First Quarter Fiscal Year 2020 Financial Highlights
GAAP Results
-
Revenue for the first quarter of fiscal year 2020 was
$399.3 million , compared to revenue of$377.2 million for the comparable period in fiscal year 2019. -
GAAP net income for the first quarter of fiscal year 2020 was
$25.9 million , compared to GAAP net income of$27.9 million for the first quarter of fiscal year 2019. GAAP net income for the first quarter of fiscal year 2020 included a foreign exchange loss of$1.9 million and a mark-to-market loss on the two interest rate swap contracts of$1.7 million , or$0.09 per diluted share, compared to a foreign exchange loss of$3.1 million , or$0.08 per diluted share, for the first quarter of fiscal year 2019. -
GAAP net income per diluted share for the first quarter of fiscal year 2020 was
$0.69 , compared to GAAP net income per diluted share of$0.75 for the first quarter of fiscal year 2019.
Non-GAAP Results
-
Non-GAAP net income for the first quarter of fiscal year 2020 was
$32.2 million , compared to non-GAAP net income of$34.1 million for the first quarter of fiscal year 2019. Non-GAAP net income for the first quarter of fiscal year 2020 included a foreign exchange loss of$1.9 million and a mark-to-market loss on the two interest rate swap contracts of$1.7 million , or$0.09 per diluted share, compared to a foreign exchange loss of$3.1 million , or$0.08 per diluted share, for the first quarter of fiscal year 2019. -
Non-GAAP net income per diluted share for the first quarter of fiscal year 2020 was
$0.86 , compared to non-GAAP net income per diluted share of$0.92 for the same period a year ago.
Business Outlook
Based on information available as of
-
Fabrinet expects second quarter revenue to be in the range of$408 million to $416 million . -
GAAP net income per diluted share is expected to be in the range of
$0.74 to $0.77 , based on approximately 37.7 million fully diluted shares outstanding. -
Non-GAAP net income per diluted share is expected to be in the range of
$0.91 to $0.94 , based on approximately 37.7 million fully diluted shares outstanding.
Conference Call Information
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What: |
Fabrinet First Quarter Fiscal-Year 2020 Financial Results Call |
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When: |
Monday, November 4, 2019 |
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Time: |
5:00 p.m. ET |
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Live Call: |
(888) 357-3694, domestic |
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(253) 237-1137, international |
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Passcode: 3684935 |
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Replay: |
(855) 859-2056, domestic |
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(404) 537-3406, international |
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Passcode: 3684935 |
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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
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) our expectation that Fabrinet Israel will be operational in the first part of calendar 2020; (2) our belief that Fabrinet Israel can mirror the success of Fabrinet West; and (3) 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 second quarter of fiscal year 2020. 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
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; expenses related to our CFO search; amortization of intangibles; business combination expenses; amortization of deferred debt issuance costs; expenses related to reduction in workforce; 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.
|
FABRINET |
||||||
|
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) |
||||||
|
(in thousands of U.S. dollars, except share data and par value) |
|
September 27,
|
|
June 28,
|
||
|
|
|
|
|
|
||
|
Assets |
|
|
|
|
||
|
Current assets |
|
|
|
|
||
|
Cash and cash equivalents |
|
$ |
168,535 |
|
$ |
180,839 |
|
Short-term restricted cash |
|
|
22,180 |
|
— |
|
|
Short-term investments |
|
|
238,266 |
|
|
256,493 |
|
Trade accounts receivable, net |
|
|
273,616 |
|
|
260,602 |
|
Contract assets |
|
|
11,620 |
|
|
12,447 |
|
Inventory, net |
|
|
321,511 |
|
|
293,612 |
|
Prepaid expenses |
|
|
6,313 |
|
|
8,827 |
|
Other current assets |
|
|
9,122 |
|
11,015 |
|
|
Total current assets |
|
|
1,051,163 |
|
|
1,023,835 |
|
Non-current assets |
|
|
|
|
||
|
Long-term restricted cash |
|
|
7,402 |
|
|
7,402 |
|
Property, plant and equipment, net |
|
|
212,270 |
|
|
210,686 |
|
Intangibles, net |
|
|
3,661 |
|
|
3,887 |
|
Operating right-of-use assets |
|
|
6,185 |
|
— |
|
|
Goodwill |
|
|
3,603 |
|
|
3,705 |
|
Deferred tax assets |
|
|
5,201 |
|
|
5,679 |
|
Other non-current assets |
|
|
225 |
|
|
124 |
|
Total non-current assets |
|
|
238,547 |
|
|
231,483 |
|
Total Assets |
|
$ |
1,289,710 |
|
$ |
1,255,318 |
|
Liabilities and Shareholders’ Equity |
|
|
|
|
||
|
Current liabilities |
|
|
|
|
||
|
Long-term borrowings, current portion, net |
|
$ |
12,157 |
|
$ |
3,250 |
|
Trade accounts payable |
|
|
252,147 |
|
|
257,617 |
|
Contract liabilities |
|
|
2,266 |
|
|
2,239 |
|
Capital lease liability, current portion |
|
|
391 |
|
|
398 |
|
Operating lease liability, current portion |
|
|
1,550 |
|
— |
|
|
Income tax payable |
|
|
2,534 |
|
|
1,801 |
|
Accrued payroll, bonus and related expenses |
|
|
18,713 |
|
|
16,510 |
|
Accrued expenses |
|
|
12,014 |
|
|
8,997 |
|
Other payables |
|
|
21,649 |
|
|
22,236 |
|
Total current liabilities |
|
|
323,421 |
|
|
313,048 |
|
Non-current liabilities |
|
|
|
|
||
|
Long-term borrowings, non-current portion, net |
|
|
48,631 |
|
|
57,688 |
|
Deferred tax liability |
|
|
3,791 |
|
|
3,561 |
|
Capital lease liability, non-current portion |
|
— |
|
|
102 |
|
|
Operating lease liability, non-current portion |
|
|
4,635 |
|
— |
|
|
Severance liabilities |
|
|
15,872 |
|
|
15,209 |
|
Other non-current liabilities |
|
|
2,665 |
|
|
2,611 |
|
Total non-current liabilities |
|
|
75,594 |
|
|
79,171 |
|
Total Liabilities |
|
|
399,015 |
|
|
392,219 |
|
Commitments and contingencies |
|
|
|
|
||
|
Shareholders’ equity |
|
|
|
|
||
|
Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding as of September 27, 2019 and June 28, 2019) |
— |
|
— |
|||
|
Ordinary shares (500,000,000 shares authorized, $0.01 par value; 38,389,128 shares and 38,230,753 shares issued; and 37,000,025 shares and 36,841,650 shares outstanding as of September 27, 2019 and June 28, 2019, respectively) |
|
|
384 |
|
|
382 |
|
Additional paid-in capital |
|
|
160,148 |
|
|
158,299 |
|
Less: Treasury shares (1,389,103 shares and 1,389,103 shares as of September 27, 2019 and June 28, 2019, respectively) |
|
|
(47,779) |
|
|
(47,779) |
|
Accumulated other comprehensive loss |
|
|
(2,598) |
|
|
(2,386) |
|
Retained earnings |
|
|
780,540 |
|
|
754,583 |
|
Total Shareholders’ Equity |
|
|
890,695 |
|
|
863,099 |
|
Total Liabilities and Shareholders’ Equity |
|
$ |
1,289,710 |
|
$ |
1,255 |
|
FABRINET |
||||||
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited) |
||||||
|
|
Three Months Ended |
|||||
|
(in thousands of U.S. dollars, except per share data) |
September 27,
|
|
September 28,
|
|||
|
Revenues |
$ |
399,296 |
|
$ |
377,177 |
|
|
Cost of revenues |
|
(353,309) |
|
|
(336,901) |
|
|
Gross profit |
|
45,987 |
|
|
40,276 |
|
|
Selling, general and administrative expenses |
|
(16,000) |
|
|
(14,437) |
|
|
Expenses related to reduction in workforce |
— |
|
|
(85) |
||
|
Operating income, net |
|
29,987 |
|
|
25,754 |
|
|
Interest income |
|
2,098 |
|
|
1,444 |
|
|
Interest expense |
|
(2,393) |
|
|
(634) |
|
|
Foreign exchange (loss) gain, net |
|
(1,953) |
|
|
3,068 |
|
|
Other income, net |
|
377 |
|
|
77 |
|
|
Income before income taxes |
|
28,116 |
|
|
29,709 |
|
|
Income tax expense |
|
(2,159) |
|
|
(1,859) |
|
|
Net income |
|
25,957 |
|
|
27,850 |
|
|
Other comprehensive (loss) income, net of tax: |
|
|
|
|||
|
Change in net unrealized gain on available-for-sale securities |
|
35 |
|
|
288 |
|
|
Change in net unrealized gain (loss) on derivative instruments |
|
39 |
|
|
(1) |
|
|
Change in net retirement benefits plan – prior service cost |
|
83 |
|
— |
||
|
Change in foreign currency translation adjustment |
|
(369) |
|
|
(200) |
|
|
Total other comprehensive (loss) income, net of tax |
|
(212) |
|
|
87 |
|
|
Net comprehensive income |
$ |
25,745 |
|
$ |
27,937 |
|
|
|
|
|
|
|||
|
Earnings per share |
|
|
|
|||
|
Basic |
$ |
0.70 |
|
$ |
0.76 |
|
|
Diluted |
$ |
0.69 |
|
$ |
0.75 |
|
|
|
||||||
|
Weighted-average number of ordinary shares outstanding (thousands of shares) |
||||||
|
Basic |
|
36,913 |
|
|
36,625 |
|
|
Diluted |
|
37,529 |
|
|
37,140 |
|
|
FABRINET |
||||||
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) |
||||||
|
|
|
Three Months Ended |
||||
|
(in thousands of U.S. dollars) |
|
September 27,
|
|
September 28,
|
||
|
|
|
|
|
|
||
|
Cash flows from operating activities |
|
|
|
|
||
|
Net income for the period |
|
$ |
25,957 |
|
$ |
27,850 |
|
Adjustments to reconcile net income to net cash provided by operating activities |
|
|
|
|
||
|
Depreciation and amortization |
|
|
7,465 |
|
|
7,412 |
|
Loss on disposal of property, plant and equipment |
|
|
8 |
|
|
46 |
|
Loss on disposal of intangibles |
|
— |
|
|
149 |
|
|
(Gain) loss from sales and maturities of available-for-sale securities |
|
|
(67) |
|
|
178 |
|
Amortization of investment discount (premium) |
|
|
65 |
|
|
(94) |
|
Amortization of deferred debt issuance costs |
|
|
2 |
|
— |
|
|
(Reversal of) allowance for doubtful accounts |
|
|
(5) |
|
— |
|
|
Unrealized loss (gain) on exchange rate and fair value of foreign currency forward contracts |
|
|
1,479 |
|
|
(4,232) |
|
Unrealized loss (gain) on fair value of interest rate swaps |
|
|
1,671 |
|
|
(50) |
|
Share-based compensation |
|
|
5,995 |
|
|
4,980 |
|
Deferred income tax |
|
|
705 |
|
|
3 |
|
Severance liabilities |
|
|
811 |
|
|
872 |
|
Other non-cash expenses |
|
|
53 |
|
|
(282) |
|
Reversal of inventory obsolescence |
|
|
(264) |
|
|
(478) |
|
Changes in operating assets and liabilities |
|
|
|
|
||
|
Trade accounts receivable |
|
|
(12,967) |
|
|
(10,887) |
|
Contract assets |
|
|
827 |
|
|
(280) |
|
Inventory |
|
|
(27,634) |
|
|
(28,904) |
|
Other current assets and non-current assets |
|
|
4,225 |
|
|
(979) |
|
Trade accounts payable |
|
|
(5,263) |
|
|
29,182 |
|
Contract liabilities |
|
|
27 |
|
— |
|
|
Income tax payable |
|
|
733 |
|
|
1,680 |
|
Other current liabilities and non-current liabilities |
|
|
(1,176) |
|
|
8,427 |
|
Net cash provided by operating activities |
|
|
2,647 |
|
|
34,593 |
|
|
|
|
|
|
||
|
Cash flows from investing activities |
|
|
|
|
||
|
Purchase of short-term investments |
|
|
(62,880) |
|
|
(1,955) |
|
Proceeds from sales of short-term investments |
|
|
49,472 |
|
|
24,181 |
|
Proceeds from maturities of short-term investments |
|
|
31,673 |
|
|
19,863 |
|
Purchase of property, plant and equipment |
|
|
(6,343) |
|
|
(5,410) |
|
Purchase of intangibles |
|
|
(246) |
|
|
(78) |
|
Net cash provided by investing activities |
|
|
11,676 |
|
|
36,601 |
|
|
|
|
|
|
||
|
Cash flows from financing activities |
|
|
|
|
||
|
Payment of debt issuance costs |
|
|
(153) |
|
— |
|
|
Proceeds from long-term borrowings |
|
|
60,938 |
|
— |
|
|
Repayment of long-term borrowings |
|
|
(60,938) |
|
|
(813) |
|
Repayment of capital lease liability |
|
|
(109) |
|
|
(123) |
|
Release of restricted cash held in connection with business acquisition |
|
— |
|
|
(3,478) |
|
|
Withholding tax related to net share settlement of restricted share units |
|
|
(4,144) |
|
|
(8,904) |
|
Net cash used in financing activities |
|
|
(4,406) |
|
|
(13,318) |
|
Net increase in cash, cash equivalents and restricted cash |
|
|
9,917 |
|
|
57,876 |
|
|
|
|
|
|
||
|
Movement in cash, cash equivalents and restricted cash |
|
|
|
|
||
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
188,241 |
|
|
161,433 |
|
Increase in cash, cash equivalents and restricted cash |
|
|
9,917 |
|
|
57,876 |
|
Effect of exchange rate on cash, cash equivalents and restricted cash |
|
|
(41) |
|
|
667 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
198,117 |
|
$ |
219,976 |
|
|
|
|
|
|
||
|
Non-cash investing and financing activities |
|
|
|
|
||
|
Construction, software and equipment-related payables |
|
$ |
9,816 |
|
$ |
3,830 |
|
FABRINET |
|||||
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||
|
(CONTINUED) |
|||||
|
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total of the same amounts shown in the unaudited condensed consolidated statements of cash flows: |
|||||
|
(amount in thousands) |
As of
|
As of
|
|||
|
|
|
|
|||
|
Cash and cash equivalents |
$ |
168,535 |
$ |
219,976 |
|
|
Restricted cash |
|
29,582 |
|
- |
|
|
Cash, cash equivalents and restricted cash |
$ |
198,117 |
$ |
219,976 |
|
|
FABRINET |
||||||||
|
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES |
||||||||
|
Three Months Ended |
||||||||
|
|
September 27,
|
|
September 28,
|
|||||
|
(in thousands of U.S. dollars, except per share data) |
Net
|
|
Diluted
|
|
Net
|
|
Diluted
|
|
|
|
|
|
|
|
|
|||
|
GAAP measures |
$25,957 |
|
$0.69 |
|
$27,850 |
|
$0.75 |
|
|
Items reconciling GAAP net income & EPS to non-GAAP net income & EPS: |
|
|
|
|
|
|
|
|
|
Related to cost of revenues: |
|
|
|
|
|
|
|
|
|
Share-based compensation expenses |
1,720 |
|
0.05 |
|
1,847 |
|
0.05 |
|
|
Depreciation of fair value uplift |
79 |
|
0.00 |
|
89 |
|
0.00 |
|
|
ASC 606 adoption impact on gross profit |
|
|
|
|
(31) |
|
0.00 |
|
|
Total related to gross profit |
1,799 |
|
0.05 |
|
1,905 |
|
0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
Related to selling, general and administrative expenses: |
|
|
|
|
|
|
|
|
|
Share-based compensation expenses |
4,275 |
|
0.11 |
|
3,133 |
|
0.08 |
|
|
Expenses related to CFO search |
— |
|
— |
|
190 |
|
0.01 |
|
|
Amortization of intangibles |
143 |
|
0.00 |
|
192 |
|
0.01 |
|
|
Business combination expenses |
— |
|
— |
|
182 |
|
0.00 |
|
|
Severance payment |
— |
|
— |
|
585 |
|
0.02 |
|
|
Total related to selling, general and administrative expenses |
4,418 |
|
0.12 |
|
4,282 |
|
0.12 |
|
|
|
|
|
|
|
|
|
|
|
|
Related to other incomes and other expenses: |
|
|
|
|
|
|
|
|
|
Expenses related to reduction in workforce |
— |
|
— |
|
85 |
|
0.00 |
|
|
Amortization of deferred debt issuance costs |
2 |
|
0.00 |
|
— |
|
— |
|
|
Total related to other incomes and other expenses |
2 |
|
0.00 |
|
85 |
|
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
Total related to net income & EPS |
6,219 |
|
0.17 |
|
6,272 |
|
0.17 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP measures |
$32,176 |
|
$0.86 |
|
$34,122 |
|
$0.92 |
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing diluted net income per share |
|
|
|
|
|
|
|
|
|
GAAP diluted shares |
|
|
37,529 |
|
|
|
37,140 |
|
|
Non-GAAP diluted shares |
|
|
37,529 |
|
|
|
37,140 |
|
|
FABRINET |
||||||
|
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW |
||||||
|
(amount in thousands) |
Three Months Ended |
|||||
|
|
September 27,
|
September 28,
|
||||
|
|
|
|
||||
|
Net cash provided by operating activities |
$ |
2,647 |
$ |
34,593 |
||
|
Less: Purchase of property, plant and equipment |
|
(6,343) |
|
(5,410) |
||
|
Non-GAAP free cash flow |
$ |
(3,696) |
$ |
29,183 |
||
|
FABRINET |
||
|
GUIDANCE FOR QUARTER ENDING DECEMBER 27, 2019 |
||
|
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES |
||
|
|
Diluted |
|
|
|
EPS |
|
|
GAAP net income per diluted share: |
$0.74 to $0.77 |
|
|
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 |
0.12 |
|
|
Expenses related to our CFO search |
0.01 |
|
|
Total related to selling, general and administrative expenses |
0.13 |
|
|
|
|
|
|
Total related to net income & EPS |
0.17 |
|
|
Non-GAAP net income per diluted share |
$0.91 to $0.94 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20191104005861/en/
Source:
Investor Contact:
Garo Toomajanian
ir@fabrinet.com