Release Date: November 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fabrinet (FN, Financial) reported a record first-quarter revenue of $804 million, marking a 17% increase from the previous year and a 7% increase from the prior quarter.
- The company achieved a healthy operating margin of 10.7% and delivered non-GAAP EPS at the upper end of its guidance range, despite a 19% headwind from foreign exchange revaluations.
- Optical communications revenue grew by 17% year-over-year, with Datacom revenue increasing by 36%, driven by optical interconnect products for AI applications.
- Fabrinet (FN) saw its automotive revenue exceed $100 million for the first time, with strong momentum in EV charging infrastructure products.
- The company is making significant progress on its new facility, which will increase its total footprint by more than 50%, supporting future growth.
Negative Points
- Fabrinet (FN) faced a higher-than-expected foreign exchange evaluation loss of $7 million due to the stronger Thai baht.
- The company anticipates increased pressure on gross margins due to a strengthening Thai baht in the upcoming quarters.
- Revenue from optical communications products that are non-speed rated decreased by $7 million from the previous quarter.
- The mix shift in Datacom revenue between 400 gig and 800 gig transceivers was not fully anticipated, affecting visibility.
- The ramp-up of 1.6 Terabit transceivers is dependent on the customer's timeline for shipping the Blackwell platform, which has faced delays.
Q & A Highlights
Q: Can you provide more details on the outlook for Datacom, specifically regarding 800 gig transceiver revenue in the December quarter?
A: Seamus Grady, CEO, explained that while Datacom growth remains optimistic, there has been a mix shift between 400 gig and 800 gig transceivers. The company is preparing for a transition to 1.6 terabit transceivers. Fabrinet remains the sole source for NVIDIA's designed transceivers, and while exact timing for 1.6 ramp-up is uncertain, the relationship with NVIDIA is strong, and capacity is being installed to meet future needs.
Q: Is the increase in 400 gig revenue mainly due to coherent ZR pluggables, or is there a new business win contributing to this growth?
A: Seamus Grady, CEO, confirmed that the growth in 400 gig revenue is primarily due to a new business win with an existing customer, which is a telecom product, specifically a data center interconnect (DCI) product.
Q: Can you provide an update on when you expect significant business with Sienna to ramp?
A: Seamus Grady, CEO, stated that the timeline for significant revenue from Sienna remains about nine months away. Everything is on track, and there have been no major changes since the last update. Fabrinet is also working on additional non-Sienna new business wins.
Q: Are there any capacity constraints for 800 gig demand from your primary customer?
A: Seamus Grady, CEO, confirmed that there are no capacity constraints for 800 gig, 400 gig, or 1.6 terabit transceivers. The growth in automotive revenue is attributed to share gain rather than inventory correction, indicating sustainable demand.
Q: What are the milestones for generating significant revenue from 1.6 terabit transceivers?
A: Seamus Grady, CEO, explained that the ramp-up of 1.6 terabit transceivers is dependent on the main customer shipping their Blackwell platform. There are no unusual constraints, and once Blackwell begins to ramp, Fabrinet is ready to support the demand increase.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
