Fabrinet Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 6, 2023

There are 10 speakers on the call.

Operator

Good afternoon. Welcome to Sabrinet's Financial Results Conference Call for the Q1 of Fiscal Year 20 24. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions on how to participate will be provided at that time. As a reminder, today's call is being recorded.

Operator

I would now like to turn the call over to your host, Garo Tumadinian, Jean Yoon, VP of Investor Relations. Please go ahead.

Speaker 1

Thank you, operator, and good afternoon, everyone. Thank you for joining us on today's conference call to discuss Fabrinet's Financial and operating results for the Q1 of fiscal year 2024, which ended September 29, 2023. With me on the call today are Seamus Grady, Chief Executive Officer and Chava Serra, Chief Financial Officer. This call is being webcast and a replay will be available on the Investors section of our website located at investor. Fabrinet.com.

Speaker 1

During this call, we will present both GAAP and non GAAP financial measures. Please refer to the Investors section of our website for important information, including our earnings press release and investor presentation, which include our GAAP to non GAAP reconciliation as well as additional details of our revenue breakdown. In addition, today's discussion will contain forward looking statements about the future financial performance of the company. Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from management's current expectations. These statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise them in light of new information or future events, except as required by law.

Speaker 1

For a description of the risk factors that may affect our results, Please refer to our recent SEC filings, in particular, the section captioned Risk Factors in our Form 10 ks filed on August 22, 2023. We will begin the call with remarks from Seamus and Chhaba, followed by time for questions. I would now like to turn the call over to Fabrinet's CEO, Seamus Grady. Seamus?

Speaker 2

Thank you, Garo. Good afternoon, everyone, and thank you for joining us on our call today. We set new quarterly records for revenue and EPS Our first quarter, both of which were above our guidance ranges. Free cash flow also reached a new quarterly record. We achieved triple digit year over year growth in datacom revenue driven by next generation optical interconnect for AI applications.

Speaker 2

This datacom growth more than made up for continued but diminishing sequential declines in telecom revenue as inventory absorption runs its course. Overall revenue was $685,500,000 representing an increase of 5% from the 4th quarter as well as from a year ago. Recall that the Q1 of fiscal 2023 was a 14 week quarter, adding approximately $20,000,000 to revenue a year ago. Excluding this impact, revenue would have grown 8% year over year. Our strong revenue growth contributed to a record bottom line with non GAAP net income of $2 per share.

Speaker 2

Looking at the Q1 in more detail, optical communications revenue increased from both a year ago and the 4th quarter. Within optical communications, telecom revenue decreased sequentially, though by a smaller amount than anticipated. Datacom growth more than offset the telecom decline again with sequential growth of 26% from a very strong 4th quarter and year over year growth of over 160%. As in Q4, datacom growth was driven primarily by AI optical interconnect. In our non optical communications business, revenue was relatively flat as anticipated.

Speaker 2

A small sequential decline in automotive revenue was largely offset by growth in industrial lasers and other non optical communications revenue. Looking to the Q2, we expect the industry wide inventory adjustments in telecom to continue. We believe that datacom growth, particularly in AI, will more than offset these headwinds again in the second quarter. In short, we are optimistic that the telecom inventory related issues are temporary, whereas the demand strength in datacom is sustainable. In summary, our record top and bottom line results represented a strong start to the fiscal year, and we are confident that we remain well positioned to continue delivering solid results as we look ahead.

Speaker 2

Now I'd like to turn the call over to Chaba for additional financial details on our Q1 of fiscal 2024 and our guidance for the Q2. Shailesh?

Speaker 3

Thank you, Seamus, and good afternoon, everyone. Revenue was above our guidance range at 600 and $85,500,000 up 5% both sequentially and from a year ago. Keep in mind The Q1 of the prior year benefited by approximately $20,000,000 due to an additional week. Our strong revenue helped to produce record earnings. Non GAAP net income was $2 per share, which was above our guidance range.

Speaker 3

We have published additional details regarding our revenue breakdown in the investor presentation, which you can find on our website. So in looking more closely at revenue, I will focus my comments on the most notable changes. Optical Communications revenue of 500 and $33,300,000 was a new quarterly record. Very strong sequential datacom growth of 26% more than made up for a smaller than anticipated decline in telecom revenue of 6%. Datacom growth is being driven primarily by 800 gig We believe there is still excess inventory in the supply chain.

Speaker 3

And in the second quarter, we DataCall revenue to again more than offset telecom declines by a wide margin. Looking at optical communications revenue by data rate, Growth in revenue from products rated 400 gig and faster was substantially greater than revenue declines from 100 gig programs. Nonoptical Communications revenue was consistent with the 4th quarter at $152,200,000 and represented 22% of total revenue. Automotive revenue declined 5% from the 4th quarter due to some inventory absorption. This was partially offset by a smaller sequential increase in Industrial Laser and Other Non Optical Communications revenue.

Speaker 3

As I discuss the details of our P and L, expense and profitability metrics will be on a non GAAP basis unless otherwise noted. Gross margin in the quarter was 12.6%. As anticipated, gross margin declined seasonally by about 20 basis points from Q4, primarily due to annual merit increases, which take effect in the Q1. Operating Expenses in the quarter were $14,900,000 or 2.2 percent of revenue, an improvement of 10 basis points from the Q4. We anticipate that operating expenses will continue to decline as a percentage of revenue as our business scales.

Speaker 3

Operating income was $71,700,000 representing an operating margin of 10.5% consistent with the 4th quarter. Our strong balance sheet again benefited our interest income, which was $5,900,000 in the quarter. Our gain from foreign currency asset and liability revaluations at the end of the quarter was relatively small at $400,000 Effective GAAP tax rate was 7.2% in the Q1, which is above the mid single digit level we continue to expect for the fiscal year as a whole. Non GAAP net income was a new quarterly record of $72,800,000 or $2 per diluted share. On a GAAP basis, net income was $1.78 per diluted share.

Speaker 3

Turning to the balance sheet and cash flow statements. At the end of the Q1, cash and short term investments were $670,800,000 up $120,300,000 from the end of the Q4. This increase was driven primarily by strong operating cash flow of $145,000,000 With CapEx of $11,400,000 free cash flow was a quarterly record at $133,600,000 Our share repurchase program was not active in the Q1. As a result, $100,000,000 remained in our share repurchase authorization at the end of the quarter. Now I will turn to our guidance for the Q2.

Speaker 3

As I mentioned, we expect inventory adjustment at our customers, primarily in the telecom space to continue into the Q2. We expect sequential revenue growth from high data rate data from AI programs to again more than offset these telecom headwinds. We anticipate automotive revenue to decline sequentially and expect industrial laser revenue to be relatively flat. In total, we expect revenue to be between $680,000,000 to $700,000,000 From a profitability perspective, we anticipate non GAAP net income to be in the range of $1.98 to $2.05 per diluted share. In summary, we are happy to have exceeded our Q1 guidance by producing record revenue, net income and free cash flow.

Speaker 3

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

Operator

Thank One moment while we compile our Q and A roster. And our first question is going to come from the line of Alex Henderson with Needham. Your line is open. Please go ahead.

Speaker 4

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

Speaker 2

Hi, Alex. Yes, it looks like Intel wanted to exit that market for their own strategic reasons. The Intel has not been a 10% customer of ours. We have been one of 2 sources on the program that we the programs that we're involved with. We remain focused on being a manufacturer serving several customers in the market rather than selling our own products.

Speaker 2

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

Speaker 4

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

Speaker 2

Well, it's a different business, I guess, to the business we're involved in. We manufacture other people's products. We have no interest in having our own products. So I would assume for Jabil, it's more of an I don't want to speak for Jabil, but it appears to be more of an ODM type offering that they'll be providing. And that's just not something that we're involved in.

Speaker 2

So I would see it as a different market to the market that we're involved. But we wish ever well.

Speaker 4

I hope there's not too much background noise. I just got out of a cab. But I was hoping you could talk one more question, if I could, and then I'll cede the floor, about any potential Pipeline activity or thoughts on how to get into the Ethernet side of the 800 gig AI opportunity? Thanks.

Speaker 2

Well, we just really follow our customers' lead, Alex, whichever protocol the customers Deemed to be the one that they want us to work on. We're happy. For us, we don't really mind whether the products are Ethernet or any other protocol, we don't really mind. So we work with our customers and we're working With, I would say, a number of customers in the space to make sure we continue to provide the products that they need and the volumes that they need. But we really don't mind whether it's Ethernet or InfiniBand or anything else.

Speaker 4

Well, yes, but your Current 800 gig customer is almost exclusively InfiniBand and NVLink and obviously over time the world will shift Towards Ethernet. So the question is, do you have a hook into that stream?

Speaker 2

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

Speaker 5

Great. Thank you.

Speaker 6

Thanks, Alex.

Speaker 2

Thank you.

Operator

Thank you. Thank you. And one moment as we move to our next question. And our next question will come from the line of Samik Chatterjee with JP. Your line is open.

Operator

Please go ahead.

Speaker 6

Yes. Thank you. Thanks for taking my questions. I guess to start off, maybe I can follow-up on Alex's question here. How Shmush, how as you move towards working with customers on the Ethernet side, what are you finding related to the competitive landscape?

Speaker 6

Just from the outside and from our perspective, it looks like more companies that are in the manufacturing supply chain in relation to Internet. But you share your thoughts about what you're seeing from a competitive aspect and what sort of the differentiation that you bring there into that ecosystem? And I have a follow-up. Thank you.

Speaker 2

Yes, I think Samik for newer products whether it's 800 gig or higher speeds, We feel pretty confident that we're well positioned to support what the customers need. I think for older generation products, It's the competitive landscape is much more competitive. But for new generation products For these kind of specific short reach, low power, low latency applications, There's really a handful of companies who are able to design these type of products and we're well positioned we think to support them. So again, whether it's InfiniBand or Ethernet, We just follow our customers lead whatever they need from us, we're happy to help them with. And again, our focus is always on producing The current generation products, but also winning the next generation products.

Speaker 2

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

Speaker 6

Okay, got it. If I can just ask as a follow-up on the guidance, going from 4Q to 1Q, you had a sequential increase of about $13,000,000 or so in revenue with Datacom easily, the increase in Datacom easily offsetting the telecom decline. As you look forward, I mean, you're carrying forward the same theme where Datacom does offset telecom, but the magnitude of it seems to be much lower Just given the $5,000,000 sequential increase at the midpoint that you're guiding to, so maybe if you can help us with the puts and takes there. Is telecom declining more than More than sort of what we've seen from 4Q to 1Q or is it the datacom ramp is moderating just given that you are maybe reaching more capacity with

Speaker 2

I would say, first of all, in Q1, our telecom declined probably less than we thought it would. It declined about 6%. Going into the quarter, I guess we thought it might decline more than that, That declined about 6%, which was primarily driven by stronger demand than anticipated for certain telecom programs, especially DCI. So again, driven by the data center and the growth going on in the data center, but DCI products which we categorize as telecopter. That's the first thing.

Speaker 2

And then as we go into Q2, yes, we think our telecom business will decline further Into Q2, as you know, we don't guide beyond 1 quarter of time, but in a general sense, I think we think telecom will decline, Datacom will increase by more than that decline. And then as we look to the kind of future, Again, based on the intelligence we have from our customers, we think the telecom decline is set to continue probably until the middle of the calendar year, which The end of our fiscal year, so further declines this quarter and the next quarter. And then we think it will begin to bottom out in the we call it the June quarter. And then the rate of growth of Datacom, I guess, it should slow down at some point. That rate of growth, it's been very strong for us, but it will inevitably Begin to begin the growth would begin to slow at some point.

Speaker 6

Okay. Thank you. Thanks for taking my questions. No problem. Thank you, Sumit.

Operator

Thank you. And one moment as we move on to our next question. And our next question is going to come from the line of Mike Tinovelis with Rosenblatt Securities. Your line is open. Please go ahead.

Speaker 7

Great. Thanks. Hi, Seamus. Hi, Mike. Hi.

Speaker 7

Can you give us any commentary at all on Kind of performance breakout between, 400 gs and 800 gs Datacom or new programs versus Existing older programs, is there any color we could get there?

Speaker 2

Well, in general, we break out 400 gig And above, which of course at this point is a pretty large category. And at some point we may want to revise how we do that. But for now It's really everything in that 400 gig and above category. So 400 gig inside the data center, 400 ZR DCI, 800 gig AI, everything really in that 400 gig and above category, but the growth has been coming from Primarily the higher speed newer programs, older programs and let's call it Traditional Datacom products have not been as strong, especially at the lower speeds 100 gig and the like. The growth for us certainly we don't speak for the whole industry, but for us the growth that we've seen has been primarily on the higher speed newer programs mainly focused around these newer Ti applications, 800 gig being the biggest driver for us there.

Speaker 5

Perfect. Maybe I'd follow-up on

Speaker 7

that question by because I thought that the color you gave about telecom and DCI driving less A decline in telecom, but less than expected was I mean, that was a great color. So maybe comparing how telecom came in to how The older datacom programs, I mean was there any surprise on the upside there or did it behave or downside or did it behave as expected?

Speaker 2

I think the traditional we call it traditional datacom I think behaved pretty much as expected. Newer datacom has been just very strong, but For us, it's expected, I think, at this point. And then like I said earlier, the strength in DCI was We had expected telecom to be down. If you just took the guidance from our customers going into the quarter And you just straight line that we should have been down double digits, probably 12% to 15% in telecom. Instead, we were down about 6%.

Speaker 2

So, Don, a lot less than we thought it would be. Again, primarily driven by DCI. So even though it's in telecom, it's driven by the data center Expansion that's going on everywhere.

Speaker 7

Got it. Okay, great.

Speaker 5

And then finally for me, just could you maybe Saba

Speaker 7

or both of you Talk about just the decision to not buy back stock in the quarter and kind of going forward, what you're thinking about with buybacks?

Speaker 8

Hi, Mike. This is Charles. Last quarter, as I mentioned in our prepared remarks, we didn't buy anything back. We have obviously an OMR opportunity in the open window. In addition, we have a 10b5 plan in place.

Speaker 8

The 10b5 plan is rule based and subject to certain prices. Obviously, it didn't trigger last quarter, but obviously, we are We'll committed to return surplus cash to our shareholders. So obviously, we are revisiting the 10b5 plan from time to time. And subject The new pricing and the market conditions, we will make amendments, and we continue to be committed to return the surplus cash we generate to shareholders.

Speaker 7

Excellent. Great. Well, thanks for letting me ask the questions. I appreciate it.

Speaker 2

You're very welcome. Thanks, Mike. Thank you.

Operator

Thank you. And our next question is going to come from the line of Tim Savageaux with Northland Capital Markets, your line is open. Please go ahead.

Speaker 9

Hey, good afternoon and congrats on the results. Couple of questions. You had previously described the AI connectivity opportunity, I think, At 800 gig or maybe just in general as in very early stages and very large opportunity, Actually maybe missing a few varies there.

Speaker 2

Yes, I think at one point I maybe said very twice and got pulled up very, very

Speaker 9

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

Speaker 2

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

Speaker 2

We're still ramping. We continue to ramp both the existing Existing, let's say, existing programs, plural. And there's additional business that we're looking at and getting qualified on. As you know, we're maniacally focused on executing the business that we've already won, but then on making sure we win the next generation programs, the new products. So we're working very, very hard on both of those, Tim, both on executing.

Speaker 2

I think we've done a very good job there, Maybe a very, very good job executing. And we're also making sure we win the next generation products and then execute very well on those. The best way to stay ahead of the competition is just work like crazy to delight the customer and make sure we do a great job and win the next generation products. That's really our focus. And we see a lot of kind of runway ahead of us and we think it's a really good opportunity for us.

Speaker 9

Great. Appreciate that. And just a follow-up, I know ZR, I think you've gotten Within shouting distance of 10% of revenue for you guys before the latest inventory correction. Given that you've called it out as kind of the Source of unexpected growth in the quarter. Maybe you can give us an update on kind of where that stands in terms of materiality of the Overall business or telecom or however you want to talk about it.

Speaker 9

And I just got one more quick follow-up after that.

Speaker 2

Yes, I think CR, foreign CR is very strong for us. We haven't broken it out yet as a separate category, but it is quite strong for us And continues to grow. It doesn't necessarily grow in a straight line, so there'll be maybe still a bit of stops and starts with 400 ZR. But we're just very happy to be participating in it and it was a source of really most of that offset between what we would have expected last quarter, That kind of down 12% to 15%. The difference between that and where we ended up was primarily 400 ZR for TCI applications.

Speaker 2

So we still think it's early days. We have a number of customers and a number of programs there and we continue to ramp those and they're not all at the same stage. Some are ahead, some are just getting qualified, but we still think 400 ZR is a good runway left for us.

Speaker 9

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

Speaker 2

Yes, I think we have as I said earlier, we still see continued weakness in telecom generally. I think we're not for 400ZR, there There will be even more weakness. That's really in the traditional telecom products. We see continued softness in the December quarter And really out to the mid probably out into the middle of next year when we think it will start to level out.

Speaker 9

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

Speaker 2

It seems in a funny in a way, it seems crazy that we're even talking about it, but it is something we have to keep a close eye on as we ramp. It seems like at the blink of an eye ago that we opened Building 8 In Chonburi, it's now completely full and Building 9 is off to a flying start. So we'll be keeping a close eye on that. I think in all probability, you could say, well, if we pull the trigger too early, what are the implications of that? They're very small indications really.

Speaker 2

So typically what we said in the past is once we get to 70% Utilization in our last building, we'll build another building. Whether we do that this time around or whether we Pulled the trigger a little bit earlier remains to be seen, but I think we're I would say stay tuned over the next couple of quarters. It's not going to take us 5 years or anything like that to get to capacity in Building 9. We're off to a great start. I was there last week and The facilitization that's going on in Building 9 and the expansion is just amazing.

Speaker 2

It's really encouraging to see. And Whether it was good luck or good planning on our part, I think our timing on Building 9 was, as it turns out, exactly right. Little bit of luck, I think never hurt anyone. So we'll be keeping a close eye on that Tim. And once we do make that decision, we communicated on This call in due course.

Speaker 2

But again, the cost would be subject to Trevor correcting me. I would say if I put a range on the $50,000,000 to $60,000,000 for another 1,000,000 square feet and about 1 year to 18 months time horizon. But yes, it's something we'll be keeping a close eye into.

Speaker 9

Great. Thanks very much.

Speaker 2

Thanks, Tim.

Operator

Thank you. And one moment for our next question. And we have a follow-up question from the line of Samik Chatterjee with JPM. Your line is open. Please go ahead.

Speaker 6

Hi. Thanks for taking the follow ups. I'll be quick, I promise. Just Tava, any color on I know you mentioned the gross margin moderated sequentially because of the merit increases, but As you embed that now into the cost structure, puts and takes on how to think about gross margin going forward? And then Seamus, either for you or Saba, like the automotive revenue declining and you said it will decline modestly.

Speaker 6

Is that more of a temporary Headwind or is this a fall off of the legacy programs while growth is sort of continuing on the new programs? Thank you. Any clarification on those two items?

Speaker 2

Maybe I'll take the automotive question first, and then I'll let Saba discuss the gross margin. Yes, we saw some, I would call it, inventory Digestion going on in automotive this past quarter. We think it's primarily temporary. There may be another quarter or so of Inventory digestion, but nothing to get too concerned about. We remain optimistic about our EV charging business overall.

Speaker 2

But like any business that's ramping, it's a little bit of inventory digestion going on. If you look at our overall revenue, We've always said we're around kind of the €90,000,000 mark since we overcame the component charges a couple of quarters ago. So it's been pretty stable actually. If you look at the last few quarters in our Q3, we had $94,000,000 of Automotive revenue last sorry Q4 was 93 and then Q1 was 88. So not a huge amount of variation kind of normal variability as our customers go through inventory digestion I would say.

Speaker 2

But overall, we remain optimistic about that business.

Speaker 8

Regarding gross margin, Samik, Obviously, as you know, there are lots of puts and takes in the gross margin. And this last fiscal quarter, we had a mild headwinds as usually from net increases. And gross margin came in as we had anticipated at 12.6%. And obviously, we are working hard to make sure that we continue to efficiently provide cost reductions for our customers and also make sure that we manage the mix of business to deliver industry leading margins. I think we have done a good job there in the last couple of years.

Speaker 8

Obviously, there are a couple of factors to be mindful that may result some seasonalities like the merit increases in the Q1. It's also subject to foreign exchanges, which We have been tailwind in the past and then we managed to overcome of the temporary headwinds there as well. So there are lots of puts and takes, but we are optimistic that we can maintain this So middle 12.5% and roundabout gross margin on both. Working hard to make sure that we continue to deliver on the operating margins as we scale the business and Thanks, Anna.

Operator

Thank you. And one moment for our next question. And our next question comes from the line of Dave Kang with B. Riley. Your line is open.

Operator

Please go ahead.

Speaker 5

Hi, yes. Thank you. First question is regarding your 400 gig plus revenue of $322,000,000 What is the rough split between datacom versus telecom?

Speaker 8

We typically don't break out and provide that breakdown. But obviously, as you appreciated what we have communicated in the past, datacom growth in that Space have been obviously far more than the telecom growth. So you would think Datacom is going to be much Stronger in that area, but we haven't provided a breakdown on that.

Speaker 5

Right. And then on the telecom portion of that 400 gig plus,

Speaker 6

I mean,

Speaker 5

Is this growing or is it going through inventory crushing? Any color on that segment?

Speaker 8

I think we touched on that as well that The traditional telecom business that's not DCI as we typically would include that in the telecom segment has been going through inventory And has been there for a while, and we continue to see have been there. But our DCI and 400ZR particularly have been very strong over the last couple of quarters and we continue to be optimistic on So I think again the puts and takes there is traditional telecom still experiencing headwinds and but the datacom, which is again driven by Data Centers, DCI is going strong for us.

Speaker 7

Got it. And just quickly on

Speaker 5

the number of 10% customers you had Or near 10% customers, any new 10% or near 10% customers?

Speaker 8

We are disclosing our 10% customers in our 10 ks at the end of the year. So obviously, we have disclosed it in August. At that time, obviously, we had 4% to 10% customers, but We are not disclosing this during the quarter. So you will have to wait for another couple of quarters to see if any change is there.

Speaker 5

Got it. Thank you.

Speaker 2

You're welcome. Thank you, Dave.

Operator

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

Speaker 2

Thank you. Thank you for joining our call today. We're very pleased with our Q1 performance, including record revenue, net income and free cash flow. We're optimistic about the longer term drivers of our business and our ability to continue to execute well to produce strong results. We look forward to speaking with you again and seeing those of you participating in the Needham Virtual Conference next week.

Speaker 2

Thank you and goodbye.

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Key Takeaways

  • Fabrinet set new quarterly records with Q1 revenue of $685.5 M (up 5% q/q & y/y; +8% excluding the extra week), non-GAAP EPS of $2.00, and free cash flow of $133.6 M, all above guidance.
  • Datacom revenue surged over 160% y/y and 26% q/q, driven by next-generation AI optical interconnect (800 G), more than offsetting a 6% sequential decline in telecom amid industry inventory adjustments.
  • Optical communications hit a record $533.3 M, while non-optical communications was flat; automotive saw temporary inventory absorption largely offset by industrial laser growth.
  • For Q2, Fabrinet guides revenue of $680 M–$700 M and non-GAAP EPS of $1.98–$2.05, expecting ongoing telecom headwinds to be more than offset by sustainable AI-driven datacom demand.
  • The balance sheet remains strong with $670.8 M in cash and short-term investments, $100 M of share repurchase authorization, and capacity expanding in Building 9 with plans for additional facilities once utilization nears 70%.
A.I. generated. May contain errors.
Earnings Conference Call
Fabrinet Q1 2024
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