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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 10-Q
____________________________
(Mark One)
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended December 29, 2023
OR
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from__________to__________
Commission File Number: 001-34775
____________________________
FABRINET
(Exact name of registrant as specified in its charter)
____________________________
Cayman Islands
(State or other jurisdiction of
incorporation or organization)
98-1228572
(I.R.S. Employer
Identification No.)

c/o Intertrust Corporate Services
One Nexus Way, Camana Bay
Grand Cayman
Cayman Islands
(Address of principal executive offices)

KY1-9005
(Zip Code)
+66 2-524-9600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Ordinary Shares, $0.01 par valueFNNew York Stock Exchange
____________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  x    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    x  No
As of January 26, 2024, the registrant had 36,308,431 ordinary shares, $0.01 par value, outstanding.

1

Table of Contents
FABRINET
FORM 10-Q
QUARTER ENDED DECEMBER 29, 2023
Table of Contents
Page No.

2

Table of Contents

RISK FACTORS SUMMARY

You should carefully consider the information set forth below under the heading “Risk Factors” in Part II, Item 1A before deciding whether to invest in our securities. Below is a summary of the principal risks associated with an investment in our securities.
Our sales depend on a small number of customers. A reduction in orders from any of these customers, the loss of any of these customers, or a customer exerting significant pricing and margin pressures on us could harm our business, financial condition and operating results.

Consolidation in the markets we serve could harm our business, financial condition and operating results.

If the optical communications market does not expand as we expect, our business may not grow as fast as we expect, which could adversely impact our business, financial condition and operating results.

Our quarterly revenues, gross profit margins and operating results have fluctuated significantly and may continue to do so in the future, which may cause the market price of our ordinary shares to decline or be volatile.

If we are unable to continue diversifying our precision optical and electro-mechanical manufacturing services across other markets within the optics industry, such as the semiconductor processing, biotechnology, metrology and material processing markets, or if these markets do not grow as fast as we expect, our business may not grow as fast as we expect, which could adversely impact our business, financial condition and operating results.

We face significant competition in our business. If we are unable to compete successfully against our current and future competitors, our business, financial condition and operating results could be harmed.

Cancellations, delays or reductions of customer orders and the relatively short-term nature of the commitments of our customers could harm our business, financial condition and operating results.

Our exposure to financially troubled customers or suppliers could harm our business, financial condition and operating results.

We purchase some of the critical materials used in certain of our products from a single source or a limited number of suppliers. Supply shortages have in the past, and could in the future, impair the quality, reduce the availability or increase the cost of materials, which could harm our revenues, profitability and customer relations.

Managing our inventory is complex and may require write-downs due to excess or obsolete inventory, which could cause our operating results to decrease significantly in a given fiscal period.

If we fail to adequately expand our manufacturing capacity, we will not be able to grow our business, which would harm our business, financial condition and operating results. Conversely, if we expand too much or too rapidly, we may experience excess capacity, which would harm our business, financial condition and operating results.

We may experience manufacturing yields that are lower than expected, potentially resulting in increased costs, which could harm our business, operating results and customer relations.

If the products that we manufacture contain defects, we could incur significant correction costs, demand for our services may decline and we may be exposed to product liability and product warranty claims, which could harm our business, financial condition, operating results and customer relations.

If we fail to attract additional skilled employees or retain key personnel, our business, financial condition and operating results could suffer.

Fluctuations in foreign currency exchange rates and changes in governmental policies regarding foreign currencies could increase our operating costs, which would adversely affect our operating results.

We conduct operations in a number of countries, which creates logistical and communications challenges for us and exposes us to other risks and challenges that could harm our business, financial condition and operating results.

We are subject to governmental export and import controls in several jurisdictions that subject us to a variety of risks, including liability, impairment of our ability to compete in international markets, and decreased sales and customer orders.

We are subject to risks related to the ongoing U.S.-China trade dispute, including increased tariffs on materials that we use in manufacturing, which could adversely affect our business, financial condition and operating results.

Political unrest and demonstrations, as well as changes in the political, social, business or economic conditions in Thailand, could harm our business, financial condition and operating results.
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We expect to continue to invest in our manufacturing operations in the People's Republic of China ("PRC"), which will continue to expose us to risks inherent in doing business in the PRC, any of which risks could harm our business, financial condition and operating results.

Natural disasters, epidemics, acts of terrorism and political and economic developments could harm our business, financial condition and operating results.

Unfavorable worldwide economic conditions (including inflation and supply chain disruptions) may negatively affect our business, financial condition and operating results.

The loan agreements for our long-term debt obligations and other credit facilities contain financial ratio covenants that may impair our ability to conduct our business.

We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to our shareholders.

Our investment portfolio may become impaired by deterioration of the capital markets.

We are not fully insured against all potential losses. Natural disasters or other catastrophes could adversely affect our business, financial condition and operating results.

There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with U.S. GAAP. Any changes in estimates, judgments and assumptions could have a material adverse effect on our business, financial condition and operating results.

Our business and operations would be adversely impacted in the event of a failure of our information technology infrastructure and/or cyber security attacks.

Intellectual property infringement claims against our customers or us could harm our business, financial condition and operating results.

Any failure to protect our customers’ intellectual property that we use in the products we manufacture for them could harm our customer relationships and subject us to liability.

We are subject to the risk of increased income taxes, which could harm our business, financial condition and operating results.

We have incurred and will continue to incur significant increased costs as a result of operating as a public company, and our management will be required to continue to devote substantial resources to various compliance initiatives.

If we are unable to meet regulatory quality standards applicable to our manufacturing and quality processes for the products we manufacture, our business, financial condition and operating results could be harmed.

Failure to comply with applicable environmental laws and regulations could have a material adverse effect on our business, financial condition and operating results.

Our share price may be volatile due to fluctuations in our operating results and other factors, including the activities and operating results of our customers or competitors, any of which could cause our share price to decline.

If securities or industry analysts do not publish research or if they publish misleading or unfavorable research about our business, the market price and trading volume of our ordinary shares could decline.

We may become a passive foreign investment company, which could result in adverse U.S. tax consequences to U.S. investors.

Our business and share price could be negatively affected as a result of activist shareholders.

Certain provisions in our constitutional documents may discourage our acquisition by a third party, which could limit our shareholders' opportunity to sell shares at a premium.

Our shareholders may face difficulties in protecting their interests because we are incorporated under Cayman Islands law.

Certain judgments obtained against us by our shareholders may not be enforceable.

Energy price volatility may negatively impact our business, financial condition and operating results.

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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FABRINET
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands of U.S. dollars, except share data and par value)December 29,
2023
June 30,
2023
Assets
Current assets
Cash and cash equivalents$334,053 $231,368 
Short-term investments406,540 319,100 
Trade accounts receivable, net of allowance for expected credit losses of $2,741 and $965, respectively
584,614 531,767 
Inventories414,758 519,576 
Prepaid expenses5,952 7,849 
Other current assets60,446 42,880 
Total current assets1,806,363 1,652,540 
Non-current assets
Property, plant and equipment, net306,019 310,350 
Intangibles, net2,549 2,394 
Operating right-of-use assets5,767 1,634 
Deferred tax assets11,804 12,095 
Other non-current assets636 635 
Total non-current assets326,775 327,108 
Total Assets$2,133,138 $1,979,648 
Liabilities and Shareholders’ Equity
Current liabilities
Long-term borrowings, current portion, net$6,078 $12,156 
Trade accounts payable376,556 381,129 
Fixed assets payable12,983 13,526 
Operating lease liabilities, current portion1,425 1,201 
Income tax payable7,581 6,024 
Accrued payroll, bonus and related expenses20,174 23,748 
Accrued expenses16,119 20,447 
Other payables45,861 23,654 
Total current liabilities486,777 481,885 
Non-current liabilities
Deferred tax liability4,546 4,799 
Operating lease liability, non-current portion3,956 66 
Severance liabilities24,505 22,159 
Other non-current liabilities1,972 2,081 
Total non-current liabilities34,979 29,105 
Total Liabilities521,756 510,990 
Commitments and contingencies (Note 15)
Shareholders’ equity
Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding as of December 29, 2023 and June 30, 2023)
  
Ordinary shares (500,000,000 shares authorized, $0.01 par value; 39,435,354 shares and 39,284,176 shares issued as of December 29, 2023 and June 30, 2023, respectively; and 36,296,621 shares and 36,183,682 shares outstanding as of December 29, 2023 and June 30, 2023, respectively)
394 393 
Additional paid-in capital209,208 206,624 
Less: Treasury shares (3,138,733 shares and 3,100,494 shares as of December 29, 2023 and June 30, 2023, respectively)
(201,205)(194,833)
Accumulated other comprehensive income (loss)4,197 (8,115)
Retained earnings1,598,788 1,464,589 
Total Shareholders’ Equity1,611,382 1,468,658 
Total Liabilities and Shareholders’ Equity$2,133,138 $1,979,648 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FABRINET
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited)
Three Months EndedSix Months Ended
(in thousands of U.S. dollars, except per share data)December 29,
2023
December 30,
2022
December 29,
2023
December 30,
2022
Revenues$712,694 $668,656 $1,398,171 $1,324,085 
Cost of revenues(624,364)(583,441)(1,225,437)(1,156,114)
        Gross profit88,330 85,215 172,734 167,971 
Selling, general and administrative expenses(19,316)(18,930)(39,745)(39,495)
Operating income69,014 66,285 132,989 128,476 
Interest income7,748 2,334 13,646 3,893 
Interest expense(36)(389)(81)(780)
Foreign exchange gain (loss), net(3,788)(3,904)(3,373)(1,819)
Other income (expense), net(35)(68)(115)(209)
Income before income taxes72,903 64,258 143,066 129,561 
Income tax expense(3,793)(1,101)(8,867)(1,789)
Net income69,110 63,157 134,199 127,772 
Other comprehensive income (loss), net of tax:
       Change in net unrealized gain (loss) on available-for-sale securities2,946 1,183 3,894 (278)
       Change in net unrealized gain (loss) on derivative instruments8,951 11,188 8,390 9,970 
       Change in net retirement benefits plan – prior service cost8 57 134 225 
       Change in foreign currency translation adjustment(206)(84)(106)162 
Total other comprehensive income (loss), net of tax11,699 12,344 12,312 10,079 
Net comprehensive income$80,809 $75,501 $146,511 $137,851 
Earnings per share
       Basic$1.90 $1.73 $3.70 $3.50 
       Diluted$1.89 $1.71 $3.67 $3.47 
Weighted-average number of ordinary shares outstanding (thousands of shares)
       Basic36,328 36,589 36,292 36,558 
       Diluted36,639 36,939 36,560 36,848 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FABRINET
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)
For the Three Months Ended December 29, 2023
 Ordinary ShareAdditional
Paid-in
Capital
Treasury
Shares
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
(in thousands of U.S. dollars, except share data)SharesAmount
Balances at September 29, 202339,430,970 $394 $202,432 $(194,833)$(7,502)$1,529,678 $1,530,169 
Net income— — — — — 69,110 69,110 
Other comprehensive income (loss)— — — — 11,699 — 11,699 
Share-based compensation— — 6,981 — — — 6,981 
Issuance of ordinary shares4,384 — — — — —  
Repurchase of 38,239 shares held as treasury shares
— — (6,372)— — (6,372)
Tax withholdings related to net share settlement of restricted share units— — (205)— — — (205)
Balances at December 29, 2023
39,435,354 $394 $209,208 $(201,205)$4,197 $1,598,788 $1,611,382 

For the Six Months Ended December 29, 2023
 Ordinary ShareAdditional
Paid-in
Capital
Treasury
Shares
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
(in thousands of U.S. dollars, except share data)SharesAmount
Balances at June 30, 202339,284,176 $393 $206,624 $(194,833)$(8,115)$1,464,589 $1,468,658 
Net income— — — — — 134,199 134,199 
Other comprehensive income (loss)— — — — 12,312 — 12,312 
Share-based compensation— — 14,937 — — — 14,937 
Issuance of ordinary shares151,178 1 (1)— — —  
Repurchase of 38,239 shares held as treasury shares
— — — (6,372)— — (6,372)
Tax withholdings related to net share settlement of restricted share units— — (12,352)— — — (12,352)
Balances at December 29, 2023
39,435,354 $394 $209,208 $(201,205)$4,197 $1,598,788 $1,611,382 








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FABRINET
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)
For the Three Months Ended December 30, 2022
 Ordinary ShareAdditional
Paid-in
Capital
Treasury
Shares
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
(in thousands of U.S. dollars, except share data)SharesAmount
Balances at September 30, 202239,245,547 $392 $187,899 $(152,158)$(15,058)$1,281,291 $1,302,366 
Net income— — — — — 63,157 63,157 
Other comprehensive income (loss)— — — — 12,344 — 12,344 
Share-based compensation— — 6,775 — — — 6,775 
Issuance of ordinary shares6,034 1 (1)— — —  
Repurchase of 1,648 shares held as treasury shares
— — (204)— — (204)
Tax withholdings related to net share settlement of restricted share units— — (307)— — — (307)
Balances at December 30, 2022
39,251,581 $393 $194,366 $(152,362)$(2,714)$1,344,448 $1,384,131 

For the Six Months Ended December 30, 2022
 Ordinary ShareAdditional
Paid-in
Capital
Treasury
Shares
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
(in thousands of U.S. dollars, except share data)SharesAmount
Balances at June 24, 202239,048,700 $390 $196,667 $(147,258)$(12,793)$1,216,676 $1,253,682 
Net income— — — — — 127,772 127,772 
Other comprehensive income (loss)— — — — 10,079 — 10,079 
Share-based compensation— — 14,498 — — — 14,498 
Issuance of ordinary shares202,881 3 (3)— — —  
Repurchase of 48,625 shares held as treasury shares
— — — (5,104)— — (5,104)
Tax withholdings related to net share settlement of restricted share units— — (16,796)— — — (16,796)
Balances at December 30, 2022
39,251,581 $393 $194,366 $(152,362)$(2,714)$1,344,448 $1,384,131 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FABRINET
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
 Six Months Ended
(in thousands of U.S. dollars)December 29,
2023
December 30,
2022
Cash flows from operating activities
Net income for the period$134,199 $127,772 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization24,186 21,596 
(Gain) loss on disposal and impairment of property, plant and equipment and intangibles(111)(337)
(Gain) loss from sales and maturities of available-for-sale securities(1)92 
Amortization of discount (premium) of short-term investments(1,397)565 
(Reversal of) allowance for expected credit losses1,776 251 
Unrealized loss (gain) on exchange rate and fair value of foreign currency forward contracts3,287 3,086 
Amortization of fair value at hedge inception of interest rate swaps(154)(346)
Share-based compensation14,714 14,498 
Deferred income tax1,117 (1,338)
Other non-cash expenses90 (305)
Changes in operating assets and liabilities
Trade accounts receivable(53,873)(80,054)
Inventories104,818 20,475 
Other current assets and non-current assets(16,360)(11,837)
Trade accounts payable(6,980)(4,176)
Income tax payable1,531 (577)
Severance liabilities1,395 1,269 
Other current liabilities and non-current liabilities20,977 14,466 
Net cash provided by operating activities229,214 105,100 
Cash flows from investing activities
Purchase of short-term investments(164,971)(74,482)
Proceeds from sales of short-term investments10,000 30,000 
Proceeds from maturities of short-term investments72,824 46,925 
Purchase of property, plant and equipment(21,236)(23,643)
Purchase of intangibles(518)(412)
Proceeds from disposal of property, plant and equipment2,048 32 
Net cash used in investing activities(101,853)(21,580)
Cash flows from financing activities
Repayment of long-term borrowings(6,094)(9,140)
Repayment of finance lease liability (5)
Repurchase of ordinary shares(6,372)(5,104)
Withholding tax related to net share settlement of restricted share units(12,352)(16,796)
Net cash used in financing activities(24,818)(31,045)
Net increase (decrease) in cash, cash equivalents and restricted cash$102,543 $52,475 
Movement in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at the beginning of period$231,368 $198,365 
Increase (decrease) in cash, cash equivalents and restricted cash102,543 52,475 
Effect of exchange rate on cash, cash equivalents and restricted cash142 (11)
Cash, cash equivalents and restricted cash at the end of period$334,053 $250,829 
Non-cash investing and financing activities
Construction, software and equipment-related payables$12,983 $18,920 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FABRINET
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands of U.S. dollars unless otherwise noted)
1.    Business and organization
General
Fabrinet (“Fabrinet” or the “Parent Company”) was incorporated on August 12, 1999, and commenced operations on January 1, 2000. The Parent Company is an exempted company incorporated in the Cayman Islands, British West Indies. The “Company” refers to Fabrinet and its subsidiaries as a group.
The Company provides 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 sub-systems, automotive components, industrial lasers, medical devices and sensors. The Company 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, complex printed circuit board assembly, advanced packaging, integration, final assembly and testing. The Company focuses primarily on the production of low-volume, high-mix products. The principal subsidiaries of Fabrinet include Fabrinet Co., Ltd. (“Fabrinet Thailand”), Casix, Inc. (“Casix”), Fabrinet West, Inc. (“Fabrinet West”) and Fabrinet Israel Ltd. (“Fabrinet Israel”).
2.    Accounting policies
Basis of presentation
The accompanying unaudited condensed consolidated financial statements for Fabrinet as of December 29, 2023 and for the three and six months ended December 29, 2023 and December 30, 2022 include normal recurring adjustments necessary for a fair statement of the financial statements set forth herein, in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or "GAAP") for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such information does not include all of the information and footnotes required by U.S. GAAP for annual financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in Fabrinet’s Annual Report on Form 10-K for the year ended June 30, 2023.
The balance sheet as of June 30, 2023 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
The results for the three and six months ended December 29, 2023 may not be indicative of results for the year ending June 28, 2024 or any future periods.
Use of Estimates
The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amount of total revenues and expenses during the year. The Company bases estimates on historical experience and various assumptions about the future that are believed to be reasonable based on available information. The Company’s reported financial position or results of operations may be materially different under different conditions or when using different estimates and assumptions, particularly with respect to significant accounting policies, which are discussed below. Significant assumptions are used in accounting for share-based compensation, allowance for expected credit losses, income taxes, inventory obsolescence, goodwill and valuation of intangible assets related to business acquisitions, among others. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates. In the event that the Company's estimates or assumptions prove to be different from actual results, adjustments will be made in subsequent periods to reflect more current information.




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Fiscal years
The Company utilizes a 52-53 week fiscal year ending on the Friday in June closest to June 30. The three months ended December 29, 2023 and December 30, 2022 consisted of 13 weeks. The six months ended December 29, 2023 and December 30, 2022 consisted of 26 and 27 weeks, respectively. Fiscal year 2024 will comprise 52 weeks and will end on June 28, 2024.
Adoption of New Accounting Standards
No new accounting standard was adopted during the first half of fiscal year 2024.
New Accounting Standards—not yet adopted by the Company
In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, “Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures,” which is intended to improve reportable segment disclosure requirements, primarily through additional disclosures about significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. This ASU will be effective for the Company in the first quarter of fiscal year 2025. The Company is currently assessing the impact to its disclosures.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740), Improvements to Income Tax Disclosures,” which requires more detailed income tax disclosures. This ASU requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction. This ASU is effective for all entities for fiscal years beginning after December 15, 2024, with early adoption permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will be effective for the Company in the first quarter of fiscal year 2026. The Company is currently assessing the impact to its disclosures.
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3.    Revenues from contracts with customers
Revenue by Geographic Area and End Market
Revenues are attributed to a particular geographic area based on the bill-to-location of the Company’s customers. The Company operates in three geographic regions: North America; Asia-Pacific and others; and Europe.
The following table presents total revenues by geographic region:
(in thousands, except percentages)Three Months Ended
December 29, 2023
As a % of Total
Revenues
Six Months Ended
December 29, 2023
As a % of Total
Revenues
North America
   U.S.$238,288 $493,147 
Others (1)
3,331 6,791 
Total revenue in North America241,619 33.9 %499,938 35.8 %
Asia-Pacific and others
   Israel (2)
267,038 477,714 
   India75,033 145,810 
   Malaysia36,626 69,945 
   China21,262 41,522 
   Hong Kong12,150 27,938 
   Thailand10,403 23,430 
   Japan5,826 12,636 
   Others1,570 2,735 
Total revenue in Asia-Pacific and others429,908 60.3 %801,730 57.3 %
Europe
   U.K.18,870 48,644 
   Germany10,395 23,175 
   Others11,902 24,684 
Total revenue in Europe$41,167 5.8 %$96,503 6.9 %
Total revenue$712,694 100.0 %$1,398,171 100.0 %

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(in thousands, except percentages)Three Months Ended
December 30, 2022
As a % of Total
Revenues
Six Months Ended
December 30, 2022
As a % of Total
Revenues
North America
   U.S.$319,918 $664,998 
Others (1)
4,033 7,657 
Total revenue in North America323,951 48.5 %672,655 50.8 %
Asia-Pacific and others
   India82,178 162,211 
   Israel59,893 97,170 
   Malaysia50,390 99,714 
   Hong Kong39,723 72,195 
   China26,480 49,544 
   Thailand16,098 28,714 
   Japan11,737 22,085 
   Others1,901 5,061 
Total revenue in Asia-Pacific and others288,400 43.1 %536,694 40.5 %
Europe
   U.K.30,316 63,148 
   Germany13,129 26,443 
   Others12,860 25,145 
Total revenue in Europe$56,305 8.4 %$114,736 8.7 %
Total revenue$668,656 100.0 %$1,324,085 100.0 %
(1)Others includes revenues from external customers based in our country of domicile, the Cayman Islands, which for each year presented is $0.
(2)Due to increase in revenue from a significant customer.
The following table presents revenues by end market:
(in thousands, except percentages)Three Months Ended
December 29, 2023
As a % of Total
Revenues
Six Months Ended
December 29, 2023
As a % of Total
Revenues
Optical communications$567,934 79.7 %$1,101,191 78.8 %
Automotive, lasers and other144,760 20.3 %296,980 21.2 %
Total$712,694 100.0 %$1,398,171 100.0 %

(in thousands, except percentages)Three Months Ended
December 30, 2022
As a % of Total
Revenues
Six Months Ended
December 30, 2022
As a % of Total
Revenues
Optical communications$506,056 75.7 %$1,003,617 75.8 %
Automotive, lasers and other162,600 24.3 %320,468 24.2 %
Total$668,656 100.0 %$1,324,085 100.0 %




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Contract Assets and Liabilities
A contract asset is recognized when the Company has recognized revenues, but has not yet issued an invoice to its customer for payment. Contract assets are recognized in the unaudited condensed consolidated balance sheets under other current assets and transferred to accounts receivable when rights to payment become unconditional.
As of December 29, 2023 and June 30, 2023, the Company's contract assets are de minimis.
A contract liability is recognized when the Company has advance payment arrangements with customers. Contract liabilities are recognized in the unaudited condensed consolidated balance sheets under other payables. The contract liabilities balance is normally recognized as revenue within six months.
The following tables summarize the activity in the Company’s contract liabilities during the six months ended December 29, 2023:
(in thousands)Contract
Liabilities
Beginning balance, June 30, 2023
$3,036 
Advance payments received during the period7,610 
Revenue recognized(4,325)
Ending balance, December 29, 2023
$6,321 

4.    Earnings per ordinary share
Basic earnings per ordinary share is computed by dividing reported net income by the weighted-average number of ordinary shares outstanding during each period. Diluted earnings per ordinary share is computed by calculating the effect of potential dilutive ordinary shares outstanding during the period using the treasury stock method. Dilutive ordinary equivalent shares consist of restricted share units and performance share units.
Earnings per ordinary share was calculated as follows:
Three Months EndedSix Months Ended
(in thousands, except per share data)December 29,
2023
December 30,
2022
December 29,
2023
December 30,
2022
Net income attributable to shareholders$69,110 $63,157 $134,199 $127,772 
Weighted-average number of ordinary shares outstanding36,328 36,589 36,292 36,558 
Incremental shares arising from the assumed vesting of restricted share units and performance share units311 350 268 290 
Weighted-average number of ordinary shares for diluted earnings per ordinary share36,639 36,939 36,560 36,848 
Basic earnings per ordinary share$1.90 $1.73 $3.70 $3.50 
Diluted earnings per ordinary share$1.89 $1.71 $3.67 $3.47 


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5.    Cash, cash equivalents and short-term investments
The Company’s cash, cash equivalents, and short-term investments are as follows:
Fair Value
(in thousands)Carrying
Cost
Unrealized
Gain/
(Loss)
Cash and
Cash
Equivalents
Marketable
Securities
Other
Investments
As of December 29, 2023
Cash$332,881 $— $332,881 $— $— 
Cash equivalents1,172  1,172 — — 
Liquidity funds31,736 — — — 31,736 
Certificates of deposit and time deposits134,777 1,519 — 136,296 — 
Corporate debt securities122,554 (1,158)— 121,396 — 
U.S. agency and U.S. treasury securities116,856 256 — 117,112 — 
Total$739,976 $617 $334,053 $374,804 $31,736 
As of June 30, 2023
Cash$230,967 $— $230,967 $— $— 
Cash equivalents401 — 401 — — 
Liquidity funds41,104 — — — 41,104 
Certificates of deposit and time deposits64,278 329 — 64,607 — 
Corporate debt securities161,453 (3,375)— 158,078 — 
U.S. agency and U.S. treasury securities55,542 (231)— 55,311 — 
Total$553,745 $(3,277)$231,368 $277,996 $41,104 
All highly liquid investments with original maturities of three months or less at the date of purchase are classified as cash equivalents. Management determines the appropriate classification of its investments at the time of purchase and reevaluates the designations at each balance sheet date. The Company may sell certain of its short-term investments prior to their stated maturities for strategic reasons including, but not limited to, anticipation of credit deterioration and duration management. The maturities of the Company’s short-term investments generally range from three months to three years.
The following table summarizes the cost and estimated fair value of short-term investments classified as available-for-sale securities based on stated effective maturities as of December 29, 2023 and June 30, 2023:
December 29, 2023June 30, 2023
(in thousands)Carrying
Cost
Fair ValueCarrying
Cost
Fair Value
Due within one year$200,139 $201,672 $172,992 $173,137 
Due between one to five years205,784 204,868 149,385 145,963 
Total$405,923 $406,540 $322,377 $319,100 

6.    Fair value of financial instruments
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value hierarchy is established, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs for the valuation of an asset or liability as of the measurement date. The three levels of inputs that may be used to measure fair value are defined as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
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Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for assets or liabilities, either directly or indirectly. If the assets or liabilities have a specified (contractual) term, Level 2 inputs must be observable for substantially the full term of assets or liabilities.
Level 3 inputs are unobservable inputs for assets or liabilities, which require the reporting entity to develop its own valuation techniques and assumptions.
The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
The following table provides details of the financial instruments measured at fair value on a recurring basis, including:
Fair Value Measurements at Reporting Date Using
(in thousands)Level 1Level 2Level 3Total
As of December 29, 2023
Assets
Cash equivalents$ $1,172 $ $1,172 
Liquidity funds 31,736  31,736 
Certificates of deposit and time deposits 136,296  136,296 
Corporate debt securities 121,396  121,396 
U.S. agency and U.S. treasury securities 117,112  117,112 
Derivative assets – current portion 4,391 
(1)
 4,391 
Total$ $412,103 $ $412,103 
Liabilities
       Derivative liabilities – current portion$ $(1)$ $(1)
Total$ $(1)
(2)
$ $(1)

Fair Value Measurements at Reporting Date Using
(in thousands)Level 1Level 2Level 3Total
As of June 30, 2023
Assets
Cash equivalents$ $401 $ $401 
Liquidity funds 41,104  41,104 
Certificates of deposit and time deposits 64,607  64,607 
Corporate debt securities 158,078  158,078 
U.S. agency and U.S. treasury securities 55,311  55,311 
Derivative assets – current portion 221 
(3)
 221 
Total$ $319,722 $ $319,722 
Liabilities
       Derivative liabilities – current portion$ $(5,236)$ $(5,236)
Total$ $(5,236)
(4)
$ $(5,236)
(1)Foreign currency forward contracts with an aggregate notional amount of $125.0 million and 0.3 million Canadian dollars and an interest rate swap agreement with a notional amount of $60.9 million.
(2)Foreign currency forward contracts with an aggregate notional amount of $1.0 million.
(3)Foreign currency forward contracts with an aggregate notional amount of $3.0 million and 0.2 million Canadian dollars and an interest rate swap agreement with a notional amount of $60.9 million.
(4)Foreign currency forward contracts with an aggregate notional amount of $140.0 million.


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Derivative Financial Instruments
The Company utilizes derivative financial instruments to hedge (i) foreign exchange risk associated with certain foreign currency denominated assets and liabilities and other foreign currency transactions, and (ii) interest rate risk associated with its long-term debt.
The Company minimizes the credit risk associated with its derivative instruments by limiting the exposure to any single counterparty and by entering into derivative instruments only with counterparties that meet the Company’s minimum credit quality standard.
Foreign currency forward and option contracts
As a result of foreign currency rate fluctuations, the U.S. dollar equivalent values of the Company’s foreign currency denominated assets and liabilities fluctuate. The Company uses foreign currency forward and option contracts to manage the foreign exchange risk associated with a portion of its foreign currency denominated assets and liabilities and other foreign currency transactions. The Company enters into foreign currency forward and option contracts to hedge fluctuations in the U.S. dollar value of forecasted transactions denominated in Thai baht and Canadian dollars with counterparties that meet the Company’s minimum credit quality standard.
The Company may enter into foreign currency forward contracts with maturities of up to 12 months to hedge fluctuations in the U.S. dollar value of forecasted transactions denominated in Thai baht, including inventory purchases, payroll and other operating expenses. The Company considers these forward contracts as dual-purpose hedges, that hedge both the foreign exchange fluctuation (i) from inception through the forecasted expenditure, and (ii) any subsequent revaluation of the account payable or accrual. The Company may designate the forward contracts that hedge the foreign exchange fluctuation from inception through the forecasted expenditure as cash flow hedges. The gain or loss on a derivative instrument designated and qualified as a cash flow hedging instrument is recorded as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. The reclassified amounts are presented in the same income statement line item as the earnings effect of the hedged item. Once the forecasted transactions are recorded, the Company will discontinue the hedging relationship by de-designating the derivative instrument and recording subsequent changes in fair value through contract maturity to foreign exchange gain (loss), net in the unaudited condensed consolidated statements of operations and comprehensive income as a natural hedge against the Thai baht denominated assets and liabilities.
The Company may also enter into non-designated foreign currency forward and option contracts to provide an offset to the re-measurement of foreign currency denominated assets and liabilities and to hedge certain forecasted exposures. Changes in the fair value of these non-designated derivatives are recorded as foreign exchange gain (loss), net in the unaudited condensed consolidated statements of operations and comprehensive income.
As of December 29, 2023, the Company had 126 outstanding U.S. dollar foreign currency forward contracts against Thai baht, with an aggregate notional amount of $126.0 million and maturity dates ranging from January 2024 through July 2024 and one outstanding Canadian dollar foreign currency forward contract with a notional amount of 0.3 million Canadian dollars and a maturity date in March 2024.
As of June 30, 2023, the Company had 143 outstanding U.S. dollar foreign currency forward contracts against Thai baht with an aggregate notional amount of $143.0 million and maturity dates ranging from July 2023 through January 2024, and one outstanding Canadian dollar foreign currency forward contract with a notional amount of 0.2 million Canadian dollars and a maturity date in September 2023.
As of December 29, 2023, the hedging relationship over foreign currency forward contracts designated for hedge accounting was determined to be highly effective based on the performance of retrospective and prospective regression testing. As of December 29, 2023, the amount in accumulated other comprehensive income (“AOCI”) expected to be reclassified into earnings within 12 months was a gain of $3.9 million.
As of June 30, 2023, the hedging relationship over foreign currency forward contracts designated for hedge accounting had been tested to be highly effective based on the performance of retrospective and prospective regression testing. As of June 30, 2023, the amount in AOCI expected to be reclassified into earnings within 12 months was a loss of $4.0 million.
During the three and six months ended December 29, 2023, the Company included an unrealized gain of $2.6 million and $2.9 million, respectively, from changes in the fair value of a foreign currency forward contract that was not designated for hedge accounting in earnings as foreign exchange gain (loss), net in the unaudited condensed consolidated statements of operations and comprehensive income.
During the three and six months ended December 30, 2022, the Company included an unrealized gain of $4.2 million and $4.0 million, respectively, from changes in the fair value of a foreign currency forward contract that was not designated for
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hedge accounting in earnings as foreign exchange gain (loss), net in the unaudited condensed consolidated statements of operations and comprehensive income.
Interest Rate Swap Agreements
The Company has entered into interest rate swap agreements to mitigate interest rate risk and improve the interest rate profile of the Company’s debt obligations. As of December 29, 2023 and June 30, 2023, the Company had one outstanding interest rate swap agreement with a notional amount of $60.9 million.
On July 25, 2018, Fabrinet Thailand entered into an interest rate swap agreement to effectively convert the floating interest rate of the term loan under the Company's previous syndicated senior credit facility agreement to a fixed interest rate of 2.86% per annum through the scheduled maturity of the term loan in June 2023 (see Note 10). The Company did not designate this interest rate swap for hedge accounting.
On September 3, 2019, Fabrinet Thailand entered into a term loan agreement under a credit facility agreement with Bank of Ayudhya Public Company Limited, and on September 10, 2019, the Company repaid in full the outstanding term loan under the Company's previous syndicated senior credit facility agreement (see Note 10). In conjunction with the funding of the new term loan, the Company entered into a second interest rate swap agreement. The combination of both of these interest rate swaps effectively converts the floating interest rate of the Company’s term loan with Bank of Ayudhya Public Company Limited to a fixed interest rate of 4.36% per annum through the maturity of the term loan in June 2024.
On September 27, 2019, the Company designated these two interest rate swaps as a cash flow hedge for the Company’s term loan under the credit facility agreement with Bank of Ayudhya Public Company Limited. The combination of these two interest rate swaps qualified for hedge accounting because the hedges were highly effective, and the Company had designated and documented contemporaneously the hedging relationships involving these interest rate swaps, one of which matured in June 2023. While the Company intends to continue to meet the conditions for hedge accounting, if hedges do not qualify as highly effective, the changes in the fair value of the derivatives used as hedges would be reflected in earnings. From September 27, 2019, any gains or losses related to these interest rate swaps are recorded in AOCI in the unaudited condensed consolidated balance sheets. The Company reclassifies a portion of the gains or losses from AOCI into earnings at each reporting period based on either the accrued interest amount or the interest payment.
As of December 29, 2023, the amount in AOCI that is expected to be reclassified into earnings within 12 months was a gain of $0.1 million.
As of June 30, 2023, the amount in AOCI that is expected to be reclassified into earnings within 12 months was a gain of $0.4 million.



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The following table provides a summary of the impact of derivative gain (loss) of the Company’s foreign currency forward contracts and interest rate swaps which were designated as cash flow hedges on the unaudited condensed consolidated statements of operations and other comprehensive income:
Three Months EndedSix Months Ended
(in thousands)Financial
statements
line item
December 29,
2023
December 30,
2022
December 29,
2023
December 30,
2022
Derivatives gain (loss) recognized in other comprehensive income (loss):
Foreign currency forward contractsOther
comprehensive
income
$11,119 $14,754 $9,554 $11,762 
Interest rate swapsOther
comprehensive
income
(75)310 (153)826 
Total derivatives gain (loss) recognized in other comprehensive income (loss)$11,044 $15,064 $9,401 $12,588 
Derivatives (gain) loss reclassified from accumulated other comprehensive income (loss) into earnings:
Foreign currency forward contractsCost of revenues$4,783 $5,534 $8,455 $9,328 
Foreign currency forward contractsSG&A199 230 354 390 
Foreign currency forward contractsForeign exchange loss, net(7,205)(9,485)(10,420)(11,990)
Interest rate swapsInterest expense(65)(155)(154)(346)
Total derivatives (gain) loss reclassified from accumulated other comprehensive income (loss) into earnings$(2,288)$(3,876)$(1,765)$(2,618)
Change in net unrealized gain (loss) on derivatives instruments$8,756 $11,188 $7,636 $9,970 
Fair Value of derivatives
The following table provides the fair values of the Company’s derivative financial instruments for the periods presented:
December 29,
2023
June 30,
2023
(in thousands)Derivative
Assets
Derivative
Liabilities
Derivative
Assets
Derivative
Liabilities
Derivatives not designated as hedging instruments
Foreign currency forward and option contracts$328 $(1)$2 $(1,256)
Derivatives designated as hedging instruments
Foreign currency forward contracts4,001  4 (3,980)
Interest rate swaps62  215  
Derivatives, gross balances$4,391 $(1)$221 $(5,236)
The Company recorded the fair value of derivative financial instruments in the unaudited condensed consolidated balance sheets as follows:
Derivative Financial InstrumentsBalance Sheet line item
Fair Value of Derivative AssetsOther current assets, Other non-current assets
Fair Value of Derivative LiabilitiesAccrued expenses, Other non-current liabilities
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7.    Inventories
(in thousands)As of December 29,
2023
As of June 30,
2023
Raw materials$87,803 $157,379 
Work in progress249,874 305,627 
Finished goods48,879 28,608 
Goods in transit28,202 27,962 
Total inventories$414,758 $519,576 

8.    Leases
The Company leases facilities under non-cancelable operating lease agreements. The Company leases a portion of its capital equipment and vehicles, certain land and buildings for its facilities in Thailand, the Cayman Islands, the PRC, the U.S., the U.K., Israel and Singapore under operating lease arrangements that expire at various dates through 2029. Certain of these lease arrangements provide the Company the ability to extend the lease from one to five years following the expiration of the current term. However, the Company has excluded all lease extension options from its right of use (“ROU”) assets and lease liabilities as the Company is not reasonably assured that it will exercise these options. None of the lease agreements contain residual value guarantees provided by the lessee. The Company also has one intercompany lease transaction in the form of a lease of office and manufacturing space.
Operating leases
As of December 29, 2023, the maturities of the Company’s operating lease liabilities were as follows:
(in thousands)
2024 (remaining six months)$994 
20251,190 
20261,118 
20271,143 
20281,143 
Thereafter287 
Total undiscounted lease payments5,875 
Less imputed interest(494)
Total present value of lease liabilities$5,381 (1)
(1)Includes current portion of operating lease liabilities of $1.4 million.
Rental expense related to the Company’s operating leases is recognized on a straight-line basis over the lease term.
Rental expense for long-term leases for the three and six months ended December 29, 2023 was $0.5 million and $1.1 million, respectively, and for the three and six months ended December 30, 2022 was $0.6 million and $1.2 million, respectively.
Rental expense for short-term leases for the three and six months ended December 29, 2023 was $0.3 million and $0.7 million, respectively, and for the three and six months ended December 30, 2022 was de minimis.
The following summarizes additional information related to the Company’s operating leases:
 
As of
December 29, 2023
As of
June 30, 2023
Weighted-average remaining lease term (in years)4.41.2
Weighted-average discount rate4.0 %3.4 %
The following table presents supplemental disclosure for the unaudited condensed consolidated statements of cash flows related to operating and finance leases for the three and six months ended December 29, 2023 and December 30, 2022:
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Three Months EndedSix Months Ended
(in thousands)December 29,
2023
December 30,
2022
December 29,
2023
December 30,
2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$785 $661 $1,744 $1,302 
Financing cash flows from finance leases$ $3 $ $5 
ROU assets obtained in exchange for lease liabilities$118 $69 $5,054 $69 
9.    Intangibles
The following tables present details of the Company’s intangibles:
(in thousands)Gross
Carrying
Amount
Accumulated
Amortization
Net
As of December 29, 2023
Software$11,165 $(8,616)$2,549 
(in thousands)Gross
Carrying
Amount
Accumulated
Amortization
Net
As of June 30, 2023
Software$10,533 $(8,139)$2,394 
The Company recorded amortization expense relating to intangibles of $0.3 million and $0.4 million for the three months ended December 29, 2023 and December 30, 2022, respectively, and $0.6 million and $0.8 million for the six months ended December 29, 2023 and December 30, 2022, respectively.
The weighted-average remaining life of software and customer relationships was:
(years)