FN - Earnings call 1 2024

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon. Welcome to Fabrinet's Financial Results Conference Call for the First Quarter of Fiscal Year 2024. [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, VP of Investor Relations. Please go ahead.

Garo Toomajanian

good and operator, you, afternoon, everyone. Thank XX, for discuss Fabrinet's you quarter fiscal ended joining for us to call of September which XXXX, conference today's year financial first on the Thank XXXX. and results operating

With is Executive Chief and Chief Seamus of Officer; the and webcast, website the a me at This be Csaba our call Investors available call on on Officer. are Grady, today Financial being Sverha, investor.fabrinet.com. replay located will section

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

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

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

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

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

Seamus Grady

met datacom by course. inventory triple-digit telecom for runs for record. up revenue in year-over-year optical which a guidance than cash our as reached first continued datacom This growth achieved today. interconnect new you growth and in for set both records joining also Thank of diminishing but new revenue Good you, us declines revenue more on and We Garo. sequential We flow were our ranges. call driven in everyone, for afternoon, our AI thank applications. EPS absorption Free next-generation above quarter, quarterly quarterly its

revenue as $XXX.X quarter, million, an increase of a that representing as from million adding well a of XX-week from ago. was quarter $XX was ago. approximately Recall X% revenue quarter to a XXXX first year Overall year fiscal the fourth the

year-over-year. would revenue have impact, grown X% this Excluding

Our contributed with line share. $X non-GAAP record strong income to a revenue growth bottom per net of

Looking more at communications, quarter the fourth increased quarter. ago in optical over the from fourth Optical detail. a amount first ] telecom revenue the sequential [ though sequentially, communications revenue anticipated. and very both a decreased Datacom gain a strong smaller than Within by offset from ] client than growth quarter to [ of year-over-year telecom and growth more XX% with growth of year XXX%.

primarily was QX, in driven by datacom As optical interconnect. growth AI

in anticipated. our revenue. offset communications as communications lasers growth nonoptical business, sequential was small revenue industrial flat A was by nonoptical revenue largely automotive in In other and decline relatively

temporary, whereas to In are second continue. quarter, We we Looking second issues optimistic is the the datacom the these quarter. to in the telecom than inventory that headwinds are in industry-wide strength inventory-related particularly the datacom expect believe AI, again offset short, telecom adjustments more will that in we sustainable. demand in growth,

delivering top record well our start and and look confident that are year, ahead. line results summary, to the we to In represented fiscal a positioned strong we continue we results bottom remain as solid

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

Csaba Sverha

to $XX week. both $XXX.X benefited year by Keep afternoon, and an above from Seamus, the you, in up mind range guidance additional ago. a year quarter X%, and good due million sequentially of that the million, Thank our Revenue approximately was everyone. first at prior

range. helped $X strong per above guidance which share, was our income Our net was revenue earnings. Non-GAAP record to produce

investor can presentation, the have We find breakdown our website. on published details which additional revenue you in regarding our

looking on comments the in notable most closely revenue, changes. So my at focus will I more

XXX-gig technology quarterly there sequential a in the AI primarily excess by wide of in Optical by for was believe Very again telecom second growth record. And revenue for we being is applications. X%. datacom up the strong still offset telecom chain. million revenue smaller-than-anticipated declines to Datacom supply datacom is revenue growth a more We in $XXX.X of a inventory driven quarter, communications than decline expect new than of made margin. more XX%

revenue. in the revenue with $XXX.X was greater and products from by communications XXX-gig of offset Growth revenue at optical lasers data was Non-optical This Looking than communications rated a industrial from substantially to XX% nonoptical communications and at in increase smaller revenue. XXX-gig fourth declines some other due products. quarter fourth revenue million and the absorption. total quarter faster was sequential by partially X% revenue consistent rate. represented Automotive declined revenue from inventory

unless was As quarter the I Gross and a ]. otherwise discuss basis, the metrics in details P&L, of [ on margin will non-GAAP our profitability noted. be expense XX.X%

as in were As declined points about X.X% XX.X%, million, revenue, an We of XX which primarily as quarter. of our seasonally or merit fourth income $XX.X from due anticipated, million operating take quarter. margin gross that Operating first the increases, representing to with Operating scales. QX, the from consistent the $XX.X effect annual in an a expenses XX to by was margin quarter. basis operating percentage basis of expenses improvement points will the business fourth anticipate of decline quarter continue revenue

$X.X sheet balance was Our our million which the benefited interest in quarter. income, again strong

small million. the mid-single-digit as a the in Our asset liability tax X.X% which was the for GAAP $X.X of year fiscal gains was end rate to quarter, is expect currency we continue the above first foreign from valuations level and whole. Effective relatively at quarter the at

record or a GAAP net Non-GAAP was a diluted of per basis, per $X.XX share. income new quarterly share. was diluted On net $X million income $XX.X

increase of a up quarterly $XXX.X driven $XXX.X primarily million cash were cash flow Turning to by CapEx first operating and and the of was $XXX $XX.X flow flow strong of the statement. This of record million, the Free million. $XXX.X end the at balance sheet short-term At quarter. million with fourth cash quarter, cash was million. from investments end the

Our active not in quarter. the share repurchase first was program

$XXX our end As million the a of remained at quarter. in authorization the share result, purchase

I will our to Now the quarter. for second turn guidance

adjustment customers As expect inventory the primarily I at telecom in continue quarter. we our second mentioned, space the to into

and We We high growth to, decline offset industrial data programs these revenue from more to expect anticipate flat. revenue telecom data sequential revenue to than from AI be sequentially rate relatively laser headwinds. again, expect automotive

of per From diluted expect net the non-GAAP we perspective, share. to to we be $XXX a revenue income total, $X.XX million $X.XX profitability $XXX be anticipate in million. range to In between to

happy revenue, In first are net have our and flow. by to free guidance summary, exceeded quarter we producing income record cash

profitability. We balance consistent continue growth with to improving

continue we to the call for questions. deliver that well ahead. execute optimistic results now we are strong look to as Operator, we We to open can ready are

Operator

the first to come from with of is [Operator question Henderson Instructions] going Needham. Our line Alex

Alex Henderson

Jabil line. think the got silicon Jabil I business a you quick Intel how has of I And existing particularly for over I've photonics you wondering will historically over that was on been the out yours. at impact photonics a about question moving customer came given Intel. the an the that purchase difficulty of you of of news know time. silicon

Seamus Grady

wanted looks of been not like exit a yes, has ours. for Intel market Alex, Intel strategic own XX% their that reasons. customer -- to it The

we're with. manufacturer on the remain being on selling customers sources X program serving involved that our of programs market one -- been We have in rather focused own products. We the that than a

high days our new out a so development on and customer became its in just we've And So level few of we're and a situations, transfer we're to literally to sit our early we business good not the involved that usually come for products, impact, supply et top. transitions understand really products, these that that's managing only ] a official business to in to the provide Intel we we have ago, Jabil, in. entirety of confident cetera. to service us, way at immediate news it's general, these including out have in find . The [ work customers. plan. become on The sold too with And down a say. And

Alex Henderson

you your you optical Or Do it? trying competitive implications of increase that to market? think get what's the Jabil do represents of an in this sight -- into the

Seamus Grady

manufacture Well, it's to business Rodin We the ]. [ guess, products. people's business, other I a different

have it's more And We Jabil, to speak in appears in. no an not to of an for just we're that's involved interest having be products, so I providing. our assume would I be of -- that something OEM want but they'll Jabil, don't it type offering that more own for

well. as the wish So market different I we involved, would a we're market but that it Jabil see to

Alex Henderson

on thoughts cede side XXX-gig I'll I you how could, about the could any into potential one I get opportunity. then hoping activity if of more pipeline or was question, the floor, to the AI Ethernet talk and

Seamus Grady

we one that protocol really us don't for we lead, mind. the don't Alex, the they deem the our We happy any be follow products really whether and really want just are us. to we're Well, work mind or international other customers' protocol, whichever to customers

products the would with really provide we that work and we're it's a or need don't our volumes we sure working So customers the to we this or whether Ethernet else. they number in anything to customers, InfiniBand they But and continue say, need. that I with, of space mind make

Alex Henderson

Ethernet. InfiniBand ]. over and time, world Well, current Delink yes, shift almost your towards obviously, the is but exclusively will XXX-gig customer then And [

is, So a the you do have stream? question that into hook

Seamus Grady

indeed. on InfiniBand We're Ethernet-based be that do a working I number products. both say, of working that but We also opportunities will we're with, again would

Operator

of Our from next Samik question JPM. the come line Chatterjee will with

Samik Chatterjee

on in about bring sort on you're -- the share Just are to competitive like as And relative from I you can a companies perspective, looks aspect? finding what's can your have our it chain guess And are the Ethernet towards maybe a supply differentiation the you side, what follow there you move Alex's thoughts you from Ethernet. to into up customers How with that in I seeing the working off, landscape? I competitive of manufacturing more But question ecosystem? relation from follow-up. that start what for here. in, the outside Seamus,

Seamus Grady

for Samik, XXX pretty higher think, to newer we're positioned the whether customers need. feel or well it's that gig support speeds, I confident we products, what

a It's support handful for new-generation products, applications. specific there's products, of for for the it's of well type competitive. are companies and latency landscape. to But these them. able more low really power, we're kind competitive these to think low reach, who short design positioned I much products, of older-generation

lead. again, focus we're or follow we current-generation, whether Whatever them help just our but also InfiniBand products. customers from us, always the again, And is Ethernet, need producing on with. next-generation they products So to winning our it's able

space. that our focused on So we're very with in customers this

Samik Chatterjee

ask I on guidance. a just as Okay. If can follow-up the Got it.

with revenue Going Easily, increase datacom. decline. in of in had telecom sequential $XX from a XQ or to million XQ, the offsetting you the about increase so revenues

$X forward, much guiding seems As you just you're But telecom. I of the does to sequential that at offset forward same carrying lower mean, midpoint given be the look million datacom the you're theme it where increase the to. magnitude

declining us reaching telecom with So we've of maybe Or if takes and to you more just it you're puts customer from that Is help ramp than maybe with XQ moderating, engaged XQ? sort can with? is are the is the that more there. capacity the datacom given seen you what

Seamus Grady

driven going especially say, more thought which anticipated might quarter, our We we declined telecom would DCI. less it guess, stronger decline programs, I primarily telecom It -- QX, X%. X%, the first declined than about certain of would. than about for was that, I demand it declined than in all, thought probably by we into

So as data categorize we on going growth the telecom. but That's data in again, the products, DCI driven the and center thing. center first which by the

QX, into our further telecom our think we yes, go QX. we as then decline into business -- will And

As of is the kind by our to in increase until you Datacom And -- fiscal we X know, time. middle year, that more on again, we the decline. year. think the of we our sense, be continue, probably don't from intelligence which a of would based quarter I we the telecom the have at set future, decline. think than decline guide general end then a as calendar will beyond think But to the telecom customers, look we will

of begin begin declines of call to further will quarter then the in it rate the out next we this to That guess, and it's very us. quarter, quarter. the it growth I point. -- And been at will some then strong So and some rate at should But the of point. bottom June it growth slow inevitably the it datacom, we slow to for think growth, will down -- begin

Operator

of Securities. Mike from question is line the to Genovese Our next with going Rosenblatt come

Michael Genovese

at commentary programs? color on existing any older there kind programs there? Is XXXG can we all give new you XXXG datacom between of and get any Can us performance versus breakout or

Seamus Grady

primarily category, gig category. category. coming Older general, some primarily around the how not which, it's gig and gig been the now, break industry, out XXXZR, speeds, at with do the higher-speed for we been focused AI, center, we But being gig like. may XXX for the point, the in us, of Well, this and And been for the really these to driver in large especially programs call a whole XXX revise above XXX the for so for at strong, the that. applications, we datacom that programs, has But XXX us and want everything gig speak pretty certainly, newer XXX at we and us, newer everything there. biggest is have -- course, data the don't gig it, that the above and The programs. seen newer higher-speed let's above and, as in that products from really mainly growth AI XXX DCI, traditional inside has lower but on growth XXX-gig growth point, we've

Michael Genovese

gave that up color. Maybe you less the thought that was decline expected. by DCI about on I because great less than follow question but a mean a -- telecom Perfect. in telecom driving I'd I -- and color

did -- the telecom Or behave maybe downside? programs, behave as Or came was there? the So surprise any there I expected? how comparing mean it how or it datacom older into did on upside

Seamus Grady

I think I expected. we much the think, pretty as it, call datacom, traditional behaved traditional,

down. the datacom been had this We maybe telecom DCI expected, at strength us, it's for has very bit surprise. was And then Newer just a earlier, in be little expected But a I strong. I think, to point. said like of

in thought our we we you driven going less probably DCI. to If lot you we line XX% into straight just a been from just and so took guidance customers X%, have XX% quarter we the digits by down be, Instead, the were about down double primarily would should that, again, down than telecom.

driven telecom, on data going expansion So even center in it's though everywhere. by that's the it's

Michael Genovese

it. Got

thinking you you going for kind in buybacks. And not Great. of could forward, what Csaba finally just decision -- Okay. just then back about me, the stock buy to of maybe talk or the both and you're about quarter

Csaba Sverha

didn't mentioned back window. an our Last anything obviously, is OMR -- in in we the quarter, this Mike, Csaba. opportunity as [ have, I we ] prepared remarks, buy open

have prices. trigger In XXbX certain addition, is we a The to still XXbX cash plan shareholders. subject obviously, rule-based it didn't surplus to return our last But to plan in are committed Obviously, place. quarter. and we

continue make surplus time new committed the we we pricing XXbX shareholders. to So the from plan and amendments, and time obviously, conditions, revisiting the we to are subject generate to will we market the return to and to be cash

Operator

next Markets. with is Savageaux Our Capital Instructions] of [Operator the come to line Tim question Northland going from

Timothy Savageaux

questions. of couple A

AI and the varies maybe very I as actually general a maybe a gig in there. stages in just opportunity. very connectivity described missing or opportunity, I XXX early You'd few previously large think, at

Seamus Grady

Yes.

I maybe point, one think said at twice. I very

very, off pulled I think on I very.

Timothy Savageaux

opportunity in guess, as terms Fabrinet Or we've give you the Well, here -- current few forward to I end ramp subtract us were where a this previously? that the any or is at year, you is what point? how as relative assessment months would the varies moved your you and can seeing you of add into of looking

Seamus Grady

would We're the design, for least, the they within us. products sourcing But you artificial building committed interconnect, We're many the intelligence that. the have interconnect applications. very position about varies like quite say, know general. leader industry. I I market I own It's in their opportunity own the very about still ramping. and in our for there now still their believe from they're we product, really, optical we're the you as or think choices. to . We're for optimistic And at insert remove Tim. can still as optimistic other

on. We programs, looking [ both getting we're floral additional qualified at and existing there's that and continue ramp to ], the business

that focused the sure on we're you but on next-generation executing win the products. maniacally new already As won, making programs know, we then of business we've

hard good Tim. very delight competition next-generation products and and So and customer both very, on a next-generation of of we've great ahead those, work best job then on sure executing. And to think we're the job way like execute the is a those. Both make crazy done a good working job very, very there. well the products. making win we also sure Maybe on of I very stay win executing, very we're It's we to and the the just do

our lot So we're we And ahead of kind us. and really really opportunity it's a good focus. of for see -- a runway us, that's we think of

Timothy Savageaux

with just for follow-up. of distance before And you've shouting that. latest I gotten Appreciate revenue I Great. correction. think ZR, a know the you within inventory of guys XX%

you've that you out of materiality And update in quarter, kind the maybe just . of talk overall stands us can one in quick or kind or unexpected that more the on about called however to I want after of follow-up that. Given give you where of source growth business the as it it. terms got an telecom of

Seamus Grady

Yes.

us. very strong is for ZR think I

of up down applications. was where participating most difference and last and we're and of broken we that we is have XX% continues We for source category, bit XXXZR offset be a between ended DCI there'll still really would The so line, yet what primarily -- to straight the quarter, with quite XX%. But kind a XXXZR. of strong in was in just separate but be starts a grow. necessarily to it grow it maybe it it, of and between to doesn't that stops -- little out happy for expected haven't that in it a very It us doesn't

So we still think it's days. early

customers a ramp they're and a we have all We to of number not at and those number there, programs continue same stage. and of the

ahead, just us. getting are for But some are left has think we runway XXXZR Some qualified. good still

Timothy Savageaux

continued wasn't and going ZR? of and now coming as sort look Are -- growth look you Well you mention December weakness quarter kind you down? in and in this be your that elsewhere ZR blip but back that's a as seeing of telecom this Should question, my thing into across we guide coming it. to forward at

Seamus Grady

Yes.

telecom have we continued think I I weeks in see -- earlier, generally. still said we as

not XXXZR, out. will the more the That's even -- middle start were it traditional think when December be there We probably to think year into . next of really telecom out products. for level telecom, in continued and I weakness. the the in quarter mid out to traditional really will softness we see

Timothy Savageaux

terms Got last of the major growth where of stand we is for the metrics seen facility? capacity in the in kind given additions question it. and the additional that in you've discussed past, me And you've do

Seamus Grady

seems a -- an a the ]. it. now that seems But have a [indiscernible] keep eye It's seems to even It in it off building close is way, flying as like in that start. and It we're blink to completely eye it ago building we ramp. of we we about is crazy on Charley something full. opened talking [ that

a close keeping on that. we're So eye

probability, very say, small the They're well, I that? think implications early, in of could implications are pull really. if we the trigger you too what all

would us stay that building. take we'll of we're next pull there. be [ there not I think, to in amazing. like A past years build it out, X it whether start get trigger on I a remains over our just and seen. another that's the we off ]. little good part, week we building the to we've or anything timing [ say It's earlier, to what or to was, And expansion our utilization once of time whether planning X over building couple really do around XX% is said think and think right. little to ] tuned our X I quarters. to we see. encouraging a bit get capacity facilitization that this It's whether I X in line last or bit last -- to in building HX. the typically, is But building, and We're So a great was exactly the the good was turns on on I look, going luck as going

eye we subject decision, it on if XX the range me, I course. this keeping that. do call million say, million So on would year cost eye on and would we'll X feet put close months And be correcting keeping But due make for time be we it's again, square be, that once a communicate about $XX in horizon. to something the Csaba I close on. million yes, $XX another But to a X we'll a to

Operator

of the Chatterjee from We with a have line JPM. follow-up question Samik

Samik Chatterjee

It's quick, I promise.

automotive the X while Is that [ punting any color embed will production-led on like mentioned either Any and know modestly. merit and the is then into legacy Just forward. to programs. sequentially of a declining think about it those you temporary Or items? of moderated the gross clarification this increases. on margin of headwind? Seamus, takes more margin you for now the because new you ] programs that falloff a And Csaba, decline the you -- is gross Csaba, how But puts the I on about growth as structure, or cost said revenue going

Seamus Grady

automotive inventory digestion But digestion, this going of about. I'll saw so inventory I'll overall. little then too our Yes, concerned that's past business charging digestion question take any -- business it, or primarily optimistic gross EV ramping, and in bit get would think about remain temporary, there's let of it's to automotive quarter. we maybe Csaba going We like on. some, quarter a but discuss the another on Maybe I margin. inventory it's We the first, call nothing

quarters revenue, ago. always overcame around overall mark of we since are look couple of said $XX the at million you we've kind we If the a component our charges

were revenue. few of you $XX So million QX, stable, we we it's pretty been last our -- at look automotive the In if had quarters. actually,

was overall, million, huge so inventory $XX would through variability QX Last and variation, But we QX of a business. that our then go was optimistic million, say. $XX as amount remain not kind of -- normal customers sorry, about I digestion,

Csaba Sverha

Regarding Samik, this anticipated increases at provide you headwind of XX.X%. mild working are And hard last quarter, we our margin. as deliver lot of the had fiscal we sure obviously, usually obviously, to continue that takes and as gross are make the gross gross we merit to and execute make margin reductions efficiently, a came we customers sure a from margin, in in puts also there we And manage know, had to well and cost that for mix margins. business mix industry-leading and as

I job have couple the years. think there of good we last done in a

to But quarter. that factors been obviously, well. be the we exchanges, a headwinds like overcome foreign subject of are in to result It's some first past have as the the also to the seasonalities there which a merit mindful tailwind there increases temporary in may couple then and managed

and about optimistic puts on the are of growth but takes, margin and as can accomplish for maintain that middle margins hard deliver make above, round that to the operating we lots we our road sure map business continue to XX.X% we are there gross this and So we scale working

Operator

line from B. the next of Our Dave Riley. question with Kang comes

Dave Kang

telecom? First between million. rough revenue plus the your What of versus datacom question XXX-gig is split regarding is $XXX

Csaba Sverha

growth than We growth. breakdown. telecom typically been in that don't space have as obviously you that past, provide But out datacom the appreciate, far communicated obviously, more the as have what break and in we

haven't to be stronger area, on think provided in much going datacom you that. is would but a So breakdown that we

Dave Kang

on segment? I through telecom cushion Right. ]? of And is this mean, it the that on inventory [ growing? Any XXX going color gig plus, Or then that portion is

Csaba Sverha

that I DCI telecom in not been space. been see we on be touched optimistic well couple there. quarters, XXXZR to as been over have the that digestion and inventory has headwind we that strong and continue business think through we on and has last and that the typically But DCI include telecom the our while, there that's would traditional very of as continue segment a for to we particularly a going

still So us. is is I experiencing for think, puts center data the there which strong is DCI, takes again the and telecom datacom, again, by and driven traditional going headwinds

Dave Kang

the And near any just near customers, quickly Got on or XX% XX% customers? it. you had new customers XX% of number or XX%

Csaba Sverha

our XX% the our customers We of are disclosing in year. at end XX-K the

that quarter. we So are it At the have obviously, had we X customers, disclosed we this not during obviously time, but in disclosing August. XX%

have see you quarters if couple to So to wait changes for there. another will . of any

Operator

I'm And to And showing conference the I to no remarks. closing questions. over hand like back Grady any further for Seamus would

Seamus Grady

Thank joining our today. for you. Thank you call

week. you results. well and to look with and forward to pleased and next Thank Conference execute cash are speaking of first in the record revenue, performance goodbye. and We seeing optimistic We our our to including produce with very ability strong again quarter you, those We're income of our free drivers business net flow. about you participating continue longer-term the Virtual to Needham

Operator

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

disconnect. now may You

Fabrinet (FN) 6 Nov 232024 Q1 Earnings call transcript