Fabrinet(FN) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Fourth quarter revenue reached $753 million, exceeding guidance and reflecting a 15% year-over-year increase and a 3% increase from Q3 [4][8] - Full year revenue totaled$ 2.9 billion, a 9% increase from fiscal year 2023 [4][9] - Non-GAAP EPS for Q4 was $2.41, surpassing guidance, while full year non-GAAP EPS reached a record$ 8.88, up 16% year-over-year [4][14] Business Line Data and Key Metrics Changes - Optical communications revenue was $596 million in Q4, accounting for 79% of total revenue, with datacom revenue at$ 350 million, up 63% year-over-year [9][10] - Telecom revenue was $282 million, down approximately 1% from Q3, but the decline was smaller than expected due to growth in data center interconnect products [9][10] - Non-optical communications revenue grew to$ 157 million, up 2% year-over-year and 12% sequentially, driven by automotive revenue which increased 17% sequentially [11][12] Market Data and Key Metrics Changes - Datacom revenue grew over 120% for the year, while telecom revenue declined more than 20% due to inventory digestion in the telecom industry [4][5] - Revenue from products rated at 800 gig and faster was $259 million, up 54% year-over-year, indicating strong demand trends [10][11] - Six customers are currently utilizing ZR optics for DCI applications, contributing to growth in the telecom segment [31] Company Strategy and Development Direction - The company plans to break ground on Building 10 at its Chonburi campus, a 2 million square foot facility, to enhance manufacturing capacity [7][8] - The decision to expand is based on overall business conviction, not limited to any single segment, with expected revenue capacity from Building 10 estimated at$ 2.4 billion [22][23] - The company is optimistic about future growth in datacom and is seeing signs of recovery in telecom, with new system program wins expected to contribute to revenue in fiscal 2025 [6][29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued revenue growth across all major product categories in Q1 of fiscal 2025, with guidance for revenue between $760 million and$ 780 million [16][17] - The company anticipates that operational efficiencies will offset temporary downward pressure on margins due to seasonal merit increases [17] - Management noted that while telecom revenue has been soft, there are indications of recovery, and datacom growth appears sustainable [26][29] Other Important Information - The company repurchased approximately 21,000 shares in Q4 at an average price of $170 per share, with a total cash outlay of$ 3.5 million [15] - The company maintains a strong balance sheet with cash and short-term investments of $859 million, up$ 65 million from Q3 [14] Q&A Session Summary Question: Timing around 1.6T and demand for 400 gig and 800 gig - Management is working with customers on 1.6T but believes 800 gig will remain relevant for a long time, with strong demand expected [19][20] Question: Conviction for Building 10 expansion - The decision to expand is based on overall business confidence, with significant upside potential and minimal downside risk [22][23] Question: Customer base for 800 gig transceivers - The company is seeing strong demand from NVIDIA and is pursuing additional customers in the datacom space [25][26] Question: Growth of coherent ZR optics - The telecom business is stabilizing, with growth in DCI driven by ZR optics [31][43] Question: Ciena win and its impact - The Ciena win is expected to ramp up in fiscal 2026, with early contributions anticipated in fiscal 2025 [52]