website. $XX.X revenue, income non-GAAP basis points million in resulting on reflecting the our at years. otherwise measures or Unless metrics expenses quarter record Gross find or in P&L. revenue, are GAAP was margin of profitability our in X.X% is QX in investor on from up earnings reconciliation the level Operating and which can a of of noted, A the were and non-GAAP X.X% for $XX

$XX.X a effective $X.XX tax $XX.X approximately million rate million be to was recorded related of was benefit primarily subsidiaries that During of share. and also better This effective operating record per at in record share. fiscal expenses. a diluted income anticipate due income result year We XXXX or evaluation a basis, $X.XX the tax allowance quarter, or net million. diluted fourth GAAP have reversal On net to operating certain control performance X%. per a $X.X is the will at of Non-GAAP we our as a of

the XX% and margin full XXXX. the from For year, we from increase Infinera $X.XX, XXXX, revenue Non-GAAP an report revenue three represented XX.X% fiscal year XX% had Note from of revenue. was and Non-GAAP includes the in margins of the customers the Cisco XX% were annually impact We billion, represented year revenue contribution Acacia. $X.XX and acquisition the of of a both Lumentum customers. strong year. revenue EPS year prior Cisco gross XX% year Cisco’s of for partial operating and for year. was was XX% X.X% a that up fiscal XX%

in would Acacia of also year XXXX. impact the fiscal customer Excluding the a XX% been have acquisition,

XX customers top year represented of in fiscal revenue, Our XXXX. compared to XX% XX%

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

expenses share the $XX.X our average our the remain remainder in fiscal we during authorization. fourth XXX,XXX million $XX.XX repurchased and XXXX. that the campus, cash at million. the adjacent buyback the an progress outlay our recently that in at was approximately of repurchase to to active facilitate paid total campus quarter Of a $XX.X Chonburi price, have for million and to fourth purchased of campus. acres will land, our the at $XX.X Pinehurst paid the addition XX In during purchase construction price plan, in in first was manufacturing related of shares expansion of we Approximately remains XX% We quarter quarter,

our fiscal to quarter would for turn year I Now, guidance the like first XXXX. to of

from optimistic strength markets we execute. a of serve, ability We to our and are position entering the remain about year and the

costs that We the anticipate are in in for summary, quarter for of a of quarter, Fabrinet. million, performances. through perspective, we believe the as From have anticipate first order For record for income and range $XXX continued fourth not net quarter that will million be Seamus If benefits these employee another to of which employees the to net non-GAAP record this represent to of we that $XXX per for we the income our to incurring the this are record safeguard $X.XX profitability non-reoccurring, the the revenue we would QX XXXX In range $X.XX non-GAAP our fiscal a point as families, well of and non-recurring cost program to annual impact merit and employees to costs, company. diluted proud impact I’d guidance includes represented are quarterly our in our this $X.XX approximately as safety from success like program guidance increases vaccination the out operational our well share. as their another business. $X.XX customary our described.

to continued questions. We are Operator, ahead ready to and call all we prospects stakeholders. the about look forward are now for success the excited for open our

Operator

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

please. Your question

John Marchetti

give you the indicates it talk seeing certainly you you expecting than do were you’re was color just a guess very much. bit that lasting that Obviously million us on those wondering challenges? guide. Thanks referenced could managing you further and that? all through asking think And where you you ball, in headwind very Can certainly having million of quarter into were goes quarter crystal this. I little guidance $XX Seamus, some at more this where of you’re here $XX that – a solid and much about the terms the us it I above of maybe to both September, if do for most mentioned

Seamus Grady

John. Hi, Yes.

we And expect in So I at we’ll and the QX quarters. we think of see QX, that that’s them that couple shortages everybody. another into continued case the for saw really least for

We but would have as if can. really on much The to knowledge about job, being end. been supply or our as we have partnering we shortages X% the to our believe It suppliers. have $XX on impact minimize we through QX, having good few about the don’t but think, a customers then any weren’t be from impact we for greater higher may requirements quarters to special more and in shortages not been and the mitigate with could with constraints, $XX anticipate really higher, the the focused We million million in doing proactive our as possible that been we when these best if customers to shortages. manage proprietary revenue a demand continue have our suppliers share including longer and could to about end, visibility

datacom entire where we’ve really the the been was working would As of component impacted the parts all for instead most been automotive in we what to business the we’ve of part been to the the business, components felt regards, secure able growth they all the just get really in business. needed supplies But, of probably it’s that of across we We spread business got sure experienced. have products in our – We the most? working, the – was our part which we those parts were seen customers, we the that fact, from revenue diligently and to pain across of markets. the have make It’s decreases we portfolio, needed. end,

spread to parts at overall, expect we So more a of business, across bag really John least the all few and continue a quarters. for it’s mixed

John Marchetti

into just big helpful, a That’s specifically, then it. both demand bounce Got Seamus. maybe here obviously And sequentially year-over-year. that and telecom pretty

where Do there, Sounds I of color the here you’re you like that you’re a think of table, share reading continue at fiscal bit little start even mean, demand expecting because the this to you’re a the look situation September? some can a is as but year. bit continue maybe a that putting you sense out likely new past that on orders strength Any in obviously, we further get increasing little visibility of to earlier. people are is bit with little maybe a you

Seamus Grady

I upbeat quarter, biggest be quarter Yes. trends seeing. the It of beyond we across mean demand quite obviously guide robust quite we would we’re time, have seems don’t but is supply and constraints. at the we markets guide a we’re say really, the to overall I the both all the we serve challenge one

most not that sure the the supply right we demand secure making demand we is pervasive we that case seeing across We’re markets of by now, strength we’re serve. really constrained a But need. it’s of of components, pretty

John Marchetti

there. last for with one putting jump or you talked of headwind new gross at expect quarter, the of in comes place $X.XX some but back be one that I’ll some out at should September $X.XX assuming look margin or taken you’re The and of the just quarter. least Maybe the we bounce I’m those in it. Csaba. December to and back back we about when cost testing out COVID the queue here measures then into the that Got

Csaba Sverha

out spread most are to of Yes, to be from while prevent protect cost also cost they on and margin. going isolated come also pay of is basically, That gross one in guidance optimistic to efforts merit improvements people our our to in efficiency gross in putting includes And our wider making our obviously, very we know, them to John. Most of margin. Hi, guiding and of beyond that keep our forecast, them related XX%. the the and is we vaccination you that profit X% feel going also increases about and QX not time, range gross a factories. again as our are very, quarter to but have between at baked in we margin our

John Marchetti

much. Thank very you

Operator

Thank you.

Our next JPMorgan. question of comes from Chatterjee Samik

is open. line Your

Samik Chatterjee

question. telecom Hi, what you you helpful, a more even guess, year-over-year my kind are about what to I quite revenues. you like terms a have was Wanted clearly thinking Any kind good strong. datacom a was afternoon terms It can solid, of of what datacom and if looks thanks looks offer be quarter taking datacom – in will update here. thinking follow-up, fiscal demand like in more share, or as happens is that first flat can are growth outlook or for how outlook of see from telecom quite in from please. there. full-year you I of growth And then even

Seamus Grady

very wins months. of Yes, function last strengthen a large I and of is – lot over it’s encouraging had in we’ve our telecom business was new particular really a that in XX or the think year the

So, that’s a growth. big driver of that

Data we by driven data even datacom space categorize in Another are lot our categorization, – DCI, our telecom, but business, behind that a telecom of driver actually categorized drivers it’s Interconnect Center business. the is though in the center as

that datacom, good and say think datacom I telecom both quite strength lot quite some strength, driver strength overall is I strong would a as that then, it telecom, be the about quite and and actually well. datacom. say we’re say, and upbeat business the we is even I let’s of and again, of telecom future, about mix like it, we’re in would in say, quite, increasing as But and some in, I feel of though but appears a growth the that XXXZR we see generally, So would good a datacom seeing

DCI. point datacom as categorized some telecom that If is it’s business of because you my our understand

Samik Chatterjee

you’re we data if What terms clearly what hearing strong just then seeing? recent recovery almost of you’ve Got laser can the kind be with a helpful. mid-XXs fourth the of seen; I segment, customers here follow-up that the pretty you kind even what in And just industrial on is or peak from quickly more of Do rebound higher – it. you’re would guess Any quarter to recovery like per into of I quarter. are seeing get there?

Seamus Grady

feel pretty bit position optimistic we be very laser quite we ready quite Yes. be pleased, business the overall on mean the like would companies they in lot outsourcing we but that stable we about feel us, always good expect growing I Guiding – we’re a markets. lot laser in have wouldn’t beyond Longer QX. been, market to say, the laser slow we of for a laser in But the reliant and QX little as laser build to about of term, market, do those the feel is we’re upbeat with bigger growth do to a really I it more. we’re of about and our that, more market. a

Samik Chatterjee

for Thank Thanks that Okay, color. you. got Thank it. you.

Seamus Grady

Thank you, Samik. No problem.

Operator

you. Thank Instructions] question Najam next Fahad Our Partners. [Operator from comes of MKM

open. is line Your

Fahad Najam

for taking to... question. you Thank wanted my I

Seamus Grady

No problem.

Fahad Najam

missed, I from color if you this quarter? you in call silicon joined us the I provide earlier, may revenue Can photonics have late. on any but gave this

Csaba Sverha

is this Csaba. Fahad, Hi

photonics silicon about the for was our and highest the $XXX far. around So sequentially up quarter. million revenue It level, X% so was

So, segment upbeat are to the and photonics well. growth really we and see we about continue, that as silicon optimistic

Fahad Najam

for you Got it. Thank that.

customer incremental terms Obviously, I you can what’s silicon you’ve product strength opportunities ZR? beginning XXX if photonics, sizable XXX was may that the ZR clearly So, of a from so follow-up got datacom adoption the that’s flat? So, gig to leading describe driving are and in of that, you see on in some anything gig markets.

be there you could would any appreciated. color, So, present

Csaba Sverha

photonics silicon is silicon driven two are existing businesses the new business. we Obviously, customers so winning revenue our part photonics of by the factors. Yes, actually our in from

market. gain to continuing that’s So,

We gain space. that share are continuing in market to also

we see handful have but that a in even seeing, are reached area. XXXZR started and are based very As not revenue our the to that material, you outlook, QX that we space optimistic QX, customers it that of we as – fiscal we in well though was noted, XXXZR, we on about

photonics silicon something has is therefore been So, that growing.

basis very year-on-year XX% If year-on-year look continue optimistic grew about we to on be it that at a you our numbers, and segment. about

Fahad Najam

color the Appreciate there.

QX, just So demand and seeing you’re have telecom of from Any in component. by them just the worst, Obviously shortages sense impeded on, QX of have highlighted terms like QX their be how say your benefit on may staying last some clearly might component of strong think the that slightly you’re highlighted at one – for better. be lot customers a customers one me may your worsening say are they there. – some

you can some you sense us give performance? how are on So, the seeing supply

Seamus Grady

Fahad, Yes. Seamus. hi, is this

we’re of mean hearing the for – – I a thing we sight in couple I happening think now. But other four or our another remarks, it think component we of suppose prepared more there’s quarters any we doesn’t don’t customers, ball. see environment. constrained another no At like same probably be unfortunately our to like quarters least least. a have end seem in at it’s three where Like I right we said crystal

than see We think ever Other it are of we’re starting don’t and from sharing next base. don’t with see it But I the improving improving customers our unfortunately. we we’ve our than... better we gotten quarters, in visibility, getting couple supply visibility that

Fahad Najam

worse? it is And getting

Seamus Grady

to say. Hard

it’s not certainly I improving. think

make environment and I making set factored customers. our constrained our job, to take the our think sure account a we but I ourselves also done when we’ve when we in commitments positioning we guidance, for think good into success,

the it’s can. we to it’s of it a phrase environment, very new for normal, seems – have best as it’s we like or we to it So, the way I sure And our think last a just so. manage challenging be year but make lot through another

Fahad Najam

Thank you. the answers. Appreciate

Seamus Grady

you, Thank Fahad. problem. No

Operator

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

Seamus Grady

strong Thank our a execute. to demonstrated forward you a and Goodbye. about for We year again today. our market to optimistic We speaking future. call trends end demand ability joining with look record soon. had We you with to remain healthy a

Fabrinet (FN) 17 Aug 212021 Q4 Earnings call transcript