Fabrinet Announces Third Quarter Fiscal Year 2022 Financial Results

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 third fiscal quarter ended March 25, 2022.

Seamus Grady, Chief Executive Officer of Fabrinet, said, “With strong execution we delivered solid revenue and non-GAAP EPS that were within our guidance ranges in the third quarter. We are optimistic that we can continue to effectively manage supply chain constraints amid growing demand to deliver strong fourth quarter results.”

Third Quarter Fiscal Year 2022 Financial Highlights

GAAP Results

  • Revenue for the third quarter of fiscal year 2022 was $564.4 million, compared to $479.3 million in the third quarter of fiscal year 2021.
  • GAAP net income for the third quarter of fiscal year 2022 was $50.7 million, compared to GAAP net income of $37.5 million for the third quarter of fiscal year 2021.
  • GAAP net income per diluted share for the third quarter of fiscal year 2022 was $1.35, compared to GAAP net income per diluted share of $1.00 for the third quarter of fiscal year 2021.

Non-GAAP Results

  • Non-GAAP net income for the third quarter of fiscal year 2022 was $56.2 million, compared to non-GAAP net income of $45.4 million for the third quarter of fiscal year 2021.
  • Non-GAAP net income per diluted share for the third quarter of fiscal year 2022 was $1.50, compared to non-GAAP net income per diluted share of $1.21 for the third quarter of fiscal year 2021.

Business Outlook

Based on information available as of May 2, 2022, Fabrinet is issuing guidance for its fourth fiscal quarter ending June 24, 2022, as follows:

  • Fabrinet expects fourth quarter revenue to be in the range of $570 million to $590 million.
  • GAAP net income per diluted share is expected to be in the range of $1.35 to $1.42, 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 $1.52 to $1.59, based on approximately 37.6 million fully diluted shares outstanding.

Conference Call Information

What:

Fabrinet Third Quarter Fiscal Year 2022 Financial Results Call

When:

Monday, May 2, 2022

Time:

5:00 p.m. ET

Live Call:

(888) 357-3694, domestic

(253) 237-1137, international

Conference ID: 8682742

Replay:

(855) 859-2056, domestic

(404) 537-3406, international

Conference ID: 8682742

Webcast:

http://investor.fabrinet.com/ (live and replay)

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 about our ability to manage supply chain constraints amid growing demand; 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 fourth quarter of fiscal year 2022. 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 Quarterly Report on Form 10-Q filed with the SEC on February 1, 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)

March 25,
2022

June 25,
2021

Assets

Current assets

Cash and cash equivalents

$

269,140

$

302,969

Short-term investments

245,852

244,963

Trade accounts receivable, net of allowance for doubtful accounts of $61 and $100, respectively

446,052

336,547

Contract assets

13,568

11,878

Inventories

452,638

422,133

Prepaid expenses

13,729

11,398

Other current assets

29,169

22,619

Total current assets

1,470,148

1,352,507

Non-current assets

Long-term restricted cash

157

154

Property, plant and equipment, net

291,767

241,129

Intangibles, net

3,593

4,371

Operating right-of-use assets

4,790

6,699

Deferred tax assets

9,171

9,428

Other non-current assets

513

1,834

Total non-current assets

309,991

263,615

Total Assets

$

1,780,139

$

1,616,122

Liabilities and Shareholders’ Equity

Current liabilities

Long-term borrowings, current portion, net

$

12,156

$

12,156

Trade accounts payable

402,581

346,555

Fixed assets payable

14,060

19,206

Contract liabilities

1,923

1,680

Operating lease liabilities, current portion

2,593

2,593

Income tax payable

2,794

3,612

Accrued payroll, bonus and related expenses

21,396

20,464

Accrued expenses

21,144

17,134

Other payables

24,012

20,958

Total current liabilities

502,659

444,358

Non-current liabilities

Long-term borrowings, non-current portion, net

18,241

27,358

Deferred tax liability

5,771

5,107

Operating lease liability, non-current portion

1,922

3,850

Severance liabilities

20,352

19,485

Other non-current liabilities

2,467

3,444

Total non-current liabilities

48,753

59,244

Total Liabilities

551,412

503,602

Commitments and contingencies

Shareholders’ equity

Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding as of March 25, 2022 and June 25, 2021)

Ordinary shares (500,000,000 shares authorized, $0.01 par value; 39,039,725 shares and 38,749,045 shares issued at March 25, 2022 and June 25, 2021, respectively; and 36,780,528 shares and 36,765,456 shares outstanding at March 25, 2022 and June 25, 2021, respectively)

390

388

Additional paid-in capital

190,705

189,445

Less: Treasury shares (2,259,197 shares and 1,983,589 shares as of March 25, 2022 and June 25, 2021, respectively)

(115,967

)

(87,343

)

Accumulated other comprehensive income (loss)

(6,888

)

(6,266

)

Retained earnings

1,160,487

1,016,296

Total Shareholders’ Equity

1,228,727

1,112,520

Total Liabilities and Shareholders’ Equity

$

1,780,139

$

1,616,122

 

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 25,
2022

March 26,
2021

March 25,
2022

March 26,
2021

Revenues

$

564,395

$

479,317

$

1,674,350

$

1,369,783

Cost of revenues

(493,702

)

(422,539

)

(1,470,689

)

(1,209,504

)

Gross profit

70,693

56,778

203,661

160,279

Selling, general and administrative expenses

(17,034

)

(19,059

)

(55,412

)

(53,078

)

Expenses related to reduction in workforce

(43

)

(135

)

(43

)

Operating income

53,659

37,676

148,114

107,158

Interest income

414

941

1,470

3,156

Interest expense

(73

)

(282

)

(347

)

(798

)

Foreign exchange gain (loss), net

(410

)

629

998

224

Other income (expense), net

(36

)

124

(1,351

)

403

Income before income taxes

53,554

39,088

148,884

110,143

Income tax expense

(2,893

)

(1,595

)

(4,693

)

(4,215

)

Net income

50,661

37,493

144,191

105,928

Other comprehensive income (loss), net of tax:

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

(2,455

)

(570

)

(3,615

)

(937

)

Change in net unrealized gain (loss) on derivative instruments

666

(5,000

)

2,743

(5,823

)

Change in net retirement benefits plan – prior service cost

124

198

448

421

Change in foreign currency translation adjustment

(34

)

90

(198

)

547

Total other comprehensive income (loss), net of tax

(1,699

)

(5,282

)

(622

)

(5,792

)

Net comprehensive income (loss)

$

48,962

$

32,211

$

143,569

$

100,136

Earnings per share

Basic

$

1.37

$

1.02

$

3.90

$

2.87

Diluted

$

1.35

$

1.00

$

3.85

$

2.82

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

Basic

36,940

36,875

36,945

36,876

Diluted

37,473

37,609

37,451

37,514

 

FABRINET
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Nine Months Ended

(in thousands of U.S. dollars)

March 25,
2022

March 26,
2021

Cash flows from operating activities

Net income for the period

$

144,191

$

105,928

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

Depreciation and amortization

28,907

26,781

Gain on disposal of property, plant and equipment

(175

)

(24

)

Gain from sales and maturities of available-for-sale securities

(13

)

(187

)

Amortization of investment discount

3,038

1,479

Amortization of deferred debt issuance costs

24

24

(Reversal of) allowance for doubtful accounts

(39

)

(317

)

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

(1,422

)

(825

)

Amortization of fair value at hedge inception of interest rate swaps

(736

)

(1,009

)

Share-based compensation

21,701

18,742

Deferred income tax

563

(382

)

Other non-cash expenses

1,067

(614

)

Changes in operating assets and liabilities

Trade accounts receivable

(109,334

)

(36,437

)

Contract assets

(1,690

)

(3,874

)

Inventories

(30,503

)

(43,497

)

Other current assets and non-current assets

(11,221

)

(18,433

)

Trade accounts payable

55,333

25,589

Contract liabilities

243

(147

)

Income tax payable

(872

)

911

Severance liabilities

1,883

2,204

Other current liabilities and non-current liabilities

6,952

3,404

Net cash provided by operating activities

107,897

79,316

Cash flows from investing activities

Purchase of short-term investments

(119,853

)

(183,041

)

Proceeds from sales of short-term investments

19,463

84,049

Proceeds from maturities of short-term investments

92,862

97,721

Purchase of property, plant and equipment

(75,327

)

(33,269

)

Purchase of intangibles

(592

)

(1,912

)

Proceeds from disposal of property, plant and equipment

229

38

Net cash used in investing activities

(83,218

)

(36,414

)

Cash flows from financing activities

Repayment of long-term borrowings

(9,141

)

(9,141

)

Repayment of finance lease liability

(100

)

Repurchase of ordinary shares

(28,624

)

(8,312

)

Withholding tax related to net share settlement of restricted share units

(20,439

)

(11,362

)

Net cash used in financing activities

(58,204

)

(28,915

)

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

$

(33,525

)

$

13,987

Movement in cash, cash equivalents and restricted cash

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

$

303,123

$

232,832

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

(33,525

)

13,987

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

(301

)

345

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

$

269,297

$

247,164

Non-cash investing and financing activities

Construction, software and equipment-related payables

$

14,060

$

11,060

 

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 unaudited condensed consolidated balance sheets that sum to the total of the same amounts shown in the unaudited condensed consolidated statements of cash flows:

(amount in thousands)

As of

March 25, 2022

As of

March 26, 2021

Cash and cash equivalents

$

269,140

$

247,011

Restricted cash

157

153

Cash, cash equivalents and restricted cash

$

269,297

$

247,164

 

FABRINET
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

Three Months Ended

Nine Months Ended

March 25,
2022

March 26,
2021

March 25,
2022

March 26,
2021

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

Net income

Diluted EPS

Net income

Diluted EPS

Net income

Diluted EPS

Net income

Diluted EPS

GAAP measures

$

50,661

$

1.35

$

37,493

$

1.00

$

144,191

$

3.85

$

105,928

$

2.82

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

Related to cost of revenues:

Share-based compensation expenses

1,183

0.03

1,388

0.04

4,579

0.12

4,805

0.13

Depreciation of fair value uplift

89

0.00

92

0.00

256

0.00

Total related to gross profit

1,183

0.03

1,477

0.04

4,671

0.12

5,061

0.13

Related to selling, general and administrative expenses:

Share-based compensation expenses

4,540

0.12

5,476

0.15

17,122

0.46

13,937

0.37

Amortization of intangibles

101

0.00

127

0.00

328

0.01

382

0.01

Severance payment and others

(250

)

0.00

755

0.02

105

0.00

755

0.02

Total related to selling, general and administrative expenses

4,391

0.12

6,358

0.17

17,555

0.47

15,074

0.40

Related to other incomes and other expenses:

Other expenses in relation to reduction in workforce

43

0.00

135

0.01

43

0.00

Amortization of deferred debt issuance costs

8

0.00

8

0.00

24

0.00

24

0.00

Total related to other incomes and other expenses

8

0.00

51

0.00

159

0.01

67

0.00

Total related to net income & EPS

5,582

0.15

7,886

0.21

22,385

0.60

20,202

0.54

Non-GAAP measures

$

56,243

$

1.50

$

45,379

$

1.21

$

166,576

$

4.45

$

126,130

$

3.36

Shares used in computing diluted net income per share

GAAP diluted shares

37,473

37,609

37,451

37,514

Non-GAAP diluted shares

37,473

37,609

37,451

37,514

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

(amount in thousands)

Three Months Ended

Nine Months Ended

March 25,
2022

March 26,
2021

March 25,
2022

March 26,
2021

Net cash provided by operating activities

$

50,329

$

38,002

$

107,897

$

79,316

Less: Purchase of property, plant and equipment

(23,410

)

(10,576

)

(75,327

)

(33,269

)

Non-GAAP free cash flow

$

26,919

$

27,426

$

32,570

$

46,047

 

FABRINET
GUIDANCE FOR QUARTER ENDING JUNE 24, 2022
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

Diluted

EPS

GAAP net income per diluted share:

$1.35 to $1.42

Related to cost of revenues:

Share-based compensation expenses

0.04

Total related to gross profit

0.04

Related to selling, general and administrative expenses:

Share-based compensation expenses

0.13

Total related to selling, general and administrative expenses

0.13

Total related to net income & EPS

0.17

Non-GAAP net income per diluted share

$1.52 to $1.59

Contacts:

Investor Contact:
Garo Toomajanian
ir@fabrinet.com

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