Fabrinet Announces Second Quarter Fiscal Year 2021 Financial Results

BANGKOK–(BUSINESS WIRE)–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 25, 2020. Seamus Grady, Chief Executive Officer of Fabrinet, said, “We delivered […]

BANGKOK–(BUSINESS WIRE)–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 25, 2020.

Seamus Grady, Chief Executive Officer of Fabrinet, said, “We delivered record revenue and profitability that exceeded our guidance ranges in the second quarter. Newer programs helped drive revenue upside while margin improvement contributed to strong profitability in the quarter.”

Grady continued, “Based on our anticipated growth, we have broken ground on construction for an additional building at our Chonburi campus. As we look ahead, we are optimistic that the third quarter will represent another record-breaking quarter for the company.”

Second Quarter Fiscal Year 2021 Financial Highlights

GAAP Results

  • Revenue for the second quarter of fiscal year 2021 was $453.8 million, compared to $426.2 million in the second quarter of fiscal year 2020.
  • GAAP net income for the second quarter of fiscal year 2021 was $35.4 million, compared to GAAP net income of $31.2 million for the second quarter of fiscal year 2020.
  • GAAP net income per diluted share for the second quarter of fiscal year 2021 was $0.94, compared to GAAP net income per diluted share of $0.83 for the second quarter of fiscal year 2020.

Non-GAAP Results

  • Non-GAAP net income for the second quarter of fiscal year 2021 was $41.5 million, compared to non-GAAP net income of $37.7 million for the second quarter of fiscal year 2020.
  • Non-GAAP net income per diluted share for the second quarter of fiscal year 2021 was $1.10, compared to non-GAAP net income per diluted share of $1.00 for the second quarter of fiscal year 2020.

Business Outlook

Based on information available as of February 1, 2021, Fabrinet is issuing guidance for its third fiscal quarter ending March 26, 2021, as follows:

  • Fabrinet expects third quarter revenue to be in the range of $455 million to $475 million.
  • GAAP net income per diluted share is expected to be in the range of $0.94 to $1.01, 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 $1.10 to $1.17, based on approximately 37.6 million fully diluted shares outstanding.

Conference Call Information

What:

 

Fabrinet Second Quarter Fiscal Year 2021 Financial Results Call

When:

 

Monday, February 1, 2021

Time:

 

5:00 p.m. ET

Live Call:

 

(888) 357-3694, domestic

(253) 237-1137, international

Passcode: 3296178

Replay:

 

(855) 859-2056, domestic

(404) 537-3406, international

Passcode: 3296178

Webcast:

 

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

This press release and any other information related to the call will also be posted on Fabrinet’s website at http://investor.fabrinet.com. A recorded version of this webcast will be available approximately two hours after the call and 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 that the third quarter will represent another record-breaking quarter for the company; 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 2021. 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 coronavirus 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 outbreak 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 outbreak intensifies or returns in various geographic areas, and (4) regional downward demand adjustments from our customers, particularly those in areas affected by the outbreak; 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 3, 2020. 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; 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 25,

2020

 

June 26,

2020

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

219,221

 

 

$

225,430

 

Short-term restricted cash

7,402

 

 

7,402

 

Short-term investments

261,817

 

 

262,693

 

Trade accounts receivable, net of allowance for doubtful accounts of $123 and $336 respectively

318,430

 

 

272,665

 

Contract assets

16,223

 

 

13,256

 

Inventories

371,996

 

 

309,786

 

Other receivable

24,310

 

 

24,310

 

Prepaid expenses

3,141

 

 

5,399

 

Other current assets

29,187

 

 

14,508

 

Total current assets

1,251,727

 

 

1,135,449

 

Non-current assets

 

 

 

Long-term restricted cash

153

 

 

 

Property, plant and equipment, net

227,670

 

 

228,274

 

Intangibles, net

4,367

 

 

4,312

 

Operating right-of-use assets

7,271

 

 

8,068

 

Deferred tax assets

6,213

 

 

5,675

 

Other non-current assets

236

 

 

202

 

Total non-current assets

245,910

 

 

246,531

 

Total Assets

1,497,637

 

 

1,381,980

 

Liabilities and Shareholders’ Equity

 

 

 

Current liabilities

 

 

 

Long-term borrowings, current portion, net

12,156

 

 

12,156

 

Trade accounts payable

296,948

 

 

251,603

 

Fixed assets payable

7,748

 

 

15,127

 

Contract liabilities

1,804

 

 

1,556

 

Operating lease liabilities, current portion

2,277

 

 

1,979

 

Income tax payable

2,806

 

 

2,242

 

Accrued payroll, bonus and related expenses

17,633

 

 

19,265

 

Accrued expenses

14,504

 

 

8,979

 

Other payables

39,159

 

 

21,514

 

Total current liabilities

395,035

 

 

334,421

 

Non-current liabilities

 

 

 

Long-term borrowings, non-current portion, net

33,436

 

 

39,514

 

Deferred tax liability

4,592

 

 

4,729

 

Operating lease liability, non-current portion

4,737

 

 

5,873

 

Severance liabilities

19,011

 

 

17,379

 

Other non-current liabilities

4,156

 

 

5,655

 

Total non-current liabilities

65,932

 

 

73,150

 

Total Liabilities

460,967

 

 

407,571

 

 

 

 

 

Shareholders’ equity

 

 

 

Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding as of December 25, 2020 and June 26, 2020)

 

 

 

Ordinary shares (500,000,000 shares authorized, $0.01 par value; 38,698,068 shares and 38,471,967 shares issued at

December 25, 2020 and June 26, 2020, respectively; and 36,852,416 shares and 36,727,864 shares outstanding at

December 25, 2020 and June 26, 2020, respectively)

387

 

 

385

 

Additional paid-in capital

177,125

 

 

175,610

 

Less: Treasury shares (1,845,652 shares and 1,744,103 shares as of December 25, 2020 and June 26, 2020, respectively)

(75,575)

 

 

(68,501)

 

Accumulated other comprehensive income (loss)

(1,657)

 

 

(1,147)

 

Retained earnings

936,390

 

 

868,062

 

Total Shareholders’ Equity

1,036,670

 

 

974,409

 

Total Liabilities and Shareholders’ Equity

$

1,497,637

 

 

$

1,381,980

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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 25,

2020

 

December 27,

2019

 

December 25,

2020

 

December 27,

2019

Revenues

$

453,827

 

 

$

426,217

 

 

$

890,466

 

 

$

825,513

 

Cost of revenues

(400,806)

 

 

(377,059)

 

 

(786,965)

 

 

(730,368)

 

Gross profit

53,021

 

 

49,158

 

 

103,501

 

 

95,145

 

Selling, general and administrative expenses

(17,156)

 

 

(17,078)

 

 

(34,019)

 

 

(33,078)

 

Expenses related to reduction in workforce

 

 

(16)

 

 

 

 

(16)

 

Operating income

35,865

 

 

32,064

 

 

69,482

 

 

62,051

 

Interest income

1,111

 

 

1,940

 

 

2,215

 

 

4,038

 

Interest expense

(265)

 

 

(181)

 

 

(516)

 

 

(2,574)

 

Foreign exchange gain (loss), net

(533)

 

 

(988)

 

 

(405)

 

 

(2,941)

 

Other income (expense), net

158

 

 

397

 

 

279

 

 

774

 

Income before income taxes

36,336

 

 

33,232

 

 

71,055

 

 

61,348

 

Income tax expense

(952)

 

 

(2,001)

 

 

(2,620)

 

 

(4,160)

 

Net income

35,384

 

 

31,231

 

 

68,435

 

 

57,188

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

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

(42)

 

 

(82)

 

 

(367)

 

 

(47)

 

Change in net unrealized gain (loss) on derivative instruments

2,385

 

 

(189)

 

 

(823)

 

 

(150)

 

Change in net retirement benefits plan – prior service cost

50

 

 

101

 

 

223

 

 

184

 

Change in foreign currency translation adjustment

(146)

 

 

616

 

 

457

 

 

247

 

Total other comprehensive income (loss), net of tax

2,247

 

 

446

 

 

(510)

 

 

234

 

Net comprehensive income (loss)

$

37,631

 

 

$

31,677

 

 

$

67,925

 

 

$

57,422

 

Earnings per share

 

 

 

 

 

 

 

Basic

$

0.96

 

 

$

0.84

 

 

$

1.86

 

 

$

1.55

 

Diluted

$

0.94

 

 

$

0.83

 

 

$

1.83

 

 

$

1.52

 

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

 

 

 

 

 

 

 

Basic

36,936

 

 

37,011

 

 

36,877

 

 

36,962

 

Diluted

37,551

 

 

37,763

 

 

37,467

 

 

37,646

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

 

 

Six Months Ended

(in thousands of U.S. dollars)

December 25,

2020

 

December 27,

2019

Cash flows from operating activities

 

 

 

Net income for the period

$

68,435

 

 

$

57,188

 

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

 

 

 

Depreciation and amortization

17,650

 

 

15,279

 

(Gain) loss on disposal of property, plant and equipment

(24)

 

 

242

 

(Gain) loss from sales and maturities of available-for-sale securities

(86)

 

 

(79)

 

Amortization of investment discount

1,003

 

 

117

 

Amortization of deferred debt issuance costs

16

 

 

10

 

(Reversal of) allowance for doubtful accounts

(321)

 

 

6

 

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

(290)

 

 

1,205

 

Unrealized loss (gain) on fair value of interest rate swaps

 

 

1,672

 

Amortization of fair value at hedge inception of interest rate swaps

(695)

 

 

(433)

 

Share-based compensation

11,878

 

 

12,183

 

Deferred income tax

(461)

 

 

1,543

 

Other non-cash expenses

(657)

 

 

(851)

 

Changes in operating assets and liabilities

 

 

 

Trade accounts receivable

(45,410)

 

 

(24,970)

 

Contract assets

(2,967)

 

 

1,333

 

Inventories

(62,211)

 

 

(767)

 

Other current assets and non-current assets

(11,983)

 

 

7,471

 

Trade accounts payable

45,179

 

 

(22,816)

 

Contract liabilities

248

 

 

121

 

Income tax payable

548

 

 

1,336

 

Severance liabilities

1,350

 

 

2,015

 

Other current liabilities and non-current liabilities

20,112

 

 

805

 

Net cash provided by operating activities

41,314

 

 

52,610

 

Cash flows from investing activities

 

 

 

Purchase of short-term investments

(126,701)

 

 

(101,727)

 

Proceeds from sales of short-term investments

57,486

 

 

72,664

 

Proceeds from maturities of short-term investments

68,807

 

 

62,666

 

Funds provided to customer to support transfer of manufacturing operations

 

 

(24,310)

 

Purchase of property, plant and equipment

(22,693)

 

 

(15,411)

 

Purchase of intangibles

(1,271)

 

 

(808)

 

Proceeds from disposal of property, plant and equipment

26

 

 

1,195

 

Net cash used in investing activities

(24,346)

 

 

(5,731)

 

Cash flows from financing activities

 

 

 

Payment of debt issuance costs

 

 

(153)

 

Proceeds from long-term borrowings

 

 

60,938

 

Repayment of long-term borrowings

(6,094)

 

 

(63,985)

 

Repayment of finance lease liability

(100)

 

 

(189)

 

Repurchase of ordinary shares

(7,074)

 

 

 

Withholding tax related to net share settlement of restricted share units

(10,361)

 

 

(4,377)

 

Net cash used in financing activities

(23,629)

 

 

(7,766)

 

Net increase (decrease) in cash, cash equivalents and restricted cash

(6,661)

 

 

39,113

 

Movement in cash, cash equivalents and restricted cash

 

 

 

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

232,832

 

 

188,241

 

Increase (decrease) in cash, cash equivalents and restricted cash

(6,661)

 

 

39,113

 

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

605

 

 

351

 

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

226,776

 

 

227,705

 

Non-cash investing and financing activities

 

 

 

Construction, software and equipment-related payables

$

7,748

 

 

$

14,307

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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:

 

As of

(amount in thousands)

December 25,

2020

 

December 27,

2019

Cash and cash equivalents

$

219,221

 

 

$

220,031

 

Restricted cash

7,555

 

 

7,674

 

Cash, cash equivalents and restricted cash

$

226,776

 

 

$

227,705

 

FABRINET

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 

 

Three Months Ended

 

Six Months Ended

 

December 25,

2020

 

December 27,

2019

 

December 25,

2020

 

December 27,

2019

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

Net

income

 

Diluted

EPS

 

Net

income

 

Diluted

EPS

 

Net

income

 

Diluted

EPS

 

Net

income

 

Diluted

EPS

GAAP measures

$

35,384

 

 

$

0.94

 

 

$

31,231

 

 

$

0.83

 

 

$

68,435

 

 

$

1.83

 

 

$

57,188

 

 

$

1.52

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Related to cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expenses

1,592

 

 

0.04

 

 

1,591

 

 

0.04

 

 

3,417

 

 

0.09

 

 

3,311

 

 

0.09

 

Depreciation of fair value uplift

83

 

 

 

 

82

 

 

 

 

167

 

 

 

 

161

 

 

 

Total related to gross profit

1,675

 

 

0.04

 

 

1,673

 

 

0.04

 

 

3,584

 

 

0.10

 

 

3,472

 

 

0.09

 

Related to selling, general and administrative expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expenses

4,259

 

 

0.11

 

 

4,597

 

 

0.12

 

 

8,461

 

 

0.23

 

 

8,872

 

 

0.24

 

Amortization of intangibles

124

 

 

 

 

143

 

 

 

 

255

 

 

0.01

 

 

286

 

 

0.01

 

Total related to selling, general and administrative expenses

4,383

 

 

0.12

 

 

4,740

 

 

0.13

 

 

8,716

 

 

0.23

 

 

9,158

 

 

0.24

 

Related to other incomes and other expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expenses in relation to reduction in workforce

 

 

 

 

16

 

 

 

 

 

 

 

 

16

 

 

 

Amortization of deferred debt issuance costs

8

 

 

 

 

8

 

 

 

 

16

 

 

 

 

10

 

 

 

Total related to other incomes and other expenses

8

 

 

 

 

24

 

 

 

 

16

 

 

 

 

26

 

 

 

Total related to net income & EPS

6,066

 

 

0.16

 

 

6,437

 

 

0.17

 

 

12,316

 

 

0.33

 

 

12,656

 

 

0.34

 

Non-GAAP measures

$

41,450

 

 

$

1.10

 

 

$

37,668

 

 

$

1.00

 

 

$

80,751

 

 

$

2.16

 

 

$

69,844

 

 

$

1.86

 

Shares used in computing diluted net income per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted shares

 

 

37,551

 

 

 

 

37,763

 

 

 

 

37,467

 

 

 

37,646

Non-GAAP diluted shares

 

 

37,551

 

 

 

 

37,763

 

 

 

 

37,467

 

 

 

37,646

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FABRINET

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

 

(amount in thousands)

Three Months Ended

Six Months Ended

 

December 25,

2020

 

December 27,

2019

December 25,

2020

 

December 27,

2019

Net cash provided by operating activities

$

6,808

 

 

$

49,963

 

$

41,314

 

 

$

52,610

 

Less: Purchase of property, plant and equipment

(10,121)

 

 

(9,068)

 

(22,693)

 

 

(15,411)

 

Non-GAAP free cash flow

$

(3,313)

 

 

$

40,895

 

$

18,621

 

 

$

37,199

 

FABRINET

GUIDANCE FOR QUARTER ENDING MARCH 26, 2021

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 

 

Diluted

EPS

GAAP net income per diluted share:

$0.94 to $1.01

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

0.12

Total related to selling, general and administrative expenses

0.12

Total related to net income & EPS

0.16

Non-GAAP net income per diluted share

$1.10 to $1.17

 

Rachel C. Carpenter

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