Fabrinet

Good afternoon. Welcome to Fibernet Financial Results Conference Call for the second quarter of fiscal year 2024. 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, Skyro Tumajenia, Vice President of Investor Relations. You may begin.

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 second quarter of fiscal year 2024, which ended December 29, 2023. With me on the call today are Seamus Grady, Chief Executive Officer, and Chabas Vera, 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, as well as additional details of our revenue breakdown. 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 10Q, filed on November 7, 2023. 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 Fabrinet's CEO, Seamus Grady. Seamus?

Seamus Grady Thank you, Carol. Good afternoon, and thank you for joining our call today. We had a very strong second quarter, which again set new records for revenue and EPS, and also exceeded our guidance ranges. Rapid Datacom growth continues to fuel our overall performance, driven by next generation AI interconnect. Telecom revenue remains impacted by inventory absorption in the ecosystem, but we are encouraged that the magnitude of these declines is getting smaller. Total revenue was $712.7 million an increase of 7% from a year ago and 4% from the first quarter. Our strong execution helped to improve operating margins from the first quarter and generate non-GAAP net income of $2.08 per share, a new quarterly record. Looking at the second quarter in more detail, optical communications revenue grew, both from a year ago and the first quarter. Within optical communications, telecom revenue decreased sequentially as anticipated. However, within telecom, we saw increasing demand for extended reach, pluggable optics, which helped soften the sequential decline. We expect that this trend will continue in Q3. When combined with what appears to be a diminishing impact from inventory absorption, we believe telecom revenue could be up slightly in the third quarter. Datacom revenue growth was strong again in the second quarter, driven by AI optical interconnect products. For the first time in our history, datacom revenue exceeded telecom revenue, largely driven by AI programs. We expect to maintain this higher datacom revenue mix even as sequential datacom growth moderates and as telecom revenue trends improve. Our non-optical communications business saw a small sequential revenue decline in the second quarter. This was primarily due to continued inventory absorption from certain automotive programs. We expect this inventory digestion in the automotive market to persist into the third quarter, but we currently anticipate a sequential improvement in the fourth quarter. Industrial laser revenue remains stable in the second quarter. Operationally, we performed very well in the second quarter with operating margins improving to 10.7%, a 20 basis point improvement from the first quarter. Looking to the third quarter, we are optimistic that we can deliver another strong performance for revenue and profitability. Despite softer near-term automotive trends, we believe telecom is positioned to show sequential revenue improvement led by growth in ZR. In addition, we expect further growth in Datacom revenue, which continues to be driven primarily by strength in AI programs. At the same time, we expect to extend our track record of strong operational execution and profitability. In summary, We are excited to have delivered another record quarter for both revenue and earnings per share, and we are confident that we can deliver another strong performance in the third quarter. Now I'd like to turn the call over to Chaba for additional financial details on our second quarter of fiscal 2024 and our guidance for the third quarter. Chaba.