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Fabrinet Announces Third Quarter Fiscal Year 2021 Financial Results

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Record Third Quarter Revenue of $479.3 Million Exceeds Guidance

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 third fiscal quarter ended March 26, 2021.

Seamus Grady, Chief Executive Officer of Fabrinet, said, "For the third quarter in a row, we delivered record revenue that exceeded our guidance. Notably, we saw sequential revenue growth from all the end markets that we track combined with improving operating margins, both of which helped generate record net income."

Grady continued, "Based on our current outlook and continued demand, we expect another record performance in the fourth quarter and we remain well-positioned to continue to deliver strong results over the longer-term."

Third Quarter Fiscal Year 2021 Financial Highlights

GAAP Results

  • Revenue for the third quarter of fiscal year 2021 was $479.3 million, compared to $411.2 million in the third quarter of fiscal year 2020.

  • GAAP net income for the third quarter of fiscal year 2021 was $37.5 million, compared to GAAP net income of $28.3 million for the third quarter of fiscal year 2020.

  • GAAP net income per diluted share for the third quarter of fiscal year 2021 was $1.00, compared to GAAP net income per diluted share of $0.75 for the third quarter of fiscal year 2020.

Non-GAAP Results

  • Non-GAAP net income for the third quarter of fiscal year 2021 was $45.4 million, compared to non-GAAP net income of $34.8 million for the third quarter of fiscal year 2020.

  • Non-GAAP net income per diluted share for the third quarter of fiscal year 2021 was $1.21, compared to non-GAAP net income per diluted share of $0.92 for the third quarter of fiscal year 2020.

Business Outlook

Based on information available as of May 3, 2021, Fabrinet is issuing guidance for its fourth fiscal quarter ending June 25, 2021, as follows:

  • Fabrinet expects fourth quarter revenue to be in the range of $475 million to $495 million.

  • GAAP net income per diluted share is expected to be in the range of $1.02 to $1.09, 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 $1.18 to $1.25, based on approximately 37.6 million fully diluted shares outstanding.

Conference Call Information

What:

Fabrinet Third Quarter Fiscal Year 2021 Financial Results Call

When:

Monday, May 3, 2021

Time:

5:00 p.m. ET

Live Call:

(888) 357-3694, domestic

(253) 237-1137, international

Passcode: 2790505

Replay:

(855) 859-2056, domestic

(404) 537-3406, international

Passcode: 2790505

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 fourth quarter will represent another record performance for the company and that we remain well-positioned to continue to deliver strong results over the longer-term; 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 fourth 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 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 February 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; 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)

March 26,

2021

June 26,

2020

Assets

Current assets

Cash and cash equivalents

$

247,011

$

225,430

Short-term restricted cash

7,402

Short-term investments

261,736

262,693

Trade accounts receivable, net of allowance for doubtful accounts of $126 and $336 respectively

309,079

272,665

Contract assets

17,130

13,256

Inventories

353,283

309,786

Other receivable

24,310

24,310

Prepaid expenses

10,653

5,399

Other current assets

31,967

14,508

Total current assets

1,255,169

1,135,449

Non-current assets

Long-term restricted cash

153

Property, plant and equipment, net

228,767

228,274

Intangibles, net

4,576

4,312

Operating right-of-use assets

6,744

8,068

Deferred tax assets

6,195

5,675

Other non-current assets

226

202

Total non-current assets

246,661

246,531

Total Assets

1,501,830

1,381,980

Liabilities and Shareholders’ Equity

Current liabilities

Long-term borrowings, current portion, net

12,156

12,156

Trade accounts payable

275,705

251,603

Fixed assets payable

11,060

15,127

Contract liabilities

1,409

1,556

Operating lease liabilities, current portion

2,390

1,979

Income tax payable

2,882

2,242

Accrued payroll, bonus and related expenses

21,639

19,265

Accrued expenses

12,651

8,979

Other payables

26,348

21,514

Total current liabilities

366,240

334,421

Non-current liabilities

Long-term borrowings, non-current portion, net

30,397

39,514

Deferred tax liability

4,855

4,729

Operating lease liability, non-current portion

4,098

5,873

Severance liabilities

19,006

17,379

Other non-current liabilities

3,728

5,655

Total non-current liabilities

62,084

73,150

Total Liabilities

428,324

407,571

Shareholders’ equity

Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding as of March 26, 2021 and June 26, 2020)

Ordinary shares (500,000,000 shares authorized, $0.01 par value; 38,741,166 shares and 38,471,967 shares issued at March 26, 2021 and June 26, 2020, respectively; and 36,880,160 shares and 36,727,864 shares outstanding at March 26, 2021 and June 26, 2020, respectively)

388

385

Additional paid-in capital

182,987

175,610

Less: Treasury shares (1,861,006 shares and 1,744,103 shares as of March 26, 2021 and June 26, 2020, respectively)

(76,813

)

(68,501

)

Accumulated other comprehensive income (loss)

(6,939

)

(1,147

)

Retained earnings

973,883

868,062

Total Shareholders’ Equity

1,073,506

974,409

Total Liabilities and Shareholders’ Equity

$

1,501,830

$

1,381,980

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(unaudited)

Three Months Ended

Nine Months Ended

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

March 26,

2021

March 27,

2020

March 26,

2021

March 27,

2020

Revenues

$

479,317

$

411,210

$

1,369,783

$

1,236,723

Cost of revenues

(422,539

)

(366,874

)

(1,209,504

)

(1,097,242

)

Gross profit

56,778

44,336

160,279

139,481

Selling, general and administrative expenses

(19,059

)

(17,111

)

(53,078

)

(50,189

)

Expenses related to reduction in workforce

(43

)

(43

)

(16

)

Operating income

37,676

27,225

107,158

89,276

Interest income

941

2,042

3,156

6,080

Interest expense

(282

)

(238

)

(798

)

(2,812

)

Foreign exchange gain (loss), net

629

(8

)

224

(2,949

)

Other income (expense), net

124

203

403

977

Income before income taxes

39,088

29,224

110,143

90,572

Income tax expense

(1,595

)

(957

)

(4,215

)

(5,117

)

Net income

37,493

28,267

105,928

85,455

Other comprehensive income (loss), net of tax:

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

(570

)

(1,356

)

(937

)

(1,403

)

Change in net unrealized gain (loss) on derivative instruments

(5,000

)

(6,569

)

(5,823

)

(6,719

)

Change in net retirement benefits plan – prior service cost

198

294

421

478

Change in foreign currency translation adjustment

90

(600

)

547

(353

)

Total other comprehensive income (loss), net of tax

(5,282

)

(8,231

)

(5,792

)

(7,997

)

Net comprehensive income (loss)

$

32,211

$

20,036

$

100,136

$

77,458

Earnings per share

Basic

$

1.02

$

0.76

$

2.87

$

2.31

Diluted

$

1.00

$

0.75

$

2.82

$

2.27

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

Basic

36,875

36,987

36,876

36,970

Diluted

37,609

37,797

37,514

37,696

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Nine Months Ended

(in thousands of U.S. dollars)

March 26,

2021

March 27,

2020

Cash flows from operating activities

Net income for the period

$

105,928

$

85,455

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

Depreciation and amortization

26,781

23,115

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

(24

)

444

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

(187

)

(93

)

Amortization of investment discount

1,479

(624

)

Amortization of deferred debt issuance costs

24

18

(Reversal of) allowance for doubtful accounts

(317

)

(17

)

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

(825

)

942

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

1,672

Amortization of fair value at hedge inception of interest rate swaps

(1,009

)

(838

)

Share-based compensation

18,742

18,301

Deferred income tax

(382

)

1,335

Other non-cash expenses

(614

)

(559

)

Changes in operating assets and liabilities

Trade accounts receivable

(36,437

)

(23,136

)

Contract assets

(3,874

)

(3,966

)

Inventories

(43,497

)

3,404

Other current assets and non-current assets

(22,919

)

5,830

Trade accounts payable

25,589

(15,571

)

Contract liabilities

(147

)

(298

)

Income tax payable

911

1,056

Severance liabilities

2,204

2,266

Other current liabilities and non-current liabilities

3,731

5,712

Net cash provided by operating activities

75,157

104,448

Cash flows from investing activities

Purchase of short-term investments

(183,041

)

(123,980

)

Proceeds from sales of short-term investments

84,049

48,808

Proceeds from maturities of short-term investments

97,721

97,358

Funds provided to customer to support transfer of manufacturing operations

(24,310

)

Purchase of property, plant and equipment

(29,061

)

(27,482

)

Purchase of intangibles

(1,961

)

(797

)

Proceeds from disposal of property, plant and equipment

38

1,482

Net cash used in investing activities

(32,255

)

(28,921

)

Cash flows from financing activities

Payment of debt issuance costs

(153

)

Proceeds from long-term borrowings

60,938

Repayment of long-term borrowings

(9,141

)

(67,032

)

Repayment of finance lease liability

(100

)

(304

)

Repurchase of ordinary shares

(8,312

)

(20,722

)

Withholding tax related to net share settlement of restricted share units

(11,362

)

(4,727

)

Net cash used in financing activities

(28,915

)

(32,000

)

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

13,987

43,527

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

13,987

43,527

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

345

(228

)

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

247,164

231,540

Non-cash investing and financing activities

Construction, software and equipment-related payables

$

11,060

$

11,906

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)

March 26,

2021

March 27,

2020

Cash and cash equivalents

$

247,011

$

224,138

Restricted cash

153

7,402

Cash, cash equivalents and restricted cash

$

247,164

$

231,540

FABRINET

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

Three Months Ended

Nine Months Ended

March 26,

2021

March 27,

2020

March 26,

2021

March 27,

2020

(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

$

37,493

$

1.00

$

28,267

$

0.75

$

105,928

$

2.82

$

85,455

$

2.27

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

Related to cost of revenues:

Share-based compensation expenses

1,388

0.04

1,489

0.04

4,805

0.13

4,800

0.13

Depreciation of fair value uplift

89

0.00

86

0.00

256

0.00

247

0.00

Total related to gross profit

1,477

0.04

1,575

0.04

5,061

0.13

5,047

0.13

Related to selling, general and administrative expenses:

Share-based compensation expenses

5,476

0.15

4,629

0.12

13,937

0.37

13,501

0.36

Amortization of intangibles

127

0.00

145

0.00

382

0.01

431

0.01

Severance payment

755

0.02

150

0.00

755

0.02

150

0.00

Total related to selling, general and administrative expenses

6,358

0.17

4,924

0.13

15,074

0.40

14,082

0.37

Related to other incomes and other expenses:

Other expenses in relation to reduction in workforce

43

0.00

43

0.00

16

0.00

Amortization of deferred debt issuance costs

8

0.00

8

0.00

24

0.00

18

0.00

Total related to other incomes and other expenses

51

8

67

34

Total related to net income & EPS

7,886

0.21

6,507

0.17

20,202

0.54

19,163

0.51

Non-GAAP measures

$

45,379

$

1.21

$

34,774

$

0.92

$

126,130

$

3.36

$

104,618

$

2.78

Shares used in computing diluted net income per share

GAAP diluted shares

37,609

37,797

37,514

37,696

Non-GAAP diluted shares

37,609

37,797

37,514

37,696

FABRINET

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

(amount in thousands)

Three Months Ended

Nine Months Ended

March 26,

2021

March 27,

2020

March 26,

2021

March 27,

2020

Net cash provided by operating activities

$

33,843

$

51,838

$

75,157

$

104,448

Less: Purchase of property, plant and equipment

(6,368

)

(12,071

)

(29,061

)

(27,482

)

Non-GAAP free cash flow

$

27,475

$

39,767

$

46,096

$

76,966

FABRINET

GUIDANCE FOR QUARTER ENDING JUNE 25, 2021

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

Diluted

EPS

GAAP net income per diluted share:

$1.02 to $1.09

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

$1.18 to $1.25

View source version on businesswire.com: https://www.businesswire.com/news/home/20210503005709/en/

Contacts

Investor Contact:
Garo Toomajanian
ir@fabrinet.com