Fabrinet (NYSE:FN) Q4 2020 Earnings Conference Call - Final Transcript

Aug 17, 2020 • 05:00 pm ET

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Fabrinet (NYSE:FN) Q4 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen. Welcome to Fabrinet's Financial Results Conference Call for the Fourth Quarter of Fiscal Year 2020. [Operator Instructions] As a reminder, today's call is being recorded.

I would now like to turn the call over to your host, Garo Toomajanian, Investor Relations.

Executive
Garo Toomajanian

Thank you, operator, and good afternoon, everyone. Thank you for joining us on today's conference call to discuss Fabrinet's financial and operating results for the fourth quarter of fiscal year 2020, which ended June 26, 2020.

With me on the call today are Seamus Grady, Chief Executive Officer; and Csaba Sverha, Chief Financial Officer. This call is being webcast, and a replay will be available on the Investors section of our website located at investor.fabrinet.com. Please refer to our website for important information, including our earnings press release and investor presentation, which include our GAAP to non-GAAP reconciliation.

I would like to remind you that today's discussion will contain forward-looking statements about the future financial performance of the company. 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 undertake no obligation to revise them in light of new information or future events, except as required by law. 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 5, 2020.

We will begin the call with remarks from Seamus and Csaba, followed by time for questions. I would now like to turn the call over to Fabrinet's CEO, Seamus Grady. Seamus?

Executive
Seamus Grady

Thank you, Garo, and good afternoon, everyone. During the fourth quarter, we demonstrated the flexibility of our business model as we generated financial results that exceeded our guidance ranges while we continued to strictly observe enhanced measures to monitor and mitigate the potential impact of COVID-19 on our employees, customers and operations. I am very proud of our team and I'm grateful for their efforts in helping us achieve these excellent results.

Revenue in the fourth quarter was $405 million or $5 million above the high end of our guidance range, driven by less severe supply constraints than contemplated in our guidance, coupled with stronger-than-expected telecom demand at the end of the quarter. From a profitability perspective, as we anticipated, our fourth quarter gross margin fell short of our target 12% to 12.5% but improved from the third quarter at 11.8%. Continued efficiency gains more than offset the slight headwind that we continued to see from efforts to mitigate the potential for COVID-19 infection. That said, we remain fully committed to returning to our target gross margin range of 12% to 12.5% and expect to do so during fiscal 2021.

From an operating perspective, we continue to run a very tight ship, with SG&A expenses coming in just under 3% of revenue in the quarter. We