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Fabrinet Announces Second Quarter Fiscal Year 2024 Financial Results

Published:

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

BANGKOK–(BUSINESS WIRE)–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.

fabrinet

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

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

Contacts

Investor Contact:
Garo Toomajanian

ir@fabrinet.com

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