Fabrinet(US:FN)2020-11-03 03:52Financial Data and Key Metrics Changes - Revenue for the first quarter reached a record $436.6 million, exceeding guidance by over $6 million [7][19] - Non-GAAP net income was a record $39.3 million or $1.05 per diluted share, which was $0.05 above the high end of guidance [19] - Gross margin improved to 12%, up from 11.8% in the prior quarter, due to manufacturing efficiencies [20] Business Line Data and Key Metrics Changes - Optical communications revenue was $344 million, up 9% from the previous quarter, with telecom revenue growing 14% to $261 million [9] - Datacom revenue decreased by 4% to $83 million, while automotive revenue increased by 28% to a record $35 million [12][13] - Revenue from silicon photonics-based products represented 25% of total revenue, driven by telecom growth [11] Market Data and Key Metrics Changes - The company anticipates continued growth in telecom driven by higher data rate products, while datacom revenue is expected to decline [14][24] - Non-optical communications revenue is expected to be slightly down sequentially, with continued softness in industrial lasers but growth in automotive [24] Company Strategy and Development Direction - The company is focused on leveraging growth in the industries it serves and investing in facilities and technologies to penetrate existing customers and win new ones [15][16] - A multifaceted growth strategy is being pursued, including system-level business expansion and exploring new markets [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth in demand for data bandwidth and capacity, despite current datacom softness being volume-driven [27][28] - The company remains well-positioned to benefit from potential outsourcing increases in the industrial laser market [15] Other Important Information - The company ended the quarter with cash, restricted cash, and investments totaling $503.8 million, an increase of $8.3 million from the previous quarter [21] - A share repurchase program remains active, with $100 million available for repurchase [22] Q&A Session Summary Question: Trends in datacom - Management noted that current softness in datacom is primarily demand-driven rather than price-driven, with optimism for future growth in data bandwidth [27][28] Question: Guidance on telecom demand - Management is pleased with telecom growth and sees a strong pipeline of new business from existing customers [30][32] Question: Customer commentary for 10% customers - The company only provides details on 10% customers at the end of the year [34] Question: Update on Cisco and Infinera - Cisco is expected to be a 10% customer by FY '21, with ramp-up largely completed by the end of the calendar year [36][39] Question: Industrial laser business outlook - Management believes the industrial laser market is under-penetrated for outsourcing, presenting long-term growth opportunities [49][55] Question: Impact of Huawei sanctions - The company anticipates a $25 million to $30 million headwind from Huawei sanctions in Q2, but has managed to guide up despite this [59] Question: Update on Israel prototyping facility - The facility is generating interest from both existing and new customers, focusing on winning new programs [62] Question: Capacity expansion in Thailand - Expansion efforts are underway, with increased production volumes and new customer attraction at the Chonburi campus [66]