Fabrinet(US:FN)2025-11-04 11:16Revenue and Geographic Performance - The percentage of revenues generated from locations outside North America decreased from 61.5% in Q3 2024 to 56.9% in Q3 2025, primarily due to increased revenue from U.S. customers[114]. - Revenues by geographic region for Q3 2025 were 43.1% from North America, 47.2% from Asia-Pacific and others, and 9.7% from Europe[116]. - The company expects future revenues from customers outside North America to align with the portion of revenues from these customers in Q3 2025[115]. - Revenues increased by $173.9 million, or 21.6%, to $978.1 million for the three months ended September 26, 2025, compared to $804.2 million for the same period in 2024[150]. - Revenues from optical communications products were $746.9 million, or 76.4% of total revenues, for the three months ended September 26, 2025, increasing by $120.6 million, or 19.3% year-over-year[150]. - Revenues from non-optical communications products increased by $53.3 million, or 30.0%, to $231.2 million, representing 23.6% of total revenues for the three months ended September 26, 2025[150]. Financial Performance - Gross profit rose by $17.4 million, or 17.6%, to $116.4 million, representing 11.9% of revenues for the three months ended September 26, 2025[152]. - Operating income increased by $17.3 million, or 22.5%, to $94.2 million, maintaining 9.6% of revenues for the three months ended September 26, 2025[154]. - Net income was $95.9 million, or 9.8% of revenues, for the three months ended September 26, 2025, compared to $77.4 million, or 9.6% of revenues, for the same period in 2024[159]. - Cost of revenues increased by $156.5 million, or 22.2%, to $861.7 million, or 88.1% of revenues, for the three months ended September 26, 2025[151]. - Interest income decreased by $1.5 million, or 13.8%, to $9.4 million, or 1.0% of revenues, for the three months ended September 26, 2025[155]. - Foreign exchange loss decreased to $2.1 million, or 0.2% of revenues, for the three months ended September 26, 2025, compared to a loss of $7.1 million, or 0.9% of revenues, for the same period in 2024[156]. - The effective tax rate increased to 5.4% for the three months ended September 26, 2025, compared to 4.2% for the same period in 2024, due to higher income subject to tax[158]. - Other comprehensive loss for Q3 2025 was $3.0 million, or 0.3% of revenues, compared to income of $15.0 million, or 1.9% of revenues in Q3 2024[160]. Expenses and Costs - The company expects SG&A expenses for fiscal year 2026 to increase compared to fiscal year 2025, mainly due to higher information technology and employee costs[121]. - Employee costs are anticipated to rise due to increasing wages in Thailand and the PRC, impacting profit margins[119]. - The company anticipates maintaining favorable pricing on services despite expected price decreases for manufactured products over time[112]. Cash Flow and Investments - Cash, cash equivalents, and short-term investments increased to $968.8 million as of September 26, 2025, from $908.9 million as of September 27, 2024, with no outstanding debt[161]. - Net cash provided by operating activities rose to $102.6 million in Q3 2025 from $83.2 million in Q3 2024, attributed to improved working capital management[166]. - Cash used in investing activities increased to $81.0 million in Q3 2025, primarily due to new manufacturing facility construction and higher capital expenditures[168]. - The company began construction of a new manufacturing facility of approximately 2.0 million square feet at a cost of $132.5 million (Thai baht 4.45 billion) in February 2025[165]. - The increase in cash used in financing activities in Q3 2025 was due to higher share repurchases and withholding tax related to restricted share units[169]. Foreign Currency and Derivatives - As of September 26, 2025, the company had $196.0 million of foreign currency forward contracts outstanding on Thai baht payables[126]. - The company recorded an unrealized loss of $1.3 million related to derivatives not designated as hedging instruments for Q3 2025[129]. - Unrealized loss from foreign currency forward contracts was $1.3 million in Q3 2025, compared to a gain of $4.1 million in Q3 2024[177]. - A 10% weakening of the U.S. dollar against the Thai baht and RMB would decrease the net dollar position by approximately $12.8 million as of September 26, 2025[177]. Company Strategy and Outlook - The company has a diverse customer base in complex industries, including optical communications, automotive, and industrial lasers[110]. - The company is focused on expanding manufacturing capacity and diversifying revenue sources through potential acquisitions[108]. - The company believes current cash and investments will meet working capital and capital expenditure needs for at least the next 12 months[165]. - The weighted-average interest rate on cash and cash equivalents was 4.0% for Q3 2025, down from 4.6% in Q3 2024[162].