Fabrinet(FN) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for the fourth quarter was $655.9 million, representing a 12% increase year-over-year and a 1% decrease sequentially [24][29] - Non-GAAP earnings per share for the quarter were$ 1.86, exceeding guidance [29] - For the full fiscal year, revenue was $2.645 billion, an increase of 17% from the prior year, with non-GAAP earnings per share reaching a record$ 7.67, up 25% from fiscal 2022 [25][30] Business Line Data and Key Metrics Changes - Datacom revenue reached a record $192.5 million in the fourth quarter, growing 107% year-over-year and 57% sequentially, driven by an 800-gig program for AI applications [11][26] - Optical communications revenue was$ 502.1 million, up 8% year-over-year but flat compared to Q3, with telecom revenue declining 17% year-over-year and 19% sequentially due to inventory adjustments [31][26] - Non-optical communications revenue was $153.8 million, up 25% year-over-year but down 5% from Q3 [13] Market Data and Key Metrics Changes - Revenue from products rated 400-gig and faster grew to$ 266.8 million, up 49% year-over-year and 21% sequentially [12] - Automotive revenue was $92.9 million, up 66% year-over-year but down 1% from Q3 [32] - Industrial laser revenue was$ 28 million, down 10% from Q3 [14] Company Strategy and Development Direction - The company is optimistic about the growth potential in AI-related programs and expects strong datacom performance to continue offsetting inventory-related headwinds [27][85] - The company plans to maintain a focus on expanding its customer base and product offerings, particularly in the AI transceiver market [57][78] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing inventory adjustments in the telecom sector but expressed confidence in the datacom segment's growth, particularly driven by AI applications [27][36] - The company anticipates total revenue in the first quarter to be moderately higher than the fourth quarter, with guidance set between $650 million and$ 670 million [36] Other Important Information - Operating expenses in the quarter were $14.9 million, or 2.3% of revenue, slightly higher than anticipated due to one-time items [10] - Gross margin for the quarter was 12.8%, a decline of about 30 basis points from Q3 due to foreign exchange fluctuations [17] - The company repurchased over 400,000 shares in Q4 for a total cash outlay of$ 38.4 million, reflecting a commitment to return capital to shareholders [35] Q&A Session Summary Question: Can you provide insight into the inventory digestion cycle in the telecom industry? - Management indicated that inventory digestion is difficult to predict but noted that it seems to align with a two-quarter cycle, with expectations for order patterns to normalize by early 2024 [54][76] Question: What is the capacity availability for the datacom segment? - Management confirmed ample capacity, particularly with the recent opening of a new facility, allowing for significant ramp-up in production [73] Question: How does the company view the future of the AI opportunity in datacom? - Management expressed excitement about the current AI program's rapid ramp-up and its significant contribution to revenue, while also indicating potential for future programs [78][85]