FN Fabrinet

• Exceeds Guidance Ranges with Record Revenue and Net Income Per Share

Fabrinet (NYSE: FN), a leading provider of advanced optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers of complex products, today announced its financial results for its third fiscal quarter ended March 29, 2024.

Seamus Grady, Chief Executive Officer of Fabrinet, said, “We delivered strong results in the quarter, exceeding both our revenue and EPS guidance. Our results were driven by record datacom revenue from continued demand for high-data-rate products, and sequential growth in telecom revenue, primarily from datacenter interconnect products. Looking to the fourth quarter, we anticipate continued strength in datacom and sequential growth in automotive. Despite ongoing inventory absorption of traditional telecom products, we remain well-positioned to deliver another strong overall performance and further advance our leadership position.”

Third Quarter Fiscal Year 2024 Financial Highlights

GAAP Results

• Revenue for the third quarter of fiscal year 2024 was $731.5 million, compared to $665.3 million for the third quarter of fiscal year 2023.

• GAAP net income for the third quarter of fiscal year 2024 was $80.9 million, compared to $59.4 million for the third quarter of fiscal year 2023.

• GAAP net income per diluted share for the third quarter of fiscal year 2024 was $2.21, compared to $1.60 for the third quarter of fiscal year 2023.

Non-GAAP Results

• Non-GAAP net income for the third quarter of fiscal year 2024 was $87.7 million, compared to $71.8 million for the third quarter of fiscal year 2023.

• Non-GAAP net income per diluted share for the third quarter of fiscal year 2024 was $2.39, compared to $1.94 for the third quarter of fiscal year 2023.

Business Outlook

Based on information available as of May 6, 2024, Fabrinet is issuing guidance for its fourth fiscal quarter ending June 28, 2024, as follows:

• Fabrinet expects fourth quarter revenue to be in the range of $720 million to $740 million.

• GAAP net income per diluted share is expected to be in the range of $2.01 to $2.08, based on approximately 36.5 million fully diluted shares outstanding.

• Non-GAAP net income per diluted share is expected to be in the range of $2.20 to $2.27, based on approximately 36.5 million fully diluted shares outstanding.

Guidance for non-GAAP net income per diluted share excludes share-based compensation expenses and certain non-recurring items. A reconciliation of non-GAAP net income per diluted share to the corresponding GAAP measure is available at the end of this press release.

Conference Call Information

What:

 

Fabrinet Third Quarter Fiscal Year 2024 Financial Results Call

When:

 

May 6, 2024

Time:

 

5:00 p.m. ET

Live Call and Replay:

 

https://investor.fabrinet.com/events-and-presentations/events

A recorded version of this webcast will be available approximately two hours after the call and accessible at http://investor.fabrinet.com. The webcast will be archived on Fabrinet’s website for a period of one year.

About Fabrinet

Fabrinet is a leading provider of advanced optical packaging and precision optical, electro-mechanical, and electronic manufacturing services to original equipment manufacturers of complex products, such as optical communication components, modules and subsystems, automotive components, medical devices, industrial lasers and sensors. Fabrinet offers a broad range of advanced optical and electro-mechanical capabilities across the entire manufacturing process, including process design and engineering, supply chain management, manufacturing, advanced packaging, integration, final assembly and testing. Fabrinet focuses on production of high complexity products in any mix and any volume. Fabrinet maintains engineering and manufacturing resources and facilities in Thailand, the United States of America, the People’s Republic of China, and Israel. For more information visit: www.fabrinet.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include: (1) our anticipation that we will see continued strength in datacom revenue and sequential growth in automotive revenue; (2) our ability to deliver strong performance in the fourth quarter of fiscal year 2024 and further advance our leadership position; and (3) all of the statements under the “Business Outlook” section regarding our expected revenue, GAAP and non-GAAP net income per share, and fully diluted shares outstanding for the fourth quarter of fiscal year 2024. These forward-looking statements involve risks and uncertainties, and actual results could vary materially from these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: changes in general economic conditions, either globally or in our markets, and the risk of recession or an economic downturn; continued disruption to our supply chain, which could increase our costs and affect our ability to procure parts and materials; less customer demand for our products and services than forecasted; less growth in the optical communications, industrial lasers and sensors markets than we forecast; difficulties expanding into additional markets, such as the semiconductor processing, biotechnology, metrology and materials processing markets; increased competition in the optical manufacturing services markets; difficulties in delivering products and services that compete effectively from a price and performance perspective; our reliance on a small number of customers and suppliers; difficulties in managing our operating costs; difficulties in managing and operating our business across multiple countries (including Thailand, the People’s Republic of China, Israel and the U.S.); and other important factors as described in reports and documents we file from time to time with the Securities and Exchange Commission (SEC), including the factors described under the section captioned “Risk Factors” in our Quarterly Report on Form 10-Q filed with the SEC on February 6, 2024. We disclaim any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise.

Non-GAAP Financial Measures

In addition to reporting financial results in accordance with GAAP, we provide investors with certain non-GAAP financial measures. These non-GAAP financial measures are in addition to, and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. We believe these non-GAAP financial measures provide investors with useful supplemental information to: (1) measure company performance against historical results, (2) facilitate comparisons to our competitors’ operating results, and (3) allow greater transparency with respect to information used by management in making financial and operational decisions. In addition, we use some of these non-GAAP financial measures to measure company performance for the purposes of determining employee incentive plan compensation.

Non-GAAP gross profit, non-GAAP operating profit, non-GAAP net income and non-GAAP net income per diluted share exclude: share-based compensation expenses; amortization of intangibles; and amortization of deferred debt issuance costs. We have excluded these items in order to enhance investors’ understanding of our underlying operations.

Non-GAAP free cash flow is net cash provided by (used in) operating activities less capital expenditures (purchase of property, plant and equipment). We use free cash flow to measure our ability to generate additional cash from our business operations.

There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. For example, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. We urge you to review the reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

 

FABRINET

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

   

(in thousands of U.S. dollars, except share data and par value)

March 29, 2024

 

June 30, 2023

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

385,111

 

 

$

231,368

 

Short-term investments

 

408,915

 

 

 

319,100

 

Trade accounts receivable, net of allowance for expected credit losses of $2,838 and $965, respectively

 

583,882

 

 

 

531,767

 

Inventories

 

454,134

 

 

 

519,576

 

Prepaid expenses

 

9,369

 

 

 

7,849

 

Other current assets

 

74,731

 

 

 

42,880

 

Total current assets

 

1,916,142

 

 

 

1,652,540

 

Non-current assets

 

 

 

Property, plant and equipment, net

 

303,118

 

 

 

310,350

 

Intangibles, net

 

2,427

 

 

 

2,394

 

Operating right-of-use assets

 

3,742

 

 

 

1,634

 

Deferred tax assets

 

10,966

 

 

 

12,095

 

Other non-current assets

 

630

 

 

 

635

 

Total non-current assets

 

320,883

 

 

 

327,108

 

Total Assets

$

2,237,025

 

 

$

1,979,648

 

Liabilities and Shareholders’ Equity

 

 

 

Current liabilities

 

 

 

Long-term borrowings, current portion, net

$

3,039

 

 

$

12,156

 

Trade accounts payable

 

429,021

 

 

 

381,129

 

Fixed assets payable

 

9,229

 

 

 

13,526

 

Operating lease liabilities, current portion

 

1,333

 

 

 

1,201

 

Income tax payable

 

4,828

 

 

 

6,024

 

Accrued payroll, bonus and related expenses

 

23,727

 

 

 

23,748

 

Accrued expenses

 

20,742

 

 

 

20,447

 

Other payables

 

52,348

 

 

 

23,654

 

Total current liabilities

 

544,267

 

 

 

481,885

 

Non-current liabilities

 

 

 

Deferred tax liability

 

4,641

 

 

 

4,799

 

Operating lease liability, non-current portion

 

2,003

 

 

 

66

 

Severance liabilities

 

23,820

 

 

 

22,159

 

Other non-current liabilities

 

2,059

 

 

 

2,081

 

Total non-current liabilities

 

32,523

 

 

 

29,105

 

Total Liabilities

 

576,790

 

 

 

510,990

 

Shareholders’ equity

 

 

 

Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding as of March 29, 2024 and June 30, 2023)

 

—

 

 

 

—

 

Ordinary shares (500,000,000 shares authorized, $0.01 par value; 39,450,434 shares and 39,284,176 shares issued as of March 29, 2024 and June 30, 2023, respectively; and 36,159,101 shares and 36,183,682 shares outstanding as of March 29, 2024 and June 30, 2023, respectively)

 

395

 

 

 

393

 

Additional paid-in capital

 

215,570

 

 

 

206,624

 

Less: Treasury shares (3,291,333 shares and 3,100,494 shares as of March 29, 2024 and June 30, 2023, respectively)

 

(230,776

)

 

 

(194,833

)

Accumulated other comprehensive income (loss)

 

(4,658

)

 

 

(8,115

)

Retained earnings

 

1,679,704

 

 

 

1,464,589

 

Total Shareholders’ Equity

 

1,660,235

 

 

 

1,468,658

 

Total Liabilities and Shareholders’ Equity

$

2,237,025

 

 

$

1,979,648

 

 

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited)

 

 

Three Months Ended

 

Nine Months Ended

(in thousands of U.S. dollars, except per share data)

March 29, 2024

 

March 31, 2023

 

March 29, 2024

 

March 31, 2023

Revenues

$

731,535

 

 

$

665,281

 

 

$

2,129,706

 

 

$

1,989,366

 

Cost of revenues

 

(640,600

)

 

 

(579,274

)

 

 

(1,866,037

)

 

 

(1,735,388

)

Gross profit

 

90,935

 

 

 

86,007

 

 

 

263,669

 

 

 

253,978

 

Selling, general and administrative expenses

 

(19,628

)

 

 

(18,309

)

 

 

(59,373

)

 

 

(57,804

)

Restructuring and other related costs

 

—

 

 

 

(5,872

)

 

 

—

 

 

 

(5,872

)

Operating income

 

71,307

 

 

 

61,826

 

 

 

204,296

 

 

 

190,302

 

Interest income

 

8,509

 

 

 

3,317

 

 

 

22,155

 

 

 

7,210

 

Interest expense

 

(26

)

 

 

(399

)

 

 

(107

)

 

 

(1,179

)

Foreign exchange gain (loss), net

 

3,348

 

 

 

(1,303

)

 

 

(25

)

 

 

(3,122

)

Other income (expense), net

 

175

 

 

 

31

 

 

 

60

 

 

 

(178

)

Income before income taxes

 

83,313

 

 

 

63,472

 

 

 

226,379

 

 

 

193,033

 

Income tax expense

 

(2,397

)

 

 

(4,117

)

 

 

(11,264

)

 

 

(5,906

)

Net income

 

80,916

 

 

 

59,355

 

 

 

215,115

 

 

 

187,127

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

Change in net unrealized gain (loss) on available-for-sale securities

 

(1,739

)

 

 

2,046

 

 

 

2,155

 

 

 

1,768

 

Change in net unrealized gain (loss) on derivative instruments

 

(7,328

)

 

 

(5,535

)

 

 

1,062

 

 

 

4,435

 

Change in net retirement benefits plan – prior service cost

 

137

 

 

 

113

 

 

 

271

 

 

 

338

 

Change in foreign currency translation adjustment

 

75

 

 

 

(191

)

 

 

(31

)

 

 

(29

)

Total other comprehensive income (loss), net of tax

 

(8,855

)

 

 

(3,567

)

 

 

3,457

 

 

 

6,512

 

Net comprehensive income

$

72,061

 

 

$

55,788

 

 

$

218,572

 

 

$

193,639

 

Earnings per share

 

 

 

 

 

 

 

Basic

$

2.23

 

 

$

1.62

 

 

$

5.93

 

 

$

5.12

 

Diluted

$

2.21

 

 

$

1.60

 

 

$

5.88

 

 

$

5.07

 

Weighted-average number of ordinary shares outstanding (thousands of shares)

 

 

 

 

 

 

 

Basic

 

36,250

 

 

 

36,608

 

 

 

36,278

 

 

 

36,575

 

Diluted

 

36,603

 

 

 

36,989

 

 

 

36,574

 

 

 

36,895

 

 

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

 

 

Nine Months Ended

(in thousands of U.S. dollars)

March 29, 2024

 

March 31, 2023

Cash flows from operating activities

 

 

 

Net income for the period

$

215,115

 

 

$

187,127

 

Adjustments to reconcile net income to net cash provided by operating activities

 

 

 

Depreciation and amortization

 

36,602

 

 

 

32,504

 

Non-cash restructuring charges and other related costs

 

—

 

 

 

2,201

 

(Gain) loss on disposal and impairment of property, plant and equipment and intangibles

 

(147

)

 

 

(1,630

)

(Gain) loss from sales and maturities of available-for-sale securities

 

(1

)

 

 

92

 

Amortization of discount (premium) of short-term investments

 

(2,317

)

 

 

300

 

(Reversal of) allowance for expected credit losses

 

1,874

 

 

 

(240

)

Unrealized loss (gain) on exchange rate and fair value of foreign currency forward contracts

 

(2,135

)

 

 

693

 

Amortization of fair value at hedge inception of interest rate swaps

 

(198

)

 

 

(478

)

Share-based compensation

 

21,440

 

 

 

21,217

 

Deferred income tax

 

1,125

 

 

 

(276

)

Other non-cash expenses

 

194

 

 

 

(127

)

Changes in operating assets and liabilities

 

 

 

Trade accounts receivable

 

(54,089

)

 

 

(105,932

)

Inventories

 

65,442

 

 

 

2,720

 

Other current assets and non-current assets

 

(33,548

)

 

 

(11,704

)

Trade accounts payable

 

48,268

 

 

 

(5,028

)

Income tax payable

 

(1,068

)

 

 

(262

)

Severance liabilities

 

2,249

 

 

 

1,917

 

Other current liabilities and non-current liabilities

 

31,278

 

 

 

19,128

 

Net cash provided by operating activities

 

330,084

 

 

 

142,222

 

Cash flows from investing activities

 

 

 

Purchase of short-term investments

 

(268,461

)

 

 

(154,033

)

Proceeds from sales of short-term investments

 

10,000

 

 

 

30,179

 

Proceeds from maturities of short-term investments

 

173,120

 

 

 

97,408

 

Purchase of property, plant and equipment

 

(34,825

)

 

 

(43,422

)

Purchase of intangibles

 

(768

)

 

 

(698

)

Proceeds from disposal of property, plant and equipment

 

2,319

 

 

 

117

 

Net cash used in investing activities

 

(118,615

)

 

 

(70,449

)

Cash flows from financing activities

 

 

 

Repayment of long-term borrowings

 

(9,141

)

 

 

(12,187

)

Repayment of finance lease liability

 

—

 

 

 

(7

)

Repurchase of ordinary shares

 

(35,943

)

 

 

(9,217

)

Withholding tax related to net share settlement of restricted share units

 

(12,716

)

 

 

(17,740

)

Net cash used in financing activities

 

(57,800

)

 

 

(39,151

)

Net increase (decrease) in cash, cash equivalents and restricted cash

$

153,669

 

 

$

32,622

 

Movement in cash, cash equivalents and restricted cash

 

 

 

Cash, cash equivalents and restricted cash at the beginning of period

$

231,368

 

 

$

198,365

 

Increase (decrease) in cash, cash equivalents and restricted cash

 

153,669

 

 

 

32,622

 

Effect of exchange rate on cash, cash equivalents and restricted cash

 

74

 

 

 

(244

)

Cash, cash equivalents and restricted cash at the end of period

$

385,111

 

 

$

230,743

 

Non-cash investing and financing activities

 

 

 

Construction, software and equipment-related payables

$

9,229

 

 

$

20,116

 

 

FABRINET

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

Reconciliation of GAAP Gross Profit and GAAP Gross Margin to Non-GAAP Gross Profit and Non-GAAP Gross Margin

 

 

Three Months Ended

 

Nine Months Ended

(in thousands of U.S. dollars, except share data)

March 29, 2024

 

March 31, 2023

 

March 29, 2024

 

March 31, 2023

Revenues

$

731,535

 

 

 

$

665,281

 

 

 

$

2,129,706

 

 

 

$

1,989,366

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit (GAAP)

$

90,935

 

12.4

%

 

$

86,007

 

12.9

%

 

$

263,669

 

12.4

%

 

$

253,978

 

12.8

%

Share-based compensation expenses

 

1,561

 

 

 

 

1,453

 

 

 

 

5,427

 

 

 

 

5,028

 

 

Gross profit (Non-GAAP)

$

92,496

 

12.6

%

 

$

87,460

 

13.1

%

 

$

269,096

 

12.6

%

 

$

259,006

 

13.0

%

 

Reconciliation of GAAP Operating Profit and GAAP Operating Margin to Non-GAAP Operating Profit and Non-GAAP Operating Margin

 

 

Three Months Ended

 

Nine Months Ended

(in thousands of U.S. dollars, except share data)

March 29, 2024

 

March 31, 2023

 

March 29, 2024

 

March 31, 2023

Revenues

$

731,535

 

 

 

$

665,281

 

 

 

$

2,129,706

 

 

 

$

1,989,366

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit (GAAP)

$

71,307

 

9.7

%

 

$

61,826

 

9.3

%

 

$

204,296

 

9.6

%

 

$

190,302

 

9.6

%

Share-based compensation expenses

 

6,726

 

 

 

 

6,533

 

 

 

 

21,440

 

 

 

 

21,031

 

 

Restructuring and other related costs

 

—

 

 

 

 

5,872

 

 

 

 

—

 

 

 

 

5,872

 

 

Amortization of intangibles

 

—

 

 

 

 

70

 

 

 

 

—

 

 

 

 

224

 

 

Operating profit (Non-GAAP)

$

78,033

 

10.7

%

 

$

74,301

 

11.2

%

 

$

225,736

 

10.6

%

 

$

217,429

 

10.9

%

 

FABRINET

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

Reconciliation of GAAP Net Income and EPS to Non-GAAP Net Income and EPS

 

 

Three Months Ended

 

Nine Months Ended

 

March 29, 2024

 

March 31, 2023

 

March 29, 2024

 

March 31, 2023

(in thousands of U.S. dollars, except share data)

Net income

 

Diluted EPS

 

Net income

 

Diluted EPS

 

Net income

 

Diluted EPS

 

Net income

 

Diluted EPS

GAAP measures

$

80,916

 

$

2.21

 

$

59,355

 

$

1.60

 

$

215,115

 

$

5.88

 

$

187,127

 

$

5.07

Items reconciling GAAP net income & EPS to non-GAAP net income & EPS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Related to cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expenses

 

1,561

 

 

0.04

 

 

1,453

 

 

0.04

 

 

5,427

 

 

0.15

 

 

5,028

 

 

0.14

Total related to gross profit

 

1,561

 

 

0.04

 

 

1,453

 

 

0.04

 

 

5,427

 

 

0.15

 

 

5,028

 

 

0.14

Related to selling, general and administrative expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expenses

 

5,165

 

 

0.14

 

 

5,080

 

 

0.14

 

 

16,013

 

 

0.44

 

 

16,003

 

 

0.43

Amortization of intangibles

 

—

 

 

—

 

 

70

 

 

0.00

 

 

—

 

 

—

 

 

224

 

 

0.01

Total related to selling, general and administrative expenses

 

5,165

 

 

0.14

 

 

5,150

 

 

0.14

 

 

16,013

 

 

0.44

 

 

16,227

 

 

0.44

Related to other income and expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and other related costs

 

—

 

 

—

 

 

5,872

 

 

0.16

 

 

—

 

 

—

 

 

5,872

 

 

0.16

Amortization of deferred debt issuance costs

 

8

 

 

0.00

 

 

8

 

 

0.00

 

 

24

 

 

0.00

 

 

24

 

 

0.00

Total related to other income and expense

 

8

 

 

0.00

 

 

5,880

 

 

0.16

 

 

24

 

 

0.00

 

 

5,896

 

 

0.16

Total related to net income & EPS

 

6,734

 

 

0.18

 

 

12,483

 

 

0.34

 

 

21,464

 

 

0.59

 

 

27,151

 

 

0.74

Non-GAAP measures

$

87,650

 

$

2.39

 

$

71,838

 

$

1.94

 

$

236,579

 

$

6.47

 

$

214,278

 

$

5.81

Shares used in computing diluted net income per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted shares

 

 

 

36,603

 

 

 

 

36,989

 

 

 

 

36,574

 

 

 

 

36,895

Non-GAAP diluted shares

 

 

 

36,603

 

 

 

 

36,989

 

 

 

 

36,574

 

 

 

 

36,895

 

FABRINET

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW

 

(in thousands)

 

Three Months Ended

 

Nine Months Ended

 

 

March 29, 2024

 

March 31, 2023

 

March 29, 2024

 

March 31, 2023

Net cash provided by operating activities

 

$

100,870

 

 

$

37,122

 

 

$

330,084

 

 

$

142,222

 

Less: Purchase of property, plant and equipment

 

 

(13,589

)

 

 

(19,779

)

 

 

(34,825

)

 

 

(43,422

)

Non-GAAP free cash flow

 

$

87,281

 

 

$

17,343

 

 

$

295,259

 

 

$

98,800

 

 

FABRINET

GUIDANCE FOR QUARTER ENDING JUNE 28, 2024

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 

 

Diluted

EPS

GAAP net income per diluted share:

$2.01 to $2.08

Related to cost of revenues:

 

Share-based compensation expenses

0.05

Total related to gross profit

0.05

Related to selling, general and administrative expenses:

 

Share-based compensation expenses

0.14

Total related to selling, general and administrative expenses

0.14

Total related to net income & EPS

0.19

Non-GAAP net income per diluted share

$2.20 to $2.27

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240506662526/en/

Investor Contact: Garo Toomajanian ir@fabrinet.com