Fabrinet

Good afternoon, and welcome to Fabrinet's Financial Results Conference Call for the fourth quarter of fiscal year 2024. 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, Garo Tumajanian, Vice President of Investor Relations. Please go ahead.

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 fourth quarter of fiscal year 2024, which ended June 28, 2024. With me on the call today are Seamus Grady, Chief Executive Officer, and Chavez Ferra, 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 10-Q filed on May 7, 2024. 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, CEO, FabriNet Thank you, Gero.

Good afternoon to everyone joining our call. Our very strong fourth quarter results capped off an outstanding year for FabriNet. Fourth quarter revenue of $753 million was above our guidance range and grew 15% from a year ago and 3% from Q3. We executed very well to produce non-GAAP EPS that also exceeded our guidance range at $2.41 per share. It's also notable that Q4 marked the fourth quarter in a row for both record revenue and EPS for the company. For the full year, revenue was $2.9 billion, an increase of 9% from fiscal year 2023. Our continued focus on cost management helped us to again grow non-GAAP earnings faster than revenue to a record $8.88 per share or a 16% year-over-year increase. 2024 was quite a remarkable year for Fabrinet. Datacom revenue grew over 120% while telecom revenue declined more than 20% for the year due to the protracted inventory digestion across the telecom industry. Our strong results throughout the year demonstrated the strength of our flexible and resilient business model. Entering the fourth quarter, we anticipated continued revenue growth in Datacom and declines in Telecom, and that's what we experienced. We also anticipated a return to sequential growth in automotive revenue, which we also saw. Within optical communications, Datacom revenue continues to drive growth, while the sequential decline in Telecom was more modest than anticipated. In Datacom, 800 gig products for AI and related applications remain the biggest revenue contributor, offset in part by the completion of the wind down of a long running 100 gig program, as we've discussed previously. We are very encouraged by the strong demand trends we are seeing for both current generation and next generation Datacom technologies. We believe that our industry-leading expertise and trusted reputation positions us particularly well to continue benefiting from long-term Datacom growth. In Telecom, ongoing inventory digestion continues to dampen revenue from traditional Telecom products. In the fourth quarter, this impact was partially offset by data center interconnect products, as well as contributions from new Telecom system program wins. In fact, we expect recent system wins of varying sizes to begin making more meaningful revenue contributions towards the second half of our fiscal 2025. These new wins make us optimistic about Fabrinet's long-term telecom revenue trends overall. Turning to non-optical communications, we saw double-digit sequential revenue growth in the quarter. As anticipated, this increase was primarily due to growth in automotive revenue, as short-term inventory absorption issues are now behind us. All in all, we had a very robust and successful quarter and year, and we remain positioned particularly well for continued momentum as we look ahead. In fact, in the first quarter of our fiscal year 2025, we anticipate sequential revenue growth from all of our major product categories. Beyond Q1, we continue to carefully evaluate our long-term capacity requirements. In that regard, we have made the decision to break ground on Building 10 at our Chanbury campus during the new fiscal year. Our first building in Chanbury was Building 8, with all 500,000 square feet now being utilized. Building 9, which is about 1 million square feet, opened about two years ago and is quickly filling up. Building 10 will be 2 million square feet in size. We expect construction to take approximately a year and a half to complete once we break ground. Capital expenditures for construction of the 2 million square foot facility will be approximately $110 million. Beyond building 10, we have ample space to further increase our manufacturing capacity. We'll keep you posted on our construction timeline as we move ahead. In summary, we delivered a record fourth quarter with revenue and EPS that are above our guidance ranges, as well as a remarkable fiscal year. We're increasingly optimistic about our future and we have numerous drivers that position us to extend our track record of success into fiscal 2025 and beyond. Now I'll turn the call over to Chaba for more financial details on our fourth quarter and fiscal 2024 and our guidance for the first quarter of fiscal 2025. Chaba.