Fabrinet (FN) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 Fabrinet Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will facilitate a question and answer session.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Paul Kalivas, General Counsel. Please proceed, sir.

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 and full year of fiscal 2011, which ended June 24, 2011.

With us on the call today are Tom Mitchell, Chief Executive Officer and Chairman of the Board of Directors of Fabrinet, and Mark Schwartz, our Chief Financial Officer and Executive Vice President. This call is being webcast and a replay will be available at the investors section of our website at investor.fabrinet.com. Please refer to our website for important information, including our earnings press release.

Before we begin, I would like to remind you that today's discussion may contain forward-looking statements. Forward-looking statements are not guarantees and actual results could differ materially due to a number of risks and uncertainties. Such forward-looking statements include our expectations regarding future operating results and tax rates, expected future growth of our end markets and our customer's markets, macroeconomic trends and the completion of Building Six.

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 SEC filings. In particular, the section captioned, risk factors, in our Form 10-Q filed on May 4, 2011.

We will commence the call with brief remarks by Tom and Mark, followed by a time for questions. I would now like to turn the call over to Fabrinet's CEO and Chairman, Tom Mitchell.

Thank you, Paul. Good afternoon, everyone. Today I'm pleased to report completing our first year as a public company with record fiscal year results. We have achieved our 46 consecutive quarter of profitability and reported results which exceeded our guidance. While our results have been strong, the market environment has remained challenging. We anticipate solid September quarter revenue trend accompanied by some reduced capacity utilization.

The driver for this lower utilization is customer inventory absorption. Even during this period of industry-wide inventory absorption, our customer relationships remain excellent and we are witnessing robust levels of new project activity. As we have mentioned previously, leading edge opportunities and new products continue to represent over 50% of our total revenues, and we continue to work with partnership with our customers to accelerate new product delivery schedules and achieve time-to-market objectives.

The net result is that we have continued confidence in our ability to penetrate market opportunities and to deliver profitable results. I will now turn the call over to Mark Schwartz, our CFO, for a further perspective of our business and financial results.

Mark?

Thank you, Tom. Before I start, please note that all numbers are GAAP unless stated otherwise. Tom mentioned the promising activity we are seeing within our customer base to support the upgrade (inaudible) infrastructures.

Video, software as a service, 4G and cloud computing continue to be embraced for an increasing number of enterprise and consumer applications. And carriers are redesigning and upgrading their networks to be more intelligent, flexible and high performance to support service demands.

We are witnessing a flow of infrastructure projects that enable the massive architectural transformation underway among the service providers. New fiber to the home build-outs, the increasing dominance of the smartphone and tablet markets for mobile computing and gaming. And recent price increases from at least one major content delivery service demonstrate the demand and pricing power of these advances.

Moreover, accompanying these trends is the need to deploy coherent, wavelength selectable, reconfigurable and tunable technologies, which provide improved capabilities and cost-per-bit value. The high precision optical modules that we manufacture for our customers are the vital building blocks of this leading edge infrastructure.

Now to review results. Our revenue for the quarter was $190.3 million, a decrease of 2.4% as compared to the March quarter, but an increase of 21% as compared to the fourth quarter of fiscal 2010. On an end market basis, revenue from optical communications was $147.4 million or 77.5% of total revenues for the quarter. While lasers, sensors and other revenues were $42.9 million, the remaining 22.5%.

For the fiscal year, revenue from optical communications was $587.8 million, or 79.1% of total revenues, while lasers, sensors and other revenue was $155.8 million, the remaining 20.9%. We are pleased with the continued diversification of our revenues. Looking back less than three years ago in the September quarter of 2008, our revenues from optical communications represented greater than 95% of our revenue, while laser sensor and other revenue accounted for less than 5%.

Our share based compensation expenses for the quarter were $0.8 million, of which $573,000 were included in SG&A. Our effective tax rate for the quarter was 1.7% and 6.6% for the full fiscal year 2011. We continue to anticipate our future global tax rate to remain at historical levels of between 7% and 9%.

On a non-GAAP basis, net income totaled $17.5 million for the quarter, or $0.50 a share calculated from a share base of $34.7 million fully diluted shares. Including share based compensation expenses, GAAP net income was $16.7 million, or $0.48 per share, which represents an annual increase of 23%.

For the fiscal year, on a non-GAAP basis, net income totaled $68.8 million, or $1.99 per share, calculated from a share base of 34.6 million fully diluted shares, an increase over fiscal 2010 results of 53%.

Including share based compensation, GAAP net income for the fiscal year was $64.3 million, or $1.87 per share, which represents an increase over fiscal 2010 results by 45%. Moving on to the balance sheet, we ended the quarter with cash and cash equivalents of $127 million, an increase of $11 million from the previous quarter.

During the quarter, we used $5.7 million of our cash toward the purchase of capital equipment and $1.1 million of our cash toward the construction of Building Six, the construction of which continues to progress on schedule to be available for customer projects in the first calendar quarter of 2012. Our inventory days increased modestly to 58 days from 57 days in the previous quarter.

Now, I'd like to discuss guidance going forward. For the first fiscal quarter of 2012, we expect revenues of between $73 million and -

(Operator Instructions)

We anticipate non-GAAP net income of $0.41 to $0.43 per share based on a fully diluted share (inaudible) million shares, and GAAP net income of $0.39 to $0.41 per share based on 34.5 million fully diluted shares. Thank you.

At this point, I'd like to turn the call back over for questions. Operator?

(Operator Instructions)

And our first question comes from the line of Ehud Gelblum of Morgan Stanley. Please proceed.

Hi, thanks. This is actually Kim Watkins in for Ehud. Thanks for taking the question. Just wanted to ask you a little bit about the quarter in itself. Have always heard you, Mark, say that you've got pretty good visibility near-term. So have been a little bit surprised by the increase in magnitude, the revenue [beats].

So, I was hoping that you could talk about maybe when in the quarter you realized that the revenue would be a lot stronger. And then the second question related to that is, do you see fiscal Q1 as being the bottom as it relates to the optical inventory correction?

Hi, Kim. Thank you, and I apologize, Kim, to others in the cue if -- for the short delay that we just experienced. I think it was -- and Tom can add some color into this -- but roughly the last two weeks of the quarter where we started to see significant uptick over our estimates for the quarter.

Certainly, during our last earnings call, early in May, the quarter looked as we had suggested. And it was only the last couple of weeks of the quarter where we did see an uptick. Difficult to say, Kim, whether that's usual or not. Some quarters there is an uptick toward the end of the quarter and some quarters it just doesn't happen. So I don't think there's much to be read into that uptick the last couple weeks of the quarter.

In terms of whether we're seeing the bottom or not, that also is difficult for us to say. I think we have the luxury in some respects of being able to rely exclusively on the demand provided to us by our customers. And so, we guide based on what our customers are providing us in terms of their demand as of the time that we are on this earnings call.

That was the case last quarter, it's the case this quarter. Certainly, our number is a bit softer than it was based on our results from last quarter, but it's difficult to say in the broader scope what that means in this industry. That's really more of a question for our customers.

Okay, that is actually really helpful. That -- excuse me, that strength that you saw in the last two weeks of the quarter, was that broad-based or just one customer? And any context you could provide around which part of the business it came through would be helpful.

It was broad-based. As you saw from our results, our revenues from lasers and sensor business was stronger in the fourth quarter, but I believe that toward the end of the quarter our revenues from our communications business ultimately ended up perhaps a bit stronger than we had anticipated earlier on.

Tom, is there anything you'd like to add to that?

No, no, I think that covers it.

Okay, and then I just have one follow-up question, which is a number of your optical customers have started to talk about pricing pressure being a little bit more acute than it has maybe in the past several quarters. Have you seen any of this trickle down to you yet, or any signs that maybe the 12% to 12.5% long-term growth margin target might not be -- or might hold or might not hold?

No, what I would say is that - that there doesn't appear to be any change for us in the competitive landscape. The pricing pressure is intense, but it's been that way for quarters if not years, so I don't think there's any changes in the dynamic there. This is a very, very competitive environment, as you know. Our customers are under pressure and one of the values we provide our customers is being able to reduce their costs in line with their own expectations.

Okay. Thank you very much.

You're very welcome.

Our next question comes from the line of Subu Subrahmanyan of Sanders Morris. Please proceed.

Thank you. I had two questions. First, on the order trends that you -- Mark [upon] picking up towards the last few weeks of the quarter, just wondering if they continued at that pace, and just kind of the trajectory going into the quarter as well as the mix you're looking at for the sequential downtick you'd spoken about? Is it lasers and sensors staying more flat while it's primarily an optical com?

And then could you talk a little bit about the supply agreement at Oclaro, the changes that have been announced and what the potential impact is over the next six to twelve months?

Sure, sure. Let's talk about the first part of your question first. And I think if you look at how we receive demand from our customers, Subu, we look - our customers generally provide us up to a year out of their forecast. So, there wasn't anything remarkable in changes of their forecast for the September quarter late in the June quarter.

We happened to have a couple of weeks of accelerated demand, as we said, but that does not appear to have impacted our first quarter and the September quarter. And I'll answer the second part of your question, and then let Tom add any color if there's anything that he'd like to say that we're seeing.

In terms of Oclaro, we continue as Tom mentioned in his remarks, to have a great relationship with our customers, Oclaro included. And they've kept us apprised nearly every step of the way as they've gone through the process they're undertaking. They mentioned it in their earnings call, some short period of time ago.

We continue to support them in their efforts and ultimately in their decision making process. But there's not really much more that we can say about it, Subu. As you know, in their call I believe they mentioned that none of their existing products were moving from Fabrinet, those products that were at Fabrinet today.

And so, our forecast for the September quarter and our internal projections for our fiscal 2012 include our revenue that we have today from our Oclaro products.

Understood. Then one follow-up I had on gross margin itself, given - I think Tom made some comments up front about the lower utilization in the near-term. How should we think about that impacting gross margins?

I think it does impact our gross margin. It's difficult for us to quantify as we sit here today, but for sure, we believe that the gross margin targets that we've set for ourself and that we've made public are consistent with where we see our operating model at.

Got it, thank you.

Our next question comes from the line of Sherri Scribner of Deutsche Bank. Please proceed.

Hi, thank you. Just a quick clarification to start. In terms of Tom's comments that there's some inventory absorption going on, is that an industry comment or is that a Fabrinet specific comment?

I think it's an industry comment. In terms of our customers broadly. So, you know, and maybe that is a Fabrinet comment really, but I think when you look at our customer base, you could say that it is likely an impact across our customers and not one specifically, so therefore, perhaps an industry comment.

It isn't a reflection of any change in our business model. It is simply a reflection of the demand that we are seeing come in from our customers.

Okay, so there's a bit of inventory built up in the channel or at customers - of finished products that needs to be absorbed over time?

Potentially. Our customers continue to tell us -- going back a little bit, Sherri, as you and others on the call know, every quarter Tom and I and our COO, much of the time, we go and visit most of our customers.

And we visit the COOs and (inaudible) and we're not hearing from those customer visits -- the last visits we had were the end of June. We're not hearing from those customers that anything different from what we're telling you.

Okay. And then just looking at the guidance, the EPS guidance is a bit softer than I would have expected. It seems to imply that operating margins will fall below 9% next quarter. Is that primarily lower utilization on the SG&A, or is that going to be a reflection of a change in the gross margin coming down pretty significantly?

Well, I think that one point not to be taken lightly is the impact of revenues at our site in China. And as the revenues from the customized optics portion of our business have declined somewhat due to the softness we're experiencing, that impacts our gross margin as a group.

Okay. So potentially, there's some negative mix in there as well as lower absorption?

Potentially, yes. We still believe we will be within the targets that we've outlined.

Okay. And just finally, on the Oclaro news, have any of your other customers asked to renegotiate contracts after seeing Oclaro's decision?

Not specifically related to Oclaro. From time to time -- I wouldn't -- with some degree of frequency over the years, we've looked at just about every contract we have with every customer and looked at terms that may or may not any longer be applicable. But there isn't anything that's arisen since Oclaro's notification, at least that I'm aware of.

Tom, is there anything that you're aware of?

No, no. I think that that's really a specific incident.

Okay, thank you.

You're very welcome.

Thanks, Sherri.

Our next question comes from the line of Cobb Sadler of Catamount Advisors. Please proceed.

Thanks, guys, for taking the question. I had a question on your comments about an uptick late in the quarter. Can you talk about within Com what type products those would be? Was it [across the] board, or was it 300-PIN tunables, rodems, any color there.

Difficult to give any color without perhaps giving more information about the potential customers that it impacted, Cobb, but I would say generally it was across the board.

Okay, great. And then the margins on new projects like tunable XFPs and -- I'm assuming those will be higher than corporate -- out of the gate, or lower than corporate out of the gate? And then how many customers or tunable XFPs would you plan on ultimately manufacturing for?

Well, we would -- and it's a softball type question, Cobb. We'd love to manufacture all the tunable XFPs for every one of our customers.

Right.

But -- so that is really - that's really difficult for us to answer. And in terms of the gross margin, we don't speak to that specifically. But contractually, our margins are set as we work with our customers. So, there's not much change there or room for anything to be more positive or negative than others.

Okay. And have you seen -- have you seen volumes out of a second, if you can say, second XFP tunable vendor? I guess there's one vendor that dominates the market and then there's a few others. Have you seen any volumes out of the other group?

Yes, no, appreciating your question, Cobb, but we can't talk about specifically.

Got you. Okay. Thanks very much, guys.

You're very welcome, Cobb.

Our next question comes from the line of John Marchetti of Cowen and Company. Please proceed.

Thanks very much. You mention that you didn't see any real changes to the orders for September in June. I'm curious, Tom, maybe if you take a little bit of a longer term view, can you talk about maybe that one year out kind of timeframe that your customers give you relative to maybe the outlook that they were giving you six months or so ago, just trying to get a sense of kind of where we are in this soft patch of optical demand right now.

No, if I look out one year and the demand there, the forecasts that were given by our customers, it looks very strong.

And no real change -- say, six months ago to where we are right now?

I don't think so.

Okay. And then, Mark, can you just talk a little bit about what happened with the tax rate this quarter and how it -- you obviously reiterated your longer term guidance going forward, but is this something that is really one-time in nature and how we should think about that moving into next year?

And then, lastly, with the new building coming on in the first of the year, do we have a situation where maybe gross margin net is a little bit lower here at the start of the fiscal year because of the absorption and lower utilization, but it stays a little bit low as you bring the new building on until you get that capacity up to a sufficient level?

Yes, there's some questions, John, about -- some questions internally and it depends on timing when the building is ready and available for our customers and completed. There's a -- perhaps a quarter in question as to when we would start depreciating that building.

But out of the gate, the first couple of quarters are perhaps a little bit longer. We're expecting some absorption in the 10 to 15 basis points from that building. I think we've said that previously on this call. And that continues to be the case. But for the quarter and for the foreseeable future, we continue to model our business in those target gross margins that we've talked about.

There was another portion of your question that I don't recall.

Just a little bit on the tax rate in the quarter?

Oh, sure. So it may have been the case from time to time in our fiscal fourth quarter, but it's more an issue of timing actual tax with estimated tax payments. We were estimating our taxes for the year to be a little bit higher percentage rate than they actually ended up.

And so, in the fourth quarter when we paid the actuals, we had to release some of that, which resulted in the lower tax rates just for this quarter. So it's a one quarter anomaly, but not related to anything specific except based on our estimates throughout the year.

Thanks very much.

You're very welcome.

Our next question comes from a line of Steve O'Brien of JPMorgan. Please proceed.

Hi, great. Thanks for taking my question. Just a little further question on the strength that came through in the last part of the June quarter, was there any potential there to be some end-of-life builds or inventory (inaudible).

I know you say, and we heard from Oclaro that they're not planning on transitioning products, so I wouldn't think they would have to build buffer stock or anything like that. But was there some kind of end-of-life thing or something along with that two week sort of uptick?

No, I'll ask Tom to add any color if I miss something. But no, as we look at the changes in the demand for the last two weeks of the quarter, it was the same products that we've been building all quarter for our customers. So there was no specific end-of-life that impacted us as an anomaly for the quarter. Tom, is there anything I'm missing there?

No, no. I -- there was nothing unusual. It was a little pickup in demand, but all-in-all, it was just -- it was very normal.

Okay. Then just secondly, looking out at September and sort of the guidance ranges we've been hearing from the optical component companies sort of suggest a relatively flattish quarter as far as their revenues are concerned. I mean based on your experience from past recoveries, how long do you expect for Fabrinet there to be kind of a lagging impact from inventory?

Well, I think history tells us that, as you suggested, Steve, we are a bit of lagging indicator. Tends to be a quarter, roughly, and -- or some number of months right around a quarter. So we'll -- the demand that we're seeing from the customers as I said previously is our guidance. There isn't any estimation that we're making over and above what we're seeing today from the customers. So, I'll just leave you with that.

Okay, thanks for that. And then maybe just lastly, we've discussed the margins here, but maybe I don't know if you can help provide a bridge between sort of the -- you gave the exact same top line guidance for the June quarter that you gave in September, maybe just coincidence, but if there's a $0.05 difference in terms of the earnings guidance, in terms of your expectations. But can you parse that through the gross margins, potential absorption, operating expenses, et cetera?

Our operating expense line should be very similar to previous quarter and it looks that way going forward for us in the future. We've said in the past that we could see our SG&A in the future reaching down to that 3% and then below 3% level. And we're still looking at that and modeling based on that in the -- as we look ahead in the future, not in the immediate couple of quarters, but down the road some. So, there's no impact from the SG&A side.

As I mentioned before, Casix and the customized optics portion of our business is weighing heavily on our gross margin, as the revenues from that business on the crystal end, on the coating side are waning during this slow period.

Great, thanks for that. And then maybe lastly, just a point of clarification or an update on -- in your 10% customers number and total contribution this quarter, any changes or new ones to list?

Right. Well, that - we plan to file our 10-K, Steve, on the 24th and all that information will be available in the 10-K.

Okay.

Thank you.

Our next question comes from the line of Ajit Pai of Stifel Nicolaus. Please proceed.

Yes, a couple of quick questions. The first one is just looking at the commercial laser opportunity and the sensor opportunity, giving us some color as to whether you have made any progress in getting any additional customers in each of those two set of markets. And also with the customers you already have, have there been any greater mix shift from captive production by them over to you folks -- in terms of new design wins that are material?

Without getting into the specifics of any customers, we're -- we continue to be very, very excited about the laser and the sensor side of our business. We see significant growth opportunities in both. In this fiscal year that we've just started and in future fiscal years.

We -- in this current quarter we're expecting to add another laser customer and we're targeting adding additional laser customers and sensor customers in fact by the end of this calendar year. So there may be more information as customers allow us to be able to provide in the future.

In terms of existing customers, there are new projects that we are in the process of transitioning from customers and new projects that have been identified. So, that continues to be a very robust area of growth for us and something that we're very excited about.

Tom, is there anything you'd like to add on the laser or sensor?

No, no. I think that we made a lot of real positive progress in our laser and sensor efforts. And we're -- like you say, Mark, we're looking so forward to the expanding of those businesses.

I think that's right.

Got it. And then when you look at the Building Six and the ramp of Building Six, is there any change in timeline, just because of your utilization falling right now that you're slowing it down deliberately by a couple of months, a few weeks? Is everything progressing exactly on the schedule that you thought of back six months to a year ago?

Everything is exactly progressing on schedule.

Exactly.

Got it. And then, when Building Six is ramping, the mix of products that you'll be selling as Building Six ramps and the wins that you're expecting to accommodate there, does that change your mix shift] of what percentage of your overall business Casix will be? Or, will Casix be ramping at the same pace as Building Six, so the relative percentage mix is not going to be materially different?

Historically, Casix has ramped at a very similar growth rate as Fabrinet. And in downturns, periods of softness at Fabrinet. We've seen the same thing in Casix. We happen to be experiencing a little bit greater downturn in Casix right now, which is reflected in the gross margin discussion we just had.

But as far as Building Six goes, when we think about adding on new infrastructure, we're not necessarily thinking about specific laser customer or specific sensor customer.

We look broadly at our business. And as you know, as we add on a new building, that new building can accommodate any business that our customers want to put in it. So that really isn't the consideration for us outside, obviously, of the demand that we see from our customers, because we do get to see their demand on us for up to a year in advance.

So, we're seeing what our customers are looking for us to build for them next June and July.

And then, shifting from the pricing pressure that you face, do the actual pricing of the vendor that you purchase from, especially when you're looking at railroads, metals, some of those kind of things. Are you seeing with the slowdown you shouldn't be seeing too much of a pressure, but are you seeing any rising component pricing for you folks?

I don't think anything outside the normal. Wouldn't you say that, Mark?

That's kind of my -- as I think about it. There's nothing that stands out today, Ajit, as specifically being impacted in terms of demand issues and pricing.

Okay, and then the last question is from the back end test, there was equipment that was getting deployed by your customers, co-located with you folks. Has there been a material slowdown in their -- and we're not asking for a specific customer, but very broadly.

Any specific push out in their adding capacity there or despite the slowdown in short-term demand and inventory, everything over there is also progressing exactly the way the plan six months to nine months ago?

Well, what I would say, Ajit, and I don't think any of the folks on this call ought to read too much into this, but I think what we're seeing is every customer is looking at their demand and what they saw their demand six months to be in the September quarter and what they're seeing it now.

And there's been changes in that, obviously, nearly across the board. So some customers are rationalizing equipment spend and everything else. We've done the same thing and I think many companies have. Outside of that, ordinary course of business type activity, there isn't anything dramatic we're seeing.

Got it. Okay, thanks so much.

You're very welcome, Ajit.

Sure.

(Operator Instructions)

And our next question comes from the line of Steven Edney of ABR Investments. Please proceed.

Yes, hi. Thanks a lot for taking the question. I just have a quick question on geographic trends. I think last quarter you'd mentioned a little bit more softer than China versus the rest of the world. Is that still the case?

Difficult for us to say. We're parroting what our customers are telling us. So I think that's more -- a better question than for our customers than for Fabrinet.

Okay. And the second part of the question is I think last quarter you guys had mentioned the street is looking for around 10% revenue growth I think for fiscal '12. You know, the long-term kind of growth rate of optical communications is around either 15% if you look back 10, 15 years. How do we think about your growth next year in context of the overall market?

Well, I think we continue to believe that we will grow at the rate of the market and then in excess of the market to an extent that we're able to penetrate the markets that we serve. So -- and I couldn't tell you what the latest growth rate estimates are for those industry reports. But we continue to believe that we're well positioned to capture in excess of the market growth rates in those industries.

Next we have a follow-up question from Subu Subrahmanyan of Sanders Morris. Please proceed.

Thank you. The follow-up question, and I know this has been asked a few different ways, but if maybe we can [synthesize]. There's two questions I guess, and part one is, given that orders did uptick in the last couple of weeks and given your (inaudible), do these products ship out of inventory rather than -- I can't imagine you were able to build the products in -- just quick enough?

And, B, you've talked in the past about Fabrinet being somewhat of a lagging indicator and I think [somebody] did ask about a couple of vendors starting to guide more flattish. Do you -- and your guidance would imply so fairly significant, maybe a 10% sequential downtick in optical com. So are you thinking you're just seeing the lagging effect and how should we think about that?

Yes, I'll answer the second part first, Subu. I think it is a lagging effect. As I said, our guidance is based off quantitative data from our customers. The demand we're seeing. In fact, as of last Wednesday in the US, there isn't any updates since then, but as of last Wednesday, that is exactly what we're seeing. So if that means we're a lagging indicator, then I think that's another data point there to suggest so.

In terms of the last couple weeks of the quarter, if we have material, there are many products that can be built within two weeks. Much of the lead time is in ordering material and bringing it in-house inspection and so forth. So, I don't think that's as much of an issue.

There are certainly some products that have a longer than two-week build time, but many of the products are within those parameters, and to the extent that we're able to build them out, we certainly made every attempt.

Understood. And your material order usually in conjunction with orders. Right? I was just wondering to the whole cycle.

By the end of the quarter, we're already ordering for next quarter some amounts. So to the extent that there are pull ins or push outs, as is always the case in manufacturing than we do what we can to make sure we can build product for our customers.

Understood, very helpful. Thanks.

You're welcome.

With no other questions, I would like to turn the call over to Paul Kalivas for closing remarks.

Thank you. This concludes Fabrinet's fourth quarter and fiscal year 2011 earnings call. Thank you, everyone, for your participation.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may disconnect at this time. Have a great day.