Q2 2020 Earnings Call
Good day, ladies and gentlemen, welcome to Fabrinets financial results conference call for the second quarter fiscal year 2020.
This time, all participants are any listen only mode.
Later, we'll conduct a question and answer session and instructions on how to participate will be given at that time.
As a reminder, today's call is being recorded.
I'd now like to turn the call over to your host Garo Toomajanian Investor Relations.
Thank you operator, and good afternoon, everyone.
Thank you for joining us on today's conference call can it's got to cabinets financial and operating results for the second quarter fiscal year 2020, which ended December 27, 2000 Nike.
Yeah on the call today, our Seamus greedy Chief Executive Officer, guessing Chief Financial Officer Choppiness Yeah.
As president of operations Finance, you see about designation.
This call is being webcast replay will be available on the Investor section about website located at Investor Dark fiber <unk> Dot com.
Please refer to our website for important information, including our earnings press release, any investor presentation, which include our GAAP to non-GAAP reconciliation.
I'd like to remind you that today's discussion will contain forward looking statements about future financial performance of the company.
Forward looking statements are subject to risks and uncertainties that could cause actual results could differ materially from management's current expectations.
These statements reflect our opinions only after the date of his presentation.
Undertakes no obligation to revise them im not going to do information what future events, except as required by law.
For a description of the risk factors that may affect our adult please refer to our recent 60 filings in particular the section captioned risk factors not form 10-Q filed on November five 2019.
You begin the call with your Mark some Shannon PSC Java all of my time question.
No I can turn the call over to Fabrinets, yes, she mcgrady James.
Thank you girl and good afternoon, everyone.
We had a very strong second quarter financial results that exceeded all of our guidance metrics, including record quarterly revenue.
Performance was driven by sequential growth in nearly all areas of our business.
End market demand stabilizing we expect to see continued year over year growth in the car Corp.
Revenue in the second quarter were 426 million up 7% from the first Walker and 6% from a year ago.
Revenue upside largely sold to the bottom line with non-GAAP net income of one dollar per share, which was also above the top end of our guidance range.
Gross margin was 11.9% and we continue to anticipate non-GAAP gross margins to be it within our target range of 12 to 12 and hot per cent for the full year.
Looking at our business by end markets optical communications revenue was 322 million up 6% from the Fourkscore.
It's represented 76% I've told her revenue consistent with the first quarter.
Well, then optical communications telecom revenue was 248.
8% from the first Walker and 20% from a year ago and represented 77% optical <unk>.
Our burdened transfer program with Infinera against contributor to our telecom growth on the program was fully ramped at the end of the quarter as anticipated.
Datacom revenue in the second quarter was 74 million slight increase from Q1, which was better than we had anticipated as demand trends for these products continue to stabilize.
Datacom represented 23% of optical communications revenue.
Hi technology.
Silicon Photonics based optical communications revenue increased by 7% from the first quarter to 82 million unrepresented, 26% of optical communications revenue.
Revenue from QSS P 20, Eightth in Qs that P. 56, Transceivers was 48 million three Megan from the first quarter.
My days were raised 100 gig programs represented 49% of optical communications revenue at 159 million.
And products races at speeds up 400 gig in a both continued to see rapid cool, Turkey, 1% from the first quarter to 49, but.
Looking at our non optical communications business revenue of 100 and formed Megan was up from 97 million in the fourth quarter, which was also better than expected.
We were pleased to see the demand for industry lasers improves and as a result revenue for these products was also better than expected at 46 me compared to 41 million Fourkscore.
We remain optimistic that over the longer term industry laser manufacturers with increasingly leverage outsourcing to remain globally competitive.
We believe we're uniquely positioned to be a leader in serving this market I see opportunity evolves.
Automotive revenue moderated to 21 million, reflecting normal quarter to quarter variability from next generation automotive programs.
Which we expect to return to growth it's hard for.
Sensor revenue increased slightly to 3.9 million from Threeq Onefive.
Finally revenue generated from other non optical applications grew 20% sequentially to Turkey 3 million, mainly from Fabrinet west.
During the quarter, we saw additional programs had ramps production at Fabrinet west transfer to Bangkok, where we anticipate their volumes we continue to grow.
This is another illustration of the success of our new product introduction model, which we would continue to leverage in Santa Clara and we're gearing up to extend his ran into coming months.
At the same time success of our program with Infinera demonstrates our ability to bins competes network systems, but offering economic advantages to our customers.
We believe there could be additional opportunities for us to vertically integrate from the component level up to the systems out there.
That can provide additional business the fabrinets, let's simplifying the supply chain for customers and we have been actively pursuing these opportunities.
And today I'm pleased to announce that after the close of the second quarter, we were awarded significant new project by Cisco.
Which would further build on our successful partnership.
Well, it's still early days, we believe that if this program ramps as anticipated.
Fiscal could represent 10% of revenue or more for Fabrinet consistent twentytwenty one.
We look forward to security more on this program as it progresses.
Finally, we also announced today that after more than a year evaluating internal and external candidates. We're pleased to welcome job as far as our new Chief Financial Officer effective February 17th.
With T.S. stepping down from the role of nearly 18 months. After initially announcing his intention to retire.
We are extremely grateful to tias for his contributions over the years to Fabrinets and for these commitments to ensuring a smooth transition.
She actually be reporting to me as SVP, especially projects. During this transition period, whose dedication and positive attitude our model for us on and we wish him the best in his well deserved retirement.
China has been vice President of operations finance at Fabrinet for almost two years, though.
I have had the pleasure working directly with Java in the past.
He displays all the characteristics that have had a meaningful hand in phablets cost success, including integrity collaboration and commitment to success.
Confident that China will play a leading role in helping fabulous get to our next level of performance.
Before I turn the call over to tea essence, traveling I would like to address the Corona virus outbreak eventual your own concerned about.
But our third quarter results often reflect a small seasonal downtick guidance said, we're providing for the third quarter also includes the anticipated impact from extended shutdowns in China due to the Corona virus outbreak.
Specifically, the lunar new year weeklong shutdown at our case Exclusivities in Suzhou, China, which manufactures custom upticks component.
Has been extended from one week to two weeks ending February 10.
In addition, some of our current parties occurs in China are also impacted by shutdowns. This as a direct impact on our top and bottom line expectations and is considered in the guidance, we're providing for the third quarter.
User data to the grown of ours is rapidly evolving and our top priority is to keep our employees safe and we'll continue to monitor the situation.
In summary.
We're pleased with our stronger than expected performance in the second quarter and we're excited about Arden, our new business activity.
We anticipate the Corona virus outbreak will result in a larger than normal sequential revenue decline into third quarter I believe we remain well positioned to extend our business success.
Market leadership as we look ahead.
Now, let me turn to call over to T S and Chad to discuss the details of our second quarter performance and our outlook Ts.
Thank you for the Kaila, Sheila and good afternoon, everyone.
I would like to congratulate Java, all these appointments and committed to making sure you transition to the CFO position he smoked.
Now turning to our results.
Well, let you more details on our financial results for the second quarter and then when could you tell boss.
Our guidance for the third quarter fiscal year 2015.
Although revenue in a second quarter fiscal year 2024 on the Infinitys Ticketfly to me then above the upper end of our guidance range and the quarterly like but.
Non-GAAP net income was one dollar but yet.
There's also above our guidance for me.
One of the foreign exchange headwinds the one thing is approximately two cents push it.
Now turning to the details of our piano reconciliations of GAAP to non-GAAP measure you think with it you know a name, but believe and investor presentation, we should have fly on their website.
Non-GAAP gross margin in the second quarter was 11.9, but that we continue to expect gross margins to be we didn't know if I gave me for the yeah.
Non-GAAP operating expenses was 12.3 million that in a second quarter.
Non-GAAP operating income was 38.5 million and non-GAAP operating margin was 9%.
Excellent in the quarter was to me then and now normalized effective tax rate was less than 5%.
We continue to expect Ali effective tax rate to be 5% to 6% for the full yet.
Non-GAAP net income was above our guidance range at 37.7 mean that in the second quarter well one dollar but does it go share as I indicated audio.
On a GAAP basis, which include the share based compensation expenses and amortizations that using costs.
Net income for the second quarter was 41.2 million or 83 cents diluted share also above the high and above guidance.
Turning to the balance sheet and cash flow statement and yellow second quarter, CAD, we speak that cash and investment well 450.5 million.
Compared to 436.4 million at yellow the first quarter.
Operating cash flow in a quarter or 50 me then and we kept by sunlight by 1 million free cash flow was 40.9 million in a second quarter.
During the quarter, our working capital we tend to Neal to lever actually begin consuming the sign for the inventory and collecting the universe.
We do not duplicate any share during the quarter 62.2 me that'd be made you know share at least the case pull them.
We will continue to evaluate market condition to opportunities to creep Acacia Ed when possible.
Before I turn the call to each other possible, while it's important guidance I'd like to take this opportunity and thing all Ali investor on the by site and appeals that and that is well your support and all that won't you have done over the years.
I appreciate your professionalism and has enjoyed working with all of you.
I wish you all nothing but the best.
I would now let's talk about the gift I'll have to see guidance.
Thank you D.S. and good afternoon to those if you're listening to our call.
I'm looking for about two stepping up as the next CFO at pub or not.
Yes, it's been a great Panther and Miami. The main thing that's spot on an open level of dialog meeting that stores. This year has had.
I'm looking for about two a smooth transition, including getting to know those of you attending go I've seen mark what other investor events in the coming month.
I would now like to turn into our guidance for the third quarter fiscal year 2020.
After a record quarterly revenue performance in Q2, you expect to maintain our year over year growth in the third quarter.
We anticipate that third quarter revenue being a moderate more than the usual seasonal impact as a result of they put on a virus outbreak in China.
For the third quarter, you anticipate revenue to be between 400, and then and 418 million.
Well, yes perspective, you anticipate non-GAAP net income fish casting the third quarter would be in the range of 92 cents. So 95 cents.
GAAP net income best CAD 75 to 78 cents based on approximately 37.9 million fully diluted shares outstanding.
In conclusion.
Yes, easy dollar strong performance in a quarter.
We are excited about our business momentum.
Despite the small near term impact this quarter nobody without they remain optimistic that became continue to be a chat all their value over the longer term.
Operator, we're now ready to open the call for questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.
Please standby well, we compile the Q when a roster.
First question comes from Alex Henderson of Needham Your question. Please.
Before I get into a question, yes. Thank you very much for all the work Youve put in with US and we really appreciate your professionalism and superb job you did running of the companies.
Finance operations and.
Replacement.
Excellent.
So.
The first question I wanted to ask was.
Obviously you hedge.
Third quarter I mean, the other side of the Corona that was the.
Fall off of tourism and.
And in Thailand, and the very sharp correction.
The bought a that has occurred obviously youre expecting some pressure from.
The strong but for now that its corrected are you changing any of your steps in terms of.
Our hedging.
[noise] policies, where are you typically hedge one one quarter fully two quarters half I think is.
Are you do it and then lesser and then the back half lock in these lower rates or how do you think you'll handle it.
Yeah, I like let me today, so that we do not chance I'll policy on hedging play somebody like exactly what do you say on the bus and for the current quarter than 50, plus and for the outboard anything if I put that weather for the quarter.
The only thing we're looking at these documents a successful hedge that's what we beat for the interest rate swap contract.
So this quarter all the into CE Mark to market interest he saw a month to month here, it's all going to the well see I you know go other comprehensive income this equity and that you would roll out overtime. So we're going to do the same thing for Tesla hedge depend on Pwc approval, we might get it done before the or maybe next quarter.
Well show in the quarter, we get it done so in that case, then all of the Guinea laws or.
What do you have like before we're going to the equity.
So just just to be clear, though I was really talking about the longer term implications of the exchange rate.
Strength pressuring gross margins and now that pressure has been removed.
By the correction.
Plan to lock that in at all so that you can NK cell via Rona issue goes away.
We end up with.
Rebound in the bought.
Yeah. The bought has mostly both of the bound yet we shall come a weakening okay right now the full cost 30.5, we'd be a Muslim luck at 30.2 last quarter. So again in a long run you know who believe that but we're continuing to on the pressure to be strengthened so we think.
Well the steps to just make sure that you know, we probably touch them and obviously the best that you'll be naturally hedged evacuate selling high but they'll be perfect. But then the industry will allow me to do that so yeah, we watch very closely.
Again, it probably but continue to strengthen what do nothing much again do at some point in time you cut it by the people that you know so and thinking.
Do the old yeah well.
At least the immediate pressure did a bit but in a long money by continuing to strengthen that you had to face effect that you know, it's a increase call well full and partial and of course not here.
So if I could ask one more question they could comment you made about Cisco.
I'm, assuming that you're not including the acquisition of vacation.
Thank you would have been over 10% either way. So I assume this is just Cisco prior to.
That acquisitions going to 10% and could you quantify that.
Doubling of your business was Cisco is it.
20% improvement in your business with Cisco what does what does this project that you're talking about.
In terms of scale.
Pair to what you're currently doing is it a significant increase.
Modest increase some some characterization.
Thanks, I would I think first of all you're correct. The numbers, we talked about her Cisco alone doesn't it doesn't include.
The let's say the Acacia business, which of course would would be significant on its own. So looking at Cisco I mean this is a significant.
I'd characterize it as a significant new business awards for us.
It's a it's a very large piece of business had its very important for us because it.
It's rice in I suppose in our wheelhouse and our sweet spot we've talked maybe at some of the investor meetings and the road shows about the importance for us of.
Penetrating some of the system companies.
That from the component level up we produced a lot of components that go into these products so to us that seem to make sense you know in order to to simplify the supply chain for our customers, but at the same time growing the business ourselves it seems to make sense for us to go after this type of business and we've been we've been fortunate with this one.
It's a it's a verticals what I would call the vertical opdivo and so its from the system from the component level up.
I'd like to say, it simplifies and streamlines as a function for the customers.
Yes, the 10% metric is for Cisco as a whole.
Which we hope we expect when they when the deal with the kitchen go through would be will be a combination of Cisco and Acacia but.
But certainly the business on the tone is significant piece of business.
It's similar in size to the increase you got off to the systems.
Business from the narrow or is it smaller than that I mean can give us some.
Bigger than a bread box kind of comment.
[laughter] spray, but.
I would say, it's it's in a similar kind of range. We don't have put a number on it right now, but it's a significant piece of business you know.
We we wouldn't business all the time, we generally don't call out specific specific.
Program. So the fact that we're calling it out which means it's a significant piece of it and so it would be of I supposed to have a similar scale.
Last question I'll cede the floor can you break out your expectation for Datacom and telecom.
In the upcoming guidance. Thanks.
In the upcoming guidance I.
I think the telecom, though.
For a couple reason or the virus as well by this doesn't help us.
But again, we he's saying on the Datacom you know I mean this quarter, how well they have can do we expect to be dal, but we've held flat and opposite of it and we see the momentum will continue so I think most of the datacom guys out outside China.
Lucky Okay. So most of the tightness you know multi penny come so we expect kind of going to be down.
Great. Thank you very much.
Thanks, Alex.
Thank you. Your next question comes from Troy Jensen Piper Sandler.
Our line is open.
Hey, John Congrats on the nice results in a T.S. Good luck, we definitely all enjoyed.
And with you over the years from now machine the best let them and so much I think it's right.
Hey, John could you guys diving I mean, you hit on Krona virus I guess Im just curious if you could kind of quantify how much of an impact at the news.
Just be curious you know your thoughts to just on those China supply chain and know how resilient as right now and what are your expectations for the virus.
Yes.
So the so they.
Krona virus outbreak itself the first week of the growing awareness outbreak.
Coincided with with the lunar new year, which meant that many of the facilities many of our own facility in China and case accident Fujio was was already shutdown as where many of our component suppliers.
And the impact you know, it's not a huge impact if I have to put a number on have you know I would say it's in the eight to 10 million range for the quarter.
And it's largely driven by the fact that you know government mandates and shutdowns for an additional week.
For example, our own operation in the casing separation Fujio, we had plans to be back.
On February card and that got pushed out by because of a government mandated shutdown to every 10th so we we lose a week's production and some of our several of our suppliers are in the same same situation.
Like I said, we estimate the impact of this this extended shutdown to be about eight to 10 billion for the quarter.
So so you know at affect our guidance would have been roughly flat sequentially.
Which which would have been.
In line with or maybe a little better than you know a seasonal.
Q3 for let's say calendar fiscal Q3 calendar Q1, which would be seasonally down for us. So.
Without this corona adverse impact.
We would have been kind of flat to slightly off I would say so about him to answer your direct question about an eight to 10 billion dollar impact.
And just thoughts on just like just the recent couple of days a week or so have you gotten more concerned.
It was done they've been more conversations and just your thoughts on how recently supply chains.
Thanks, good visibility if you haven't supply.
We think it's pretty resilient and we think if you know of course, you know none of none of US know when we could find ourselves here at Walker from now, saying, we we were too conservative and overestimated the impact or we could find yourself, saying, we weren't conservative and often we underestimate the impact it's really very difficult to say I think if you know are working assumption is that that all the our own.
Operation as well as the suppliers, who are affected that the all get back to work.
From today on February 10th if something happens this week.
That changes.
Then the impact could be could be greater similarly.
So I think it's we're not I mean, obviously are primary concern is for the health and welfare of our employees and we're taking.
Great precautions to make sure everyone as well.
Both in and in our operation and cases, but also in our you know our large campus in Thailand, and as you can imagine we've a lot of visitors who come through.
It's it's a 10000 person campus, we have a lot of people who come through there. So we're taking you know grid precautions to make sure everyone safe and well.
So that's our first concern, but nevertheless, we think the supply chain is actually quite resilient and.
Businesses get back to back into operation you know a week from today, we should be okay, but we're going to keep a very very close eye in for sure as everyone.
Yeah understood and this one last question I'll cede the floor.
Just your comments on industrial laser string.
I'm curious to know that existing programs are getting better or is that some of these new design wins against.
It's it's a combination of both actually you know we've we continue to penetrate this stuff Marcus you know and wind business, there with a number of companies.
But I I would say the strength in the quarter was mostly.
With existing existing customers existing funds.
And.
Understood a T.S. hope to see done in San Diego.
Yeah, well sure. Thank you. Thank you Troy.
Thank you. My next question comes from Samik Chatterjee of JP Morgan question. Please.
Hi, Thanks for taking my question. So you.
I appreciate your comments about telecom on the supply side. The just wanted to understand how you're thinking about the demand side as well because even before the Corona virus. In fact, I think we saw a couple of no industry players kind of sign the warning signs on Fiveg network deployment in the different geographies, including China. So just wanted to understand.
Beyond kind of the supply constraints, how you're thinking about demand or if there is a slowdown oh, how long would have taken the supply chain just kind of show up in your Oh, yes demand levels or autos and so any insights on back would be helpful.
Yes, so the demand.
W. Sorry, the the telecom demands a T has talked about was more focused on the demand side than the supply and then the supply side. So we are seeing you know some softness but for US. It's you know nothing I would say greater than the normal seasonal softness that we would see in this quarter.
We do and again, we don't we don't claimed to represent the industry or have any great insight, but certainly from what we see.
We don't see any any huge change.
Other than what we would normally see as a seasonal.
Go down little bit of a slow down this quarter. The other thing is you know as many of our our customers have enough announced yes, we don't want to be a.
Seem to be speaking for them, so what I would say, but like I say I don't we don't believe there's anything.
Other than the normal seasonal slowdown Ts what do you think too I think well say.
The we cannot.
Yes on one or two quarter, you know, but for the coming quarter.
<unk>.
Okay.
Okay got it and if I can just a follow up on the 400 gig.
Well the growth that you had which is pretty strong 31 person growth as you kind of looking through the end of the Youre right now the growth. So for small would be is how you're thinking book do you think that kind of growth good as sustainable on the 400, good products beforehand getting about products.
Yes, that's what we grouped together 400 gig an above I mean at some point, we may get a bit more granular with that but right now we we see that continues to be quite strong.
We don't guide beyond one quarter, but.
We do so we do see demand for that formed to get going above continue into two top certainly outpaced the growth of the rest of the business, it's going quite strongly for us.
Great. Thank you.
Thanks Mick.
Thank you once again to ask a question. Please press star one and you touched on telephone again, that's star one on your touched on telephone to ask a question.
Next question comes from the line of John Machete of Stifel. Your question. Please.
Hey, guys. This is Scott on for John Congrats on the great quarter and thank you. So again I'm on the systems opportunity you discussed could you maybe touch on how that affects margins going forward.
Yeah, we're not going to you know, we're not going to break up margins by customer a program.
It's not something we've we've done and we don't plan to start doing that now I'm sure our customers wouldn't be too happy with as if we started to break that out of it. It's you know I would say it's a it's obviously piece of business. We're we're very happy about we're very very proud to be to the expanding our partnership our relationship with Cisco, but we're not getting prepared to talk about the margins on that.
Program.
I mean, so not necessarily on the Cisco, one specifically, but I mean.
As you move forward and look for more opportunities of that kind could you give some color on how that overall should impact margins.
I think you know as we look at I think spend against the system business and we have a couple of I would say significant wins under our belt, where I suppose when the fortunate position of being able to be somewhat selective about which particular pieces of business. We go after in that space. So we're not chasing everybody. We're not chasing every ratcheting every customer were not chasing every product or every opportunity with every cost.
We are being selective on really for us where it makes a lot of a sense is where we're already making some of the the optical component.
The optical components that that or you are already in the bomb.
Those systems that allows us to be first of all very competitive for our customers and also we can we can you know.
Since the products in a way that simplifies the supply chain for our customers that can just see with one one stop shop, one supplier rather than having to deal with severance suppliers. It also you know it helps us.
To help the customer to eliminate the margin stack that they have to deal with if there if there.
To have a stack supply chain. So we're really flapping the supply chain.
In a way this allows us to make a make a respectable margins were happy with.
On on allows the customer to save a lots of money because the eliminates a lot of the the margin stack that they that they have to deal with if they use multiple suppliers. So that's really the.
If you like to secret sauce, you know is that we eliminate the margin set for the customers.
But what we do it in a way that we're able to produce the products.
At a price and other margin that's acceptable to us.
That's great. Thank you so much.
No problem. Thank you.
Thank you. Our next question comes from Alex Henderson of Needham Your line is open.
No I wasn't unless you get off.
A couple of questions Tonight.
Wanted to just talk a little bit about.
The Infinera business coming in obviously, that's a fairly new program.
Have you.
Did you say, it's fully in the numbers now has there been any.
Option issues or any other issues with with that in the move during the fourth.
Quarter calendar that we should be aware of digits perturbed the numbers as result of startup or ramp up costs.
That will fall out or any any any additional commentary around that would be helpful.
I would say, we're you know were falling around in the sense at all of the products.
Our transferred you know as you're going to be as if we see as Alex it's not a simple thing to transfer an entire factory from from burn into Bangkok.
We're fully ramped in the sense at all the products a transfer we're fully up to speed the yields rather an acceptable level, we have capacity installed.
As regards the demand you, let's say the you know intra quarter kinda demand variability that might might exist. There you know I know when infinera announce a within the next you didn't think next week. So we'd really let them talk about you know what the demand profile looks like it's not really are placed to talk about that but all I would say is we're very happy with how the program has gone were very.
You're happy with their relationship with Infinera, we were very excited to be.
<unk>, making sure we're building to the new programs under the right programs for Infinera.
And that the transfer has just gone very very well.
So you want to production issues.
Fourth quarter calendar that impacted the gross margins, bringing it down a little bit or anything of that sort that we should be aware of.
No I mean, the gross margin to 11.9% was really a mix and overall mix.
And again, the D. that the difference between between 12% and 11.9, it's not very significant but it was really just to an overall product mix certainly nothing nothing related to a two delays or anything like that with Infinera no.
Going back to the Cisco announcement.
Do you think that that might start to.
Particularly it into the numbers.
I think it's early early to say I mean, it's a you know I think we've we've shown you know I suppose from from our past a track record we are able to go very fast and transfer these programs very quickly, but at the end at the end of the day.
The pace is essentially set by the customer in the in these cases, we have to go to pay says that the customers comfort with so a it's a very recent when it's actually one of the business since we closed the quarter. So we're just really into throws right now were put into timelines together and agreeing with the customer on the transfer plan. So.
It's really too early to say, Alex when the revenue might has.
But I think that going into the new facility as opposed to Pinterest.
Yes, yes, yes.
And any commentary about a utilization rates.
How you're doing on those programs.
In in a.
Yeah, I mean, I think we did we did break out a couple of quarters ago, we used to breakout you know the.
The degree to which Chonburi was occupied unspoken for we stopped doing that because it's not a meaningful it's not really meaningful indicator of anything actually because we've been so successful as expanding the space in pain Hurst.
So we don't really talk about that metric anymore again, because it's not really meaningful we do continue obviously to date. This this new business wins will be all.
Less than four days, the Chonburi operation and we continue to to find more space and expand the manufacturing footprint in ER and painter. So you know we need of a need to know concerns about her ability to to expand and grow the business and then of course were.
We're always ready to pull the trigger on the next set of the next building in Chonburi and we have room for another probably five buildings.
Of the same I meet again, each each building, it's about a half million square feet and would have revenue capacity of about $500 million. So we have ample room to expand into and chonburi.
Okay six delays in terms of re ramping.
Pretty sure case mix is one of your highest margin business.
To the extent that that gets delayed that probably has.
Bigger impact not just on the revenues, but also on the margin mix I would think.
Is it reasonable to think that's pressuring the gross margins a little bit in the.
For the very short term and then you'll get that back.
Yeah I live it that's that's a fair that's a fair way to think about Alex obviously components.
Optical components, given the nature of these products there.
There are more like June and.
Then electronic products starting the margin profile is quite different it's it's a it's a higher margin products than Oh, let's say it a typical dms type product. So yes. The you know the margin impact is higher and every dollar of revenue, we don't get out of cases.
But you know we haven't seen it again your rights as well as more of a delays and other than a cancellation if you like.
If you lose capacity weaker 10 days of capacity, it's hard to get that back.
So I.
Then pushed to the parts to the to the next quarter. So one more question if I could see Fabrinet west success.
Other products up to 33 million up 20% is pretty pretty strong results is that production that's anticipating.
Move of the line and therefore, we ought to expect.
Fall off in the other or with the.
Nine already be moved then we should.
See that continuing to ramp as we start to get it into a.
Full production in Thailand, and therefore, the other line.
We'll accelerate.
What's the shape of that curve.
So the 30 30 or 33 million of other.
You know that would be a combination that's not just fabrinet west will be combination of Fabrinet west, but also programs that were maybe previously ramped in fabrinet west that are now ramping in Thailand.
You know as we as we ramp business and Fabrinet West and then transfer to Bangkok, Yes, We will you know transfer production or we should start to see a nice uptake in in the other and utilize that other category grows you know it may get recategorized when it becomes more meaningful into into one of the other areas, but that business.
Growth in in a in Bangkok, you know, where we work hard to to backfill if you like with new business and new customers into Fabrinet West.
Well the production already moved to Thailand, and it is already ramping it's just been moved from Fabrinet West correct correct. Okay. I thought you were saying it was going to be moved in the third quarter.
Well there was a combination that you know what does it there's a constant flow I would say through fabrinet west so at any point in time.
You will have a mix of business, that's being ramped in from Midwest.
And being transferred you know and has already transferred so that's that for us as a measure successes.
Success for us and problems West is if we we transfer everything and end up having to.
Backfill Fabrinet west with new business, it's a it's a bit country chooser for our business, but we really view feminine west as you know, it's an in fee to Bangkok and success means that the the revenue is a bit volatiles unpartnered west because that means we're being successful I'd convincing customers to transfer and entire program to Bangkok.
Got it thanks.
Got it.
Thank you. Our next question comes from Faade Michelle.
Your line is open.
Thank you for taking my question first I wanted to thank Ts for all your support over the years. It was a pleasure working with you enjoy your retirement.
Thank you my question goes to Oh.
Our diversification.
Get the Cisco announcement is gonna be another 10% customer along with momentum can you speak to the revenue diversification. It seems like your top tier four customers they account for greater than 50% of your total revenue if my math is right.
So just help me understand if I'm thinking about it the right way.
Yes. So we historically we've had won the last few years, we've had one a 10% customer and again of course, we report the customers.
And your basis, when we when we look back.
You know if we if we if we're successful with our with our current plans.
You know we go from having won 10% customer to 310% customers. So there's always a trade off for had of course between.
Being.
Over concentrated but at the same time, you do you do need sufficient scale with anyone customer to serve the customer correctly and property. So we're very happy with.
I suppose a trajectory we run.
The way, we've been able to penetrate some some new mark new markets for US you know you opportunity for us and really show the customer.
I'll use the value that we can bring in simplifying their supply chain. So it's what we see it as a real win win and we will have we love.
Three certainly three.
10% customers as we as we hopefully as we look back enough when 21 and this all quality customer I know what everybody else credit you know you for the whole whatever yeah or high quality customers.
So we feel can you remind us the number of silicon photonics customers you guys have.
And if that number is growing.
Just trying to get us as of the diversification beyond the top three a customers that we have five or six silicon photonics customers and in some of them would be big Big household names, but there's also some smaller startup type.
Silicon photonics customers in there as well so five or six in total.
Appreciate the answers. Thank you very much at congratulations again tier.
Thank you again, thank you.
Thank you at this time I'd like to turn the call back over to CEO Seamus craving for closing remarks, Sir.
Thank you. So thank you for joining our call today, everyone. We're we're pleased to again exceeded our guidance for revenue and EPS in the second quarter, and we're well positioned to deliver another strong performance in Q3, we're looking forward to seeing those of you who will be attending our Q and a session and we'll see another Vince until then goodbye. Thank you.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
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