Fabrinet(FN) - 2025 Q3 - Quarterly Report

Revenue Trends - The percentage of revenues generated from locations outside North America decreased from 62.8% in Q3 2024 to 53.8% in Q3 2025, primarily due to increased revenue from a U.S. customer[122]. - For the nine months ended March 28, 2025, the percentage of revenues from outside North America decreased from 63.7% to 56.8%[123]. - Revenues increased by $379.9 million, or 17.8%, to$ 2,509.6 million for the nine months ended March 28, 2025, driven by demand for optical and non-optical communications products[161]. - Revenues from optical communications products rose by $238.1 million, or 14.1%, to$ 1,930.7 million, representing 76.9% of total revenues for the nine months ended March 28, 2025[161]. - Revenues from non-optical communications products increased by $141.9 million, or 32.5%, to$ 578.9 million, accounting for 23.1% of total revenues for the same period[161]. - For the three months ended March 28, 2025, revenues increased by $140.3 million, or 19.2%, to$ 871.8 million compared to $731.5 million for the same period in 2024[160]. - Revenues from optical communications products were$ 657.2 million, representing 75.4% of total revenues, with an increase of $65.8 million, or 11.1%, compared to the prior year[160]. - Revenues from non-optical communications products increased by$ 74.5 million, or 53.2%, to $214.6 million, primarily driven by growth in automotive revenue[160]. Financial Performance - Gross profit for the three months ended March 28, 2025, was$ 102.2 million, with a gross margin of 11.7%, compared to $90.9 million and 12.4% in the same period of 2024[156][157]. - Operating income for the three months ended March 28, 2025, was$ 78.9 million, representing an operating margin of 9.0%, compared to $71.3 million and 9.7% in the same period of 2024[156][157]. - Net income for the three months ended March 28, 2025, was$ 81.3 million, compared to $80.9 million in the same period of 2024, reflecting a slight increase[156]. - Gross profit for the nine months ended March 28, 2025, increased by$ 38.4 million, or 14.6%, to $302.1 million, representing 12.0% of revenues[165]. - Operating income for the nine months ended March 28, 2025, increased by$ 31.1 million, or 15.2%, to $235.4 million, or 9.4% of revenues[170]. - Net income for the nine months ended March 28, 2025, was$ 245.3 million, or 9.8% of revenues, compared to $215.1 million, or 10.1% of revenues for the same period last year[180]. Expenses and Costs - The company expects SG&A expenses for fiscal year 2025 to increase compared to fiscal year 2024, mainly due to higher employee costs, legal expenses, and R&D expenses[132]. - SG&A expenses for the nine months ended March 28, 2025, increased by$ 5.9 million, or 9.9%, to $65.3 million, or 2.6% of revenues[167]. - The company anticipates incurring incremental costs of revenue due to planned expansion into new geographic markets, although the exact amount is undetermined[130]. Tax and Financial Management - The effective tax rate for the company is influenced by the mix of tax rates in various jurisdictions, with a corporate income tax rate of 20% for its Thai subsidiary[149][150][151]. - The company has received preferential tax treatment in Thailand, including a corporate tax exemption on income generated from certain projects through June 2026[150]. - The company’s deferred income tax assets are based on estimates of future taxable income, which may change depending on market conditions and tax law changes[152]. Cash and Investments - Cash, cash equivalents, and short-term investments totaled$ 950.7 million as of March 28, 2025, with no outstanding debt[184]. - Cash, cash equivalents, and short-term investments totaled $950.7 million as of March 28, 2025, up from$ 858.6 million as of June 28, 2024[194]. - Interest income for the nine months ended March 28, 2025, increased by $10.3 million, or 46.6%, to$ 32.4 million, or 1.3% of revenues[172]. - Cash used in investing activities increased due to higher investment purchases and capital expenditures, with cash used for the nine months ended March 28, 2025, compared to March 29, 2024[191]. - Cash used in financing activities rose due to increased share repurchases and higher withholding tax, offset by lower long-term debt repayments for the nine months ended March 28, 2025, compared to March 29, 2024[192]. - A 10 basis point decline in interest rates would have decreased interest income by approximately $0.7 million for the nine months ended March 28, 2025, compared to$ 0.5 million for the same period in 2024[194]. Foreign Currency Exposure - As of March 28, 2025, foreign currency denominated assets included 33,796 thousand USD in Thai baht, 4,885 thousand USD in RMB, and 3,106 thousand USD in GBP[136]. - Foreign currency liabilities as of March 28, 2025, included 120,606 thousand USD in Thai baht, 11,074 thousand USD in RMB, and 144 thousand USD in GBP[136]. - The company has $155.0 million of foreign currency forward contracts outstanding on Thai baht payables as of March 28, 2025, compared to$ 135.0 million as of June 28, 2024[137]. - The majority of the company's revenues are denominated in U.S. dollars, while significant expenses are in Thai baht and RMB, leading to foreign currency risk exposure[197]. - A 10% weakening of the U.S. dollar against the Thai baht and RMB would have resulted in a decrease in the net dollar position of approximately $10.0 million and$ 7.2 million as of March 28, 2025, and June 28, 2024, respectively[199]. - The company continues to monitor the financial performance of suppliers and customers to mitigate credit risk, believing it will not incur material losses from such exposures[200]. Strategic Initiatives - The company plans to diversify revenue sources and execute acquisitions as part of its growth strategy[116]. - The company believes it is a global leader in providing advanced optical packaging and manufacturing services across various complex industries[117]. - The company began construction of a new manufacturing facility of approximately 2.0 million square feet at its Chonburi campus, with an expected cost of $132.5 million (Thai baht 4.45 billion)[188]. - The company has not used derivative financial instruments in its investment portfolio, indicating a conservative investment strategy[194].