FN Fabrinet

• Record Revenue and Net Income Per Share Exceed Guidance Ranges

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 first fiscal quarter ended September 29, 2023.

Seamus Grady, Chief Executive Officer of Fabrinet, said, “We had a very strong start to the year with revenue and net income per share that were above our guidance ranges, and also marked new quarterly records. Industry-wide inventory adjustments continue to affect certain programs, but these declines were more than offset by quickly ramping new programs. We continue to carefully manage costs, which resulted in strong bottom-line results. We expect to extend our strong execution into the second quarter, as reflected in our guidance.”

First Quarter Fiscal Year 2024 Financial Highlights

GAAP Results

• Revenue for the first quarter of fiscal year 2024, a thirteen-week quarter, was $685.5 million, compared to $655.4 million for the first quarter of fiscal year 2023, a fourteen-week quarter.
• GAAP net income for the first quarter of fiscal year 2024 was $65.1 million, compared to $64.6 million for the first quarter of fiscal year 2023.
• GAAP net income per diluted share for the first quarter of fiscal year 2024 was $1.78, compared to $1.76 for the first quarter of fiscal year 2023.

Non-GAAP Results

• Non-GAAP net income for the first quarter of fiscal year 2024 was $72.8 million, compared to $72.4 million for the first quarter of fiscal year 2023.
• Non-GAAP net income per diluted share for the first quarter of fiscal year 2024 was $2.00, compared to $1.97 for the first quarter of fiscal year 2023.

Business Outlook

Based on information available as of November 6, 2023, Fabrinet is issuing guidance for its second fiscal quarter ending December 29, 2023, as follows:

• Fabrinet expects second quarter revenue to be in the range of $680 million to $700 million.
• GAAP net income per diluted share is expected to be in the range of $1.78 to $1.85, 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 $1.98 to $2.05, 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 First Quarter Fiscal Year 2024 Financial Results Call

When:

 

November 6, 2023

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 optimism that we will be able to extend our strong execution into the second quarter; and (2) 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 second 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 Annual Report on Form 10-K filed with the SEC on August 22, 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)

September 29, 2023

 

June 30, 2023

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

308,338

 

 

$

231,368

 

Short-term investments

 

362,428

 

 

 

319,100

 

Trade accounts receivable, net of allowance for doubtful accounts of $1,768 and $965, respectively

 

535,006

 

 

 

531,767

 

Inventories

 

440,095

 

 

 

519,576

 

Prepaid expenses

 

6,328

 

 

 

7,849

 

Other current assets

 

39,766

 

 

 

42,880

 

Total current assets

 

1,691,961

 

 

 

1,652,540

 

Non-current assets

 

 

 

Property, plant and equipment, net

 

306,665

 

 

 

310,350

 

Intangibles, net

 

2,598

 

 

 

2,394

 

Operating right-of-use assets

 

6,024

 

 

 

1,634

 

Deferred tax assets

 

11,363

 

 

 

12,095

 

Other non-current assets

 

610

 

 

 

635

 

Total non-current assets

 

327,260

 

 

 

327,108

 

Total Assets

$

2,019,221

 

 

$

1,979,648

 

Liabilities and Shareholders’ Equity

 

 

 

Current liabilities

 

 

 

Long-term borrowings, current portion, net

$

9,117

 

 

$

12,156

 

Trade accounts payable

 

357,106

 

 

 

381,129

 

Fixed assets payable

 

9,313

 

 

 

13,526

 

Operating lease liabilities, current portion

 

1,587

 

 

 

1,201

 

Income tax payable

 

7,013

 

 

 

6,024

 

Accrued payroll, bonus and related expenses

 

22,976

 

 

 

23,748

 

Accrued expenses

 

24,034

 

 

 

20,447

 

Other payables

 

24,287

 

 

 

23,654

 

Total current liabilities

 

455,433

 

 

 

481,885

 

Non-current liabilities

 

 

 

Deferred tax liability

 

5,117

 

 

 

4,799

 

Operating lease liability, non-current portion

 

4,052

 

 

 

66

 

Severance liabilities

 

22,269

 

 

 

22,159

 

Other non-current liabilities

 

2,181

 

 

 

2,081

 

Total non-current liabilities

 

33,619

 

 

 

29,105

 

Total Liabilities

 

489,052

 

 

 

510,990

 

Shareholders’ equity

 

 

 

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

 

—

 

 

 

—

 

Ordinary shares (500,000,000 shares authorized, $0.01 par value; 39,430,970 shares and 39,284,176 shares issued at September 29, 2023 and June 30, 2023, respectively; and 36,330,476 shares and 36,183,682 shares outstanding at September 29, 2023 and June 30, 2023, respectively)

 

394

 

 

 

393

 

Additional paid-in capital

 

202,432

 

 

 

206,624

 

Less: Treasury shares (3,100,494 shares as of September 29, 2023 and June 30, 2023)

 

(194,833

)

 

 

(194,833

)

Accumulated other comprehensive income (loss)

 

(7,502

)

 

 

(8,115

)

Retained earnings

 

1,529,678

 

 

 

1,464,589

 

Total Shareholders’ Equity

 

1,530,169

 

 

 

1,468,658

 

Total Liabilities and Shareholders’ Equity

$

2,019,221

 

 

$

1,979,648

 

 

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited)

 

 

Three Months Ended

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

September 29, 2023

 

September 30, 2022

Revenues

$

685,477

 

 

$

655,429

 

Cost of revenues

 

(601,073

)

 

 

(572,673

)

Gross profit

 

84,404

 

 

 

82,756

 

Selling, general and administrative expenses

 

(20,429

)

 

 

(20,565

)

Operating income

 

63,975

 

 

 

62,191

 

Interest income

 

5,898

 

 

 

1,559

 

Interest expense

 

(45

)

 

 

(391

)

Foreign exchange gain (loss), net

 

415

 

 

 

2,085

 

Other income (expense), net

 

(80

)

 

 

(141

)

Income before income taxes

 

70,163

 

 

 

65,303

 

Income tax expense

 

(5,074

)

 

 

(688

)

Net income

 

65,089

 

 

 

64,615

 

Other comprehensive income (loss), net of tax:

 

 

 

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

 

948

 

 

 

(1,461

)

Change in net unrealized gain (loss) on derivative instruments

 

(561

)

 

 

(1,218

)

Change in net retirement benefits plan – prior service cost

 

126

 

 

 

168

 

Change in foreign currency translation adjustment

 

100

 

 

 

246

 

Total other comprehensive income (loss), net of tax

 

613

 

 

 

(2,265

)

Net comprehensive income

$

65,702

 

 

$

62,350

 

Earnings per share

 

 

 

Basic

$

1.80

 

 

$

1.77

 

Diluted

$

1.78

 

 

$

1.76

 

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

 

 

 

Basic

 

36,256

 

 

 

36,528

 

Diluted

 

36,481

 

 

 

36,758

 

 

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

 

 

Three Months Ended

(in thousands of U.S. dollars)

September 29, 2023

 

September 30, 2022

Cash flows from operating activities

 

 

 

Net income for the period

$

65,089

 

 

$

64,615

 

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

 

 

 

Depreciation and amortization

 

11,961

 

 

 

11,055

 

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

 

12

 

 

 

(9

)

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

 

—

 

 

 

92

 

Amortization of discount (premium) of short-term investments

 

(596

)

 

 

442

 

(Reversal of) allowance for doubtful accounts

 

803

 

 

 

(91

)

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

 

(52

)

 

 

(386

)

Amortization of fair value at hedge inception of interest rate swaps

 

(88

)

 

 

(191

)

Share-based compensation

 

7,733

 

 

 

7,723

 

Deferred income tax

 

1,377

 

 

 

(219

)

Other non-cash expenses

 

222

 

 

 

(439

)

Changes in operating assets and liabilities

 

 

 

Trade accounts receivable

 

(4,138

)

 

 

(24,476

)

Inventories

 

79,481

 

 

 

28,808

 

Other current assets and non-current assets

 

3,238

 

 

 

(10,661

)

Trade accounts payable

 

(24,397

)

 

 

(29,774

)

Income tax payable

 

963

 

 

 

(276

)

Severance liabilities

 

706

 

 

 

617

 

Other current liabilities and non-current liabilities

 

2,735

 

 

 

13,804

 

Net cash provided by operating activities

 

145,049

 

 

 

60,634

 

Cash flows from investing activities

 

 

 

Purchase of short-term investments

 

(77,692

)

 

 

(25,609

)

Proceeds from sales of short-term investments

 

—

 

 

 

30,000

 

Proceeds from maturities of short-term investments

 

35,909

 

 

 

29,236

 

Purchase of property, plant and equipment

 

(11,435

)

 

 

(10,258

)

Purchase of intangibles

 

(180

)

 

 

(11

)

Proceeds from disposal of property, plant and equipment

 

318

 

 

 

9

 

Net cash used in investing activities

 

(53,080

)

 

 

23,367

 

Cash flows from financing activities

 

 

 

Repayment of long-term borrowings

 

(3,047

)

 

 

(6,094

)

Repayment of finance lease liability

 

—

 

 

 

(2

)

Repurchase of ordinary shares

 

—

 

 

 

(4,900

)

Withholding tax related to net share settlement of restricted share units

 

(12,147

)

 

 

(16,489

)

Net cash used in financing activities

 

(15,194

)

 

 

(27,485

)

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

$

76,775

 

 

$

56,516

 

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

 

76,775

 

 

 

56,516

 

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

 

195

 

 

 

520

 

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

$

308,338

 

 

$

255,401

 

Non-cash investing and financing activities

 

 

 

Construction, software and equipment-related payables

$

9,313

 

 

$

12,541

 

 

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Continued)

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows:

 

 

As of

(in thousands)

September 29, 2023

 

September 30, 2022

Cash and cash equivalents

$

308,338

 

$

255,260

Restricted cash

 

—

 

 

141

Cash, cash equivalents and restricted cash

$

308,338

 

$

255,401

 

FABRINET

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 

 

 

Three Months Ended

 

 

September 29, 2023

 

September 30, 2022

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

 

Net income

 

Diluted EPS

 

Net income

 

Diluted EPS

GAAP measures

 

$

65,089

 

$

1.78

 

$

64,615

 

$

1.76

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

 

 

 

 

 

 

 

 

Related to cost of revenues:

 

 

 

 

 

 

 

 

Share-based compensation expenses

 

 

2,165

 

 

0.06

 

 

1,915

 

 

0.05

Total related to gross profit

 

 

2,165

 

 

0.06

 

 

1,915

 

 

0.05

Related to selling, general and administrative expenses:

 

 

 

 

 

 

 

 

Share-based compensation expenses

 

 

5,568

 

 

0.16

 

 

5,808

 

 

0.16

Amortization of intangibles

 

 

—

 

 

—

 

 

83

 

 

0.00

Total related to selling, general and administrative expenses

 

 

5,568

 

 

0.16

 

 

5,891

 

 

0.16

Related to other income and expense:

 

 

 

 

 

 

 

 

Amortization of deferred debt issuance costs

 

 

8

 

 

0.00

 

 

8

 

 

0.00

Total related to other income and expense

 

 

8

 

 

0.00

 

 

8

 

 

0.00

Total related to net income & EPS

 

 

7,741

 

 

0.22

 

 

7,814

 

 

0.21

Non-GAAP measures

 

$

72,830

 

$

2.00

 

$

72,429

 

$

1.97

Shares used in computing diluted net income per share

 

 

 

 

 

 

 

 

GAAP diluted shares

 

 

 

 

36,481

 

 

 

 

36,758

Non-GAAP diluted shares

 

 

 

 

36,481

 

 

 

 

36,758

 

FABRINET

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

 

(in thousands)

Three Months Ended

 

September 29, 2023

 

September 30, 2022

Net cash provided by operating activities

$

145,049

 

 

$

60,634

 

Less: Purchase of property, plant and equipment

 

(11,435

)

 

 

(10,258

)

Non-GAAP free cash flow

$

133,614

 

 

$

50,376

 

 

FABRINET

GUIDANCE FOR QUARTER ENDING DECEMBER 29, 2023

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 

 

Diluted

EPS

GAAP net income per diluted share:

$1.78 to $1.85

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

0.15

Total related to selling, general and administrative expenses

0.15

Total related to net income & EPS

0.20

Non-GAAP net income per diluted share

$1.98 to $2.05

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231106364428/en/

Investor Contact: Garo Toomajanian ir@fabrinet.com