Good afternoon, and welcome to Fabrinet's Financial Results Conference Call for the Fourth Quarter of Fiscal Year 2024. At this time, all participants 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. As a reminder, today's call is being recorded.

I would now like to turn the call over to your host, Garo Toomajanian, Vice President of Investor Relations. Please go ahead..

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 2024, which ended June 28, 2024. 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. 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. 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 7, 2024. 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?.

Thank you, Garo. Good afternoon to everyone joining our call. Our very strong fourth quarter results capped off, an outstanding year for Fabrinet. Fourth quarter revenue of $753 million was above our guidance range and grew 15%, from a year ago and 3% from Q3.

We executed very well to produce non-GAAP EPS that also exceeded our guidance range at $2.41 per share. It's also notable that Q4 marked the fourth quarter in a row for both record revenue, and EPS for the company. For the full year, revenue was $2.9 billion, an increase of 9% from fiscal year 2023.

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 a 16% year-over-year increase. 2024 was quite a remarkable year for Fabrinet.

Datacom revenue grew over 120% while telecom revenue declined more than 20% for the year, due to the protracted inventory digestion across the telecom industry. Our strong results throughout the year demonstrated the strength of our flexible and resilient business model.

Entering the fourth quarter, we anticipated continued revenue growth in datacom and declines in telecom, and that's what we experienced. We also anticipated a return to sequential growth in automotive revenue, which we also saw.

Within optical communications, datacom revenue continues to drive growth, while the sequential decline in telecom was more modest than anticipated.

In datacom, 800 gig products for AI and related applications remain the biggest revenue contributor, offsetting part by the completion of the wind-down of a long-running 100 gig program, as we've discussed previously.

We are very encouraged by the strong demand trends we are seeing for both current generation, and next generation datacom technologies. We believe that our industry- leading expertise and trusted reputation positions us particularly well to continue benefiting from long-term datacom growth.

In 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.

In fact, we expect recent system wins of varying sizes to begin making more meaningful revenue contributions towards the second half of our fiscal 2025. These new wins make us optimistic about Fabrinet's long-term telecom revenue trends overall. 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. All in all, we had a very robust and successful quarter in the year, and we remain positioned particularly well for continued momentum as we look ahead.

In fact, in the first quarter of our fiscal year 2025, we anticipate sequential revenue growth from all of our major product categories. 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.

Our first building in Chonburi was Building 8, with all 500,000 square feet now being utilized. Building 9, which is about 1 million square feet, opened about two years ago and is quickly filling up. Building 10 will be 2 million square feet in size. We expect construction to take approximately a year and a half to complete, once we break ground.

Capital expenditures for construction of the 2 million square foot facility will be approximately $110 million. Beyond Building 10, we have ample space to further increase our manufacturing capacity. We keep you posted on our construction timeline as we move ahead.

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. We're increasingly optimistic about our future, and we have numerous drivers that position us to extend our track record of success into fiscal 2025 and beyond.

Now, I'll turn the call over to Csaba for more financial details on our fourth quarter and fiscal 2024 and our guidance for the first quarter of fiscal 2025.

Csaba?.

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.

This strong revenue helped produce record non-GAAP earnings per share of $2.41, which was also above our guidance. For the full fiscal year, revenue was a record $2.9 billion, an increase of 9% from fiscal 2023. 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. And I will now focus my comments, on some of the more notable metrics. In the fourth quarter, optical communications revenue was $596 million, or 79% of total revenue an increase of 19%, from a year ago and 1% from Q3.

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.

Telecom revenue declined approximately 1% from Q3, which was a smaller decline than expected, due to continued growth from data center interconnect products. With the optical 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.

Therefore, we are now breaking out revenue by speed into two categories, 800 gig and faster and below 800 gig. In the fourth quarter revenue from products rated at 800 gig and faster was $259 million, up 54% from a year ago. Revenue from products below 800 gig was $223 million, up 4% from a year ago.

Revenue from optical communications products that are non-speed rated, including ROADMs, amplifiers, fiber arrays and other devices was $114 million, down 5% from a year ago. The historical two-year trend of this breakout, is provided in the most recent Investor deck on our website.

From that breakout, you will observe that in fiscal 2024 products rated at 800 gig and above, started to dominate and were the biggest contributor to growth. Although products below 800 gig continue to grow, thanks to 400 ZR programs, which reached 10% of optical communications revenue in Q4.

Revenue from non-optical communications saw healthy growth in the fourth quarter to $157 million up 2% from a year ago, and 12% from Q3. This increased us primarily the result of increasing automotive revenue, as we have moved past a short-term inventory correction period. Automotive revenue was $86 million in the fourth quarter, up 17% sequentially.

As I discussed the details of our P&L, expense and profitability metrics will be on a non-GAAP basis, unless otherwise noted. Gross margin in the fourth quarter was 12.5%, a 10 basis point declined from Q3, and was within our guidance range. Operating expenses were $14 million slightly less than 2% of revenue.

Operating income was $80 million, representing an operating margin of 10.7% consistent with the third quarter. The combination of our strong cash balance and elevated interest rate environment provided record interest income of $11 million. Effective GAAP tax rate was 4.6% in the fourth quarter.

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. For the full year revenue was $2.9 billion, up 9% from fiscal 2023. In fiscal 2024, we had two customers that contributed 10% or more to revenue, and NVIDIA at 35% and Cisco at 13%.

Our top 10 customers together made up 86% of revenue, up from 84% in fiscal 2023. For the fiscal year, gross margins were 12.6% down 40 basis points from fiscal 2023, primarily due to the absence of FX tailwind that we benefited from last year. Operating margin for the fiscal year was 10.6%, a decrease of 20 basis points from fiscal 2023.

You will note, this is a smaller decline than we saw in our gross margin, reflecting operating leverage inherent in our model. Non-GAAP net income was a record $8.88 per share an increase of 16% from a year ago, with EPS growth again outpacing revenue growth. We maintain a very strong balance sheet throughout fiscal year 2024.

We close the year with cash and short-term investments of $859 million up $65 million from the end of the third quarter. The primary driver of this increase, was strong operating cash flow of $83 million. With CapEx of $13 million, free cash flow in the quarter was $70 million.

For the full year, we generated record operating cash flow of $413 million, a remarkable increase of 94% from fiscal 2023. Free cash flow in fiscal 2024 was also a record at $368 million an increase of 142% from a year ago.

In the fourth quarter, we repurchased approximately 21,000 shares at an average price of $170 per share, for a total cash outlay of $3.5 million. For the full year, we repurchased approximately 212,000 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 10b5-1 and open market share repurchase programs. Since the end of the quarter our Board has authorized an additional $139 million for repurchases, so that we now have $200 million available for share buyback.

This is double the size of our repurchase authorization, at the beginning of fiscal 2024. Now I will turn to our guidance, for the first quarter of fiscal year 2025. After a year of breaking quarterly records for revenue and EPS, we are optimistic that the first quarter will represent another strong quarter for Fabrinet.

In fact, we anticipate that revenue will be up sequentially, in all of our major product areas. We expect datacom growth to be driven mainly, by advanced high data rate products. We expect telecom revenue to increase from the combination of growth in data center interconnect products, and recent new programming.

And we believe that automotive and laser revenue, will also grow sequentially. Overall, we expect first quarter revenue to be in the range of $760 million to $780 million. We also expect strong performance from profitability perspective.

Keep in mind that in the first quarter, we will see the seasonal impact of annual merit increases, which puts temporary downward pressure on margins. As in the past, we expect operational efficiencies to offset this cost increases, as we progress through the year.

Based on recent strength in Thai Baht, we expect the foreign exchange evaluation lost in the first quarter. With 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.

We expect our momentum to continue in fiscal 2025, beginning with a strong first quarter as we extend our track record of solid execution. Operator, we are now ready to open the call for questions..

Thank you. [Operator Instructions] And our first question comes from Samik Chatterjee with JPMorgan. Please go ahead..

Hi. Good afternoon. Thanks for the question. This is Joe Cardoso on for Samik. So maybe first one here just on the datacom business, curious if you could talk about the timing around 1.6T, and whether you think that could start to, or whether that's beginning to materialize as early as your 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 '24, just doing kind of the back of the envelope a lot of 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 1.6T to cannibalize it. Is that still the same case? Still expectations going into 2025 and does that apply to 400 gig as well? And then I have a quick follow-up? Thank you..

Thanks Joe. So yes 1.6, we don't talk - we can't talk about the specific timeline for our customers' product before they do, but certainly we're working hard with our customer on 1.6T. But we think that 800 gig will be around for a while, it's used extensively in a lot of the products and the networks we've made for our customers.

And we think what we think 800 gig would be around for a long time. Our aim is always is to be working with the customers on the next generation products, while we're building the current generation products.

1.6T transceivers, they're quite complex and they don't ramp up overnight, but that 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. But we're certainly making sure they're ready from a capacity perspective.

800 gig like I say 800 gig, the demand is very strong 400 gig, still remains, but they like the time - actually the timing of 1.6 we leave that to our customers to talk about..

No, thank you Seamus. And then, maybe just in terms of my second question, and maybe bigger picture obviously great to get the news around, Building 10 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 around the datacom business, or there are other areas of the - your portfolio that's driving conviction here, and supporting the additional facility build out. Just curious high-level thoughts, how you're thinking about much driving conviction there? Thank you. Appreciate the question..

No problem. It's really our overall conviction about the overall business. It's not only any one particular if you like segments, Building 9 and actually building it before they filled faster than we had anticipated. And Building 10 is a good use of our cash. We have the cash available.

We get better economies of scale by building a two million square foot facility, rather than a one million square foot and it's just a better overall use of the land available to us, to build the two million square foot facility. And really, we have conviction in the pipeline and in the business.

The upside opportunity is significant, if you do the math on the on the revenue per square foot, it would suggest that the revenue capacity in Building 10, should be about $2.4 billion plus or minus $2.4 billion. So the upside opportunity is significant, and the downside risk is very small.

Even if we were to build our Building 10 and didn't put any business in there for a period of time, the gross margin headwind would be about 15 basis points, so it's very small.

So it's a combination of all those factors the conviction the business, we believe it's a good use of our cash, and it's also, good upside potential very little downside risk..

Thank you. One moment for our next question, please. And it comes from the line of Karl Ackerman with BNP Paribas. Please proceed..

Yes. Thank you gentlemen, you are - I've got two questions first, your 800 gig transceiver revenue today has been primarily driven by our largest customer, and some investors have been concerned that a push out of the latest GPU would impact your near-term outlook that does not appear to be the case.

So does your September quarter outlook imply that you are seeing a broadening of your datacom customer base for 800 gig as several hyperscalers are beginning to deploy broadly 800 networking switches?.

So, yes I mean we don't we don't really comment on our customers product launches. We know that our big customers you say for 800 gig has been NVIDIA and they continue to see strong demand for their products.

And our understanding is that they will extend and expand production, based on current GPUs to meet the demand that's there, and we're happy to continue to support them. We're working hard on a number of opportunities we talked about these before there's really three categories of - if you like AI related growth vectors.

There's outside of NVIDIA obviously we're very happy with the growth of NVIDIA, but we're pursuing others. There's other GPU companies, there's other merchants transceiver opportunities, and then there's hyperscalers who are looking to maybe go direct and we're pursuing all three.

So, our outlook is really a function of continued strength - continued strength in the datacom business and the telecom softness that we've seen for the last while we are seeing indications that that demand is beginning to recover.

So, I suppose in simple terms the datacom growth looks to be sustainable, and the telecom weakness is temporary we think. We've also had some success with winning some new complete network system business as well as we will be introducing over the next. So we want to make sure we have ample capacity for that.

We've been able to pick up some additional complete network system business..

Yes. Thanks for that, Seamus. To that point could you discuss the breadth of customer adoption and growth of coherent ZR optics using telecom and DCI. And at the same time as I may, these you spoke in your prepared comments about new programs within telecom beginning to float in the model the second half of fiscal '25.

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 within the telecom programs, or if it's driven predominantly by the datacom opportunity that you see? Thank you..

Yes, it's actually both it's the continued strength in datacom and we believe our ability to pick up additional business there. But also what we see as some recovery in telecom, but also some new wins. We have been picking up some new business, we've had some success with the number of system wins of varying sizes over the last one.

If you go back a few years ago, we had the Infinera win then we had some considerable success with Cisco. And more recently we've been awarded one of these is an award from Ciena actually, who's been a customer of ours for some time, but they've been a customer more on the on the component side.

They haven't been a 10% customer, so they haven't been in the 10% chart if you like, but they're very important customer for us, and an excellent customer. And we're very happy that we've been awarded, the manufacturing of the majority share of their next generation network modem business.

Along with all of the associated virtually integrations optical components. So, we've been making the majority of the modems, and all of the optics for those modems, and we expect we expect this program, really in our fiscal Q4, which means this win will be it'll be more important for fiscal '26 revenue and fiscal '25 revenue.

But over the over the next kind of six to nine months we'll begin to ramp that and we're very happy with - the expansion of this relationship with Ciena. So it's a combination of returning to strength in telecom plus some additional business, we've been picking up in telecom. And of course sustainable datacom demand, and datacom growth as well..

Very helpful..

In relation to ZR sorry, you asked also about the ZR so our telecom business overall year-on-year it's down 23% year-on-year. But within that, 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 we've - we have had some success in 400 ZR and also 800 ZR and ZR Plus.

And right now, we have six customers, six ZR customers are varying sizes. So ZR optics with - in particular, for DCI applications has been a real source of strength for us. And we've been - we've been very happy with the adoption of ZR in the DCI space over the last month..

Very helpful. Thank you..

You're welcome..

Our next question comes from the line of Alex Henderson with Needham. Alex, your line is open..

Thanks so much. Wow, you got Ciena in there, the systems business, that's fabulous. Congratulations. That's good news.

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 group as opposed to one or two customers? And then second, within the systems business, 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 pick up faster than the overall telecom component business?.

Well, certainly, I think our systems business will - because we've had some success there, I mean we have obviously had some success on the component business as well, but that is still hampered by inventory digestion. And again, we can't really easily distinguish 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 for traditional telecom products is starting to stabilize.

It doesn't really mean - or doesn't necessarily mean we're off to the races yet, but there could still be some remaining digested with the big year-over-year and sequential declines, we think, are largely behind us at this point. On the system side, yes, so for us, we think the system business will probably grow faster in the component business.

We haven't broken it out that way, yes, we may as you say, at some point in the future. 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 we would probably wait until the end of the fiscal year to do that..

In your remarks, you made a comment that the AI has multiple alternative growth factors outside of NVIDIA.

Are any of those three categories that you identified anywhere near 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?.

Well, as you know, Alex, we generally tend to not announce anything until there's something to announce as evidenced by the Ciena 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 won it, we generally don't talk about it.

So - but there's three -- as you said, the three growth vectors we're pursuing, with bigger and with energy and working very, very hard on those. We're quite optimistic that there's a lot of business to be won in all three of those areas.

And again, the three areas being other GPU companies other merchant transceiver opportunities; and thirdly, hyperscale companies who want to go direct with the - maybe with their own optical interval.

So, we're working hard on all three of those, but nothing to announce at this point, but we're optimistic, but it takes time we'll take a long time to learn these opportunities..

One last question, then I'll see the floor. So I think you've talked about pricing pressure being larger than the 10% to 15% normal price pressure that has been evident in this category, for I don't know the decade or plus with the exception of the COVID window.

And you clearly selling predominantly into a single customer who's now got qualification from multiple customers, or multiple alternative suppliers. The combination of those two with some slowing of the overall growth rate, expected in this category in '25 and '26.

Does it suggest to you that this category, could decelerate to pretty modest growth? Or as you have share loss against your major customer, and 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 solid 5% to 15% kind of growth, which is what you've been producing quarter-to-quarter over the last year.

How do we think about this dynamic perspective? Thanks..

Yes. We've been growing about 15% compound annual growth rate over the last three or four years. Our top line has grown about 15% each year. Our earnings has grown about 24% in the same period each year. And from a customer's perspective, yes, cost is a factor, but it's not the only consideration.

First of all, in terms of cost, we're very I would say, confident in our ability, to meet any cost targets that the customer - any of our customers need us to meet. 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. So, we're very cost conscious, we're very cost competitive and we're very compact. But our customers really care about several factors.

Cost being one, but it's not the only one technology and really the ability of their supplier to be a technology leader to make sure they can get to market first, with their new products is critical. And then quality and delivery, are absolutely critical and the ability to ramp quickly, when an opportunity comes along.

So having capacity available, is creative as well and of course, costs. So it's all of those factors. It's not only one factor. It's all of those factors that we believe our customers are most preoccupied with, and so are we. So we're confident in our ability to continue to grow the business. We don't give long-term guidance.

As Alex, we guide one quarter at a time. But I think our optimism about the business, is you can see - the steps we're taking to continue to expand our capacity, and make sure we're ready for the future. It's a good indication of how we feel..

Great. Thanks..

Thanks, Alex.

Thank you. Our next question comes from the line of Tim Savageaux with Northland Capital Markets. Go ahead..

Yes. Okay. Sorry about that. My congratulations as well. And I just try and put that in a little more context in terms of the win here. You'd mentioned Infinera and Cisco, historically. I think we started out with relatively muted expectations there. But clearly, they are very sizable customers for you, I think the increment there is couple $300 million.

I don't know whether you said it there. I think you mentioned Ciena was not a 10% customer currently. I assume they will be in fiscal '26.

Is that fair to say?.

I guess if you dial in approximately 12 months from now, we'll find out. But - it's too early to say, Tim. And I think it's early days. Obviously, it's not early days in our relationship with Ciena. They've been a customer for a very long time and an excellent customer.

But this latest job, this latest win we're just getting geared up to begin to ramp it. So it's early days, but we're very happy with the win, very happy with the relationship..

Okay. And you mentioned modems. I assume that's the kind of the main line kind of coherent line cards, and the associated optics that go with that.

And I don't know if you can say this, but would that include pluggables as well, ZR pluggables or maybe you already do that?.

Yes. I prefer probably not to go to that level of detail. I mean, we do a lot of work with Ciena. Like I say, they have not been a 10% customer. So - and again, it's not really our place to disclose the specific components we make for our customers. But it's a pretty broad-based relationship and a very successful..

Great understood. Well done. Thanks very much..

Thank you..

Thank you. [Operator Instructions]. Our next question comes from the line of Mike Genovese with Rosenblatt Securities. Please proceed..

Great. Thank you. So Seamus, the Ciena win sounds very positive, and the ZR commentary was positive.

I'm just wondering on the telecom side of the world, are there any other green shoots to point out? Or are those the two main things? Or is there a third in the fourth?.

Well I think - the other couple of comments are on the overall, let's say, our traditional telecom business. We do think it's stabilizing. We're starting to see demand coming back. We're starting to see it stabilize. So early days, but we think our traditional telecom business is starting to stabilize. And then the other point would be on DCI.

So TCI continues to be a good growth driver, especially 400 but also in TR has been a good solid beacon of legs and growth for us over the last while. They will be the four main telecom comments, if you like..

Right. And then just to clarify and kind of put kind of your business in context with other people's business in the industry.

Is it correct to assume that everything you make for the customer is a multi-mode transceiver? Is that correct?.

No. We make all kinds of transceivers, single-mode, multimode. Everything..

Okay. Okay.

So I guess, though, would - how would you position like the products that you make versus other people's products out there, for instance, that use EMLs, is there significant overlap in those applications? Or do you think that there are kind of different products for different parts of the network?.

I think, again, it's probably more of a question for our customers than for us. I mean we make whatever the customers want us to make.

And again, in broad terms, right now with our big customer there, there's really two sources, if you like, for products that they have, they have their own design, which we make, their own designs, floors, which we make. And then there's the merchant transceiver suppliers as well.

But the puts and takes around kind of who is watching, which one is best suited to, which application we leave that to our customers to talk about..

Okay. Then finally, I actually even feel a little bit embarrassed to this question, because it really seems to be trying to read the tea leaves way too closely. But if we just look at the 800G business, and thanks for breaking that out. I guess the sequential growth looks like maybe it was at a low point 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? And is there anything at all to read about the market by that?.

I don't think so. I don't think there's a whole - I wouldn't read a whole it into that. We certainly don't read anything significant into that, Mike..

Okay, thanks so much. Appreciate it..

Thanks, Mike..

Thank you. One moment for our next question. 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 you were going to make the decision on Building 10 during this fiscal year.

Have - did you make that decision during the June quarter that you're 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?.

No, we've made the decision, and what we said in our prepared remarks was that we would break ground in the fiscal year. In the new fiscal year, which we're now in.

So we've taken the decision to 200 - sorry, 2 million square foot facility or it will be a 2 million square foot facility, so double the size of Building 9, and we'll break ground on that in this fiscal year..

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 today? Is that a year and a half from quarter two?.

From when we break out. And I mean, we generally - once we make the decision, obviously, these are significant investments, and it's a major undertaking major project. 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 lined up, so that takes a little bit of time.

And then we'll break ground at some point 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..

Okay. Cool. Okay. So can I assume that you're at a 70% utilization rate then right now on Building 9.

I think in the past, you've talked about that as being the threshold at which you guys make a decision?.

We don't break that number out anymore. You can assume anything you like, really. We don't break that number out. We did historically, and it just wasn't productive. And that's the guideline we had set ourselves in the past. But when we get to 70% on the last building, we would pull the trigger on the next building.

But really, the - like I said, there's very little very little downside risk to building our next building a little bit earlier. Even if we don't end up filling it, there's really very little downside risk about 15 basis points. And the upside opportunities.

So, we're not going to confirm the utilization percentage other than to say, Building 8 filled up much faster than we thought it would and so is Building 9, 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 flat footed, some of these big opportunities if and - when they come our way in the future, we want to make sure we're ready..

Got it. Great. And then just one last follow-up. So on the Ciena win, I guess, from the timing of Building 10 breaking ground and then being up and running, I assume the Ciena win is going to come on relatively slowly. Like if I look at Ciena's optical business, obviously, there are multiples of the size of Cisco. Cisco is a 10% customer for you.

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?.

Yes, it's really begin to ramp in early calendar, we call it, 2025 or the second half 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 '25 story than an - sorry, an FY '26 story than an FY '25 story.

We'll be - and we already are working on elements of it, but we really don't start to ramp it in earnest until the March and the June quarter..

Okay, thank you. Congrats on the win. Thanks..

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..

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 market. We look forward to speaking with you again.

And to seeing those of you who will be attending the Jefferies conference next week. Goodbye..

And with that, thank you all for participating in today's conference. You may now disconnect..