- Revenue and EPS Exceed Guidance
Ranges
- Gross Margin Increases to Highest
Level in Seven Quarters
- Year-to-Date Cash Flow From
Operations of $105.5 Million Up 17% From Year-Ago Period
Fabrinet (NYSE: FN), a leading provider of advanced optical
packaging and precision optical, electro-mechanical and electronic
manufacturing services to original equipment manufacturers of
complex products, today announced its financial results for its
third quarter ended March 29, 2019.
Seamus Grady, Chief Executive Officer of Fabrinet, said, “We
exceeded our guidance for revenue and profitability in the third
quarter on both an ASC 605 and ASC 606 basis, primarily due to
increasing demand from the telecom market. In addition, we were
pleased to see non-GAAP gross margins return to within our target
range. With new business wins and strong customer relationships, we
are optimistic that we can deliver a strong fourth quarter
resulting in a record year for revenue and profitability.”
Third Quarter Fiscal Year 2019 Financial Highlights
As of the first quarter of fiscal 2019, Fabrinet is reporting
results under the new revenue recognition standard Accounting
Standards Codification Topic 606 (“ASC 606”), using the modified
retrospective method. Financial results for reporting periods prior
to fiscal year 2019 are presented as previously disclosed in
conformity with the old revenue recognition standard Accounting
Standards Codification Topic 605 (“ASC 605”). A reconciliation to
ASC 605 is included at the end of this press release.
GAAP Results
- Revenue for the third quarter of fiscal
year 2019 was $399.0 million, compared to revenue of $332.2 million
for the comparable period in fiscal year 2018.
- GAAP net income for the third quarter
of fiscal year 2019 was $28.6 million, compared to GAAP net income
of $21.1 million for the third quarter of fiscal year 2018. GAAP
net income for the third quarter of fiscal year 2019 included a
foreign exchange loss of ($3.1) million, or ($0.08) per diluted
share, compared to a foreign exchange loss of ($2.4) million, or
($0.06) per diluted share, for the third quarter of fiscal year
2018.
- GAAP net income per diluted share for
the third quarter of fiscal year 2019 was $0.76, compared to GAAP
net income per diluted share of $0.55 for the third quarter of
fiscal year 2018.
- Cash flow from operations for the first
three quarters of fiscal 2019 was $105.5 million, compared to $89.8
million for the first three quarters of fiscal 2018.
Non-GAAP Results
- Non-GAAP net income for the third
quarter of fiscal year 2019 was $34.3 million, compared to non-GAAP
net income of $26.9 million for the third quarter of fiscal year
2018. Non-GAAP net income for the third quarter of fiscal year 2019
included a foreign exchange loss of ($3.1) million, or ($0.08) per
diluted share, compared to a foreign exchange loss of ($2.4)
million, or ($0.06) per diluted share, for the third quarter of
fiscal year 2018.
- Non-GAAP net income per diluted share
for the third quarter of fiscal year 2019 was $0.92, compared to
non-GAAP net income per diluted share of $0.71 for the same period
in fiscal year 2018.
Share Repurchase Program Update
During the third quarter of fiscal 2019, Fabrinet repurchased
100,000 ordinary shares at an average price of $53.78. On May 1,
2019, Fabrinet’s Board of Directors approved the repurchase of up
to an additional $50.0 million of Fabrinet’s ordinary shares,
bringing the aggregate authorization under Fabrinet’s existing
share repurchase program to $110.0 million, with $62.2 million
currently remaining.
Business Outlook
The guidance provided below for the fourth quarter of fiscal
2019 is based on ASC 605; however, we will report revenues for such
quarter based on ASC 606. As of the first quarter of fiscal 2019,
Fabrinet is reporting results under ASC 606, which it is adopting
for fiscal year 2019 on a modified retrospective method. A
reconciliation to ASC 605 is included at the end of this press
release.
Based on information available as of May 6, 2019, Fabrinet is
issuing guidance for the fourth quarter of its fiscal year 2019
ending June 28, 2019, as follows:
- Fabrinet expects fourth quarter revenue
to be in the range of $396 million to $404 million.
- GAAP net income per diluted share is
expected to be in the range of $0.78 to $0.82, based on
approximately 37.6 million fully diluted shares outstanding.
- Non-GAAP net income per diluted share
is expected to be in the range of $0.92 to $0.96, based on
approximately 37.6 million fully diluted shares outstanding.
Conference Call Information
What: Fabrinet Third Quarter Fiscal Year 2019
Financial Results Call When: Monday, May 6, 2019 Time: 5:00 p.m. ET
Live Call: (888) 357-3694, domestic (253) 237-1137, international
Passcode: 1558338 Replay: (855) 859-2056, domestic (404) 537-3406,
international Passcode: 1558338 Webcast:
http://investor.fabrinet.com/ (live and
replay)
This press release and any other information related to the call
will also be posted on Fabrinet’s website at
http://investor.fabrinet.com. A recorded version of this webcast
will be available approximately two hours after the call and will
be archived on Fabrinet’s website for a period of one year.
About Fabrinet
Fabrinet is a leading provider of advanced optical packaging and
precision optical, electro-mechanical, and electronic manufacturing
services to original equipment manufacturers of complex products,
such as optical communication components, modules and subsystems,
automotive components, medical devices, industrial lasers and
sensors. Fabrinet offers a broad range of advanced optical and
electro-mechanical capabilities across the entire manufacturing
process, including process design and engineering, supply chain
management, manufacturing, advanced packaging, integration, final
assembly and testing. Fabrinet focuses on production of high
complexity products in any mix and any volume. Fabrinet maintains
engineering and manufacturing resources and facilities in Thailand,
the United States of America, the People’s Republic of China and
the United Kingdom. For more information visit:
www.fabrinet.com.
Forward-Looking Statements
“Safe Harbor” Statement Under U.S. Private Securities
Litigation Reform Act of 1995
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These statements include: (1) statements regarding our
optimism that the fourth quarter will result in a record year for
both revenue and profitability; and (2) all of the statements under
the "Business Outlook" section regarding our expected revenue, GAAP
and non-GAAP net income per share, and fully diluted shares
outstanding for the fourth quarter of fiscal year 2019. These
forward-looking statements involve risks and uncertainties, and
actual results could vary materially from these forward-looking
statements. Important factors that could cause actual results to
differ materially from those in the forward-looking statements
include, but are not limited to: less customer demand for our
products and services than forecasted; less growth in the optical
communications, industrial lasers and sensors markets than we
forecast; difficulties expanding into additional markets, such as
the semiconductor processing, biotechnology, metrology and
materials processing markets; increased competition in the optical
manufacturing services markets; difficulties in delivering products
and services that compete effectively from a price and performance
perspective; our reliance on a small number of customers and
suppliers; difficulties in managing our operating costs;
difficulties in managing and operating our business across multiple
countries (including Thailand, the People's Republic of China, the
U.S. and the U.K.); and other important factors as described in
reports and documents we file from time to time with the Securities
and Exchange Commission (SEC), including the factors described
under the section captioned “Risk Factors” in our Quarterly Report
on Form 10-Q, filed on February 5, 2019. We disclaim any obligation
to update information contained in these forward-looking statements
whether as a result of new information, future events, or
otherwise.
Use of Non-GAAP Financials
We refer to the non-GAAP financial measures cited above in
making operating decisions because they provide meaningful
supplemental information regarding our ongoing operational
performance. Non-GAAP net income excludes: share-based compensation
expenses; depreciation of fair value uplift; severance payments;
executive search expenses; amortization of intangibles; business
combination expenses; amortization of debt issuance costs;
restructuring charges; and ASC 606 adjustments. We have excluded
these items in order to enhance investors’ understanding of our
underlying operations. The use of these non-GAAP financial measures
has material limitations because they should not be used to
evaluate our company without reference to their corresponding GAAP
financial measures. As such, we compensate for these material
limitations by using these non-GAAP financial measures in
conjunction with GAAP financial measures.
These non-GAAP financial measures are used to: (1) measure
company performance against historical results, (2) facilitate
comparisons to our competitors’ operating results, and (3) allow
greater transparency with respect to information used by management
in making financial and operational decisions. In addition, these
non-GAAP financial measures are used to measure company performance
for the purposes of determining employee incentive plan
compensation.
FABRINETCONDENSED CONSOLIDATED
BALANCE SHEETS (unaudited)
(in thousands of U.S. dollars, except share data)
March 29,2019
June 29,2018
Assets Current assets Cash and cash equivalents $
166,407 $ 158,102 Restricted cash in connection with business
acquisition — 3,331 Short-term investments 242,484 174,269 Trade
accounts receivable, net 265,110 246,912 Contract assets 10,543 —
Inventory, net 285,431 257,687 Prepaid expenses 12,299 8,061 Other
current assets 5,236 5,948 Total current assets
987,510 854,310 Non-current assets Property, plant
and equipment, net 209,084 219,640 Intangibles, net 4,112 4,880
Goodwill 3,823 3,828 Deferred tax assets 5,734 5,280 Other
non-current assets 354 80 Total non-current assets
223,107 233,708
Total Assets $ 1,210,617 $
1,088,018
Liabilities and Shareholders’ Equity Current
liabilities Bank borrowings $ 3,250 $ 3,250 Trade accounts payable
256,282 220,159 Capital lease liability, current portion 417 451
Income tax payable 2,651 709 Deferred liability in connection with
business acquisition — 3,331 Accrued payroll, bonus and related
expenses 17,900 13,476 Accrued expenses 8,772 9,013 Other payables
16,370 19,728 Total current liabilities 305,642
270,117 Non-current liabilities Long-term loan from bank 58,500
60,938 Deferred tax liability 3,177 2,284 Capital lease liability,
non-current portion 209 516 Severance liabilities 11,837 10,162
Other non-current liabilities 2,364 3,062 Total non-current
liabilities 76,087 76,962
Total Liabilities 381,729
347,079 Commitments and contingencies Shareholders’ equity
Preferred shares (5,000,000 shares authorized, $0.01 par value; no
shares issued and outstanding as of March 29, 2019 and June 29,
2018) — — Ordinary shares (500,000,000 shares authorized, $0.01 par
value; 38,216,231 shares and 37,723,733 shares issued; and
36,827,128 shares and 36,434,630 shares outstanding as of March 29,
2019 and June 29, 2018, respectively) 382 377 Additional paid-in
capital 154,738 151,797 Less: Treasury shares (1,389,103 shares and
1,289,103 shares as of March 29, 2019 and June 29, 2018,
respectively) (47,779) (42,401) Accumulated other comprehensive
loss (79) (1,257) Retained earnings 721,626 632,423
Total
Shareholders’ Equity 828,888 740,939
Total Liabilities and
Shareholders’ Equity $ 1,210,617 $ 1,088,018
FABRINETCONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONSAND COMPREHENSIVE INCOME
(unaudited)
Three Months Ended Nine Months Ended
(in thousands of U.S. dollars, except per share amounts)
March 29,2019
March 30,2018
March 29,2019
March 30,2018
Revenues $ 398,951 $ 332,213 $ 1,179,208 $ 1,026,598 Cost of
revenues (352,193) (295,280) (1,046,610)
(912,167) Gross profit 46,758 36,933 132,598 114,431
Selling, general and administrative expenses (14,132) (12,418)
(41,296) (41,253) Expenses related to reduction in workforce
(323) — (727) (1,776) Operating income 32,303
24,515 90,575 71,402 Interest income 2,144 1,149 4,770 2,554
Interest expense (1,423) (820) (3,673) (2,499) Foreign exchange
loss, net (3,055) (2,428) (408) (5,710) Other income, net
159 91 798 438 Income before income taxes
30,128 22,507 92,062 66,185 Income tax expense (1,493)
(1,454) (4,064) (4,786) Net income
28,635 21,053 87,998 61,399 Other
comprehensive income (loss), net of tax: Change in net unrealized
gain (loss) on available-for-sale securities
513
(616)
1,399 (1,048) Change in net unrealized loss on derivative
instruments
(1)
—
(2) (1) Change in foreign currency translation adjustment
486
789
(219)
1,358
Total other comprehensive income, net of tax 998 173
1,178 309 Net comprehensive income $ 29,633 $ 21,226
$ 89,176 $ 61,708
Earnings per share Basic $ 0.78 $
0.56 $ 2.39 $ 1.64 Diluted $ 0.76 $ 0.55 $ 2.35 $ 1.61
Weighted-average number of ordinary shares outstanding
(thousands of shares) Basic 36,891 37,275 36,786 37,400 Diluted
37,539 38,055 37,383 38,125
FABRINETCONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (unaudited)
Nine Months Ended (in thousands of U.S. dollars)
March 29,2019
March 30,2018
Cash flows from operating activities Net income for
the period $ 87,998 $ 61,399 Adjustments to reconcile net income to
net cash provided by operating activities Depreciation and
amortization 22,521 21,288 Loss (gain) on disposal of property,
plant and equipment 81 (153) Loss on disposal of intangibles 149 —
(Gain) loss from sales and maturities of available-for-sale
securities (196) 362 Amortization of investment premium (604) (31)
Amortization of deferred debt issuance costs — 433 Allowance for
doubtful accounts 12 44 Unrealized (gain) loss on exchange rate and
fair value of derivative instruments (5,351) 1,393 Share-based
compensation 13,373 17,704 Deferred income tax 438 19 Other
non-cash expenses 1,142 1,941 Inventory (reversal of inventory)
obsolescence 280 (291) Changes in operating assets and liabilities
Trade accounts receivable (17,942) 21,411 Contract assets (666) —
Inventory (36,698) (973) Other current assets and non-current
assets (1,568) (9,853) Trade accounts payable 37,576 (22,518)
Income tax payable 1,942 (1,678) Other current liabilities and
non-current liabilities 3,017 (703) Net cash provided
by operating activities 105,504 89,794
Cash flows
from investing activities Purchase of short-term investments
(202,328) (84,519) Proceeds from sales of short-term investments
85,941 22,169 Proceeds from maturities of short-term investments
50,370 42,977 Purchase of property, plant and equipment (13,211)
(28,268) Purchase of intangibles (290) (1,487) Proceeds from
disposal of property, plant and equipment 473 202 Net
cash used in investing activities (79,045) (48,926)
Cash flows from financing activities Proceeds of short-term
loans from bank — 5,000 Repayment of short-term loans from bank —
(1,003) Repayment of long-term loans from bank (2,438) (10,200)
Repayment of capital lease liability (342) (293) Repurchase of
ordinary shares (5,378) (22,407) Proceeds from issuance of ordinary
shares under employee share option plans
—
993 Release of restricted cash held in connection with business
acquisition (3,478) — Withholding tax related to net share
settlement of restricted share units (10,427) (4,030)
Net cash used in financing activities (22,063)
(31,940)
Net increase in cash, cash equivalents and restricted
cash 4,396 8,928
Movement in cash, cash
equivalents and restricted cash Cash, cash equivalents and
restricted cash at beginning of period 161,433 137,137 Increase in
cash, cash equivalents and restricted cash 4,396 8,928 Effect of
exchange rate on cash, cash equivalents and restricted cash
578 (89)
Cash, cash equivalents and restricted cash at
end of period $ 166,407 $ 145,976
Non-cash investing
and financing activities Construction, software-related and
equipment-related payables $ 3,286 $ 4,684
FABRINETCONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (unaudited) (Continued)
The following table provides a
reconciliation of cash, cash equivalents andrestricted cash
reported within the condensed consolidated balance sheets that sum
to thetotal of the same amounts shown in the condensed consolidated
statements of cash flows:
(amount in thousands)
As ofMarch 29, 2019
As ofMarch 30, 2018
Cash and cash equivalents $ 166,407 $ 142,407 Restricted
cash in connection with business acquisition — 3,569
Cash, cash equivalents and restricted cash $ 166,407 $ 145,976
FABRINETRECONCILIATION OF ASC
605 TO ASC 606
Three Months Ended
March 29,2019
(in thousands of U.S. dollars, except per share amounts)
As
reported under
ASC 606
Adjustment ASC 605 Revenues $
398,951 $ 2,793 $ 401,744 Cost of revenues (350,874)
(2,699) (353,573) Gross profit 48,077 94 48,171 Selling,
general and administrative expenses (10,061) —
(10,061) Operating income 38,016 94 38,110 Interest income 2,144 —
2,144 Interest expense (1,423) — (1,423) Foreign exchange loss
(3,055) — (3,055) Other income 159 — 159
Income before income taxes 35,841 94 35,935 Income tax expense
(1,493) — (1,493) Net income 34,348
94 34,442 Other comprehensive income, net of tax:
Change in net unrealized gain on available-for-sale securities
513
—
513
Change in net unrealized loss on derivative instruments
(1)
—
(1)
Change in foreign currency translation adjustment 486
— 486 Total other comprehensive income, net of tax
998 — 998 Net comprehensive income $ 35,346 $ 94 $
35,440
Earnings per share Basic $ 0.93 $ 0.00 $ 0.93 Diluted $ 0.92
$ 0.00 $ 0.92
Weighted-average number of ordinary shares
outstanding (thousands of shares) Basic 36,891 — 36,891 Diluted
37,539 — 37,539
FABRINET
RECONCILIATION OF GAAP MEASURES TO
NON-GAAP MEASURES
Three Months Ended Nine Months Ended
March 29, 2019(ASC 606)
March 30, 2018(ASC 605)
March 29, 2019(ASC 606)
March 30, 2018(ASC 605)
(in thousands of U.S. dollars,
except per share data)
Netincome
DilutedEPS
Netincome
DilutedEPS
Netincome
DilutedEPS
Netincome
DilutedEPS
GAAP measures 28,635
0.76 21,053 0.55 87,998 2.35
61,399 1.61 Items reconciling GAAP net income &
EPS to non-GAAP net income & EPS: Related to cost of revenues:
Share-based compensation expenses
1,237
0.03
1,564
0.04
4,384 0.12 5,277 0.14 Depreciation of fair value uplift
82
0.00
88
0.00
255 0.01 241 0.00 ASC 606 adoption impact on gross profit
-
-
-
-
(31)
(0.00)
-
-
Total related to gross profit
1,319
0.04
1,652
0.04
4,608 0.12 5,518 0.14 Related to selling,
general and administrative expenses: Share-based compensation
expenses
3,187
0.08
3,762
0.10
8,989 0.24 12,427 0.33 Expenses related to CFO/CEO search
285
0.01
-
-
857
0.02
204 0.00 Amortization of intangibles
163
0.00
205
0.01
531
0.01
582
0.02
Business combination expenses
88
0.00
-
-
328 0.01 117 0.00 Severance payment 348 0.01 - - 949
0.03 - - Total related to selling, general and
administrative expenses
4,071
0.11
3,967
0.11
11,654
0.31
13,329
0.35
Related to other incomes and other expenses: Other expenses
in relation to reduction in workforce
323
0.01
-
-
727
0.02
1,776
0.05
Amortization of debt issuance costs
-
-
238 0.01
-
-
778 0.02
Total related to other incomes and
other expenses 323 0.01 238 0.01 727 0.02
2,554 0.07 Total related to net income & EPS
5,713
0.15
5,857
0.16
16,989
0.45
21,401
0.56
Non-GAAP measures 34,348 0.92
26,910 0.71 104,987 2.81
82,800 2.17 Shares used in computing
diluted net income per share GAAP diluted shares 37,539 38,055
37,383 38,125 Non-GAAP diluted shares 37,539 38,055 37,383 38,125
FABRINETRECONCILIATION OF NET
CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(amount in thousands)
Three Months Ended
Nine Months Ended
March 29,2019
March 30,2018
March 29,2019
March 30,2018
Net cash provided by operating activities
$
36,206
$
52,681
$
105,504
$
89,794
Less: Purchase of property, plant and equipment
(3,479
)
(6,863
)
(13,211
)
(28,268
)
Non-GAAP free cash flow $ 32,727 $ 45,818 $ 92,293
$ 61,526
FABRINETGUIDANCE FOR QUARTER
ENDING JUNE 28, 2019RECONCILIATION OF GAAP MEASURES TO
NON-GAAP MEASURES
DilutedEPS GAAP net income per
diluted share: $0.78 to $0.82 Related to cost of
revenues: Share-based compensation expenses 0.04 Total related
to gross profit 0.04
Related to selling, general and
administrative expenses: Share-based compensation expenses 0.09
Expenses related to our CFO search 0.01 Total related to selling,
general and administrative expenses 0.10
Total related to
net income & EPS 0.14 Non-GAAP net income per
diluted share $0.92 to $0.96
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version on businesswire.com: https://www.businesswire.com/news/home/20190506005637/en/
Investor Contact:Garo Toomajanianir@fabrinet.com
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