Fabrinet Q2 FY2025 earnings call

Key Remarks - Seamus Grady: Second quarter revenue was $834 million, up 17% y/y and 4% q/q, with record non-GAAP earnings per share of $2.61. Strong Q3 trends expected, with datacom having bumpiness but optimism for future as next-gen products ramp. Broke ground on Building 10 at Chonburi campus, a 2 million square foot facility. Repurchased over one-third of $200 million share repurchase authorization, and Board authorized additional $100 million. Telecom revenue up 24% y/y and 17% q/q driven by DCI products and system wins. Automotive revenue up 32% y/y. ### Csaba Sverha: Optical Communications revenue $647M, up 14% y/y and 3% q/q. Datacom $299M (46% of optical), up 4% y/y but down 9% q/q. Telecom $348M (54% of optical), up 24% y/y and 17% q/q. Non-Optical Communications $186M, up 29% y/y and 5% q/q. Gross margin 12.4% in Q2, operating income record $88 million with 10.6% margin. Interest income $11M, foreign exchange evaluation gain $4M, effective tax rate 8.7% due to discrete items.

Optical Communications revenue was $647 million, up 14% from a year ago and 3% from Q1. Datacom revenue within Optical Communications was $299 million, or 46% of optical communications revenue, up 4% from a year ago but down 9% from Q1. Telecom revenue was $348 million, or 54% of Optical Communications revenue, up 24% from a year ago and 17% from Q1. Non-Optical Communications revenue was $186 million, up 29% from a year ago and 5% sequentially. Each of automotive, industrial laser and other revenue category within Non-Optical Communications was up sequentially and grew over 20% year-over-year.

For third quarter, total revenue expected between $850 million and $870 million. EPS expected between $2.55 to $2.63 per diluted share. Datacom revenue expected to be down slightly sequentially. Telecom revenue expected strong sequential growth. Automotive revenue expected to continue growing sequentially. CapEx for Building 10 will have linear cash outlay with about $20 million uplift in spends over next six to eight quarters, adding $2.4 billion in revenue capacity.

Forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from management's current expectations. Refer to recent SEC filings for risk factors.

Q: When should we expect to see record revenue in telecom?

A: Seamus Grady said telecom business is strong now, with drivers like new program wins and DCI products, but exact timing of record revenue is hard to predict as it depends on customer schedules.

Q: What's driving confidence in timing of next-generation datacom product ramp?

A: Seamus Grady said confidence comes from being ready and prepared, working to customer schedule, with good visibility beyond component lead times.

Q: How do tariffs impact Fabrinet?

A: Seamus Grady said tariffs not seen as a headwind, and if anything could help by potentially driving production to their location, though impact is early and hard to predict.

Q: What's the timeframe for CapEx from Building 10 to online capacity?

A: Csaba Sverha said lead time of Building 10 is about 18 months, with linear cash outlay in CapEx over next six to eight quarters.