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Fabrinet (NYSE:FN)
Q2 2020 Earnings Call
Feb 03, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, ladies and gentlemen. Welcome to Fabrinet's financial results conference call for the second 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.

Garo Toomajanian -- Investor Relations

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 second quarter and fiscal year 2020 which ended December 27, 2019. With me on the call today are Seamus Grady, chief executive officer; TS Ng, chief financial officer; and Csaba Sverha, vice president of operations, finance, and CFO designate. 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 capturing risk factors in our Form 10-Q filed on November 5, 2019. We will begin the call with remarks from Seamus, TS and Csaba, followed by time for questions. I would now like to turn the call over to Fabrinet's CEO, Seamus Grady. Seamus?

Seamus Grady -- Chief Executive Officer

Thank you, Garo, and good afternoon, everyone. We had a very strong second quarter, with financial results that exceeded all of our guidance metrics, including record quarterly revenue. This performance was driven by sequential growth in nearly all areas of our business. With end market demand stabilizing, we expect to see continued year-over-year growth in the third quarter.

Revenue in the second quarter was 426 million, up 7% from the first quarter and 6% from a year ago. Revenue upside largely fell to the bottom line with non-GAAP net income of $1 per share, which was also above the top end of our guidance range. Gross margin was 11.9%, and we continue to anticipate non-GAAP gross margins to be within our target range of 12 to 12 and a half percent for the full year. Looking at our business by end markets.

Optical communications revenue was 322 million, up 6% from the first quarter. This represented 76% of total revenue, consistent with the first quarter. Within optical communications, telecom revenue was 248 million, up 8% from the first quarter and 20% from a year ago, and represented 77% of optical revenue. Our Berlin transfer program with Infinera, again, contributed to our telecom growth, and the program was fully ramped at the end of the quarter as anticipated.

Datacom revenue in the second quarter was 74 million, a slight increase from Q1, which was better than we had anticipated as demand trends for these products continue to stabilize. Datacom represented 23% of optical communications revenue. By technology, silicon photonics-based optical communications revenue increased by 7% from the first quarter to 82 million, and represented 26% of optical communications revenue. Revenue from QSFP28 and QSFP56 transceivers was 48 million, up 3 million from the first quarter.

By data rate, 100-gig programs represented 49% of optical communications revenue at 159 million, and products rated at speeds of 400 gig and above continued to see rapid growth, up 31% from the first quarter to 49 million. Looking at our non-optical communications business, revenue of 104 million was up from 97 million in the first quarter, which was also better than expected. We were pleased to see the demand for industrial lasers improve, and as a result, revenue for these products was also better than expected at 46 million, compared to 41 million in the first quarter. We remain optimistic that over the longer-term, industrial laser manufacturers will increasingly leverage outsourcing to remain globally competitive.

And we believe we are uniquely positioned to be a leader in serving this market as the opportunity evolves. Automotive revenue moderated to 21 million, reflecting normal quarter-to-quarter variability from next generation automotive programs and which we expect to return to growth in the third quarter. Sensor revenue increased slightly to 3.9 million from 3.5 million. Finally, revenue generated from other non-optical applications grew 20% sequentially to 33 million, mainly from Fabrinet West.

During the quarter, we saw additional programs that had ramped production at Fabrinet West transferred to Bangkok where we anticipate their volumes will continue to grow. This is another illustration of the success of our new product introduction model which we will continue to leverage in Santa Clara and we are gearing up to extend to Israel in the coming months. At the same time, the success of our program with Infinera demonstrates our ability to build complete network systems, while offering economic advantages to our customers. We believe there could be additional opportunities for us to vertically integrate from the component level, up to the system level, that can provide additional business to Fabrinet, while simplifying the supply chain for our customers, and we have been actively pursuing these opportunities.

And today, I am pleased to announce that after the close of the second quarter, we were awarded a significant new project by Cisco which will further build on our successful partnership. While it is still early days, we believe that if this program ramps as anticipated, that Cisco could represent 10% of revenue or more for Fabrinet in fiscal 2021. We look forward to sharing more on this program as it progresses. Finally, we also announced today that after more than a year of evaluating internal and external candidates, we are pleased to welcome Csaba Sverha as our new chief financial officer, effective February 17th, with TS stepping down from the role nearly 18 months after initially announcing his intention to retire.

We're extremely grateful to TS for his contributions over the years to Fabrinet, and for his commitment to ensuring a smooth transition. TS will be reporting to me as EVP special projects during this transition period. His dedication and positive attitude are a model for us all, and we wish him the best in his well-deserved retirement. Csaba has been vice president of operations finance at Fabrinet for almost two years now, and I have had the pleasure of working directly with Csaba in the past.

He displays all the characteristics that have had a meaningful hand in Fabrinet's past success, including integrity, collaboration, and commitment to success. I am confident that Csaba will play a leading role in helping Fabrinet get to our next level of performance. Before I turn the call over to TS and Csaba, I would like to address the coronavirus outbreak that I'm sure you are all concerned about. While our third-quarter results often reflect a small seasonal down-take, guidance that we are providing for the third quarter also includes the anticipated impact from extended shutdowns in China due to the coronavirus outbreak.

Specifically, the Lunar New Year week-long shutdown at our Casix facility in Fuzhou, China, which manufactures custom optics components, has been extended from one week to two weeks ending February 10th. In addition, some of our third-party suppliers in China are also impacted by shutdowns. This has a direct impact on our top and bottom-line expectations, and is considered in the guidance we are providing for the third quarter. News related to the coronavirus is rapidly evolving, and our top priority is to keep our employees safe, and will continue to monitor the situation.

In summary, we are pleased with our stronger than expected performance in the second quarter, and we're excited about our new business activity. While we anticipate that coronavirus outbreak will result in a larger than normal sequential revenue decline in the third quarter, I believe we remain well positioned to extend our business success and market leadership as we look ahead. Now let me turn the call over to TS and Csaba to discuss the details of our second quarter performance and our outlook. TS?

TS Ng

Thank you for kind words, Seamus, and good afternoon, everyone. I would like to congratulate Csaba on his appointment, and I am committed to making sure his transition to the CFO position is smooth. Now turning to our results. I will provide you in more details on our financial results for the second quarter, and then we'll introduce Csaba to provide our guidance for the third quarter of fiscal year 2020.

Total revenue in the second quarter of fiscal year 2020 was 426.2 million, above the upper end of our guidance range, and a quarterly record. Non-GAAP net income was $1 per share, and was also above our guidance range, even after a foreign exchange headwind of 1 million, or approximately $0.03 per share. Now turning to the details of our P&L, the reconciliations of GAAP to non-GAAP measures is included in our earnings press release and investor presentation, which you can find on our website. Non-GAAP gross margin in the second quarter was 11.9%.

We continue to expect gross margin to be within our target range for the year. Non-GAAP operating expense was 12.3 million in the second quarter. As a result, non-GAAP operating income was 38.5 million, and non-GAAP operating margin was 9%. Taxes in the quarter was 2 million, and our normalized effective tax rate was less than 5%.

We continue to expect our effective tax rate to be 5 to 6% for the full year. Non-GAAP net income was above our guidance range at 37.7 million in the second quarter or $1 per diluted share, as I indicated earlier, on a GAAP basis, which includes share base compensation expenses and amortizations of debt issuing costs, net income for the second quarter was 31.2 million or $0.83 per diluted share, also above the high-end of our guidance. Turning to the balance sheet and cash flow statement. At the end of second quarter, cash, restricted cash, and investments was 450.5 million compared to 436.4 million at the end of the first quarter.

Operating cash flow in the quarter was 50 million, and with capex of 9.1 million, free cash flow was 40.9 million in the second quarter. During the quarter, our working capital returned to neutral level as we began consuming the transfer inventory and collecting receivables. We did not repurchase any shares during the quarter. 62.2 million remain in our share repurchase program.

We will continue to evaluate market conditions to opportunistically purchase shares when possible. Before I turn the call to Csaba to provide our third-quarter guidance, I would like to take this opportunity to thank all our investors on the buy side and our sell side analysts for your support and all the work you have done over the years. I appreciate your professionalism, and have enjoyed working with all of you. I wish you all nothing but the best.

I will now invite Csaba to give our FQ3 guidance.

Csaba Sverha -- Vice President of Operations, Finance, and Chief Financial Officer Designate

Thank you, TS, and good afternoon to those of you listening to our call. I'm looking forward to stepping up as the next CFO at Fabrinet. TS has been a great mentor, and my aim is to maintain the transparent and open level of dialogue with investors that TS has had. I'm looking forward to a smooth transition, including getting to know those of you attending OFC in March, or other investor events in the coming months.

I would now like to turn to our guidance for the third quarter of fiscal year 2020. After the record quarterly revenue performance in Q2, we expect to maintain our year-over-year growth in the third quarter. We anticipate that the third-quarter revenue will moderate more than the usual seasonal impact as a result of the coronavirus outbreak in China. For the third quarter, we anticipate revenue to be between 410 and 418 million.

From an EPS perspective, we anticipate non-GAAP net income per share in the third quarter to be in the range of $0.92 to $0.95, and GAAP net income per share of $0.75 to $0.78, based on approximately 37.9 million fully diluted shares outstanding. In conclusion, we are pleased with our strong performance in the quarter. We are excited about our business momentum, and despite a small near-term impact of coronavirus outbreak, we remain optimistic that we can continue to build shareholder value over the longer-term. Operator, we are now ready to open the call for questions.

Questions & Answers:


Operator

Thank you. [Operator instructions] First question comes from Alex Henderson of Needham. Your question, please.

Alex Henderson -- Needham and Company -- Analyst

Well, before I get into a question, TS, thank you very much for all the work you've put in with us. And we really appreciate your professionalism, and superb job you did running the company's financial operations.

TS Ng

Thank you, Alex.

Alex Henderson -- Needham and Company -- Analyst

And welcome to your replacement.

Csaba Sverha -- Vice President of Operations, Finance, and Chief Financial Officer Designate

Thank you, Alex.

Alex Henderson -- Needham and Company -- Analyst

So, the first question I wanted to ask was, obviously, you hedged forward a quarter, I mean, the other side of the corona event was the fall-off of tourism in Thailand and the very sharp correction in the baht that has occurred. Obviously, you were expecting some pressure from the strong baht before. Now that it's corrected, are you changing any of your steps in terms of your hedging policies where you typically hedge one quarter fully, two quarters half, I think, is the way you do it, and then lesser in the back half. Will you lock in these lower rates? Or how do you think you'll handle it?

TS Ng

Yeah. Alex, let me tell you the answer to that, OK? We did not change our policy of hedging. For example, like what you say, 100% for the current quarter, then 50% for the out quarter, and then 25% for the out quarter. The only thing we are looking at is to document it as a cash flow hedge.

That's what we did for the interest rate swap contract. And so, this quarter, all the interest rate mark to market -- interest rate swap mark to market is all going to the OCI, you know, other comprehensive income, net of equity, and then you roll out over time. So, we're going to do the same thing for cash flow hedge. Depend on PWC approval, we might get it done this quarter or maybe next quarter.

But for sure, next quarter, we get it done. So, in that case, then all the gain and loss, like what you advised before, were going to the equity.

Alex Henderson -- Needham and Company -- Analyst

So just to be clear, though, I was really talking about the longer-term implications of the exchange rate strength pressuring gross margins. And now that pressure has been removed by the correction, do you plan to lock that in at all so that you can in case--

TS Ng

Obviously, yeah.

Alex Henderson -- Needham and Company -- Analyst

the corona issue goes away, and we end up with a rebound in the baht?

TS Ng

Yeah. The baht has not totally rebound yet. We see a short-term weakening, OK? Right now, the forecast is 30.5%. We've been mark-to-market at 30.2% last quarter.

So again, in the long run, you know, we believe that baht will continue to, under pressure, to strengthen. So, we take proper steps to just make sure that, you know, we probably hedge them. And obviously, the best hedge will be natural hedge. If I can sell in Thai baht, that will be perfect.

But then, the industry won't allow me to do that. So yes, we watch it very closely. Again, if Thai baht continue to strengthen, really nothing much you can do. At some point in time, you've got to bite the bullet.

So and taking into the OCI will release the immediate pressure a little bit, but in the long run, if baht continues to strengthen, then you have to face the fact that it's increased cost for pressure on the gross margin.

Alex Henderson -- Needham and Company -- Analyst

So, if I could ask one more question. The comment you made about Cisco, I'm assuming that you're not including the acquisition of Acacia in those numbers. Otherwise, I think you would've been over 10% either way. So, I assume this is just Cisco prior to that acquisition going to 10%? And could you quantify that? Is that a doubling of your business with Cisco? Or is it 20% improvement in your business with Cisco? What is this project that you're talking about in terms of scale, compared to what you're currently doing? Is it a significant increase, a modest increase? Some characterization.

Seamus Grady -- Chief Executive Officer

Thanks, Alex. I would -- I think, first of all, you're correct. The numbers we talked about are Cisco alone. It doesn't include the, let's say, the Acacia business, which, of course, would be significant on its own.

So, looking at Cisco, I mean, this is a significant -- I would characterize it as a significant new business award for us. You know, it's a very large piece of business. And it's very important for us because it's right in, I suppose, in our wheelhouse, in our sweet spot, we've talked maybe at some of the investor meetings and the road shows about the importance for us of, you know, penetrating some of the system companies from the component level up. We produce a lot of components that go into these products.

So, to us, it seems to make sense, in order to simplify the supply chain for our customers, while at the same time, growing the business ourselves. It seems to make sense for us to go after this type of business, and we've been fortunate with this one. It's a vertical -- what I would call a vertical up deal. So, it's from the component level up.

Like I say, it simplifies and streamlines the supply chain for the customers. Yeah, the 10% metric is for Cisco as a whole, which we hope -- we expect, when they -- when the deal with Acacia goes through, will be a combination of Cisco and Acacia. But certainly, the business on its own is a significant piece of business.

Alex Henderson -- Needham and Company -- Analyst

So, is it similar in size to the increase you got off of the systems business from Infinera? Or is it smaller than that? I mean, can you give me some -- is it bigger than a bread box kind of comment? Can you help us frame it?

Seamus Grady -- Chief Executive Officer

I would say it's in a similar kind of range. We don't want to put a number on it right now, but it's a significant piece of business, you know. I mean, you know, we win business all the time. We generally don't call out specific programs.

So, the fact that we're calling it out means it's a significant piece of business. So, it will be of a, I suppose, of a similar scale.

Alex Henderson -- Needham and Company -- Analyst

OK. One last question, and I'll give the floor up. Can you break out your expectation for datacom and telecom in the upcoming guidance? Thanks.

Seamus Grady -- Chief Executive Officer

In the upcoming guidance.

TS Ng

I think the telecom is down for a couple of reasons. The virus, coronavirus, doesn't help us. But again, we see strength on the datacom. You know, I mean, this quarter, third quarter actually, too, we expect to be down, but we kind of flat and up a little bit, and we see the momentum will continue.

So I think most of the datacom guys are outside China. Lucky, OK? So most of the Chinese are mostly telecom. So, we expect telecom to be down.

Alex Henderson -- Needham and Company -- Analyst

Great. Thanks very much.

Seamus Grady -- Chief Executive Officer

Thanks, Alex.

Operator

Thank you. Our next question comes from Troy Jensen of Piper Sandler. Your line is open.

Troy Jensen -- Piper Sandler -- Analyst

Hey, gentlemen. Congrats on the nice results, and TS, good luck. We definitely all enjoyed working with you over the years, and wish you the best.

TS Ng

Thank you so much.

Seamus Grady -- Chief Executive Officer

Thank you, Troy.

Troy Jensen -- Piper Sandler -- Analyst

Hey, gentlemen, could you guys dive in? I mean, you hit on the coronavirus. I guess, I'm just curious if you could kind of quantify how much of an impact that is? I'd just be curious, your thoughts, too, just on the old China supply chain and how resilient is it right now, and what are your expectations for the virus going forward, so to speak?

Seamus Grady -- Chief Executive Officer

So the coronavirus outbreak itself, the first week of the coronavirus outbreak coincided with, you know, Lunar New Year, which meant that many of the facilities, many of our own facility in China in Casix and Fuzhou was already shut down, as were many of our component suppliers. And the impact, you know, it's not a huge impact. If I had to put a number on it, you know, I would say it's in the 8 to 10 million range for the quarter. And it's largely driven by the fact that, you know, government-mandated shut downs for an additional week.

For example, our own operations in the Casix operation and Fuzhou, we had plans to be back on February third, and that got pushed out by -- because of the government-mandated shut down, to February 10th. So, we lose a week's production and some of our -- several of our suppliers are in the same situation. Like I say, we estimate the impact of this extended shut down to be about 8 to 10 million for the quarter. So, in effect, our guidance would have been roughly flat sequentially, which would've been in line with or maybe a little bit better than a seasonal Q3 for us, let's say, fiscal Q3, calendar Q1, which would be seasonally down for us.

So, without this coronavirus impact, we would have been kind of flat to slightly up, I would say. So about -- to answer your direct question, about an 8 to 10 million impact.

Troy Jensen -- Piper Sandler -- Analyst

And just thoughts on just like, just the recent couple of days or week or so. Have you gotten more concerned about – or has there been more conversations, and just your thoughts on how resilient the supply chain is right now for you guys, the visibility that you have on supply?

Seamus Grady -- Chief Executive Officer

We think it's pretty resilient, and we think it's -- of course, none of us know when we could find ourselves here a quarter from now, saying we were too conservative and overestimated the impact. Or we could find ourselves saying we weren't conservative enough and we underestimated the impact. It's really very difficult to say. I think if -- our working assumption is that all the -- our own operation, as well as the suppliers who are affected, that they all get back to work a week from today in February 10th.

If something happens this week, that changes, you know, then the impact could be greater, similarly. So I think it's -- we're not -- I mean, obviously, our primary concern is for the health and welfare of our employees, and we're taking great, you know, precautions to make sure everyone is well, both in our operation in Casix, but also in our large campus in Thailand. As you can imagine, we have a lot of visitors who come through. It's a 10,000-person campus.

We have a lot of people who come through there. So, we're taking, you know, great precautions to make sure everyone is safe and well. So that's our first concern. But nevertheless, we think the supply chain is actually quite resilient.

And if businesses get back into operation a week from today, we should be OK. But we're going to keep a very, very close eye on it for sure, as everyone.

Troy Jensen -- Piper Sandler -- Analyst

Perfect. Yeah. Understood. And just one last question, and I'll cede the floor.

Just your comments on industrial laser strength, curious to know is that existing programs getting better or is that some of these new design wins that you guys have been turning in?

Seamus Grady -- Chief Executive Officer

It's a combination of both, actually. We've continued to penetrate that market and win business there with a number of companies, but I would say the strength in the quarter was mostly with existing customers, existing business.

Troy Jensen -- Piper Sandler -- Analyst

Understood. TS, hope to see you down in San Diego.

TS Ng

For sure. Thank you.

Seamus Grady -- Chief Executive Officer

Thank you, Troy.

Operator

Thank you. Our next question comes from Samik Chatterjee of JP Morgan. Your question, please.

Samik Chatterjee -- J.P. Morgan -- Analyst

Hi, thanks for taking my question. So, I appreciate your comments about telecom and the supply side there. Just wanted to understand how you're thinking about the demand side as well? Because even before the coronavirus impact, I think we saw a couple of industry players kind of sign the warning signs on 5G network deployment in the different geographies, including China. So, just wanted to understand beyond kind of the supply constraints, how you're thinking about demand.

If there is a slowdown, how long will it take in the supply chain to kind of show up in your demand level or orders? And so, any insights on that would be helpful.

Seamus Grady -- Chief Executive Officer

Yeah. So, the demand -- sorry, the telecom demand that TS talked about was more focused on the demand side than the supply side. So, we are seeing some softness. But for us, it's nothing, I would say, greater than the normal seasonal softness that we would see in this quarter.

We do -- and again, we don't claim to represent the industry or have any great insights, but certainly, from what we see, you know, we don't see any huge change, you know, other than what we would normally see as a seasonal slowdown, a little bit of a slowdown this quarter. The other thing is, you know, as many of our customers have not announced, yet, we don't to be -- seem to be speaking for them. So, but I would say, like I said, I don't -- we don't believe there's anything other than the normal seasonal slowdown. TS, what do you think? Would you --

TS Ng

I think well said. Yeah. We cannot see beyond one or two quarters, you know. But for the coming quarter, essentially, exactly what Seamus said.

Samik Chatterjee -- J.P. Morgan -- Analyst

OK. Got it. And if I can just follow-up on the 400 gig, the growth that you had, which is pretty strong, 31% growth. As your kind of looking through the end of the year, right now, the growth of a small base.

How are you are thinking about -- do you think that kind of growth rate is sustainable on the 400-gig products -- 400 gig and above products?

Seamus Grady -- Chief Executive Officer

Yeah. So, we group together 400 gig and above. I mean, at some point, we may get a bit more granular with that. But right now, you know, we see that continuing to be quite strong.

We don't guide beyond one quarter, but you know, we do see demand for that 400 gig and above continuing to certainly outpace the growth of the rest of the business. It's growing quite strongly for us.

Samik Chatterjee -- J.P. Morgan -- Analyst

Great. Thank you.

Seamus Grady -- Chief Executive Officer

Thank you, Samik.

Operator

Thank you. [Operator instructions] Our next question comes from the line of John Marchetti of Stifel. Your question, please.

Unknown speaker

Hey, guys. This is Scott on for John. Congrats on the great quarter. And thank you, TS, again.

On the systems opportunity you discussed, could you maybe touch on how that affects margins going forward?

Seamus Grady -- Chief Executive Officer

Yeah. Well, we're not going to break out margins by customer or program. It's not something we've done, and we don't plan to start doing that now. I'm sure our customers wouldn't be too happy with it if we start to break that out.

It's, you know, I would say, it's obviously a piece of business we're very happy about. We're very, very proud to be expanding our partnership and our relationship with Cisco, but, you know, we're not really prepared to talk about the margins under that program.

Unknown speaker

I mean, so not necessarily on the Cisco one specifically, but I mean, as you move forward and look for more opportunities of that kind, could you give some color on how that overall should impact margins?

Seamus Grady -- Chief Executive Officer

Yeah. I think as we look at expanding into the system business, and we have a couple of, I would say, significant wins under our belt, we're, I suppose we're in the fortunate position of being able to be somewhat selective about which particular pieces of business we go after in that space. So, we're not chasing everybody. We're not chasing every customer.

We're not chasing every product or every opportunity with every customer. We are being selective. And really, for us, where it makes a lot of sense is where we're already making some of the optical component, the optical components that are already in the bomb for those systems. That allows us to be, first of all, very competitive for our customers.

And also, we can build the products in a way that simplifies the supply chain for our customers. They can just deal with one one-stop shop, one supplier rather than having to deal with several suppliers. And also, it helps us to help the customer to eliminate the margin stack that they have to deal with if they're -- if they have a stacked supply chain. So, we're really flattening the supply chain in a way that allows us to , you know, make a respectable margin that we're happy with, and allows the customer to save a lot of money because they eliminate a lot of the margin stack that they have to deal with if they use multiple suppliers.

So that's really the if you like, the secret sauce is that we eliminate the margin stack for the customers, but we do it in a way that we're able to produce the products at a price and at a margin that's acceptable to us.

Unknown speaker

All right. That's great. Thank you so much.

Seamus Grady -- Chief Executive Officer

No problem.

TS Ng

Thank you.

Operator

Thank you. Our next question comes from Alex Henderson of Needham. Your line is open.

Alex Henderson -- Needham and Company -- Analyst

I wasn't going to let you get off with only a couple of questions tonight. I wanted to just talk a little bit about, you know, the Infinera business coming in. Obviously, that's a fairly new program. Have you -- you say it's fully in the numbers now.

Has there been any production issues, or any other issues with that in the move during the fourth-quarter calendar that we should be aware of? Did it perturb the numbers as a result of start-up or ramp-up costs that will fall out? Or any additional commentary around that would be helpful.

Seamus Grady -- Chief Executive Officer

I would say we're, you know, fully ramped in the sense that all of the products are transferred. You know, as you can appreciate, Alex, it's not a simple thing to transfer an entire factory from Berlin to Bangkok. But we're fully ramped in the sense that all the products are transferred. We're fully up to speed.

The yields are at an acceptable level. We have capacity installed. As regards to the demand, let's say, the inter quarter kind of demand variability that might exist there, you know, I know Infinera announced within the next few days, I think, the next week, so we'd really let them talk about what the demand profile looks like. It's not really our place to talk about that.

But all I would say is we're very happy with how the program has gone. We're very happy with the relationship with Infinera. We're very excited to be, you know, making sure we're building the new programs and the right programs for Infinera. And, you know, the transfer has just gone very, very well, and that's --

Alex Henderson -- Needham and Company -- Analyst

So, there was no production issues in the fourth-quarter calendar that impacted the gross margins, bringing it down a little bit, or anything of that sort that we should be aware of?

Seamus Grady -- Chief Executive Officer

No. I mean, the gross margin, the 11.9%, was really a mix, an overall mix, and again, the difference between 12% and 11.9%, it's not very significant, but it was really just an overall product mix. Certainly, nothing related to , you know, delays or anything like that with Infinera, no.

Alex Henderson -- Needham and Company -- Analyst

Great. And going back to the Cisco announcement, when do you think that that might start to reticulate into the numbers?

Seamus Grady -- Chief Executive Officer

I think it's early to say. I mean, it's -- I think we've shown, I suppose, from our past track record, we're able to go very fast and transfer these programs very quickly. But at the end -- in the end of the day, the pace is essentially set by the customer in these cases. We have to go at a pace that the customer is comfortable with.

So, it's a very recent win. It's actually, we won the business since we closed the quarter. So, we're just really in the throes right now of putting the time lines together and agreeing with the customer on the transfer plan, so it's really too early to say, Alex, when the revenue might hit.

Alex Henderson -- Needham and Company -- Analyst

But is that going into the new facility as opposed to in the Pinehurst?

Seamus Grady -- Chief Executive Officer

Yes. Yes.

Alex Henderson -- Needham and Company -- Analyst

Great. And any commentary about utilization rates and how you're doing on all of those programs?

Seamus Grady -- Chief Executive Officer

In -- yeah. I mean, I think we did break out a couple of quarters ago. We used to break out, you know, the degree to which Chonburi was occupied and spoken for. We stopped doing that because it's not a meaningful -- it's not really a meaningful indicator of anything, actually.

Because we've been so successful as expanding the space in Pinehurst, so we don't really, you know, talk about that metric anymore, again, because it's not really meaningful. We do continue -- obviously, this new business win will be all destined for the Chonburi operation, and we continue to, you know, find more space and expand the manufacturing footprint in Pinehurst. So, we need no concerns about our ability to expand and grow the business. And then of course, we're always ready to pull the trigger on the next building in Chonburi and we have room for another probably five buildings of the same – I mean, again, each building, it's about half million square feet and would have revenue capacity of about $500 million, so we have ample room to expand in Chonburi.

Alex Henderson -- Needham and Company -- Analyst

On the Casix delays in terms of reramping, I mean, I'm pretty sure Casix is one of your highest-margin business. To the extent that that gets delayed, that probably has a bigger impact, not just on the revenues, but also on the margin mix, I would think. Is it reasonable to think that that's pressuring the gross margins a little bit in the -- over the very short-term, and then you'll get that back?

Seamus Grady -- Chief Executive Officer

Yeah. A little bit. That's such a fair -- that's a fair way to think about it, Alex. Obviously, components -- optical components, given the nature of these products, they're more like jewels than electronic products.

Certainly, the margin profile is quite different. It's a higher-margin product than, let's say, a typical EMS-type product. So yeah, the margin impact is higher in every dollar of revenue we don't get out of Casix. But we haven't seen -- again, you're right as well, it's more of a delay than a cancellation, if you like.

If you lose capacity, a week or 10 days of capacity, it's hard to get that back. So, it would then push to the next quarter.

Alex Henderson -- Needham and Company -- Analyst

So, one more question, if I could. The Fabrinet West success ramping other products up to 33 million, up 20%, is pretty strong results. Is that production that's anticipating a move of the line, and therefore, we ought to expect a falloff in the other? Or would the line already be moved and we should see that continuing to ramp as we start to get it into, you know, full production in Thailand, and therefore, the other line will accelerate? What's the shape of that curve?

Seamus Grady -- Chief Executive Officer

So, the 30 or 33 million of other, that would be a combination -- that's not just Fabrinet West. It will be combination of Fabrinet West, but also programs that were maybe previously ramped in Fabrinet West, that are now ramping in Thailand, you know, as we ramp business in Fabrinet West, and then transfer it to Bangkok, yes, we will , you know, transfer our production, and we should start to see a nice uptick in the other. And, you know, as that other category grows, it may get recategorized when it becomes more meaningful into one of the other areas. But as that business grows in Bangkok, you know, we work hard to backfill, if you like, with new business and new customers into Fabrinet West, so --

Alex Henderson -- Needham and Company -- Analyst

Right, so, the production already moved to Thailand, and it is already ramping, it's just been moved from Fabrinet West?

Seamus Grady -- Chief Executive Officer

Correct. Correct.

Alex Henderson -- Needham and Company -- Analyst

Oh, OK. I thought you were saying it was going to be moved in the third quarter.

Seamus Grady -- Chief Executive Officer

Well, there's a combination -- there's a constant flow, I would say, through Fabrinet West. So, at any point in time, you'll have a mix of business that's being ramped in Fabrinet West, and being transferred, and has already transferred. So that's -- and that, for us, is a measure of success is -- success for us in Fabrinet West is if we transfer everything and end up having to backfill Fabrinet West with new business. It's a bit counterintuitive for our business, but we really view Fabrinet West as -- it's an in-feed to Bangkok and success means that the revenue is a bit volatile in Fabrinet West because it means we're being successful at convincing customers to transfer an entire program to Bangkok.

Alex Henderson -- Needham and Company -- Analyst

Yeah. I got it. Thanks.

Seamus Grady -- Chief Executive Officer

Thanks, Alex.

Operator

Thank you. Our next question comes from Fahad Najam of Cowen. Your line is open.

Fahad Najam -- Cowen and Company -- Analyst

Thank you for taking my question. First, I wanted to thank TS for all your support over the years. It was a pleasure working with you. Enjoy your retirement.

TS Ng

Thank you, Fahad.

Fahad Najam -- Cowen and Company -- Analyst

My question goes to -- on diversification. I get this Cisco announcement is going to be another 10% customer, along with Lumentum, can you speak to the revenue diversification? It seems like your top three, four customers may account for greater than 50% of your total revenue, if my math is right. So just help me understand if I'm thinking about it the right way.

Seamus Grady -- Chief Executive Officer

Yeah. So, we -- historically, we've had one -- the last few years, we've had one 10% customer. Again, of course, we report the customers on a full-year basis when we look back. If we're successful with our current plans, you know, we go from having one 10% customer to 3 10% customers.

So, there's always a trade-off, Fahad, of course, between being over-concentrated, but at the same time, you do need sufficient scale with any one customer to serve the customer correctly and properly. So, we're very happy with, I suppose, the trajectory we're on, the way we've been able to penetrate some new markets for us, new opportunities for us, and really show the customer value, the value that we can bring in simplifying their supply chain. So, we see it as a real win-win. And we'll have, you know, three – certainly, three 10% customers as we -- hopefully, as we look back in FY '21.

TS Ng

And these are all quality customers. I'm not worried about their credit, you know, before the whatever, you know.

Seamus Grady -- Chief Executive Officer

Yeah. High-quality customers. So, we feel --

Fahad Najam -- Cowen and Company -- Analyst

Can you remind us the number of silicon photonics customers you guys have and if that number is growing? Just trying to get a sense of the diversification beyond the top three customers.

Seamus Grady -- Chief Executive Officer

Yeah, we have five or six silicon photonics customers. I mean, some of them would be big household names, but there's also some smaller start-up type silicon photonics customers in there as well. So, five or six in total.

Fahad Najam -- Cowen and Company -- Analyst

Appreciate the effort. Thank you so much. And congratulations again, TS.

TS Ng

Thank you.

Seamus Grady -- Chief Executive Officer

Thank you.

Operator

Thank you. At this time, I'd like to turn the call back over to CEO Seamus Grady for closing remarks. Sir?

Seamus Grady -- Chief Executive Officer

Thank you. So, thank you for joining our call today, everyone. We're pleased to, again, exceed our guidance for revenue and EPS in the second quarter, and we're well-positioned to deliver another strong performance in Q3. We're looking forward to seeing those of you who will be attending our Q&A session at OFC and at other events.

Until then, goodbye. Thank you.

Operator

[Operator signoff]

Duration: 42 minutes

Call participants:

Garo Toomajanian -- Investor Relations

Seamus Grady -- Chief Executive Officer

TS Ng

Csaba Sverha -- Vice President of Operations, Finance, and Chief Financial Officer Designate

Alex Henderson -- Needham and Company -- Analyst

Troy Jensen -- Piper Sandler -- Analyst

Samik Chatterjee -- J.P. Morgan -- Analyst

Unknown speaker

Fahad Najam -- Cowen and Company -- Analyst

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