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 second fiscal quarter ended December 29, 2023.

Seamus Grady, Chief Executive Officer of Fabrinet, said, “Our strong second quarter results exceeded our guidance ranges and also represented record levels for revenue and net income per share. We continued to see strong datacom revenue growth, which helped drive our overall top line performance. We remain confident that newer datacom programs will significantly contribute to our results as we look ahead. Telecom revenue moderated by a smaller amount than anticipated in the quarter, and we are optimistic that the impact of ongoing inventory adjustments in the telecom market could continue to diminish. With continued business momentum, we are well-positioned to extend our track record of strong execution into the third quarter.”

Second Quarter Fiscal Year 2024 Financial Highlights

GAAP Results

• Revenue for the second quarter of fiscal year 2024 was $712.7 million, compared to $668.7 million for the second quarter of fiscal year 2023.

• GAAP net income for the second quarter of fiscal year 2024 was $69.1 million, compared to $63.2 million for the second quarter of fiscal year 2023.

• GAAP net income per diluted share for the second quarter of fiscal year 2024 was $1.89, compared to $1.71 for the second quarter of fiscal year 2023.

Non-GAAP Results

• Non-GAAP net income for the second quarter of fiscal year 2024 was $76.1 million, compared to $70.0 million for the second quarter of fiscal year 2023.

• Non-GAAP net income per diluted share for the second quarter of fiscal year 2024 was $2.08, compared to $1.90 for the second quarter of fiscal year 2023.

Business Outlook

Based on information available as of February 5, 2024, Fabrinet is issuing guidance for its third fiscal quarter ending March 29, 2024, as follows:

• Fabrinet expects third quarter revenue to be in the range of $705 million to $725 million.

• GAAP net income per diluted share is expected to be in the range of $1.89 to $1.96, based on approximately 36.6 million fully diluted shares outstanding.

• Non-GAAP net income per diluted share is expected to be in the range of $2.08 to $2.15, based on approximately 36.6 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 Second Quarter Fiscal Year 2024 Financial Results Call

When:

 

February 5, 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

“Safe Harbor” Statement Under U.S. Private Securities Litigation Reform Act of 1995

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include: (1) our confidence that newer datacom programs will significantly contribute to future results; (2) our optimism that the impact of ongoing inventory adjustments in the telecom market could continue to diminish; (3) our ability to extend our strong execution into the third quarter of fiscal year 2024; and (4) 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 third 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 November 7, 2023. We disclaim any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise.

Use of Non-GAAP Financials

We refer to the non-GAAP financial measures cited above in making operating decisions because they provide meaningful supplemental information regarding our ongoing operational performance. Non-GAAP net income excludes: 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. The use of these non-GAAP financial measures has material limitations because they should not be used to evaluate our company without reference to their corresponding GAAP financial measures. As such, we compensate for these material limitations by using these non-GAAP financial measures in conjunction with GAAP financial measures.

These non-GAAP financial measures are used 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, some of these non-GAAP financial measures are used to measure company performance for the purposes of determining employee incentive plan compensation.

FABRINET

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

 

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

December 29, 2023

 

June 30, 2023

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

334,053

 

 

$

231,368

 

Short-term investments

 

406,540

 

 

 

319,100

 

Trade accounts receivable, net of allowance for expected credit losses of $2,741 and $965, respectively

 

584,614

 

 

 

531,767

 

Inventories

 

414,758

 

 

 

519,576

 

Prepaid expenses

 

5,952

 

 

 

7,849

 

Other current assets

 

60,446

 

 

 

42,880

 

Total current assets

 

1,806,363

 

 

 

1,652,540

 

Non-current assets

 

 

 

Property, plant and equipment, net

 

306,019

 

 

 

310,350

 

Intangibles, net

 

2,549

 

 

 

2,394

 

Operating right-of-use assets

 

5,767

 

 

 

1,634

 

Deferred tax assets

 

11,804

 

 

 

12,095

 

Other non-current assets

 

636

 

 

 

635

 

Total non-current assets

 

326,775

 

 

 

327,108

Total Assets

$

2,133,138

 

 

$

1,979,648

 

Liabilities and Shareholders’ Equity

 

 

 

Current liabilities

 

 

 

Long-term borrowings, current portion, net

$

6,078

 

 

$

12,156

 

Trade accounts payable

 

376,556

 

 

 

381,129

 

Fixed assets payable

 

12,983

 

 

 

13,526

 

Operating lease liabilities, current portion

 

1,425

 

 

 

1,201

 

Income tax payable

 

7,581

 

 

 

6,024

 

Accrued payroll, bonus and related expenses

 

20,174

 

 

 

23,748

 

Accrued expenses

 

16,119

 

 

 

20,447

 

Other payables

 

45,861

 

 

 

23,654

 

Total current liabilities

 

486,777

 

 

 

481,885

 

Non-current liabilities

 

 

 

Deferred tax liability

 

4,546

 

 

 

4,799

 

Operating lease liability, non-current portion

 

3,956

 

 

 

66

 

Severance liabilities

 

24,505

 

 

 

22,159

 

Other non-current liabilities

 

1,972

 

 

 

2,081

 

Total non-current liabilities

 

34,979

 

 

 

29,105

 

Total Liabilities

 

521,756

 

 

 

510,990

 

Shareholders’ equity

 

 

 

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

 

—

 

 

 

—

 

Ordinary shares (500,000,000 shares authorized, $0.01 par value; 39,435,354 shares and 39,284,176 shares issued as of December 29, 2023 and June 30, 2023, respectively; and 36,296,621 shares and 36,183,682 shares outstanding as of December 29, 2023 and June 30, 2023, respectively)

 

394

 

 

 

393

 

Additional paid-in capital

 

209,208

 

 

 

206,624

 

Less: Treasury shares (3,138,733 shares and 3,100,494 shares as of December 29, 2023 and June 30, 2023, respectively)

 

(201,205

)

 

 

(194,833

)

Accumulated other comprehensive income (loss)

 

4,197

 

 

 

(8,115

)

Retained earnings

 

1,598,788

 

 

 

1,464,589

 

Total Shareholders’ Equity

 

1,611,382

 

 

 

1,468,658

 

Total Liabilities and Shareholders’ Equity

$

2,133,138

 

 

$

1,979,648

 

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited)

 

 

Three Months Ended

 

Six Months Ended

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

December 29, 2023

 

December 30, 2022

 

December 29, 2023

 

December 30, 2022

Revenues

$

712,694

 

 

$

668,656

 

 

$

1,398,171

 

 

$

1,324,085

 

Cost of revenues

 

(624,364

)

 

 

(583,441

)

 

 

(1,225,437

)

 

 

(1,156,114

)

Gross profit

 

88,330

 

 

 

85,215

 

 

 

172,734

 

 

 

167,971

 

Selling, general and administrative expenses

 

(19,316

)

 

 

(18,930

)

 

 

(39,745

)

 

 

(39,495

)

Operating income

 

69,014

 

 

 

66,285

 

 

 

132,989

 

 

 

128,476

 

Interest income

 

7,748

 

 

 

2,334

 

 

 

13,646

 

 

 

3,893

 

Interest expense

 

(36

)

 

 

(389

)

 

 

(81

)

 

 

(780

)

Foreign exchange gain (loss), net

 

(3,788

)

 

 

(3,904

)

 

 

(3,373

)

 

 

(1,819

)

Other income (expense), net

 

(35

)

 

 

(68

)

 

 

(115

)

 

 

(209

)

Income before income taxes

 

72,903

 

 

 

64,258

 

 

 

143,066

 

 

 

129,561

 

Income tax expense

 

(3,793

)

 

 

(1,101

)

 

 

(8,867

)

 

 

(1,789

)

Net income

 

69,110

 

 

 

63,157

 

 

 

134,199

 

 

 

127,772

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

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

 

2,946

 

 

 

1,183

 

 

 

3,894

 

 

 

(278

)

Change in net unrealized gain (loss) on derivative instruments

 

8,951

 

 

 

11,188

 

 

 

8,390

 

 

 

9,970

 

Change in net retirement benefits plan – prior service cost

 

8

 

 

 

57

 

 

 

134

 

 

 

225

 

Change in foreign currency translation adjustment

 

(206

)

 

 

(84

)

 

 

(106

)

 

 

162

 

Total other comprehensive income (loss), net of tax

 

11,699

 

 

 

12,344

 

 

 

12,312

 

 

 

10,079

 

Net comprehensive income

$

80,809

 

 

$

75,501

 

 

$

146,511

 

 

$

137,851

 

Earnings per share

 

 

 

 

 

 

 

Basic

$

1.90

 

 

$

1.73

 

 

$

3.70

 

 

$

3.50

 

Diluted

$

1.89

 

 

$

1.71

 

 

$

3.67

 

 

$

3.47

 

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

 

 

 

 

 

 

 

Basic

 

36,328

 

 

 

36,589

 

 

 

36,292

 

 

 

36,558

 

Diluted

 

36,639

 

 

 

36,939

 

 

 

36,560

 

 

 

36,848

 

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

 

 

Six Months Ended

(in thousands of U.S. dollars)

December 29, 2023

 

December 30, 2022

Cash flows from operating activities

 

 

 

Net income for the period

$

134,199

 

 

$

127,772

 

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

 

 

 

Depreciation and amortization

 

24,186

 

 

 

21,596

 

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

 

(111

)

 

 

(337

)

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

 

(1

)

 

 

92

 

Amortization of discount (premium) of short-term investments

 

(1,397

)

 

 

565

 

(Reversal of) allowance for expected credit losses

 

1,776

 

 

 

251

 

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

 

3,287

 

 

 

3,086

 

Amortization of fair value at hedge inception of interest rate swaps

 

(154

)

 

 

(346

)

Share-based compensation

 

14,714

 

 

 

14,498

 

Deferred income tax

 

1,117

 

 

 

(1,338

)

Other non-cash expenses

 

90

 

 

 

(305

)

Changes in operating assets and liabilities

 

 

 

Trade accounts receivable

 

(53,873

)

 

 

(80,054

)

Inventories

 

104,818

 

 

 

20,475

 

Other current assets and non-current assets

 

(16,360

)

 

 

(11,837

)

Trade accounts payable

 

(6,980

)

 

 

(4,176

)

Income tax payable

 

1,531

 

 

 

(577

)

Severance liabilities

 

1,395

 

 

 

1,269

 

Other current liabilities and non-current liabilities

 

20,977

 

 

 

14,466

 

Net cash provided by operating activities

 

229,214

 

 

 

105,100

 

Cash flows from investing activities

 

 

 

Purchase of short-term investments

 

(164,971

)

 

 

(74,482

)

Proceeds from sales of short-term investments

 

10,000

 

 

 

30,000

 

Proceeds from maturities of short-term investments

 

72,824

 

 

 

46,925

 

Purchase of property, plant and equipment

 

(21,236

)

 

 

(23,643

)

Purchase of intangibles

 

(518

)

 

 

(412

)

Proceeds from disposal of property, plant and equipment

 

2,048

 

 

 

32

 

Net cash used in investing activities

 

(101,853

)

 

 

(21,580

)

Cash flows from financing activities

 

 

 

Repayment of long-term borrowings

 

(6,094

)

 

 

(9,140

)

Repayment of finance lease liability

 

—

 

 

 

(5

)

Repurchase of ordinary shares

 

(6,372

)

 

 

(5,104

)

Withholding tax related to net share settlement of restricted share units

 

(12,352

)

 

 

(16,796

)

Net cash used in financing activities

 

(24,818

)

 

 

(31,045

)

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

$

102,543

 

 

$

52,475

 

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

 

102,543

 

 

 

52,475

 

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

 

142

 

 

 

(11

)

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

$

334,053

 

 

$

250,829

 

Non-cash investing and financing activities

 

 

 

Construction, software and equipment-related payables

$

12,983

 

 

$

18,920

 

FABRINET

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 

 

Three Months Ended

 

Six Months Ended

 

December 29, 2023

 

December 30, 2022

 

December 29, 2023

 

December 30, 2022

(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

$

69,110

 

$

1.89

 

$

63,157

 

$

1.71

 

$

134,199

 

$

3.67

 

$

127,772

 

$

3.47

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Related to cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expenses

 

1,701

 

 

0.05

 

 

1,660

 

 

0.05

 

 

3,866

 

 

0.11

 

 

3,576

 

 

0.10

Total related to gross profit

 

1,701

 

 

0.05

 

 

1,660

 

 

0.05

 

 

3,866

 

 

0.11

 

 

3,576

 

 

0.10

Related to selling, general and administrative expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expenses

 

5,280

 

 

0.14

 

 

5,115

 

 

0.14

 

 

10,848

 

 

0.30

 

 

10,922

 

 

0.29

Amortization of intangibles

 

—

 

 

—

 

 

71

 

 

0.00

 

 

—

 

 

—

 

 

154

 

 

0.01

Total related to selling, general and administrative expenses

 

5,280

 

 

0.14

 

 

5,186

 

 

0.14

 

 

10,848

 

 

0.30

 

 

11,076

 

 

0.30

Related to other income and expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of deferred debt issuance costs

 

8

 

 

0.00

 

 

8

 

 

0.00

 

 

16

 

 

0.00

 

 

16

 

 

0.00

Total related to other income and expense

 

8

 

 

0.00

 

 

8

 

 

0.00

 

 

16

 

 

0.00

 

 

16

 

 

0.00

Total related to net income & EPS

 

6,989

 

 

0.19

 

 

6,854

 

 

0.19

 

 

14,730

 

 

0.41

 

 

14,668

 

 

0.40

Non-GAAP measures

$

76,099

 

$

2.08

 

$

70,011

 

$

1.90

 

$

148,929

 

$

4.08

 

$

142,440

 

$

3.87

Shares used in computing diluted net income per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted shares

 

 

 

36,639

 

 

 

 

36,939

 

 

 

 

36,560

 

 

 

 

36,848

Non-GAAP diluted shares

 

 

 

36,639

 

 

 

 

36,939

 

 

 

 

36,560

 

 

 

 

36,848

FABRINET

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

 

(in thousands)

 

Three Months Ended

 

Six Months Ended

 

 

December 29, 2023

 

December 30, 2022

 

December 29, 2023

 

December 30, 2022

Net cash provided by operating activities

 

$

84,165

 

 

$

44,466

 

 

$

229,214

 

 

$

105,100

 

Less: Purchase of property, plant and equipment

 

 

(9,801

)

 

 

(13,385

)

 

 

(21,236

)

 

 

(23,643

)

Non-GAAP free cash flow

 

$

74,364

 

 

$

31,081

 

 

$

207,978

 

 

$

81,457

 

FABRINET

GUIDANCE FOR QUARTER ENDING MARCH 29, 2024

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 

 

Diluted EPS

GAAP net income per diluted share:

$1.89 to $1.96

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

$2.08 to $2.15

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240205945777/en/

Investor Contact: Garo Toomajanian ir@fabrinet.com