Fabrinet

Good afternoon. Welcome to FabriNet's Financial Results Conference Call for the second quarter of fiscal year 2025. 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.

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 2025, which ended December 27, 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 November 5, 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?

Thank you, Gero. Good afternoon, and thanks to those of you joining our call today. Our strong business momentum continued in the second quarter and represented a record quarter for both revenue and profitability, with growth that exceeded our expectations. Revenue of $834 million was an increase of 17% from a year ago and 4% from Q1. Our team executed well to produce record non-GAAP earnings per share of $2.61. While this is a remarkable performance, we are also very excited to see the positive trends in key areas of our business extending into the third quarter. This reflects both increasing demand in the high growth markets we serve, as well as our ability to further deepen relationships with existing customers and gain additional market share. As a result, we are confident that our strong revenue growth will extend into the third quarter, along with the corresponding increase in profitability. We are excited about these growth trends and have ample capacity to meet our near- to medium-term requirements and commitments to our customers. That said, with our continued growth, we will need additional capacity in the future, which is why we are pleased to announce that last month we broke ground on Building 10, a new 2 million square foot facility at our Chanbury campus, adding more than 50% to our total footprint. This new building will provide us with plenty of capacity to support our anticipated growth over the longer term. Also reflecting our confidence, during the second quarter, we repurchased more than one third of our $200 million authorized for share repurchases. And our board just authorized an additional $100 million for share buybacks. Looking at the dynamics of the quarter in more detail, within optical communications, Datacom experienced some bumpiness ahead of the ramp in next generation products at a major customer and grew 4% from a year ago but declined 9% from the first quarter. While we believe datacom demand could see a slight decrease in the third quarter, we remain confident that datacom revenue trends will improve as next generation technologies at the 1.6 terabit data rates begin to ramp later this calendar year. Meanwhile, we were pleased to see telecom revenue perform even better than anticipated in the quarter, increasing 24% from a year ago and 17% sequentially. Our telecom revenue strength was driven primarily by increasing demand for data center interconnect products and by early success with recent telecom system wins. We're optimistic that this positive trend will extend into the third quarter. Turning to non-optical communications, we experienced another healthy performance in automotive, with revenue up 32% from a year ago and roughly flat from Q1. Also contributing to our growth in the quarter, industrial laser revenue was up 24% from a year ago and 6% from last quarter. In summary, with the confluence of several positive growth drivers ahead of us, we are more confident than ever in our business. In the coming quarters, we expect our Datacom business to return to faster growth. In Telecom, we anticipate further growth driven by increasing momentum from recent system wins coupled with rising demand for data center interconnect products. Collectively, we are very optimistic as we look to the third quarter and beyond. Now I'll turn the call over to Chaba for more financial details on our second quarter and our guidance for the third quarter of fiscal 2025. Chaba.

Thank you, Seamus, and good afternoon, everyone. We had a strong second quarter with revenue and net income per share that were above our guidance ranges. Revenue in the second quarter was $834 million. an increase of 17% from a year ago, and 4% from Q1. Non-GAAP EPS was $2.61, with revenue upside and FX revaluation gain contributing to our results. Details of our revenue breakdown are included in the investor presentation on our website, so I will focus my comments on some of the more noteworthy highlights. In the second quarter, optical communications revenue was $647 million, up 14% from a year ago and 3% from Q1. Within optical communications, Datacom revenue was $299 million, or 46% of optical communications revenue, an increase of 4% from a year ago, but a decline of 9% as a major customer transitions to next-generation products. Telecom revenue was $348 million, or 54% of optical communications revenue, a remarkable increase of 24% from a year ago and 17% from Q1, driven primarily by growth in DCI products and early contributions from recent system business wins. By data rate, revenue from 800 gig and faster products was $257 million, up 12% from a year ago and flat sequentially. Revenue from products below 800 gig was $277 million, an increase of 25% from a year ago and 5% from Q1. 400 ZR products for data center interconnect applications were very strong contributors to growth, reaching 10% of total revenue in the quarter. Revenue from optical communications products that are non-speed rated was $114 million, up 6% from Q1. Non-optical communications revenue was $186 million, up 29% from a year ago and 5% sequentially. Each of automotive, industrial laser, and other revenue category was up sequentially and grew over 20% year over year. As I discussed the details of our P&L, expense and profitability metrics will be on a non-GAAP basis unless otherwise noted. Gross margin in the second quarter was 12.4%, compared to 12.7% in the first quarter, primarily due to Q1 FX tailwinds turning into slight headwinds as anticipated. Operating expenses were flat sequentially at $16 million, offsetting most of the impact of slightly lower gross margins. Operating income was a record $88 million, representing an operating margin of 10.6% compared to 10.7% both a year ago and last quarter. Interest income of $11 million in the quarter was in line with Q1, and a foreign exchange evaluation gain contributed $4 million. Effective GAAP tax rate was elevated in the quarter at 8.7% due to discrete items. We continue to expect an effective tax rate in the mid-single digit for the fiscal year. Non-GAAP net income was $95 million, or $2.61 per diluted share, which was above our guidance range and a quarterly record. Turning to the balance sheet, we ended the second quarter with cash and short-term investments of $935 million, up $26 million from the end of the first quarter. Operating cash flow in the quarter was strong at $116 million. CapEx was $22 million, resulting in free cash flow of $94 million in the second quarter. As Seamus mentioned, we recently broke ground on our new building 10 in Chamburi. which will considerably increase our manufacturing capacity. As a result, we expect to incur a higher capex outlay over the next several quarters. Turning to share buybacks, recall that we increased the size of our share repurchase program in August to $200 million. During the second quarter, we were very active in the program and acquired 292,000 shares at an average price of $235 per share for a total cash outlay of $69 million. As a result, at the end of the second quarter, we had $131 million remaining under our repurchase authorization. As a sign of continued confidence in our business, last week our board authorized an additional $100 million for share repurchases. Now I will turn to our guidance for the third quarter of fiscal year 2025. As Seamus highlighted, we have several reasons to be optimistic about our business in Q3 and beyond. And this is reflected in our outlook. For the third quarter, we expect total revenue to be between $850 and $870 million. By major product area, we anticipate Datacom revenue to be down slightly sequentially in anticipation of the ramp in coming quarters from next generation products. We expect Telecom revenue to see strong sequential growth again in Q3, as increasing DCI momentum and new system means make larger contributions. We also expect automotive revenue to continue to grow sequentially. We expect FX pressure on gross margin to persist in the third quarter, but believe we can again offset much of that impact with continued operating leverage. Therefore, we anticipate EPS in the third quarter to be between $2.55 to $2.63 per diluted share. In summary, After a very strong second quarter, we continue to be very optimistic about our business as we benefit from several positive trends. We believe QC will represent another quarter of record revenue for the company as our strong business momentum continues in the third quarter and beyond. Operator, we are now ready to open the call for questions.

Yes, sir. Ladies and gentlemen, if you have a question or comment at this time, please press star one one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press star one one again. Again, if you have a question or comment at this time, please press star one one on your telephone keypad. Please stand by while we compile the Q&A roster. Question or comment comes from the line of Carl Ackerman from BNP Paribas. Your line is open.

Yes, thank you, gentlemen. For my first question, I was hoping to discuss telecom for a second. When should we expect to see record revenue in telecom? I guess, is that implied in your March quarter outlook? I ask because telecom fell from about $400 million a quarter two years ago to a trough of $280 in June of last year, but now you're seeing traction, coherent ZR modules, and two large system business wins that appear to be just flowing into your results that do support this end market recovery. So you've got several things acting as tailwinds. So if you could talk about the visibility you see within telecom and when we should see record revenue in that segment.

Yeah, thanks. Thanks, Carl. So, yeah, as you rightly say, our telecom revenue was down for the last several quarters as the whole industry digested inventory. You know, the nice thing is the counter cyclicality we have in the business when our telecom revenue was flat, our datacom revenue was growing nicely. And at the moment, our datacom revenue is a little bit flat as we wait for a new product launch and our telecom revenue is back to strength. And the drivers of that are a mixture of new program wins and strength in primarily DCI products, ZR products. So we expect that trend to continue. Some of the system wins are beginning to show in the numbers, but the majority of the new system wins are actually not in our results yet. The Sienna win we talked about previously is more of an FY26 story from a revenue perspective. And the other system win where we took business away from one of our competitors is really just beginning to ramp. So yeah, good strength in telecom, really offsetting that softness in datacom, but we expect that strength in telecom to continue for the next several quarters. Exactly when it gets back to where we were before the inventory digestion, it's really hard to say, and I wouldn't like to speculate, but we're just focused on getting the customers what they need. And we're very happy to see, as I say, the telecom business being very strong for us, just when we need it to be when the datacom business is a little bit soft.

Yeah, thank you for that. If I may have a follow-up. Sure. The growth in your silicon photonics business is now approaching record levels as well. I guess within silicon photonics is the incremental growth coming from high-speed transceivers inside the data center, or is it mainly coherent ZR for DCI and other telecom applications? Thank you.

It's mainly the latter, coherent transceivers for ZR, transceivers for DCI applications between the data centers. That's the main driver of our silicon photonics growth. And we're a very early adopter of silicon photonics. We've been building silicon photonics products for over a decade at this stage. So we really feel we're in a strong position as the industry moves more towards silicon photonics and also co-packaged optics. For us, it's a fairly natural transition to go from one to the other. But yeah, that growth in silicon photonics is primarily driven by coherent ZR DCI products.

Got it. Thank you.

Thank you, Carl.

Thank you. Our next question or comment comes to the line of Sameek Chatterjee from JP Morgan. Your line is open.

Hi, thanks for taking my questions. Sima, you talked about the next generation product in Datacom for the primary customer that you have here, and I think you've referenced sort of the strong visibility you have in cramping the next generation product. I mean, what's driving that confidence in terms of timing, you're guiding here to a moderation in 3Q as well, so should we just conclude that the new product sort of ramps starting in 4Q towards the end of the year and has the timing from the customer in terms of when that next product ramps, has that also changed or is it still pretty intact in terms of the timing that you were expecting to ramp the next generation product and have a follow-up?

Thank you. Yeah, I think the timing of the next generation product really depends on our customers' launch timing. We would expect to see a ramp about one quarter before our customer wants to ship product to their customers. We're ready, we're prepared and we're ready to go from a capacity perspective and we're really just working to the customer's schedule. So no big change other than we're working to the customer's schedule in terms of the launch. We have good visibility. We still have the same visibility we've had. We have visibility well beyond the component lead times. And we're quite optimistic. We're not concerned. It's really just a question of making sure we're ready to go when the customer is ready to go. So we're ready to ramp and ready to go whenever the product launches.

Okay, got it. And relative to the volumes that you're expected to ramp on initially or even sort of volumes through the cycle as well as pricing on these sort of products, what is the visibility that you have currently from the customer? I mean, particularly if you compare it to 800 gig and when you initially ramping in terms of price and volume, how does the next generation product compare?

I think in terms of if I take volume, first of all, I think, uh, you know, the volume, I think once it, once it gets going, it will be a pretty steep ramp. Uh, that's not unusual in that part of our business. So we're, we're ready for that. Um, In terms of ASPs, you know, we continually reduce our costs and therefore our prices to our customers. There's nothing new about that. I think if anything, maybe the delay with launching the end product has allowed us and the customer to really focus on cost and make sure we're very cost competitive. So, you know, we expect when the 1.6 product launches that, you know, we'll be very cost competitive. That's a relative to 800 gig. It won't be as much of an uplift as, as might traditionally happen when you double the speed. But like I say, we're ready to go. We're working very hard to make sure the costs are competitive. And yeah, the volumes, we're just ready to go whenever the customer is. But we're optimistic. We have no reason to be pessimistic or anything like that. We're quite optimistic. It's just a question of timing. Great. Thank you for taking my questions. You're welcome.

Thank you. Our next question or comment comes from the line of George Nodder from Jefferies. Mr. Nodder, your line is open.

Hi there. Thanks very much, guys. I guess I was going to ask the question of the day, I think, which is tariffs. Obviously, it's been something the industry has been concerned about for some time. I'm wondering if you guys are seeing incremental opportunity associated with tariffs going in place now. Yeah, was this an opportunity for Fafnir to take share? Can you kind of give us a sense for what you're seeing from the customers in your conversations? Thanks.

Yeah, hi, George. Yeah, we're keeping a close eye on that. You know, based on where our factories are located, so far at least, we haven't seen any tariffs being imposed on China. So we don't expect any negative impact. If anything, we maybe expect a potential positive impact if customers want to move production you know, with the most recent tariffs, you know, a lot of the supply chain in our industry, if you like, is still, a lot of it is in Mexico and some of it is still in China. So we're quite happy to work with the customers if they want to move production in our direction. So if anything, we see the tariffs, leaving aside the kind of macroeconomic impact, which I'll leave it to people smarter than me to talk about, but just in terms of the demand and, you know, our ability to win business, we don't see tariffs as a headwind. If anything, we think it could actually help us a little bit. But it's very early days. It's hard to say what will happen.

Got it. And then, you know, I think part of the trick in this is that there is some lead time, you know, moving manufacturing from one country or one geography to another. Is that, you know, if there is a benefit, is that months away, quarters away, years away? Like, how do you think about what's reasonable in terms of when it could help you?

Very hard to say, George. I don't like to not answer the question, but it's very hard to say. I think if there is a benefit, I'll put it this way, I think if the benefit hasn't materialized in months or quarters, it probably won't at that point. Because sometimes customers, companies decide to stay where they are because they'll find other ways to reduce cost or whatever. But I think it's an opportunity. I wouldn't get too excited about it, though. I think it's an opportunity. but I'd say it's probably more months and quarters than years. Yeah, the products are complex, but we tend to move, we have a track record of being able to move very complex products very quickly. So if customers want to move, we're ready to support them. We can move very quickly.

Okay, Tuber, thank you.

You're welcome.

Thank you. Our next question or comment comes from the line of Ryan Kuntz from Needham. Mr. Kuntz, your line is open.

Great, thanks for the question. Seamus, with your momentum in ZR and DCI, I wonder if you're contemplating or your customers are contemplating yet much of a transition over to 800 ZR yet, or are you really seeing 400 as the dominant force here in 25?

So, yeah, so first of all, in FQ4 and FQ1, 400 ZR was 10% or more of our optical revenue, and in Q2, 400 ZR was 10% of our total revenue. So it's a very important, if you like, category for us. You know, if you do the math, that represents about a 43% sequential increase to 83 million. So ZR is very, very important for us. And we do expect 400 ZR to remain strong in the coming quarters. We have actually called and shipped 800 ZR as well. But I think 800 ZR is It's early days, but we have actually qualified and have shipped some 800 ZR as well.

Got it. Great. And it relates to your expectations. You talked about some lumpiness here on the Datacom side. Is that primarily your lower speed Datacom you think that will suffer more or more the high end at 800 you think will see a little bit of a slowdown? Anything you can share there?

Yeah, so we don't have much low-speed Datacom business. It's mostly predominantly 800 gig and above. What I would say is we're very optimistic about our Datacom business overall. When we provided guidance, we indicated that Datacom would be roughly flat and things turned out a little bit softer than anticipated. And then the near term, the product transition we talked about, means our overall datacom revenue will will see additional softness in q3 again nothing that we're overly concerned about but it is at those higher speed products we continue to anticipate increasing demand and revenue as our customer ramps the next generation 1.6 terabit products which makes us optimistic over the longer term albeit we have some near-term softness um know in the meantime we have we have several other drivers that contributed to strong growth in q2 and we will continue to benefit from those in q3 interestingly if you look at we we often talk about our the counter cyclicality in our business that it seems when once one part of our business is is down another part is up but that's really what we've been seeing here with with our telecom and datacom business you know historically when we were going through that inventory digestion for several quarters our our datacom business uh was was strong And at the moment, you know, our datacom business is a little bit flat, but our telecom business is very strong. But the mix of our business is more on the leading edge, higher speed products, not the older products.

Got it. Makes sense. And just last if I could around, what's the rough time frame between your CapEx and when you can bring capacity online? Are we talking months, quarters?

Go ahead, Sean.

Ryan, if you are talking about our building 10, so the lead time of that is about 18 months. So we will see a linear cash outlay in terms of capex. So you would see probably about 20 million uplift in capex spends and cash outlay in the next, let's say, six to eight quarters.

Thanks so much.

And just maybe, Ryan, just to put some context around building 10, you know, in terms of the revenue capacity that we're adding. general rule of thumb, we generate about $1,200 per square foot in annual revenue. So, you know, building 10 will be a 2 million square foot facility. So it's about a $2.4 billion capacity addition that we're investing in. So, you know, obviously the actual revenue will depend on the mix of products, but that's the ballpark, you know, capacity that we're adding is about 2.4 billion.

That's great. Really impressive. Thank you, gentlemen.

Thank you, Ryan.

Thanks, Ryan. Thank you. Our next question or comment comes from the line of George Wang from Barclays. Mr. Wang, your line is open.

Hey, guys. Thanks for taking my question. Just two quick ones. Firstly, just I kind of want to hone in on the 1.16 ramp. Just maybe kind of versus the last quarter, are you guys seeing further delay or kind of, you know, kind of, you know, quote, unquote, kind of status quo, kind of still waiting for B300 transition, kind of, as you guys called out later this year. And also, kind of, are there other impediments for wider adoption for 1.60, you know, such as maybe, you know, the supply chain is waiting for the 800G network interface cards, which probably doesn't arrive until later this year. Can you kind of unpack some of the potential other underlying constraints, you know, aside from just your largest Datacom customer kind of, you know, sorting through the transition on the blackboard?

Yeah, I think on the wider questions around the supply chain and waiting for network interface cards and things like that, that's probably a question more that are directed to our customer. It's not something we really comment on or have any particular knowledge of. You know, we've been producing you know, sample qualification bills of 1.6T and to the point where we're ready to go, you know, whenever the customer is, as I talked about earlier, it's really just a question of the timing of that product launch. Again, wider questions about other parts of the network we're not really in a position to talk about, mostly because we don't know, but it's also just a question that would be better directed to our customers.

Okay, thanks. Just a quick one, if I can. In terms of Sienna business, obviously, it's anticipated it's going to be a much bigger customer in the next few quarters, kind of FY26, as you guys called out. Is there any sort of a refresher view in terms of the peak revenue run rate? I mean, do you think it can you know, surpass Cisco, kind of, you know, 10% customer. Any sort of latest thoughts in terms of the prospect for Sienna, you know, recognizing its early days? Just curious if you have additional thoughts on that.

Yeah, so we've had a couple of, you know, solid recent system wins, one of which is the Sienna new products that we talked about in prior quarters. It's a new networking product that Sienna is introducing this year. We I think we said at the time when we continue to expect that the bulk of the Sienna ramp will be in late fiscal 2025 and into early fiscal 2026. So it's more of an FY26 story from a revenue point of view. And that's really is, you know, we'd be ramping, of course, in line with the customer's ramp plans. You know, the revenue run rate for Sienna, we wouldn't comment on. We don't comment on individual other than at the end of the fiscal year, if the customer becomes a 10% customer, we disclose the revenue. But outside of that, we don't comment on individual customers' revenue, and we certainly don't forecast revenue at the customer level. So I'm afraid I can't give you a whole lot more information there, George.

Okay, thank you. I'll go back to the queue.

You're welcome. Thank you.

Thank you. Our next questioner comes from the line of Tim Savago from Northland Capital Markets. Mr. Savago, your line is open.

Thanks. Good afternoon, and congrats on the results and outlook here. Maybe I can try and come at that from another direction. So first question, if you look at the sequential growth in telecom this quarter, you've been pretty clear about the ZR, data center interconnect impact. You know, fair to conclude that the You know, other piece of that $50 million is, you know, the new program ramp with the major customer that you're talking about or anything to discuss with regard to the broader telecom landscape recovering.

So, yeah, it's primarily ZR and also the beginning, the early days of the ramp of another program win that we had, a competitive new business win where we took We took a little bit of share away from one of our competitors. You know, the customer we named before the Sienna business, that is really not in the numbers yet. That hasn't really started yet. So it's a combination of that other competitive system win plus the ramp up of ZR and DCI. You know, we really took the opportunity when the telecom business was flat because of inventory digestion, We spoke about this previously. We took the opportunity to use that to go win business. So we're beginning to see the fruits of that now.

Okay. Well, that makes this question a little easier. And Chava's referred to a couple of times, strengthen the business in Q3 and beyond. So I think that fairly opens up a discussion about fiscal Q4. Okay. And Seamus, you just said that the Siena ramp, you do expect to begin in fiscal 25. Yeah. So I guess looking at the sum total of that, you're typically seasonally pretty strong in the June quarter anyway. But it looks like you got a fair bit of momentum heading into that June quarter, regardless of whether you see 1.6T start to ramp then, which... You know, I imagine you might, but feel free to comment on that as well and just give your assessment on that overall setup there.

You're exactly right, Tim. I couldn't have said it better myself. So we have, you know, the part of our business which has been a headwind for the longest time, the telecom business has now turned back into a tailwind with a number of growth vectors in there. You know, ZR continues to grow nicely. The new network system wins that we've taken share of existing products away from one of our competitors. And then, of course, the Sienna win that hasn't really figured in our numbers yet. And then there's other system wins that we're also working on. Like I said, we alluded to earlier, we've been very busy trying to win telecom business during the time when the industry was flat. And we've been working very, very hard at that. We generally don't announce anything until there's something to announce, but There's others that we're still working hard on. So telecom, yes, is turning from being a headwind to being a tailwind. And then around the same time, all going well, we should start to ramp those next generation Datacom products as well. So we're quite optimistic going into the second half of the year. That coupled with the announcement around the new factory and the increased share buyback, I think should give you some indication of that.

Absolutely. And, well, quick one for me. I missed the non-optical guide, if you wouldn't mind repeating that briefly. And the last real question is, you know, my assumption would be, I guess I'm trying to get you to rank order of magnitude the size of the relative new systems opportunities. I would assume Deanna would be larger to much larger, but maybe not, if you're willing to comment on that. Thanks.

Yeah, I think I'll let Xavi give you the non-optical guide in a moment, but I think, yeah, the Sienna win, we're very happy with that. They're just a fantastic customer, fantastic companies to do business with, and we're so honored to be part of their supply chain and really looking forward to that business ramping. We're ready to support them. We're very excited about that, but we're also excited about the other new business wins we've had. The Sienna one, because it's a new product, okay, it doesn't ramp straight away, but when it does ramp, then it has longer legs. We have it for the life of the product, whereas some of the other ones, it's great to get the win because you get a quick infusion of revenue, but if you're ramping it, if we're ramping it in the middle of the product lifecycle, you don't get that full run at the business. So we're very happy overall. I wouldn't like to try and rank them. It's like trying to tell you which of my children I prefer. We love them all.

With regards to the guidance, Tim, we are anticipating automotive to be sequentially up and laser to be flat to slightly up as well. So across the board, we are seeing upside going into Q3 other than the temporary softness in data cost. Great. Thanks a lot.

You're welcome. Thank you. You're welcome. Thank you. Our next question or comment comes from the line of Mike Genovese from Rosenblatt Securities. Mr. Genovese, your line is open.

Great, thanks. I mean, just to clarify something that's been asked a couple times already, I probably won't get a new answer, but so on June versus September for when we might see, you know, Datacom grow again sequentially, is it just too early to tell? Or, I mean, do you have a, Did you have a sense one way or the other whether that would happen in June or September?

Well, I mean, we only guide one quarter of the time, Mike. So, you know, right now we're guiding one quarter of the time. So we're not going to really go beyond that. Yeah, we have a sense of when the new products will begin to ramp. But as we've learned the hard way over the years, sometimes new products, they don't launch exactly in line with your expectations. And sometimes they launch much quicker than we think they will. So it's really early days. But from our point of view, we're just ready to support the customer whenever they're ready to start ramping the product. But I wouldn't want to get into whether it's June or September at this point.

And I guess you probably, again, don't have a view on the overall market. But do you think that your results are representative of the overall 800G market or just, you know, I mean, obviously you have one customer there. Do you think the market is maybe doing better than what you guys are showing or do you have any idea about that?

I don't really. You know, we just go by what the customers need from us. You know, I think if you look at 800 gig, let's say data center 800 gig, There's several players there now. We're the only supplier, let's say, producing our customers design as a contract manufacturer, but then there are other merchant suppliers there. So we don't have visibility to the overall. If you look at our overall 800 gig and above number in our numbers, that also includes, of course, telecom products. It's really a mixed bag. I don't think we're necessarily representative of the overall industry because, of course, we don't have all the customers. We don't have all the products.

Okay, and this is just finally for me, if I can sneak one more in. Are you seeing anything with EMLs, particularly 200G per lane or even 100G per lane EMLs being hard to get? Is that having any impact on customers? either the size or the timing of the 800G market going to 1.6?

Yeah, I think it's not a secret. They're very hard to get. The world needs more EMLs. So, yeah, they're one of the components that's in fairly short supply.

Okay. I would ask one more if I could. Sure. As long as I have you. You know, look, in the beginning of the 800G market, there weren't a lot of merchant guys ready yet. So the start of 800G was a lot of share gain for Finisar, almost because you guys were the only player in town, the only game in town. I guess 1.6, everyone has had more of a time to sort of develop on the same timeline. But do you see 1.6 as an opportunity to gain some share, or how do you think that could play out?

It's hard to say. I think it's a little bit different this time around. I mean, for 800 gig, the products were new, the application was new, and I think we were probably sole source for a period of time until some of the merchant suppliers really caught up with the demand. I think this time around is different. Everyone knows the demand is very real. Plus, the industry, I would assume all the merchant guys are working very hard to get their 1.6 know offering uh ready and ready to roll out as well on on 800 gig you know i think the the one of the reasons we we were the sole source in the early days was more to do with just i assume reducing the amount of complexity and the number of variables in the total network i think that's probably still the case but i think as soon as the merchant suppliers are ready are ready to go i i would assume they'll be in the supply chain fairly quickly um So I think one of the, depending on your perspective, but one of the good things about the delay with launching 1.6 is that everyone is ready to go. Our customer is ready to go. The supply base is more ready to go. So I think more supply overall should see things ramp fairly quickly.

I appreciate the straightforward answers and the interesting discussion. Thanks so much.

No problem. Thank you, Mike.

Thank you. I'm sure no additional questions in the queue at this time. I'd like to turn the conference back over to Mr. Grady for any closing remarks.

Thank you for joining our call today. We're excited that our second quarter results again exceeded our guidance to produce record revenue and EPS for the company. We continue to be very optimistic about our future with several tailwinds driving our growth in the third quarter and beyond. We look forward to speaking with you again and to seeing those of you who will be attending the Susquehanna virtual conference later this month. Goodbye.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.