Q4 2024 Fabrinet Earnings Call
We are in a listen only mode.
Later, we will conduct a question and answer session and instructions on how to participate will be provided at that time I'm.
As a reminder, today's call is being recorded.
Speaker Change: I'd now like to turn the call over to your host Garrett tumor Johnson Vice President of Investor Relations. Please go ahead.
Speaker Change: Thank you operator, and good afternoon, everyone. Thank you for joining us on today's conference call to discuss <unk> financial and operating results for the fourth quarter of fiscal year 2024, which ended June 28 2024.
With me on the call today are Seamus Grady, Chief Executive Officer, and <unk> Chief Financial Officer.
Speaker Change: This call is being webcast and a replay will be available on the investors section of our website located at Investor Dot fiber net dot com.
Speaker Change: During this call we will present, both GAAP and non-GAAP financial measures. Please refer to the investors section of our website for important information, including our earnings press release, and Investor presentation, which include our GAAP to non-GAAP reconciliation as well as additional details of our revenue breakdown.
Speaker Change: In addition, today's discussion will contain forward looking statements about the future financial performance of the company.
Speaker Change: Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from management's current expectations.
Speaker Change: These statements reflect our opinions only as of the date of this presentation and we undertake no obligation to revise them in light of new information or future events, except as required by law.
Speaker Change: For a description of the risk factors that may affect our results. Please refer to our recent SEC filings in particular, the section captioned risk factors in our Form 10-Q filed on May seven 2024.
We will begin the call with remarks from Seamus and Ciao, followed by time for questions I would now like to turn the call over to fabricate CEO Seamus Grady Seamus.
Speaker Change: Thank you Carol and good afternoon to everyone joining our call.
Speaker Change: Our very strong fourth quarter results.
Ciao: <unk> off an outstanding year for Fibernet.
Ciao: Fourth quarter revenue of $753 million was above our guidance range and grew 15% from a year ago and 3% from Q3.
Ciao: We executed very well to produce non-GAAP EPS also exceeded our guidance range.
Ciao: $2 41 per share.
Ciao: It's also notable that Q4 marks the fourth quarter in a row for both record revenue and EPS for the company.
Ciao: For the full year revenue was $2 9 billion, an increase of 9% from fiscal year 2023.
Ciao: Our continued focus on cost management helped us to again grow non-GAAP earnings faster than revenue to a record $8 88 per share or 16% year over year increase.
Ciao: 2024 was quite a remarkable year for fibernet.
Ciao: Datacom revenue grew over 120% on telecom revenue declined more than 20% for the year due to the protracted inventory digestion across the telecom industry.
Ciao: Our strong results throughout the year demonstrated the strength of our flexible and resilient business model.
Ciao: Entering the fourth quarter, we anticipate continued revenue growth in Datacom and declines in telecom and that's what we experienced we also anticipate a return to sequential growth in automotive revenue, which we also saw.
Ciao: Within optical communications Datacom revenue continues to drive growth, while the sequential decline in telecom was more modest than anticipated.
Ciao: In Datacom 800 gig products for AI and related applications remain the biggest revenue contributor.
Ciao: Offset in part by the completion of the wind down of a long running 100 gig program as we've discussed previously.
Ciao: We are very encouraged by the strong demand trends, we're seeing for both current generation and next generation Datacom technologies.
Ciao: We believe that our industry, leading expertise and trusted reputation positions us, particularly well to continue benefiting from long term datacom growth.
And telecom ongoing inventory digestion continues to dampen revenue from traditional telecom products.
In the fourth quarter. This impact was partially offset by data center interconnect products as well as contributions from new Telecom system program wins.
Ciao: In fact, we expect recent system wins are varying sizes to begin making more meaningful revenue contributions towards the second half of our fiscal 2025.
Ciao: These new wins make us optimistic about fiber and that's long term telecom revenue trends overall.
Ciao: Turning to non optical communications, we saw double digit sequential revenue growth in the quarter as.
Ciao: As anticipated this increase was primarily due to growth in automotive revenue as short term inventory absorption issues are now behind us.
Ciao: All in all we had a very robust and successful quarter and year and we remain positioned particularly well for continued momentum as we look ahead.
Ciao: In fact in the fourth quarter of our fiscal year 2025, we anticipate sequential revenue growth from all of our major product categories.
Ciao: Beyond Q1, we continue to carefully evaluate our long term capacity requirements in that regard we have made the decision to break ground on building 10 at our Chonburi campus during the new fiscal year.
Ciao: Our first building in Chonburi was building Hayes with all 500000 square feet now being utilized.
Ciao: Building nine which is about 1 million square feet opened about two years ago and has quickly filling up.
Ciao: Building 10 would be 2 million square feet in size, we expect construction to take approximately a year and a half to complete once we break ground.
Ciao: Capital expenditures for construction of the 2 million square foot facility will be approximately $110 million.
Ciao: Beyond building 10, we have ample space to further increase our manufacturing capacity.
Ciao: We'll keep you posted on our construction timeline as we move ahead.
Ciao: In summary, we delivered a record fourth quarter with revenue and EPS that were above our guidance ranges as well as a remarkable fiscal year.
Ciao: We are increasingly optimistic about our future and we have numerous drivers have positioned us to extend our track record of success into fiscal 2025 and beyond now.
Speaker Change: Now I'll turn the call over to <unk> for more financial details on our fourth quarter and fiscal 2024, and our guidance for the first quarter of fiscal 2025 Ciao.
Speaker Change: Thank you Seamus and good afternoon, everyone. We had a terrific fourth quarter to end a very strong year.
Speaker Change: Record fourth quarter revenue of $753 million was above our guidance range and represented an increase of 15% from a year ago and 3% from Q3.
Speaker Change: The strong revenue helped produced record non-GAAP earnings per share of $2 41.
Which was also above our guidance.
Speaker Change: For the full fiscal year revenue was a record $2 $9 billion, an increase of 9% from fiscal 2023.
Speaker Change: As in recent years non-GAAP earnings grew faster than revenue, reaching a new record of $8 88 per share up 16% from the prior year.
Speaker Change: Details of our revenue breakdown are included in the Investor presentation on our website.
Speaker Change: And I will now focus my comments on some of the more notable metrics.
Speaker Change: In the fourth quarter optical communications revenue of about $596 million or 79% of total revenue on.
Speaker Change: An increase of 19% from a year ago and 1% from Q3.
Speaker Change: Within optical communications Datacom revenue of $315 million or 53% of optical communications revenue, an increase of 63% from a year ago and 3% from the prior quarter.
Speaker Change: Telecom revenue was $282 million or 47% of optical communications revenue.
Speaker Change: Telecom revenue declined approximately 1% from Q3, which was a smaller decline than expected due to continued growth from data center interconnect products.
Speaker Change: Yeah.
Speaker Change: We don't think our communication industry transitioning to higher data rates, we continue to see strong growth from 800 gig and faster products that are now clearly the key drivers of our growth.
Speaker Change: Therefore, we are now breaking out revenue by speed into two categories eight.
Speaker Change: 800 gig and foster and below 800 gig.
Speaker Change: In the fourth quarter revenue from products rated at 800 gig and faster plus $259 million.
Speaker Change: Up 54% from a year ago.
Speaker Change: Revenue from product below 800 gig was $223 million up 4% from a year ago.
Speaker Change: Revenue for all pick our communications products that are non feed related including rodents amplifiers fiber arrays and other devices was $114 million down 5% from a year ago.
Speaker Change: The historical two year trend of this breakout is provided in the most recent investor deck on our website.
Speaker Change: From that breakout you will observe that in fiscal 2024 products rated at 800 gig and above started to dominate and where the biggest contributor to growth.
Speaker Change: <unk> products below 800 gig continued to grow thanks to 400, ZR programs, which reached 10% of optical communications revenue in Q4.
Revenue from non optical communications, so healthy growth in the fourth quarter to $157 million.
Speaker Change: Up 2% from a year ago and 12% from Q3.
Speaker Change: This increase was primarily the result of increasing automotive revenue as we have moved past a short term inventory correction period.
Speaker Change: Our automotive revenue was $86 million in the fourth quarter.
Speaker Change: 17% sequentially.
Speaker Change: As I discuss the details of our P&L expense and profitability metrics will be on a non-GAAP basis, unless otherwise noted.
Speaker Change: Gross margin in the fourth quarter of a sub 5%.
Speaker Change: A 10 basis point decline from Q3, and it was within our guidance range.
Speaker Change: Operating expenses were $14 million slightly less than 2% of revenue.
Speaker Change: Operating income was $80 million, representing an operating margin of 10, 7% consistent with the third quarter.
Speaker Change: The combination of our strong cash balance and elevated interest rate environment provided record interest income of $11 million.
Speaker Change: The GAAP tax rate was four 6% in the fourth quarter.
Speaker Change: We anticipate that our tax rate will remain in the mid single digit in fiscal year 2025.
Speaker Change: non-GAAP net income was a record $88 million or $2 41 per diluted share.
Speaker Change: For the full year revenue was $2 $9 billion up 9% from fiscal 2023.
Speaker Change: In fiscal 2024, we had two customers that contributed 10% or more to revenue and.
<unk> at 35% and Cisco at 13%.
Speaker Change: Our top 10 customers together made up 86% of revenue up from 84% in fiscal 2023.
Speaker Change: For the fiscal year gross margins of 12, 6%.
Speaker Change: Down 40 basis points from fiscal 2023, primarily due to the absence of FX tailwind that they benefited from last year.
Speaker Change: Operating margin for the fiscal year was 10, 6% a decrease of 20 basis points from fiscal 2023.
Speaker Change: You will note. This is a smaller decline than we saw in our gross margin, reflecting operating leverage inherent in our model.
Speaker Change: non-GAAP net income was a record $8 88 per share an increase of 16% from a year ago at EPS growth again outpacing revenue growth.
Speaker Change: We maintained a very strong balance sheet throughout fiscal year 'twenty 'twenty four.
Speaker Change: We closed the year with cash and short term investments of $859 million up $65 million from the end of the third quarter.
Speaker Change: The primary driver of this increase by strong operating cash flow of $83 million at Capex of $13 million free cash flow in the quarter by $70 million.
Speaker Change: For the full year, we generated record operating cash flow of $413 million.
Speaker Change: Market will increase of 94% from fiscal 2023.
Speaker Change: Free cash flow in fiscal 2024 was also a record at $368 million, an increase of 142% from a year ago.
Speaker Change: In the fourth quarter, we repurchased approximately 21000 shares at an average price of $170 per share for a total cash outlay of $3 $5 million.
Speaker Change: For the full year, we repurchased approximately 212000 shares at an average price of $186 per share for a total cash outlay of $39 million.
We remain committed to investing in our growth while also returning capital to shareholders with our <unk> and open market share repurchase programs.
Speaker Change: Since the end of the quarter. Our board has authorized an additional $139 million 40 purchases. So that we now have $200 million available for share buyback.
Speaker Change: This is double the size of our repurchase authorization at the beginning of fiscal 'twenty to 'twenty four.
Speaker Change: Now I will turn to our guidance for the first quarter of fiscal year 2025.
Speaker Change: After a year of breaking quarterly records for revenue and EPS. We are optimistic that the first quarter will represent another strong quarter for fibernet.
Speaker Change: In fact, we anticipate that revenue will be up sequentially in all of our major product areas.
Speaker Change: I expect data comp growth to be driven mainly by advanced high data rate products, yes.
Speaker Change: We expect <unk> revenue to increase from the combination of growth in data center interconnect products as recent new programming.
Speaker Change: And we believe that automotive and laser revenue will also grow sequentially.
Speaker Change: Overall, we expect first quarter revenue to be in the range of $760 million to $780 million.
Speaker Change: We also expect strong performance from profitability perspective.
Speaker Change: Keep in mind that in the first quarter, maybe you'll see the seasonal impact of annual merit increases, which puts temporary downward pressure on margins.
Speaker Change: As in the past, we expect operational efficiencies to offset these cost increases as we progress through the year.
Speaker Change: Based on recent strength in Thai baht, they expect the foreign exchange revaluation loss in the first quarter.
Speaker Change: That in mind, we are anticipating EPS to be $2 33 to $2 40 per share.
Speaker Change: In summary, we had another record quarter with results that exceeded our guidance for both revenue and EPS. We expect our momentum to continue in fiscal 2025, beginning we had a strong first quarter as we extend our track record of solid execution.
Speaker Change: Operator, we are now ready to open the call for questions.
Speaker Change: Thank you and as a reminder to ask a question simply press Star one one on your telephone and wait for your name to be announced to remove yourself from the queue Press Star One again, please standby for our first question.
Sami <unk>: And our first question comes from Sami <unk> with J P. Morgan. Please go ahead.
Sami <unk>: Hey, good afternoon. Thanks for the question. This is Joe Cardoso on for Sonic.
Speaker Change: So maybe first one here just on the Datacom business.
Sami <unk>: I guess, if you could talk about the timing around 116, and whether you think that can start to worry whether that's beginning to materialize as early as the September quarter, and then second part of this question is just like how are you thinking about 400 gig and 800 gig demand going forward. Both of these look like strong growth drivers in 2004, just doing kind of on the back of the envelope.
Speaker Change: Our math here on the new disclosures and I think in the past you highlighted expectation that 800 gig demand continues as you don't expect 160 to cannibalize it.
Speaker Change: Is that still the same case fill expectations going into 2025 and does that apply to 400 gig as well and then I have a quick follow up thank you.
Speaker Change: Thank you. Thanks, Joe So yeah, one six we don't talk about we can talk about the specific timelines for our customers' product before before they do but certainly.
Speaker Change: We're working hard with our customer on on 160, but we think today 100 gig will be around for a while it's used extensively in the legacy products in the networks, we make for our customers.
And we can work with vacation gig will be around for a long time are our aim as always is to be working with the customers on the next generation products, while we're on rebuilding the current generation products.
Speaker Change: 162, <unk> Transceivers you know they are quite complex and they don't ramp up overnight.
Speaker Change: And again, the timing of the announcement of <unk>.
Speaker Change: A new product like that is really off to a customer. So we wouldn't really we wouldn't really comment on that.
Speaker Change: But we're certainly making sure that we're ready for that.
Speaker Change: A passenger perspective.
Speaker Change: 100 gig and I can say is or to gauge the demand is very strong 400 gig.
Speaker Change: It still remains.
Speaker Change: But.
Speaker Change: The tax or the timing of $1 six we believe that for our customers to talk about.
Seamus: No. Thanks, Seamus and then maybe just in terms of my second question, maybe bigger picture, obviously, great to hear the news around southern kind of expansion as we think about the portfolio and what's driving the conviction to break ground. There is this all related to further confidence in terms of on the Datacom business or are there other areas of.
Seamus: The.
Speaker Change: Our portfolio, that's driving conviction here and supporting additional facility build out just curious high level thoughts on how you're thinking about what's driving the conviction. There. Thank you. We appreciate the questions.
Speaker Change: It's really all of our overall conviction.
Speaker Change: Conviction about the overall business, it's not any one particular.
Speaker Change: If you like segments building.
Speaker Change: Building building nine and actually building it before us to fill faster than we had anticipated.
Speaker Change:
Yeah.
Speaker Change: Building building tenants of good use of our cash we have the cash available.
Speaker Change: We get better economies of scale by building 2 million square foot facility, rather than a one 1 million square foot and it's just a.
Speaker Change: Overall use of the land available tools to build a 2 million square foot facility.
Speaker Change: And really we have conviction in the pipeline and the business the upside opportunity is significant if you do the math on the on the revenue per square foot.
Speaker Change: It would suggest that the revenue capacity and building 10 should be about $2, four plus or minus $2 4 billion.
Speaker Change: So the upside opportunity is significant on the downside risk is very small.
Speaker Change: Even if we were to build up.
Speaker Change: Building tenant didn't put any business in there for a period of time the the gross margin headwinds would be about 15 basis points. So it's very small so it's a combination of all those factors the conviction of the business.
Speaker Change: We believe it's a good use of our of our cash and its also good upside potential with further downside risk.
Speaker Change: Thank you one moment for our next question. Please.
Speaker Change: And he comes from the line of Karl Ackerman with BNP Paribas. Please proceed.
Karl Ackerman: Yes. Thank you.
Gentlemen.
Karl Ackerman: I've got two questions first your 800 gig transceiver revenue to date has been primarily driven by your largest customer.
Speaker Change: And some investors have been concerned that a push out of the latest GPU.
Speaker Change: Would impact your near term outlook that does not appear to be the case. So does your September quarter outlook.
Speaker Change: Imply that you are seeing a broadening of your datacom customer base for 800 gig as several hyperscale errors.
Speaker Change: <unk> began to employ broadly 800 gig networking switches.
Speaker Change: So, yes, I mean.
Speaker Change: We don't we don't really comment on our customers' product launches.
Speaker Change: We know that our big customers and safe ratio under gagan spend in video.
Speaker Change: They they continue to see strong demand for their products.
Speaker Change: And.
Speaker Change: Our understanding is that they will extend that expands.
Speaker Change: Production based on current Gpus to meet the demand that's there and we're happy to continue to support them.
Speaker Change: We're working hard on a number of opportunities we've talked about these before there's really three categories.
Speaker Change: If you like AI related growth vectors theirs.
Speaker Change: Outside of Nvidia, obviously, we're very happy with the growth in video poker pursuing other says there's other GPU companies.
Speaker Change: There is other merchants transceiver opportunities and then there is hyperscale or so we're looking to maybe go direct and we are pursuing all three.
Speaker Change: Our outlook is really a function of continued strength.
Speaker Change: <unk> strength in the.
Speaker Change: The Datacom business.
Speaker Change: And the <unk>.
Speaker Change: Telecom.
Speaker Change: The softness that we've seen for the last while we are seeing indications.
Speaker Change: Demand is beginning to recover so I suppose in.
Speaker Change: Simple terms the Datacom grew.
Speaker Change: <unk> looks to be sustainable.
Speaker Change: Telecom weakness.
Speaker Change: As temporary we think we've also had some success with winning some new complete network system business.
Speaker Change: As well as we will be introducing over the next one so we.
We want to make sure we have ample capacity for that we've been able to pick up some additional.
Speaker Change: Complete network system business.
Speaker Change: Yeah, Thanks for that Seamus.
To that point could you discuss the breadth of customer adoption and growth of coherent ZR optics used in telecom in Dci.
Speaker Change: And then at the same time, if I may you spoke in your prepared comments about new programs within telecom began to float in the mall in the second half of fiscal 'twenty five I'm curious whether the reason to expand building 10 of what appears to be twice as large as your previous plans is driven by the outlook.
Speaker Change: Within the telecom programs or if it's driven predominantly by the Datacom opportunity that you see thank you.
Speaker Change: Yes, it's actually book, it's the continued strength in Datacom and we believe R. R.
Speaker Change: Relative to pick up additional business there, but also while we see some recovery in telecom, but also some some new wins.
Speaker Change: We have been picking up some new business.
Speaker Change: We've had some success with a number of system wins of varying sizes over the last one if you go back a.
Speaker Change: A few years ago, we had the Infinera a win that we had some.
Speaker Change: Considerable success with Cisco and more recently, we've been awarded.
Speaker Change: One of these is going to walk from from Sienna actually who's been a customer of ours for some time, because they've been a customer more on the on the component side.
Speaker Change: They haven't been a 10% customer so they haven't been in the 10% to charter if you like but theyre very important customer for us on an excellent customer and we're very happy that we've been awarded.
Speaker Change: The manufacturing of the majority share of their next generation network motor business.
Speaker Change: Along with all of the associated FERC integrated optical components. So we've been making the majority of the.
Speaker Change: The modems and all of the optics for those modems and we expect we expect this program really in the.
Speaker Change: In our fiscal Q4, which means this win will be it can be more important for fiscal 'twenty six revenue in fiscal 'twenty fiery revenue, but over the over the next kind of six to nine months we began.
Speaker Change: We'll begin to ramp that and we're very happy with it.
Speaker Change: Pension of this relationship with CMS, So it's a combination of.
Speaker Change: Returning to strength in telecom plus some additional business, we've been picking up in telecom and of course sustainable datacom demand in the datacom growth as well.
Speaker Change: Very helpful.
Speaker Change: And rescue ZR, sorry, you asked also about CR so.
Speaker Change: Our telecom business overall year on year, it's down.
Speaker Change: 20, 23% year on year.
Speaker Change: But within that we've had we've had some very nice growth in Dci, which is not just ZR, but it's a lot of that growth has been ZR and <unk>.
Speaker Change: We have some success in coherent ZR and also Asia, ZR and ZR plus right now we have six.
Speaker Change: Fixed customers six Z are customers of varying sizes. So.
Speaker Change: ZR optics.
Speaker Change: In particular for Dci applications has been a real source of.
Speaker Change: Strength for us.
Speaker Change: We've been pretty happy with the adoption of AR VR in the Dci space over the last one.
Speaker Change: Very helpful. Thank you.
Youre welcome.
Speaker Change: Thank you.
Speaker Change: Our next question.
Speaker Change: Comes from the line of Alex Henderson with Needham Alex Your line is open.
Alex Henderson: Thanks, So much Wow, you got Siena and Theres a systems business. That's fabulous congratulations that's good news thanks, Sean.
Mike: I was hoping Mike.
Mike: Talk a little bit about whether you're going to break that out as a category now that it's become.
Speaker Change: A multiple vendor.
Speaker Change: Group as opposed to one or two customers.
Speaker Change: And then second.
Speaker Change: Within the <unk>.
Speaker Change: Yes.
Speaker Change: Systems business.
Speaker Change: A lot of systems inventory out there, but it seems to be clearing faster on the system side than the component side.
Speaker Change: So do you expect the systems business to to.
Pick up faster than the overall telecom component business.
Speaker Change: Well, certainly I think our systems business will because we've had some success there.
Speaker Change: You've obviously had some success.
Speaker Change: On the on the component business as well, but that is still hampered by inventory digestion.
Speaker Change: And again, we cant really easily distinguished between inventory adjustments and market demand. So it's not always clear to us but based on what we are seeing from our customers. It does feel as though inventory digestion and again on the component side.
Speaker Change: Our traditional telecom products is starting to stabilize.
Speaker Change: It doesn't really mean it doesn't necessarily mean, we're off to the races, yet put several hundred could still be some.
Speaker Change: Remaining digestion, but the big year over year on sequential declines, we think current largely behind us at this point.
On the on the systems side, yes, so for US we take the system business will probably grow faster in the component business, we haven't we haven't broken it out.
Speaker Change: That's where yes, we may have seen at some point in the future.
Speaker Change: You know up to now we've had one or two customers in that space, but as we add to that customer portfolio. We may at some point in the future but not.
Some of our customers it does feel as though inventory digestion and again on the component side.
Speaker Change: It would probably wait until the end of our fiscal year to do that.
For our traditional telecom products is starting to stabilize.
Speaker Change: In your remarks, you made a comment that yes.
Speaker Change: It has multiple alternative growth factors outside of Nvidia.
It doesn't really mean, Merck, which doesn't necessarily mean, we're off to the races, yet, but there could still be some.
Speaker Change: Are any of those three categories that you identified anywhere near.
Remaining digestion, but the big year over year and sequential declines, we think cargo largely behind us at this point.
The possibility of an announcement do you think that that's something that could happen. During this upcoming fiscal year or do you think that's really 26 and beyond type of business.
On the on the system side, yet so for US we take the system business will probably grow faster in the component business, we haven't we haven't broken that out.
Speaker Change: Well, yes, we may as you say at some point in the future.
Speaker Change: Well as you as you know Alex we generally tend to not.
Speaker Change: You know up to now we've had one or two customers in that space, but as we add to that customer portfolio. We may at some point in the future but not.
Speaker Change: Announce anything domestic until there's something to announce as evidenced by the CNN news.
Speaker Change: It would probably wait until the end of our fiscal year to do that but that's for sure.
Speaker Change:
Speaker Change: Our approach is to work very hard with our customers to try and win these opportunities, but until such time as we've actually want us we generally don't talk about or so but there's three as you said the three growth vectors we're pursuing.
Speaker Change: Your remarks, you made a comment that Oh, yes, multiple alternative growth vectors outside of Nvidia.
Speaker Change: Are any of those three categories that you identified anywhere near that.
Speaker Change: We are pursuing with vigor and with energy and working very very hard on those.
Speaker Change: Possibility of an announcement do you think that that's something that could happen. During this upcoming fiscal year or do you think that's really 'twenty fixer and beyond type of business.
Speaker Change: We're quite optimistic that there's a lot of business to be won and all three of those areas and again, the three areas being other GPU companies.
Speaker Change: Other merchant merchant.
Well as you as you know Alex we generally tend to <unk>.
Speaker Change: Transceiver opportunities and thirdly.
Speaker Change: Announced anything unless until there's something to announce.
Speaker Change: Hyperscale companies, who want to go direct with maybe with their own optical interconnects. So we're working hard on all three of those but nothing to announce at this point.
Speaker Change: Evidenced by the CNN news.
Speaker Change: Hmm.
Speaker Change: Our approach is to work very hard with our customers to try and win these opportunities, but until such time as we've actually want us we generally don't talk about or so, but there's three but you said the three growth vectors we're pursuing.
Speaker Change: We're optimistic that that takes time to take a long time to learn these up to one last question then I'll cede the floor. So.
Speaker Change: I think you've talked about pricing pressure being larger than the 10% to 15% normal price pressure that.
Speaker Change: We're pursuing with vigor and with energy and <unk>.
Speaker Change: Working very very hard on those.
Speaker Change: Has been evidenced in this category for.
Speaker Change: We're quite optimistic that there's a lot of business to be won at all three of those areas and again, the three areas being other GPU companies.
Speaker Change: I don't know decade, or plus with the exception of the.
Speaker Change: Covid window.
Speaker Change: You clearly.
Speaker Change: Other merchants merchant.
Speaker Change: Predominantly into a single customer who has now got qualification from multiple customers or.
Speaker Change: Transceiver opportunities and thirdly.
Speaker Change: Hyperscale companies, who want to go direct with them, maybe what their own optical interconnect. So we're working hard on all three of those but nothing to announce at this point.
Speaker Change: Multiple alternative suppliers.
Speaker Change: The combination of those two with some slowing of the overall growth rate expected in this category in 'twenty five 'twenty six.
Speaker Change: We're optimistic with it takes time to take a long time to lend itself to one last question then I'll cede the floor. So.
Speaker Change: I think you've talked about pricing pressure being larger than the 10% to 15% normal price pressure that AR.
Speaker Change: Does it suggest to you that this category could decelerate to pretty modest growth.
Speaker Change: Has been evident in this category for I.
Speaker Change: <unk>.
Speaker Change: As you have share loss against the euro.
Speaker Change: I don't know decade, or plus with the exception of the Covid.
Major.
Speaker Change: Our customer end.
Speaker Change: Covid window.
Speaker Change: The pricing pressures there or do you have visibility that the new capacity coming on stream from that customer.
Speaker Change: And.
Speaker Change: You're clearly self.
Speaker Change: Selling predominantly into a single customer who has now got qualification from multiple customers or multiple.
Speaker Change: Coming in quarter after quarter after quarter is going to continue to drive.
Speaker Change: Multiple volatile alternative suppliers.
Speaker Change: The combination of those two with some slowing of the overall growth rate are expected in this category in 'twenty five and 'twenty six.
Speaker Change: Solid 5% to 15% kind of growth, which is what <unk> been producing.
Speaker Change: Quarter to quarter over the last year, how do we think about.
Does it suggest to you that this category could decelerate to pretty modest growth.
Speaker Change: This dynamic from your perspective.
Speaker Change: Thanks, Yeah. So yeah, we've been we've been growing about 15% compound annual growth rate over the last the last three three or four years.
Speaker Change: Or.
Speaker Change: You know as you have share loss against that.
Speaker Change: Your major.
Speaker Change: Our top line has grown about 15% each year, our earnings has grown about 24% and same periods each year.
Speaker Change: Our customer and.
The pricing pressures there or do you have visibility that the new capacity coming on stream from that customer.
Speaker Change: And from a customer's perspective, yeah cost is a factor.
Speaker Change: Coming in quarter after quarter after quarter is going to continue to drive.
Speaker Change: But it's not the only consideration.
Speaker Change: First of all in terms of cost we're very.
Speaker Change: Solid 5% to 15% kind of growth.
Speaker Change: I would say confidence in our ability to meet any cost targets that the customer.
Speaker Change: As what you've been producing.
Speaker Change: If any of our customers needed to make sure. We're very cost competitive we have a low cost footprint, we have a very compact footprint and we don't have any redundant capacity in any geographies around the world. So we don't have a capacity overhang we have to deal with it. So we're you know we're very we're very cost conscious we're very cost competitive and we're very compact.
Speaker Change: Order to quarter over the last year or how do we think about this dynamic from your perspective.
Speaker Change: Thanks, Yeah. So yeah, we've been we've been growing about 15% compound annual growth rate over the last the last three three or four years.
Speaker Change: Our topline is growing about 15% each year, our earnings has grown about 24%.
Speaker Change: But our customers really care about several factors cost being one, but it's not the only one technology.
Speaker Change: Periods, each year and you know from.
Speaker Change: And really the ability of their supplier to be a technology leader to make sure. They can get to market first with our new products is critical and then quality and delivery are absolutely critical.
Speaker Change: From a customer's perspective, yeah cost is a factor.
Speaker Change: But it's not the only consideration.
Speaker Change: First of all in terms of cost were very.
And the ability to ramp quickly when an opportunity comes along so having capacity available is critical as well and of course cost. So it's all of the outlets all of those factors. It's not any one factor. It's all of those factors that we believe our customers are.
I'd say confident in our ability to meet any cost targets that the customer.
Speaker Change: If any of our customers need us to make sure we're very cost competitive.
Speaker Change: Our low cost footprint, we have a very compact footprint and we don't have any redundant capacity in any geographies around the world. So we don't have a capacity overhang that we have to deal with it. So we're you know we're very we're very cost conscious we're very cost competitive and very compact.
Speaker Change: Our most are preoccupied with them and so are we so we're confident in our ability to continue to grow the business.
Speaker Change: Don't give long term guidance as you know Alex We guide one quarter at a time, but.
Speaker Change: But our customers really care about several factors cost being one, but it's not the only one technology.
Speaker Change: But I think our our our optimism about the business is.
Speaker Change: And really the ability of their supplier to be a technology leader to make sure. They can get to market first with your new products is critical.
You can see are the steps, we're taking to continue to expand our capacity and make sure. We're ready for the future. This is a good indication of how we feel.
Speaker Change: Quality and delivery are absolutely critical.
Alex Henderson: Great. Thanks.
Speaker Change: And the ability to ramp quickly when an opportunity comes along having capacity available is critical as well and of course cost. So it's all of those all of those factors. It's not any one factor. It's all of those factors that we we believe our customers are.
Alex Henderson: Thanks, a lot.
Speaker Change: Thank you.
Tim South: Our next question comes from the line of team South of China.
Tim South: Hey, good afternoon with Northland capital markets go ahead.
Speaker Change: Our most are preoccupied with them and so are we so we're confident in our ability to continue to grow the business.
Speaker Change: Yeah, Okay, sorry about that.
Speaker Change: My congratulations as well thank you Shannon.
Speaker Change: Don't give long term guidance as you know Alex We guide one quarter at a time.
Speaker Change: And let me just try and put that in a little more context in terms of the wind here you'd mentioned.
Speaker Change: But I think our our our optimism about the business is.
Speaker Change: You can see are the steps, we're taking to continue to expand our capacity and make sure. We're ready for the future. It is a good indication of how we feel.
Speaker Change: Infinera and Cisco historically.
Speaker Change: I think we started out with relatively muted expectations, there, but you know who.
Great. Thanks.
Thanks.
Speaker Change: Clearly.
Speaker Change: Thank you.
Speaker Change: They are very sizable customers for you I think the increment there as you know a couple $300 million.
Speaker Change: Our next question comes from the line of teen salvage al.
Speaker Change: Don't know whether you said it there I think you mentioned <unk> was not a 10% customer currently is.
Speaker Change: Hey, good afternoon with northern capital markets go ahead.
Speaker Change: Assume they will be in fiscal 'twenty six is that fair to say.
Speaker Change: Yeah, Okay, sorry about that.
Speaker Change: Well I guess, if you dial in approximately 12 months from now and we'll find out.
Timna: And my congratulations as well thank you timna.
Speaker Change: And let me just try and put that in a little more context in terms of the wind here you had mentioned.
Speaker Change: It's too early to say, Tim and I think it's.
Speaker Change: It's early days, obviously its not early days in the relationship with C. I know they've been a customer for a very long time in the next few customer but this latest this latest win.
Speaker Change: Infinera and Cisco historically.
Speaker Change: Just getting geared up to begin to wrap it so it's early days, but where.
Speaker Change: I think we started out with relatively muted expectations, there, but yeah.
Speaker Change: We're very happy with the win very happy with the relationship.
Speaker Change: Clearly.
Speaker Change: Theyre very sizable customers fee I think the increment theres.
Speaker Change: Okay, and you mentioned modems I assume that the kind of the mainland kind of coherent <unk>.
Couple of $300 million.
Speaker Change: I don't know whether you said it there I think you had mentioned <unk> was not a 10% customer currently I assume they will be in fiscal 'twenty six is that fair to say.
Speaker Change: Your line cards and.
Speaker Change: The associated optics that go with that.
Speaker Change: I don't know if you can say this but would that include <unk> as well. So you are applicable or maybe you already do that.
Speaker Change: Well I guess, if you die and then approximately 12 months from now and we'll find out.
Speaker Change: Yeah, I'd prefer probably not to go into that level of detail I mean, we do a lot of a lot of.
Speaker Change:
Speaker Change: It's too early to say, Tim and I think you know it's early days, obviously its not early days and normally as you could see I know they've been a customer for a final time of Mexican customer, but this latest our latest win.
Speaker Change: Work with with Sienna and like I said, there have not been a 10% customer. So again, it's not really our place to disclose the specific components, we make for our customers.
Speaker Change: We're just getting geared up to begin to ramp and so it's early days, but where.
Speaker Change: It's a pretty broad based relationship on a very successful one.
Speaker Change: We're very happy with the win very happy with the relationship.
Speaker Change: Okay, and you mentioned modems I assume that the kind of the mainland coherent.
Speaker Change: Alright, understood well done thanks very much.
Speaker Change: Thank you.
And as a reminder to our kind of audience have you do have a question simply press star one one to get in the queue.
Speaker Change: Line cards and the associated optics that go with that.
Speaker Change: I don't know if you can say this but would that include buckles is well see our applicable or maybe you already do that.
Speaker Change: Yeah.
Speaker Change: And our next question comes from the line of Mike Genovese with Russell Black Securities. Please proceed.
Speaker Change: Yeah, I'd prefer probably not to go into that level of detail I mean, we do a lot of a lot of.
Work with with Sienna.
Mike Genovese: Great. Thank you.
Speaker Change: I stayed there have not been a 10% customer so again, it's not really our place to disclose the specific components, we make for our customers.
So seamus.
Speaker Change: The Seattle wins sounds that sounds very positive.
Mike Genovese: Dr commentary was positive I'm, just wondering on the telecom side of the world are there any other claims.
Speaker Change: It's a pretty broad based relationship on a very successful one.
Speaker Change: Green shoots to point out or are those the two main things is there or is there a third in the fourth.
Speaker Change: Okay understood well done thanks very much.
Speaker Change: Well I think.
Anna: Thank you Anna Saturday mine, there too I tell the audience have you do have a question simply press star one one to get in the queue.
Speaker Change: The other the other couple of comments are on the overall, let's say our traditional telecom business.
We do we do think it's stabilizing we're starting to see demand coming back.
Anna: Okay.
Anna: And our next question comes from the line of Mike Genovese with Russell Black Securities. Please proceed.
Speaker Change: Not going to see it stabilize.
Speaker Change: No.
Speaker Change: Early days, but we think our traditional telecom business is starting to stabilize.
Mike Genovese: Great. Thank you.
Mike Genovese: Hey, Matt.
Speaker Change: And then the other point would be on Dci.
Speaker Change: The piano wind sounds that sounds very positive.
Speaker Change: Dr commentary was positive.
So GCI continues to be a good growth driver, especially on <unk>.
Mike Genovese: Wondering on the telecom side of the World are there any other green shoot.
Speaker Change: 400, <unk>, but also.
<unk> has been a good solid.
Speaker Change: Point out or are those the two main things is there or is there a hearing the horse.
Speaker Change: Beacon of likes of growth for us over the last one there'll be the four main telecom my comments if you like.
Speaker Change: Well I think.
Speaker Change: The other the other couple of comments are on the overall, let's say our traditional telecom business.
Speaker Change: Alright.
Speaker Change #100: And then just to clarify and then kind of put you know kind of your your business in context with other people's business and the industry is.
Speaker Change: We do we do think it's stabilizing we're starting to see demand coming back we're starting to see it stabilize so.
Speaker Change #101: Is it correct to assume that everything you can make for the customer is a is a multimode transmit transceiver is that is that correct.
Speaker Change: Early days, but we think our traditional telecom business is starting to stabilize.
Speaker Change #102: No we make.
And then the other point would be on Dci.
Speaker Change #103: All kinds of transceiver single mode Multimode.
Speaker Change: The Dci continues to be a good growth driver, especially.
Speaker Change #103: Thanks.
Speaker Change #103: Okay.
Speaker Change: 400, they are but also.
Speaker Change #103: Okay.
Speaker Change: <unk> has been a good solid.
Speaker Change #103:
Speaker Change #104: I guess I guess, but.
Speaking of license growth for us over the last one there'll be the four main telecom comments if you like.
How would you position like the products.
Speaker Change #105: You make versus other people's products out there for instance, they use E. M. LS is there a significant overlap in those applications or do you think that there.
Speaker Change: Alright.
Speaker Change: And then just to clarify and then kind of put you know kind of your your business in context with other people's business and the industry is.
Different products for different parts of the network.
Speaker Change: Is it is it correct to assume that everything you can make for the customer is a is a multi mode transient transceiver is that is that correct.
Speaker Change #106: I think again, it's probably more of a question for them.
Speaker Change #107: Our customers and for US I mean, we make whatever the customers want us to make.
Speaker Change #107: Okay.
No we make.
Speaker Change #108: And again in broad terms.
All kinds of transceiver single mode Multimode.
Speaker Change #109: Right now with our with our big customer, they're just really to <unk>.
Speaker Change: Thanks.
Speaker Change #109: Sources, if you like for products that they have to have their own design, which we make their own designs floors, which we make.
Speaker Change: Okay.
Speaker Change: Okay. So.
Speaker Change: I guess I guess, but.
Speaker Change #109: And then theres the merchants transceiver.
Speaker Change: How would you position like the products.
Speaker Change #109: Suppliers as well.
Speaker Change: You make.
Speaker Change #109: But with the puts and takes around kind of kudos, Washington, which which one is best suited to which application we believe that for our customers to talk about.
Speaker Change: Versus other People's products out there for instance, they use ml is there a significant overlap in those applications or do you do you think that there.
Speaker Change: Different products for different parts of the network.
Speaker Change #110: Okay, and then finally, I actually even feel a little bit embarrassed asking this question because it really seems to be trying to read the tea leaves wait too closely but if we just look at the 800 gig business and thanks for breaking that out.
Speaker Change: I think again, it's probably more of a question for them.
Speaker Change: Our customers understand for us I mean, we make whatever the customers want us to make.
Speaker Change: Okay.
They've got the sequential growth it looks like maybe it was at a low point and in the fourth quarter and from the guide it sounds like it maybe be a little bit faster sequentially in the first quarter than it was in the fourth quarter.
Speaker Change: And again in broad terms.
Speaker Change: Right now with our with our big customer, they're just really too so.
Speaker Change: Sources, if you like for products that they have to have their own design, which we make their own designs, Florida, which we make.
Speaker Change: And then there's the merchant transceiver.
Speaker Change #111: And is there anything at all to read about the market.
Speaker Change: Suppliers as well.
Speaker Change #110: By that.
But with the puts and takes around kind of kudos, Washington, which which one is best suited to which applications. They believe that for our customers talk about.
Speaker Change #112: I don't think so.
Speaker Change #112: I don't think as a whole I wouldnt read a whole lot into Nash, we certainly don't just don't read anything significant into brush Mike.
Speaker Change #113: Okay. Thank you very much I appreciate it.
Speaker Change: Okay, then finally high actually even feel a little bit embarrassed asking this question because it really seems to be trying to read the tea leaves wait too closely but if we just look at the 800 gig business and thanks for breaking that out.
Speaker Change #114: Thank you.
Speaker Change #115: Thank you one moment for our next question.
Speaker Change #116: It comes from the line of George Notter with Jefferies. Please proceed.
George Notter: Hi, guys. Thanks, very much I wanted to ask about building 10.
Speaker Change: They've got the sequential growth it looks like maybe it was at a low point and in the fourth quarter and from the guide it sounds like it maybe be a little bit faster sequentially in the first quarter than it was in the fourth quarter.
George Notter: Think the way you phrase to Seamus was that youre going to make the decision of building 10. During this fiscal year have did you make that decision during the June quarter that youre breaking ground in the June quarter or did you mean to infer that you could break ground in any one of the next several quarters. We've made the decision I am Hope you said in our prepared remarks.
Speaker Change: And is there anything at all to read about the market.
Speaker Change: By that.
Speaker Change: I don't think so.
I don't think as a whole I wouldnt read a whole lot into that we certainly don't just don't read anything significant into us Mike.
It looks like we would.
George Notter: Break ground in in the fiscal year in the new fiscal year, which were which were now in.
Speaker Change: Okay. Thanks, very much I appreciate it.
Speaker Change: Thank you.
Thank you one moment for our next question.
George Notter: So we've taken the decision to.
Speaker Change #118: 200, <unk> I'm wondering 2 million square foot for cynosure or will it be a 2 million square foot facility. Some double the size of building nine.
Speaker Change: It comes from the line of George Notter with Jefferies. Please proceed.
George Notter: Hi, guys. Thanks, very much I wanted to ask about building 10.
Speaker Change #118: And we will break ground on this fiscal year.
Seamus: Think the way you phrased it Seamus was that youre going to make the decision of building 10. During this fiscal year have did you make that decision during the June quarter that youre breaking ground in the June quarter or did you mean to infer that you could break ground in any one of the next several quarters. We've made the decision I am Hope you said in our prepared remarks.
Speaker Change #119: Got it okay. So you mentioned, it's a year and a half to get it up and running is that a year and a half from from today is that a year and a half from.
Speaker Change #119: When we break ground order a quarter or two.
Speaker Change #119: I guess on it from when we breakdown.
Speaker Change #120: We generally once we make the decision.
Speaker Change #120: These are significant investments and it's a major undertaking major project.
Speaker Change: Was that we would bring.
Speaker Change: Break ground in in the fiscal year in the new fiscal year, which were which were now in.
Speaker Change #120: We will typically make the decision then of course, we have to go out to <unk>.
Speaker Change #120: Tender and make sure we have all the permits lineups that takes a little bit of time.
Speaker Change: So we've taken the decision.
200, <unk> I'm wondering 2 million square foot for cynosure or will it be a 2 million square foot facility. Some double the size of the 89.
Speaker Change #120: Then we will break ground.
Speaker Change #120: Some points in the next few quarters, we'll update on that in the future and then from once we break ground, it's about 18 months.
Speaker Change: And we will break ground on that this fiscal year.
Speaker Change: Got it okay. So you mentioned, it's a year and a half to get it up and running is that a year and a half from from today is that a year and a half from.
Speaker Change #121: Got it okay.
Speaker Change #122: Cool, Okay. So I can I assume that you're at a 70% utilization rate than right now on building nine I think in the past you've talked about that as being the.
Speaker Change: When we break around border a quarter or two from I guess on it.
Speaker Change #123: The threshold at which you guys make a decision.
Speaker Change: When we breakdown.
Speaker Change: You know we.
Speaker Change: We generally once we make the decision you know obviously these are significant investments and it's a major undertaking major project.
Speaker Change #124: We don't break that number out anymore. You can you can assume anything you like really we don't break that number out we did historically and it just wasn't productive.
Speaker Change: We will typically make the decision then of course, we have to go out to out to tender and make sure. We have all the permits lineups that takes those at a time.
Speaker Change #124: And that's the guideline we had centers has in the past when we get to 70% on an.
Speaker Change: Then you know we will break ground.
Speaker Change #124: The last building, we would pull the trigger on the next building.
Speaker Change: Some points in the next few quarters, we'll update on that in the future and then from once we break ground, it's about 18 months.
Speaker Change #124: But really just like I said, there is very little.
Speaker Change #124: There's a downside risk to building.
Speaker Change: Got it okay.
Speaker Change #124: Our next building a little bit earlier, even if even if we don't end up filling up there's really very little downside risk about 15 basis points and the upside opportunity is huge so we're not going to confirm utilization percentage other than to say building it filled up.
Speaker Change: Cool, Okay. So I can I assume that you're at a 70% utilization rate than right now on building nine I think in the past you've talked about that as being the.
Speaker Change: The threshold at which you guys make a decision.
Faster than we and we thought it would on solid there's always building nine it's filling up faster than we had anticipated. So we don't want to we want to make sure we don't get caught.
Speaker Change: We don't break that number out anymore. You can you can assume anything you like really we don't break that number out we did historically and it just wasn't productive.
Speaker Change #124: Flat photos, if some of these big opportunities if and when they come they come our way in the future we want to make sure we're ready.
Speaker Change: And that's the guideline we had centers has in the past when we get to 70% on an.
Speaker Change #125: Got it great and then just one last follow up.
Speaker Change: The last building, we would pull the trigger on the next building.
Speaker Change #125: So on the Sienna win I guess from the timing of building 10, breaking ground and then being up and running.
Speaker Change: But really just like I said, there's very little downside.
Speaker Change: A downside risk to building.
Speaker Change: Our next building a little bit earlier, even if even if we don't end up killing us there's really very little downside risk about 15 basis points from the upside opportunity is huge so we're not going to confirm the utilization percentage other than to say until it filled up.
Speaker Change #126: Assume the Sienna when it's going to come on relatively slowly like if I. If I look at CN is the optical business. Obviously, there are multiples of the size of Cisco Cisco is a 10% customer for you.
Speaker Change #126:
Speaker Change: Much faster than we thought it would and sort of does it so it has been.
Speaker Change #127: I guess I'm just I'm wondering if it's fair to say that it will take some time to really get that.
Speaker Change: It's filling up faster than we had anticipated. So we don't want to we want to make sure we don't get caught.
Speaker Change #128: <unk> ramped yeah, that's a really begin to ramp.
Speaker Change #129: An early early calendar when call it 20 to 25 or the <unk>.
Speaker Change: Flat photos.
Speaker Change: These big opportunities, if and when they come they come our way in the future we want to make sure we're ready.
Speaker Change #130: Second half of our of our fiscal year, so really into the March or even into the June quarter. Our fiscal Q4. So the ramp will be more of a FY 'twenty five story than in FY, sorry, FY 'twenty six.
Speaker Change: Got it great and then just one last follow up so on the Sienna win I guess from the timing of building 10, breaking ground and then being up and running.
Speaker Change: I assume the Sienna when it's gonna come on relatively slowly like if I. If I look at Sandoz optical business. Obviously, there are multiples of the size of Cisco Cisco is a 10% customer for you.
Speaker Change #130: Story than in FY 'twenty final will be and we are already are working on elements of it but we'd really don't start to ramp in earnest until the March and the June quarter.
Speaker Change:
Speaker Change #131: Great. Thank you congrats on the win thanks. Thank you very much. Thank you.
Speaker Change: I guess I'm just I'm wondering if it's fair to say that it will take some time to really get that business ramped.
Speaker Change #132: Thank you and that's all the time, we have for Q&A today, I will turn the call back to Seamus Grady for closing comments.
Speaker Change: Yeah, it's a really begin to ramp.
Speaker Change: And in early early calendar when call. It 2025 for the second half of our of our fiscal year, so really into the.
Seamus Grady: Thank you. Thank you for joining our call today, we're very pleased with our record quarter and fiscal year, we're optimistic that our business momentum will continue into the first quarter as we extend our leadership position in the markets. We look forward to speaking with you again and to seeing those of you who will be attending the Jefferies Conference next week Goodbye.
Speaker Change: In March or even into the June quarter, our fiscal Q4, so the ramp will be more of a FY 'twenty five story than in FY, sorry, FY 'twenty six story than in FY 'twenty five star will be and we are already are working on elements of it.
Speaker Change #133: And with that thank you all for participating in today's conference you may now disconnect.
Speaker Change: You really don't start to ramp it in earnest until March and the June quarter.
Speaker Change: Great. Thank you congrats on the way. Thank you very much. Thank you.
Speaker Change: Thank you and that's all the time, we have for Q&A today, I will turn the call back to Seamus Grady for closing comments.
Seamus Grady: Thank you. Thank you for joining our call today, we're very pleased with our record quarter and fiscal year, we're optimistic that our business momentum will continue into the first quarter as we extend our leadership position in the markets. We look forward to speaking with you again and to seeing those of you who will be attending the Jefferies Conference next week Goodbye.
Speaker Change: And with that thank you all for participating in today's conference you may now disconnect.
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Speaker Change: Good afternoon, and welcome to <unk> financial results conference call for the fourth quarter of fiscal year 2024.
Speaker Change: At this time all participants are in a listen only mode.
Speaker Change: Later, we will conduct a question and answer session and instructions on how to participate will be provided at that time.
Speaker Change: As a reminder, today's call is being recorded.
Speaker Change: I'd now like to turn the call over to your host Garrett tumor Johnson Vice President of Investor Relations. Please go ahead.
Speaker Change: Thank you operator, and good afternoon, everyone. Thank you for joining us on today's conference call to discuss <unk> financial and operating results for the fourth quarter and fiscal year 2024, which ended June 28 2024.
Speaker Change: With me on the call today are Seamus Grady, Chief Executive Officer, and Cabot's Ferrar, Chief Financial Officer. This.
Speaker Change: This call is being webcast and a replay will be available on the investors section of our website located at Investor <unk> Dot com.
Speaker Change: During this call we will present, both GAAP and non-GAAP financial measures. Please refer to the investors section of our website for important information, including our earnings press release, and Investor presentation, which include our GAAP to non-GAAP reconciliation as well as additional details of our revenue breakdown.
In addition, today's discussion will contain forward looking statements about the future financial performance of the company.
Speaker Change: Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from management's current expectations.
These statements reflect our opinions only as of the date of this presentation and we are.
Speaker Change: Undertake no obligation to revise them in light of new information or future events, except as required by law.
Speaker Change: For a description of the risk factors that may affect our results. Please refer to our recent SEC filings in particular, the section captioned risk factors in our Form 10-Q filed on May seven 2024.
Seamus Grady: We will begin the call with remarks from Seamus in Charbagh, followed by time for questions I would now like to turn the call over to fabricate CEO Seamus Grady Seamus.
Seamus Grady: Thank you Garo and good afternoon to everyone joining our call.
Speaker Change: Our very strong fourth quarter results.
Speaker Change: <unk> off an outstanding year for fiberglass.
Speaker Change: Fourth quarter revenue of $753 million was above our guidance range and grew 15% from a year ago and 3% from Q3.
Speaker Change: We executed very well to produce non-GAAP EPS also exceeded our guidance range at $2 41 per share.
Speaker Change: It's also notable Q4 marks the fourth quarter in a row for both record revenue and EPS for the company.
Speaker Change: For the full year revenue was $2 9 billion, an increase of 9% from fiscal year 2023.
Speaker Change: Our continued focus on cost management helped us to again grow non-GAAP earnings faster than revenue to a record $8 88 per share or 16% year over year increase.
Speaker Change: 2024 was quite a remarkable year for properties.
Speaker Change: Datacom revenue grew over 120% on telecom revenue declined more than 20% for the year due to the protracted inventory digestion across the telecom industry.
Speaker Change: Our strong results throughout the year demonstrated the strength of our flexible and resilient business model.
Speaker Change: Entering the fourth quarter, we anticipate its continued revenue growth in Datacom and declines in telecom and Thats. What we experienced we also anticipated a return to sequential growth in automotive revenue, which we also saw.
Speaker Change: Within optical communications Datacom revenue continues to drive growth on the sequential decline in telecom was more modest than anticipated.
Speaker Change: In Datacom 800 gig products.
Speaker Change: And related applications remain the biggest revenue contributor.
Speaker Change: This has empowered by the completion of the wind down of a long running 100 gig program as we've discussed previously.
Speaker Change: We are very encouraged by the strong demand trends, we're seeing for both current generation and next generation Datacom technologies.
Speaker Change: We believe that our industry, leading expertise and trusted reputation positions us, particularly well to continue benefiting from long term datacom growth.
Speaker Change: In telecom ongoing inventory digestion continues to dampen revenue from traditional telecom products.
Speaker Change: In the fourth quarter. This impact was partially offset by data center interconnect products as well as contributions from new Telecom system program wins.
Speaker Change: In fact, we expect recent system wins are varying sizes to begin making more meaningful revenue contributions towards the second half of our fiscal 2025.
Speaker Change: These new wins make us optimistic about Farber next long term telecom revenue trends overall.
Speaker Change: Turning to non optical communications, we saw double digit sequential revenue growth in the quarter as anticipated. This increase was primarily due to growth in automotive revenue as short term inventory absorption issues are now behind us.
Speaker Change: All in all we had a very robust and successful quarter and year and we remain positioned particularly well for continued momentum as we look ahead.
Speaker Change: In fact in the first quarter of our fiscal year 2025, we anticipate sequential revenue growth from all of our major product categories.
Speaker Change: Beyond Q1, we continued to carefully evaluate our long term capacity requirements in that regard we have made the decision to break ground on building 10 at our Chonburi campus during the new fiscal year.
Speaker Change: Our first building in Chonburi was building case with all 500000 square feet now being utilized.
Speaker Change: <unk> nine which is about 1 million square feet opened about two years ago and has quickly filling up.
Speaker Change: Building 10 would be 2 million square feet in size, we expect construction to take approximately a year and a half to complete once we break ground.
Speaker Change: Capital expenditures for construction of the 2 million square foot facility will be approximately $110 million.
Speaker Change: Beyond building 10, we have ample space to further increase our manufacturing capacity.
Speaker Change: We'll keep you posted on our construction timeline as we move ahead.
Speaker Change: In summary, we delivered a record fourth quarter with revenue and EPS at or above our guidance ranges as well as a remarkable fiscal year.
Speaker Change: We are increasingly optimistic about our future and we have numerous drivers have positioned us to extend our track record of success into fiscal 2025 and beyond.
Speaker Change: Now, let's turn the call over to <unk> for more financial details on our fourth quarter and fiscal 2024, and our guidance for the first quarter of fiscal 2025.
Speaker Change: Thank you Seamus and good afternoon, everyone. We had a terrific fourth quarter to end, a very strong year record fourth quarter revenue of $753 million was above our guidance range and represented an increase of 15% from a year ago and 3% from Q3.
Speaker Change: The strong revenue helped produce record non-GAAP earnings per share of $2 41 said Mitch.
<unk> was also above our guidance.
Speaker Change: For the full fiscal year revenue was a record $2 $9 billion, an increase of 9% from fiscal 2023.
Speaker Change: As in recent years non-GAAP earnings grew faster than revenue, reaching a new record of $8 88 per share up 16% from the prior year.
Details of our revenue breakdown are included in the Investor presentation on our website.
Speaker Change: And I will now focus my comments on some of the more notable metrics.
Speaker Change: In the fourth quarter optical communications revenue of about $596 million or 79% of total revenue an increase of 19% from a year ago and 1% from Q3.
Speaker Change: Within optical communications Datacom revenue was $350 million or 53% of optical communications revenue, an increase of 63% from a year ago and 3% from the prior quarter.
Telecom revenue was $282 million or 47% of optical communications revenue.
Speaker Change: Telecom revenue declined approximately 1% from Q3, which was a smaller decline than expected due to continued growth from data center interconnect products.
Speaker Change: Okay.
Speaker Change: We had the optical communication industry transitioning to higher data rates, we continued to see strong growth from 800 gig and faster products that are now clearly the key drivers of our growth.
Speaker Change: Therefore, we are now breaking out revenue by speed into two categories.
Speaker Change: 800 gig and foster and below 800 gig.
In the fourth quarter revenue from products rated at 800 gig and faster plus $259 million.
Speaker Change: 54% from a year ago.
Speaker Change: Revenue from product below 800 gig was $223 million.
Speaker Change: Up 4% from a year ago.
Speaker Change: Revenue from our pick our communications product that are non feed related including road <unk> amplifiers fiber raise and other devices was $114 million down 5% from a year ago.
Speaker Change: The historical two year trend of this breakout is provided in the most recent investor deck on our website.
Speaker Change: From that breakout you will observe that in fiscal 2024 product jaded at 800 gig and above started to dominate and the biggest contributor to growth.
Speaker Change: Although product below 800 gig continued to grow thanks to 400, ZR programs, which reached 10% of optical communications revenue in Q4.
Speaker Change: Revenue from non optical communications, so healthy growth in the fourth quarter to $157 million up 2% from a year ago and 12% from Q3.
Speaker Change: This increase was primarily the result of increasing our automotive revenue as we have moved past a short term inventory correction period.
Speaker Change: Our automotive revenue was $86 million in the fourth quarter up.
Speaker Change: Up 17% sequentially.
Speaker Change: As I discuss the details of our P&L expense and profitability metrics will be on a non-GAAP basis, unless otherwise noted.
Speaker Change: Gross margin in the fourth quarter at about 12, 5%.
Speaker Change: A 10 basis point decline from Q3, and it was within our guidance range.
Speaker Change: Operating expenses were $14 million slightly less than 2% of revenue.
Speaker Change: Operating income was $80 million, representing an operating margin of 10, 7% consistent with the third quarter.
Speaker Change: The combination of our strong cash balance and elevated interest rate environment provided record interest income of $11 million.
Speaker Change: The GAAP tax rate was four 6% in the fourth quarter.
Speaker Change: We anticipate that our tax rate will remain in the mid single digit in fiscal year 2025.
non-GAAP net income was a record $88 million or $2.41 per diluted share.
Speaker Change: For the full year revenue was $2 9 billion up 9% from fiscal 2023.
Speaker Change: In fiscal 2024, we had two customers that contributed 10% or more to revenue and media at 35% as Cisco at 13%.
Speaker Change: Our top 10 customers together made up 86% of revenue up from 84% in fiscal 2023.
Speaker Change: For the fiscal year gross margin that's up 6%.
Speaker Change: Down 40 basis points from fiscal 2023, primarily due to the absence of FX tailwind that we benefited from last year.
Speaker Change: Operating margin for the fiscal year was 10, 6% a decrease of 20 basis points from fiscal 2023.
Speaker Change: You will note. This is a smaller decline than we saw in our gross margin, reflecting operating leverage inherent in our model.
Speaker Change: non-GAAP net income was a record $8 88 per share an increase of 16% from a year ago at EPS growth again outpacing revenue growth.
Speaker Change: We maintained a very strong balance sheet throughout fiscal year 'twenty 'twenty four.
Speaker Change: Closed the year with cash and short term investments of $859 million up $65 million from the end of the third quarter.
Speaker Change: The primary driver of this increase of our strong operating cash flow of $83 million, we had capex of $13 million free cash flow in the quarter by $70 million.
Speaker Change: For the full year, we generated record operating cash flow of $413 million.
Speaker Change: Arguably increase of 94% from fiscal 2023.
Speaker Change: Free cash flow in fiscal 2024 was also a record at $368 billion, an increase of 142% from a year ago.
Speaker Change: In the fourth quarter, we repurchased approximately 21000 shares at an average price of $170 per share, but our total cash outlay of $3 $5 million.
Speaker Change: For the full year, we repurchased approximately 212000 shares at an average price of $186 per share for a total cash outlay of $39 million.
Speaker Change: We remain committed to investing in our growth, but also returning capital to shareholders with our <unk> and open market share repurchase programs.
Speaker Change: Since the end of the quarter. Our board has authorized an additional $139 million 40 purchases. So that we now have $200 million available for share buyback.
Speaker Change: This is double the size of our repurchase authorization at the beginning of fiscal 2024.
Speaker Change: Now I will turn to our guidance for the first quarter of fiscal year 2025.
Speaker Change: After a year of breaking quarterly records for revenue and EPS. We are optimistic that the first quarter will represent another strong quarter for fibernet.
In fact, we anticipate that revenue will be up sequentially in all of our major product areas.
Speaker Change: We expect data comp growth to be driven mainly by advanced high data rate products.
We expect <unk> revenue to increase from the combination of growth in data center interconnect product at least and new program wins.
Speaker Change: And we believe that automotive and laser revenue will also grow sequentially.
Speaker Change: Overall, we expect first quarter revenue to be in the range of $760 million to $780 million.
Speaker Change: We also expect to outperformance from profitability perspective.
Speaker Change: Keep in mind that in the first quarter, maybe we will see the seasonal impact of annual merit increases, which puts temporary downward pressure on margins.
Speaker Change: As in the past, we expect operational efficiencies to offset these cost increases as we progress through the year.
Speaker Change: Based on recent strength in Thai baht, they expect the foreign exchange revaluation loss in the first quarter.
That in mind, we are anticipating EPS to be $2 33 to $2 40 per share.
In summary, we had another record quarter with results that exceeded our guidance for both revenue and EPS.
Our momentum to continue in fiscal 2025, beginning we had a strong first quarter as we extend our track record of solid execution.
Speaker Change: Operator, we are now ready to open the call for questions.
Speaker Change: Thank you and as a reminder to ask a question simply press Star one one on your telephone and wait for your name to be announced to remove yourself from the queue Press Star One again, please standby for our first question.
Speaker Change: Okay.
And our first question comes from Sami <unk> with Jpmorgan. Please go ahead.
Hey, good afternoon. Thanks for the question. This is Joe Cardoso on for Sonic.
The first one here just on the Datacom business curious if you could talk about the timing around 116, and whether you think that can start to operate whether that's beginning to materialize as early as the September quarter, and then second part of this question is just like how are you thinking about 400 gig and 800 gig.
Speaker Change: Demand going forward both of these look like strong growth drivers in $2000 for just doing kind of on the back of the envelope math.
Speaker Change: Here on the new disclosures and I think in the past you highlighted expectation that 800 gig demand continues as you don't expect 160 to cannibalize it.
Speaker Change: Is that still the same case fill expectations going into 2025 and does that apply to 400 gig as well and then I have a quick follow up thank you.
Thank you. Thanks, Joe So yes, one six we don't talk about we can talk about the specific timelines.
Speaker Change: For our customers product before before they do but certainly.
Speaker Change: We're working hard with our customer on 160, but we think today's hundred gig will be around for a while it's used extensively and allopathy products in the networks, we make for our customers.
Speaker Change: And we think both litigation gagan will be around for a long time are our aim as always is to be working with the customers on the next generation products. While we're on we're building the current generation products.
Speaker Change: 162, <unk> Transceivers, you know, they're quite complex and they don't ramp up overnight.
Speaker Change: Again, the timing of the announcement of a new product like that is really up to our customers. So we wouldn't really we wouldn't really comment on that.
Speaker Change: But we're certainly making sure that we're ready for Matt.
Speaker Change: A capacity perspective.
Speaker Change: 800 gig.
Say it again the demand is very strong 400 gig.
Speaker Change: It still remains.
Speaker Change: <unk>.
Speaker Change: Like the tax at the timing of $1 six we believe that for our customers to talk about.
Seamus Grady: No. Thanks, Seamus and then maybe just in terms of my second question, maybe bigger picture, obviously, great to hear the news around southern count expansion as we think about the portfolio and what's driving the conviction to break ground. There is this all related to further confidence in terms of on the Datacom business or are there other areas.
Speaker Change: The portfolio, that's driving conviction here and supporting additional facility build out just curious high level thoughts on how youre thinking about and let's start with conviction. There. Thank you I. Appreciate the question still from it's really of our overall conviction about the overall business, it's not any one particular.
Speaker Change: Do you like segments.
Speaker Change: Building building nine and actually building it before the sales faster than we had anticipated.
Speaker Change: <unk>.
Speaker Change: Building building tenants of good use of our cash we have the cash available.
Speaker Change: We get better economies of scale by building 2 million square foot facility, rather than a one 1 million square foot and it's just a.
Speaker Change: Better overall use of the land available to us to build.
Speaker Change: 2 million square foot facility.
Speaker Change: And really we have conviction in the pipeline and the business the upside opportunity is significant if you do the math on that on the revenue per square foot.
Speaker Change: It would suggest that the revenue capacity.
Speaker Change: Building 10 should be about $2, four plus or minus $2 4 billion.
Speaker Change: So the upside opportunity is significant on the downside risk is very small.
Speaker Change: Even if we were to build.
Speaker Change: Building tenant didn't put any business in there for a period of time the the gross margin headwinds would be about 15 basis points. So it's very small so it's a combination of all those factors the conviction of the business.
Speaker Change: We believe it's a good use of our of our cash and its also good upside potential with further downside risk.
Speaker Change: Thank you one moment for our next question. Please.
Speaker Change: And he comes from the line of Karl Ackerman with BNP Paribas. Please proceed.
Karl Ackerman: Okay. Thank you.
Karl Ackerman: Gentlemen, your four I've got two questions. Firstly your 800 gig transceiver revenue to date has been primarily driven by your largest customer.
Speaker Change: And some investors have been concerned that a push out of the latest GPU.
Speaker Change: Would impact your near term outlook that does not appear to be the case. So does your September quarter outlook.
Speaker Change: Imply that you are seeing a broadening of your datacom customer base for 800 gig as several hyperscale.
Speaker Change: <unk> began to employ broadly 800 gig networking switches.
Speaker Change: So, yes, I mean, we.
Speaker Change: We don't we don't really comment on our customers' product launches.
Speaker Change: We know that our big customers safe ratio under <unk> has been in video.
Speaker Change: They they continued to see strong demand for their products.
Speaker Change: And.
Speaker Change: Our understanding is that they will extend that expands.
Speaker Change: Production based on current Gpus to meet the demand that's there and we're happy to continue to support them.
Speaker Change: We're working hard on a number of opportunities we've talked about these before theres really three categories.
Speaker Change: If you like AI related growth vectors theirs.
Speaker Change: Outside of India, Obviously, we're very happy with the growth in video poker pursuing other says theres other GPU companies.
Speaker Change: There is other merchants transceiver opportunities and then there is hyperscale or so could you maybe go direct and we are pursuing all three.
Speaker Change: So our outlook is really a function of continued strength.
Speaker Change: Continued strength in the.
Speaker Change: The Datacom business.
Speaker Change: And the telecom.
Speaker Change: Softness that we've seen for the last while we are seeing indications.
Speaker Change: That demand is beginning to recover so I suppose in.
Speaker Change: Simple terms the datacom.
Speaker Change: Growth looks to be sustainable.
Telecom weakness.
Speaker Change: As temporary we think we've also had some success with winning some new complete network system business.
Speaker Change: As well as we will be introducing over the next one so we want to make sure we have ample capacity for that we've been able to pick up some additional cash.
Speaker Change: Street Metro system business.
Speaker Change: Yes, thanks for that Seamus.
Speaker Change: To that point could you discuss the breadth of customer adoption and growth of coherent ZR optics using telecom in Dci.
Speaker Change #100: And then at the same time, if I may.
Speaker Change #101: You spoke in your prepared comments about new programs within telecom beginning to flow into the model in the second half of fiscal 'twenty five I'm curious, whether the reason to expand building 10.
Speaker Change #102: Of what appears to be twice as large as your previous plans is driven by the outlook.
Speaker Change #102: Within the telecom.
Speaker Change #103: Programs or if it's driven predominantly by the Datacom opportunity that you see thank you.
Speaker Change #103: Yes, Brian it's actually book it.
Speaker Change #104: Continued strength in Datacom, and we believe our our.
Speaker Change #104: The ability to pick up additional business there, but also what we see is some recovery in telecom, but also some some new wins.
Speaker Change #104: We have been picking up some new business.
Speaker Change #104: We've had some success with a number of system wins of varying sizes over the last one if you go back.
Speaker Change #104: Few years ago, we had the Infinera a win that we had some.
Speaker Change #104: Considerable success with Cisco.
And more recently we've been awarded.
One of these is an award from Sienna.
Speaker Change #104: <unk>, who has been a customer of ours for some time, but that's been a customer more on the on the components side. They.
Speaker Change #104: They haven't been a 10% customer so they haven't been in the 10% charter if you like but theyre very important customer for us on an excellent customer and we're very happy that we've been awarded.
Speaker Change #104: The manufacturing of the majority share of their next generation network motor business.
Speaker Change #104: Along with all of the associates FERC key integrators optical components. So we've been making the majority of the.
Speaker Change #104: The modems and all of the optics for those modems and we expect we expect this program really in the.
Speaker Change #104: In our fiscal Q4, which means this win will be it could be more important for fiscal 'twenty six revenue in fiscal 'twenty fiery revenue, but over the over the next kind of six to nine months we began.
Speaker Change #104: We will begin to ramp that and we're very happy with it the expansion of this relationship with <unk>. So it's a combination of.
Speaker Change #105: Returning to strength in telecom plus some additional business, we've been picking up in telecom and of course sustainable datacom demand in the datacom growth as well.
Speaker Change #106: Very helpful.
Speaker Change #107: Interestingly, our sorry, you asked also about CR so.
Speaker Change #107: Our telecom business overall year on year, it's down.
Speaker Change #108: 20, 23% year on year.
Speaker Change #108: But within that we've had we've had some very nice growth in Dci, which is not just ZR, but it's a lot of that growth has been ZR and <unk>.
Speaker Change #108: We have some some success in cohort as they are and also Asia, ZR and ZR plus and right now we have six.
Speaker Change #108: Fixed customers six Z are customers of varying sizes. So.
Speaker Change #108: ZR optics.
In particular for Dci applications has been a resource of.
Speaker Change #108: Strength for us and we've been we've been very happy with the adoption of VR in the Dci space over the last one.
Speaker Change #109: Very helpful. Thank you.
Speaker Change #110: Youre welcome thank.
Speaker Change #110: Thank you.
Speaker Change #111: Our next question.
Speaker Change #111: Comes from the line of Alex Henderson with Needham Alex Your line is open.
Alex Henderson: Thanks, So much Wow, you got Siena in there the systems business, that's fabulous congratulations thats good news.
Alex Henderson: I was hoping you might talk a little bit about whether you're going to break that out as a category now that it's become.
A multiple vendor.
Alex Henderson: <unk>.
Speaker Change #114: Group as opposed to one or two customers.
Speaker Change #115: And then second.
Within the <unk>.
Speaker Change #115: The systems business.
Speaker Change #115: A lot of systems inventory out there, but it seems to be clearing faster on the system side than the component side.
So do you expect the systems business to to.
Speaker Change #115: Pick up faster than the overall telecom component business.
Speaker Change #115: Well, certainly I think our systems business will because we've had some success there.
Speaker Change #116: You've obviously had some success.
Speaker Change #117: On the on the component business as well, but that is still hampered by inventory digestion.
Speaker Change #117: And again, we cant really easily distinguished between inventory adjustments on market demand. So it's not always clear to us but based on what we are seeing from our customers. It does feel as though inventory digestion and again on the component side.
Speaker Change #117: Our traditional telecom products is starting to stabilize.
Speaker Change #117: It doesn't really mean it doesn't necessarily mean, we're off to the races, yet and there could still be some <unk>.
Speaker Change #117: Remaining digestion, but the big year over year on sequential declines, we think are largely behind us at this point.
Speaker Change #118: On the on the system side, yet so for US we take the system business will probably grow faster in the component business, we haven't we haven't broken it out.
Speaker Change #118: Well, yes, we may at some point in the future.
Speaker Change #118: Up to now we've had one or two customers in that space, but as we add to that customer portfolio. We may at some point in the future but not.
Speaker Change #118: Probably wait until the end of the fiscal year to do that.
Speaker Change #119: Thank you.
Speaker Change #120: The remarks, you made a comment that.
It has multiple alternative growth factors outside of Nvidia.
Speaker Change #121: Are any of those three categories that you identified anywhere near.
Possibility of announcements do you think that thats something that could happen. During this upcoming fiscal year or do you think that is really 26 and beyond type of business.
Speaker Change #121: Well as you as you know Alex we generally tend to Nash.
Speaker Change #122: Now, it's anything domestic until there's something to announce.
Speaker Change #122: Evidenced by the CNN news.
Our approach is to work very hard with our customers to try and win these opportunities, but until such time as we've actually want us we generally don't talk about or so but this three as you said the three growth vectors we're pursuing.
Speaker Change #122: We're pursuing with bigger onwards, with energy and working very very hard on those.
Speaker Change #122: We're quite optimistic that there is a lot of business to be won at all three of those areas and again, the three areas being other GPU companies.
Speaker Change #122: Other merchants.
Speaker Change #122: Merchant.
Transceiver opportunities and thirdly.
Hyperscale companies, who want to go direct with maybe with their own optical interconnect. So we're working hard on all three of those but nothing to announce at this point.
Speaker Change #122: We're optimistic with it takes time to take a long time to land. These up to one last question then I'll cede the floor. So.
Speaker Change #123: I think you've talked about pricing pressure being larger than the 10% to 15% normal price pressure that.
Speaker Change #123: <unk> has been evident in this category for.
Speaker Change #123: I don't know decade, or plus with the exception of the Covid window.
And.
Speaker Change #124: You clearly.
Speaker Change #124: <unk> predominantly into a single customer who has now got qualification from multiple customers.
Speaker Change #124: Multiple volatile alternative suppliers.
Speaker Change #124: The combination of those two with some slowing of the overall growth rate expected in this category in 'twenty five 'twenty six.
Speaker Change #125: Does it suggest to you that this category could decelerate to pretty modest growth.
Speaker Change #124: Sure.
Speaker Change #124: As you have share loss against.
Speaker Change #126: Your major.
Customer and.
Speaker Change #127: The pricing pressures there or do you have visibility that the new capacity coming on stream from that customer.
Coming in quarter after quarter after quarter is going to continue to drive.
Speaker Change #128: Solid 5% to 15% kind of growth.
Speaker Change #128: Which is what <unk> been producing.
Speaker Change #128: Quarter to quarter over the last year, how do we think about.
Speaker Change #128: This dynamic from your perspective.
Speaker Change #129: Thanks, Yes, so yeah, we've been we've been growing about 15% compound annual growth rate over the last the last three three or four years.
Speaker Change #129: Our topline is growing about 15% each year, our earnings has grown about 24% and same periods each year.
Speaker Change #130: And from a customer's perspective.
Speaker Change #131: Cost is a factor.
Speaker Change #131: It's not the only consideration.
Speaker Change #131: First of all in terms of cost we're very.
Speaker Change #131: I would say confident in our ability to meet any cost targets that the customer.
Speaker Change #131: Many of our customers needed to meet where we're very cost competitive we have a low cost footprint. We have a very compact footprint and we don't have any redundant capacity in any geographies around the world. So we don't have a capacity overhang that we have to deal with it. So we're very we're very cost conscious we're very cost competitive and very compact.
But our customers really care about several factors cost being one, but it's not the only one technology.
Speaker Change #131: And really the ability of their supplier to be a technology leader to make sure. They can get to market first with our new products is critical and then quality and delivery are absolutely critical.
Speaker Change #131: And the ability to ramp quickly when an opportunity comes along so having capacity available is critical as well and of course cost. So it's all of the outlets all of those factors. It's not any one factor. It's all of those factors that we believe our customers are.
Speaker Change #131: Most are preoccupied with.
Speaker Change #131: So are we so we're confident in our ability to continue to grow the business.
Speaker Change #131: We don't give long term guidance as you know Alex We guide one quarter at a time.
Speaker Change #131: But I think our our optimism about the business is.
Speaker Change #131: You can see are the steps, we're taking to continue to expand our capacity and make sure. We're ready for the future. This is a good indication of how we feel.
Alex Henderson: Great. Thanks.
Alex Henderson: Thanks.
Alex Henderson: Thank you.
Speaker Change #132: Our next question comes from the line of team salvage al.
Tim Savageault: Hey, good afternoon with Northland capital markets go ahead.
Speaker Change #134: Yeah, Okay, sorry about that.
Timna: My congratulations as well thank you timna.
Speaker Change #135: And let me try and put that in a little more context.
Terms of the wind here you had mentioned.
Speaker Change #135: Infinera and Cisco historically.
Speaker Change #135: I think we started out with relatively muted expectations there but.
Clearly.
Speaker Change #136: They are very sizable customers for you I think the increment theirs.
Speaker Change #137: $300 million.
Speaker Change #138: I don't know whether you said it there I think you mentioned <unk> was not a 10% customer currently I assume they will be in fiscal 'twenty six is that fair to say.
Speaker Change #137: Yeah.
Speaker Change #139: And I guess, if you dial in approximately 12 months from now we'll find out.
Speaker Change #139: It's too early to say, Tim and I think.
Speaker Change #140: It's early days, obviously its not early days in our relationship with CNN had been a customer for a very long time in the next few customer but this latest this latest win.
Speaker Change #140: We're just getting geared up to begin to rapid so it's early days, but we are.
Speaker Change #140: We're very happy with the win very happy with the relationship.
Speaker Change #141: Okay, and you mentioned modems I assume that the kind of the mainline kind of coherent.
Speaker Change #141: Line cards and the associated optics that go with that.
Speaker Change #142: I don't know if you can say this but would that include <unk> as well. So you are applicable or maybe you already do that.
Speaker Change #143: Yes, I'd prefer probably not to go into that level of detail.
Speaker Change #144: We do a lot of a lot of.
Speaker Change #144: <unk> with Sienna.
Speaker Change #145: I stayed there have not been a 10% customer so again, it's not really our place to disclose the specific components, we make for our customers.
Speaker Change #145: Pretty broad based relationship on a very successful.
Speaker Change #146: Great understood well done thanks very much.
Thank you and as a reminder to our Taylor audience. If you do have a question simply press star one one to get in the queue.
Speaker Change #146: Okay.
Speaker Change #147: And our next question comes from the line of Mike Genovese with Russell <unk> Securities. Please proceed.
Mike Genovese: Great. Thank you.
Speaker Change #148: <unk> found that sounds very positive.
Mike Genovese: Dr commentary was positive I'm, just wondering on the telecom side of the world are there any other <unk>.
Speaker Change #149: Green shoots to point out are those the two main things is there or is there a hearing the horse.
Speaker Change #150: Well I think.
Speaker Change #149: Yeah.
The other the other couple of comments are on the overall, let's say our traditional telecom business.
Speaker Change #151: We do we do think it's stabilizing we're starting to see demand coming back we're starting to see it stabilize so.
Speaker Change #151: Early days, but we think our traditional telecom business is starting to stabilize.
Speaker Change #151: And then the other point would be on Dci.
Speaker Change #151: So Dci continues to be a good growth driver, especially on.
Speaker Change #152: 400, <unk>, but also <unk>.
Speaker Change #152: <unk> has been a good solid.
Speaker Change #152: Speaking of legs of growth for us over the last one there'll be that the four main telecom comments if you like.
Right.
Speaker Change #153: And then just to clarify and then kind of put you know kind of your your business in context with other people's business and the industry.
Speaker Change #152: Is it correct to assume that.
Speaker Change #154: Everything you can make for the customer is that as a multimode <unk>.
Speaker Change #155: Transceiver is that is that correct.
Speaker Change #156: No we make.
Speaker Change #157: All kinds of transceiver single mode Multimode.
Speaker Change #157: Everything.
Speaker Change #157: Okay.
Speaker Change #157: Okay.
Speaker Change #157:
Speaker Change #158: I guess I guess.
Speaker Change #159: How would you position like the products that you make versus other people's products out there for instance, <unk> is there a significant overlap in those applications or do you think that they're kind of different products for different parts of the network.
Speaker Change #160: I think again, it's probably more of a question for our.
Speaker Change #161: Our customers and for US I mean, we make whatever the customers want us to make.
Okay.
And again in broad terms.
Now with our with our big customer there there's really two sources. If you like for products that they have to have their own design, which we make their own designs, Florida, which we make and then there is the merchant transceiver.
Suppliers as well.
Speaker Change #160: But what the puts and takes around.
Speaker Change #160: <unk>, which which one is best suited to which application that really matter to our customers talk about.
Speaker Change #162: Okay, then finally high actually even feel a little bit embarrassed asking this question.
Speaker Change #163: It really seems to be trying to read the tea leaves way too closely but if we just look at the 800 gig business and thanks for breaking that out.
Speaker Change #164: The sequential growth it looks like maybe it was at a low point.
In the fourth quarter and from the guide it sounds like it may be a little bit faster sequentially in the first quarter than it was in the fourth quarter.
Speaker Change #165: And is there anything at all to read about the market.
By that.
Speaker Change #166: I don't think so.
Speaker Change #167: I don't think as a whole I wouldnt read a whole lot into that we certainly don't just don't read anything significant into us Mike Okay.
Speaker Change #168: Alright, thanks, very much I appreciate it.
Speaker Change #169: Yes. Thank you.
Speaker Change #170: Thank you one moment for our next question.
Speaker Change #171: It comes from the line of George Notter with Jefferies. Please proceed.
Hi, guys. Thanks, very much I wanted to ask about building 10, I think the way you phrased. It Seamus was that youre going to make the decision of building 10 during this fiscal year.
Did you make that decision during the June quarter that Youre breaking ground in the June quarter or did you mean to infer that you could break ground in any one of the next several quarters.
Speaker Change #172: We've made the decision on what we said in our prepared remarks was that we would.
Speaker Change #172: Break ground in the fiscal year in the new fiscal year, which were which were now in.
Speaker Change #172: So we've taken the decision.
200, <unk> I'm, sorry, 2 million square foot facility will be a 2 million square foot facility. Some double the size of building nine.
Speaker Change #172: And we will break ground on that this fiscal year.
Speaker Change #173: Got it okay. So you mentioned, it's a year and a half to get it up and running is that a year and a half from from today is that a year and a half from.
Speaker Change #173: When we break ground order a quarter or two from I guess on it.
Speaker Change #173: When we breakdown.
Speaker Change #174: We generally once we make the decision obviously these are significant investments and it's a major undertaking major project.
Speaker Change #175: We will typically make the decision then of course, we have to go out to out to tender and make sure. We have all the permits lineups that takes a look at a time.
Speaker Change #175: Then we will break ground at some points in the next few quarters, we'll update on that in the future and then from once we break ground, it's about 18 months.
Speaker Change #176: Got it okay cool.
Speaker Change #177: Cool, Okay. So I can I assume that you're at a 70% utilization rate than right now on building nine I think in the past you've talked about that as being the.
Speaker Change #178: The threshold at which you guys make a decision.
Speaker Change #179: We don't break that number out anymore. You can you can assume anything you like really we don't break that number out.
Speaker Change #180: We did historically and it just wasn't productive.
Speaker Change #181: And that's the guideline we had centers has in the past that when we get to 70% on <unk>.
Speaker Change #181: The last building, we would pull the trigger on the next lending.
Speaker Change #181: But really does like I said, there's very little.
Speaker Change #182: Or is this a downside risk to building.
Speaker Change #182: Our next building a little bit earlier, even if even if we don't end up filling us theres really very little downside risk about 15 basis points from the upside opportunity is huge so we're not going to confirm safety utilization percentage other than to say building it filled up.
Speaker Change #182: Much faster than we and we thought it would and solid so its building nine it's filling up faster than we had anticipated. So we don't want to we want to make sure we don't get caught.
Speaker Change #183: Flat photos.
Speaker Change #183: These big opportunities, if and when they come they come our way in the future we want to make sure we're ready.
Speaker Change #184: Got it great and then just one last follow up.
Speaker Change #184: So on the Sienna win I guess from the timing of building 10, breaking ground and then being up and running.
Speaker Change #185: I assume the Sienna when it's going to come on relatively slowly like if I. If I look at Santos optical business. Obviously, there are multiples of the size of Cisco Cisco is a 10% customer for you.
Speaker Change #186: I guess I'm just I'm wondering if it's fair to say that it will take some time to really get that business ramped.
Speaker Change #187: It will really begin to ramp.
Speaker Change #188: An early early calendar when call it 2025 or the second half of our of our fiscal year, so really into the <unk>.
March or even into the June quarter, our fiscal Q4, so the ramp will be more of a FY 'twenty five story than in FY, sorry, FY 'twenty six story than in FY 'twenty five sorry will be and we are already are working on elements of it.
Speaker Change #188: Really don't start to ramp it in earnest until the March and the June quarter.
Speaker Change #189: Great. Thank you congrats on the way. Thank you very much. Thank you.
Thank you and that's all the time, we have for Q&A today, I will turn the call back to Seamus Grady for closing comments.
Seamus Grady: Thank you. Thank you for joining our call today, we're very pleased with our record quarter and fiscal year. We are optimistic that our business momentum will continue into the first quarter as we extend our leadership position in the markets.
We look forward to speaking with you again and to seeing those of you who will be attending the Jefferies Conference next week Goodbye.
Speaker Change #190: And with that thank you all for participating in today's conference you may now disconnect.