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Fabrinet Announces Third Quarter Fiscal Year 2024 Financial Results
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
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, June 30,
2024 2023
------------------------------------------------------ ------------------------------------------------------
Assets
Current assets
$ 385,111 $ 231,368
Cash and cash equivalents
408,915 319,100
Short-term investments
583,882 531,767
Trade accounts receivable, net of allowance for expected credit losses of $2,838 and $965, respectively
454,134 519,576
Inventories
9,369 7,849
Prepaid expenses
74,731 42,880
Other current assets
-------------------- -------------- -------------------- -------------------- -------------- --------------------
1,916,142 1,652,540
Total current assets
-------------------- -------------- -------------------- -------------------- -------------- --------------------
Non-current assets
303,118 310,350
Property, plant and equipment, net
2,427 2,394
Intangibles, net
3,742 1,634
Operating right-of-use assets
10,966 12,095
Deferred tax assets
630 635
Other non-current assets
-------------------- -------------- -------------------- -------------------- -------------- --------------------
320,883 327,108
Total non-current assets
-------------------- -------------- -------------------- -------------------- -------------- --------------------
Total Assets $ 2,237,025 $ 1,979,648
==================== ============== ==================== ==================== ============== ====================
Liabilities and Shareholders' Equity
Current liabilities
$ 3,039 $ 12,156
Long-term borrowings, current portion, net
429,021 381,129
Trade accounts payable
9,229 13,526
Fixed assets payable
1,333 1,201
Operating lease liabilities, current portion
4,828 6,024
Income tax payable
23,727 23,748
Accrued payroll, bonus and related expenses
20,742 20,447
Accrued expenses
52,348 23,654
Other payables
-------------------- -------------- -------------------- -------------------- -------------- --------------------
544,267 481,885
Total current liabilities
-------------------- -------------- -------------------- -------------------- -------------- --------------------
Non-current liabilities
4,641 4,799
Deferred tax liability
2,003 66
Operating lease liability, non-current portion
23,820 22,159
Severance liabilities
2,059 2,081
Other non-current liabilities
-------------------- -------------- -------------------- -------------------- -------------- --------------------
32,523 29,105
Total non-current liabilities
-------------------- -------------- -------------------- -------------------- -------------- --------------------
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
-------------------- -------------- -------------------- -------------------- -------------- --------------------
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, March 31, March 29, March 31,
2024 2023 2024 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 )
-------------------- -------------- -------------------- -------------------- -------- -------------------- -------------------- -------------- -------------------- -------------------- ---------- --------------------
90,935 86,007 263,669 253,978
Gross profit
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:
(1,739 ) 2,046 2,155 1,768
Change in net unrealized gain (loss) on available-for-sale securities
(7,328 ) (5,535 ) 1,062 4,435
Change in net unrealized gain (loss) on derivative instruments
137 113 271 338
Change in net retirement benefits plan - prior service cost
75 (191 ) (31 ) (29 )
Change in foreign currency translation adjustment
-------------------- -------------- -------------------- -------------------- -------- -------------------- -------------------- -------------- -------------------- -------------------- ---------- --------------------
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
$ 2.23 $ 1.62 $ 5.93 $ 5.12
Basic
$ 2.21 $ 1.60 $ 5.88 $ 5.07
Diluted
Weighted-average number of ordinary shares outstanding (thousands of shares)
36,250 36,608 36,278 36,575
Basic
FABRINET
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Nine Months Ended
--------------------------------------------------------------------------------------------------------------------------
(in thousands of U.S. dollars) March 29, March 31,
2024 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
36,602 32,504
Depreciation and amortization
-- 2,201
Non-cash restructuring charges and other related costs
(147 ) (1,630 )
(Gain) loss on disposal and impairment of property, plant and equipment and intangibles
(1 ) 92
(Gain) loss from sales and maturities of available-for-sale securities
(2,317 ) 300
Amortization of discount (premium) of short-term investments
1,874 (240 )
(Reversal of) allowance for expected credit losses
(2,135 ) 693
Unrealized loss (gain) on exchange rate and fair value of foreign currency forward contracts
(198 ) (478 )
Amortization of fair value at hedge inception of interest rate swaps
21,440 21,217
Share-based compensation
1,125 (276 )
Deferred income tax
194 (127 )
Other non-cash expenses
Changes in operating assets and liabilities
(54,089 ) (105,932 )
Trade accounts receivable
65,442 2,720
Inventories
(33,548 ) (11,704 )
Other current assets and non-current assets
48,268 (5,028 )
Trade accounts payable
(1,068 ) (262 )
Income tax payable
2,249 1,917
Severance liabilities
31,278 19,128
Other current liabilities and non-current liabilities
-------------------- -------------- -------------------- -------------------- -------- --------------------
330,084 142,222
Net cash provided by operating activities
-------------------- -------------- -------------------- -------------------- -------- --------------------
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
-------------------- -------------- -------------------- -------------------- -------- --------------------
(118,615 ) (70,449 )
Net cash used in investing activities
-------------------- -------------- -------------------- -------------------- -------- --------------------
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 )
-------------------- -------------- -------------------- -------------------- -------- --------------------
(57,800 ) (39,151 )
Net cash used in financing activities
-------------------- -------------- -------------------- -------------------- -------- --------------------
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
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, March 31, March 29, March 31,
2024 2023 2024 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
-------------------- ---------- -------------------- ---------- -------------------- ---------- -------------------- ----------
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, March 31, March 29, March 31,
2024 2023 2024 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
-------------------- -------------- -------------------- ---------- -------------------- -------------- -------------------- ----------
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, March 31, March 29, March 31,
2024 2023 2024 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:
1,561 0.04 1,453 0.04 5,427 0.15 5,028 0.14
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
-------------------- -------------- -------------------- -------------- -------------------- ---------- -------------------- ---------- -------------------- -------------- -------------------- -------------- -------------------- ---------- -------------------- ----------
Related to selling, general and administrative expenses:
5,165 0.14 5,080 0.14 16,013 0.44 16,003 0.43
Share-based compensation expenses
-- -- 70 0.00 -- -- 224 0.01
Amortization of intangibles
-------------------- -------------- -------------------- -------------- -------------------- ---------- -------------------- ---------- -------------------- -------------- -------------------- -------------- -------------------- ---------- -------------------- ----------
5,165 0.14 5,150 0.14 16,013 0.44 16,227 0.44
Total related to selling, general and administrative expenses
-------------------- -------------- -------------------- -------------- -------------------- ---------- -------------------- ---------- -------------------- -------------- -------------------- -------------- -------------------- ---------- -------------------- ----------
Related to other income and expense:
-- -- 5,872 0.16 -- --