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Fabrinet Announces Fourth Quarter and Fiscal Year 2023 Financial Results

  • Fourth Quarter Revenue and Earnings Per Share Exceed 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 fourth quarter and fiscal year ended June 30, 2023.

Seamus Grady, Chief Executive Officer of Fabrinet, said, “We exceeded our guidance for revenue and earnings per share in the fourth quarter. During the quarter we saw very strong growth in datacom revenue, driven by new AI products, which more than offset anticipated headwinds from inventory adjustments at some customers. Our strong fourth quarter results helped produce record performances for revenue, profitability and cash flow in fiscal 2023. As we look to the first quarter of fiscal 2024, we are optimistic that new datacom programs can continue to offset inventory absorption in the industry, and that we can extend our track record of strong execution.”

Fourth Quarter Fiscal Year 2023 Financial Highlights

GAAP Results

  • Revenue for the fourth quarter of fiscal year 2023 was $655.9 million, compared to $587.9 million for the fourth quarter of fiscal year 2022.
  • GAAP net income for the fourth quarter of fiscal year 2023 was $60.8 million, compared to $56.2 million for the fourth quarter of fiscal year 2022.
  • GAAP net income per diluted share for the fourth quarter of fiscal year 2023 was $1.65, compared to $1.51 for the fourth quarter of fiscal year 2022.

Non-GAAP Results

  • Non-GAAP net income for the fourth quarter of fiscal year 2023 was $68.4 million, compared to $62.6 million for the fourth quarter of fiscal year 2022.
  • Non-GAAP net income per diluted share for the fourth quarter of fiscal year 2023 was $1.86, compared to $1.68 for the fourth quarter of fiscal year 2022.

Fiscal Year 2023 Financial Highlights

GAAP Results

  • Revenue for fiscal year 2023 was $2.65 billion, compared to $2.26 billion for fiscal year 2022.
  • GAAP net income for fiscal year 2023 was $247.9 million, compared to $200.4 million for fiscal year 2022.
  • GAAP net income per diluted share for fiscal year 2023 was $6.73, compared to $5.36 for fiscal year 2022.

Non-GAAP Results

  • Non-GAAP net income for fiscal year 2023 was $282.7 million, compared to $229.2 million for fiscal year 2022.
  • Non-GAAP net income per diluted share for fiscal year 2023 was $7.67, compared to $6.13 for fiscal year 2022.

Share Repurchase Program Expanded

Fabrinet also announced that its Board of Directors has approved the repurchase of up to an additional $47.6 million of Fabrinet’s ordinary shares, bringing the aggregate authorization under Fabrinet’s existing share repurchase program to $294.8 million, with $100.0 million currently remaining.

Business Outlook

Based on information available as of August 21, 2023, Fabrinet is issuing guidance for its first fiscal quarter ending September 29, 2023, as follows:

  • Fabrinet expects first quarter revenue to be in the range of $650 million to $670 million.
  • GAAP net income per diluted share is expected to be in the range of $1.60 to $1.67, based on approximately 36.5 million fully diluted shares outstanding.
  • Non-GAAP net income per diluted share is expected to be in the range of $1.83 to $1.90, based on approximately 36.5 million fully diluted shares outstanding.

Guidance for non-GAAP net income per diluted share excludes share-based compensation expenses and certain non-recurring items. A reconciliation of non-GAAP net income per diluted share to the corresponding GAAP measure is available at the end of this press release.

Conference Call Information

What:

 

Fabrinet Fourth Quarter Fiscal Year 2023 Financial Results Call

When:

 

August 21, 2023

Time:

 

5:00 p.m. ET

Live Call and Replay:

 

https://investor.fabrinet.com/events-and-presentations/events

A recorded version of this webcast will be available approximately two hours after the call and accessible at http://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 and Israel. 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 new datacom programs can continue to offset inventory absorption and that we can extend our track record of strong execution; 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 first quarter of fiscal year 2024. 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 growing global economic downturn; continued disruption to our supply chain, which could increase our costs and affect our ability to procure parts and materials; 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 and the U.S); 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 May 9, 2023. 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; restructuring and other related costs; 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

CONSOLIDATED BALANCE SHEETS

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

June 30,

2023

June 24,

2022

(unaudited)

Assets
Current assets
Cash and cash equivalents

$

231,368

 

$

197,996

 

Short-term restricted cash

 

 

 

220

 

Short-term investments

 

319,100

 

 

280,157

 

Trade accounts receivable, net of allowance for doubtful accounts of $965 and $1,271, respectively

 

531,767

 

 

452,670

 

Inventories

 

519,576

 

 

557,145

 

Prepaid expenses

 

7,849

 

 

11,626

 

Other current assets

 

42,880

 

 

25,357

 

Total current assets

 

1,652,540

 

 

1,525,171

 

Non-current assets
Long-term restricted cash

 

 

 

149

 

Property, plant and equipment, net

 

310,350

 

 

292,277

 

Intangibles, net

 

2,394

 

 

3,508

 

Operating right-of-use assets

 

1,634

 

 

4,084

 

Deferred tax assets

 

12,095

 

 

9,800

 

Other non-current assets

 

635

 

 

652

 

Total non-current assets

 

327,108

 

 

310,470

 

Total Assets

$

1,979,648

 

$

1,835,641

 

Liabilities and Shareholders’ Equity
Current liabilities
Long-term borrowings, current portion, net

$

12,156

 

$

12,156

 

Trade accounts payable

 

381,129

 

 

439,684

 

Fixed assets payable

 

13,526

 

 

9,085

 

Operating lease liabilities, current portion

 

1,201

 

 

2,319

 

Income tax payable

 

6,024

 

 

2,898

 

Accrued payroll, bonus and related expenses

 

23,748

 

 

20,374

 

Accrued expenses

 

20,447

 

 

24,758

 

Other payables

 

23,654

 

 

27,213

 

Total current liabilities

 

481,885

 

 

538,487

 

Non-current liabilities
Long-term borrowings, non-current portion, net

 

 

 

15,202

 

Deferred tax liability

 

4,799

 

 

6,001

 

Operating lease liabilities, non-current portion

 

66

 

 

1,476

 

Severance liabilities

 

22,159

 

 

18,384

 

Other non-current liabilities

 

2,081

 

 

2,409

 

Total non-current liabilities

 

29,105

 

 

43,472

 

Total Liabilities

 

510,990

 

 

581,959

 

Shareholders’ equity
Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding as of June 30, 2023 and June 24, 2022)

 

 

 

 

Ordinary shares (500,000,000 shares authorized, $0.01 par value; 39,284,176 shares and 39,048,700 shares issued as of June 30, 2023 and June 24, 2022, respectively; and 36,183,682 shares and 36,436,683 shares outstanding as of June 30, 2023 and June 24, 2022, respectively)

 

393

 

 

390

 

Additional paid-in capital

 

206,624

 

 

196,667

 

Less: Treasury shares (3,100,494 shares and 2,612,017 shares as of June 30, 2023 and June 24, 2022, respectively)

 

(194,833

)

 

(147,258

)

Accumulated other comprehensive income (loss)

 

(8,115

)

 

(12,793

)

Retained earnings

 

1,464,589

 

 

1,216,676

 

Total Shareholders’ Equity

 

1,468,658

 

 

1,253,682

 

Total Liabilities and Shareholders’ Equity

$

1,979,648

 

$

1,835,641

 

 

FABRINET

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

 

Three Months Ended

 

Year Ended

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

June 30,

2023

 

June 24,

2022

 

June 30,

2023

 

June 24,

2022

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

Revenues

$

655,871

 

$

587,874

 

$

2,645,237

 

$

2,262,224

 

Cost of revenues

 

(573,576

)

 

(512,941

)

 

(2,308,964

)

 

(1,983,630

)

Gross profit

 

82,295

 

 

74,933

 

 

336,273

 

 

278,594

 

Selling, general and administrative expenses

 

(19,869

)

 

(18,529

)

 

(77,673

)

 

(73,941

)

Restructuring and other related costs

 

(1,024

)

 

 

 

(6,896

)

 

(135

)

Operating income

 

61,402

 

 

56,404

 

 

251,704

 

 

204,518

 

Interest income

 

4,024

 

 

735

 

 

11,234

 

 

2,205

 

Interest expense

 

(293

)

 

(85

)

 

(1,472

)

 

(432

)

Foreign exchange gain (loss), net

 

1,911

 

 

1,304

 

 

(1,211

)

 

2,302

 

Other income (expense), net

 

19

 

 

(276

)

 

(159

)

 

(1,627

)

Income before income taxes

 

67,063

 

 

58,082

 

 

260,096

 

 

206,966

 

Income tax expense

 

(6,277

)

 

(1,893

)

 

(12,183

)

 

(6,586

)

Net income

 

60,786

 

 

56,189

 

 

247,913

 

 

200,380

 

Other comprehensive income (loss), net of tax
Change in net unrealized gain (loss) on available-for-sale securities

 

971

 

 

(2,711

)

 

2,739

 

 

(6,326

)

Change in net unrealized gain (loss) on derivative instruments

 

(2,894

)

 

(3,321

)

 

1,541

 

 

(578

)

Change in net retirement benefits plan – prior service cost

 

135

 

 

174

 

 

473

 

 

622

 

Change in foreign currency translation adjustment

 

(46

)

 

(47

)

 

(75

)

 

(245

)

Total other comprehensive income (loss), net of tax

 

(1,834

)

 

(5,905

)

 

4,678

 

 

(6,527

)

Net comprehensive income

$

58,952

 

$

50,284

 

$

252,591

 

$

193,853

 

Earnings per share
Basic

$

1.67

 

$

1.53

 

$

6.79

 

$

5.43

 

Diluted

$

1.65

 

$

1.51

 

$

6.73

 

$

5.36

 

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

 

36,337

 

 

36,668

 

 

36,515

 

 

36,876

 

Diluted

 

36,737

 

 

37,222

 

 

36,855

 

 

37,394

 

 

FABRINET

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

Year Ended

(in thousands of U.S. dollars)

June 30,

2023

 

June 24,

2022

 

(unaudited)

 

Cash flows from operating activities
Net income

$

247,913

 

$

200,380

 

Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization

 

43,832

 

 

38,738

 

Non-cash restructuring charges and other related costs

 

2,201

 

 

 

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

 

(1,506

)

 

(101

)

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

 

92

 

 

13

 

Amortization of discount (premium) of short-term investments

 

280

 

 

3,691

 

Amortization of deferred debt issuance costs

 

31

 

 

32

 

(Reversal of) allowance for doubtful accounts

 

(307

)

 

1,171

 

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

 

175

 

 

(2,832

)

Amortization of fair value at hedge inception of interest rate swaps

 

(587

)

 

(937

)

Share-based compensation

 

28,127

 

 

28,048

 

Deferred income tax

 

(3,484

)

 

(191

)

Other non-cash expenses

 

601

 

 

1,390

 

Changes in operating assets and liabilities
Trade accounts receivable

 

(76,917

)

 

(105,550

)

Inventories

 

37,449

 

 

(135,011

)

Other current assets and non-current assets

 

(13,568

)

 

(6,430

)

Trade accounts payable

 

(58,596

)

 

93,499

 

Income tax payable

 

2,977

 

 

(761

)

Severance liabilities

 

3,753

 

 

1,033

 

Other current liabilities and non-current liabilities

 

844

 

 

8,064

 

Net cash provided by operating activities

 

213,310

 

 

124,246

 

Cash flows from investing activities
Purchase of short-term investments

 

(217,005

)

 

(198,318

)

Proceeds from sales of short-term investments

 

30,179

 

 

19,463

 

Proceeds from maturities of short-term investments

 

150,252

 

 

133,632

 

Purchase of property, plant and equipment

 

(61,360

)

 

(89,588

)

Purchase of intangibles

 

(911

)

 

(995

)

Proceeds from disposal of property, plant and equipment

 

128

 

 

263

 

Net cash used in investing activities

 

(98,717

)

 

(135,543

)

Cash flows from financing activities
Repayment of long-term borrowings

 

(15,233

)

 

(12,188

)

Repayment of finance lease liability

 

(9

)

 

(7

)

Repurchase of ordinary shares

 

(47,575

)

 

(59,915

)

Withholding tax related to net share settlement of restricted share units

 

(18,167

)

 

(20,824

)

Net cash used in financing activities

 

(80,984

)

 

(92,934

)

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

$

33,609

 

$

(104,231

)

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

$

198,365

 

$

303,123

 

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

 

33,609

 

 

(104,231

)

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

 

(606

)

 

(527

)

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

$

231,368

 

$

198,365

 

Non-cash investing and financing activities
Construction, software and equipment related payables

$

13,526

 

$

9,085

 

 

FABRINET

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

 
Supplemental disclosures

Year Ended

(in thousands of U.S. dollars)

June 30,

2023

June 24,

2022

(unaudited)

Cash paid for
Interest

$

2,377

$

2,244

Taxes

$

14,158

$

9,296

Cash received for interest

$

11,048

$

1,603

Non-cash investing and financing activities
Construction, software and equipment related payables

$

13,526

$

9,085

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

 

As of

(in thousands  of U.S. dollars)

June 30,

2023

June 24,

2022

(unaudited)

Cash and cash equivalents

$

231,368

$

197,996

Restricted cash

 

 

369

Cash, cash equivalents and restricted cash

$

231,368

$

198,365

 

FABRINET

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES (UNAUDITED)

 

 

Three Months Ended

 

Year Ended

 

June 30, 2023

 

June 24, 2022

 

June 30, 2023

 

June 24, 2022

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

Net income

 

Diluted

EPS

 

Net income

 

Diluted

EPS

 

Net income

 

Diluted

EPS

 

Net income

 

Diluted

EPS

GAAP measures

$

60,786

$

1.65

$

56,189

$

1.51

$

247,913

$

6.73

$

200,380

$

5.36

Items reconciling GAAP net income & EPS to non-GAAP net income & EPS:
Related to cost of revenues:
Share-based compensation expenses

 

1,636

 

0.05

 

1,388

 

0.04

 

6,664

 

0.18

 

5,967

 

0.16

Depreciation of fair value uplift

 

 

 

 

 

 

 

92

 

0.00

Total related to gross profit

 

1,636

 

0.05

 

1,388

 

0.04

 

6,664

 

0.18

 

6,059

 

0.16

Related to selling, general and administrative expenses:
Share-based compensation expenses

 

4,936

 

0.13

 

4,959

 

0.13

 

20,939

 

0.57

 

22,081

 

0.59

Amortization of intangibles

 

 

 

94

 

0.00

 

224

 

0.01

 

422

 

0.01

Severance payment and others

 

 

 

 

 

 

 

105

 

0.00

Total related to selling, general and administrative expenses

 

4,936

 

0.13

 

5,053

 

0.13

 

21,163

 

0.58

 

22,608

 

0.60

Related to other income and expense:
Restructuring and other related costs

 

1,024

 

0.03

 

 

 

6,896

 

0.18

 

135

 

0.01

Amortization of deferred debt issuance costs

 

8

 

0.00

 

8

 

0.00

 

32

 

0.00

 

32

 

0.00

Total related to other income and expense

 

1,032

 

0.03

 

8

 

0.00

 

6,928

 

0.18

 

167

 

0.01

Total related to net income & EPS

 

7,604

 

0.21

 

6,449

 

0.17

 

34,755

 

0.94

 

28,834

 

0.77

Non-GAAP measures

$

68,390

$

1.86

$

62,638

$

1.68

$

282,668

$

7.67

$

229,214

$

6.13

Shares used in computing diluted net income per share
GAAP diluted shares

 

36,737

 

37,222

 

36,855

 

37,394

Non-GAAP diluted shares

 

36,737

 

37,222

 

36,855

 

37,394

 

FABRINET

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW (UNAUDITED)

 
(in thousands)

Three Months Ended

 

Year Ended

 

 

June 30, 2023

 

June 24, 2022

 

June 30, 2023

 

June 24, 2022

Net cash provided by operating activities

 

71,088

 

$

16,349

 

$

213,310

 

$

124,246

 

Less: Purchase of property, plant and equipment

 

(17,938

)

 

(14,261

)

 

(61,360

)

 

(89,588

)

Non-GAAP free cash flow

 

53,150

 

$

2,088

 

$

151,950

 

$

34,658

 

 

FABRINET

GUIDANCE FOR QUARTER ENDING SEPTEMBER 29, 2023

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

 

Diluted

EPS

GAAP net income per diluted share:

$1.60 to $1.67

Related to cost of revenues:

 

Share-based compensation expenses

0.07

Total related to gross profit

0.07

Related to selling, general and administrative expenses:

 

Share-based compensation expenses

0.16

Total related to selling, general and administrative expenses

0.16

Total related to net income & EPS

0.23

Non-GAAP net income per diluted share

$1.83 to $1.90

 

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