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Fabrinet Announces Second Quarter Fiscal Year 2022 Financial Results

Business Wire - Mon Jan 31, 3:15PM CST

Fabrinet (NYSE: FN), a leading provider of advanced optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers of complex products, today announced its financial results for its second fiscal quarter ended December 24, 2021.

Seamus Grady, Chief Executive Officer of Fabrinet, said, “We had an excellent second quarter with revenue and non-GAAP EPS that exceeded our guidance ranges. Our team continues to effectively manage ongoing supply chain constraints, and with continued strong demand trends, our outlook remains very positive.”

Second Quarter Fiscal Year 2022 Financial Highlights

GAAP Results

  • Revenue for the second quarter of fiscal year 2022 was $566.6 million, compared to $453.8 million in the second quarter of fiscal year 2021.
  • GAAP net income for the second quarter of fiscal year 2022 was $48.9 million, compared to GAAP net income of $35.4 million for the second quarter of fiscal year 2021.
  • GAAP net income per diluted share for the second quarter of fiscal year 2022 was $1.30, compared to GAAP net income per diluted share of $0.94 for the second quarter of fiscal year 2021.

Non-GAAP Results

  • Non-GAAP net income for the second quarter of fiscal year 2022 was $56.2 million, compared to non-GAAP net income of $41.5 million for the second quarter of fiscal year 2021.
  • Non-GAAP net income per diluted share for the second quarter of fiscal year 2022 was $1.50, compared to non-GAAP net income per diluted share of $1.10 for the second quarter of fiscal year 2021.

Business Outlook

Based on information available as of January 31, 2022, Fabrinet is issuing guidance for its third fiscal quarter ending March 25, 2022, as follows:

  • Fabrinet expects third quarter revenue to be in the range of $560 million to $580 million.
  • GAAP net income per diluted share is expected to be in the range of $1.30 to $1.37, based on approximately 37.6 million fully diluted shares outstanding.
  • Non-GAAP net income per diluted share is expected to be in the range of $1.48 to $1.55, based on approximately 37.6 million fully diluted shares outstanding.

Conference Call Information

What:

 

Fabrinet Second Quarter Fiscal Year 2022 Financial Results Call

When:

 

Monday, January 31, 2022

Time:

 

5:00 p.m. ET

Live Call:

 

(888) 357-3694, domestic

(253) 237-1137, international

Conference ID: 9373655

Replay:

 

(855) 859-2056, domestic

(404) 537-3406, international

Conference ID: 9373655

Webcast:

 

https://investor.fabrinet.com/ (live and replay)

A recorded version of this webcast will be available approximately two hours after the call and accessible at https://investor.fabrinet.com. The webcast will be archived on Fabrinet’s website for a period of one year.

About Fabrinet

Fabrinet is a leading provider of advanced optical packaging and precision optical, electro-mechanical, and electronic manufacturing services to original equipment manufacturers of complex products, such as optical communication components, modules and subsystems, automotive components, medical devices, industrial lasers and sensors. Fabrinet offers a broad range of advanced optical and electro-mechanical capabilities across the entire manufacturing process, including process design and engineering, supply chain management, manufacturing, advanced packaging, integration, final assembly and testing. Fabrinet focuses on production of high complexity products in any mix and any volume. Fabrinet maintains engineering and manufacturing resources and facilities in Thailand, the United States of America, the People’s Republic of China, Israel and the United Kingdom. For more information visit: www.fabrinet.com.

Forward-Looking Statements

“Safe Harbor” Statement Under U.S. Private Securities Litigation Reform Act of 1995

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include: (1) our optimism about continued strong demand; and (2) all of the statements under the “Business Outlook” section regarding our expected revenue, GAAP and non-GAAP net income per share, and fully diluted shares outstanding for the third quarter of fiscal year 2022. These forward-looking statements involve risks and uncertainties, and actual results could vary materially from these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: the effects of the COVID-19 pandemic on our business, particularly the possibility of (1) the growing global economic downturn, (2) extended shutdowns at any of our manufacturing facilities, especially if the pandemic intensifies or returns in various geographic areas, (3) continued disruption to our supply chain, which could increase our costs and affect our ability to procure parts and materials, especially if the pandemic intensifies or returns in various geographic areas, and (4) regional downward demand adjustments from our customers, particularly those in areas affected by the pandemic; less customer demand for our products and services than forecasted; less growth in the optical communications, industrial lasers and sensors markets than we forecast; difficulties expanding into additional markets, such as the semiconductor processing, biotechnology, metrology and materials processing markets; increased competition in the optical manufacturing services markets; difficulties in delivering products and services that compete effectively from a price and performance perspective; our reliance on a small number of customers and suppliers; difficulties in managing our operating costs; difficulties in managing and operating our business across multiple countries (including Thailand, the People’s Republic of China, Israel, the U.S. and the U.K.); and other important factors as described in reports and documents we file from time to time with the Securities and Exchange Commission (SEC), including the factors described under the section captioned “Risk Factors” in our Quarterly Report on Form 10-Q filed with the SEC on November 2, 2021. We disclaim any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise.

Use of Non-GAAP Financials

We refer to the non-GAAP financial measures cited above in making operating decisions because they provide meaningful supplemental information regarding our ongoing operational performance. Non-GAAP net income excludes: share-based compensation expenses; depreciation of fair value uplift; amortization of intangibles; severance payment and others; other expenses in relation to reduction in workforce; and amortization of deferred debt issuance costs. We have excluded these items in order to enhance investors’ understanding of our underlying operations. The use of these non-GAAP financial measures has material limitations because they should not be used to evaluate our company without reference to their corresponding GAAP financial measures. As such, we compensate for these material limitations by using these non-GAAP financial measures in conjunction with GAAP financial measures.

These non-GAAP financial measures are used to: (1) measure company performance against historical results, (2) facilitate comparisons to our competitors’ operating results, and (3) allow greater transparency with respect to information used by management in making financial and operational decisions. In addition, these non-GAAP financial measures are used to measure company performance for the purposes of determining employee incentive plan compensation.

FABRINET

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands of U.S. dollars, except share data and par value)

December 24,

2021

 

June 25,

2021

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

276,531

 

 

$

302,969

 

Short-term restricted cash

 

157

 

 

 

 

Short-term investments

 

243,339

 

 

 

244,963

 

Trade accounts receivable, net of allowance for doubtful accounts of $70 and $100, respectively

 

384,725

 

 

 

336,547

 

Contract assets

 

13,148

 

 

 

11,878

 

Inventories

 

484,873

 

 

 

422,133

 

Prepaid expenses

 

8,765

 

 

 

11,398

 

Other current assets

 

28,449

 

 

 

22,619

 

Total current assets

 

1,439,987

 

 

 

1,352,507

 

Non-current assets

 

 

 

Long-term restricted cash

 

157

 

 

 

154

 

Property, plant and equipment, net

 

290,683

 

 

 

241,129

 

Intangibles, net

 

3,878

 

 

 

4,371

 

Operating right-of-use assets

 

5,478

 

 

 

6,699

 

Deferred tax assets

 

10,025

 

 

 

9,428

 

Other non-current assets

 

587

 

 

 

1,834

 

Total non-current assets

 

310,808

 

 

 

263,615

 

Total Assets

$

1,750,795

 

 

$

1,616,122

 

Liabilities and Shareholders’ Equity

 

 

 

Current liabilities

 

 

 

Long-term borrowings, current portion, net

$

12,156

 

 

$

12,156

 

Trade accounts payable

 

391,176

 

 

 

346,555

 

Fixed assets payable

 

28,740

 

 

 

19,206

 

Contract liabilities

 

1,894

 

 

 

1,680

 

Operating lease liabilities, current portion

 

2,631

 

 

 

2,593

 

Income tax payable

 

2,200

 

 

 

3,612

 

Accrued payroll, bonus and related expenses

 

18,382

 

 

 

20,464

 

Accrued expenses

 

19,826

 

 

 

17,134

 

Other payables

 

23,032

 

 

 

20,958

 

Total current liabilities

 

500,037

 

 

 

444,358

 

Non-current liabilities

 

 

 

Long-term borrowings, non-current portion, net

 

21,279

 

 

 

27,358

 

Deferred tax liability

 

5,082

 

 

 

5,107

 

Operating lease liability, non-current portion

 

2,581

 

 

 

3,850

 

Severance liabilities

 

19,834

 

 

 

19,485

 

Other non-current liabilities

 

2,791

 

 

 

3,444

 

Total non-current liabilities

 

51,567

 

 

 

59,244

 

Total Liabilities

 

551,604

 

 

 

503,602

 

Commitments and contingencies

 

 

 

Shareholders’ equity

 

 

 

Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding as of December 24, 2021 and June 25, 2021)

 

 

 

 

 

Ordinary shares (500,000,000 shares authorized, $0.01 par value; 39,008,996 shares and 38,749,045 shares issued at December 24, 2021 and June 25, 2021, respectively; and 36,987,138 shares and 36,765,456 shares outstanding at December 24, 2021 and June 25, 2021, respectively)

 

390

 

 

 

388

 

Additional paid-in capital

 

185,940

 

 

 

189,445

 

Less: Treasury shares (2,021,858 shares and 1,983,589 shares as of December 24, 2021 and June 25, 2021 respectively)

 

(91,776

)

 

 

(87,343

)

Accumulated other comprehensive income (loss)

 

(5,189

)

 

 

(6,266

)

Retained earnings

 

1,109,826

 

 

 

1,016,296

 

Total Shareholders’ Equity

 

1,199,191

 

 

 

1,112,520

 

Total Liabilities and Shareholders’ Equity

$

1,750,795

 

 

$

1,616,122

 

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited)

 

Three Months Ended

 

Six Months Ended

(in thousands of U.S. dollars, except per share data)

December 24,

2021

 

December 25,

2020

 

December 24,

2021

 

December 25,

2020

Revenues

$

566,633

 

 

$

453,827

 

 

$

1,109,955

 

 

$

890,466

 

Cost of revenues

 

(497,262

)

 

 

(400,806

)

 

 

(976,987

)

 

 

(786,965

)

Gross profit

 

69,371

 

 

 

53,021

 

 

 

132,968

 

 

 

103,501

 

Selling, general and administrative expenses

 

(17,791

)

 

 

(17,156

)

 

 

(38,378

)

 

 

(34,019

)

Expenses related to reduction in workforce

 

(135

)

 

 

 

 

 

(135

)

 

 

 

Operating income

 

51,445

 

 

 

35,865

 

 

 

94,455

 

 

 

69,482

 

Interest income

 

295

 

 

 

1,111

 

 

 

1,056

 

 

 

2,215

 

Interest expense

 

(238

)

 

 

(265

)

 

 

(274

)

 

 

(516

)

Foreign exchange gain (loss), net

 

(364

)

 

 

(533

)

 

 

1,408

 

 

 

(405

)

Other income (expense), net

 

(1,055

)

 

 

158

 

 

 

(1,315

)

 

 

279

 

Income before income taxes

 

50,083

 

 

 

36,336

 

 

 

95,330

 

 

 

71,055

 

Income tax expense

 

(1,204

)

 

 

(952

)

 

 

(1,800

)

 

 

(2,620

)

Net income

 

48,879

 

 

 

35,384

 

 

 

93,530

 

 

 

68,435

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

Change in net unrealized gain (loss) on available-for-sale securities

 

(947

)

 

 

(42

)

 

 

(1,160

)

 

 

(367

)

Change in net unrealized gain (loss) on derivative instruments

 

3,294

 

 

 

2,385

 

 

 

2,077

 

 

 

(823

)

Change in net retirement benefits plan – prior service cost

 

126

 

 

 

50

 

 

 

324

 

 

 

223

 

Change in foreign currency translation adjustment

 

 

 

 

(146

)

 

 

(164

)

 

 

457

 

Total other comprehensive income (loss), net of tax

 

2,473

 

 

 

2,247

 

 

 

1,077

 

 

 

(510

)

Net comprehensive income (loss)

$

51,352

 

 

$

37,631

 

 

$

94,607

 

 

$

67,925

 

Earnings per share

 

 

 

 

 

 

 

Basic

$

1.32

 

 

$

0.96

 

 

$

2.53

 

 

$

1.86

 

Diluted

$

1.30

 

 

$

0.94

 

 

$

2.50

 

 

$

1.83

 

Weighted-average number of ordinary shares outstanding (thousands of shares)

 

 

 

 

 

 

 

Basic

 

37,017

 

 

 

36,936

 

 

 

36,947

 

 

 

36,877

 

Diluted

 

37,552

 

 

 

37,551

 

 

 

37,440

 

 

 

37,467

 

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

 

Six Months Ended

(in thousands of U.S. dollars)

December 24,

2021

 

December 25,

2020

Cash flows from operating activities

 

 

 

Net income for the period

$

93,530

 

 

$

68,435

 

Adjustments to reconcile net income to net cash provided by operating activities

 

 

 

Depreciation and amortization

 

19,114

 

 

 

17,650

 

Gain on disposal of property, plant and equipment

 

(135

)

 

 

(24

)

Gain from sales and maturities of available-for-sale securities

 

(13

)

 

 

(86

)

Amortization of investment discount

 

2,079

 

 

 

1,003

 

Amortization of deferred debt issuance costs

 

16

 

 

 

16

 

(Reversal of) allowance for doubtful accounts

 

(30

)

 

 

(321

)

Unrealized gain on exchange rate and fair value of foreign currency forward contracts

 

(673

)

 

 

(290

)

Amortization of fair value at hedge inception of interest rate swaps

 

(513

)

 

 

(695

)

Share-based compensation

 

15,978

 

 

 

11,878

 

Deferred income tax

 

(986

)

 

 

(461

)

Other non-cash expenses

 

268

 

 

 

(657

)

Changes in operating assets and liabilities

 

 

 

Trade accounts receivable

 

(48,046

)

 

 

(45,410

)

Contract assets

 

(1,270

)

 

 

(2,967

)

Inventories

 

(62,740

)

 

 

(62,211

)

Other current assets and non-current assets

 

(5,568

)

 

 

(11,983

)

Trade accounts payable

 

44,078

 

 

 

45,179

 

Contract liabilities

 

214

 

 

 

248

 

Income tax payable

 

(1,323

)

 

 

548

 

Severance liabilities

 

1,708

 

 

 

1,350

 

Other current liabilities and non-current liabilities

 

1,880

 

 

 

20,112

 

Net cash provided by operating activities

 

57,568

 

 

 

41,314

 

Cash flows from investing activities

 

 

 

Purchase of short-term investments

 

(78,786

)

 

 

(126,701

)

Proceeds from sales of short-term investments

 

19,463

 

 

 

57,486

 

Proceeds from maturities of short-term investments

 

57,721

 

 

 

68,807

 

Purchase of property, plant and equipment

 

(51,917

)

 

 

(22,693

)

Purchase of intangibles

 

(446

)

 

 

(1,271

)

Proceeds from disposal of property, plant and equipment

 

188

 

 

 

26

 

Net cash used in investing activities

 

(53,777

)

 

 

(24,346

)

Cash flows from financing activities

 

 

 

Repayment of long-term borrowings

 

(6,094

)

 

 

(6,094

)

Repayment of finance lease liability

 

 

 

 

(100

)

Repurchase of ordinary shares

 

(4,198

)

 

 

(7,074

)

Withholding tax related to net share settlement of restricted share units

 

(19,481

)

 

 

(10,361

)

Net cash used in financing activities

 

(29,773

)

 

 

(23,629

)

Net decrease in cash, cash equivalents and restricted cash

$

(25,982

)

 

$

(6,661

)

Movement in cash, cash equivalents and restricted cash

 

 

 

Cash, cash equivalents and restricted cash at the beginning of period

$

303,123

 

 

$

232,832

 

Decrease in cash, cash equivalents and restricted cash

 

(25,982

)

 

 

(6,661

)

Effect of exchange rate on cash, cash equivalents and restricted cash

 

(296

)

 

 

605

 

Cash, cash equivalents and restricted cash at the end of period

$

276,845

 

 

$

226,776

 

Non-cash investing and financing activities

 

 

 

Construction, software and equipment-related payables

$

28,740

 

 

$

7,748

 

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Continued)

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total of the same amounts shown in the unaudited condensed consolidated statements of cash flows:

(amount in thousands)

As of

December 24,

2021

 

As of

December 25,

2020

Cash and cash equivalents

$

276,531

 

$

219,221

Restricted cash

 

314

 

 

 

7,555

 

Cash, cash equivalents and restricted cash

$

276,845

 

 

$

226,776

 

FABRINET

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 

Three Months Ended

 

Six Months Ended

 

December 24,

2021

 

December 25,

2020

 

December 24,

2021

 

December 25,

2020

(in thousands of U.S. dollars, except share data and par value)

Net

income

 

Diluted

EPS

 

Net

income

 

Diluted

EPS

 

Net

income

 

Diluted

EPS

 

Net

income

 

Diluted

EPS

GAAP measures

$

48,879

 

$

1.30

 

$

35,384

 

$

0.94

 

$

93,530

 

$

2.50

 

$

68,435

 

$

1.83

Items reconciling GAAP net income & EPS to non-GAAP net income & EPS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Related to cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expenses

 

1,421

 

 

0.04

 

 

1,592

 

 

0.04

 

 

3,396

 

 

0.09

 

 

3,417

 

 

0.09

Depreciation of fair value uplift

 

 

 

 

 

83

 

 

0.00

 

 

92

 

 

0.00

 

 

167

 

 

0.00

Total related to gross profit

 

1,421

 

 

0.04

 

 

1,675

 

 

0.04

 

 

3,488

 

 

0.09

 

 

3,584

 

 

0.10

Related to selling, general and administrative expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expenses

 

5,265

 

 

0.14

 

 

4,259

 

 

0.11

 

 

12,582

 

 

0.33

 

 

8,461

 

 

0.23

Amortization of intangibles

 

108

 

 

0.00

 

 

124

 

 

0.00

 

 

227

 

 

0.01

 

 

255

 

 

0.01

Severance payment and others

 

355

 

 

0.01

 

 

 

 

 

 

355

 

 

0.01

 

 

 

 

Total related to selling, general and administrative expenses

 

5,728

 

 

0.15

 

 

4,383

 

 

0.12

 

 

13,164

 

 

0.35

 

 

8,716

 

 

0.23

Related to other incomes and other expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expenses in relation to reduction in workforce

 

135

 

 

0.00

 

 

 

 

 

 

135

 

 

0.01

 

 

 

 

Amortization of deferred debt issuance costs

 

8

 

 

0.00

 

 

8

 

 

0.00

 

 

16

 

 

0.00

 

 

16

 

 

0.00

Total related to other incomes and other expenses

 

143

 

 

0.00

 

 

8

 

 

0.00

 

 

151

 

 

0.01

 

 

16

 

 

0.00

Total related to net income & EPS

 

7,292

 

 

0.19

 

 

6,066

 

 

0.16

 

 

16,803

 

 

0.45

 

 

12,316

 

 

0.33

Non-GAAP measures

$

56,171

 

$

1.50

 

$

41,450

 

$

1.10

 

$

110,333

 

$

2.95

 

$

80,751

 

$

2.16

Shares used in computing diluted net income per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted shares

 

 

 

37,552

 

 

 

 

37,551

 

 

 

 

37,440

 

 

 

 

37,467

Non-GAAP diluted shares

 

 

 

37,552

 

 

 

 

37,551

 

 

 

 

37,440

 

 

 

 

37,467

FABRINET

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW

(amount in thousands)

 

Three Months Ended

 

Six Months Ended

 

 

December 24,

2021

 

December 25,

2020

 

December 24,

2021

 

December 25,

2020

Net cash provided by operating activities

 

$

18,553

 

 

$

6,808

 

 

$

57,568

 

 

$

41,314

 

Less: Purchase of property, plant and equipment

 

 

(17,301

)

 

 

(10,121

)

 

 

(51,917

)

 

 

(22,693

)

Non-GAAP free cash flow

 

$

1,252

 

 

$

(3,313

)

 

$

5,651

 

 

$

18,621

 

FABRINET

GUIDANCE FOR QUARTER ENDING MARCH 25, 2022

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 

Diluted

EPS

GAAP net income per diluted share:

$1.30 to $1.37

Related to cost of revenues:

 

Share-based compensation expenses

0.04

Total related to gross profit

0.04

Related to selling, general and administrative expenses:

 

Share-based compensation expenses

0.14

Total related to selling, general and administrative expenses

0.14

Total related to net income & EPS

0.18

Non-GAAP net income per diluted share

$1.48 to $1.55

 

Provided Content: Content provided by Business Wire. The Globe and Mail was not involved, and material was not reviewed prior to publication.