Fabrinet (FN) Q4 Earnings call transcript Aug 19, 2024

Fabrinet, a leading provider of optical technology components, reported a strong fourth quarter and fiscal year performance, surpassing its guidance ranges for both revenue and earnings per share (EPS). The company's fourth quarter revenue of $753 million, a 15% increase from the previous year, was driven by robust demand trends in datacom and a return to sequential growth in automotive revenue.

Datacom Business Growth and Future Outlook

Fabrinet's datacom business, which accounts for the majority of its revenue, saw a remarkable 120% growth this year, with 800-gig products for AI and related applications being the biggest contributor. This growth is expected to continue, as demand trends for both current generation and next-generation datacom technologies remain strong. The company's expertise and reputation in datacom position it well for long-term growth in this sector.

Telecom Business Challenges and Future Prospects

In contrast, the telecom business experienced a decline due to ongoing inventory digestion across the telecom industry. However, recent system wins are expected to begin contributing significantly towards the second half of fiscal 2025, making Fabrinet optimistic about its long-term telecom revenue trends.

Expansion Plans and Capital Investments

Fabrinet announced plans to expand its Chonburi campus with a new 2 million square foot facility, Building 10, which is expected to take approximately 1.5 years to complete. This expansion is a testament to the company's confidence in its business model and its optimistic outlook for the future.

Future Growth Opportunities

Fabrinet is exploring opportunities in nonoptical communications, particularly in automotive revenue, which is expected to grow sequentially in the first quarter of fiscal year 2025. The company's strategy of diversifying its customer base and product offerings is a key driver of its growth, as evidenced by its recent win with Sienna, a significant customer in the telecom industry.

Financial Performance and Guidance

Fabrinet's financial performance for the year was strong, with revenue of $2.9 billion, an increase of 9% from the previous fiscal year. The company's non-GAAP earnings grew faster than revenue, reaching a new record of $8.88 per share, a 16% year-over-year increase. For the first quarter of fiscal year 2025, Fabrinet anticipates sequential revenue growth from all of its major product categories, driven by datacom growth and the recovery of telecom revenue.

Conclusion

Fabrinet's strong fourth quarter and fiscal year performance, coupled with its optimistic outlook for the future, underscore its position as a leader in the optical technology components market. The company's strategic focus on datacom growth, expansion plans, and capital investments position it well for continued momentum in fiscal 2025 and beyond.