FN - Earnings call transcript Q2 2022

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Operator

Good afternoon. Welcome to Fabrinet's Financial Results Conference Call for the Second 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. December 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 second 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-Q For risk the Factors may in the November 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

ongoing with are to our the guidance our $XXX.X income constraints ranges. our continue am ahead. for we both for industry on levels look team's was through today's us non-GAAP results net continue we thank quarter conference XXXX. joining confident Garo. can deliver very per you, that wide to was you ability everyone, we We're to strong pleased afternoon, supply as share, and end Thank pleased particularly with and and manage Good of top of above million call. performance $X.XX Revenue the I second fiscal

our expected were navigate constraints we was end the to million quarter these telecom range with supply $XX and in had to chain headwinds revenue impressed declines growth. of from and million. with another datacom the to essentially communications within detail more continued year communications from revenue and ability revenue newer quarter sequentially year. I'm flat By $XX drive at in optical Looking constraints team's markets over programs Non-optical offsetting automotive. first for strong increased laser with industrial, small our the quarter

chain constraints impacted traditional supply Our automotive primarily products.

of near any forward, in Looking from the meaningful component signs term. we see shortages don't relief

ability. support continue fiscal into our these remains To We mitigate to the the at well underway our at year. our the for future growth impacts the on of of our expansion end facility best to completion track Chonburi

customer new the we're our be trends summary, for meet seeing, we in with building able pleased our strong execution, effective are very Given strong company. demand needs another X another and performance which timed the strong deliver In be for to we'll of to produce million square will well supply continued With space. demand we're helps optimistic record management QX. the quarter trends additional foot opening

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

Csaba Sverha

afternoon and everyone. good Thank Seamus you,

non-GAAP and non-GAAP strong increased X% profitability are XX% million the revenue $XXX.X Revenue to ranges. drove quarter outside excited earnings record our per of share. $X.XX quarter ago. We another year very from with guidance of a report and exceeded Revenue from diluted that first

the XXX QX quarter to grew decreased to gig million, million X% million, Within Photonics to million. prior $XXX.X X% products X% was gig at and Non-optical or datacom speed $XX.X total was revenue Looking Revenue XX% revenue record. from essentially million. from to increased the datacom from saw total the X% revenue $XXX.X products or $XXX.X revenue automotive the communications $XXX from non-optical XXX in first a down rated flat By quarter. represented higher levels. $XXX.X of growth new first growth communications million. from and sequentially Within $XX million first Clara revenue and from introduction of and at XX% Telecom last telecom Israel. quarter in revenue facilities of product from little With increased XX% XX% record optical in increased the quarter. to increased more quarter, Other we to non-optical first X% $XX.X million at optical Silicon revenue of industrial revenue up from revenue; detail, X%. XX% from communications products laser our quarter $XX.X to technology, revenue Revenue to sequentially new $XXX.X communications from increased million. both Santa million contribution

to Gross million target end up a quarter our the range. was record at X.X% of you sections in to Relations or non-GAAP very revenue. measures XX.X% is included operating margin million. can Non-GAAP of reconciliation metrics website. release Operationally, presentation, operating our press continue in P&L, I margin profitability was of our basis basis and expenses from we $XX.X the which Operating and points turn A earnings to expense As run at of upper income XX.X%. a $XX.X details of non-GAAP noted. QX This unless on Investor provided investor efficiently. find of and otherwise the resulted XX our in our GAAP in

we basis expect was tax diluted share. the per quarter to at X%. and share. in positive Non-GAAP was anticipate that income On While or to diluted a the X.X% returning the operating per X.X% margins $X.XX continue leverage operating we fiscal rate we net trends XX% for range. our tax $X.XX be in to in second the continue anticipate GAAP income rate record $XX.X to million, will year was Effective near a approximately net term,

balances for Operating a million With Cash cash cash of flow $X.X second total flow quarter quarter. $X.X the $XXX.X quarter. restricted average cash [XX.X investments cash reflect first end end At the cash statement. $XX.X cash, $XXX.XX to the of the million of Turning million. outlay thousand] an balance flow million at repurchase were at $XX.X end million, $X.X of sheet of the the million. also quarter shares and price and was of the down the from of free in the was CapEx

our As remain a in repurchase result $XX.X organization. share million

slightly in third higher up to will This guidance revenue turn be demand for third will Based to the to flat the be in fiscal I board, non-optical and strong quarter. chain million third communications which million includes supply we impact both Now of the headwind across quarter our the largely expecting optical to of continued $XX estimate the year we quarter. XXXX. are on from $XX

$X.XX quarter, be net per the We share. of in $XXX income summary, of to we million anticipate pleased quarter. with in and $XXX diluted For we very be range revenue $X.XX range million. the to the the third anticipate second are In our non-GAAP results to for

strong increased levels third now produce will execution call for in open a performance that demand Operator optimistic strong quarter. we are questions. again and are We the ready to the

Operator

Our comes line of Henderson Instructions] question the Needham. Alex of [Operator from first

line is open. Your

Alex Henderson

nice for guys, Hey quarter. Thanks the [print].

million eventually they're XX XX% about system sale. product little not supply of year's it how seeing you're at talking than a we these versus through. terms growth is what be that measure So seems that running larger the talk much And you the when a what clear its find in-house, of your bit but full XX% orders in looking order the that to of of to XX% of and XX the about? backlog pretty $XX passing from you you're up talk on into all are the significantly backlogs will so headwind revenues, to the implied contract to chain companies to year's million way Obviously, manufacturer. am about the the me may XX% mean I $XX million, I chain components Can right? million full the to down way your of of

Seamus Grady

around demand Yes, I remains Alex. think, strong. -- message kind the quite a of Hi

illustrative I'm circumstances are that are is the rightly good pressure very But out say of to it's some mixed the out heard limited supply constraints is demand, sorry, is that that putting there. strong, component point as seeing news. demand So on set the been a increased the that which suppliers demand, people you We've message. But ease. kind we've increased

that haven't I anything can thus as guidance, the far. increased components see we've amount really evidence of of a constraints. said, And robust. If that's you it in of is by seen driven is, two demand to is like tightening couple our One the very We impact the factors. the

are broader broker supply now. any that So markets that's chain there in in on And secondly that or that's market were the in surplus supply the out components the limited pressure distribution there. the up putting out of drying increased components

surplus said, the they've alternate products out point. at manufacturers were this really at quite we're So that directly strong shaken the point. demand supply I is dealing and products in Like been chain, this with or

some point see So we it for time pressure do be to continuing come. to a

Alex Henderson

to back question, going Just the Seamus.

So question the is, the that in OEMs the up actually really million, So on million larger doesn't to systems that think it? Is orders a about million of quarter, when are a you there's to basis at much $XX the million? about for to might current be talk $XX ultimately product. firm $XX anything demand $XX the by what's pent end captured than the reflect backlog that's that the that the users that way fair

Seamus Grady

that's at $XX the beyond fair million for Yes, that quarter. we it. our $XX this to quarter. see I way think headwind this ability demand, look look deliver a to million doesn't on to It that's commitment the the at That

think to is strong broader very I continues fair very the from customer yes, be strong. your demand but So And base. statement demand is very the

Alex Henderson

have been and look your certainly better If if for result margins, operating BOT the from X.X, had subject, I your better gross digit coming statement, I off has a revenues? to OpEx? margins, about that think is I structure the range pretty than of on margins? that which the Thanks. the now falling the bit and nice OpEx down it the buy different the parts upper your mean, kind really a X.X little you the income at aspect is X.X traditional Do of sustainable a we seems table. while fall. a look double does band. on end than as into helps much BOT Was advantage you of over cost could down to the hitting it point at to the to at it? this you've expected of on this much of that after gross And to Thai upside somewhat do as level much giving And and ability How summer expected in get at stabilized the we the

Csaba Sverha

Hi, Alex, this Csaba. is

by take me one one. it let So

has Thai somewhat BOT stable the in the months. indeed, six So been last

OpEx and COGS start the structure see in we So to in the did last our in quarter. pickup cost both

know, you as program our So hedging place. in we have

So forward. gives impact a us stable that of kind pretty going

So stable I anticipate months. that somewhat next this in is the be to going six

BOT Secondly, labor our primarily side. cost overhead our on and and spending structure is

material we So in are really terms U.S. buying of dollars in mostly.

is we or the there cannot to buy impact [V leverage BOT] So advance. or of no use in whatsoever the

from and our impacting COGS definitely OpEx that's So line labor perspective.

it it's of operating terms And In playing has part BOT that. yes, was also obviously, down Thai sequentially. expense

also have in seasonality we some So tailwinds the structure. OpEx

we it longer X% to So going that be term, anticipate range in X.X% to forward. returning to the

So I think your summarized I think all pretty much that's questions. I

Alex Henderson

you any quarter All pretty little look negative. swing all sense and Can income unusual if us you've that's the March the all? the them what an a you give all right. where below forex aggregate in And of of like of going just had going in to then you interest interest think line, bit

Csaba Sverha

typically are we not So numbers. the line guiding below

the So and hand. rate it's function the BOT of on Thai exchange that a have we assets always

see. basically line anticipate would So would neutral going I there expect that's in you what the forward. and

Alex Henderson

Thanks. right. see I'll the All floor.

Seamus Grady

Alex. Thanks

Operator

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

open. Your line is

Samik Chatterjee

Quicl Great. Hey Hey Thank Hey Csaba. you. guys. Seamus. questions.

I think strong operating margins by expect you way, the margin operating congrats this So you margin clarification, the on gross the first mentioned on and a which, quarter.

in line to maybe a But levels to saying comment and just those or are said back longer You bit expect if term. clarify with you itself that you want quarter your sort clarify, of historical just in first. back the me third for more from come come can them you

Csaba Sverha

Hi Samil this is Csaba.

low record X.X% So indeed a yes, had OpEx. we

growth So top the earlier, one the had it's we is tailwind obviously, I on as some line indicated the as seasonal [used] well that well. see leverage factors of primarily strong as we as operating

it going anticipating a So range it we somewhere forward. X.X% to to when around comes longer are term, to X% be

So we'll I running into think range. historically, be that

going aside forward. So and if X.X% seasonality, anticipate stay exchange I X% set range the in to the to we rate

Samik Chatterjee

Got it.

Okay.

margins, margin, through. gross I essentially the my the you these be in to on is mean, talked despite navigating So the quite had continue quarter volume headwinds gross of all sustainability leverage you're as benefit will the particularly you How gross of as should about question, strong you've well this strong supply to [indiscernible] margin we kind think demand seems about. the as assured really that from

Csaba Sverha

So gross yes, XX.X% strong margin indeed, we quarter. had a very

So we about good sustainability. feel pretty

So we is have range XX.X%. our XX% to said that always somewhere target between

to that is high. operating comes cost price not it when So our leverage, fixed

we think OpEx the I margin of we been see couple and So will benefit on grow last we seeing organically. as quarters. more operating what line over That's line the have

XX.X% regards with margin, we gross XX% to hold target ahead. of to we and anticipate our range to So maintain as look

quarter. the efficiently very and you We had may as last to in one continue remember, we some headwinds time execute

XX% to expect stay XX.X.% in range So grew continue target this to sequentially we our we and to quarter obviously

Samik Chatterjee

don't growth one more with three squeeze the cycle quarters you're XX% ‘XX. in in is a me But for as your sort I the if guidance you terms look through will know guys of that like above year-on-year up high at in you XX% fiscal like to in here, are from a March, you of point here. growth we Okay. allow Looks first optical. particularly which the function step going did doing

your thoughts in you're you How of levels So coming expansion share can sort are from customers? what particularly hearing your plus the sustainable these through as you think if XX% about of and maybe capacity and the growth terms as capacity well?

Seamus Grady

tough answer a think. accurately it's I me one think I to for

have growth at the outsized is underlying the, by business growth you of the look this is you're which you had a the If we last right, strong. quite years couple it's in like, of lot driven if

we've think good But best and building customers. I last servicing able growth growth really for from some products outside win had Infinera. we're year, had the and to those we large a we've last of the visits deliver been with right prior the the from also look big that customers couple back had we years.\ Infinera, year, and If Cisco the win you big accordion from wins

large, been have strong. margin. these So do supplemented that growth the then with been complete underlying we We've negatively And our system to gross we has that very able impacting network had, without wins.

the secure, customers, products to always we're winning sure the So take that that right a work on focused we're larger building next very on we long products, don't generation on to continue and continuing on opportunities. those. from these our we're just work continuing path -- very making time come also working but They to on They along easily. hard

obviously feel but most that of we're trajectory about give going growth to your not we the So good projections, we're on.

X expansion in kind online at We we fiscal timeframe, the have additional capacity in coming the of opening our end should new an new June/July of facility which is be feet. the million our year square Schaumburg,

customers, secure and secure we've the the large these customers. wins making able been the our to for we've So and feel about we that expansions we're also customers to business it's good been our an able time. We exciting products with have,

on. So path the we about feel that good are growth we

Samik Chatterjee

Thank lot. you. a Thanks

Seamus Grady

Thank you Samik.

Operator

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

Seamus Grady

charges. third With Thank of and with of again. these our both to a QX. quarter, very forward quarter into Goodbye. you. optimistic in We trends reflecting again effective excellent We strong demand trends call results component that financial joining we Thank you combination continuing you speaking strong look today. the navigation delivered second of deliver can the for we're

Operator

you concludes this And call. Thank today's participating. for conference

now may You disconnect.

Fabrinet (FN) 1 Feb 222022 Q2 Earnings call transcript