Fabrinet (NYSE:FN) Q1 2024 Earnings Call Transcript

Samik Chatterjee: Yes, thank you. Thanks for taking my questions. I guess to start off, maybe I can follow-up on Alex’s question here. Seamus, as you move towards working with customers on the Ethernet side, what are you finding relative to the competitive landscape? Just from the outside in, from our perspective, looks like more companies are, in their manufacturing supply chain, in relation to Ethernet, but can you share your thoughts about what you’re seeing from a competitive aspect, and what’s the differentiation that you bring there into that ecosystem? And I have a follow-up. Thank you.

Seamus Grady: Yes, I think, Samik, for newer products, whether it’s 800-gig or higher speeds, we feel pretty confident that we’re well-positioned to support the customer’s need. I think for older-generation products, the competitive landscape, it’s much more competitive. But for new-generation products, for these kind of specific short-reach low-power low-latency applications, there’s really a handful of companies who are able to design these products. And we’re well-positioned, we think, to support them. So again, whether it’s InfiniBand or Ethernet, we just follow our customer’s lead, whatever they need from us we’re happy to help them with. And again, our focus is always on producing the current generation products, but also winning the next-generation products. So, we’re very focused on that with our customers in this space.

Samik Chatterjee: Okay, got it. If I can just ask as a follow-up on the guidance, going from 4Q to 1Q, you had a sequential increase of about $13 million or so in the revenue, with the increase in datacom easily offsetting the telecom decline. As you look forward, you’re carrying forward the same theme, where datacom does offset telecom, but the magnitude of it seems to be much lower just given the $5 million sequential increase at the midpoint that you’re guiding to. So maybe if you can help us with the puts and takes there, is telecom declining more than what we’ve seen from 4Q to 1Q or is that the datacom ramp is moderating just given that you are maybe reaching more capacity with a customer that you’re engaged with? Thank you.

Seamus Grady: I would say, first of all, in Q1, our telecom declined probably less than we thought it would. It declined about 6%. Going into the quarter, I guess we thought it might decline more than that. It declined about 6%, which was primarily driven by stronger demand than anticipated for certain telecom programs, especially DCI. So again, driven by the datacenter and the growth going on in the datacenter, but DCI products which we categorize as telecom, that’s the first thing. And then as we go into Q2, yes, we think our telecom business will decline further into Q2. As you know, we don’t guide beyond one quarter’s time, but in a general sense, we think telecom will decline, datacom will increase by more than that decline.

And then as we look at the future, again based on the intelligence we have from our customers, we think the telecom decline is set to continue probably until the middle of the calendar year, which would be the end of our fiscal year. So, further declines this quarter and the next quarter, and then we think it will begin to bottom out in the, call it, the June quarter. And then the rate of growth of datacom, I guess it should slow down at some point, that rate of growth. It’s been very strong for us, but it will inevitably begin to — the growth will begin to slow at some point.

Samik Chatterjee: Okay, thank you. Thanks for taking my questions.

Seamus Grady: No problem. Thank you, Samik.

Operator: Thank you. [Operator Instructions] And our next question is going to come from the line of Mike Genovese with Rosenblatt Securities. Your line is open, please go ahead.

Michael Genovese: Great, thanks. Hi, Seamus.