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Fabrinet Announces First Quarter Fiscal Year 2023 Financial Results

  • Record First Quarter Revenue of $655.4 Million Exceeds Guidance
  • Record GAAP and Non-GAAP Net Income per Share Exceeds Guidance

BANGKOK, Thailand--(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 first quarter of fiscal year 2023 ended September 30, 2022.

Seamus Grady, Chief Executive Officer of Fabrinet, said, “We delivered strong revenue that exceeded our guidance and executed well to produce robust margins, particularly for a first quarter. This performance, combined with favorable foreign exchange tailwinds helped produce earnings per share that were well above the high-end of our guidance range. We are optimistic that favorable demand trends and our track record of execution will extend into the second quarter to produce another quarter of strong financial results.”

First Quarter Fiscal Year 2023 Financial Highlights

GAAP Results

  • Revenue for the first quarter of fiscal year 2023, a 14-week quarter, was $655.4 million, compared to $543.3 million for the first quarter of fiscal year 2022, a 13-week quarter.
  • GAAP net income for the first quarter of fiscal year 2023 was $64.6 million, compared to $44.7 million for the first quarter of fiscal year 2022.
  • GAAP net income per diluted share for the first quarter of fiscal year 2023 was $1.76, compared to $1.20 for the first quarter of fiscal year 2022.

Non-GAAP Results

  • Non-GAAP net income for the first quarter of fiscal year 2023 was $72.4 million, compared to $54.2 million for the first quarter of fiscal year 2022.
  • Non-GAAP net income per diluted share for the first quarter of fiscal year 2023 was $1.97, compared to $1.45 for the first quarter of fiscal year 2022.

Business Outlook

Based on information available as of November 7, 2022, Fabrinet is issuing guidance for its second quarter of fiscal year 2023, a 13-week quarter ending December 30, 2022, as follows:

  • Fabrinet expects second quarter revenue to be in the range of $640 million to $660 million.
  • GAAP net income per diluted share is expected to be in the range of $1.67 to $1.74, based on approximately 37.6 million fully diluted shares outstanding.
  • Non-GAAP net income per diluted share is expected to be in the range of $1.86 to $1.93, based on approximately 37.6 million fully diluted shares outstanding.

Conference Call Information

What:

 

Fabrinet First Quarter Fiscal Year 2023 Financial Results Call

When:

 

November 7, 2022

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, Israel and the

United Kingdom. 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 favorable demand trends will continue and we will be able to achieve strong financial results in the second quarter of fiscal year 2023; 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 2023. 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: the effects of the COVID-19 pandemic on our business, particularly the possibility of (1) the growing global economic downturn, (2) extended shutdowns at any of our manufacturing facilities, especially if the pandemic intensifies or returns in various geographic areas, (3) continued disruption to our supply chain, which could increase our costs and affect our ability to procure parts and materials, especially if the pandemic intensifies or returns in various geographic areas, and (4) regional downward demand adjustments from our customers, particularly those in areas affected by the pandemic; 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, the U.S. and the U.K.); 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 16, 2022. 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; depreciation of fair value uplift; amortization of intangibles; severance payment and others; other expenses in relation to reduction in workforce; 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, 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 30,
2022

 

June 24,
2022

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

255,260

 

 

$

197,996

 

Short-term restricted cash

 

 

 

 

220

 

Short-term investments

 

244,536

 

 

 

280,157

 

Trade accounts receivable, net of allowance for doubtful accounts of $1,177 and $1,271, respectively

 

462,352

 

 

 

439,330

 

Contract assets

 

14,220

 

 

 

13,464

 

Inventories

 

528,050

 

 

 

557,145

 

Prepaid expenses

 

15,466

 

 

 

11,626

 

Other current assets

 

32,029

 

 

 

25,233

 

Total current assets

 

1,551,913

 

 

 

1,525,171

 

Non-current assets

 

 

 

Long-term restricted cash

 

141

 

 

 

149

 

Property, plant and equipment, net

 

294,877

 

 

 

292,277

 

Intangibles, net

 

3,348

 

 

 

3,508

 

Operating right-of-use assets

 

3,247

 

 

 

4,084

 

Deferred tax assets

 

10,200

 

 

 

9,800

 

Other non-current assets

 

663

 

 

 

652

 

Total non-current assets

 

312,476

 

 

 

310,470

 

Total Assets

$

1,864,389

 

 

$

1,835,641

 

Liabilities and Shareholders’ Equity

 

 

 

Current liabilities

 

 

 

Long-term borrowings, current portion, net

$

12,156

 

 

$

12,156

 

Trade accounts payable

 

409,414

 

 

 

439,684

 

Fixed assets payable

 

12,541

 

 

 

9,085

 

Contract liabilities

 

6,348

 

 

 

1,982

 

Finance lease liability, current portion

 

9

 

 

 

10

 

Operating lease liabilities, current portion

 

2,305

 

 

 

2,319

 

Income tax payable

 

2,771

 

 

 

2,898

 

Accrued payroll, bonus and related expenses

 

22,103

 

 

 

20,374

 

Accrued expenses

 

32,556

 

 

 

24,758

 

Other payables

 

26,152

 

 

 

25,221

 

Total current liabilities

 

526,355

 

 

 

538,487

 

Non-current liabilities

 

 

 

Long-term borrowings, non-current portion, net

 

9,117

 

 

 

15,202

 

Deferred tax liability

 

6,609

 

 

 

6,001

 

Finance lease liability, non-current portion

 

65

 

 

 

75

 

Operating lease liability, non-current portion

 

647

 

 

 

1,476

 

Severance liabilities

 

17,892

 

 

 

18,384

 

Other non-current liabilities

 

1,338

 

 

 

2,334

 

Total non-current liabilities

 

35,668

 

 

 

43,472

 

Total Liabilities

 

562,023

 

 

 

581,959

 

 

 

 

 

Shareholders’ equity

 

 

 

Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding as of September 30, 2022 and June 24, 2022)

 

 

 

 

 

Ordinary shares (500,000,000 shares authorized, $0.01 par value; 39,245,547 shares and 39,048,700 shares issued at September 30, 2022 and June 24, 2022, respectively; and 36,586,553 shares and 36,436,683 shares outstanding at September 30, 2022 and June 24, 2022, respectively)

 

392

 

 

 

390

 

Additional paid-in capital

 

187,899

 

 

 

196,667

 

Less: Treasury shares (2,658,994 shares and 2,612,017 shares as of September 30, 2022 and June 24, 2022, respectively)

 

(152,158

)

 

 

(147,258

)

Accumulated other comprehensive income (loss)

 

(15,058

)

 

 

(12,793

)

Retained earnings

 

1,281,291

 

 

 

1,216,676

 

Total Shareholders’ Equity

 

1,302,366

 

 

 

1,253,682

 

Total Liabilities and Shareholders’ Equity

$

1,864,389

 

 

$

1,835,641

 

 
 

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited)

 

 

Three Months Ended

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

September 30,
2022

 

September 24,
2021

Revenues

$

655,429

 

 

$

543,322

 

Cost of revenues

 

(572,673

)

 

 

(479,725

)

Gross profit

 

82,756

 

 

 

63,597

 

Selling, general and administrative expenses

 

(20,565

)

 

 

(20,587

)

Operating income

 

62,191

 

 

 

43,010

 

Interest income

 

1,559

 

 

 

761

 

Interest expense

 

(391

)

 

 

(36

)

Foreign exchange gain (loss), net

 

2,085

 

 

 

1,772

 

Other income (expense), net

 

(141

)

 

 

(260

)

Income before income taxes

 

65,303

 

 

 

45,247

 

Income tax expense

 

(688

)

 

 

(596

)

Net income

 

64,615

 

 

 

44,651

 

Other comprehensive income (loss), net of tax:

 

 

 

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

 

(1,461

)

 

 

(213

)

Change in net unrealized gain (loss) on derivative instruments

 

(1,218

)

 

 

(1,217

)

Change in net retirement benefits plan – prior service cost

 

168

 

 

 

198

 

Change in foreign currency translation adjustment

 

246

 

 

 

(164

)

Total other comprehensive income (loss), net of tax

 

(2,265

)

 

 

(1,396

)

Net comprehensive income

$

62,350

 

 

$

43,255

 

Earnings per share

 

 

 

Basic

$

1.77

 

 

$

1.21

 

Diluted

$

1.76

 

 

$

1.20

 

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

 

 

 

Basic

 

36,528

 

 

 

36,877

 

Diluted

 

36,758

 

 

 

37,328

 

 

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

 

 

Three Months Ended

(in thousands of U.S. dollars)

September 30,
2022

 

September 24,
2021

Cash flows from operating activities

 

 

 

Net income for the period

$

64,615

 

 

$

44,651

 

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

 

 

 

Depreciation and amortization

 

11,055

 

 

 

9,535

 

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

 

(9

)

 

 

(98

)

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

 

92

 

 

 

(13

)

Amortization of discount (premium) of short-term investment

 

442

 

 

 

1,109

 

Amortization of deferred debt issuance costs

 

8

 

 

 

8

 

(Reversal of) allowance for doubtful accounts

 

(91

)

 

 

(1

)

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

 

(386

)

 

 

(1,436

)

Amortization of fair value at hedge inception of interest rate swaps

 

(191

)

 

 

(268

)

Share-based compensation

 

7,723

 

 

 

9,292

 

Deferred income tax

 

(219

)

 

 

(104

)

Other non-cash expenses

 

(447

)

 

 

257

 

Changes in operating assets and liabilities

 

 

 

Trade accounts receivable

 

(23,625

)

 

 

(10,160

)

Contract assets

 

(756

)

 

 

(1,242

)

Inventories

 

28,808

 

 

 

(43,135

)

Other current assets and non-current assets

 

(10,756

)

 

 

(1,054

)

Trade accounts payable

 

(29,774

)

 

 

27,541

 

Contract liabilities

 

4,366

 

 

 

75

 

Income tax payable

 

(276

)

 

 

(747

)

Severance liabilities

 

617

 

 

 

893

 

Other current liabilities and non-current liabilities

 

9,438

 

 

 

1,808

 

Net cash provided by operating activities

 

60,634

 

 

 

36,911

 

Cash flows from investing activities

 

 

 

Purchase of short-term investments

 

(25,609

)

 

 

(78,101

)

Proceeds from sales of short-term investments

 

30,000

 

 

 

19,463

 

Proceeds from maturities of short-term investments

 

29,236

 

 

 

43,791

 

Purchase of property, plant and equipment

 

(10,258

)

 

 

(32,522

)

Purchase of intangibles

 

(11

)

 

 

(311

)

Proceeds from disposal of property, plant and equipment

 

9

 

 

 

145

 

Net cash used in investing activities

 

23,367

 

 

 

(47,535

)

Cash flows from financing activities

 

 

 

Repayment of long-term borrowings

 

(6,094

)

 

 

(3,047

)

Repayment of finance lease liability

 

(2

)

 

 

 

Repurchase of ordinary shares

 

(4,900

)

 

 

 

Withholding tax related to net share settlement of restricted share units

 

(16,489

)

 

 

(19,065

)

Net cash used in financing activities

 

(27,485

)

 

 

(22,112

)

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

$

56,516

 

 

$

(32,736

)

Movement in cash, cash equivalents and restricted cash

 

 

 

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

$

198,365

 

 

$

303,123

 

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

 

56,516

 

 

 

(32,736

)

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

 

520

 

 

 

(321

)

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

$

255,401

 

 

$

270,066

 

Non-cash investing and financing activities

 

 

 

Construction, software and equipment-related payables

$

12,541

 

 

$

24,174

 

 

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 30,
2022

 

September 24,
2021

Cash and cash equivalents

$

255,260

 

$

269,911

Restricted cash

 

141

 

 

155

Cash, cash equivalents and restricted cash

$

255,401

 

$

270,066

 

FABRINET

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 

 

Three Months Ended

 

September 30,
2022

 

September 24,
2021

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

Net income

 

Diluted EPS

 

Net income

 

Diluted EPS

GAAP measures

$

64,615

 

$

1.76

 

$

44,651

 

$

1.20

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

 

 

 

 

 

 

 

Related to cost of revenues:

 

 

 

 

 

 

 

Share-based compensation expenses

 

1,915

 

 

0.05

 

 

1,975

 

 

0.05

Depreciation of fair value uplift

 

 

 

 

 

92

 

 

0.00

Total related to gross profit

 

1,915

 

 

0.05

 

 

2,067

 

 

0.05

Related to selling, general and administrative expenses:

 

 

 

 

 

 

 

Share-based compensation expenses

 

5,808

 

 

0.16

 

 

7,317

 

 

0.20

Amortization of intangibles

 

83

 

 

0.00

 

 

119

 

 

0.00

Total related to selling, general and administrative expenses

 

5,891

 

 

0.16

 

 

7,436

 

 

0.20

Related to other incomes and other expenses:

 

 

 

 

 

 

 

Amortization of deferred debt issuance costs

 

8

 

 

0.00

 

 

8

 

 

0.00

Total related to other incomes and other expenses

 

8

 

 

0.00

 

 

8

 

 

0.00

Total related to net income & EPS

 

7,814

 

 

0.21

 

 

9,511

 

 

0.25

Non-GAAP measures

$

72,429

 

$

1.97

 

$

54,162

 

$

1.45

Shares used in computing diluted net income per share

 

 

 

 

 

 

 

GAAP diluted shares

 

 

 

36,758

 

 

 

 

37,328

Non-GAAP diluted shares

 

 

 

36,758

 

 

 

 

37,328

 

FABRINET

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

 

(in thousands)

 

Three Months Ended

 

 

September 30,
2022

 

September 24,
2021

Net cash provided by operating activities

 

$

60,634

 

 

$

36,911

 

Less: Purchase of property, plant and equipment

 

 

(10,258

)

 

 

(32,522

)

Non-GAAP free cash flow

 

$

50,376

 

 

$

4,389

 

FABRINET

GUIDANCE FOR QUARTER ENDING DECEMBER 30, 2022

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 

 

Diluted

EPS

GAAP net income per diluted share:

$1.67 to $1.74

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

$1.86 to $1.93

 

Contacts

Investor Contact:
Garo Toomajanian

[email protected]

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