FN - Earnings call transcript Q1 2022

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Operator

Good afternoon. Welcome to Fabrinet's Results conference call for the first quarter of fiscal year 2022. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the call over to your host, Garo Toomajanian, Investor Relations.

Garo Toomajanian

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

for financial we section our measures. present presentation, and information, website Please of to call, both investor will this earnings non-GAAP During GAAP our Investors refer the our and reconciliation. press important including GAAP to release non-GAAP include which

discussion today's addition, financial performance statements the will In about the future contain forward-looking company. of

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

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

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

Seamus Grady

more guidance. business, XXXX million end to start the our fiscal robust for reaching on for our our above which today's us that to exceeded high thank top conference line joining $XX million, Garo. of had revenue trends you, expectations. you everyone, the We a afternoon, contributed remain quarter $XXX.X Thank strong and Good and across than first call. Demand results with bottom

ago. range. net which optical particularly very quarter we continue guidance the of grew to revenue also income a in quarter fourth effectively $X.XX non-GAAP year our the for from revenue communications, bottom strong We and from above had falling share, our per a line From was perspective, XX% as reflected which execute upside a XX% to with

a was As optical both detail demand strong datacom. telecom Csaba in communications will in moment, evident and

supply continued well others We execute that continue the we many experience. to constraints despite and to component

$XX million we headwind During our would in a the call, revenue estimated to from these $XX we first that see million quarter last constraints.

We pleased at actual that to lower of report are that the the impact end range. was

automotive of Our these most component in chain was results. in ability lean resulted supply the from in communications evident quarter. revenue moderate optical many a the overcome our automotive markets' charges to Component fourth charges record extremely in decline

continued chain of our pleased costs additional our that very great of we a building are to in As second global quarter, Operationally, X XX% is add or that, business our margins growth Chonburi despite for footprint, our COVID-XX feet strong we increasing point, quarter. campus, target in This manufacturing employees second I'm quarter overall vaccinated. been in we well. or square first virtually program vaccination look optimistic Thailand headwinds. building these capacity. to the At substantially in our construction will persisting has delivering are successful employees ranges and happy and despite now fully to our our at COVID-XX the were also million within XX% related I'm our progressing supply that anticipating about approximately this demand success are across healthy announce all Thailand

and ahead. Chonburi revenue summary, us when years that continued at to anticipated anticipate business. in we first end for to we quarter, online and since Chonburi customer represent enable completed based remain strong, fully our right fiscal coming strong on-track opens for another continue the building demand building will around second and effectively Demand after first will just our be on for now extremely QX are momentum are our very our of This are optimistic quarter be excited construction building the In is demand, the schedule business to We year. that occupied strong meeting in time timely second that a the will trends we in profitability. be extend Chonburi

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

Csaba Sverha

Thank you, and good afternoon, everyone. Seamus,

profitability start year from in above our of the to million for with quarter. represented increase a off Revenue of XX% and revenue quarter and and are the X% fourth a fiscal guidance ago. from $XXX.X great was the We year well record first non-GAAP an

continue very program we of exchange line, outperformance to which This with guidance. per $X.XX per bottom gains, share approximately our foreign the exceeded share, expenses to vaccination that fell execute diluted includes earnings line As efficiently, in our also top the result QX. incurred $X.XX related our in to offsetting non-GAAP we

fourth higher increased $XXX.X Based from on and to or expecting the was gig was Revenue ago. fourth and from quarter speed $XXX.X million, a QX $XXX.X products strong revenue of XXX $XXX.X up at and of from million, photonics modestly quarter. revenue reached continue increased silicon up Looking Revenue was the record, revenue. a revenue XX% second of record at the of revenue, to products By fourth from gig from XXX a XX% rated XX% revenue optical demand, $XX.X a new decrease increase a are year million. quarter. communications datacom and $XXX.X or XX% XX% in million telecom of quarter XXX% the representing revenue optical quarter total a year total QX. see more million from fourth last increased product communications from we from ago, to XX% total up XX% but of from up the or quarter. technology, X% detail. was from sequential from the communications, made strong X% Within in Nonoptical communications the million, XX% growth million quarter $XXX in Optical

at impact of was expectations shortages overall products, were the end our automotive. noted, in more nonoptical of the these for component Seamus quarter, apparent especially for lower constraints as While the

revenues now On sensor other serving than for applications, of decrease include automotive from nonoptical revenue reclassifying quarterly our of majority the this last $XX.X revenue sensor X% the quarter. communications less past two to represented basis, combined are years. of we a has million, historical automotive revenue revenue and which revenue, With automotive was X%

quarter. from declined a more that nonoptical comparison revenue decline portion but Industrial While Other for category XX-month stable we in of don't was trailing sequentially. excluding million, QX, direct the was X% includes laser out revenue $XX.X X% revenue future, million, intend to a This previously now classified basis. fourth communications automotive from the as viewed was $XX.X break of on this purposes, up sensors, revenue, a when X% sensors. a

tax down can you margin annual expenses expenses QX, find on our our the measures related GAAP investor our turning income or in considering Unless Non-GAAP were revenue. $X.XX the Operating $XX.X quarter, points in is with revenue, will the of merit net profitability rate increases. included XX income tax we X.X% quarter first rate Gross continue that otherwise to XXXX to to basis, noted, basis. diluted fiscal presentation, press our be or $XX.X expectation, GAAP basis to our resulting was in details the XX.X%, release Now reconciliation P&L. million of record share. website. consistent a diluted or a and operating was share. X%. million was our Effective the was approximately and non-GAAP in $XX.X in metrics net X.X% a which $X.XX are at per income of per year X.X% On anticipate of from on of million vaccination A earnings non-GAAP program

$X.X was shareholders $XX quarter, buybacks. cash to the investments quarter. million with fourth $XXX.X and first surplus balance plan, the to We end authorization. Currently, committed and free restricted million, in $XXX.X to At share to cash repurchase opportunistic our sheet the $XX.X the shares cash, flow XXbX-X We million, at Turning quarter. we share of million Operating million. With open return the million cash a statement. compared of combined $XX.X remain flow through flow cash cash CapEx end share were did market the quarter. of during was first repurchase have any not the in repurchase

like momentum will our for After quarter start second the fiscal the strong year Now optimistic of in are turn I a XXXX. quarter. guidance that to we continue to our to would second the year,

$XXX are questions. change we be $XXX to stronger shortages will second we We million. per to income top open share. again component to to net quarter. $XX a expect million to estimate cost the second our strong line strong From now great the to off call in million diluted similar the for of start growth We execution a in profitability that we headwinds that $XX Operator, are summary, optimistic ready non-GAAP In that results we impact and are revenue the anticipate by we produce first and year, range anticipate the $X.XX even again perspective, will that trends million. combine supply to in ongoing we With demand backdrop, in quarter, quarter. approximately to revenue second $X.XX revenue quarter range the of the from the for despite experienced

Operator

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

is open. line Your

Alex Henderson

you Thanks. me Can OK? hear

Seamus Grady

fine, you we Alex. Yes,

Alex Henderson

Perfect.

far every a very has any has that company a There's hardware it. across systems So related results so been Nice Outstanding rate quarter. and in congratulations. characteristics tough results environment. almost order to that or reported strong

well -- companies? of commentary if So kind these an hearing extension so, to beyond you're quarter well in case? visibility from that current talk the Can beyond And you I fact, the and that's, assume getting are traditional you whether they're metrics. the what of

Seamus Grady

Yes.

So to we quite be see continuing demand strong. the

weeks days I visibility we all longer experiencing. out constraints about the visibility, forecast. have, the normal. we that with have XX would much we're much Normally, further these than have say, Obviously, component We longer supply rolling

remain further still Alex, the quarter have So we're signals quite at a one we visibility do business. but do just across time, out. demand seeing our guide strong We

Alex Henderson

is sense got assume to ago, not just like asking or point? increasing commitment rate off was and times talking guidance, you have the year Arista all multiple quarters characteristics moment order way this I a that. of you're their at call of which X the 'XX. I visibility. your next through seeing orders that but their for billion some about I they're no? that prior your So mean, by it is to visibility have accurate commitments, Is just $X the -- I'm that visibility into rather purchase

Seamus Grady

would on this say, stage. Yes. year It we But say, close I within mean, cases, some commodities a the at to would have I and in depends I it depends visibility really the, out, the on customers, specific it's supply, customer. component We're to we have positioning to like certainly revenue using supply. normally not the not we for of of component But it anything which forecast that. quarters, the would securing out for four visibility have. purpose three, purpose the or

Alex Henderson

the on the can versus us telecom for expectation QX What's you context? that guide, In in granularity give revenue more on datacom? growth going any

Csaba Sverha

Alex, is this Csaba.

what be our to anticipating So are telecom in we remarks, prepared we be -- and continue datacom to strong. mentioned

about at are up So we guiding midpoint again, sequentially, at $XXX million.

and do anticipate we So telecom datacom to continue. strong

Alex Henderson

no any two granularity between the growth? the or of rates between So difference

Csaba Sverha

guidance breaking not usually do of we but providing continue are to We perspective, anticipate down that grow. them guidance and both to from a

Alex Henderson

Okay. I of BOT. lows. talk the a is to five-year I'm looking at bit that almost a at it And little about then wanted chart

very time last in off is hard a line. back almost it's level in think this time straight ago. Obviously, at XXXX, July which a the February, since I long of come was it was

margins. that planning Obviously, BOT, I considerably your given in would competitive how a position quarter, or think impact costs But numbers? should you your it's on that? How benefit. that entire does current that your benefiting help from are the are help So your

Csaba Sverha

yes. So

on sheet gain balance So of as the sheer we items. revaluation I fact per current mentioned $X.XX the of had quarter. a in the remarks, the prepared That's share the

So as hedging our continuing FX are we and with programs. know, currency you

quarters So we usually out hedged ahead. three

XXX% So the we entering with XX% ahead. with are XX% position and quarter hedge quarter and then next

the makes and competitive We stays will is in see BOT QX in curve cost in and in position base if stays the as -- we benefits and our levels, definitely QX way. a obviously, and anticipate our the same the our from tailwind tailwind do a assuming more Thai of most current Thailand this So BOT.

Alex Henderson

is stay My hasn't yes, And level if I'm period forecast question of hedging policy to asking which hedging your extended is, clearly, rates is, policy exchange for the have changed. not Csaba, this an wants we currency. at what nobody time,

some out, this it And So at are to power will therefore, in alternatively, it benefit? to yourself How more you to flat share of we're you will you environment be margins? feed this How handle buying wins? competitive Or level. BOT? this strategy we your assuming that should something into go and relative gains? about use allow after you things Will the it on think back some level pricing will sold where of use that supplies drive it

Csaba Sverha

So all, dollars. U.S. of in are still of spending first most our material

So BOT. in our labor and spending predominantly overhead is

there can to there going -- So we leverage not is pay much not offset. to ahead increase Obviously, ahead. you just to are

of what to of the will you is in are gains some these fall should anticipate basically, as realizing quarters. the So bottom this line forward the obviously next couple we from contracts

that's something line. you falling should gross to in anticipate bottom and the So margins definitely the

Alex Henderson

what year. on? of talk made of that last coming about think some Could was you portion online comments remind the question. the us coming end Perfect. facility you one is you it And I the online? Can capacity coming at

Seamus Grady

Yes.

new is space. fully So square will at the coming and I Building is year, just feet, ramping million finished be, and building and of as that's feet million the by the square the it's point building, X fiscal say, would a will online, of -- over be up current new know, as about X building, which end we occupied

we think the got we've timing-wise, timing right. So

and little bit a X expectations, and been think great X I coming a of up, little a be online at which is time. ahead our just good filling part. of bit maybe has right our planning the will on look news of lot Building Building

we calendar should and up fiscal capacity and So full about effectively at in middle year, be year the year, the next in the X end running or about Building building so of X. of

Alex Henderson

asking should about customer. question, like? thinking But any current the little cede winning in period Can last One are environment? not systems Thanks. be talk additional current about I'll customers? looks bit broadly, pipeline How systems then you Okay. the the floor. What systems? a you particular and new we about performance I'm

Seamus Grady

the announce working content and the network would we content Yes. effective, Yes, it's builds of most how kind we're We've I building own it our exciting the success for convert where we've talking and couple vertical us had say, its for is, companies where but where where into some say, success systems in pipeline so But we can already, in complete at integration the the we're profound have isn't of when that I our content lot that for a of compelling reality. content, a the with, we it without the both and we as very Alex, on point. system quite this additional strong customer. bottoms-up us. of, the would regard terms pipeline that it's of significant and we're have in in with makes system seen have have impact revenue. be And question very can nothing network and on we But -- to customer, target past, space, a and when

that So at work continuing but with communicate we're this there's a to point. few nothing more to companies

Alex Henderson

the quarter. for great Thanks Great.

Seamus Grady

it. Appreciate Alex. Thanks,

Operator

comes [Operator from Instructions] JPMorgan. Chatterjee question Our of Samik next

is open. line Your

UnidentifiedAnalyst

This Great Great. Congratulations see. on for Samik Jen Chatterjee. [ph] on to quarter. is the Angela strong

Seamus Grady

Thank you.

UnidentifiedAnalyst

have first the question So more chain. I on supply

that? So a appreciate provide more I into the details about I were the down exact any we little mentioned really you any appreciate could could would but bottleneck know Thanks. where drill rising, you bit might color. component you costs be? would

Seamus Grady

those cost than on it's variances we seeing It's to customers it's commodity all through we spread pretty to our a But of it's supply costs to optical and prone less the some think bear in And are our customers. those the customers. across have it I as it's perspective, sizable base. we base. pervasive to across Angela, only again, Unfortunately, So go costs the pass from variances. our to commodity, one up pretty coming have also component bit the unfavorable particular, But are the costs not on is our If anything, industries. pervasive. From constraints one across maybe little not commodities, supply any pass automotive. several

call automotive lean traditional automotive of let's tends run have That business. supply it small chain quite We amount anyway. to business, a

certainly, from a million little room the it it's bigger it's side have potential affecting $XX about bit the at the or in seen $XX I with And quarter. bit maybe foreseeable worse in little our we when in every still in to of into see customer, came low great I'm same to as continuing headwind million So future. headwind, range. -- the we on it's perspective, have more this afraid $XX automotive going for baked million insight think, But the it I improve. sized optical I about it don't improve. here's a that product. space. million We the It headwind maybe every any about XX, wisdom, great quarter, And we've to there continuing, $XX any last to And think quarter. end for not It's it's

it's and but it little So not certainly maybe it's continuing, stabilized bit, a improved. has

UnidentifiedAnalyst

the Great. just And appreciate last question. I commentary. then

it, mean, continuing? optical ramp appreciated. communications that? hear love if you are might those mean, impressive exactly but I see detail the And driving Thank there these I On photonics be the in I must more really you. numbers. about have like side, be XXXG see any silicon can Would what trends to additional part driven of would

Seamus Grady

Yes.

to right XXX and gig gig remains that. well. datacom. from, yes, about the right again, silicon to the say, with photonics communications you of as XXXG and off, the time and feel optical think XXX now starting the certainly it a it's also strong business, hit and take we across good good XXXZR of nail XXX But the both on I kind head. The We're gig. very middle XXX let's in telecom And transition that

So gig well. and ramping, we on strong come have then XXX starting XXXZR gig remains is XXX as to

optimistic strong, So demand segments are and quite quite that. overall, the we're about we're seeing

UnidentifiedAnalyst

you. Thank Great.

Seamus Grady

you. Thank

Operator

from MKM Our Najam of Fahad next question Partners.

Your line is open.

Fahad Najam

apologize, Couple you Thank today. call. earnings missed taking on my I prepared much I of remarks. going of for your

us you you you're silicon I'm data a in strength and if on apologize. can follow-up asking And trends silicon telecom center saw help understand then quarter in So versus intra seeing the photonics. the have But of repeat, I and I the photonics terms in XXXZR you

Seamus Grady

It's number. So we datacom not center, telecom revenue. our photonics let's say, silicon classify, in intra our data in

Now within really center traditional out, silicon let's telecom data our photonics-based products. versus telecom say, number, intra we don't break

really see intra-data would as to don't out. overall, we We we're we let's across But central both board encouraging So seeing that silicon-based really datacom. encouraging it demand break the demands. is traditional trends is, what out, telecom look Fahad. strong that don't And I say -- breaking But are the out, telecom in quite it or further break out and granularity between, those is say, products. and

Fahad Najam

you the if gig can you not single looking one ZR on to story? now XXX-gig for if answer still deploy you Got there I'm than hear beginning ZR? what ZR, customer predominantly revenue it more one it out if are Or But Is XXX XXX you seeing I to just like. call XXX-gig it. gig that, is, us, it love would then than answer can't And is more ZR? a is for supplier to material it still But sure individually. vendor

Seamus Grady

a wouldn't exciting out activity at customers. meaningful aren't of say. would -- to but we're meaningful see And we're relatively the XXXZR those various look And and over to of more that they're point, see it's multiple of are customers. certainly, encouraging. we continue be performance handful production various we'll some at I with optimistic But stages breaking we this you're projections still And correct, overall. seeing XXXZR time. No. ramping ramp It's at at vendors, become It small. we're stages starting Overall, very

three on would say, I bit a would cycle. have, development solid in the But one little demand one well. four coming I in customers reason three We a behind as customers fourth or say, is have I say with the four XXXZR. The strong maybe certainly, three, we of customers or and

multiple So we space. customers have in that

Fahad Najam

opportunity I ask CMI kind if these X.X 'XX, of How or terabit could will revenue Can -- you one you you opportunity becoming end see that early of but for of your emergence customers probably large speak with involves pluggables? sometime in an lead is the to the it likely a incremental this your Got next-generation customer? new you that of X do unique product much you, the 'XX think it. terms Is of growth pluggable. MSAs, Seamus, the announced at that ship new --

Seamus Grady

I'm sure or you're -- to, not I'm product customer referring sure which Fahad. not

Fahad Najam

factor much how new Cisco form called CMI of that be form upside And announced it's because incremental a was new I would opportunity wondering pluggable X. an factor. just a

do you form the it's new how you -- a -- something So to more higher opportunities? whenever new Is have because just a we introduction faster, new Is because revenue think should factor, about form capacity factors incremental? it of how that beyond touch is system? it factor,

Seamus Grady

Yes.

can our business, form into So also within say, the in make sure it part really and big, in the certainly, I goes much mind we're that the form of We We're pluggable interested as terms would big it's our making we kind technology of global -- is. the making and content factor don't a that -- we're manufacturing of factor, pluggable obviously, what the a agnostic. pluggables, and the more as pluggable. content

about to particular, that excited new pluggables, always demand But generally announced form I'm comment So they've move what we're have more in afraid on about. Any don't don't we a really certain without to example I customer because gets themselves. -- you the talking specific any talked we're until factors about. for

Fahad Najam

answers. Appreciate the you. Thank

Seamus Grady

No, Thank you, Fahad. problem.

Operator

questions time. at Seamus further Grady call remarks. no I'll turn back you. to closing this his the for over Thank I'm showing

Seamus Grady

you and goodbye. you, year to to and with to We're pleased we'll optimistic able Thank be start We're operator. results our the Thank in you, look exceeded guidance QX, that we quarter with another with excellent that speaking deliver again. ranges. our forward fiscal strong

Operator

all Ladies today's gentlemen, participating. conclude does you conference. and you. Thank Thank for this

disconnect. Have day. now a may great You

Fabrinet (FN) 2 Nov 212022 Q1 Earnings call transcript