Fabrinet

Good afternoon. Welcome to Fabrinet's Financial Results Conference Call for the first quarter of fiscal year 2023. At this time, all participants are in a 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 Tumajinian, VP of 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 first quarter of fiscal year 2023, which ended September 30, 2022. With me on the call today are Seamus Grady, Chief Executive Officer, and Chavez Ferra, Chief Financial Officer. This call will be 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-K, held on August 16, 2022. We will begin the call with remarks from Seamus and Shabba, followed by time for questions. I would now like to turn the call over to Fabrinus' CEO, Seamus Grady.

SEAMUS GRADY Thank you, Gero. Good afternoon, everyone, and thank you for joining us on our call today. We're off to a strong start in fiscal 2023, with first quarter results that exceeded our guidance. Total revenue was $655.4 million, with a better supply situation than anticipated, which contributed to our strong performance. Revenue increased 21% from a year ago, or 17% when we adjust for the contribution of approximately $20 million due to the 14-week quarter. In other words, revenue would have been $20 million lower if not for the additional week. Demand remains strong across the board, with sequential growth from nearly all the end markets that we serve. Supply for some automotive components saw relief in the quarter, resulting in a supply headwind to revenue that was only about half of the $25 to $30 million we had anticipated. We also executed well to produce non-GAAP operating margins of 10.7%, consistent with our record fourth quarter and a full percentage point higher than the prior year. Revenue upside and strong margins helped drive non-GAAP EPS Looking at the quarter in more detail, we delivered a record quarter for both optical communications and automotive revenue, even after considering the extra week in the quarter. In the second quarter, we expect to start seeing optical communications revenue further supported by our new partnership with DZS, a global leader in access networking infrastructure, service assurance, and consumer experience software solutions. Through our partnership, DCS will transition sourcing, procurement, fulfillment, and manufacturing activities in its Seminole, Florida facility to FabriNet. We believe this new systems win has the potential to be a significant contributor to our growth when fully ramped. Turning to non-optical communications, we had an especially strong quarter. Automotive revenue was up more than $30 million, or more than 50% sequentially. as improved component availability allowed us to capture more revenue than anticipated in a quarter. Overall demand from our customers remains very strong, which makes us optimistic about our future. While supply constraints remain a limiting factor on our growth, we continue to focus on managing supply conditions as effectively as possible. From a capacity perspective, we are very well positioned to serve increasing demand. Last week, we held an official ribbon-cutting ceremony for Building 9 at our Chonburi campus, adding approximately 1 million square feet of space. While we are maintaining our practice of letting our customers take the lead and announcing relationships, we are very pleased with the early demand and traction at Building 9. Looking at the second quarter, we remain optimistic that strong demand trends will continue to drive growth, both year over year and sequentially, after factoring the additional week in the first quarter. We also remain confident that we can continue to realize incremental operating efficiencies as revenue grows faster than expenses. In summary, we had a strong first quarter with results that exceeded our guidance. We're optimistic about continued demand in our markets and we're well positioned to extend our track record of success as we look ahead. Now I'd like to turn the call over to Chaba for additional financial details on our first quarter and our guidance for the second quarter of fiscal 2023.