• Record First Quarter Revenue of $436.6 Million Exceeds Guidance
  • Record Net Income per Share Exceeds Guidance
  • GAAP Net Income per Share Increases 28% and Non-GAAP Net Income per Share Increases 22% Year-over-Year

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 25, 2020.

Seamus Grady, Chief Executive Officer of Fabrinet, said, “We have a lot to be optimistic about, as numerous drivers contributed to our growth and outperformance in the first quarter. Our strategy is working as strength from newer programs offsets the softness we see in certain markets.”

Grady continued, “We believe that we can grow faster than the markets we serve by focusing on attracting new customers, winning new projects at existing customers, and pursuing new programs that leverage our advanced precision manufacturing capabilities.”

First Quarter Fiscal Year 2021 Financial Highlights

GAAP Results

  • Revenue for the first quarter of fiscal year 2021 was $436.6 million, compared to $399.3 million in the first quarter of fiscal year 2020.
  • GAAP net income for the first quarter of fiscal year 2021 was $33.1 million, compared to GAAP net income of $26.0 million for the first quarter of fiscal year 2020.
  • GAAP net income per diluted share for the first quarter of fiscal year 2021 was $0.88, compared to GAAP net income per diluted share of $0.69 for the first quarter of fiscal year 2020.

Non-GAAP Results

  • Non-GAAP net income for the first quarter of fiscal year 2021 was $39.3 million, compared to non-GAAP net income of $32.2 million for the first quarter of fiscal year 2020.
  • Non-GAAP net income per diluted share for the first quarter of fiscal year 2021 was $1.05, compared to non-GAAP net income per diluted share of $0.86 for the first quarter of fiscal year 2020.

Business Outlook

Based on information available as of November 2, 2020, Fabrinet is issuing guidance for its second fiscal quarter ending December 25, 2020, as follows:

  • Fabrinet expects second quarter revenue to be in the range of $420 million to $440 million.
  • GAAP net income per diluted share is expected to be in the range of $0.84 to $0.91, based on approximately 37.7 million fully diluted shares outstanding.
  • Non-GAAP net income per diluted share is expected to be in the range of $1.00 to $1.07, based on approximately 37.7 million fully diluted shares outstanding.

Conference Call Information

What:

Fabrinet First Quarter Fiscal Year 2021 Financial Results Call

When:

Monday, November 2, 2020

Time:

5:00 p.m. ET

Live Call:

(888) 357-3694, domestic

 

(253) 237-1137, international

 

Passcode: 9490738

Replay:

(855) 859-2056, domestic

 

(404) 537-3406, international

 

Passcode: 9490738

Webcast:

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

This press release and any other information related to the call will also be posted on Fabrinet’s website at http://investor.fabrinet.com. A recorded version of this webcast will be available approximately two hours after the call and 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 expectations that our strategy is working and we will be able to grow faster than the markets we serve; 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 2021. 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 coronavirus 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 outbreak 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 outbreak intensifies or returns in various geographic areas, and (4) regional downward demand adjustments from our customers, particularly those in areas affected by the outbreak; 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 18, 2020. 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; 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 25, 2020

 

June 26, 2020

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

189,201

 

$

225,430

Short-term restricted cash

 

 

7,402

 

 

7,402

Short-term investments

 

 

307,238

 

 

262,693

Trade accounts receivable, net of allowance for doubtful accounts of $186 and $336, respectively

 

 

289,162

 

 

272,665

Contract assets

 

 

11,757

 

 

13,256

Inventories

 

 

339,429

 

 

309,786

Other receivable

 

 

24,310

 

 

24,310

Prepaid expenses

 

 

4,095

 

 

5,399

Other current assets

 

 

7,827

 

 

14,508

Total current assets

 

 

1,180,421

 

 

1,135,449

Non-current assets

 

 

 

 

 

 

Property, plant and equipment, net

 

 

227,623

 

 

228,274

Intangibles, net

 

 

4,147

 

 

4,312

Operating right-of-use assets

 

 

7,228

 

 

8,068

Deferred tax assets

 

 

5,766

 

 

5,675

Other non-current assets

 

 

221

 

 

202

Total non-current assets

 

 

244,985

 

 

246,531

Total Assets

 

$

1,425,406

 

$

1,381,980

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Long-term borrowings, current portion, net

 

$

12,156

 

$

12,156

Trade accounts payable

 

 

284,173

 

 

251,603

Fixed assets payable

 

 

9,616

 

 

15,127

Contract liabilities

 

 

966

 

 

1,556

Operating lease liabilities, current portion

 

 

2,098

 

 

1,979

Income tax payable

 

 

2,940

 

 

2,242

Accrued payroll, bonus and related expenses

 

 

18,881

 

 

19,265

Accrued expenses

 

 

10,077

 

 

8,979

Other payables

 

 

14,542

 

 

21,514

Total current liabilities

 

355,449

 

334,421

Non-current liabilities

 

 

 

 

Long-term borrowings, non-current portion, net

 

36,475

 

39,514

Deferred tax liability

 

4,927

 

4,729

Operating lease liability, non-current portion

 

4,906

 

5,873

Severance liabilities

 

17,609

 

17,379

Other non-current liabilities

 

5,337

 

5,655

Total non-current liabilities

 

69,254

 

73,150

Total Liabilities

 

424,703

 

407,571

Commitments and contingencies

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding at September 25, 2020 and June 26, 2020)

 

 

Ordinary shares (500,000,000 shares authorized, $0.01 par value; 38,680,659 shares and 38,471,967 shares issued at September 25, 2020 and June 26, 2020, respectively; and 36,936,556 shares and 36,727,864 shares outstanding at September 25, 2020 and June 26, 2020, respectively)

 

 

387

 

385

Additional paid-in capital

 

 

171,715

 

175,610

Less: Treasury shares (1,744,103 shares and 1,744,103 shares at September 25, 2020 and June 26, 2020, respectively)

 

 

(68,501)

 

(68,501)

Accumulated other comprehensive loss

 

 

(3,904)

 

(1,147)

Retained earnings

 

 

901,006

 

868,062

Total Shareholders’ Equity

 

1,000,703

 

974,409

Total Liabilities and Shareholders’ Equity

 

$

1,425,406

 

$

1,381,980

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited)

 

 

Three Months Ended

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

September 25, 2020

 

September 27, 2019

Revenues

$

436,639

 

$

399,296

Cost of revenues

 

(386,159)

 

 

(353,309)

Gross profit

 

50,480

 

 

45,987

Selling, general and administrative expenses

 

(16,863)

 

 

(16,000)

Operating income

 

33,617

 

 

29,987

Interest income

 

1,104

 

 

2,098

Interest expense

 

(251)

 

 

(2,393)

Foreign exchange gain (loss), net

 

128

 

 

(1,953)

Other income (expense), net

 

121

 

 

377

Income before income taxes

 

34,719

 

 

28,116

Income tax expense

 

(1,668)

 

 

(2,159)

Net income

 

33,051

 

 

25,957

Other comprehensive income (loss), net of tax:

 

 

 

 

 

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

 

(325)

 

 

35

Change in net unrealized gain (loss) on derivative instruments

 

(3,208)

 

 

39

Change in net retirement benefits plan – prior service cost

 

173

 

 

83

Change in foreign currency translation adjustment

 

603

 

 

(369)

Total other comprehensive income (loss), net of tax

 

(2,757)

 

 

(212)

Net comprehensive income

$

30,294

 

$

25,745

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

Basic

$

0.90

 

$

0.70

Diluted

$

0.88

 

$

0.69

 

 

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

Basic

 

36,818

 

 

36,913

Diluted

 

37,383

 

 

37,529

 

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

 

 

 

Three Months Ended

(in thousands of U.S. dollars)

 

September 25, 2020

 

September 27, 2019

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

Net income for the period

 

$

33,051

 

$

25,957

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

 

 

 

 

 

 

Depreciation and amortization

 

 

8,570

 

 

7,465

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

 

 

(19)

 

 

8

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

 

 

 

 

(67)

Amortization of investment discount

 

 

481

 

 

65

Amortization of deferred debt issuance costs

 

 

8

 

 

2

(Reversal of) allowance for doubtful accounts

 

 

(257)

 

 

(5)

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

 

 

(890)

 

 

1,479

Unrealized loss (gain) on fair value of interest rate swaps

 

 

 

 

1,671

Amortization of fair value at hedge inception of interest rate swaps

 

 

(359)

 

 

Share-based compensation

 

 

6,027

 

 

5,995

Deferred income tax

 

 

56

 

 

705

Other non-cash expenses

 

 

96

 

 

53

Changes in operating assets and liabilities

 

 

 

 

 

 

Trade accounts receivable

 

 

(16,497)

 

 

(12,967)

Contract assets

 

 

1,499

 

 

827

Inventories

 

 

(29,643)

 

 

(27,898)

Other current assets and non-current assets

 

 

7,812

 

 

4,225

Trade accounts payable

 

 

33,546

 

 

(5,263)

Contract liabilities

 

 

(590)

 

 

27

Income tax payable

 

 

871

 

 

733

Severance liabilities

 

 

745

 

 

811

Other current liabilities and non-current liabilities

 

 

(10,001)

 

 

(1,176)

Net cash provided by operating activities

 

 

34,506

 

 

2,647

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Purchase of short-term investments

 

 

(79,103)

 

 

(62,880)

Proceeds from sales of short-term investments

 

 

 

 

49,472

Proceeds from maturities of short-term investments

 

 

33,750

 

 

31,673

Purchase of property, plant and equipment

 

 

(12,572)

 

 

(6,343)

Purchase of intangibles

 

 

(530)

 

 

(246)

Proceeds from disposal of property, plant and equipment

 

 

21

 

 

Net cash (used in) provided by investing activities

 

 

(58,434)

 

 

11,676

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Payment of debt issuance costs

 

 

 

 

(153)

Proceeds from long-term borrowings

 

 

 

 

60,938

Repayment of long-term borrowings

 

 

(3,047)

 

 

(60,938)

Repayment of finance lease liability

 

 

(100)

 

 

(109)

Withholding tax related to net share settlement of restricted share units

 

 

(9,920)

 

 

(4,144)

Net cash used in financing activities

 

 

(13,067)

 

 

(4,406)

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

 

 

(36,995)

 

 

9,917

 

 

 

 

 

 

 

Movement in cash, cash equivalents and restricted cash

 

 

 

 

 

 

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

 

 

232,832

 

 

188,241

(Decrease) increase in cash, cash equivalents and restricted cash

 

 

(36,995)

 

 

9,917

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

 

 

766

 

 

(41)

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

 

$

196,603

 

$

198,117

 

 

 

 

 

 

 

Non-cash investing and financing activities

 

 

 

 

 

 

Construction, software and equipment-related payables

 

$

9,616

 

$

9,816

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:

 

As of

(amount in thousands)

September 25, 2020

September 27, 2019

 

 

 

Cash and cash equivalents

$

189,201

$

168,535

Restricted cash

 

7,402

 

29,582

Cash, cash equivalents and restricted cash

$

196,603

$

198,117

FABRINET

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 

Three Months Ended

 

September 25, 2020

 

September 27, 2019

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

Net income

Diluted EPS

 

Net income

Diluted EPS

 

 

 

 

 

 

GAAP measures

$

33,051

$

0.88

 

$

25,957

$

0.69

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

 

 

 

 

 

Related to cost of revenues:

 

 

 

 

 

Share-based compensation expenses

 

1,825

 

0.05

 

 

1,720

 

0.05

Depreciation of fair value uplift

 

84

 

0.00

 

 

79

 

0.00

Total related to gross profit

 

1,909

 

0.05

 

 

1,799

 

0.05

 

 

 

 

 

 

Related to selling, general and administrative expenses:

 

 

 

 

 

Share-based compensation expenses

 

4,202

 

0.11

 

 

4,275

 

0.11

Amortization of intangibles

 

131

 

0.00

 

 

143

 

0.00

Total related to selling, general and administrative expenses

 

4,333

 

0.12

 

 

4,418

 

0.12

 

 

 

 

 

 

Related to other incomes and other expenses:

 

 

 

 

 

Amortization of deferred debt issuance costs

 

8

 

0.00

 

 

2

 

0.00

Total related to other incomes and other expenses

 

8

 

0.00

 

 

2

 

0.00

 

 

 

 

 

 

Total related to net income & EPS

 

6,250

 

0.17

 

 

6,219

 

0.17

 

 

 

 

 

 

Non-GAAP measures

$

39,301

$

1.05

 

$

32,176

$

0.86

 

 

 

 

 

 

Shares used in computing diluted net income per share

 

 

 

 

 

GAAP diluted shares

 

 

37,383

 

 

 

37,529

Non-GAAP diluted shares

 

 

37,383

 

 

 

37,529

FABRINET

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

 

(amount in thousands)

Three Months Ended

 

September 25, 2020

September 27, 2019

 

 

 

Net cash provided by operating activities

$

34,506

 

$

2,647

 

Less: Purchase of property, plant and equipment

 

(12,572

)

 

(6,343

)

Non-GAAP free cash flow

$

21,934

 

$

(3,696

)

FABRINET

GUIDANCE FOR QUARTER ENDING DECEMBER 25, 2020

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 

 

 

 

 

Diluted

 

 

EPS

GAAP net income per diluted share:

$0.84 to $0.91

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

0.12

Total related to selling, general and administrative expenses

0.12

 

 

Total related to net income & EPS

0.16

Non-GAAP net income per diluted share

$1.00 to $1.07

 

Investor Contact: Garo Toomajanian ir@fabrinet.com