Record Third Quarter Revenue of $479.3 Million Exceeds Guidance

Fabrinet (NYSE:FN), a leading provider of advanced optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers of complex products, today announced its financial results for its third fiscal quarter ended March 26, 2021.

Seamus Grady, Chief Executive Officer of Fabrinet, said, "For the third quarter in a row, we delivered record revenue that exceeded our guidance. Notably, we saw sequential revenue growth from all the end markets that we track combined with improving operating margins, both of which helped generate record net income."

Grady continued, "Based on our current outlook and continued demand, we expect another record performance in the fourth quarter and we remain well-positioned to continue to deliver strong results over the longer-term."

Third Quarter Fiscal Year 2021 Financial Highlights

GAAP Results

Revenue for the third quarter of fiscal year 2021 was $479.3 million, compared to $411.2 million in the third quarter of fiscal year 2020.
GAAP net income for the third quarter of fiscal year 2021 was $37.5 million, compared to GAAP net income of $28.3 million for the third quarter of fiscal year 2020.
GAAP net income per diluted share for the third quarter of fiscal year 2021 was $1.00, compared to GAAP net income per diluted share of $0.75 for the third quarter of fiscal year 2020.

Non-GAAP Results

Non-GAAP net income for the third quarter of fiscal year 2021 was $45.4 million, compared to non-GAAP net income of $34.8 million for the third quarter of fiscal year 2020.
Non-GAAP net income per diluted share for the third quarter of fiscal year 2021 was $1.21, compared to non-GAAP net income per diluted share of $0.92 for the third quarter of fiscal year 2020.

Business Outlook

Based on information available as of May 3, 2021, Fabrinet is issuing guidance for its fourth fiscal quarter ending June 25, 2021, as follows:

Fabrinet expects fourth quarter revenue to be in the range of $475 million to $495 million.
GAAP net income per diluted share is expected to be in the range of $1.02 to $1.09, based on approximately 37.6 million fully diluted shares outstanding.
Non-GAAP net income per diluted share is expected to be in the range of $1.18 to $1.25, based on approximately 37.6 million fully diluted shares outstanding.

Conference Call Information

What:		Fabrinet Third Quarter Fiscal Year 2021 Financial Results Call
When:		Monday, May 3, 2021
Time:		5:00 p.m. ET
Live Call:		(888) 357-3694, domestic
		(253) 237-1137, international
		Passcode: 2790505
Replay:		(855) 859-2056, domestic
		(404) 537-3406, international
		Passcode: 2790505
Webcast:		http://investor.fabrinet.com/ (live and replay)

This press release and any other information related to the call will also be posted on Fabrinet's website at http://investor.fabrinet.com. A recorded version of this webcast will be available approximately two hours after the call and will be archived on Fabrinet's website for a period of one year.

About Fabrinet

Fabrinet is a leading provider of advanced optical packaging and precision optical, electro-mechanical, and electronic manufacturing services to original equipment manufacturers of complex products, such as optical communication components, modules and subsystems, automotive components, medical devices, industrial lasers and sensors. Fabrinet offers a broad range of advanced optical and electro-mechanical capabilities across the entire manufacturing process, including process design and engineering, supply chain management, manufacturing, advanced packaging, integration, final assembly and testing. Fabrinet focuses on production of high complexity products in any mix and any volume. Fabrinet maintains engineering and manufacturing resources and facilities in Thailand, the United States of America, the People's Republic of China, Israel and the United Kingdom. For more information visit: www.fabrinet.com.

Forward-Looking Statements

"Safe Harbor" Statement Under U.S. Private Securities Litigation Reform Act of 1995

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include: (1) our optimism that the fourth quarter will represent another record performance for the company and that we remain well-positioned to continue to deliver strong results over the longer-term; and (2) all of the statements under the "Business Outlook" section regarding our expected revenue, GAAP and non-GAAP net income per share, and fully diluted shares outstanding for the fourth quarter of fiscal year 2021. These forward-looking statements involve risks and uncertainties, and actual results could vary materially from these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: the effects of the COVID-19 pandemic on our business, particularly the possibility of (1) the growing global economic downturn, (2) extended shutdowns at any of our manufacturing facilities, especially if the pandemic intensifies or returns in various geographic areas, (3) continued disruption to our supply chain, which could increase our costs and affect our ability to procure parts and materials, especially if the pandemic intensifies or returns in various geographic areas, and (4) regional downward demand adjustments from our customers, particularly those in areas affected by the pandemic; less customer demand for our products and services than forecasted; less growth in the optical communications, industrial lasers and sensors markets than we forecast; difficulties expanding into additional markets, such as the semiconductor processing, biotechnology, metrology and materials processing markets; increased competition in the optical manufacturing services markets; difficulties in delivering products and services that compete effectively from a price and performance perspective; our reliance on a small number of customers and suppliers; difficulties in managing our operating costs; difficulties in managing and operating our business across multiple countries (including Thailand, the People's Republic of China, Israel, the U.S. and the U.K.); and other important factors as described in reports and documents we file from time to time with the Securities and Exchange Commission (SEC), including the factors described under the section captioned "Risk Factors" in our Quarterly Report on Form 10-Q, filed with the SEC on February 2, 2021. We disclaim any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise.

Use of Non-GAAP Financials

We refer to the non-GAAP financial measures cited above in making operating decisions because they provide meaningful supplemental information regarding our ongoing operational performance. Non-GAAP net income excludes: share-based compensation expenses; depreciation of fair value uplift; amortization of intangibles; and amortization of deferred debt issuance costs. We have excluded these items in order to enhance investors' understanding of our underlying operations. The use of these non-GAAP financial measures has material limitations because they should not be used to evaluate our company without reference to their corresponding GAAP financial measures. As such, we compensate for these material limitations by using these non-GAAP financial measures in conjunction with GAAP financial measures.

These non-GAAP financial measures are used to: (1) measure company performance against historical results, (2) facilitate comparisons to our competitors' operating results, and (3) allow greater transparency with respect to information used by management in making financial and operational decisions. In addition, these non-GAAP financial measures are used to measure company performance for the purposes of determining employee incentive plan compensation.

FABRINET
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands of U.S. dollars, except share data and par value)	March 26, 2021			June 26, 2020
Assets
Current assets
Cash and cash equivalents	$	247,011		$	225,430
Short-term restricted cash		—			7,402
Short-term investments		261,736			262,693
Trade accounts receivable, net of allowance for doubtful accounts of $126 and $336 respectively		309,079			272,665
Contract assets		17,130			13,256
Inventories		353,283			309,786
Other receivable		24,310			24,310
Prepaid expenses		10,653			5,399
Other current assets		31,967			14,508
Total current assets		1,255,169			1,135,449
Non-current assets
Long-term restricted cash		153			—
Property, plant and equipment, net		228,767			228,274
Intangibles, net		4,576			4,312
Operating right-of-use assets		6,744			8,068
Deferred tax assets		6,195			5,675
Other non-current assets		226			202
Total non-current assets		246,661			246,531
Total Assets		1,501,830			1,381,980
Liabilities and Shareholders' Equity
Current liabilities
Long-term borrowings, current portion, net		12,156			12,156
Trade accounts payable		275,705			251,603
Fixed assets payable		11,060			15,127
Contract liabilities		1,409			1,556
Operating lease liabilities, current portion		2,390			1,979
Income tax payable		2,882			2,242
Accrued payroll, bonus and related expenses		21,639			19,265
Accrued expenses		12,651			8,979
Other payables		26,348			21,514
Total current liabilities		366,240			334,421
Non-current liabilities
Long-term borrowings, non-current portion, net		30,397			39,514
Deferred tax liability		4,855			4,729
Operating lease liability, non-current portion		4,098			5,873
Severance liabilities		19,006			17,379
Other non-current liabilities		3,728			5,655
Total non-current liabilities		62,084			73,150
Total Liabilities		428,324			407,571

Shareholders' equity
Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding as of March 26, 2021 and June 26, 2020)		—			—
Ordinary shares (500,000,000 shares authorized, $0.01 par value; 38,741,166 shares and 38,471,967 shares issued at March 26, 2021 and June 26, 2020, respectively; and 36,880,160 shares and 36,727,864 shares outstanding at March 26, 2021 and June 26, 2020, respectively)		388			385
Additional paid-in capital		182,987			175,610
Less: Treasury shares (1,861,006 shares and 1,744,103 shares as of March 26, 2021 and June 26, 2020, respectively)		(76,813	)		(68,501	)
Accumulated other comprehensive income (loss)		(6,939	)		(1,147	)
Retained earnings		973,883			868,062
Total Shareholders' Equity		1,073,506			974,409
Total Liabilities and Shareholders' Equity	$	1,501,830		$	1,381,980

FABRINET
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(unaudited)

	Three Months Ended						Nine Months Ended
(in thousands of U.S. dollars, except per share data)	March 26, 2021			March 27, 2020			March 26, 2021			March 27, 2020
Revenues	$	479,317		$	411,210		$	1,369,783		$	1,236,723
Cost of revenues		(422,539	)		(366,874	)		(1,209,504	)		(1,097,242	)
Gross profit		56,778			44,336			160,279			139,481
Selling, general and administrative expenses		(19,059	)		(17,111	)		(53,078	)		(50,189	)
Expenses related to reduction in workforce		(43	)		—			(43	)		(16	)
Operating income		37,676			27,225			107,158			89,276
Interest income		941			2,042			3,156			6,080
Interest expense		(282	)		(238	)		(798	)		(2,812	)
Foreign exchange gain (loss), net		629			(8	)		224			(2,949	)
Other income (expense), net		124			203			403			977
Income before income taxes		39,088			29,224			110,143			90,572
Income tax expense		(1,595	)		(957	)		(4,215	)		(5,117	)
Net income		37,493			28,267			105,928			85,455
Other comprehensive income (loss), net of tax:
Change in net unrealized gain (loss) on available-for-sale securities		(570	)		(1,356	)		(937	)		(1,403	)
Change in net unrealized gain (loss) on derivative instruments		(5,000	)		(6,569	)		(5,823	)		(6,719	)
Change in net retirement benefits plan – prior service cost		198			294			421			478
Change in foreign currency translation adjustment		90			(600	)		547			(353	)
Total other comprehensive income (loss), net of tax		(5,282	)		(8,231	)		(5,792	)		(7,997	)
Net comprehensive income (loss)	$	32,211		$	20,036		$	100,136		$	77,458
Earnings per share
Basic	$	1.02		$	0.76		$	2.87		$	2.31
Diluted	$	1.00		$	0.75		$	2.82		$	2.27
Weighted-average number of ordinary shares outstanding (thousands of shares)
Basic		36,875			36,987			36,876			36,970
Diluted		37,609			37,797			37,514			37,696

FABRINET
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

	Nine Months Ended
(in thousands of U.S. dollars)	March 26, 2021			March 27, 2020
Cash flows from operating activities
Net income for the period	$	105,928		$	85,455
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		26,781			23,115
(Gain) loss on disposal of property, plant and equipment		(24	)		444
(Gain) loss from sales and maturities of available-for-sale securities		(187	)		(93	)
Amortization of investment discount		1,479			(624	)
Amortization of deferred debt issuance costs		24			18
(Reversal of) allowance for doubtful accounts		(317	)		(17	)
Unrealized (gain) loss on exchange rate and fair value of foreign currency forward contracts		(825	)		942
Unrealized loss (gain) on fair value of interest rate swaps		—			1,672
Amortization of fair value at hedge inception of interest rate swaps		(1,009	)		(838	)
Share-based compensation		18,742			18,301
Deferred income tax		(382	)		1,335
Other non-cash expenses		(614	)		(559	)
Changes in operating assets and liabilities
Trade accounts receivable		(36,437	)		(23,136	)
Contract assets		(3,874	)		(3,966	)
Inventories		(43,497	)		3,404
Other current assets and non-current assets		(22,919	)		5,830
Trade accounts payable		25,589			(15,571	)
Contract liabilities		(147	)		(298	)
Income tax payable		911			1,056
Severance liabilities		2,204			2,266
Other current liabilities and non-current liabilities		3,731			5,712
Net cash provided by operating activities		75,157			104,448
Cash flows from investing activities
Purchase of short-term investments		(183,041	)		(123,980	)
Proceeds from sales of short-term investments		84,049			48,808
Proceeds from maturities of short-term investments		97,721			97,358
Funds provided to customer to support transfer of manufacturing operations		—			(24,310	)
Purchase of property, plant and equipment		(29,061	)		(27,482	)
Purchase of intangibles		(1,961	)		(797	)
Proceeds from disposal of property, plant and equipment		38			1,482
Net cash used in investing activities		(32,255	)		(28,921	)
Cash flows from financing activities
Payment of debt issuance costs		—			(153	)
Proceeds from long-term borrowings		—			60,938
Repayment of long-term borrowings		(9,141	)		(67,032	)
Repayment of finance lease liability		(100	)		(304	)
Repurchase of ordinary shares		(8,312	)		(20,722	)
Withholding tax related to net share settlement of restricted share units		(11,362	)		(4,727	)
Net cash used in financing activities		(28,915	)		(32,000	)
Net increase (decrease) in cash, cash equivalents and restricted cash		13,987			43,527
Movement in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at the beginning of period		232,832			188,241
Increase (decrease) in cash, cash equivalents and restricted cash		13,987			43,527
Effect of exchange rate on cash, cash equivalents and restricted cash		345			(228	)
Cash, cash equivalents and restricted cash at the end of period		247,164			231,540
Non-cash investing and financing activities
Construction, software and equipment-related payables	$	11,060		$	11,906

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Continued)

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total of the same amounts shown in the unaudited condensed consolidated statements of cash flows:

	As of
(amount in thousands)	March 26, 2021		March 27, 2020
Cash and cash equivalents	$	247,011	$	224,138
Restricted cash	153		7,402
Cash, cash equivalents and restricted cash	$	247,164	$	231,540

FABRINET
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

	Three Months Ended								Nine Months Ended
	March 26, 2021				March 27, 2020				March 26, 2021				March 27, 2020
(in thousands of U.S. dollars, except per share data)	Net income		Diluted EPS		Net income		Diluted EPS		Net income		Diluted EPS		Net income		Diluted EPS
GAAP measures	$	37,493	$	1.00	$	28,267	$	0.75	$	105,928	$	2.82	$	85,455	$	2.27
Items reconciling GAAP net income & EPS to non-GAAP net income & EPS:
Related to cost of revenues:
Share-based compensation expenses	1,388		0.04		1,489		0.04		4,805		0.13		4,800		0.13
Depreciation of fair value uplift	89		0.00		86		0.00		256		0.00		247		0.00
Total related to gross profit	1,477		0.04		1,575		0.04		5,061		0.13		5,047		0.13
Related to selling, general and administrative expenses:
Share-based compensation expenses	5,476		0.15		4,629		0.12		13,937		0.37		13,501		0.36
Amortization of intangibles	127		0.00		145		0.00		382		0.01		431		0.01
Severance payment	755		0.02		150		0.00		755		0.02		150		0.00
Total related to selling, general and administrative expenses	6,358		0.17		4,924		0.13		15,074		0.40		14,082		0.37
Related to other incomes and other expenses:
Other expenses in relation to reduction in workforce	43		0.00		—		—		43		0.00		16		0.00
Amortization of deferred debt issuance costs	8		0.00		8		0.00		24		0.00		18		0.00
Total related to other incomes and other expenses	51		—		8		—		67		—		34		—
Total related to net income & EPS	7,886		0.21		6,507		0.17		20,202		0.54		19,163		0.51
Non-GAAP measures	$	45,379	$	1.21	$	34,774	$	0.92	$	126,130	$	3.36	$	104,618	$	2.78
Shares used in computing diluted net income per share
GAAP diluted shares			37,609				37,797				37,514				37,696
Non-GAAP diluted shares			37,609				37,797				37,514				37,696

FABRINET
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW

(amount in thousands)	Three Months Ended						Nine Months Ended
	March 26, 2021			March 27, 2020			March 26, 2021			March 27, 2020
Net cash provided by operating activities	$	33,843		$	51,838		$	75,157		$	104,448
Less: Purchase of property, plant and equipment		(6,368	)		(12,071	)		(29,061	)		(27,482	)
Non-GAAP free cash flow	$	27,475		$	39,767		$	46,096		$	76,966

FABRINET
GUIDANCE FOR QUARTER ENDING JUNE 25, 2021
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

	Diluted EPS
GAAP net income per diluted share:	$1.02 to $1.09
Related to cost of revenues:
Share-based compensation expenses	0.04
Total related to gross profit	0.04
Related to selling, general and administrative expenses:
Share-based compensation expenses	0.12
Total related to selling, general and administrative expenses	0.12
Total related to net income & EPS	0.16
Non-GAAP net income per diluted share	$1.18 to $1.25

View source version on businesswire.com: https://www.businesswire.com/news/home/20210503005709/en/

Fabrinet Announces Third Quarter Fiscal Year 2021 Financial Results