Fabrinet(US:FN)2021-02-02 04:47Financial Data and Key Metrics Changes - Revenue for Q2 2021 reached a record $453.8 million, exceeding guidance by nearly $14 million, representing year-over-year and sequential growth [5][12] - Earnings per share (EPS) increased to a record $1.10, reflecting year-over-year and sequential growth [5][15] - Gross margin improved to 12.1%, up from 12% in the prior quarter, driven by manufacturing efficiencies [15] Business Line Data and Key Metrics Changes - Optical communications revenue was $347.8 million, accounting for 77% of total revenue, up 1% from Q1 [12] - Telecom revenue within optical communications was $273.2 million, up 5% sequentially, while datacom revenue was $74.6 million, down 10% sequentially [12] - Automotive revenue grew to $47 million, up 34% sequentially and more than 100% year-over-year, becoming the largest category in non-optical communications [13] Market Data and Key Metrics Changes - Automotive programs, particularly LIDAR, were significant growth drivers, with automotive revenue growing more than 30% from Q1 and more than doubling from a year ago [6][13] - Industrial laser revenue was approximately flat at $33.7 million, with expectations for improvement in Q3 [7][14] - Optical communications saw modest growth, with telecom strength offsetting softness in datacom products [7][12] Company Strategy and Development Direction - The company is expanding its manufacturing footprint with a new 1 million square foot building in Chonburi, Thailand, expected to triple its capacity in the region [9] - The expansion reflects confidence in long-term growth and aims to support anticipated revenue increases from new products and programs [9][10] - The company is optimistic about continued growth in automotive and telecom sectors, with plans to enhance manufacturing capabilities [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for Q3, expecting revenue growth across all key categories, including optical communications and automotive [17][18] - The company is addressing supply chain challenges, particularly in the automotive sector, by securing critical parts and working closely with customers [37] - Management noted that the faster ramp of Cisco's transfer program is expected to contribute positively to future revenue growth [8][28] Other Important Information - The company anticipates total revenue for Q3 to be between $455 million and $475 million, with EPS guidance of $1.10 to $1.17 [18] - The effective tax rate is expected to be around 4% for the year, influenced by tax incentives at the Chonburi facility [15][24] - The company repurchased approximately 102,000 shares at an average price of $69.64 during the quarter [16] Q&A Session Summary Question: Impact of SolarWinds hack on customers - Management confirmed no issues related to the SolarWinds hack, stating they were fortunate not to be affected [20][21] Question: Clarification on tax rate guidance - The anticipated effective tax rate is about 4%, driven by increased profits from the Chonburi campus [22][24] Question: Impact of Acacia and Cisco merger - Management feels positive about the relationship with Cisco post-merger, indicating no major impact expected [25] Question: Lumentum acquisition implications - Management is optimistic about the potential benefits from the Lumentum acquisition, given their longstanding relationships [26] Question: Supply constraints in automotive market - Management acknowledged supply challenges but emphasized their proactive approach to securing parts [36] Question: Growth drivers in automotive segment - Growth in automotive is primarily driven by LIDAR and traditional automotive business, with strong demand noted [40] Question: Capacity addition and new building impact - The new building is expected to support increased capacity driven by growth in various sectors, including automotive and telecom [30][32] Question: Future revenue expectations from new building - The new facility is estimated to account for roughly $1 billion in revenue potential [41] Question: Datacom revenue outlook - Management expects datacom revenue to improve, indicating that the inflection point may be behind them [34][49] Question: Co-packaged optics interest - Management noted increasing interest in co-packaged optics as a future growth driver [62] Question: Currency hedging strategy - The company has a layered hedging strategy in place to mitigate currency fluctuations, with expectations of some pressure on Q3 gross margins [63][64]