Fabrinet

Good afternoon. Welcome to Fabrinet's Financial Results Conference Call for the third quarter of fiscal year 2022. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions on how to participate will be provided at that time. As a reminder, today's call is being recorded. I would now like to turn the call over to your host, Gero Tumajanian, Investor Relations.

Thank you, Operator, and good afternoon, everyone. Thank you for joining us on today's conference call to discuss Fabrinet's financial and operating results for the third quarter of fiscal year 2022, which ended March 25, 2022. With me on the call today are Seamus Grady, Chief Executive Officer, and Chava Serra, Chief Financial Officer. This call is being webcast, and a replay will be available on the Investor section of our website, located at investor.fabrinet.com. During this call, we will present both GAAP and non-GAAP financial measures. Please refer to the investor section of our website for important information, including our earnings press release and investor presentation, which include our GAAP to non-GAAP reconciliation. In addition, today's discussion will contain forward-looking statements about the future financial performance of the company. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from management's current expectations. These statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise them in light of new information or future events, except as required by law. For a description of the risk factors that may affect our results, please refer to our recent SEC filings, in particular, the section captioned, Risk Factors, in our Form 10-Q, filed on February 1, 2022. We will begin the call with remarks from Seamus and Chaba, followed by time for questions. I would now like to turn the call over to Fabrinus' CEO, Seamus Grady. Seamus?

Thank you, Gerald. Good afternoon, everyone, and thank you for joining us on today's conference call. We delivered a solid third quarter performance with strong execution from the team as supply chain headwinds continue to offset a very strong demand environment. Revenue in the quarter was $564.4 million, which was within our guidance range and grew 18% from a year ago, and was essentially flat sequentially. Operationally, we continued to perform at a very high level, which contributed to record non-GAAP operating margins of 10.5% in the quarter, resulting in non-GAAP net income of $1.50 per share. Looking at the quarter in a little more detail, demand across all our products categories remains robust, with supply constraints remaining our biggest obstacle to higher growth. During this period of component shortages, our team has done a terrific job managing these constraints to better serve our customers. One way we do this is to help our customers source and qualify alternative parts and materials for products we manufacture for them. Sometimes these substitutions are very straightforward, and at other times, more complex products can require requalification and validation. not just by our customers, but by their end customers as well. During the third quarter, certain customer programs were delayed by these component requalification efforts, adding an estimated $15 million supply chain related headwind to the $30 to $35 million supply chain impact we had previously estimated. The good news is that these alternative components have since been fully qualified and we have already resumed shipment of the associated products, meaning that the revenue has essentially shifted from the third quarter to the fourth. Now let me provide some additional color on the third quarter. By end market, we have another strong quarter for optical communications. Telecom revenue grew both sequentially and year over year, and Datacom revenue grew from a year ago, but declined sequentially, as this was the area most impacted by the component requalifications I just discussed. Non-optical communications revenue grew both sequentially and year over year to the highest level in our history, driven primarily by strong automotive revenue, which was up more than 10% sequentially. While we have no direct business in Russia or Ukraine, our automotive business saw a small impact in the quarter from customers with other suppliers in the region. Turning to capacity expansion, construction of Building 9 our new 1 million square foot building at our Chanbury campus is nearly complete. This building increases our total footprint by approximately 50% to more than 3 million square feet, which will provide us with ample capacity to meet demand from new and existing customers for some time. In fact, we're excited that certain existing customers experiencing rapid growth are already in discussions with us to expand into the new building. More on this during our Q4 earnings call. As we look at the fourth quarter more broadly, the strong momentum across all of our business is continuing. Our team continues to do an excellent job managing component supply issues, but these supply chain constraints have not shown any signs of improvement, and if anything, are increasing. As Chaba will detail in a moment, our revenue guidance for the fourth quarter would have been 40 to 45 million dollars higher if not for these headwinds, which have grown substantially since the beginning of the year. That said, we expect to continue to benefit from our enviable track record of execution that drives industry-leading margins. In summary, I'm very proud of our team's strong execution, both in managing supply constraints as well as delivering industry-leading margins. With demand trends that remain very strong across the board, we're confident that we can deliver top and bottom line growth in the fourth quarter, including record profitability. Now I'd like to turn the call over to Chaba for additional financial details on our third quarter and our guidance for the fourth quarter of fiscal 2022. Chaba.