FN - Earnings call transcript Q3 2024

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Operator

Good afternoon. Welcome to Fabrinet's Financial Results Conference Call for the Third 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.

You may begin.

Garo Toomajanian

Thank you, operator, and good afternoon, everyone. March us operating conference quarter Seamus results year which joining Fabrinet's to of Grady, for on Officer. XXXX, and me and financial for ended Chief Chief you Executive on today Csaba call today's discuss fiscal the Officer; Thank call XXXX.With Sverha, are Financial XX, the third we GAAP website will the Investors on non-GAAP call being located investor.fabrinet.com.During This at available is both webcast, be and will this measures. financial call, of and a our present replay section refer important performance contain to of details include as press statements forward-looking the investor the website Please reconciliation, of Investors section future will company. additional which information, release our about our the of revenue presentation, our for non-GAAP as earnings GAAP breakdown.In to including addition, financial our well discussion and today's

statements cause could to presentation, current opinions in uncertainties of of the subject actual from revise light to These date results only statements Forward-looking risks except particular, management's and no future obligation Risk materially our in we a refer information X, undertake February our our our XX-Q, please description reflect filings, that may as of risk captioned expectations. events, required differ affect results, that by them are as and to or to SEC filed on recent of the new section the in law.For factors Form Factors XXXX. this

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

Seamus Grady

today. afternoon of our Good joining those call Garo. you, to Thank you

$X.XX accompanied high in and was of that share.The anticipated, XXX% in results $XXX.X revenue communications, telecom, revenue. quarter out datacom income from than saw with that and a Within were remain both non-GAAP also telecom sequential position result our applications, quarters third decline about market.After growing guidance growth sequential played very are above communications, again communications revenue Datacom included non-optical small quarter datacom a from technology telecom of Revenue record for demand We and a with mainly continues in AI record was net of per benefit growth million better ranges. automotive optical our EPS for end the from ago. optical QX. by our optimistic a very revenue outpaced that and we revenue several year datacom declines, in XXX-gig from with to revenue pleased

out [Technical declines interconnect more that primarily However, was Difficulty]. this telecom center that data it's from from products traditional point sequential continued offset important to driven growth than

for strong telecom to We be automotive revenue continued fiscal to that see will our optimistic automotive we customers a Industrial certain rate continue another to year communications, the positioned quarter what our are record the performance. note ] revenue high the expect further for [Technical guidance fourth our in sequentially for we the momentum, extend year-over-year represent the elevated small a increase can fourth third growth another driver an This revenue of the our due [ for in momentum, accelerating ranges. quarter. with revenue choppiness quarter, more leadership third record to ahead quarter are company, High fiscal for and finish near-term to with again sequential on guidance comments business and company, EPS I'll financial revenue end on products above to a forward our third about the quarter.Looking last turn primarily optimistic was details continue revenue in our faster inventory than market.Now, decline. quarter. in non-optical looking Csaba another Csaba? digestion saw an to of will we and QX. EPS to we inventory in We're solid delivered quarter. lies year down work levels.Turning and we that were with are we revenue a our and Consistent XXXX Difficulty] we confident products as to quarter remained our of as revenue.In our this well very data important in datacom year call growing are we deliver stable outstanding with to the summary, fourth laser With over quarter,

Csaba Sverha

guidance you, quarterly range million, afternoon, quarter. We XX% range. of year record per had $X.XX, and was earnings above a and ago record quarter. $XXX.X drove above was strong everyone. good We and up also at from X% the Thank non-GAAP Seamus, a third Revenue share which our second a up new from our a guidance

and XXX-gig optical a rated gig the communications will contributed revaluation rated XXX see are from telecom gain and Details or data declined ago on revenue focus $XXX.X revenue revenue, EPS from year share demand.Telecom for million, X% our was below XXX% XX% center but per communications an than on and presentation to breakdown ago of to high of from the ago XX% of of metrics.Optical non-GAAP interconnect which optical data products sequentially. exchange second quarter. Products even above $XXX.X was and as see growth prior strong XX% from to notable revenue. I increase XX% year were total growth applications, declines rate, XX% strong the at year our of continue or AI Datacom up continued in to XX% rate from investor a Telecom revenue the share, QX, per year XX% without revenue comments of but communications faster $XXX.X This optical increased a from been increase million included from million increasing $X.XX an will in products.By well from from tailwind. our XX% revenue of revenue of decline $XXX growth, website, more X% representing a primarily traditional my quarter. quarter. more was continued and dominate came still and ago X% continued communications revenue, earnings QX revenue guidance products in have our the to offset million, this data Foreign

As saw non-optical QX.This QX. $XXX.X automotive inventory we a was due Automotive certain from was decline previously $XX.X revenue, anticipated, absorption in primarily of revenue communications million, down anticipated from products. which X% down to was X% million, decline

P&L, X% expect sequentially.As sequentially We non-GAAP inventory of laser and $XX.X in third XX.X%, million, the income near-term with quarter. quarter revenue revenue. consistent in the margin increase quarter Operating subside. million at details to produced I otherwise operating $XX of a metrics an This was operating fourth basis, consistent revenue also automotive the or Gross will margin second Industrial quarter XX.X%. as be our representing of was the on profitability noted. flat issues expense discuss second expenses in unless were the of

margins, line Our million with our sheet, with ranges.Our target our were provide interest low of fixed elevated coupled in interest to cost long-term healthy rates structure industry-leading which maintain $X.X income. helped us balance to helped

income tax the I by and liability from $X.X earlier, per As GAAP net of X.X% third share the was quarter. $X.XX million foreign Effective revaluations quarter. in end the or rate benefited mentioned at currency asset

On Free were reached statements. and to quarter, million. $XXX.X quarter. short-term CapEx $XXX this At our the $XX.X third a The rate diluted cash for strong with income Non-GAAP of was $XX cash in net or quarter $XX.X sheet $XX.X end We $XX.X flow a share. million up of primary was of mid-single-digit operating the per balance and end of GAAP the income continue million, share.Turning diluted the anticipate million cash the the net basis, million, cash year. was from $X.XX investments million. of or $X.XX to million fiscal driver second increase flow flow per

quarter, shares an share repurchased quarter. for outlay average price our active our share repurchase during At Our million guidance $XX.X in authorization.Now, the will remained total of XXX,XXX end program $XX.X share the a at turn for fourth per of approximately buyback the I was of to million. cash quarter. the We $XXX.XX third

the slightly absorption the are data inventory expect revenue is sequential driven offsetting legacy the AI, more datacom telecom product of demand. continues expect quarter. products industry-wide fourth This XXX-gig high for which revenue, quarter traditional decline up to to in sequentially of growth impact a end telecom we in being than rate program.For primarily as fourth impact the by We a be

revenue anticipate revenue We we to In driven sequentially, in the to communications the be up by expect non-optical automotive of be total, revenue. primarily $XXX fourth in range $XXX an in million increase quarter. to million

results We expect per for $X.XX of record had and exceeded summary, $X.XX with that quarter guidance our both we EPS. income net revenue another share.In to

are now that for for we as fourth in again results to of out questions. the are and success open profitability, will closing optimistic are positioned revenue We ahead.Operator, a see quarter, look we we strong continued year and we believe we record well call ready the

Operator

Samik first Chatterjee from JPMorgan. of question [Operator Instructions] Our will come

Samik Chatterjee

the revenues and in I what the I terms decline expecting have maybe but seeing, sort telecom can digestion provide is and been how few updated the you couple, sequential you're more you about increase had can provided after of of outlook this a where a with you Any quarter. the color if you're why start have a calling sustained that that follow-up. thoughts out business? I of then now? any more sustainable more of on And a quick demand inventory sort DCI not the a long sequential quarters you've in And driving recovery sort for asking lasts

Seamus Grady

real seems coming going probably has we see inventory be into calendar it any been seeing.Our XXXZR. still increase and we've early for that or it's out say few XXXX certainty, before That hard softness through rightly out telecom It's -- digestion part with certainly point you middle see to the in but on seeing, as growth telecom continuing demand in Samik, the in to growth quarters. we we've even telecom. been into that out it's been, coming industry back of back this another

It's to you generally quite -- say, XXXZR, datacom be go grow line. both linear business medium have on telecom always ZR term as ZR, straight I'd of now, and there type As growth. over continues for customer yes, certainly particular. a optimistic we and Right up bit But sometimes I soft our but engagements XXXZR to would strong little lumpiness long that has ZR point continues us. our very right yes, been But, X quite say us. be follow-on But we also the for in not in forward. the know, and in we're of a strong will and a doesn't about to products.So spot a DCI technology, and business, next-generation to ZR be

Samik Chatterjee

it. Got for on side. my follow-up maybe And datacom the

a growth had take start Any ramp like? of look $X does thoughts out about -- datacom quarter. the that revenue? in sequential the to you when off, revenue product gig growth timing rolling this X.XT on business XXX million, there see drive million the in You what that's of When sequential $X you a underlying to bit of

Seamus Grady

great future is is products rolled if less X% X.X of a won't but we're than industry our was optimistic well. Yes, remains then XXX this It's guess continue gig less away time and off for And I remaining these are we as revenue. once about let customer year-on-year rates products, at were very robust. in optimistic XXX-gig in demand optical in look us.The about. exact gig you continuing the what next-generation as our off quarter-on-quarter, and the XX% growth, at We for be as demand grew datacom will that question. products say that comes products. rolling is to rolling only little we're and reluctant we I at while XXX position was of almost say, continue.So point, very along, higher position, timing But product quarter to XXX-gig than to X.X robust, also support The that we replace ramp a data one announce think mean, for very rated the the the still strength remain and we you the XXX customers date very and It those -- XXX less have about The launches. with the will gig. will reasons which for from than we I say, strong one to lower did datacom go bit of talk and strongly the you both demand considering, -- to be we products product even quarter, X.X it comes and gig. the guide that at remain believe -- their is, in that strong our very XXX% along, off. strong business XXX XXX-gig accounted that transitioning a looks very complement quarter, our very gig, once will would robust, very our that,

Operator

Ackerman question of from will Karl Paribas. come next Our BNP

Karl Ackerman

-- I and of could gig hoping you both customer well opportunity to up hoping engagements because or product was than ago. was this broadening on based on based for is June transition better XXX XXX later days the for spoken what about as that guide your you've -- X.XT expected discuss I broadening XX on as your seems it up this design that holding was quarter wins year, certainly gig

if you tie be would So in, those could X helpful. just that very

Seamus Grady

Again, outside XXX to but well at quarter customer other robust. engagements and And soon. tapering support sure would next-generation that very about happy, gig the XXX-gig our a see but of as XXX would talk number we do reluctant remains are we're on we're products that And are a still very the and excited terabit of and guide also gig making I optimistic X.X the don't we both Yes. they're we're about early we of gearing time, we say, Like one continue customer we I'm stages, we're up the to in about and support in off We you timing that are for say. main to relatively X.X positioned.There anytime X.X think how our products, and very products. beyond have because, well. said, positioned focused main there, space, we I only

the sure geared making we're with customer need whatever support on and we're So, they to us. up a pipeline from working

Karl Ackerman

Maybe follow versus was AOC earlier issue, short-reach center active lot of all, between where products, and there opportunities just marketplace I confusion broadening cable and at see highlight your on see see perhaps very connectivity X.XT? like data Perhaps an in gig that confusion and I connectivity to you are based any and for if could versus you helpful. but you cannibalization, could some gig for if you doesn't use the highlight copper to there's in for you core quarter. if that, Yes. of think it or in-rack the beyond, a opportunities appear that into think the products, this you when your whether products, would XXX the just be XXX is in yourself Again, there seeing where just some June

Seamus Grady

copper. Yes, we cannibalization seen the certainly any of have demand with not

there's it's CEO doesn't think specific for about that we're copper, an think I I for [ customer. interconnects. what copper the particularly use -- application where a Infinite's spoke ] that But cannibalize It they recently. doing application

XXX-gig. if unusual, say, XXX-gig will when grows.So, is going pace, new anything, the doesn't X.X in doesn't these continue when just these also to going going grow exponentially along, to it it of is of need X.X remaining it's demand away. cannibalize data anywhere comes it's AI of it not go comes a a more like comes rate like datacom centers, less decline. as technology. it to seem their a centers and along, there's rate seem XXX-gig optical going when the interconnect of cannibalize But a If world, or beyond, going anything, grow, for increase. to is seems will an normally let's each technology iteration grow that to data And XXX-gig X.X certainly, growth, quite in along, -- bit the go as it's speeds, see to and growth robust.And to the higher we like So old it as seems we -- tends optical interconnect at the

quite excited we're about So, that.

Operator

Northland Tim next of Savageaux will Markets. Capital Our coming be from question Instructions] [Operator

Timothy Savageaux

of there. of ask, of I'd comment Maybe just your the the over you Strong to and about that impressions some Congrats. connectivity was going last the answer because AI of and it's to OFC coming that you the point related to question the or results. sort I thought what that of versus gig quarter XXX of in and the kind impressions continuing have overall of, does to hand? have guess, to certainly additive at And the came opportunity hoping of the speak kind this size X.X kind out of market, might being quarter one specificity I the to last of be to ago. you a how about on mix X what conclusion might interested size grow.

Seamus Grady

domain. be a pipeline XXX-gig. I are of cannibalize the Yes, products it's if That's you that additive -- view think and the in the that X.X at we will really that public in the architecture the have the function looking are not like, -- that of

go If to to go it.When XXX-gig additive products, architecture It comes you cannibalizing of to you the of does at look look X.X you the look is you their that appear X.X at Nvidia's it cannibalized doesn't GPUs, you products, gets terabit and their appear be at website along. to when number those XXX-gig. connections, not

that's of it's suppose, a along calculate X.X opinion, what's XXX come gig -- like When just continue. more I seems Tim, out of and -- math. an and it it's will So really less we will required,

So that's that. really what's behind

it So, of understand then, that be see I X.X all no of ramp in our days, be waiting as the last that remains XXX-gig? guess, particular and the guess we're of magnitude change seen. is XX in the waiting the of to as course, to to timing and perception ramp. steep what will I

Timothy Savageaux

as quarters. your capacity And assess some couple here imagine on and planning that over necessitate of Well, might you I Great. the that next part.

So any capacity facilities update for I'll ask or expansion. plans increased quarterly my on for

Seamus Grady

The question? we I all evaluate it's XX Yes, something mean, perennial Building time. the

come the at capacity is frees the point.But every Building our very, going. least basically evaluate very something us out in very we even operation. of XXX I was right we to months to next with of XX be bit a of expectations. phase for of gig X we're the is little Pinehurst our I that a nevertheless, think happen, regularly, at tried at capitalize go nothing Three that's back demand really very direction. with we well. to is space X, to of The growth might our a to or full did I what where little quarter. wave ago all We're into have for we this happy things pretty And now.And where is up will there. surprised going But that to want pleasantly how been predict to this certain announce that If year it's we Building are the several in X has ahead up the have for ready like right program We quarters. freeing and now, that's It's next demand think space say be We our with there. Building just the Tim, bit expansion of and us point. very are last in transferring

have have comes execute.So, the to to we We when very do third, it we capacity. execution. to then well have And

in next And capacity I very at we ahead I us additional an about the Tim, reputation regard. additions steep think looking building, to looking were ballpark volume it's Building $XX and just a and main of but or not capacity think for us very which schedule, problem be add because thereabouts ship capacity to on is capacity products, low million risk, we'll a feet X for million the We have very to capitalize and optimistic of that demand make will ready we'll another and capacity.If depends we're CapEx, will $X.X-plus-billion probably about square additional, But at good it's we're in at expanding capacity. to ramp sure customer. $XX which while. over the we probably additional really X pace add capacity million add about to closely and future we're give and is the our that were have on And to continue a we significant able us. for there of

So -- basis points. to that for and gross XX the do us margin about headwind is

the if like, the downside, So terms you very it's of potential in upside headwind, huge. but tiny is a financial

very announce say, nothing to we'll for but that. risk to continue So evaluate us again, next and call, low it, the But I to it's expect stay be would do ]. on -- [ tuned this would certainly, for while to we

Timothy Savageaux

remind there is kind kind one us on just of and time more to being capacity? of the maybe frame what front. And thing call of that to the able making Can then from breaking you ground ramp

Seamus Grady

Yes.

kind we probably when we're thereabouts, minus. or I decision, and of there from say, think plus the up make or XX it's running, until months I would

do quickly. it So, pretty we can

be changes, Building a like the really, what recipe will or Chonburi of I'm and out mirror a it of or very X. this the But about know XX campus, mirror figured some We we've have the repeat months of building most before. sorry, we will you XX, less part, say, geography We more I make thereabouts. small our might build, image or if a Building point, will at we do -- for XX, Building built of similar a would be of image but there to

Operator

would I to like hand to Seamus call the closing for back And now remarks.

Seamus Grady

and beyond those you exceeded We to speaking another in believe participating you joining you year strong Riley with call our XXXX. the Morgan extend seeing Goodbye. out this to third success positioned and delivered forward fiscal again revenue we today. guidance We to later record We our JP that performance conferences anticipate well look for B. month. are of the our Thank closing EPS and quarter. and for another

Operator

for Thank this today's concludes And you conference. your participation.

disconnect. now may You

Fabrinet (FN) 6 May 242024 Q3 Earnings call transcript