10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________

FORM 10-Q

____________________________

(Mark One)

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2023

OR

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from__________to__________

Commission File Number: 001-34775

____________________________

FABRINET

(Exact name of registrant as specified in its charter)

____________________________

Cayman Islands (State or other jurisdiction of incorporation or organization) 98-1228572 (I.R.S. Employer Identification No.)

c/o Intertrust Corporate Services

One Nexus Way, Camana Bay

Grand Cayman

Cayman Islands

(Address of principal executive offices)

KY1-9005

(Zip Code)

+66 2-524-9600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary Shares, $0.01 par value	FN	New York Stock Exchange

____________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the

registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  x    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    x  No

As of April 28, 2023, the registrant had 36,297,059 ordinary shares, $0.01 par value, outstanding.

1

FABRINET

FORM 10-Q

QUARTER ENDED MARCH 31, 2023

Table of Contents

	Page No.
RISK FACTORS SUMMARY	3
PART I. FINANCIAL INFORMATION	5
Item 1. Financial Statements	5
Condensed Consolidated Balance Sheets as of March 31, 2023 and June 24, 2022 (unaudited)	5
Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended March 31, 2023 and March 25, 2022 (unaudited)	6
Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended March 31, 2023 and March 25, 2022 (unaudited)	7
Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2023 and March 25, 2022 (unaudited)	9
Notes to Condensed Consolidated Financial Statements (unaudited)	11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3. Quantitative and Qualitative Disclosures About Market Risk	43
Item 4. Controls and Procedures	44
PART II. OTHER INFORMATION	45
Item 1. Legal Proceedings	45
Item 1A. Risk Factors	45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 6. Exhibits	63
Signature	64

2

RISK FACTORS SUMMARY

You should carefully consider the information set forth below under the heading “Risk Factors” in Part II, Item 1A before deciding whether to invest in our securities. Below is a summary of the principal risks associated with an investment in our securities.

•Our sales depend on a small number of customers. A reduction in orders from any of these customers, the loss of any of these customers, or a customer exerting significant pricing and margin pressures on us could harm our business, financial condition and operating results.

•Consolidation in the markets we serve could harm our business, financial condition and operating results.

•If the optical communications market does not expand as we expect, our business may not grow as fast as we expect.

•Our quarterly revenues, gross profit margins and operating results have fluctuated significantly and may continue to do so in the future, which may cause the market price of our ordinary shares to decline or be volatile.

•If we are unable to continue diversifying our precision optical and electro-mechanical manufacturing services across other markets within the optics industry, or if these markets do not grow as fast as we expect, our business may not grow as fast as we expect.

•We face significant competition in our business. If we are unable to compete successfully against our current and future competitors, our business, financial condition and operating results could be harmed.

•Cancellations, delays or reductions of customer orders and the relatively short-term nature of the commitments of our customers could harm our business, financial condition and operating results.

•Our exposure to financially troubled customers or suppliers could harm our business, financial condition and operating results.

•We purchase some of the critical materials used in certain of our products from a single source or a limited number of suppliers. Supply shortages have in the past, and could in the future, impair the quality, reduce the availability or increase the cost of materials, which could harm our revenues, profitability and customer relations.

•Managing our inventory is complex and may require write-downs due to excess or obsolete inventory, which could cause our operating results to decrease significantly in a given fiscal period.

•If we fail to adequately expand our manufacturing capacity, we will not be able to grow our business, which would harm our business, financial condition and operating results. Conversely, if we expand too much or too rapidly, we may experience excess capacity, which would harm our business, financial condition and operating results.

•We may experience manufacturing yields that are lower than expected, potentially resulting in increased costs, which could harm our business, operating results and customer relations.

•If the products that we manufacture contain defects, we could incur significant correction costs, demand for our services may decline and we may be exposed to product liability and product warranty claims, which could harm our business, financial condition, operating results and customer relations.

•If we fail to attract additional skilled employees or retain key personnel, our business, financial condition and operating results could suffer.

•Fluctuations in foreign currency exchange rates and changes in governmental policies regarding foreign currencies could increase our operating costs, which would adversely affect our operating results.

•We conduct operations in a number of countries, which creates logistical and communications challenges for us and exposes us to other risks and challenges that could harm our business, financial condition and operating results.

•We are subject to governmental export and import controls in several jurisdictions that subject us to a variety of risks, including liability, impairment of our ability to compete in international markets, and decreased sales and customer orders.

•We are subject to risks related to the ongoing U.S.-China trade dispute, including increased tariffs on materials that we use in manufacturing, which could adversely affect our business, financial condition and operating results.

•Political unrest and demonstrations, as well as changes in the political, social, business or economic conditions in Thailand, could harm our business, financial condition and operating results.

3

•We expect to continue to invest in our manufacturing operations in the People's Republic of China ("PRC"), which will continue to expose us to risks inherent in doing business in the PRC, any of which risks could harm our business, financial condition and operating results.

•Natural disasters, epidemics (including COVID-19), acts of terrorism and political and economic developments could harm our business, financial condition and operating results.

•Unfavorable worldwide economic conditions (including inflation and supply chain disruptions) may negatively affect our business, financial condition and operating results.

•The loan agreements for our long-term debt obligations and other credit facilities contain financial ratio covenants that may impair our ability to conduct our business.

•The phase-out of the London Interbank Offered Rate ("LIBOR") could affect interest rates under our existing credit facility agreement, as well as our ability to seek future debt financing.

•We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to our shareholders.

•Our investment portfolio may become impaired by deterioration of the capital markets.

•We are not fully insured against all potential losses. Natural disasters or other catastrophes could adversely affect our business, financial condition and operating results.

•There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with U.S. GAAP. Any changes in estimates, judgments and assumptions could have a material adverse effect on our business, financial condition and operating results.

•Our business and operations would be adversely impacted in the event of a failure of our information technology infrastructure and/or cyber security attacks.

•Intellectual property infringement claims against our customers or us could harm our business, financial condition and operating results.

•Any failure to protect our customers’ intellectual property that we use in the products we manufacture for them could harm our customer relationships and subject us to liability.

•We are subject to the risk of increased income taxes, which could harm our business, financial condition and operating results.

•We have incurred and will continue to incur significant increased costs as a result of operating as a public company, and our management will be required to continue to devote substantial resources to various compliance initiatives.

•If we are unable to meet regulatory quality standards applicable to our manufacturing and quality processes for the products we manufacture, our business, financial condition and operating results could be harmed.

•Failure to comply with applicable environmental laws and regulations could have a material adverse effect on our business, financial condition and operating results.

•Our share price may be volatile due to fluctuations in our operating results and other factors, including the activities and operating results of our customers or competitors, any of which could cause our share price to decline.

•If securities or industry analysts do not publish research or if they publish misleading or unfavorable research about our business, the market price and trading volume of our ordinary shares could decline.

•We may become a passive foreign investment company, which could result in adverse U.S. tax consequences to U.S. investors.

•Our business and share price could be negatively affected as a result of activist shareholders.

•Certain provisions in our constitutional documents may discourage our acquisition by a third party, which could limit our shareholders' opportunity to sell shares at a premium.

•Our shareholders may face difficulties in protecting their interests because we are incorporated under Cayman Islands law.

•Certain judgments obtained against us by our shareholders may not be enforceable.

•Energy price volatility may negatively impact our business, financial condition and operating results.

4

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FABRINET

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands of U.S. dollars, except share data and par value)	March 31, 2023		June 24, 2022
Assets
Current assets
Cash and cash equivalents	$	230,743	$	197,996
Short-term restricted cash	—		220
Short-term investments	307,980		280,157
Trade accounts receivable, net of allowance for doubtful accounts of $1,031 and $1,271, respectively	540,343		439,330
Contract assets	21,081		13,464
Inventories	554,247		557,145
Prepaid expenses	10,606		11,626
Other current assets	39,610		25,233
Total current assets	1,704,610		1,525,171
Non-current assets
Long-term restricted cash	—		149
Property, plant and equipment, net	308,365		292,277
Intangibles, net	2,471		3,508
Operating right-of-use assets	2,210		4,084
Deferred tax assets	10,487		9,800
Other non-current assets	658		652
Total non-current assets	324,191		310,470
Total Assets	$	2,028,801	$	1,835,641
Liabilities and Shareholders’ Equity
Current liabilities
Long-term borrowings, current portion, net	$	12,156	$	12,156
Trade accounts payable	436,085		439,684
Fixed assets payable	20,116		9,085
Contract liabilities	3,249		1,982
Operating lease liabilities, current portion	1,634		2,319
Income tax payable	2,785		2,898
Accrued payroll, bonus and related expenses	28,899		20,374
Accrued expenses	23,428		24,758
Other payables	26,637		25,231
Total current liabilities	554,989		538,487
Non-current liabilities
Long-term borrowings, non-current portion, net	3,039		15,202
Deferred tax liability	6,159		6,001
Operating lease liability, non-current portion	235		1,476
Severance liabilities	21,267		18,384
Other non-current liabilities	1,531		2,409
Total non-current liabilities	32,231		43,472
Total Liabilities	587,220		581,959
Commitments and contingencies (Note 15)
Shareholders’ equity
Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding as of March 31, 2023 and June 24, 2022)	—		—
Ordinary shares (500,000,000 shares authorized, $0.01 par value; 39,274,783 shares and 39,048,700 shares issued at March 31, 2023 and June 24, 2022, respectively; and 36,578,909 shares and 36,436,683 shares outstanding at March 31, 2023 and June 24, 2022, respectively)	393		390
Additional paid-in capital	200,141		196,667
Less: Treasury shares (2,695,874 shares and 2,612,017 shares as of March 31, 2023 and June 24, 2022, respectively)	(156,475)		(147,258)
Accumulated other comprehensive income (loss)	(6,281)		(12,793)
Retained earnings	1,403,803		1,216,676
Total Shareholders’ Equity	1,441,581		1,253,682
Total Liabilities and Shareholders’ Equity	$	2,028,801	$	1,835,641

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited)

	Three Months Ended				Nine Months Ended
(in thousands of U.S. dollars, except per share data)	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
Revenues	$	665,281	$	564,395	$	1,989,366	$	1,674,350
Cost of revenues	(579,274)		(493,702)		(1,735,388)		(1,470,689)
Gross profit	86,007		70,693		253,978		203,661
Selling, general and administrative expenses	(18,309)		(17,034)		(57,804)		(55,412)
Restructuring and other related costs	(5,872)		—		(5,872)		(135)
Operating income	61,826		53,659		190,302		148,114
Interest income	3,317		414		7,210		1,470
Interest expense	(399)		(73)		(1,179)		(347)
Foreign exchange gain (loss), net	(1,303)		(410)		(3,122)		998
Other income (expense), net	31		(36)		(178)		(1,351)
Income before income taxes	63,472		53,554		193,033		148,884
Income tax expense	(4,117)		(2,893)		(5,906)		(4,693)
Net income	59,355		50,661		187,127		144,191
Other comprehensive income (loss), net of tax:
Change in net unrealized gain (loss) on available-for-sale securities	2,046		(2,455)		1,768		(3,615)
Change in net unrealized gain (loss) on derivative instruments	(5,535)		666		4,435		2,743
Change in net retirement benefits plan – prior service cost	113		124		338		448
Change in foreign currency translation adjustment	(191)		(34)		(29)		(198)
Total other comprehensive income (loss), net of tax	(3,567)		(1,699)		6,512		(622)
Net comprehensive income	$	55,788	$	48,962	$	193,639	$	143,569
Earnings per share
Basic	$	1.62	$	1.37	$	5.12	$	3.90
Diluted	$	1.60	$	1.35	$	5.07	$	3.85
Weighted-average number of ordinary shares outstanding (thousands of shares)
Basic	36,608		36,940		36,575		36,945
Diluted	36,989		37,473		36,895		37,451

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)

For the Three Months Ended March 31, 2023

	Ordinary Share			Additional Paid-in Capital		Treasury Shares		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total
(in thousands of U.S. dollars, except share data)	Shares	Amount
Balances at December 30, 2022	39,251,581	$	393	$	194,366	$	(152,362)	$	(2,714)	$	1,344,448	$	1,384,131
Net income	—	—		—		—		—		59,355		59,355
Other comprehensive income (loss)	—	—		—		—		(3,567)		—		(3,567)
Share-based compensation	—	—		6,719		—		—		—		6,719
Issuance of ordinary shares	23,202	—		—		—		—		—		—
Repurchase of 35,232 shares held as treasury shares	—	—				(4,113)		—		—		(4,113)
Tax withholdings related to net share settlement of restricted share units	—	—		(944)		—		—		—		(944)
Balances at March 31, 2023	39,274,783	$	393	$	200,141	$	(156,475)	$	(6,281)	$	1,403,803	$	1,441,581

For the Nine Months Ended March 31, 2023

	Ordinary Share			Additional Paid-in Capital		Treasury Shares		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total
(in thousands of U.S. dollars, except share data)	Shares	Amount
Balances at June 24, 2022	39,048,700	$	390	$	196,667	$	(147,258)	$	(12,793)	$	1,216,676	$	1,253,682
Net income	—	—		—		—		—		187,127		187,127
Other comprehensive income (loss)	—	—		—		—		6,512		—		6,512
Share-based compensation	—	—		21,217		—		—		—		21,217
Issuance of ordinary shares	226,083	3		(3)		—		—		—		—
Repurchase of 83,857 shares held as treasury shares	—	—		—		(9,217)		—		—		(9,217)
Tax withholdings related to net share settlement of restricted share units	—	—		(17,740)		—		—		—		(17,740)
Balances at March 31, 2023	39,274,783	$	393	$	200,141	$	(156,475)	$	(6,281)	$	1,403,803	$	1,441,581

7

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)

For the Three Months Ended March 25, 2022

	Ordinary Share			Additional Paid-in Capital		Treasury Shares		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total
(in thousands of U.S. dollars, except share data)	Shares	Amount
Balances at December 24, 2021	39,008,996	$	390	$	185,940	$	(91,776)	$	(5,189)	$	1,109,826	$	1,199,191
Net income	—	—		—		—		—		50,661		50,661
Other comprehensive income (loss)	—	—		—		—		(1,699)		—		(1,699)
Share-based compensation	—	—		5,723		—		—		—		5,723
Issuance of ordinary shares	30,729	—		—		—		—		—		—
Repurchase of 237,339 shares held as treasury shares	—	—		—		(24,191)		—		—		(24,191)
Tax withholdings related to net share settlement of restricted share units	—	—		(958)		—		—		—		(958)
Balances at March 25, 2022	39,039,725	$	390	$	190,705	$	(115,967)	$	(6,888)	$	1,160,487	$	1,228,727

For the Nine Months Ended March 25, 2022

	Ordinary Share			Additional Paid-in Capital		Treasury Shares		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total
(in thousands of U.S. dollars, except share data)	Shares	Amount
Balances at June 25, 2021	38,749,045	$	388	$	189,445	$	(87,343)	$	(6,266)	$	1,016,296	$	1,112,520
Net income	—	—		—		—		—		144,191		144,191
Other comprehensive income (loss)	—	—		—		—		(622)		—		(622)
Share-based compensation	—	—		21,701		—		—		—		21,701
Issuance of ordinary shares	290,680	2		(2)		—		—		—		—
Repurchase of 275,608 shares held as treasury shares	—	—		—		(28,624)		—		—		(28,624)
Tax withholdings related to net share settlement of restricted share units	—	—		(20,439)		—		—		—		(20,439)
Balances at March 25, 2022	39,039,725	$	390	$	190,705	$	(115,967)	$	(6,888)	$	1,160,487	$	1,228,727

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

	Nine Months Ended
(in thousands of U.S. dollars)	March 31, 2023		March 25, 2022
Cash flows from operating activities
Net income for the period	$	187,127	$	144,191
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	32,504		28,907
Non-cash restructuring charges and other related costs	2,201		—
(Gain) loss on disposal and impairment of property, plant and equipment	(1,630)		(175)
(Gain) loss from sales and maturities of available-for-sale securities	92		(13)
Amortization of discount (premium) of short-term investments	300		3,038
Amortization of deferred debt issuance costs	24		24
(Reversal of) allowance for doubtful accounts	(240)		(39)
Unrealized loss (gain) on exchange rate and fair value of foreign currency forward contracts	693		(1,422)
Amortization of fair value at hedge inception of interest rate swaps	(478)		(736)
Share-based compensation	21,217		21,701
Deferred income tax	(276)		563
Other non-cash expenses	(151)		1,067
Changes in operating assets and liabilities
Trade accounts receivable	(98,212)		(109,334)
Contract assets	(7,617)		(1,690)
Inventories	2,720		(30,503)
Other current assets and non-current assets	(11,807)		(11,221)
Trade accounts payable	(5,028)		55,333
Contract liabilities	1,267		243
Income tax payable	(262)		(872)
Severance liabilities	1,917		1,883
Other current liabilities and non-current liabilities	17,861		6,952
Net cash provided by operating activities	142,222		107,897
Cash flows from investing activities
Purchase of short-term investments	(154,033)		(119,853)
Proceeds from sales of short-term investments	30,179		19,463
Proceeds from maturities of short-term investments	97,408		92,862
Purchase of property, plant and equipment	(43,422)		(75,327)
Purchase of intangibles	(698)		(592)
Proceeds from disposal of property, plant and equipment	117		229
Net cash used in investing activities	(70,449)		(83,218)
Cash flows from financing activities
Repayment of long-term borrowings	(12,187)		(9,141)
Repayment of finance lease liability	(7)		—
Repurchase of ordinary shares	(9,217)		(28,624)
Withholding tax related to net share settlement of restricted share units	(17,740)		(20,439)
Net cash used in financing activities	(39,151)		(58,204)
Net increase (decrease) in cash, cash equivalents and restricted cash	$	32,622	$	(33,525)
Movement in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at the beginning of period	$	198,365	$	303,123
Increase (decrease) in cash, cash equivalents and restricted cash	32,622		(33,525)
Effect of exchange rate on cash, cash equivalents and restricted cash	(244)		(301)
Cash, cash equivalents and restricted cash at the end of period	$	230,743	$	269,297
Non-cash investing and financing activities
Construction, software and equipment-related payables	$	20,116	$	14,060

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

9

FABRINET

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Continued)

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total of the same amounts shown in the unaudited condensed consolidated statements of cash flows:

(in thousands of U.S. dollars)	As of March 31, 2023		As of March 25, 2022
Cash and cash equivalents	$	230,743	$	269,140
Restricted cash	—		157
Cash, cash equivalents and restricted cash	$	230,743	$	269,297

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

10

FABRINET

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(in thousands of U.S. dollars unless otherwise noted)

1.    Business and organization

General

Fabrinet (“Fabrinet” or the “Parent Company”) was incorporated on August 12, 1999, and commenced operations on January 1, 2000. The Parent Company is an exempted company incorporated in the Cayman Islands, British West Indies. The “Company” refers to Fabrinet and its subsidiaries as a group.

The Company provides advanced optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers (“OEMs”) of complex products, such as optical communication components, modules and sub-systems, industrial lasers, automotive components, medical devices and sensors. The Company offers a broad range of advanced optical and electro-mechanical capabilities across the entire manufacturing process, including process design and engineering, supply chain management, manufacturing, complex printed circuit board assembly, advanced packaging, integration, final assembly and testing. The Company focuses primarily on the production of low-volume, high-mix products. The principal subsidiaries of Fabrinet include Fabrinet Co., Ltd. (“Fabrinet Thailand”), Casix, Inc. (“Casix”), Fabrinet West, Inc. (“Fabrinet West”) and Fabrinet Israel Ltd. (“Fabrinet Israel”).

2.    Accounting policies

Basis of presentation

The accompanying unaudited condensed consolidated financial statements for Fabrinet as of March 31, 2023 and for the three and nine months ended March 31, 2023 and March 25, 2022 include normal recurring adjustments necessary for a fair statement of the financial statements set forth herein, in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or "GAAP") for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such information does not include all of the information and footnotes required by U.S. GAAP for annual financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in Fabrinet’s Annual Report on Form 10-K for the year ended June 24, 2022.

The balance sheet as of June 24, 2022 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

The results for the three and nine months ended March 31, 2023 may not be indicative of results for the year ending June 30, 2023 or any future periods.

Use of Estimates

The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amount of total revenues and expenses during the year. The Company bases estimates on historical experience and various assumptions about the future that are believed to be reasonable based on available information. The Company’s reported financial position or results of operations may be materially different under different conditions or when using different estimates and assumptions, particularly with respect to significant accounting policies, which are discussed below. Significant assumptions are used in accounting for share-based compensation, allowance for doubtful accounts, allowance for expected credit losses, income taxes, inventory obsolescence, goodwill and valuation of intangible assets related to business acquisition, among others. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates. In the event that the Company's estimates or assumptions prove to be different from actual results, adjustments will be made in subsequent periods to reflect more current information. Additionally, the extent to which the evolving COVID-19 pandemic impacts the Company’s unaudited condensed consolidated financial statements will depend on a number of factors, including the magnitude and duration of the pandemic. These estimates may change, as new events occur and additional information is obtained, or based upon the occurrence of other factors related to the COVID-19 pandemic that could result in material impacts to the Company's unaudited condensed consolidated financial statements in future reporting periods.

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Fiscal years

The Company utilizes a 52-53 week fiscal year ending on the Friday in June closest to June 30. The three months ended March 31, 2023 and March 25, 2022 consisted of 13 weeks. The nine months ended March 31, 2023 and March 25, 2022 consisted of 40 weeks and 39 weeks, respectively. Fiscal year 2023 will comprise 53 weeks and will end on June 30, 2023.

Adoption of New Accounting Standards

In November 2021, the Financial Accounting Standard Board issued Accounting Standards Update ("ASU") 2021-10, “Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance,” which requires annual disclosures that increase the transparency of transactions involving government assistance, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity’s financial statements. The amendments in this update are effective for all entities within the ASU's scope for financial statements issued for annual periods beginning after December 15, 2021. The Company adopted this standard in the first quarter of fiscal year 2023 with no material impact on its unaudited condensed consolidated financial statements.

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3.    Revenues from contracts with customers

Revenue by Geographic Area and End Market

Revenues are attributed to a particular geographic area based on the bill-to-location of the Company’s customers. The Company operates in three geographic regions: North America; Asia-Pacific and others; and Europe.

The following table presents total revenues by geographic region:

(in thousands, except percentages)	Three Months Ended March 31, 2023		As a % of Total Revenues		Nine Months Ended March 31, 2023		As a % of Total Revenues
North America
U.S.	$	310,100			$	975,098
Others (1)	6,035				13,693
Total revenue in North America	316,135		47.5	%	988,791		49.7	%
Asia-Pacific and others
India	85,731				247,942
Israel	85,562				182,732
Hong Kong	37,120				109,315
Malaysia	30,688				130,402
Thailand	16,706				45,420
China	11,194				60,738
Japan	10,044				32,129
Others	2,896				7,957
Total revenue in Asia-Pacific and others	279,941		42.1	%	816,635		41.1	%
Europe
U.K.	40,292				103,440
Germany	14,532				40,975
Ireland (2)	176				438
Others	14,205				39,087
Total revenue in Europe	$	69,205	10.4	%	$	183,940	9.2	%
Total revenue	$	665,281	100.0	%	$	1,989,366	100.0	%

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(in thousands, except percentages)	Three Months Ended March 25, 2022		As a % of Total Revenues		Nine Months Ended March 25, 2022		As a % of Total Revenues
North America
U.S.	$	292,475			$	781,469
Others (1)	4,123				8,996
Total revenue in North America	296,598		52.5	%	790,465		47.2	%
Asia-Pacific and others
India	70,956				210,009
Malaysia	51,188				163,306
Hong Kong	17,338				61,575
Israel	16,883				67,318
Japan	16,449				47,258
China	12,843				40,624
Others	10,559				34,349
Total revenue in Asia-Pacific and others	196,216		34.8	%	624,439		37.3	%
Europe
Ireland (2)	28,640				133,024
U.K.	21,632				64,151
Germany	10,688				28,098
Others	10,621				34,173
Total revenue in Europe	$	71,581	12.7	%	$	259,446	15.5	%
Total revenue	$	564,395	100.0	%	$	1,674,350	100.0	%

(1)Others includes revenues from external customers based in our country of domicile, the Cayman Islands, which for each year presented is $0.

(2)Due to change in bill-to-location for a certain customer.

The following table presents revenues by end market:

(in thousands, except percentages)	Three Months Ended March 31, 2023		As a % of Total Revenues		Nine Months Ended March 31, 2023		As a % of Total Revenues
Optical communications	$	502,615	75.5	%	$	1,506,232	75.7	%
Lasers, sensors and other	162,666		24.5	%	483,134		24.3	%
Total	$	665,281	100.0	%	$	1,989,366	100.0	%

(in thousands, except percentages)	Three Months Ended March 25, 2022		As a % of Total Revenues		Nine Months Ended March 25, 2022		As a % of Total Revenues
Optical communications	$	440,003	78.0	%	$	1,318,087	78.7	%
Lasers, sensors and other	124,392		22.0	%	356,263		21.3	%
Total	$	564,395	100.0	%	$	1,674,350	100.0	%

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Contract Assets and Liabilities

A contract asset is recognized when the Company has recognized revenues prior to generating an invoice for payment. Contract assets are classified separately within the unaudited condensed consolidated balance sheets and transferred to accounts receivable when rights to payment become unconditional.

A contract liability is recognized when the Company has advance payment arrangements with customers. The contract liabilities balance is normally recognized as revenue within six months.

The following tables summarize the activity in the Company’s contract assets and contract liabilities during the nine months ended March 31, 2023:

(in thousands)	Contract Assets
Beginning balance, June 24, 2022	$	13,464
Revenue recognized	57,617
Amounts collected or invoiced	(50,000)
Ending balance, March 31, 2023	$	21,081

(in thousands)	Contract Liabilities
Beginning balance, June 24, 2022	$	1,982
Advance payment received during the period	13,073
Revenue recognized	(11,806)
Ending balance, March 31, 2023	$	3,249

4.    Earnings per ordinary share

Basic earnings per ordinary share is computed by dividing reported net income by the weighted-average number of ordinary shares outstanding during each period. Diluted earnings per ordinary share is computed by calculating the effect of potential dilutive ordinary shares outstanding during the period using the treasury stock method. Dilutive ordinary equivalent shares consist of restricted share units and performance share units.

Earnings per ordinary share was calculated as follows:

	Three Months Ended				Nine Months Ended
(in thousands, except per share data)	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
Net income attributable to shareholders	$	59,355	$	50,661	$	187,127	$	144,191
Weighted-average number of ordinary shares outstanding	36,608		36,940		36,575		36,945
Incremental shares arising from the assumed vesting of restricted share units and performance share units	381		533		320		506
Weighted-average number of ordinary shares for diluted earnings per ordinary share	36,989		37,473		36,895		37,451
Basic earnings per ordinary share	$	1.62	$	1.37	$	5.12	$	3.90
Diluted earnings per ordinary share	$	1.60	$	1.35	$	5.07	$	3.85

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5.    Cash, cash equivalents and short-term investments

The Company’s cash, cash equivalents, and short-term investments are as follows:

					Fair Value
(in thousands)	Carrying Cost		Unrealized Gain/ (Loss)		Cash and Cash Equivalents		Marketable Securities		Other Investments
As of March 31, 2023
Cash	$	211,433	$	—	$	211,433	$	—	$	—
Cash equivalents	19,320		(10)		19,310		—		—
Liquidity funds	40,528		—		—		—		40,528
Certificates of deposit and time deposits	44,341		43		—		44,384		—
Corporate debt securities	215,295		(4,127)		—		211,168		—
U.S. agency and U.S. treasury securities	12,054		(154)		—		11,900		—
Total	$	542,971	$	(4,248)	$	230,743	$	267,452	$	40,528
As of June 24, 2022
Cash	$	187,630	$	—	$	187,630	$	—	$	—
Cash equivalents	10,367		(1)		10,366		—		—
Liquidity funds	31,477		—		—		—		31,477
Corporate debt securities	234,689		(5,671)		—		229,018		—
U.S. agency and U.S. treasury securities	20,007		(345)		—		19,662		—
Total	$	484,170	$	(6,017)	$	197,996	$	248,680	$	31,477

All highly liquid investments with original maturities of three months or less at the date of purchase are classified as cash equivalents. Management determines the appropriate classification of its investments at the time of purchase and reevaluates the designations at each balance sheet date. The Company may sell certain of its short-term investments prior to their stated maturities for strategic reasons including, but not limited to, anticipation of credit deterioration and duration management. The maturities of the Company’s short-term investments generally range from three months to three years.

The following table summarizes the cost and estimated fair value of short-term investments classified as available-for-sale securities based on stated effective maturities as of March 31, 2023 and June 24, 2022:

	March 31, 2023				June 24, 2022
(in thousands)	Carrying Cost		Fair Value		Carrying Cost		Fair Value
Due within one year	$	150,720	$	150,547	$	101,976	$	101,400
Due between one to five years	161,498		157,433		184,197		178,757
Total	$	312,218	$	307,980	$	286,173	$	280,157

6.    Fair value of financial instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value hierarchy is established, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs for the valuation of an asset or liability as of the measurement date. The three levels of inputs that may be used to measure fair value are defined as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for assets or liabilities, either directly or indirectly. If the assets or liabilities have a specified (contractual) term, Level 2 inputs must be observable for substantially the full term of assets or liabilities.

Level 3 inputs are unobservable inputs for assets or liabilities, which require the reporting entity to develop its own valuation techniques and assumptions.

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The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

The following table provides details of the financial instruments measured at fair value on a recurring basis, including:

	Fair Value Measurements at Reporting Date Using
(in thousands)	Level 1		Level 2			Level 3		Total
As of March 31, 2023
Assets
Cash equivalents	$	—	$	19,310		$	—	$	19,310
Liquidity funds	—		40,528			—		40,528
Certificates of deposit and time deposits	—		44,384			—		44,384
Corporate debt securities	—		211,168			—		211,168
U.S. agency and U.S. treasury securities	—		11,900			—		11,900
Derivative assets – current portion	—		2,078		(1)	—		2,078
Derivative assets – non-current portion	—		10		(2)	—		10
Total	$	—	$	329,378		$	—	$	329,378
Liabilities
Derivative liabilities – current portion	$	—	$	(1,794)		$	—	$	(1,794)
Total	$	—	$	(1,794)	(3)	$	—	$	(1,794)

	Fair Value Measurements at Reporting Date Using
(in thousands)	Level 1		Level 2			Level 3		Total
As of June 24, 2022
Assets
Cash equivalents	$	—	$	10,366		$	—	$	10,366
Liquidity funds	—		31,477			—		31,477
Corporate debt securities	—		229,018			—		229,018
U.S. agency and U.S. treasury securities	—		19,662			—		19,662
Derivative assets – current portion	—		110		(4)	—		110
Total	$	—	$	290,633		$	—	$	290,633
Liabilities
Derivative liabilities – current portion	$	—	$	(7,345)		$	—	$	(7,345)
Derivative liabilities – non-current portion	—		(234)			—		(234)
Total	$	—	$	(7,579)	(5)	$	—	$	(7,579)

(1)Foreign currency forward contracts with an aggregate notional amount of $78.0 million and an interest rate swap agreement with a notional amount of $64.2 million.

(2)Interest rate swap agreement with notional amount of $60.9 million.

(3)Foreign currency forward contracts with an aggregate notional amount of $52.0 million and 0.4 million Canadian dollars and an interest rate swap agreement with a notional amount of $60.9 million.

(4)Interest rate swap agreement with a notional amount of $64.2 million.

(5)Foreign currency forward contracts with an aggregate notional amount of $135.0 million and 0.5 million Canadian dollars and an interest rate swap agreement with a notional amount of $60.9 million.

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Derivative Financial Instruments

The Company utilizes derivative financial instruments to hedge (i) foreign exchange risk associated with certain foreign currency denominated assets and liabilities and other foreign currency transactions, and (ii) interest rate risk associated with its long-term debt.

The Company minimizes the credit risk associated with its derivative instruments by limiting the exposure to any single counterparty and by entering into derivative instruments only with counterparties that meet the Company’s minimum credit quality standard.

Foreign currency forward and option contracts

As a result of foreign currency rate fluctuations, the U.S. dollar equivalent values of the Company’s foreign currency denominated assets and liabilities fluctuate. The Company uses foreign currency forward and option contracts to manage the foreign exchange risk associated with a portion of its foreign currency denominated assets and liabilities and other foreign currency transactions. The Company enters into foreign currency forward and option contracts to hedge fluctuations in the U.S. dollar value of forecasted transactions denominated in Thai baht and Canadian dollars with counterparties that meet the Company’s minimum credit quality standard.

The Company may enter into foreign currency forward contracts with maturities of up to 12 months to hedge fluctuations in the U.S. dollar value of forecasted transactions denominated in Thai baht, including inventory purchases, payroll and other operating expenses. The Company considers these forward contracts as dual-purpose hedges, that hedge both the foreign exchange fluctuation (i) from inception through the forecasted expenditure, and (ii) any subsequent revaluation of the account payable or accrual. The Company may designate the forward contracts that hedge the foreign exchange fluctuation from inception through the forecasted expenditure as cash flow hedges. The gain or loss on a derivative instrument designated and qualified as a cash flow hedging instrument is recorded as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. The reclassified amounts are presented in the same income statement line item as the earnings effect of the hedged item. Once the forecasted transactions are recorded, the Company will discontinue the hedging relationship by de-designating the derivative instrument and recording subsequent changes in fair value through contract maturity to foreign exchange gain (loss), net in the unaudited condensed consolidated statements of operations and comprehensive income as a natural hedge against the Thai baht denominated assets and liabilities.

The Company may also enter into non-designated foreign currency forward and option contracts to provide an offset to the re-measurement of foreign currency denominated assets and liabilities and to hedge certain forecasted exposures. Changes in the fair value of these non-designated derivatives are recorded as foreign exchange gain (loss), net in the unaudited condensed consolidated statements of operations and comprehensive income.

As of March 31, 2023, the Company had 130 outstanding U.S. dollar foreign currency forward contracts against Thai baht, with an aggregate notional amount of $130.0 million and maturity dates ranging from April 2023 through October 2023 and one outstanding Canadian dollar foreign currency forward contract with a notional amount of 0.4 million Canadian dollars and a maturity date in June 2023.

As of June 24, 2022, the Company had 135 outstanding U.S. dollar foreign currency forward contracts against Thai baht with an aggregate notional amount of $135.0 million and maturity dates ranging from July 2022 through January 2023, and one foreign currency contract with a notional amount of 0.5 million Canadian dollars and with a maturity date in September 2022.

As of March 31, 2023, the hedging relationship over foreign currency forward contracts that were designated for hedge accounting was determined to be highly effective based on the performance of retrospective and prospective regression testing. As of March 31, 2023, the amount in accumulated other comprehensive income (“AOCI”) that is expected to be reclassified into earnings within 12 months was a loss of $1.0 million.

As of June 24, 2022, the hedging relationship over foreign currency forward contracts that were designated for hedge accounting had been tested to be highly effective based on the performance of retrospective and prospective regression testing. As of June 24, 2022, the amount in AOCI that is expected to be reclassified into earnings within 12 months was a loss of $4.8 million.

During the three and nine months ended March 31, 2023, the Company included an unrealized loss of $2.1 million and unrealized gain of $1.8 million, respectively, from changes in the fair value of a foreign currency forward contract that was not designated for hedge accounting in earnings as foreign exchange gain (loss), net in the unaudited condensed consolidated statements of operations and comprehensive income.

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During the three and nine months ended March 25, 2022, the Company included an unrealized gain of $0.1 million and $0.6 million, respectively, from changes in the fair value of a foreign currency forward contract that was not designated for hedge accounting in earnings as foreign exchange gain (loss), net in the unaudited condensed consolidated statements of operations and comprehensive income.

Interest Rate Swap Agreements

The Company entered into interest rate swap agreements to mitigate interest rate risk and improve the interest rate profile of the Company’s debt obligations. As of March 31, 2023 and June 24, 2022, the Company had two outstanding interest rate swap agreements with an aggregate notional amount of $125.1 million.

On July 25, 2018, Fabrinet Thailand entered into an interest rate swap agreement to effectively convert the floating interest rate of the term loan under the Company's previous syndicated senior credit facility agreement to a fixed interest rate of 2.86% per annum through the scheduled maturity of the term loan in June 2023 (see Note 10). The Company did not designate this interest rate swap for hedge accounting.

On September 3, 2019, Fabrinet Thailand entered into a term loan agreement under a credit facility agreement with Bank of Ayudhya Public Company Limited, and on September 10, 2019, the Company repaid in full the outstanding term loan under the Company's previous syndicated senior credit facility agreement (see Note 10). In conjunction with the funding of the new term loan, the Company entered into a second interest rate swap agreement. The combination of both of these interest rate swaps effectively converts the floating interest rate of the Company’s term loan with Bank of Ayudhya Public Company Limited to a fixed interest rate of 4.36% per annum through the maturity of the term loan in June 2024.

On September 27, 2019, the Company designated these two interest rate swaps as a cash flow hedge for the Company’s term loan under the credit facility agreement with Bank of Ayudhya Public Company Limited. The combination of these two interest rate swaps qualified for hedge accounting because the hedges are highly effective, and the Company has designated and documented contemporaneously the hedging relationships involving these interest rate swaps. While the Company intends to continue to meet the conditions for hedge accounting, if hedges do not qualify as highly effective, the changes in the fair value of the derivatives used as hedges would be reflected in earnings. From September 27, 2019, any gains or losses related to these interest rate swaps are recorded in AOCI in the unaudited condensed consolidated balance sheets. The Company reclassifies a portion of the gains or losses from AOCI into earnings at each reporting period based on either the accrued interest amount or the interest payment.

As of March 31, 2023, the amount in AOCI that is expected to be reclassified into earnings within 12 months was a gain of $0.3 million.

As of June 24, 2022, the amount in AOCI that is expected to be reclassified into earnings within 12 months was a loss of $0.5 million.

19

The following table provides a summary of the impact of derivative gain (loss) of the Company’s foreign currency forward contracts and interest rate swaps which were designated as cash flow hedges on the unaudited condensed consolidated statements of operations and other comprehensive income:

		Three Months Ended				Nine Months Ended
(in thousands)	Financial statements line item	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
Derivatives gain (loss) recognized in other comprehensive income (loss):
Foreign currency forward contracts	Other comprehensive income	$	(5,068)	$	1,009	$	6,694	$	2,558
Interest rate swaps	Other comprehensive income	242		882		1,068		1,885
Total derivatives gain (loss) recognized in other comprehensive income (loss)		$	(4,826)	$	1,891	$	7,762	$	4,443
Derivatives (gain) loss reclassified from accumulated other comprehensive income (loss) into earnings:
Foreign currency forward contracts	Cost of revenues	$	(3,245)	$	1,117	$	6,083	$	6,216
Foreign currency forward contracts	SG&A	(140)		46		250		258
Foreign currency forward contracts	Foreign exchange loss, net	2,807		(2,165)		(9,183)		(7,438)
Interest rate swaps	Interest expense	(131)		(223)		(477)		(736)
Total derivatives (gain) loss reclassified from accumulated other comprehensive income (loss) into earnings		$	(709)	$	(1,225)	$	(3,327)	$	(1,700)
Change in net unrealized gain (loss) on derivatives instruments		$	(5,535)	$	666	$	4,435	$	2,743

Fair Value of derivatives

The following table provides the fair values of the Company’s derivative financial instruments for the periods presented:

	March 31, 2023				June 24, 2022
(in thousands)	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Derivatives not designated as hedging instruments
Foreign currency forward and option contracts	$	1,378	$	(7)	$	—	$	(1,561)
Derivatives designated as hedging instruments
Foreign currency forward contracts	511		(1,569)		—		(4,821)
Interest rate swaps	199		(218)		110		(1,197)
Derivatives, gross balances	$	2,088	$	(1,794)	$	110	$	(7,579)

The Company recorded the fair value of derivative financial instruments in the unaudited condensed consolidated balance sheets as follows:

Derivative Financial Instruments	Balance Sheet line item
Fair Value of Derivative Assets	Other current assets, Other non-current assets
Fair Value of Derivative Liabilities	Accrued expenses, Other non-current liabilities

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7.    Inventories

(in thousands)	As of March 31, 2023		As of June 24, 2022
Raw materials	$	174,047	$	275,730
Work in progress	321,908		217,638
Finished goods	30,244		15,203
Goods in transit	28,048		48,574
Total inventories	$	554,247	$	557,145

8.    Leases

The Company leases facilities under non-cancelable operating lease agreements. The Company leases a portion of its capital equipment and vehicles, certain land and buildings for its facilities in Thailand, the Cayman Islands, the PRC, the U.S., the U.K., Israel and Singapore under operating lease arrangements that expire at various dates through 2025. Certain of these lease arrangements provide the Company the ability to extend the lease from one to five years following the expiration of the current term. However, the Company has excluded all lease extension options from its right of use (“ROU”) assets and lease liabilities as the Company is not reasonably assured that it will exercise these options. None of the lease agreements contain residual value guarantees provided by the lessee. The Company also has one intercompany lease transaction in the form of a lease of office and manufacturing space.

Operating leases

As of March 31, 2023, the maturities of the Company’s operating lease liabilities were as follows:

(in thousands)
2023 (remaining three months)	$	644
2024	1,213
2025	45
Total undiscounted lease payments	1,902
Less imputed interest	(33)
Total present value of lease liabilities	$	1,869	(1)

(1)Includes current portion of operating lease liabilities of $1.6 million.

Rental expense related to the Company’s operating leases is recognized on a straight-line basis over the lease term.

Rental expense for long-term leases for the three and nine months ended March 31, 2023 was $0.6 million and $1.8 million, respectively, and for the three and nine months ended March 25, 2022 was $0.7 million and $2.1 million, respectively. Rental expense for short-term leases for the three and nine months ended March 31, 2023 was $0.2 million and $0.3 million, respectively, and for the three and nine months ended March 25, 2022 was $0.1 million and $0.2 million, respectively.

Finance leases

As of March 31, 2023, the Company had one finance lease agreement with a de minimis amount.

The following summarizes additional information related to the Company’s operating leases:

	As of March 31, 2023		As of June 24, 2022
Weighted-average remaining lease term (in years)	1.3		1.8
Weighted-average discount rate	3.4	%	3.4	%

The following table presents supplemental disclosure for the unaudited condensed consolidated statement of cash flows related to operating and finance leases for the three and nine months ended March 31, 2023 and March 25, 2022:

21

	Three Months Ended				Nine Months Ended
(in thousands)	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	575	$	678	$	1,877	$	2,076
Financing cash flows from finance leases	$	2	$	—	$	7	$	—
ROU assets obtained in exchange for lease liabilities	$	—	$	—	$	79	$	38

9.    Intangibles

The following tables present details of the Company’s intangibles:

(in thousands)	Gross Carrying Amount		Accumulated Amortization		Foreign Currency Translation Adjustment		Net
As of March 31, 2023
Software	$	10,379	$	(7,908)	$	—	$	2,471
Total intangibles (1)	$	10,379	$	(7,908)	$	—	$	2,471

(1)Customer relationships and backlog were written-off in March 2023.

(in thousands)	Gross Carrying Amount		Accumulated Amortization		Foreign Currency Translation Adjustment		Net
As of June 24, 2022
Software	$	10,484	$	(7,681)	$	—	$	2,803
Customer relationships	4,373		(3,610)		(58)		705
Backlog	119		(119)		—		—
Total intangibles	$	14,976	$	(11,410)	$	(58)	$	3,508

The Company recorded amortization expense relating to intangibles of $0.3 million and $0.4 million for the three months ended March 31, 2023 and March 25, 2022, respectively, and $1.1 million and $1.2 million for the nine months ended March 31, 2023 and March 25, 2022, respectively.

The weighted-average remaining life of software and customer relationships was:

(years)	As of March 31, 2023	As of June 24, 2022
Software	3.2	3.8
Customer relationships	—	3.1
Total intangibles	3.2	3.8

Based on the carrying amount of intangibles as of March 31, 2023, and assuming no future impairment of the underlying assets, the estimated future amortization during each fiscal year was as follows:

(in thousands)
2023 (remaining three months)	$	235
2024	847
2025	660
2026	438
2027	230
Thereafter	61
Total	$	2,471

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10.    Borrowings 

The Company’s total borrowings, including current and non-current portions of long-term borrowings, consisted of the following:

(in thousands of U.S. dollars)
Rate	Conditions	Maturity	As of March 31, 2023		As of June 24, 2022
Long-term borrowings, current portion, net:
Long-term borrowings, current portion			$	12,188	$	12,188
Less: Unamortized debt issuance costs, current portion			(32)		(32)
Long-term borrowings, current portion, net			$	12,156	$	12,156
Long-term borrowings, non-current portion, net:
Term loan borrowings:
3-month LIBOR +1.35% per annum (1)	Repayable in quarterly installments	June 2024	$	15,234	$	27,421
Less: Current portion			(12,187)		(12,188)
Less: Unamortized debt issuance costs, non-current portion			(8)		(31)
Long-term borrowings, non-current portion, net			$	3,039	$	15,202

(1)The Company has entered into interest rate swaps that effectively fix a series of future interest payments on its term loans. Refer to Note 6.

The movements of long-term borrowings for the nine months ended March 31, 2023 and March 25, 2022 were as follows:

	Nine Months Ended
(in thousands)	March 31, 2023		March 25, 2022
Opening balance	$	27,421	$	39,609
Repayments during the period	(12,187)		(9,141)
Closing balance	$	15,234	$	30,468

As of March 31, 2023, future maturities of long-term borrowings during each fiscal year were as follows:

(in thousands)
2023 (remaining three months)	$	3,047
2024	12,187
Total	$	15,234

Credit facility agreements:

On August 20, 2019, Fabrinet Thailand (the “Borrower”) and Bank of Ayudhya Public Company Limited (the “Bank”) entered into a credit facility agreement (the “2019 Credit Facility Agreement”), which provides for a facility of 110.0 million Thai baht (approximately $3.6 million based on the applicable exchange rate as of September 27, 2019) and $160.9 million that may be used for, among other things, an overdraft facility, short-term loans against promissory notes, a letter of guarantee facility, a term loan facility and foreign exchange facilities. The Bank may approve any request for extension of credit under the 2019 Credit Facility Agreement and may increase or decrease any facility amount in its sole discretion.

Under the 2019 Credit Facility Agreement, on August 20, 2019, the Borrower and the Bank entered into a term loan agreement (the "Term Loan Agreement") pursuant to which the Borrower drew down on September 3, 2019 a term loan in the original principal amount of $60.9 million. The proceeds from the term loan, together with cash on hand, were used to repay outstanding obligations under the Company's previous syndicated senior credit facility agreement.

The term loan accrues interest at 3-month LIBOR plus 1.35% and is repayable in quarterly installments of $3.0 million, commencing on September 30, 2019. On March 9, 2023, the Borrower and the Bank amended the Term Loan Agreement to replace the interest rate reference from LIBOR to the Secured Overnight Financing Rate ("SOFR") effective from September 29, 2023. The term loan will mature on June 30, 2024. The Borrower may prepay the term loan in whole or in part at any time without premium or penalty. Any portion of the term loan repaid or prepaid may not be borrowed

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again. During the three and nine months ended March 31, 2023, the Company recorded $0.6 million and $1.7 million, respectively, of interest expense in connection with this term loan, including the impact from interest rate swaps.

Any borrowings under the 2019 Credit Facility Agreement, including those borrowings under the Term Loan Agreement, are guaranteed by Fabrinet and secured by land and buildings owned by the Borrower in the Pathumthani and Chonburi Provinces in Thailand.

The Term Loan Agreement contains affirmative and negative covenants applicable to the Borrower, including delivery of financial statements and other information, compliance with laws, maintenance of insurance, and restrictions on granting security interests or liens on its assets, disposing of its assets, incurring indebtedness and making acquisitions. While the term loan is outstanding, the Borrower is required to maintain a loan to value of the mortgaged real property ratio of not greater than 65%. If the loan to value ratio is not maintained, the Borrower will be required to provide additional security or prepay a portion of the term loan in order to restore the required ratio. The Company is also required to maintain a debt service coverage ratio of at least 1.25 times and a debt-to-equity ratio of less than or equal to 1.0 times. In the case of any payment of a dividend by the Company, its debt service coverage ratio must be at least 1.50 times. As of March 31, 2023, the Company was in compliance with all of its financial covenants under the Term Loan Agreement.

The events of default under the Term Loan Agreement include failure to timely pay amounts due under the Term Loan Agreement or the related finance documents, failure to comply with the covenants under the Term Loan Agreement or the related finance documents, cross default with other indebtedness of the Borrower, events of bankruptcy or insolvency in respect of the Borrower, and the occurrence of any event or series of events that in the opinion of the Bank has or is reasonably likely to have a material adverse effect.

As of March 31, 2023, there was $15.2 million outstanding under the term loan.

On March 9, 2023, Fabrinet Thailand and the Parent Company (the “Borrowers”) and the Bank entered into a credit facility agreement (the “2023 Credit Facility Agreement”), which provides a facility of $55.0 million.

Any borrowings under the 2023 Credit Facility Agreement are secured by land and buildings owned by the Borrowers in the Pathumthani and Chonburi Provinces in Thailand.

Under the 2023 Credit Facility Agreement, the Borrowers are required to maintain a loan to value of the mortgaged real property ratio of not greater than 60%. The Borrowers are also required to maintain a debt service coverage ratio of at least 1.25 times and a debt-to-equity ratio of less than or equal to 1.0 times. In the case of any payment of a dividend by the Company, its debt service coverage ratio must be at least 1.50 times.

As of March 31, 2023, there was no amount outstanding under the 2023 Credit Facility.

11.    Income taxes

As of March 31, 2023 and June 24, 2022, the liability for uncertain tax positions including accrued interest and penalties was $0.9 million and $1.6 million, respectively. The Company expects the estimated amount of liability associated with its uncertain tax positions to decrease within the next 12 months due to the expiration of statutes of limitations with respect to these positions.

The Company files income tax returns in the United States and foreign tax jurisdictions. The tax years from 2015 to 2021 remain open to examination by U.S. federal and state, and foreign tax authorities. The Company’s income tax is recognized based on the best estimate of the expected annual effective tax rate for the full financial year of each entity in the Company, adjusted for discrete items arising in that quarter. If the Company’s estimated annual effective tax rate changes, the Company makes a cumulative adjustment in that quarter.

The effective tax rate for the Company for the three months ended March 31, 2023 and March 25, 2022 was 6.5% and 5.4%, respectively, of net income. The increase was primarily due to an increase in income subject to tax during the three months ended March 31, 2023 as compared to the three months ended March 25, 2022.

The effective tax rate for the Company for the nine months ended March 31, 2023 and March 25, 2022 was 3.1% and 3.2%, respectively, of net income. The decrease was primarily due to lower annualized effective tax rate offset by an increase in income subject to tax during the nine months ended March 31, 2023 as compared to the nine months ended March 25, 2022.

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12.    Share-based compensation

Share-based compensation

The grant date fair value of restricted share units and performance share units is based on the market value of the Company's ordinary shares on the date of grant.

The effect of recording share-based compensation expense for the three and nine months ended March 31, 2023 and March 25, 2022 was as follows:

	Three Months Ended				Nine Months Ended
(in thousands)	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
Share-based compensation expense by type of award:
Restricted share units	$	3,945	$	3,126	$	12,845	$	11,720
Performance share units	2,774		2,597		8,372		9,981
Total share-based compensation expense	6,719		5,723		21,217		21,701
Tax effect on share-based compensation expense	—		—		—		—
Net effect on share-based compensation expense	$	6,719	$	5,723	$	21,217	$	21,701

Share-based compensation expense was recorded in the unaudited condensed consolidated statements of operations and comprehensive income as follows:

	Three Months Ended				Nine Months Ended
(in thousands)	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
Cost of revenue	$	1,453	$	1,183	$	5,028	$	4,579
Selling, general and administrative expense	5,080		4,540		16,003		17,122
Restructuring and other related costs	186		—		186		—
Total share-based compensation expense	$	6,719	$	5,723	$	21,217	$	21,701

The Company did not capitalize any share-based compensation expense as part of any asset costs during the three and nine months ended March 31, 2023 and March 25, 2022.

Share-based award activity

On December 12, 2019, the Company’s shareholders approved Fabrinet’s 2020 Equity Incentive Plan (the “2020 Plan”). Upon the approval of the 2020 Plan, Fabrinet’s Amended and Restated 2010 Performance Incentive Plan (the “2010 Plan”) was simultaneously terminated. The 2020 Plan provides for the grant of equity awards thereunder with respect to (i) 1,700,000 ordinary shares, plus (ii) up to 1,300,000 ordinary shares that, as of immediately prior to the termination of the 2010 Plan, had been reserved but not issued pursuant to any awards granted under the 2010 Plan and are not subject to any awards thereunder. Upon termination of the 2010 Plan, 1,281,619 ordinary shares were reserved for issuance under the 2020 Plan pursuant to clause (ii) of the preceding sentence.

As of March 31, 2023, there were 343,211 restricted share units outstanding, 204,016 performance share units outstanding and 1,958,203 ordinary shares available for future grant under the 2020 Plan.

As of March 31, 2023, there were 30,827 restricted share units outstanding under the 2010 Plan. No ordinary shares are available for future grant under the 2010 Plan.

On November 2, 2017, the Company adopted the 2017 Inducement Equity Incentive Plan (the “2017 Inducement Plan”) with a reserve of 160,000 ordinary shares authorized for future issuance solely for the granting of inducement share options and equity awards to new employees. The 2017 Inducement Plan was adopted without shareholder approval in reliance on the “employment inducement exemption” provided under the New York Stock Exchange Listed Company Manual. As of March 31, 2023, there were no awards outstanding and 111,347 ordinary shares available for future grant under the 2017 Inducement Plan.

The 2020 Plan, 2010 Plan and 2017 Inducement Plan are collectively referred to as the “Equity Incentive Plans.”

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The following table summarizes the number of equity awards outstanding and ordinary shares available for grant under each of the Equity Incentive Plans as of March 31, 2023:

(share units)	Restricted Share Units outstanding	Performance Share Units outstanding	Ordinary Shares available for future grant
2020 Plan	343,211	204,016	1,958,203
2010 Plan	30,827	—	—
2017 Inducement Plan	—	—	111,347
Total	374,038	204,016	2,069,550

Restricted share units and performance share units

Restricted share units and performance share units have been granted under the Equity Incentive Plans.

Restricted share units granted to employees generally vest in equal installments over three or four years on each anniversary of the vesting commencement date. Restricted share units granted to non-employee directors generally cliff vest 100% on the first of January, approximately one year from the grant date, provided the director continues to serve through such date.

Performance share units granted to executives will vest, if at all, at the end of a two-year performance period based on the Company’s achievement of pre-defined performance criteria, which consist of revenue and non-GAAP operating margin targets. The actual number of performance share units that may vest at the end of the performance period ranges from 0% to 100% of the award grant.

The following table summarizes restricted share unit activity under the Equity Incentive Plans:

	Number of Shares	Weighted- Average Grant Date Fair Value Per Share
Balance as of June 24, 2022	459,626	$	75.14
Granted	154,113	$	119.23
Vested	(220,004)	$	67.23
Forfeited	(19,697)	$	91.84
Balance as of March 31, 2023	374,038	$	97.08

	Number of Shares	Weighted- Average Grant Date Fair Value Per Share
Balance as of June 25, 2021	641,875	$	55.74
Granted	165,684	$	102.74
Vested	(310,473)	$	51.12
Forfeited	(36,158)	$	69.84
Balance as of March 25, 2022	460,928	$	73.96

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The following table summarizes performance share unit activity under the Equity Incentive Plans:

	Number of Shares	Weighted- Average Grant Date Fair Value Per Share
Balance as of June 24, 2022	285,882	$	81.64
Granted	97,142	$	117.35
Vested	(179,008)	$	70.05
Forfeited	—	$	—
Balance as of March 31, 2023	204,016	$	108.81

	Number of Shares	Weighted- Average Grant Date Fair Value Per Share
Balance as of June 25, 2021	427,028	$	57.82
Granted	110,832	$	101.05
Vested	(190,213)	48.65
Forfeited	(61,765)	$	53.38
Balance as of March 25, 2022	285,882	$	81.64

The fair value of restricted share units and performance share units is based on the market value of Fabrinet's ordinary shares on the date of grant.

As of March 31, 2023, there was $15.1 million and $9.4 million of unrecognized share-based compensation expense related to restricted share units and performance share units, respectively, under the Equity Incentive Plans that is expected to be recorded over a weighted-average period of 2.6 and 1.2 years, respectively.

For the nine months ended March 31, 2023 and March 25, 2022, the Company withheld an aggregate of 172,929 shares and 210,006 shares, respectively, upon the vesting of restricted share units and performance shares units, based upon the closing share price on the vesting date to settle employee tax withholding obligations. For the nine months ended March 31, 2023 and March 25, 2022, the Company then remitted cash of $17.7 million and $20.4 million, respectively, to the appropriate taxing authorities and presented it as a financing activity within the unaudited condensed consolidated statements of cash flows. The payment was recorded as a reduction of additional paid-in capital.

13.    Shareholders’ equity

Share capital

Fabrinet’s authorized share capital is 500,000,000 ordinary shares, par value of $0.01 per ordinary share, and 5,000,000 preferred shares, par value of $0.01 per preferred share.

For the three and nine months ended March 31, 2023, Fabrinet issued 23,202 and 226,083 ordinary shares, respectively, upon the vesting of restricted share units and performance share units under the Equity Incentive Plans, net of shares withheld.

For the three and nine months ended March 25, 2022, Fabrinet issued 30,729 and 290,680 ordinary shares, respectively, upon the vesting of restricted share units and performance share units under the Equity Incentive Plans, net of shares withheld.

All such issued shares are fully paid.

Treasury shares

In August 2017, the Company’s board of directors approved a share repurchase program to permit the Company to repurchase up to $30.0 million worth of its issued and outstanding ordinary shares in the open market in accordance with applicable rules and regulations. In February 2018, May 2019, August 2020 and August 2022, the Company’s board of directors approved an increase of $30.0 million, $50.0 million, $58.5 million and $78.7 million, respectively, to the original share repurchase authorization, bringing the aggregate authorization to $247.2 million.

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During the nine months ended March 31, 2023, the Company repurchased 83,857 shares under the program at an average price per share (excluding other direct costs) of $109.89 totaling $9.2 million. As of March 31, 2023, the Company had a remaining authorization to repurchase up to $90.8 million worth of its ordinary shares under the share repurchase program. Shares repurchased under the share repurchase program are held as treasury shares.

14.    Accumulated other comprehensive income (loss)

The changes in AOCI for the nine months ended March 31, 2023 and March 25, 2022 were as follows:

(in thousands)	Unrealized net (Losses)/Gains on Available-for-sale Securities		Unrealized net (Losses)/Gains on Derivative Instruments		Retirement benefit plan - Prior service cost		Foreign Currency Translation Adjustment		Total
Balance as of June 24, 2022	$	(6,018)	$	(5,082)	$	(803)	$	(890)	$	(12,793)
Other comprehensive income (loss) before reclassification adjustment	1,675		7,762		—		(29)		9,408
Amounts reclassified out of AOCI to the unaudited condensed consolidated statements of operations and comprehensive income	93		(3,327)		338		—		(2,896)
Tax effects	—		—		—		—		—
Other comprehensive income (loss)	$	1,768	$	4,435	$	338	$	(29)	$	6,512
Balance as of March 31, 2023	$	(4,250)	$	(647)	$	(465)	$	(919)	$	(6,281)

(in thousands)	Unrealized net (Losses)/Gains on Available-for-sale Securities		Unrealized net (Losses)/Gains on Derivative Instruments		Retirement benefit plan - Prior service cost		Foreign Currency Translation Adjustment		Total
Balance as of June 25, 2021	$	308	$	(4,504)	$	(1,425)	$	(645)	$	(6,266)
Other comprehensive income (loss) before reclassification adjustment	(3,602)		4,443		—		(198)		643
Amounts reclassified out of AOCI to the unaudited condensed consolidated statements of operations and comprehensive income	(13)		(1,700)		448		—		(1,265)
Tax effects	—		—		—		—		—
Other comprehensive income (loss)	$	(3,615)	$	2,743	$	448	$	(198)	$	(622)
Balance as of March 25, 2022	$	(3,307)	$	(1,761)	$	(977)	$	(843)	$	(6,888)

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15.    Commitments and contingencies

Bank guarantees

As of March 31, 2023 and June 24, 2022, there were outstanding bank guarantees on behalf of the Company's subsidiary in Thailand for electricity usage and other normal business expenses totaling $1.6 million and $1.4 million, respectively, or Thai baht 53.0 million and 50.2 million, respectively. In addition, there were other immaterial bank guarantees on behalf of the Company's subsidiary in Israel to support the operations related to the Customs department.

As of June 24, 2022, there was an outstanding bank guarantee on behalf of the Company's subsidiary in the PRC to support the subsidiary's operations totaling Renminbi 1.0 million, which bank guarantee was backed by cash collateral of $0.1 million. This bank guarantee was released in December 2022. In addition, there were other immaterial bank guarantees on behalf of the Company's subsidiary in the U.K. to support its operations.

Purchase obligations

Purchase obligations represent legally binding commitments to purchase inventory and other commitments made in the normal course of business to meet operational requirements. Although open purchase orders are considered enforceable and legally binding, their terms generally give the Company the option to cancel, reschedule and/or adjust its requirements based on its business needs prior to the delivery of goods or performance of services. Obligations to purchase inventory and other commitments are generally expected to be fulfilled within one year.

As of March 31, 2023, the Company had a purchase obligation and other commitments to third parties of $1.09 billion.

Capital expenditures

As of March 31, 2023, the Company had total capital expenditure commitments to third parties of $18.3 million.

Indemnification of directors and officers

Cayman Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of directors and officers, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Fabrinet’s amended and restated memorandum and articles of association provide for indemnification of directors and officers for actions, costs, charges, losses, damages and expenses incurred in their capacities as such, except that such indemnification does not extend to any matter in respect of any fraud or dishonesty that may attach to any of them.

In accordance with Fabrinet’s form of indemnification agreement for its directors and officers, Fabrinet has agreed to indemnify its directors and officers against certain liabilities and expenses incurred by such persons in connection with claims by reason of their being such a director or officer. Fabrinet maintains a director and officer liability insurance policy that may enable it to recover a portion of any future amounts paid under the indemnification agreements.

16.    Restructuring and other related costs

Restructuring and other related costs may consist of voluntary or involuntary severance-related charges, asset-related charges and other costs due to exit activities. We recognize voluntary severance-related charges when an employee accepts the offered benefit arrangement. We recognize involuntary severance-related charges depending on whether the termination benefits are provided under an ongoing benefit arrangement or under a one-time benefit arrangement. If the former, we recognize the charges once they are probable and the amounts are estimable. If the latter, we recognize the charges once the benefits have been communicated to employees.

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17.    Business segments and geographic information

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is Fabrinet’s Chief Executive Officer. As of March 31, 2023, the Company operated and internally managed a single operating segment. Accordingly, the Company does not accumulate discrete information with respect to separate product lines and does not have separate reportable segments.

For the Company’s revenues by geographic region, see “Revenue by Geographic Area and End Market” in Note 3.

The following table presents long-lived assets by the country in which they are based:

(in thousands)	March 31, 2023		June 24, 2022
Long-Lived Assets:
Thailand	$	261,506	$	240,750
U.S.	25,669		25,938
China	17,651		19,686
Israel	3,023		4,025
Others	516		1,878
Total	$	308,365	$	292,277

Significant customers

The Company had three customers that each contributed to 10% or more of the Company's total trade accounts receivable as of March 31, 2023 and June 24, 2022.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

•our goals and strategies;

•our and our customers’ estimates regarding future revenues, operating results, expenses, capital requirements and liquidity;

•our belief that we will be able to maintain favorable pricing on our services;

•our expectation that the portion of our revenues attributable to customers in regions outside of North America for the remainder of fiscal year 2023 will be in line with the portion of revenues attributable to such customers during the nine months ended March 31, 2023;

•our expectation that we will incur incremental costs of revenue as a result of our planned expansion of our business into new geographic markets;

•our expectation that our fiscal year 2023 selling, general and administrative (“SG&A”) expenses will increase compared to our fiscal year 2022 SG&A expenses;

•our expectation that our employee costs will increase in Thailand and the PRC;

•our future capital expenditures and our needs for additional financing;

•the expansion of our manufacturing capacity, including into new geographies;

•the growth rates of our existing markets and potential new markets;

•our ability, and the ability of our customers and suppliers, to respond successfully to technological or industry developments;

•our expectations regarding the potential impact of the COVID-19 pandemic on our business, financial condition and operating results;

•our suppliers’ estimates regarding future costs;

•our ability to increase our penetration of existing markets and to penetrate new markets;

•our plans to diversify our sources of revenues;

•our plans to execute acquisitions;

•trends in the optical communications, industrial lasers, and sensors markets, including trends to outsource the production of components used in those markets;

•our ability to attract and retain a qualified management team and other qualified personnel and advisors; and

•competition in our existing and new markets.

These forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form10-Q, in particular, the risks discussed under the heading “Risk Factors” in Part II, Item 1A as well as those discussed in other documents we file with the Securities and Exchange Commission. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. “We,” “us” or “our” collectively refer to Fabrinet and its subsidiaries.

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Overview

We provide advanced optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers (“OEMs”) of complex products such as optical communication components, modules and sub-systems, industrial lasers, automotive components, medical devices and sensors. We offer a broad range of advanced optical and electro-mechanical capabilities across the entire manufacturing process, including process design and engineering, supply chain management, manufacturing, complex printed circuit board assembly, advanced packaging, integration, final assembly and testing. Although we focus primarily on low-volume production of a wide variety of high complexity products, which we refer to as “low-volume, high-mix,” we also have the capability to accommodate high-volume production. Based on our extensive experience, and the positive feedback we have received from our customers, we believe we are a global leader in providing these services to the optical communications, industrial lasers and automotive markets.

Our customer base includes companies in complex industries that require advanced precision manufacturing capabilities such as optical communications, industrial lasers, automotive and sensors. The products that we manufacture for our OEM customers include selective switching products; tunable transponders and transceivers; active optical cables; solid state, diode-pumped, gas and fiber lasers; and sensors. In many cases, we are the sole outsourced manufacturing partner used by our customers for the products that we manufacture for them.

We also design and fabricate application-specific crystals, lenses, prisms, mirrors, laser components, and substrates (collectively referred to as “customized optics”) and other custom and standard borosilicate, clear fused quartz, and synthetic fused silica glass products (collectively referred to as “customized glass”). We incorporate our customized optics and glass into many of the products we manufacture for our OEM customers, and we also sell customized optics and glass in the merchant market.

Recent Developments Related to COVID-19

In China, the relaxation in early December 2022 of restrictions related to COVID-19 coincided with a surge in COVID-19 infections, which peaked in the last week of December 2022 and subsided by the second half of January 2023. While the surge in China significantly disrupted our operations there, our operating results were not significantly affected due to the successful execution of our contingency plan and various precautionary measures we have undertaken. However, any worsening of the COVID-19 pandemic in China or globally may result in more stringent measures being implemented by local authorities, such as shutting down our manufacturing facilities, which would have a significant negative impact on our operations.

Due to the unprecedented and unpredictable human and economic impact of the COVID-19 pandemic globally, including inflationary pressures and supply chain constraints that have emerged as the world exits the acute phase of the pandemic, and the evolving and differing national strategies for dealing with COVID-19, it is challenging to provide a forward-looking assessment. Despite uncertainty and concern about the global economy and the health of various industries, we can share some relevant perspectives as we continue to assess the impacts of COVID-19 on our business in the future:

•A significant portion of our costs is variable, which allows us to adjust manufacturing costs relatively quickly to respond to the changing demand of our customers. However, because parts and materials account for the largest portion of our costs, inflationary pressures and supply chain issues will continue to negatively affect our gross margins for the foreseeable future.

•The ongoing safety and health of our employees is and will remain a key priority. To this end, we will continue to monitor local restrictions at our facilities across the world, the administration and efficacy of vaccines and the number of new COVID-19 cases to determine whether and when additional safeguards may become necessary.

•Given our $538.7 million in cash, cash equivalents and short-term investments, and our total debt of approximately $15.2 million as of March 31, 2023, we believe we are in a solid position from a capital and financial resources perspective. We expect that current cash and cash equivalent balances and short-term investments, and cash flows generated from operations will be sufficient to meet our domestic and international working capital needs and other capital and liquidity requirements for at least the next 12 months.

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Revenues

We believe we are able to expand our relationships with existing customers and attract new customers due to, among other factors, our broad range of complex engineering and manufacturing service offerings, flexible low-cost manufacturing platform, process optimization capabilities, advanced supply chain management, excellent customer service, and experienced management team. Although we expect the prices we charge for our manufactured products to decrease over time (partly as a result of competitive market forces), we believe we will be able to continue to maintain favorable pricing for our services because of our ability to reduce cycle time, adjust our product mix by focusing on more complicated products, improve product quality and yields, and reduce material costs for the products we manufacture. We believe these capabilities have enabled us to help our OEM customers reduce their manufacturing costs while maintaining or improving the design, quality, reliability, and delivery times for their products.

We expect that disruptions in our supply chain and fluctuations in the availability of parts and materials will continue to have a significant impact on our ability to generate revenue, despite strong demand from our customers. These supply chain disruptions have been exacerbated by recent global events, such as (1) COVID-related lockdowns in China, which caused freight and logistics issues and unforeseen delays during the first half of fiscal year 2023, and (2) the armed conflict between Russia and Ukraine. While we have no significant direct business in Ukraine or Russia, the conflict has negatively impacted demand from some of our automotive customers that have other suppliers in the region. Moreover, if a future surge in COVID-19 cases in China were to cause the facilities of our subsidiary in Fuzhou, China to be locked down, we would be negatively impacted since we and some of our customers rely on the optics components that are manufactured in such facilities. Furthermore, in some cases, our efforts to identify and secure alternative supply chain sources has resulted in our customers or their end customers requiring requalification and validation of components, a process that can often be lengthy and has negatively impacted the timing of our revenue.

Revenues by Geography

We generate revenues from three geographic regions: North America, Asia-Pacific and others, and Europe. Revenues are attributed to a particular geographic area based on the bill-to-location of our customers, notwithstanding that our customers may ultimately ship their products to end customers in a different geographic region. The substantial majority of our revenues are derived from our manufacturing facilities in Asia-Pacific.

The percentage of our revenues generated from a bill-to location outside of North America increased from 47.5% in the three months ended March 25, 2022 to 52.5% in the three months ended March 31, 2023, primarily because the increase in sales to our customers outside of North America was higher than the increase in sales to our customers in North America.

The percentage of our revenues generated from a bill-to location outside of North America decreased from 52.8% in the nine months ended March 25, 2022 to 50.3% in the nine months ended March 31, 2023, primarily because the increase in sales to our customers outside of North America was lower than the increase in sales to our customers in North America.

Based on the short and medium-term indications and forecasts from our customers, we expect that the portion of our future revenues attributable to customers in regions outside North America for the remainder of fiscal year 2023 will be in line with the portion of revenues attributable to such customers during the nine months ended March 31, 2023.

The following table presents percentages of total revenues by geographic region:

	Three Months Ended				Nine Months Ended
	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
North America	47.5	%	52.5	%	49.7	%	47.2	%
Asia-Pacific and others	42.1		34.8		41.1		37.3
Europe	10.4		12.7		9.2		15.5
	100.0	%	100.0	%	100.0	%	100.0	%

Our Contracts

We enter into supply agreements with our customers which generally have an initial term of up to three years, subject to automatic renewals for subsequent one-year terms unless expressly terminated. Although there are no minimum purchase requirements in our supply agreements, our customers provide us with rolling forecasts of their demand requirements. Our

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supply agreements generally include provisions for pricing and periodic review of pricing, consignment of our customer’s unique production equipment to us, and the sharing of benefits from cost-savings derived from our efforts. We are generally required to purchase materials, which may include long lead-time materials and materials that are subject to minimum order quantities and/or non-cancelable or non-returnable terms, to meet the stated demands of our customers. After procuring materials, we manufacture products for our customers based on purchase orders that contain terms regarding product quantities, delivery locations and delivery dates. Our customers generally are obligated to purchase finished goods that we have manufactured according to their demand requirements. Materials that are not consumed by our customers within a specified period of time, or that are no longer required due to a product’s cancellation or end-of-life, are typically designated as excess or obsolete inventory under our contracts. Once materials are designated as either excess or obsolete inventory, our customers are typically required to purchase such inventory from us even if they have chosen to cancel production of the related products. The excess or obsolete inventory is shipped to the customer and revenue is recognized upon shipment.

Cost of Revenues

The key components of our cost of revenues are material costs, employee costs, and infrastructure-related costs. Material costs generally represent the majority of our cost of revenues. Several of the materials we require to manufacture products for our customers are customized for their products and often sourced from a single supplier or in some cases, our own subsidiaries. Shortages from sole-source suppliers due to yield loss, quality concerns and capacity constraints, among other factors, may increase our expenses and negatively impact our gross profit margin or total revenues in a given quarter. Material costs include scrap material. Historically, scrap rate diminishes during a product’s life cycle due to process, fixturing and test improvement and optimization.

A second significant element of our cost of revenues is employee costs, including indirect employee costs related to design, configuration and optimization of manufacturing processes for our customers, quality testing, materials testing and other engineering services; and direct costs related to our manufacturing employees. Direct employee costs include employee salaries, insurance and benefits, merit-based bonuses, recruitment, training and retention. Historically, our employee costs have increased primarily due to increases in the number of employees necessary to support our growth and, to a lesser extent, costs to recruit, train and retain employees. Our cost of revenues is significantly impacted by salary levels in Thailand, the PRC and the United Kingdom, the fluctuation of the Thai baht, Chinese Renminbi ("RMB") and Pound Sterling ("GBP") against our functional currency, the U.S. dollar, and our ability to retain our employees. We expect our employee costs to increase as wages continue to increase in Thailand and the PRC. Wage increases may impact our ability to sustain our competitive advantage and may reduce our profit margin. We seek to mitigate these cost increases through improvements in employee productivity, employee retention and asset utilization.

Our infrastructure costs are comprised of depreciation, utilities, facilities management and overhead costs. Most of our facility leases are long-term agreements. Our depreciation costs include buildings and fixed assets, primarily at our Pinehurst and Chonburi campuses in Thailand, and capital equipment located at each of our manufacturing locations.

We expect to incur incremental costs of revenue as a result of our planned expansion into new geographic markets, though we are not able to determine the amount of these incremental expenses.

Selling, General and Administrative Expenses

Our SG&A expenses primarily consist of corporate employee costs for sales and marketing, general and administrative and other support personnel, including research and development expenses related to the design of customized optics and glass, travel expenses, legal and other professional fees, share-based compensation expense and other general expenses not related to cost of revenues. In fiscal year 2023, we expect our SG&A expenses will increase compared with our fiscal year 2022 SG&A expenses, mainly due to increased employee costs.

The compensation committee of our board of directors approved a fiscal year 2023 executive incentive plan with quantitative objectives based solely on achieving certain revenue targets and non-GAAP operating margin targets for fiscal year 2023. Bonuses under the fiscal year 2023 executive incentive plan are payable after the end of fiscal year 2023. In fiscal year 2022, the compensation committee approved a fiscal year 2022 executive incentive plan with quantitative objectives that were based solely on achieving certain revenue targets and non-GAAP operating margin targets for fiscal year 2022.

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Additional Financial Disclosures

Foreign Exchange

As a result of our international operations, we are exposed to foreign exchange risk arising from various currency exposures, and primarily with respect to the Thai baht. Although a majority of our total revenues is denominated in U.S. dollars, a substantial portion of our payroll plus certain other operating expenses are incurred and paid in Thai baht. The exchange rate between the Thai baht and the U.S. dollar has fluctuated substantially in recent years and may continue to fluctuate substantially in the future. We report our financial results in U.S. dollars and our results of operations have been and could in the future be negatively impacted if the Thai baht appreciates against the U.S. dollar. Smaller portions of our expenses are incurred in a variety of other currencies, including RMB, GBP, Canadian dollars, Euros, and Japanese yen, the appreciation of which may also negatively impact our financial results.

In order to manage the risks arising from fluctuations in foreign currency exchange rates, we use derivative instruments. We may enter into foreign currency exchange forward or put option contracts to manage foreign currency exposures associated with certain assets and liabilities and other forecasted foreign currency transactions and may designate these instruments as hedging instruments. The forward and put option contracts generally have maturities of up to 12 months. All foreign currency exchange contracts are recognized in the unaudited condensed consolidated balance sheets at fair value. Gains or losses on our forward and put option contracts generally present gross amount in the assets, liabilities, and transactions economically hedged.

We had foreign currency denominated assets and liabilities in Thai baht, RMB and GBP as follows:

	As of March 31, 2023					As of June 24, 2022
(amount in thousands, except percentages)	Currency	$		%		Currency	$		%
Assets
Thai baht	964,191	$	28,275	75.3	%	753,924	$	21,213	64.0	%
RMB	28,079	4,086		10.9		34,382	5,132		15.5
GBP	4,168	5,167		13.8		5,544	6,801		20.5
Total		$	37,528	100.0	%		$	33,146	100.0	%
Liabilities
Thai baht	3,142,992	$	92,170	93.3	%	2,393,112	$	67,336	84.8	%
RMB	38,962	5,670		5.7		61,191	9,133		11.5
GBP	794	984		1.0		2,379	2,918		3.7
Total		$	98,824	100.0	%		$	79,387	100.0	%

The Thai baht assets represent cash and cash equivalents, trade accounts receivable, deposits and other current assets. The Thai baht liabilities represent trade accounts payable, accrued expenses, income tax payable and other payables. As of March 31, 2023, there was $130.0 million of foreign currency forward contracts outstanding on the Thai baht payables. As of June 24, 2022, there was $135.0 million of foreign currency forward contracts outstanding on the Thai baht payables.

The RMB assets represent cash and cash equivalents, trade accounts receivable and other current assets. The RMB liabilities represent trade accounts payable, accrued expenses, income tax payable and other payables. As of March 31, 2023 and June 24, 2022, we did not have any derivative contracts denominated in RMB.

The GBP assets represent cash, trade accounts receivable, and other current assets. The GBP liabilities represent trade accounts payable and other payables. As of March 31, 2023 and June 24, 2022, we did not have any derivative contracts denominated in GBP.

For the three months ended March 31, 2023 and March 25, 2022, we recorded a loss of $2.1 million and gain of $0.1 million, respectively, related to derivatives that are not designated as hedging instruments in the unaudited condensed consolidated statements of operations and comprehensive income.

For the nine months ended March 31, 2023 and March 25, 2022, we recorded a gain of $1.8 million and $0.6 million, respectively, related to derivatives that are not designated as hedging instruments in the unaudited condensed consolidated statements of operations and comprehensive income.

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Currency Regulation and Dividend Distribution

Foreign exchange regulation in the PRC is primarily governed by the following rules:

•Foreign Currency Administration Rules, as amended on August 5, 2008, or the Exchange Rules;

•Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules; and

•Notice on Perfecting Practices Concerning Foreign Exchange Settlement Regarding the Capital Contribution by Foreign-invested Enterprises, as promulgated by the State Administration of Foreign Exchange (“SAFE”), on August 29, 2008, or Circular 142.

Under the Exchange Rules, RMB is freely convertible into foreign currencies for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions. However, conversion of RMB for capital account items, such as direct investments, loans, security investments and repatriation of investments, is still subject to the approval of SAFE.

Under the Administration Rules, foreign-invested enterprises may only buy, sell, or remit foreign currencies at banks authorized to conduct foreign exchange business after providing valid commercial documents and relevant supporting documents and, in the case of capital account item transactions, obtaining approval from SAFE. Capital investments by foreign-invested enterprises outside of the PRC are also subject to limitations, which include approvals by the Ministry of Commerce, SAFE and the State Development and Reform Commission. 

Circular 142 regulates the conversion by a foreign-invested company of foreign currency into RMB by restricting how the converted RMB may be used. Circular 142 requires that the registered capital of a foreign-invested enterprise settled in RMB converted from foreign currencies may only be used for purposes within the business scope approved by the applicable governmental authority and may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight of the flow and use of the registered capital of foreign-invested enterprises settled in RMB converted from foreign currencies. The use of such RMB capital may not be changed without SAFE’s approval and may not be used to repay RMB loans if the proceeds of such loans have not been used.

On January 5, 2007, SAFE promulgated the Detailed Rules for Implementing the Measures for the Administration on Individual Foreign Exchange, or the Implementation Rules. Under the Implementation Rules, PRC citizens who are granted share options by an overseas publicly-listed company are required, through a PRC agent or PRC subsidiary of such overseas publicly-listed company, to register with SAFE and complete certain other procedures.

In addition, the General Administration of Taxation has issued circulars concerning employee share options. Under these circulars, our employees working in the PRC who exercise share options will be subject to PRC individual income tax. Our PRC subsidiary has obligations to file documents related to employee share options with relevant tax authorities and withhold individual income taxes of those employees who exercise their share options.

Furthermore, our transfer of funds to our subsidiaries in Thailand and the PRC are each subject to approval by governmental authorities in case of an increase in registered capital, or subject to registration with governmental authorities in case of a shareholder loan. These limitations on the flow of funds between our subsidiaries and us could restrict our ability to act in response to changing market conditions.

Income Tax

Our effective tax rate is a function of the mix of tax rates in the various jurisdictions in which we do business. We are domiciled in the Cayman Islands. Under the current laws of the Cayman Islands, we are not subject to tax in the Cayman Islands on income or capital gains until March 6, 2039.

Throughout the period of our operations in Thailand, we have generally received income tax and other incentives from the Thailand Board of Investment. Preferential tax treatment from the Thai government in the form of a corporate tax exemption on income generated from projects to manufacture certain products at our Chonburi campus is currently available to us through June 2026. Similar preferential tax treatment was available to us through June 2020 with respect to products manufactured at our Pinehurst campus Building 6. After June 2020, 50% of our income generated from products manufactured at our Pinehurst campus will be exempted from tax through June 2025. New preferential tax treatment is available to us for products manufactured at our Chonburi campus Building 9, where income generated will be tax exempt through 2031, capped at our actual investment amount. Such preferential tax treatment is contingent on various factors, including the export of our customers’ products out of Thailand and our agreement not to move our manufacturing facilities out of our current province in

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Thailand for at least 15 years from the date on which preferential tax treatment was granted. Currently, the corporate income tax rate for our Thai subsidiary is 20%.

As of March 31, 2023, the corporate income tax rates for our subsidiaries in the PRC, the U.S., the U.K. and Israel were 25%, 21%, 19% and 23%, respectively. In October 2022, the U.K. announced an increase in the corporate income tax rate from 19% to 25%, effective April 1, 2023.

Critical Accounting Policies and Use of Estimates

We prepare our unaudited condensed consolidated financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities on the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the financial reporting period. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Because the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We consider the policies discussed below to be critical to an understanding of our unaudited condensed consolidated financial statements, as their application places the most significant demands on our management’s judgment.

Our critical accounting policies are disclosed in our Annual Report on Form10-K for the fiscal year ended June 24, 2022. The adoption of new accounting policies and accounting standards are disclosed in Note 2 to the unaudited condensed consolidated financial statements. There were no changes to our accounting policies.

Results of Operations

The following table sets forth a summary of our unaudited condensed consolidated statements of operations and comprehensive income. Note that period-to-period comparisons of operating results should not be relied upon as indicative of future performance.

(in thousands)	Three Months Ended				Nine Months Ended
	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
Revenues	$	665,281	$	564,395	$	1,989,366	$	1,674,350
Cost of revenues	(579,274)		(493,702)		(1,735,388)		(1,470,689)
Gross profit	86,007		70,693		253,978		203,661
Selling, general and administrative expenses	(18,309)		(17,034)		(57,804)		(55,412)
Restructuring and other related costs	(5,872)		—		(5,872)		(135)
Operating income	61,826		53,659		190,302		148,114
Interest income	3,317		414		7,210		1,470
Interest expense	(399)		(73)		(1,179)		(347)
Foreign exchange gain (loss), net	(1,303)		(410)		(3,122)		998
Other income (expense), net	31		(36)		(178)		(1,351)
Income before income taxes	63,472		53,554		193,033		148,884
Income tax expense	(4,117)		(2,893)		(5,906)		(4,693)
Net income	59,355		50,661		187,127		144,191
Other comprehensive income (loss), net of tax	(3,567)		(1,699)		6,512		(622)
Net comprehensive income	$	55,788	$	48,962	$	193,639	$	143,569

The following table sets forth a summary of our unaudited condensed consolidated statements of operations and comprehensive income as a percentage of revenues for the periods indicated.

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	Three Months Ended				Nine Months Ended
	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
Revenues	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenues	(87.1)		(87.5)		(87.2)		(87.8)
Gross profit	12.9		12.5		12.8		12.2
Selling, general and administrative expenses	(2.7)		(3.0)		(2.9)		(3.4)
Restructuring and other related costs	(0.9)		—		(0.3)		0.0
Operating income	9.3		9.5		9.6		8.8
Interest income	0.5		0.1		0.4		0.1
Interest expense	(0.1)		0.0		(0.1)		0.1
Foreign exchange gain (loss), net	(0.2)		(0.1)		(0.2)		0.1
Other income (expense), net	0.0		0.0		0.0		(0.2)
Income before income taxes	9.5		9.5		9.7		8.9
Income tax expense	(0.6)		(0.5)		(0.3)		(0.3)
Net income	8.9		9.0		9.4		8.6
Other comprehensive income (loss), net of tax	(0.5)		(0.3)		0.3		0.0
Net comprehensive income	8.4	%	8.7	%	9.7	%	8.6	%

The following table sets forth our revenues by end market for the periods indicated.

	Three Months Ended				Nine Months Ended
(in thousands)	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
Optical communications	$	502,615	$	440,003	$	1,506,232	$	1,318,087
Lasers, sensors and other	162,666		124,392		483,134		356,263
Total	$	665,281	$	564,395	$	1,989,366	$	1,674,350

We operate and internally manage a single operating segment. As such, discrete information with respect to separate product lines and segments is not accumulated.

Comparison of Three and Nine Months Ended March 31, 2023 with Three and Nine Months Ended March 25, 2022

Revenues

Our revenues increased by $100.9 million, or 17.9%, to $665.3 million for the three months ended March 31, 2023, compared with $564.4 million for the three months ended March 25, 2022. This increase was due to an increase in our key customers’ demand during the three months ended March 31, 2023. Revenues from optical communications products increased by $62.6 million, or 14.2%, and revenue from non-optical communications products increased by $38.3 million, or 30.8%, for the three months ended March 31, 2023, compared to the same period in the prior fiscal year.

Our revenues increased by $315.0 million, or 18.8%, to $1,989.4 million for the nine months ended March 31, 2023, compared with $1,674.4 million for the nine months ended March 25, 2022. This increase was due to (1) an increase in our key customers’ demand during the nine months ended March 31, 2023, and (2) the positive impact of an additional week of revenue during the nine months ended March 31, 2023. Revenues from optical communications products increased by $188.1 million, or 14.3%, and revenue from non-optical communications products increased by $126.9 million, or 35.6%, for the nine months ended March 31, 2023, compared to the same period in the prior fiscal year.

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Cost of revenues

Our cost of revenues increased by $85.6 million, or 17.3%, to $579.3 million, or 87.1% of revenues, for the three months ended March 31, 2023, compared with $493.7 million, or 87.5% of revenues, for the three months ended March 25, 2022. This increase in cost of revenues on an absolute dollar basis was in line with the increase in sales volume.

Our cost of revenues increased by $264.7 million, or 18.0%, to $1,735.4 million, or 87.2% of revenues, for the nine months ended March 31, 2023, compared with $1,470.7 million, or 87.8% of revenues, for the nine months ended March 25, 2022. This increase in cost of revenues on an absolute dollar basis was in line with the increase in sales volume.

Gross profit

Our gross profit increased by $15.3 million, or 21.6%, to $86.0 million, or 12.9% of revenues, for the three months ended March 31, 2023, compared with $70.7 million, or 12.5% of revenues, for the three months ended March 25, 2022. The increase was primarily due to an increase in sales volume.

Our gross profit increased by $50.3 million, or 24.7%, to $254.0 million, or 12.8% of revenues, for the nine months ended March 31, 2023, compared with $203.7 million, or 12.2% of revenues, for the nine months ended March 25, 2022. The increase was primarily due to an increase in sales volume.

SG&A expenses

Our SG&A expenses increased by $1.3 million, or 7.6%, to $18.3 million, or 2.7% of revenues, for the three months ended March 31, 2023, compared with $17.0 million, or 3.0% of revenues, for the three months ended March 25, 2022. The increase was primarily due to (1) an increase in share-based compensation expenses of $0.5 million, (2) an increase in legal and consulting fees of $0.3 million, (3) an increase in sales and marketing expenses of $0.3 million, and (4) an increase in executive benefits of $0.1 million.

Our SG&A expenses increased by $2.4 million, or 4.3%, to $57.8 million, or 2.9% of revenues, for the nine months ended March 31, 2023, compared with $55.4 million, or 3.3% of revenues, for the nine months ended March 25, 2022. The increase was primarily due to (1) an increase in legal and consulting fees of $0.9 million, (2) an increase in sales and marketing expenses of $0.9 million, (3) an increase in executive benefits of $0.8 million, (4) an increase in R&D expenses of $0.6 million, and (5) an increase in insurance expenses of $0.3 million, offset by a decrease in share-based compensation expenses of $1.1 million.

Restructuring and other related costs

We recorded restructuring and other related costs for the three and nine months ended March 31, 2023 of $5.9 million.

Operating income

Our operating income increased by $8.1 million, or 15.1%, to $61.8 million, or 9.3% of revenues, for the three months ended March 31, 2023, compared with $53.7 million, or 9.5% of revenues, for the three months ended March 25, 2022. The increase was primarily due to an increase in revenues.

Our operating income increased by $42.2 million, or 28.5%, to $190.3 million, or 9.6% of revenues, for the nine months ended March 31, 2023, compared with $148.1 million, or 8.8% of revenues, for the nine months ended March 25, 2022. The increase was primarily due to an increase in revenues.

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Interest income

Our interest income increased by $2.9 million, or 725.0%, to $3.3 million, or 0.5% of revenues, for the three months ended March 31, 2023, compared with $0.4 million, or 0.1% of revenues, for the three months ended March 25, 2022. The increase was primarily due to a higher weighted average interest rate during the three months ended March 31, 2023 compared to same period in the prior fiscal year.

Our interest income increased by $5.7 million, or 380.0%, to $7.2 million, or 0.4% of revenues, for the nine months ended March 31, 2023, compared with $1.5 million, or 0.1% of revenues, for the nine months ended March 25, 2022. The increase was primarily due to a higher weighted average interest rate during the nine months ended March 31, 2023 compared to same period in the prior fiscal year.

Interest expense

Our interest expense increased by $0.3 million to $0.4 million for the three months ended March 31, 2023, compared with $0.1 million for the three months ended March 25, 2022. The increase was primarily due to (1) lower interest expense capitalized of $0.3 million following the completion of a new manufacturing building at our Chonburi campus in July 2022, and (2) lower amortization of the fair value of interest rate swaps of $0.1 million during the three months ended March 31, 2023, offset by lower interest expense due to a decrease in the amount of outstanding long-term loans.

Our interest expense increased by $0.9 million to $1.2 million for the nine months ended March 31, 2023, compared with $0.3 million for the nine months ended March 25, 2022. The increase was primarily due to (1) lower interest expense capitalized of $0.6 million following the completion of a new manufacturing building at our Chonburi campus in July 2022, and (2) lower amortization of the fair value of interest rate swaps of $0.3 million during the nine months ended March 31, 2023.

Foreign exchange gain (loss), net

We recorded foreign exchange loss, net of $1.3 million for the three months ended March 31, 2023, compared with foreign exchange loss, net of $0.4 million for the three months ended March 25, 2022. The increase in foreign exchange loss was mainly due to (1) unrealized loss from mark-to-market forward contracts of $2.2 million for the three months ended March 31, 2023, and (2) higher realized loss from payment/receipt of $1.1 million for the three months ended March 31, 2023, offset by (1) unrealized gain from revaluation of outstanding Thai baht assets and liabilities of $2.1 million for the three months ended March 31, 2023, and (2) higher unrealized gain from revaluation of currencies other than Thai baht of $0.2 million for the three months ended March 31, 2023.

We recorded foreign exchange loss, net of $3.1 million for the nine months ended March 31, 2023, compared with foreign exchange gain, net of $1.0 million for the nine months ended March 25, 2022. The increase in foreign exchange loss was mainly due to (1) unrealized loss from revaluation of outstanding Thai baht assets and liabilities of $3.7 million for the nine months ended March 31, 2023, (2) realized loss from payment/receipt of $1.8 million for the nine months ended March 31, 2023, and (3) higher unrealized loss from revaluation of currencies other than Thai baht of $0.3 million for the nine months ended March 31, 2023, offset by (1) higher unrealized gain from mark-to-market forward contracts of $1.2 million for the nine months ended March 31, 2023, and (2) foreign exchange gain, totaling $0.6 million for the nine months ended March 31, 2023 from our subsidiaries in the PRC and the U.K.

Income before income taxes

We recorded income before income taxes of $63.5 million for the three months ended March 31, 2023, compared with $53.6 million for the three months ended March 25, 2022.

We recorded income before income taxes of $193.0 million for the nine months ended March 31, 2023, compared with $148.9 million for the nine months ended March 25, 2022.

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Income tax expense

Our provision for income tax reflects effective tax rates of 6.5% and 5.4% for the three months ended March 31, 2023 and March 25, 2022, respectively. The increase was primarily due to an increase in income subject to tax during the three months ended March 31, 2023 as compared to the three months ended March 25, 2022.

Our provision for income tax reflects effective tax rates of 3.1% and 3.2% for the nine months ended March 31, 2023 and March 25, 2022, respectively. The decrease was primarily due to lower annualized effective tax rate offset by an increase in income subject to tax during the nine months ended March 31, 2023 as compared to the nine months ended March 25, 2022.

Net income

We recorded net income of $59.4 million, or 8.9% of revenues, for the three months ended March 31, 2023, compared with $50.7 million, or 9.0% of revenues, for the three months ended March 25, 2022.

We recorded net income of $187.1 million, or 9.4% of revenues, for the nine months ended March 31, 2023, compared with $144.2 million, or 8.6% of revenues, for the nine months ended March 25, 2022.

Other comprehensive income (loss)

We recorded other comprehensive loss of $3.6 million, or 0.5% of revenues, for the three months ended March 31, 2023, compared with other comprehensive loss of $1.7 million, or 0.3% of revenues, for the three months ended March 25, 2022. The increase in other comprehensive loss was mainly due to (1) unrealized loss from mark-to-market of forward contracts and interest rate swap agreement of $6.2 million for the three months ended March 31, 2023, and (2) higher unrealized loss from foreign currency translation adjustment of $0.2 million for the three months ended March 31, 2023, offset by unrealized gain from mark-to-market of available-for-sale debt securities of $4.5 million for the three months ended March 31, 2023.

We recorded other comprehensive income of $6.5 million, or 0.3% of revenues, for the nine months ended March 31, 2023, compared with other comprehensive loss of $0.6 million, or 0.0% of revenues, for the nine months ended March 25, 2022. The increase in other comprehensive income was mainly due to (1) unrealized gain from mark-to-market of available-for-sale debt securities of $5.4 million for the nine months ended March 31, 2023, and (2) higher unrealized gain from mark-to-market of forward contracts and interest rate swap agreement of $1.7 million for the nine months ended March 31, 2023.

Liquidity and Capital Resources

Cash Flows and Working Capital

We primarily finance our operations through cash flow from operations. As of March 31, 2023 and March 25, 2022, we had cash, cash equivalents, and short-term investments of $538.7 million and $515.0 million, respectively, and outstanding debt of $15.2 million and $30.5 million, respectively.

Our cash and cash equivalents, which primarily consist of cash on hand, demand deposits, and liquid investments with original maturities of three months or less, are placed with banks and other financial institutions. The weighted-average interest rate on our cash and cash equivalents was 2.7% and 2.1% for the three and nine months ended March 31, 2023, respectively, and 0.4% and 0.5% for the three and nine months ended March 25, 2022, respectively.

Our cash investments are made in accordance with an investment policy approved by the audit committee of our board of directors. In general, our investment policy requires that securities purchased be rated A1, P-1, F1 or better. No security may have an effective maturity that exceeds three years. Our investments in fixed income securities are primarily classified as available-for-sale and are recorded at fair value. The cost of securities sold is based on the specific identification method. Unrealized gains and losses on these securities are recorded as other comprehensive income (loss) and are reported as a separate component of shareholders’ equity.

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During the nine months ended March 31, 2023, we repaid $12.2 million of the term loan under our 2019 Credit Facility Agreement. As a result, as of March 31, 2023, we had a long-term borrowing of $15.2 million under our 2019 Credit Facility Agreement (see Note 10 of Notes to Unaudited Condensed Consolidated Financial Statements for further details). We anticipate that our internally generated working capital, along with our cash and cash equivalents will be adequate to repay these obligations. To better manage our cash on hand, we held short-term investments of $308.0 million as of March 31, 2023.

We believe that our current cash and cash equivalents, short-term investments, cash flow from operations, and funds available through our credit facility will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our ability to sustain our working capital position is subject to a number of risks that we discuss in Part II, Item 1A of this Quarterly Report on Form 10-Q.

We also believe that our current manufacturing capacity is sufficient to meet our anticipated production requirements for at least the next few quarters.

The following table shows our cash flows for the periods indicated:

	Nine Months Ended
(in thousands)	March 31, 2023		March 25, 2022
Net cash provided by operating activities	$	142,222	$	107,897
Net cash used in investing activities	$	(70,449)	$	(83,218)
Net cash used in financing activities	$	(39,151)	$	(58,204)
Net increase (decrease) in cash, cash equivalents and restricted cash	$	32,622	$	(33,525)

Operating Activities

Cash provided by operating activities is net income adjusted for certain non-cash items and changes in certain assets and liabilities. The increase in cash provided by operating activities during the nine months ended March 31, 2023 as compared to the nine months ended March 25, 2022 was primarily driven by higher net income and was also affected by cash-favorable working capital changes.

Investing Activities

Investing cash flows consist primarily of investment purchases, sales, maturities, and disposals; and capital expenditures. Cash used in investing activities was lower for the nine months ended March 31, 2023 as compared to cash used in investing activities for the nine months ended March 25, 2022 primarily due to fewer capital expenditures and an increase in proceeds from sales and maturities of short-term investments, offset by higher investment purchases.

Financing Activities

Financing cash flows consist primarily of repayment of long-term debt, share repurchases, and withholding tax related to net share settlement of restricted share units. Cash used in financing activities was lower for the nine months ended March 31, 2023 as compared to the nine months ended March 25, 2022 primarily due to less cash paid for share repurchases and a decrease in withholding tax related to net share settlement of restricted share units, offset by an increase in the repayment of long-term borrowings due to an additional installment from the additional week in the first quarter of fiscal year 2023.

Recent Accounting Pronouncements

See Note 2 of Notes to Unaudited Condensed Consolidated Financial Statements for recent accounting pronouncements that could have an effect on us.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We had cash, cash equivalents, restricted cash and short-term investments totaling $538.7 million and $478.5 million as of March 31, 2023 and June 24, 2022, respectively. We have interest rate risk exposure relating to the interest income generated by excess cash invested in highly liquid investments with maturities of three months or less from the original dates of purchase. The cash, cash equivalents, and short-term investments are held for working capital purposes. We have not used derivative financial instruments in our investment portfolio. We have not been exposed nor do we anticipate being exposed to material risks due to changes in market interest rates. Declines in interest rates, however, will reduce future investment income. If overall interest rates had declined by 10 basis points during the nine months ended March 31, 2023 and March 25, 2022, our interest income would have decreased by approximately $0.3 million and $0.2 million, respectively, assuming consistent investment levels.

We also have interest rate risk exposure in movements in interest rates associated with our interest-bearing liabilities. The interest-bearing liabilities are denominated in U.S. dollars and the interest expense is based on LIBOR, plus an additional margin, depending on the lending institution. If the LIBOR had increased by 100 basis points during the nine months ended March 31, 2023 and March 25, 2022, our interest expense would have increased by approximately $0.2 million and $0.3 million, respectively, assuming consistent borrowing levels. As a result of the phase-out of LIBOR, we amended the Term Loan Agreement to replace the interest rate reference from LIBOR to the SOFR effective from September 29, 2023 (see Note 10).

We therefore entered into interest rate swap agreements (the “Swap Agreements”) to manage this risk and increase the profile of our debt obligation. The terms of the Swap Agreements allow us to effectively convert the floating interest rate to a fixed interest rate. This locks the variable interest expenses associated with our floating rate borrowings and results in fixed interest expenses that are unsusceptible to market rate increases. We designated the Swap Agreements as a cash flow hedge, and they qualify for hedge accounting because the hedges are highly effective. While we intend to continue to meet the conditions for hedge accounting, if hedges do not qualify as highly effective, the changes in the fair value of the derivatives used as hedges would be reflected in our earnings. From September 27, 2019, any gains or losses related to these outstanding interest rate swaps will be recorded in accumulated other comprehensive income in the unaudited condensed consolidated balance sheets, with subsequent reclassification to interest expense when settled.

We maintain an investment portfolio in a variety of financial instruments, including, but not limited to, U.S. government and agency bonds, corporate obligations, money market funds, asset-backed securities, and other investment-grade securities. The majority of these investments pay a fixed rate of interest. The securities in the investment portfolio are subject to market price risk due to changes in interest rates, perceived issuer creditworthiness, marketability, and other factors. These investments are generally classified as available-for-sale and, consequently, are recorded on our unaudited condensed consolidated balance sheets at fair value with unrealized gains or losses reported as a separate component of shareholders’ equity.

Investments in both fixed-rate and floating-rate interest earning instruments carry a degree of interest rate risk. The fair market values of our fixed-rate securities decline if interest rates rise, while floating-rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may be less than we expect because of changes in interest rates, or we may suffer losses in principal if forced to sell securities that have experienced a decline in market value because of changes in interest rates.

Foreign Currency Risk

As a result of our foreign operations, we have significant expenses, assets and liabilities that are denominated in foreign currencies. Substantially all of our employees and most of our facilities are located in Thailand, the PRC and the United Kingdom. Therefore, a substantial portion of our payroll as well as certain other operating expenses are paid in Thai baht, RMB and GBP. The significant majority of our revenues are denominated in U.S. dollars because our customer contracts generally provide that our customers will pay us in U.S. dollars.

As a consequence, our gross profit margins, operating results, profitability and cash flows are adversely impacted when the dollar depreciates relative to the Thai baht, the GBP or the RMB. We have a particularly significant currency rate exposure to changes in the exchange rate between the Thai baht, the GBP, the RMB and the U.S. dollar. We must translate foreign currency-denominated results of operations, assets and liabilities for our foreign subsidiaries to U.S. dollars in our unaudited condensed consolidated financial statements. Consequently, increases and decreases in the value of the U.S. dollar compared with such foreign currencies will affect our reported results of operations and the value of our assets and liabilities on our unaudited condensed consolidated balance sheets, even if our results of operations or the value of those assets and liabilities has

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not changed in its original currency. These transactions could significantly affect the comparability of our results between financial periods or result in significant changes to the carrying value of our assets, liabilities and shareholders’ equity.

We attempt to hedge against these exchange rate risks by entering into derivative instruments that are typically one to eighteen months in duration, leaving us exposed to longer term changes in exchange rates. Beginning December 28, 2019, we designated the foreign currency forward contracts used to hedge fluctuations in the U.S. dollar value of forecasted transactions denominated in Thai baht as cash flow hedges, as they qualified for hedge accounting because the hedges are highly effective. While we intend to continue to meet the conditions for hedge accounting, if hedges do not qualify as highly effective, the changes in the fair value of the derivatives used as hedges would be reflected in our earnings. Any gains or losses related to these outstanding foreign currency forward contracts will be recorded in accumulated other comprehensive income (loss) in the unaudited condensed consolidated balance sheets, with subsequent reclassification to the same statement of operations and comprehensive income line item as the earnings effect of hedge items when settled. We recorded unrealized gain of $1.8 million and $0.6 million for the nine months ended March 31, 2023 and March 25, 2022, respectively, related to derivatives that are not designated as hedging instruments. As foreign currency exchange rates fluctuate relative to the U.S. dollar, we expect to incur foreign currency translation adjustments and may incur foreign currency exchange losses. For example, a 10% weakening in the U.S. dollar against the Thai baht, the RMB and the GBP would have resulted in a decrease in our net dollar position of approximately $6.8 million and $5.3 million as of March 31, 2023 and June 24, 2022, respectively. We cannot give any assurance as to the effect that future changes in foreign currency rates will have on our unaudited condensed consolidated financial position, operating results or cash flows.

Credit Risk

Credit risk refers to our exposures to financial institutions, suppliers and customers that have in the past and may in the future experience financial difficulty, particularly in light of recent conditions in the credit markets and the global economy. As of March 31, 2023, our cash and cash equivalents were held in deposits and highly liquid investment products with maturities of three months or less with banks and other financial institutions having credit ratings of A minus or above. Our short-term investments as of March 31, 2023 are held in various financial institutions with a maturity limit not to exceed three years, and all securities are rated A1, P-1, F1 or better. We continue to monitor our surplus cash and consider investment in corporate and U.S. government debt as well as certain available-for-sale and held-to-maturity securities in accordance with our investment policy. We generally monitor the financial performance of our suppliers and customers, as well as other factors that may affect their access to capital and liquidity. Presently, we believe that we will not incur material losses due to our exposures to such credit risk.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our chief executive officer and chief financial officer concluded that as of the end of the period covered by this Quarterly Report on Form10-Q, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and include controls and procedures designed to ensure that the information required to be disclosed by us in such reports is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures. Management’s assessment of the effectiveness of our internal control over financial reporting is expressed at the level of reasonable assurance because a control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system’s objectives will be met.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may be involved in litigation relating to claims arising in the ordinary course of our business. There are currently no material claims or actions pending or threatened against us.

ITEM 1A. RISK FACTORS

Investing in our ordinary shares involves a high degree of risk. You should carefully consider the following risks, as well as the other information contained in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and the related notes, before investing in our ordinary shares. The risks and uncertainties described below are not the only ones that we may face. Additional risks and uncertainties of which we are unaware, or that we currently deem immaterial, also may become important factors that affect us or our ordinary shares. If any of the following risks actually occur, they may harm our business, financial condition and operating results. In this event, the market price of our ordinary shares could decline, and you could lose some or all of your investment.

COVID-19 and Macroeconomic Environment Updates

The COVID-19 pandemic has adversely affected the global economy, disrupted global supply chains and created significant volatility in the financial markets. In addition, the pandemic has, at times, resulted in travel restrictions, business closures and the institution of quarantines and other restrictions on movement in many communities.

In China, the relaxation in early December 2022 of restrictions related to COVID-19 coincided with a surge in COVID-19 infections, which peaked in the last week of December 2022 and subsided by the second half of January 2023. While the surge in China significantly disrupted our operations there, our operating results were not significantly affected due to the successful execution of our contingency plan and various precautionary measures we have undertaken. However, the extent of the impact of COVID-19 on our future business, financial condition and operating results will depend largely on future developments, including (i) the duration and magnitude of the pandemic; (ii) the measures taken by governmental authorities and private sectors to limit the spread of COVID-19; (iii) our ability to continue providing products and services; and (iv) the effect of the pandemic and resulting global economic uncertainty and financial market volatility on our customers, all of which are highly uncertain and unpredictable. While we have updated our risk factors to reflect risks of which we are aware, additional impacts may arise that we are not aware of currently.

In March 2023, the bank failures of Silicon Valley Bank and Signature Bank created significant market disruption and uncertainty within the U.S. banking sector, in particular with respect to regional banks. While we do not hold any investments or deposits with regional banks in the U.S., we continue to monitor the impacts of this situation but do not anticipate a significant impact on our future results of operations or financial position.

In addition, increased international political instability, evidenced by the threat or occurrence of terrorist attacks, enhanced national security measures, Russia’s invasion of Ukraine, conflicts in the Middle East and Asia, strained international relations arising from these conflicts and the related decline in consumer confidence and economic weakness, may hinder our ability to do business. Although such events have not significantly affected our business or operations, the ultimate impact is unknown and future developments could adversely affect our financial condition and operating results.

Company and Operational Risks

Our sales depend on a small number of customers. A reduction in orders from any of these customers, the loss of any of these customers, or a customer exerting significant pricing and margin pressures on us could harm our business, financial condition and operating results.

We have depended, and will continue to depend, upon a small number of customers for a significant percentage of our revenues. During the three months ended March 31, 2023 and March 25, 2022, we had four customers and three customers, respectively, that each contributed 10% or more of our revenues. Such customers together accounted for 52.8% and 48.3% of our revenues during the respective periods. During each of the nine months ended March 31, 2023 and March 25, 2022, we had three customers that each contributed 10% or more of our revenues. Such customers together accounted for 45.1% and 48.5% of our revenues during the respective periods. Dependence on a small number of customers means that a reduction in orders from, a loss of, or other adverse actions by any one of these customers would reduce our revenues and could have a material adverse effect on our business, financial condition and operating results.

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Further, our customer concentration increases the concentration of our accounts receivable and our exposure to payment default by any of our key customers. Many of our existing and potential customers have substantial debt burdens, have experienced financial distress or have static or declining revenues, all of which may be exacerbated by the global economic downturn and uncertainty due to COVID-19 and subsequent adverse conditions in the credit markets, as well as the impact of the U.S.-China trade dispute. Certain of our customers have gone out of business, declared bankruptcy, been acquired, or announced their withdrawal from segments of the optics market. We generate significant accounts payable and inventory for the services that we provide to our customers, which could expose us to substantial and potentially unrecoverable costs if we do not receive payment from our customers.

Our reliance on a small number of customers gives our customers substantial purchasing power and leverage in negotiating contracts with us. In addition, although we enter into master supply agreements with our customers, the level of business to be transacted under those agreements is not guaranteed. Instead, we are awarded business under those agreements on a project-by-project basis. Some of our customers have at times significantly reduced or delayed the volume of manufacturing services that they order from us. If we are unable to maintain our relationships with our existing significant customers, our business, financial condition and operating results could be harmed.

Consolidation in the markets we serve could harm our business, financial condition and operating results.

Consolidation in the markets we serve has resulted in a reduction in the number of potential customers for our services. For example, Lumentum Holdings Inc. (“Lumentum”) completed its acquisition of NeoPhotonics Corporation in August 2022; Coherent Corp. (formerly known as II-VI Incorporated) completed its acquisition of Coherent, Inc. in July 2022; Cisco Systems, Inc. completed its acquisition of Acacia Communications Inc. in March 2021; Coherent Corp. completed its acquisition of Finisar Corporation in September 2019; and Lumentum completed its acquisition of Oclaro, Inc. in December 2018. In some cases, consolidation among our customers has led to a reduction in demand for our services as customers have acquired the capacity to manufacture products in-house.

Consolidation among our customers and their customers will continue to adversely affect our business, financial condition and operating results in several ways. Consolidation among our customers and their customers may result in a smaller number of large customers whose size and purchasing power give them increased leverage that may result in, among other things, decreases in our average selling prices. In addition to pricing pressures, this consolidation may also reduce overall demand for our manufacturing services if customers obtain new capacity to manufacture products in-house or discontinue duplicate or competing product lines in order to streamline operations. If demand for our manufacturing services decreases, our business, financial condition and operating results could be harmed.

If the optical communications market does not expand as we expect, our business may not grow as fast as we expect, which could adversely impact our business, financial condition and operating results.

Revenues from optical communications products represented 75.5% and 78.0% of our revenues for the three months ended March 31, 2023 and March 25, 2022, respectively. Our future success as a provider of precision optical, electro-mechanical and electronic manufacturing services for the optical communications market depends on the continued growth of the optics industry and, in particular, the continued expansion of global information networks, particularly those directly or indirectly dependent upon a fiber optic infrastructure. As part of that growth, we anticipate that demand for voice, video, and other data services delivered over high-speed connections (both wired and wireless) will continue to increase. Without network and bandwidth growth, the need for enhanced communications products would be jeopardized. Currently, demand for network services and for high-speed broadband access, in particular, is increasing but growth may be limited by several factors, including, among others: (1) relative strength or weakness of the global economy or the economy in certain countries or regions, (2) an uncertain regulatory environment, and (3) uncertainty regarding long-term sustainable business models as multiple industries, such as the cable, traditional telecommunications, wireless and satellite industries, offer competing content delivery solutions. The optical communications market also has experienced periods of overcapacity, some of which have occurred even during periods of relatively high network usage and bandwidth demands. If the factors described above were to slow, stop or reverse the expansion in the optical communications market, our business, financial condition and operating results would be negatively affected.

Our quarterly revenues, gross profit margins and operating results have fluctuated significantly and may continue to do so in the future, which may cause the market price of our ordinary shares to decline or be volatile.

Our quarterly revenues, gross profit margins and operating results have fluctuated significantly and may continue to fluctuate significantly in the future. For example, any of the risks described in this “Risk Factors” section and, in particular, the following factors, could cause our revenues, gross profit margins and operating results to fluctuate from quarter to quarter:

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•any reduction in customer demand or our ability to fulfill customer orders as a result of disruptions in our supply chain caused by COVID-19 or geopolitical conflicts such as the ongoing armed conflict in Ukraine;

•our ability to acquire new customers and retain our existing customers;

•the cyclicality of the optical communications, industrial lasers, medical and sensors markets;

•competition;

•our ability to achieve favorable pricing for our services;

•the effect of fluctuations in foreign currency exchange rates;

•our ability to manage our headcount and other costs; and

•changes in the relative mix in our revenues.

Therefore, we believe that quarter-to-quarter comparisons of our operating results may not be useful in predicting our future operating results. You should not rely on our results for one quarter as any indication of our future performance. Quarterly variations in our operations could result in significant volatility in the market price of our ordinary shares.

If we are unable to continue diversifying our precision optical and electro-mechanical manufacturing services across other markets within the optics industry, such as the semiconductor processing, biotechnology, metrology and material processing markets, or if these markets do not grow as fast as we expect, our business may not grow as fast as we expect, which could adversely impact our business, financial condition and operating results.

We intend to continue diversifying across other markets within the optics industry, such as the semiconductor processing, biotechnology, metrology, and material processing markets, to reduce our dependence on the optical communications market and to grow our business. Currently, the optical communications market contributes the significant majority of our revenues. There can be no assurance that our efforts to further expand and diversify into other markets within the optics industry will prove successful or that these markets will continue to grow as fast as we expect. If the opportunities presented by these markets prove to be less than anticipated, if we are less successful than expected in diversifying into these markets, or if our margins in these markets prove to be less than expected, our growth may slow or stall, and we may incur costs that are not offset by revenues in these markets, all of which could harm our business, financial condition and operating results.

We face significant competition in our business. If we are unable to compete successfully against our current and future competitors, our business, financial condition and operating results could be harmed.

Our current and prospective customers tend to evaluate our capabilities against the merits of their internal manufacturing as well as the capabilities of other third-party manufacturers. We believe the internal manufacturing capabilities of current and prospective customers are our primary competition. This competition is particularly strong when our customers have excess manufacturing capacity, as was the case when the markets that we serve experienced a significant downturn in 2008 and 2009 that resulted in underutilized capacity. Should our existing and potential customers have excess manufacturing capacity at their facilities, it could adversely affect our business. In addition, as a result of the 2011 flooding in Thailand, some of our customers began manufacturing products internally or using other third-party manufacturers that were not affected by the flooding. If our customers choose to manufacture products internally rather than to outsource production to us, or choose to outsource to a different third-party manufacturer, our business, financial condition and operating results could be harmed.

Competitors in the market for optical manufacturing services include Benchmark Electronics, Inc., Celestica Inc., Sanmina-SCI Corporation, Jabil Circuit, Inc., and Venture Corporation Limited. Our customized optics and glass operations face competition from companies such as Browave Corporation, Fujian Castech Crystals, Inc., Photop Technologies, Inc., and Research Electro-Optic, Inc. Other existing contract manufacturing companies, original design manufacturers or outsourced semiconductor assembly and test companies could also enter our target markets. In addition, we may face new competitors as we attempt to penetrate new markets.

Many of our customers and potential competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater resources than we have. These advantages may allow them to devote greater resources than we can to the development and promotion of service offerings that are similar or superior to our service offerings. These competitors may also engage in more extensive research and development, undertake more far-reaching marketing campaigns, adopt more aggressive pricing policies or offer services that achieve greater market acceptance than ours. These competitors may also compete with us by making more attractive offers to our existing and potential employees, suppliers, and strategic

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partners. Further, consolidation in the optics industry could lead to larger and more geographically diverse competitors. New and increased competition could result in price reductions for our services, reduced gross profit margins or loss of market share. We may not be able to compete successfully against our current and future competitors, and the competitive pressures we face may harm our business, financial condition and operating results.

Cancellations, delays or reductions of customer orders and the relatively short-term nature of the commitments of our customers could harm our business, financial condition and operating results.

We do not typically obtain firm purchase orders or commitments from our customers that extend beyond 13 weeks. While we work closely with our customers to develop forecasts for periods of up to one year, these forecasts are not binding and may be unreliable. Customers may cancel their orders, change production quantities from forecasted volumes or delay production for a number of reasons beyond our control. Any material delay, cancellation or reduction of orders could cause our revenues to decline significantly and could cause us to hold excess materials. Many of our costs and operating expenses are fixed. As a result, a reduction in customer demand could decrease our gross profit and harm our business, financial condition and operating results.

In addition, we make significant decisions with respect to production schedules, material procurement commitments, personnel needs and other resource requirements based on our estimate of our customers’ requirements. The short-term nature of our customers’ commitments and the possibility of rapid changes in demand for their products reduce our ability to accurately estimate the future requirements of our customers. Inability to forecast the level of customer orders with certainty makes it difficult to allocate resources to specific customers, order appropriate levels of materials and maximize the use of our manufacturing capacity. This could also lead to an inability to meet a spike in production demand, all of which could harm our business, financial condition and operating results.

Our exposure to financially troubled customers or suppliers could harm our business, financial condition and operating results.

Some of our customers and suppliers have in the past and may in the future experience financial difficulty, particularly in light of the global economic downturn and uncertainty due to COVID-19 and subsequent adverse conditions in the credit markets that have affected access to capital and liquidity. In addition, the recent failures of Silicon Valley Bank and Signature Bank created significant market disruption and uncertainty within the U.S. banking sector, in particular with respect to regional banks. During challenging economic times, our customers may face challenges in gaining timely access to sufficient credit, which could impact their ability to make timely payments to us. As a result, we devote significant resources to monitor receivables and inventory balances with certain of our customers. If our customers experience financial difficulty, we could have difficulty recovering amounts owed to us from these customers, or demand for our services from these customers could decline. If our suppliers experience financial difficulty, we could have trouble sourcing materials necessary to fulfill production requirements and meet scheduled shipments. Any such financial difficulty could adversely affect our operating results and financial condition by resulting in a reduction in our revenues, a charge for inventory write-offs, a provision for doubtful accounts, and larger working capital requirements due to increased days in inventory and days in accounts receivable.

We purchase some of the critical materials used in certain of our products from a single source or a limited number of suppliers. Supply shortages have in the past, and could in the future, impair the quality, reduce the availability or increase the cost of materials, which could harm our revenues, profitability and customer relations.

We rely on a single source or a limited number of suppliers for critical materials used in a significant number of the products we manufacture. We generally purchase these single or limited source materials through standard purchase orders and do not maintain long-term supply agreements with our suppliers. We generally use a rolling 12-month forecast based on anticipated product orders, customer forecasts, product order history, backlog, and warranty and service demand to determine our materials requirements. Lead times for the parts and components that we order vary significantly and depend on factors such as manufacturing cycle times, manufacturing yields, and the availability of raw materials used to produce the parts or components. Historically, we have experienced supply shortages resulting from various causes, including reduced yields by our suppliers, which prevented us from manufacturing products for our customers in a timely manner. Currently, we are experiencing various levels of semiconductor impact due to a significant global shortage. The semiconductor supply chain is complex, and a constrained wafer capacity is occurring deep in the chain. During the COVID-19 pandemic, there has been a surging demand for consumer electronics, which in turn has increased the demand for semiconductors. At the same time, wafer foundries that support chipmakers have not invested enough in recent years to increase capacities to the levels needed to support current demand from all of their customers. Wafers have a long lead time for production, in some cases up to 30 weeks, which further exacerbates the shortage. A shortage of semiconductors or other key components can cause a significant disruption to our production schedule and have a substantial adverse effect on our business, financial condition and operating results.

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Our revenues, profitability and customer relations will be harmed by continued fluctuations in the availability of materials, a stoppage or delay of supply, a substitution of more expensive or less reliable parts, the receipt of defective parts or contaminated materials, an increase in the price of supplies, or an inability to obtain reductions in price from our suppliers in response to competitive pressures. We continue to undertake programs to strengthen our supply chain. Nevertheless, we are experiencing, and expect for the foreseeable future to experience, strain on our supply chain, as well as periodic supplier problems. These supply chain issues have impacted, and will continue to impact, our ability to generate revenue. In addition, we have incurred, and expect for the foreseeable future to incur, increased costs related to our efforts to address these problems.

Managing our inventory is complex and may require write-downs due to excess or obsolete inventory, which could cause our operating results to decrease significantly in a given fiscal period.

Managing our inventory is complex. We are generally required to procure materials based upon the anticipated demand of our customers. The inaccuracy of these forecasts or estimates could result in excess supply or shortages of certain materials. Inventory that is not used or expected to be used as and when planned may become excess or obsolete. Generally, we are unable to use most of the materials purchased for one of our customers to manufacture products for any of our other customers. Additionally, we could experience reduced or delayed product shipments or incur additional inventory write-downs and cancellation charges or penalties, which would increase costs and could harm our business, financial condition and operating results. While our agreements with customers are structured to mitigate our risks related to excess or obsolete inventory, enforcement of these provisions may result in material expense, and delay in payment for inventory. If any of our significant customers becomes unable or unwilling to purchase inventory or does not agree to such contractual provisions in the future, our business, financial condition and operating results may be harmed.

If we fail to adequately expand our manufacturing capacity, we will not be able to grow our business, which would harm our business, financial condition and operating results. Conversely, if we expand too much or too rapidly, we may experience excess capacity, which would harm our business, financial condition and operating results.

We may not be able to pursue many large customer orders or sustain our historical growth rates if we do not have sufficient manufacturing capacity to enable us to commit to provide customers with specified quantities of products. If our customers do not believe that we have sufficient manufacturing capacity, they may: (1) outsource all of their production to another manufacturer that they believe can fulfill all of their production requirements; (2) look to a second manufacturer for the manufacture of additional quantities of the products that we currently manufacture for them; (3) manufacture the products themselves; or (4) decide against using our services for their new products.

Most recently, we expanded our manufacturing capacity by building a new facility at our Chonburi campus in Thailand in 2022. We may continue to devote significant resources to the expansion of our manufacturing capacity, and any such expansion will be expensive, will require management’s time and may disrupt our operations. In the event we are unsuccessful in our attempts to expand our manufacturing capacity, our business, financial condition and operating results could be harmed.

However, if we successfully expand our manufacturing capacity but are unable to promptly utilize the additional space due to reduced demand for our services or an inability to win new projects, add new customers or penetrate new markets, or if the optics industry does not grow as we expect, we may experience periods of excess capacity, which could harm our business, financial condition and operating results.

We may experience manufacturing yields that are lower than expected, potentially resulting in increased costs, which could harm our business, operating results and customer relations.

Manufacturing yields depend on a number of factors, including the following:

•the quality of input, materials and equipment;

•the quality and feasibility of our customer’s design;

•the repeatability and complexity of the manufacturing process;

•the experience and quality of training of our manufacturing and engineering teams; and

•the monitoring of the manufacturing environment.

Lower volume production due to continually changing designs generally results in lower yields. Manufacturing yields and margins can also be lower if we receive or inadvertently use defective or contaminated materials from our suppliers. In addition, our customer contracts typically provide that we will supply products at a fixed price each quarter, which assumes

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specific production yields and quality metrics. If we do not meet the yield assumptions and quality metrics used in calculating the price of a product, we may not be able to recover the costs associated with our failure to do so. Consequently, our operating results and profitability may be harmed.

If the products that we manufacture contain defects, we could incur significant correction costs, demand for our services may decline and we may be exposed to product liability and product warranty claims, which could harm our business, financial condition, operating results and customer relations.

We manufacture products to our customers’ specifications, and our manufacturing processes and facilities must comply with applicable statutory and regulatory requirements. In addition, our customers’ products and the manufacturing processes that we use to produce them are often complex. As a result, products that we manufacture may at times contain manufacturing or design defects, and our manufacturing processes may be subject to errors or fail to be in compliance with applicable statutory or regulatory requirements. Additionally, not all defects are immediately detectable. The testing procedures of our customers are generally limited to the evaluation of the products that we manufacture under likely and foreseeable failure scenarios. For various reasons (including, among others, the occurrence of performance problems that are unforeseeable at the time of testing or that are detected only when products are fully deployed and operated under peak stress conditions), these products may fail to perform as expected after their initial acceptance by a customer.

We generally provide a warranty of between one to five years on the products that we manufacture for our customers. This warranty typically guarantees that products will conform to our customers’ specifications and be free from defects in workmanship. Defects in the products we manufacture, whether caused by a design, engineering, manufacturing or component failure or by deficiencies in our manufacturing processes, and whether such defects are discovered during or after the warranty period, could result in product or component failures, which may damage our business reputation, whether or not we are indemnified for such failures. We could also incur significant costs to repair or replace defective products under warranty, particularly when such failures occur in installed systems. In some instances, we may also be required to incur costs to repair or replace defective products outside of the warranty period in the event that a recurring defect is discovered in a certain percentage of a customer’s products delivered over an agreed upon period of time. We have experienced product or component failures in the past and remain exposed to such failures, as the products that we manufacture are widely deployed throughout the world in multiple environments and applications. Further, due to the difficulty in determining whether a given defect resulted from our customer’s design of the product or our manufacturing process, we may be exposed to product liability or product warranty claims arising from defects that are not attributable to our manufacturing process. In addition, if the number or type of defects exceeds certain percentage limitations contained in our contractual arrangements, we may be required to conduct extensive failure analysis, re-qualify for production or cease production of the specified products.

Product liability claims may include liability for personal injury or property damage. Product warranty claims may include liability for a recall, repair or replacement of a product or component. Although liability for these claims is generally assigned to our customers in our contracts, even where they have assumed liability our customers may not, or may not have the resources to, satisfy claims for costs or liabilities arising from a defective product. Additionally, under one of our contracts, in the event the products we manufacture do not meet the end-customer’s testing requirements or otherwise fail, we may be required to pay penalties to our customer, including a fee during the time period that the customer or end-customer’s production line is not operational as a result of the failure of the products that we manufacture, all of which could harm our business, operating results and customer relations. If we engineer or manufacture a product that is found to cause any personal injury or property damage or is otherwise found to be defective, we could incur significant costs to resolve the claim. While we maintain insurance for certain product liability claims, we do not maintain insurance for any recalls and, therefore, would be required to pay any associated costs that are determined to be our responsibility. A successful product liability or product warranty claim in excess of our insurance coverage or any material claim for which insurance coverage is denied, limited, is not available or has not been obtained could harm our business, financial condition and operating results.

If we fail to attract additional skilled employees or retain key personnel, our business, financial condition and operating results could suffer.

Our future success depends, in part, upon our ability to attract additional skilled employees and retain our current key personnel. We have identified several areas where we intend to expand our hiring, including business development, finance, human resources, operations and supply chain management. We may not be able to hire and retain such personnel at compensation levels consistent with our existing compensation and salary structure. Our future also depends on the continued contributions of our executive management team and other key management and technical personnel, each of whom would be difficult to replace. Although we have key person life insurance policies on some of our executive officers, the loss of any of our executive officers or key personnel or the inability to continue to attract qualified personnel could harm our business, financial condition and operating results.

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Risks Related to Our International Operations

Fluctuations in foreign currency exchange rates and changes in governmental policies regarding foreign currencies could increase our operating costs, which would adversely affect our operating results.

Volatility in the functional and non-functional currencies of our entities and the U.S. dollar could seriously harm our business, financial condition and operating results. The primary impact of currency exchange fluctuations is on our cash, receivables, and payables of our operating entities. We may experience significant unexpected losses from fluctuations in exchange rates. For example, in the three months ended December 30, 2022, we experienced a $3.9 million foreign exchange loss, which negatively affected our net income per share for the same period by $0.11.

Our customer contracts generally require that our customers pay us in U.S. dollars. However, the majority of our payroll and other operating expenses are paid in Thai baht. As a result of these arrangements, we have significant exposure to changes in the exchange rate between the Thai baht and the U.S. dollar, and our operating results are adversely impacted when the U.S. dollar depreciates relative to the Thai baht and other currencies. As of March 31, 2023, the U.S. dollar had appreciated approximately 9.4% against the Thai baht since March 26, 2021. While we attempt to hedge against certain exchange rate risks, we typically enter into hedging contracts with maturities of up to 12 months, leaving us exposed to longer term changes in exchange rates.

Additionally, we have significant exposure to changes in the exchange rate between the Chinese Renminbi (“RMB”) and pound sterling (“GBP”) and the U.S. dollar. The expenses of our subsidiaries located in the PRC and the United Kingdom are denominated in RMB and GBP, respectively. Currently, RMB are convertible in connection with trade and service-related foreign exchange transactions, foreign debt service, and payment of dividends. The PRC government may at its discretion restrict access in the future to foreign currencies for current account transactions. If this occurs, our PRC subsidiary may not be able to pay us dividends in U.S. dollars without prior approval from the PRC State Administration of Foreign Exchange. In addition, conversion of RMB for most capital account items, including direct investments, is still subject to government approval in the PRC. This restriction may limit our ability to invest the earnings of our PRC subsidiary. As of March 31, 2023, the U.S. dollar had appreciated approximately 4.9% against the RMB since March 26, 2021. There remains significant international pressure on the PRC government to adopt a substantially more liberalized currency policy. GBP are convertible in connection with trade- and service-related foreign exchange transactions and foreign debt service. As of March 31, 2023, the U.S. dollar had appreciated approximately 11.0% against the GBP since March 26, 2021. Any appreciation in the value of the RMB and GBP against the U.S. dollar could negatively impact our operating results.

We conduct operations in a number of countries, which creates logistical and communications challenges for us and exposes us to other risks and challenges that could harm our business, financial condition and operating results.

The vast majority of our operations, including manufacturing and customer support, are located primarily in the Asia- Pacific region. The distances between Thailand, the PRC and our customers and suppliers globally create a number of logistical and communications challenges for us, including managing operations across multiple time zones, directing the manufacture and delivery of products across significant distances, coordinating the procurement of raw materials and their delivery to multiple locations and coordinating the activities and decisions of our management team, the members of which are based in different countries.

Our customers are located throughout the world, and our principal manufacturing facilities are located in Thailand. Revenues from the bill-to-location of customers outside of North America accounted for 52.5% and 47.5% of our revenues for the three months ended March 31, 2023 and March 25, 2022, respectively. We expect that revenues from the bill-to-location of customers outside of North America will continue to account for a significant portion of our revenues. Our customers also depend on international sales, which further exposes us to the risks associated with international operations. Conducting business outside the United States subjects us to a number of additional risks and challenges, including:

•compliance with a variety of domestic and foreign laws and regulations, including trade regulatory requirements;

•periodic changes in a specific country or region’s economic conditions, such as recession;

•unanticipated restrictions on our ability to sell to foreign customers where sales of products and the provision of services may require export licenses or are prohibited by government action (for example, in early 2018, the U.S. Department of Commerce prohibited the export and sale of a broad category of U.S. products, as well as the provision of services, to ZTE Corporation, and in 2019, to Huawei, both of which are customers of certain of our customers);

•fluctuations in currency exchange rates;

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•inadequate protection of intellectual property rights in some countries; and

•political, legal and economic instability, foreign conflicts, and the impact of regional and global infectious illnesses in the countries in which we and our customers and suppliers are located (for example, disruptions to international operations associated with the occurrence of the COVID-19 pandemic or the ongoing armed conflict in Ukraine).

Our failure to manage the risks and challenges associated with our international operations could have a material adverse effect on our business.

We are subject to governmental export and import controls in several jurisdictions that subject us to a variety of risks, including liability, impairment of our ability to compete in international markets, and decreased sales and customer orders.

We are subject to governmental export and import controls in Thailand, the PRC, the United Kingdom and the United States that may limit our business opportunities. Various countries regulate the import of certain technologies and have enacted laws or taken actions that could limit (1) our ability to export or sell the products we manufacture and (2) our customers’ ability to export or sell products that we manufacture for them. The export of certain technologies from the United States, the United Kingdom and other nations to the PRC is barred by applicable export controls, and similar prohibitions could be extended to Thailand, thereby limiting our ability to manufacture certain products. Any change in export or import regulations or related legislation, shift in approach to the enforcement of existing regulations, or change in the countries, persons or technologies targeted by such regulations could limit our ability to offer our manufacturing services to existing or potential customers, which could harm our business, financial condition and operating results.

For example, the May 2019 addition of Huawei and certain affiliates by the U.S. Commerce Department’s Bureau of Industry and Security ("BIS") to the BIS Entity List denied Huawei the ability to purchase products, software and technology that are subject to U.S. Export Administration Regulations. Although we do not sell directly to Huawei, some of our customers do sell to Huawei (and its affiliates) directly. To ensure compliance, some of our customers immediately suspended shipments to Huawei in order to assess whether their products were subject to the restrictions resulting from the ban. This had an immediate impact on our customer orders in the fourth quarter of fiscal year 2019, which affected our revenue for that quarter. We expect this ban to continue to adversely affect orders from our customers for the foreseeable future.

We are subject to risks related to the ongoing U.S.-China trade dispute, including increased tariffs on materials that we use in manufacturing, which could adversely affect our business, financial condition and operating results.

In August 2019, the U.S. imposed tariffs on a wide range of products and goods manufactured in the PRC that are directly or indirectly imported into the U.S. Although the U.S. announced on January 15, 2020 the reduction of certain tariffs on Chinese imported goods and delayed the implementation of certain other related tariffs, we have no assurance that the U.S. will not continue to increase or impose tariffs on imports from the PRC or alter trade agreements and terms between the PRC and the U.S., which may include limiting trade with the PRC. Trade restrictions, including tariffs, quotas, embargoes, safeguards and customs restrictions, could increase the cost of materials we use to manufacture certain products, which could result in lower margins. The tariffs could also result in disruptions to our supply chain, as suppliers struggle to fill orders from companies trying to purchase goods in bulk ahead of announced tariffs taking effect. The adoption of trade tariffs both globally and between the U.S. and the PRC specifically could also cause a decrease in the sales of our customers’ products to end-users located in the PRC, which could directly impact our revenues in the form of reduced orders. If existing tariffs are raised further, or if new tariffs are imposed on additional categories of components used in our manufacturing activities, and if we are unable to pass on the costs of such tariffs to our customers, our operating results would be harmed.

Political unrest and demonstrations, as well as changes in the political, social, business or economic conditions in Thailand, could harm our business, financial condition and operating results.

The majority of our assets and manufacturing operations are located in Thailand. Therefore, political, social, business and economic conditions in Thailand have a significant effect on our business. Any changes to tax regimes, laws, exchange controls or political action in Thailand may harm our business, financial condition and operating results.

Thailand has a history of political unrest that includes the involvement of the military as an active participant in the ruling government. In recent years, political unrest in the country has sparked political demonstrations and, in some instances, violence. Any future political instability in Thailand could prevent shipments from entering or leaving the country, disrupt our ability to manufacture products in Thailand, and force us to transfer our operations to more stable, and potentially more costly, regions, which would harm our business, financial condition and operating results.

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Further, the Thai government may raise the minimum wage standards for labor and could repeal certain promotional certificates that we have received or tax holidays for certain export and value added taxes that we enjoy, either preventing us from engaging in our current or anticipated activities or subjecting us to higher tax rates.

We expect to continue to invest in our manufacturing operations in the PRC, which will continue to expose us to risks inherent in doing business in the PRC, any of which risks could harm our business, financial condition and operating results.

We anticipate that we will continue to invest in our customized optics manufacturing facilities located in Fuzhou, the PRC. Because these operations are located in the PRC, they are subject to greater political, legal and economic risks than the geographies in which the facilities of many of our competitors and customers are located. In particular, the political and economic climate in the PRC (both at national and regional levels) is fluid and unpredictable. A large part of the PRC’s economy is still being operated under varying degrees of control by the PRC government. By imposing industrial policies and other economic measures, such as control of foreign exchange, taxation, import and export tariffs, environmental regulations, land use rights, intellectual property and restrictions on foreign participation in the domestic market of various industries, the PRC government exerts considerable direct and indirect influence on the development of the PRC economy. Many of the economic reforms carried out by the PRC government are unprecedented or experimental and are expected to change further. Any changes to the political, legal or economic climate in the PRC could harm our business, financial condition and operating results.

Our PRC subsidiary is a “wholly foreign-owned enterprise” and is therefore subject to laws and regulations applicable to foreign investment in the PRC, in general, and laws and regulations applicable to wholly foreign-owned enterprises, in particular. The PRC has made significant progress in the promulgation of laws and regulations pertaining to economic matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. However, the promulgation of new laws, changes in existing laws and abrogation of local regulations by national laws may have a negative impact on our business and prospects. In addition, these laws and regulations are relatively new, and published cases are limited in volume and non-binding. Therefore, the interpretation and enforcement of these laws and regulations involve significant uncertainties. Laws may be changed with little or no prior notice, for political or other reasons. These uncertainties could limit the legal protections available to foreign investors. Furthermore, any litigation in the PRC may be protracted and result in substantial costs and diversion of resources and management’s attention.

Natural disasters, epidemics (including COVID-19), acts of terrorism and political and economic developments could harm our business, financial condition and operating results.

Natural disasters could severely disrupt our manufacturing operations and increase our supply chain costs. These events, over which we have little or no control, could cause a decrease in demand for our services, make it difficult or impossible for us to manufacture and deliver products or for our suppliers to deliver components allowing us to manufacture those products, require large expenditures to repair or replace our facilities, or create delays and inefficiencies in our supply chain. For example, the 2011 flooding in Thailand forced us to temporarily shut down all of our manufacturing facilities in Thailand and cease production permanently at our former Chokchai facility, which adversely affected our ability to meet our customers’ demands during fiscal year 2012.

In some countries in which we operate, including the PRC, the U.S., the U.K. and Thailand, outbreaks of infectious diseases such as COVID-19, H1N1 influenza virus, severe acute respiratory syndrome or bird flu could disrupt our manufacturing operations, reduce demand for our customers’ products and increase our supply chain costs. For example, our facility in Fuzhou, the PRC, which manufactures custom optics components, was not permitted to resume operations for a period of two weeks in February 2020 due to the outbreak of COVID-19, which negatively affected our revenues for the three months ended March 27, 2020. In addition, we and some of our suppliers and customers in the PRC experienced labor shortages during the three months ended March 27, 2020 due to travel restrictions imposed by the Chinese government. We continue to take precautionary measures including leaves of absence for affected employees and their close contacts, stringent contact tracing, enhanced safe distancing measures, and arrangements for the vaccination of our employees in Thailand. Any worsening of the pandemic may result in more stringent measures being implemented by local authorities, such as shutting down our manufacturing facilities, which would have a significant negative impact on our operations.

While we are unable to accurately predict the full impact that COVID-19 will have on our business, financial condition and operating results due to numerous uncertainties, including the duration and severity of the pandemic as well as related containment measures ordered by government authorities, our compliance with such measures has already impacted our day-to-day operations and could continue to disrupt our business, as well as that of our customers, suppliers and other counterparties, for an indefinite period of time.

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In addition, increased international political instability, evidenced by the threat or occurrence of terrorist attacks, enhanced national security measures, Russia’s invasion of Ukraine, conflicts in the Middle East and Asia, strained international relations arising from these conflicts and the related decline in consumer confidence and economic weakness, may hinder our ability to do business. Any escalation in these events or similar future events may disrupt our operations and the operations of our customers and suppliers and may affect the availability of materials needed for our manufacturing services. Such events may also disrupt the transportation of materials to our manufacturing facilities and finished products to our customers. These events have had, and may continue to have, an adverse impact on the U.S. and world economy in general, and customer confidence and spending in particular, which in turn could adversely affect our total revenues and operating results. The impact of these events on the volatility of the U.S. and world financial markets also could increase the volatility of the market price of our ordinary shares and may limit the capital resources available to us, our customers and our suppliers.

Financial Risks

Unfavorable worldwide economic conditions (including inflation and supply chain disruptions) may negatively affect our business, financial condition and operating results.

The global economic downturn and uncertainty due to the effects of COVID-19 and subsequent volatility and adverse conditions in the capital and credit markets have negatively affected levels of business and consumer spending, heightening concerns about the likelihood of a global recession and potential default of various national bonds and debt backed by individual countries. Such developments, as well as the politics impacting these, could adversely affect our financial results. In particular, the economic disruption caused by COVID-19 has led to reduced demand in some of our customers’ optical communications product portfolios and significant volatility in global stock markets and currency exchange rates. Uncertainty about worldwide economic conditions poses a risk as businesses may further reduce or postpone spending in response to reduced budgets, tight credit, negative financial news and declines in income or asset values, which could adversely affect our business, financial condition and operating results and increase the volatility of our share price. In addition, our ability to access capital markets may be restricted, which could have an impact on our ability to react to changing economic and business conditions and could also adversely affect our business, financial condition and operating results.

Inflation has also risen globally to historically high levels. If the inflation rate continues to increase, the costs of labor and other expenses could also increase. There is no assurance that our revenues will increase at the same rate to maintain the same level of profitability. Inflation and government efforts to combat inflation, such as raising the benchmark interest rate, could increase market volatility and have an adverse effect on the financial market and global economy. In addition, we expect that disruptions in our supply chain and fluctuations in the availability of parts and materials will continue to have a significant impact on our ability to generate revenue, despite strong demand from our customers. These supply chain disruptions have been exacerbated by recent global events, such as (1) COVID-related lockdowns in China, which have caused freight and logistics issues and unforeseen delays, and (2) the armed conflict between Russia and Ukraine. Such adverse conditions could negatively impact demand for our products, which could adversely affect our business, financial condition and operating results.

The loan agreements for our long-term debt obligations and other credit facilities contain financial ratio covenants that may impair our ability to conduct our business.

The loan agreements for our long-term and short-term debt obligations contain financial ratio covenants that may limit management’s discretion with respect to certain business matters. These covenants require us to maintain a specified maximum total leverage ratio, minimum debt service coverage ratio (earnings before interest and depreciation and amortization plus cash on hand minus short-term debt), a minimum tangible net worth and a minimum quick ratio, which may restrict our ability to incur additional indebtedness and limit our ability to use our cash. In the event of our default on these loans or a breach of a covenant, the lenders may immediately cancel the loan agreement, deem the full amount of the outstanding indebtedness immediately due and payable, charge us interest on a monthly basis on the full amount of the outstanding indebtedness and, if we cannot repay all of our outstanding obligations, sell the assets pledged as collateral for the loan in order to fulfill our obligation. We may also be held responsible for any damages and related expenses incurred by the lender as a result of any default. Any failure by us or our subsidiaries to comply with these agreements could harm our business, financial condition and operating results.

The phase-out of the London Interbank Offered Rate (“LIBOR”) could affect interest rates under our existing credit facility agreement, as well as our ability to seek future debt financing.

LIBOR is the basic rate of interest used in lending between banks on the London interbank market and is widely used as a reference for setting the interest rates on loans globally. We generally use LIBOR as a reference rate to calculate interest rates under our credit facility agreement. In 2017, the U.K.’s Financial Conduct Authority ("FCA"), which regulates LIBOR,

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announced that it intended to phase out LIBOR by the end of 2021. On March 5, 2021, the FCA announced the dates on which the panel bank submissions for all LIBOR settings will cease, after which representative LIBOR rates will no longer be available. The FCA confirmed that all LIBOR settings will cease to be provided by any administrator or no longer be representative as follows: immediately after December 31, 2021, in the case of all GBP, EUR, CHF and JPY settings, and the 1-week and 2-month USD settings; and immediately after June 30, 2023, in the case of the remaining USD settings. In November 2022, the FCA announced the temporary extension period until end of September 2024 for 1-month, 2-month and 6-month USD setting.

The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, has identified replacing USD LIBOR with SOFR, calculated using short-term repurchase agreements backed by Treasury securities. In response to the announcement by the FCA on the future cessation and loss of representativeness of LIBOR benchmark, the International Swaps and Derivatives Association ("ISDA") issued a statement on March 5, 2021 confirming that the FCA’s announcement constitutes an index cessation event under IBOR Fallbacks and Supplements and the ISDA 2020 Fallbacks Protocol for all 35 LIBOR settings. As a result, the fallback spread adjustments were fixed as of the date of the announcement.

The fallbacks will automatically occur for outstanding derivatives contracts that incorporate the IBOR Fallbacks Supplement or are subject to the ISDA 2020 Fallbacks Protocol immediately after December 31, 2021 for outstanding derivatives referenced to all EUR, GBP, CHF and JPY LIBOR settings, and June 30, 2023 for outstanding derivatives referenced to all USD LIBOR settings.

We have adhered to the ISDA 2020 IBOR Fallbacks Protocol since January 2021 for outstanding interest rate swap agreements which we have with banks with interest rates referenced to 1-month USD LIBOR and 3-month USD LIBOR settings; therefore, the fallbacks will automatically occur immediately after June 30, 2023 as described above.

The new rates may not be as favorable to us as those in effect prior to any LIBOR phase-out. In addition, the transition process may involve, among other things, increased volatility or illiquidity in markets for instruments that currently rely on LIBOR. The transition may also result in reductions in the value of certain instruments or the effectiveness of related transactions such as hedges, increased borrowing costs, uncertainty under applicable documentation, or difficult and costly consent processes. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, may result in expenses, difficulties, complications or delays in connection with future financing efforts, which could have a material adverse impact on our business, financial condition and operating results.

We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to our shareholders.

We anticipate that our current cash and cash equivalents, together with cash provided by operating activities and funds available through our working capital and credit facilities, will be sufficient to meet our current and anticipated needs for general corporate purposes for at least the next 12 months. However, we operate in a market that makes our prospects difficult to evaluate. It is possible that we may not generate sufficient cash flow from operations or otherwise have the capital resources to meet our future capital needs. If this occurs, we may need additional financing to execute on our current or future business strategies.

Furthermore, if we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our shareholders could be significantly diluted, and these newly-issued securities may have rights, preferences or privileges senior to those of existing shareholders. If adequate additional funds are not available or are not available on acceptable terms, if and when needed, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our manufacturing services, hire additional technical and other personnel, or otherwise respond to competitive pressures could be significantly limited.

Our investment portfolio may become impaired by deterioration of the capital markets.

We use professional investment management firms to manage our excess cash and cash equivalents. Our short-term investments as of March 31, 2023 are primarily investments in a fixed income portfolio, including liquidity funds, certificates of deposit and time deposits, corporate debt securities, and U.S. agency and U.S. Treasury securities. Our investment portfolio may become impaired by deterioration of the capital markets. We follow an established investment policy and set of guidelines to monitor and help mitigate our exposure to interest rate and credit risk. The policy sets forth credit quality standards and limits our exposure to any one issuer, as well as our maximum exposure to various asset classes. The policy also provides that we may not invest in short-term investments with a maturity in excess of three years.

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Should financial market conditions worsen, investments in some financial instruments may pose risks arising from market liquidity and credit concerns. In addition, any deterioration of the capital markets could cause our other income and expense to vary from expectations. As of March 31, 2023, we did not record any impairment charges associated with our portfolio of short-term investments, and although we believe our current investment portfolio has little risk of material impairment, we cannot predict future market conditions or market liquidity, or credit availability, and can provide no assurance that our investment portfolio will remain materially unimpaired.

We are not fully insured against all potential losses. Natural disasters or other catastrophes could adversely affect our business, financial condition and operating results.

Our current property and casualty insurance covers loss or damage to our property and third-party property over which we have custody and control, as well as losses associated with business interruption, subject to specified exclusions and limitations such as coinsurance, facilities location sub-limits and other policy limitations and covenants. Even with insurance coverage, natural disasters or other catastrophic events, including acts of war, could cause us to suffer substantial losses in our operational capacity and could also lead to a loss of opportunity and to a potential adverse impact on our relationships with our existing customers resulting from our inability to produce products for them, for which we might not be compensated by existing insurance. This in turn could have a material adverse effect on our business, financial condition and operating results.

There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with U.S. GAAP. Any changes in estimates, judgments and assumptions could have a material adverse effect on our business, financial condition and operating results.

The preparation of financial statements in accordance with U.S. GAAP involves making estimates, judgments and assumptions that affect reported amounts of assets (including intangible assets), liabilities and related reserves, revenues, expenses and income. Estimates, judgments and assumptions are inherently subject to change in the future, and any such changes could result in corresponding changes to the amounts of assets, liabilities, revenues, expenses and income. Any such changes could have a material adverse effect on our business, financial condition and operating results.

Intellectual Property and Cybersecurity Risks

Our business and operations would be adversely impacted in the event of a failure of our information technology infrastructure and/or cyber security attacks.

We rely upon the capacity, availability and security of our information technology hardware and software infrastructure. For instance, we use a combination of standard and customized software platforms to manage, record, and report all aspects of our operations and, in many instances, enable our customers to remotely access certain areas of our databases to monitor yields, inventory positions, work-in-progress status and vendor quality data. We are constantly expanding and updating our information technology infrastructure in response to our changing needs. Any failure to manage, expand and update our information technology infrastructure or any failure in the operation of this infrastructure could harm our business.

Despite our implementation of security measures, our systems are vulnerable to damage caused by computer viruses, natural disasters, unauthorized access and other similar disruptions. Any system failure, accident or security breach could result in disruptions to our operations. To the extent that any disruption, cyber-attack or other security breach results in a loss or damage to our data or inappropriate disclosure of confidential information, our business could be harmed. In addition, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.

Intellectual property infringement claims against our customers or us could harm our business, financial condition and operating results.

Our services involve the creation and use of intellectual property rights, which subject us to the risk of intellectual property infringement claims from third parties and claims arising from the allocation of intellectual property rights among us and our customers.

Our customers may require that we indemnify them against the risk of intellectual property infringement arising out of our manufacturing processes. If any claims are brought against us or our customers for such infringement, whether or not these claims have merit, we could be required to expend significant resources in defense of such claims. In the event of an infringement claim, we may be required to spend a significant amount of time and money to develop non-infringing alternatives

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or obtain licenses. We may not be successful in developing such alternatives or obtaining such licenses on reasonable terms or at all, which could harm our business, financial condition and operating results.

Any failure to protect our customers’ intellectual property that we use in the products we manufacture for them could harm our customer relationships and subject us to liability.

We focus on manufacturing complex optical products for our customers. These products often contain our customers’ intellectual property, including trade secrets and know-how. Our success depends, in part, on our ability to protect our customers’ intellectual property. We may maintain separate and secure areas for customer proprietary manufacturing processes and materials and dedicate floor space, equipment, engineers and supply chain management to protect our customers’ proprietary drawings, materials and products. The steps we take to protect our customers’ intellectual property may not adequately prevent its disclosure or misappropriation. If we fail to protect our customers’ intellectual property, our customer relationships could be harmed, and we may experience difficulty in establishing new customer relationships. In addition, our customers might pursue legal claims against us for any failure to protect their intellectual property, possibly resulting in harm to our reputation and our business, financial condition and operating results.

Tax, Compliance and Regulatory Risks

We are subject to the risk of increased income taxes, which could harm our business, financial condition and operating results.

We are subject to income and other taxes in Thailand, the PRC, the U.K., the U.S. and Israel. Our effective income tax rate, provision for income taxes and future tax liability could be adversely affected by numerous factors, including the results of tax audits and examinations, income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in income tax rates, changes in the valuation of deferred tax assets and liabilities, failure to meet obligations with respect to tax exemptions, and changes in tax laws and regulations. From time to time, we engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. As of March 31, 2023, our U.S. federal and state tax returns remain open to examination for the tax years 2017 through 2020. In addition, tax returns that remain open to examination in Thailand, the PRC, the U.K. and Israel range from the tax years 2015 through 2021. The results of audits and examinations of previously filed tax returns and continuing assessments of our tax exposures may have an adverse effect on our provision for income taxes and tax liability. For example, in connection with the conclusion of the audit of our U.S. federal and state tax returns for the tax years 2016 and 2017, we incurred additional taxes, interest and penalties.

We base our tax position upon the anticipated nature and conduct of our business and upon our understanding of the tax laws of the various countries in which we have assets or conduct activities. However, our tax position is subject to review and possible challenge by tax authorities and to possible changes in law, which may have retroactive effect. Fabrinet (the “Cayman Islands Parent”) is an exempted company incorporated in the Cayman Islands. We maintain manufacturing operations in Thailand, the PRC, the U.K., the U.S. and Israel. We cannot determine in advance the extent to which some jurisdictions may require us to pay taxes or make payments in lieu of taxes. Under the current laws of the Cayman Islands, we are not subject to tax in the Cayman Islands on income or capital gains until March 6, 2039.

Preferential tax treatment from the Thai government in the form of a corporate tax exemption on income generated from projects to manufacture certain products at our Chonburi campus is available to us through June 2026. Similar preferential tax treatment was available to us through June 2020 with respect to products manufactured at our Pinehurst campus. After June 2020, 50% of our income generated from products manufactured at our Pinehurst campus will be exempted from tax through June 2025. New preferential tax treatment is available to us for products manufactured at our Chonburi campus Building 9, where income generated will be tax exempt through 2031, capped at our actual investment amount. Such preferential tax treatment is contingent on various factors, including the export of our customers’ products out of Thailand and our agreement not to move our manufacturing facilities out of our current province in Thailand for at least 15 years from the date on which preferential tax treatment was granted. We will lose this favorable tax treatment in Thailand unless we comply with these restrictions, and as a result we may delay or forego certain strategic business decisions due to these tax considerations.

There is also a risk that Thailand or another jurisdiction in which we operate may treat the Cayman Islands Parent as having a permanent establishment in such jurisdiction and subject its income to tax. If we become subject to additional taxes in any jurisdiction or if any jurisdiction begins to treat the Cayman Islands Parent as having a permanent establishment, such tax treatment could materially and adversely affect our business, financial condition and operating results.

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Certain of our subsidiaries provide products and services to, and may from time to time undertake certain significant transactions with, us and our other subsidiaries in different jurisdictions. For instance, we have intercompany agreements in place that provide for our California and Singapore subsidiaries to provide administrative services for the Cayman Islands Parent, and the Cayman Islands Parent has entered into manufacturing agreements with our Thai subsidiary. In general, related party transactions and, in particular, related party financing transactions, are subject to close review by tax authorities. Moreover, several jurisdictions in which we operate have tax laws with detailed transfer pricing rules that require all transactions with non-resident related parties to be priced using arm’s length pricing principles and require the existence of contemporaneous documentation to support such pricing. Tax authorities in various jurisdictions could challenge the validity of our related party transfer pricing policies. Such a challenge generally involves a complex area of taxation and a significant degree of judgment by management. If any tax authorities are successful in challenging our financing or transfer pricing policies, our income tax expense may be adversely affected and we could become subject to interest and penalty charges, which may harm our business, financial condition and operating results.

Several governments are considering various tax reform proposals that, if enacted, may contain provisions that could increase our tax expense. Further changes in the tax laws of various jurisdictions could arise as a result of the base erosion and profit shifting project undertaken by the Organisation for Economic Co-operation and Development, which represents a coalition of member countries and has recommended changes to numerous long-standing tax principles. If implemented by taxing authorities, such changes could have a material adverse effect on our business, financial condition and operating results.

We have incurred and will continue to incur significant increased costs as a result of operating as a public company, and our management will be required to continue to devote substantial resources to various compliance initiatives.

The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as well as other rules implemented by the SEC and the New York Stock Exchange (“NYSE”), impose various requirements on public companies, including requiring changes in corporate governance practices. These and proposed corporate governance laws and regulations under consideration may further increase our compliance costs. If compliance with these various legal and regulatory requirements diverts our management’s attention from other business concerns, it could have a material adverse effect on our business, financial condition and operating results. The Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and disclosure controls and procedures quarterly. While we were able to assert in our Annual Report on Form 10-K for our fiscal year ended June 24, 2022 that our internal control over financial reporting was effective as of June 24, 2022, we cannot predict the outcome of our testing in future periods. If we are unable to assert in any future reporting periods that our internal control over financial reporting is effective (or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal controls), we could lose investor confidence in the accuracy and completeness of our financial reports, which would have an adverse effect on our share price.

Given the nature and complexity of our business and the fact that some members of our management team are located in Thailand while others are located in the U.S., control deficiencies may periodically occur. While we have ongoing measures and procedures to prevent and remedy control deficiencies, if they occur there can be no assurance that we will be successful or that we will be able to prevent material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Moreover, if we identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses in future periods, the market price of our ordinary shares could decline and we could be subject to potential delisting by the NYSE and review by the NYSE, the SEC, or other regulatory authorities, which would require us to expend additional financial and management resources. As a result, our shareholders could lose confidence in our financial reporting, which would harm our business and the market price of our ordinary shares.

If we are unable to meet regulatory quality standards applicable to our manufacturing and quality processes for the products we manufacture, our business, financial condition and operating results could be harmed.

As a manufacturer of products for the optics industry, we are required to meet certain certification standards, including the following: ISO 9001 for Manufacturing Quality Management Systems; ISO 14001 for Environmental Management Systems; TL 9000 for Telecommunications Industry Quality Certification; IATF 16949 for Automotive Industry Quality Certification; ISO 13485 for Medical Devices Industry Quality Certification; AS 9100 for Aerospace Industry Quality Certification; NADCAP (National Aerospace and Defense Contractors Accreditation Program) for Quality Assurance throughout the Aerospace and Defense Industries; and ISO 45001 for Occupational Health and Safety Management Systems. We also maintain compliance with various additional standards imposed by the FDA with respect to the manufacture of medical devices.

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Additionally, we are required to register with the FDA and other regulatory bodies and are subject to continual review and periodic inspection for compliance with various regulations, including testing, quality control and documentation procedures. We hold the following additional certifications: ANSI ESD S20.20 for facilities and manufacturing process control, in compliance with ESD standard; Transported Asset Protection Association ("TAPA") and Custom Trade Partnership Against Terrorism ("C-TPAT") for Logistic Security Management System; and CSR-DIW for Corporate Social Responsibility in Thailand. In the European Union, we are required to maintain certain ISO certifications in order to sell our precision optical, electro-mechanical and electronic manufacturing services and we must undergo periodic inspections by regulatory bodies to obtain and maintain these certifications. If any regulatory inspection reveals that we are not in compliance with applicable standards, regulators may take action against us, including issuing a warning letter, imposing fines on us, requiring a recall of the products we manufactured for our customers, or closing our manufacturing facilities. If any of these actions were to occur, it could harm our reputation as well as our business, financial condition and operating results.

Failure to comply with applicable environmental laws and regulations could have a material adverse effect on our business, financial condition and operating results.

The sale and manufacturing of products in certain states and countries may subject us to environmental laws and regulations. In addition, rules adopted by the SEC implementing the Dodd- Frank Wall Street Reform and Consumer Protection Act of 2010 impose diligence and disclosure requirements regarding the use of “conflict minerals” mined from the Democratic Republic of Congo and adjoining countries in the products we manufacture for our customers. Compliance with these rules has resulted in additional cost and expense, including for due diligence to determine and verify the sources of any conflict minerals used in the products we manufacture, and may result in additional costs of remediation and other changes to processes or sources of supply as a consequence of such verification activities. These rules may also affect the sourcing and availability of minerals used in the products we manufacture, as there may be only a limited number of suppliers offering “conflict free” metals that can be used in the products we manufacture for our customers.

Although we do not anticipate any material adverse effects based on the nature of our operations and these laws and regulations, we will need to ensure that we and, in some cases, our suppliers comply with applicable laws and regulations. If we fail to timely comply with such laws and regulations, our customers may cease doing business with us, which would have a material adverse effect on our business, financial condition and operating results. In addition, if we were found to be in violation of these laws, we could be subject to governmental fines, liability to our customers and damage to our reputation, which would also have a material adverse effect on our business, financial condition and operating results.

Risks Related to Ownership of Our Ordinary Shares

Our share price may be volatile due to fluctuations in our operating results and other factors, including the activities and operating results of our customers or competitors, any of which could cause our share price to decline.

Our revenues, expenses and results of operations have fluctuated in the past and are likely to do so in the future from quarter-to-quarter and year-to-year due to the risk factors described in this section and elsewhere in this Quarterly Report on Form 10-Q. In addition to market and industry factors, the price and trading volume of our ordinary shares may fluctuate in response to a number of events and factors relating to us, our competitors, our customers and the markets we serve, many of which are beyond our control. Factors such as variations in our total revenues, earnings and cash flow, announcements of new investments or acquisitions, changes in our pricing practices or those of our competitors, commencement or outcome of litigation, sales of ordinary shares by us or our principal shareholders, fluctuations in market prices for our services and general market conditions could cause the market price of our ordinary shares to change substantially. Any of these factors may result in large and sudden changes in the volume and price at which our ordinary shares trade. Volatility and weakness in our share price could mean that investors may not be able to sell their shares at or above the prices they paid and could also impair our ability in the future to offer our ordinary shares or convertible securities as a source of additional capital and/or as consideration in the acquisition of other businesses.

Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may cause the market price of our ordinary shares to decline. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

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If securities or industry analysts do not publish research or if they publish misleading or unfavorable research about our business, the market price and trading volume of our ordinary shares could decline.

The trading market for our ordinary shares depends in part on the research and reports that securities or industry analysts publish about us or our business. If securities or industry analysts stop covering us, or if too few analysts cover us, the market price of our ordinary shares could be adversely impacted. If one or more of the analysts who covers us downgrades our ordinary shares or publishes misleading or unfavorable research about our business, our market price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our ordinary shares could decrease, which could cause the market price or trading volume of our ordinary shares to decline.

We may become a passive foreign investment company, which could result in adverse U.S. tax consequences to U.S. investors.

Based upon estimates of the value of our assets, which are based in part on the trading price of our ordinary shares, we do not expect to be a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes for the taxable year 2022 or for the foreseeable future. However, despite our expectations, we cannot guarantee that we will not become a PFIC for the taxable year 2022 or any future year because our PFIC status is determined at the end of each year and depends on the

composition of our income and assets during such year. If we become a PFIC, our U.S. investors will be subject to increased tax liabilities under U.S. tax laws and regulations as well as burdensome reporting requirements.

Our business could be negatively affected as a result of activist shareholders.

If an activist investor takes an ownership position in our ordinary shares, responding to actions by such activist shareholder could be costly and time-consuming, disrupt our operations and divert the attention of management and our employees. Additionally, perceived uncertainties as to our future direction as a result of shareholder activism or changes to the composition of our board of directors may lead to the perception of a change in the direction of our business or other instability, which may be exploited by our competitors, cause concern to our current or potential customers, and make it more difficult to attract and retain qualified personnel. If customers choose to delay, defer or reduce transactions with us or do business with our competitors instead of us because of any such issues, then our business, financial condition and operating results would be adversely affected. In addition, our share price could experience periods of increased volatility as a result of shareholder activism.

Certain provisions in our constitutional documents may discourage our acquisition by a third party, which could limit our shareholders' opportunity to sell shares at a premium.

Our constitutional documents include provisions that could limit the ability of others to acquire control of us, modify our structure or cause us to engage in change-of-control transactions, including, among other things, provisions that:

•establish a classified board of directors;

•prohibit our shareholders from calling meetings or acting by written consent in lieu of a meeting;

•limit the ability of our shareholders to propose actions at duly convened meetings; and

•authorize our board of directors, without action by our shareholders, to issue preferred shares and additional ordinary shares.

These provisions could have the effect of depriving our shareholders of an opportunity to sell their ordinary shares at a premium over prevailing market prices by discouraging third parties from seeking to acquire control of us in a tender offer or similar transaction.

Our shareholders may face difficulties in protecting their interests because we are incorporated under Cayman Islands law.

Our corporate affairs are governed by our amended and restated memorandum and articles of association (“MOA”), by the Companies Law (as amended) of the Cayman Islands and the common law of the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under the laws of the Cayman Islands are not as clearly established under statutes or judicial precedent as in jurisdictions in the U.S. Therefore, our shareholders may have more difficulty in protecting their interests than would shareholders of a corporation incorporated in a jurisdiction in the U.S., due to the comparatively less developed nature of Cayman Islands law in this area.

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The Companies Law permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. Dissenting shareholders have the right to be paid the fair value of their shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) if they follow the required procedures, subject to certain exceptions. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.

In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting convened for that purpose. The convening of the meeting and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. A dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved.

When a takeover offer is made and accepted by holders of 90.0% of the shares within four months, the offeror may, within a two-month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but is unlikely to succeed unless there is evidence of fraud, bad faith or collusion.

If the arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of a corporation incorporated in a jurisdiction in the U.S., providing rights to receive payment in cash for the judicially determined value of the shares. This may make it more difficult for our shareholders to assess the value of any consideration they may receive in a merger or consolidation or to require that the offeror give them additional consideration if they believe the consideration offered is insufficient.

Shareholders of Cayman Islands exempted companies have no general rights under Cayman Islands law to inspect corporate records and accounts or to obtain copies of lists of shareholders. Our directors have discretion under our MOA to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for our shareholders to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

Subject to limited exceptions, under Cayman Islands law, a minority shareholder may not bring a derivative action against the board of directors.

Certain judgments obtained against us by our shareholders may not be enforceable.

The Cayman Islands Parent is a Cayman Islands exempted company and substantially all of our assets are located outside of the U.S. Given our domicile and the location of our assets, it may be difficult to enforce in U.S. courts judgments obtained against us in U.S. courts based on the civil liability provisions of the U.S. federal securities laws. In addition, there is uncertainty as to whether the courts of the Cayman Islands, Thailand or the PRC would recognize or enforce judgments of U.S. courts against us predicated upon the civil liability provisions of the securities laws of the U.S. or any state. In particular, a judgment in a U.S. court would not be recognized and accepted by Thai courts without a re-trial or examination of the merits of the case. In addition, there is uncertainty as to whether such Cayman Islands, Thai or PRC courts would be competent to hear original actions brought in the Cayman Islands, Thailand or the PRC against us predicated upon the securities laws of the U.S. or any state.

General Risks

Energy price volatility may negatively impact our business, financial condition and operating results.

We, along with our suppliers and customers, rely on various energy sources in our manufacturing and transportation activities. Energy prices have been subject to increases and general volatility caused by market fluctuations, supply and demand, currency fluctuation, production and transportation disruption, world events and government regulations. While we are currently experiencing lower energy prices, a significant increase is possible, which could increase our raw material and transportation costs. In addition, increased transportation costs of our suppliers and customers could be passed along to us. We may not be able to increase our prices to adequately offset these increased costs, and any increase in our prices may reduce our future customer orders, which could harm our business, financial condition and operating results.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Sales of Unregistered Securities

Not applicable.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table summarizes share repurchase activity for the three months ended March 31, 2023:

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased As Part of Publicly  Announced Program (1)	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program  (1)
December 31, 2022 – January 27, 2023	—	$	—	—	$	94,897,103
January 28, 2023 – February 24, 2023	6,500	$	122.90	6,500	$	94,098,226
February 25, 2023 – March 31, 2023	28,732	$	115.32	28,732	$	90,784,808
Total	35,232			35,232

(1) On August 18, 2017, we announced that our board of directors had approved a share repurchase program to permit us to repurchase up to $30.0 million worth of our issued and outstanding ordinary shares in the open market in accordance with applicable rules and regulations, including pursuant to pre-set trading plans adopted in accordance with Rule 10b5-1 under the Exchange Act of 1934. In February 2018, May 2019, August 2020 and August 2022, we announced that our board of directors approved increases of $30.0 million, $50.0 million, $58.5 million and $78.7 million, respectively, to the original share repurchase authorization, bringing the aggregate authorization to $247.2 million. The repurchased shares will be held as treasury stock. Our share repurchase program does not have an expiration date. During the three months ended March 31, 2023, repurchases under our share repurchase program were made in accordance with Rule 10b-18, including pursuant to a pre-set trading plan adopted in accordance with Rule 10b5-1. During the three months ended March 31, 2023, 35,232 shares were repurchased under the program, at an average price per share (excluding other direct costs) of $116.72, for an aggregate purchase price of $4.1 million. As of March 31, 2023, we had a remaining authorization to repurchase up to $90.8 million worth of our ordinary shares.

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ITEMS 3, 4 and 5 are not applicable and have been omitted.

ITEM 6. EXHIBITS

		Incorporated by reference herein
Exhibit Number	Description	Form	Exhibit No.	Filing Date
10.1	Amendment Agreement to Term Loan Agreement, dated March 9, 2023, by and between Fabrinet Co., Ltd. And Bank of Ayudhya Public Company Limited
31.1	Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	Inline XBRL Instance
101.SCH	Inline XBRL Taxonomy Extension Schema
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 9, 2023.

	FABRINET
By:	/s/    CSABA SVERHA
Name:	Csaba Sverha
Title:	Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)

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EX-10.1

AMENDMENT AGREEMENT TO TERM LOAN AGREEMENT

dated

9 MAR 2023

..................................................................

by

FABRINET COMPANY LIMITED

as Borrower

and

BANK OF AYUDHYA PUBLIC COMPANY LIMITED

as Bank

relating to

TERM LOAN AGREEMENT dated 20 August 2019

AMENDMENT AGREEMENT TO TERM LOAN AGREEMENT

This Amendment Agreement is dated .....................9 MAR 2023....................................

Between

(1)    FABRINET COMPANY LIMITED, a private limited company incorporated and existing under the laws of Thailand having the registered office located at 5/6 Moo 6 Khlong Nueng Sub-District, Khlong Luang District, Pathum Thani Province, Thailand (the "Borrower"); and

(2)    BANK OF AYUDHYA PUBLIC COMPANY LIMITED a public company limited incorporated and existing under the laws of Thailand having the registered office located at 1222 Rama III Road, Bang Phongphang Sub-District, Yan Nawa District, Bangkok, Thailand (the "Bank").

RECITALS

(A)    The Borrower and the Bank entered into the Term Loan Agreement dated 20 August 2019, as amended from time to time (the "Facility Agreement").

(B)    The parties have agreed to amend the Facility Agreement as set out in this Amendment Agreement.

(C)    This Amendment Agreement is supplemental to the Facility Agreement.

IT IS AGREED as follows:

1.    DEFINITIONS AND INTERPRETATION

1.1    Definitions

In this Amendment Agreement:

"Amendment Agreement" means this Amendment Agreement.

"Facility Agreement" has the meaning given to it in Recital (A).

"Clause" means a clause of this Amendment Agreement.

"Party" means a party to this Amendment Agreement.

"Schedule" means a schedule of this Amendment Agreement.

1.2    Construction

(a)    Unless a contrary indication appears, terms defined in the Facility Agreement have the same meaning in this Amendment Agreement unless given a different meaning in this Amendment Agreement; and

(b)    This Amendment Agreement is an integral part of the Facility Agreement and shall be attached thereto. If any provision of this Amendment Agreement should present any inconsistency or contradiction with the Facility Agreement, the provisions of this Amendment Agreement shall prevail.

2.    AMENDMENT OF THE FACILITY AGREEMENT

(a)    With effect from the date of this Amendment Agreement, the clauses and schedules of the Facility Agreement set out in the Schedule (Amendments to the Facility Agreement) shall be amended to the

effect that they shall be read and construed for all purposes as set out in the Schedule (Amendments to the Facility Agreement).

(b)    All other provisions of the Facility Agreement shall remain unchanged.

3.    REPRESENTATIONS AND WARRANTIES

The Borrower makes the representations and warranties set out in Clause 8 of the Facility Agreement to the Bank on the date of this Amendment Agreement, in each case by reference to the facts and circumstances then existing.

4.    CONTINUITY AND FURTHER ASSURANCE

4.1    Continuing obligations

The provisions of the Facility Agreement and the other Finance Documents shall, save as amended by this Amendment Agreement, continue to be in full force and effect and neither the Facility Agreement nor any other Finance Document shall be, or shall be deemed to be, novated by the terms and conditions of this Amendment Agreement.

4.2    Further assurance

The Parties shall do all such acts and things necessary or desirable to give effect to the amendments effected or to be effected pursuant to this Amendment Agreement.

5.    GOVERNING LAW AND ENFORCEMENT

This Amendment Agreement shall be governed by and construed in accordance with the laws of Thailand.

This Amendment Agreement has been entered into on the date stated at the beginning of this Amendment Agreement.

EXECUTION

In witness whereof the parties have signed this Amendment Agreement in the presence of witnesses as of the date first above written.

The Borrower:     

Fabrinet Company Limited

/s/ CSABA SVERHA	/s/ CSABA SVERHA
Csaba Sverha	Csaba Sverha
Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)	Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)

Witness                     

/s/ PANPIJIT SRISUWATCHAREE

Panpijit Srisuwatcharee

First Assistant Vice President, Corporate Banking Department 3

The Bank:

Bank of Ayudhya Public Company Limited

/s/ PRATUANG TEAMKAEW	/s/ RATCHANOK PATUMAPA
Pratuang Teamkaew	Ratchanok Patumapa
Assistant Vice President	Assistant Vice President

Witness

/s/ RAPEEPORN VISITTHONGSARIT

Rapeeporn Visitthonhsarit

Officer

For more details about the Bank’s privacy notice, please visit www.krungsri.com/pdpa/privacy-notice-en

SCHEDULE
AMENDMENTS TO THE FACILITY AGREEMENT

1.Clause 1.1 (Definitions), insertion or replacement (as the case may be) of the following definitions:

Business Day means a day (other than a Saturday, a Sunday or a public holiday of financial institutions announced by the relevant authorities) on which banks are opened for general business in Bangkok, Thailand and New York City, the United States.

Default Rate means the maximum default interest rate chargeable to the defaulting customer pursuant to the Bank's announcement in relation to the commercial loan (for corporate).

Fallback Rate (SOFR) means, in relation to any Fallback Rate (SOFR) Loan:

(a)    the applicable Fallback Rate (SOFR) Screen Rate; or

(b)    if the Bank determined that there is no applicable Fallback Rate (SOFR) Screen Rate for the Interest Period for that Loan, the Interpolated Fallback Rate (SOFR) Screen Rate for that Loan,

provided that, if any such rate is below zero, Fallback Rate (SOFR) will be deemed to be zero.

Fallback Rate (SOFR) Screen Rate means, with respect to any 3 (three) months Interest Period or any other period, the reference rate computed and displayed on Bloomberg Screen corresponding to the Bloomberg ticker for the fallback for U.S. Dollar LIBOR accessed via <FBAK> <GO> Page (or, if applicable, accessed via the Bloomberg Screen <HP> <GO>) or any other published source designated by Bloomberg Index Services Limited as a Fallback Rate (SOFR) for 3 (three) months period or any other period rounded to 5 decimal places on the Fallback Rate (SOFR) Quotation Day with the applicable Original U.S. Dollar LIBOR Rate Record Day for such period.

Fallback Rate (SOFR) Loan means any Loan which is, or becomes, a "Fallback Rate (SOFR) Loan" pursuant to Clause 6A.1 (Interest Rate Switch from LIBOR to Fallback Rate (SOFR)).

Fallback Rate (SOFR) Quotation Day means, in relation to any period for which an interest rate is to be determined, two (2) Business Days before the last day of that period.

"Interpolated Fallback Rate (SOFR) Screen Rate" means, in relation to Fallback Rate (SOFR) for a Fallback Rate (SOFR) Loan, the rate rounded to the same number of decimal places as Fallback Rate (SOFR) Screen Rate which results from interpolating on a linear basis between:

(a)the applicable Fallback Rate (SOFR) Screen Rate for the longest period (for which that Fallback Rate (SOFR) is available) which is less than the Interest Period of that Loan; and

(b)the applicable Fallback Rate (SOFR) Screen Rate for the shortest period (for which that Fallback Rate (SOFR) is available) which exceeds the Interest Period of that Loan,

each on the Fallback Rate (SOFR) Quotation Day for that Loan.

LIBOR Loan means any Loan or, if applicable, any unpaid sum which use LIBOR.

Margin (LIBOR) means one point three five (1.35)% per annum.

Original U.S. Dollar LIBOR Rate Record Day means, in relation to any period for which an interest rate is to be determined, 2 (two) Business Days before the first day of that period.

USD means the lawful currency for the time being of the United States of America.

2.Replacement of Clause 1.2(a)(viii):

(viii)    a Default being outstanding means that it has not been remedied (if any) or waived;

3.Replacement of Clause 2.8 (Interest Rate):

2.8 Interest Rate The following applicable rate: (1)with respect to LIBOR Loan, the percentage rate per annum which is the aggregate of the applicable Margin (LIBOR) and 3 months USD LIBOR; and (2)with respect to Fallback Rate (SOFR) Loan, the percentage rate per annum which is the aggregate of the applicable Margin (LIBOR) and Fallback Rate (SOFR).

4.Replacement of Clause 6.4 (Interest on overdue amounts):

6.4    Interest on overdue amounts

If the Borrower fails to perform its obligations hereunder and/or fails to pay an amount payable by it under this Agreement or an Event of Default under this Agreement has occurred, the Borrower agrees that it is in default and all outstanding indebtedness whether or not due shall become immediately due and payable.

In case that the Borrower is in default as stipulated in paragraph 1 above, the Borrower agrees that the Bank is entitled to charge the Default Rate as stipulated in this Agreement from the date on which the Borrower is in default until the Borrower fully repays all indebtedness owing to the Bank on all Loans, except in the case that the Borrower is obliged to repay in instalment and the Borrower fails to repay in any instalment, the Bank is entitled to charge the Default Rate on Loan which is due and payable but unpaid of each instalment in accordance with the applicable law and/or rules and procedures stipulated by the Bank of Thailand which may be amended from time to time.

5.Insertion of new Clause 6A (Rate Switch (LIBOR to Fallback Rate (SOFR))):

6A    Rate Switch (LIBOR to Fallback Rate (SOFR))

6A.1    Interest Rate Switch from LIBOR to Fallback Rate (SOFR)

Upon the occurrence of the LIBOR Replacement Event, on and from the LIBOR Replacement Event Effective Date:

1.use of Fallback Rate (SOFR) will replace the use of LIBOR for the calculation of interest for Loans; and

2.any Loan or any unpaid sum shall be a "Fallback Rate (SOFR) Loan" and the applicable interest rate in Clause 2.8 (Interest Rate) shall apply to each such Loan for an Interest Period occurring after the LIBOR Replacement Event Effective Date.

6A.2    LIBOR Replacement Event

    LIBOR Replacement Event

In this Agreement:

LIBOR Replacement Event means:

(a)the methodology, formula or other means of determining LIBOR has, in the opinion of the Bank, materially changed;

(b)

(i)the administrator of LIBOR publicly announces that it has ceased or will cease, to provide LIBOR permanently or indefinitely and, at that time, there is no successor administrator to continue to provide LIBOR;

(ii)the supervisor of the administrator of LIBOR publicly announces that LIBOR has been or will be permanently or indefinitely discontinued; or

(iii)the administrator of LIBOR or its supervisor announces that LIBOR may no longer be used;

(c)the administrator of LIBOR determines that LIBOR should be calculated in accordance with its reduced volume or other contingency or fallback policies or arrangements and either:

(i)the circumstance(s) or event(s) leading to such determination are not (in the opinion of the Bank) temporary; or

(ii)LIBOR is calculated in accordance with any such policy or arrangement for a period no less than 15 days ; or

(d)in the opinion of the Bank, LIBOR is otherwise no longer appropriate for the purposes of calculating interest under this Agreement.

LIBOR Replacement Event Effective Date means:

(a)    in case of an occurrence of a LIBOR Replacement Event described in paragraphs (a) or (d) of the definition of LIBOR Replacement Event, the date on which the Bank notifies the Borrower in writing to be the LIBOR Replacement Event Effective Date;

(b)    in case of an occurrence of a LIBOR Replacement Event described in paragraph (b) of the definition of LIBOR Replacement Event, the first date on which the administrator of LIBOR (or a successor administrator of LIBOR) ceases to publish LIBOR or the first date on which the administrator of LIBOR (or a successor administrator of LIBOR) announces that LIBOR may no longer be used;

(c)    in case of an occurrence of a LIBOR Replacement Event described in paragraph (c)(i) of the definition of LIBOR Replacement Event, the date on which the Bank notifies the Borrower in writing to be the LIBOR Replacement Event Effective Date; or

(d)    in case of an occurrence of a LIBOR Replacement Event described in paragraph (c)(ii) of the definition of LIBOR Replacement Event, the first date after the period set out in paragraph (c)(ii) thereof has expired.

6.Insertion of new Clause 6B (Temporary Unavailability of Fallback Rate (SOFR)):

6B    Temporary Unavailability of Fallback Rate (SOFR)

If Fallback Rate (SOFR) for that Original U.S. Dollar LIBOR Rate Record Day has not been published by the administrator of Fallback Rate (SOFR) on the Fallback Rate (SOFR) Quotation Day, and the Fallback Rate (SOFR) Replacement Event Effective Date has not occurred ("Fallback Rate (SOFR) Unavailability"), then the rate for that Interest Period will be the Fallback Rate (SOFR) as most recently provided or published at that time for the most recent Original U.S. Dollar LIBOR Rate Record Day, notwithstanding that such day does not correspond to the Original U.S. Dollar LIBOR Rate Record Day.

7.Insertion of new Clause 6.6A (Market Disruption – Fallback Rate (SOFR)):

6.6A     Market Disruption – Fallback Rate (SOFR)

(a)    In relation to the LIBOR Loan, Clause 6.6 (Market Disruption) shall continue to apply.

(b)    In relation to the Fallback Rate (SOFR) Loan, Clause 6.6 (Market Disruption) shall apply mutatis mutandis.

8.Replacement of Clause 10.2:

10.2    If an Event of Default under Clause 10.1 is outstanding, the Borrower agrees that the Bank shall have the right to:

(a)    cancel all or any part of the unutilised Commitment; and/or

(b)    enforce all or any part of the security constituted by the Security Documents.

9.Replacement of Clause 13.1:

13.1     The Borrower hereby grants consent to the Bank to exchange with or disclose, transmit and/or transfer to the entities within its financial business group, its data processors, third-party service providers (outsource), its agents, subcontractors, and/or co-branding partners the Borrower’s personal data and other data provided by the Borrower to the Bank for the use of the credit application/utilization that are necessary to be disclosed for the purpose of providing credit facilities in accordance with this terms and conditions in applying credit facility or credit utilization, considering credit application, conducting any action pursuant to credit application, conducting credit analysis, drawdown and receipt of money under credit facilities, arranging for contract execution/ any registration, evaluating collateral value, following up and monitoring status of Borrower, including for the purposes of carrying out risk assessment of the Borrower, preparing and delivering statement, reviewing repayment details, preventing and detecting fraud include investigating fraudulent transaction, improving the Bank’s products and services, communicating with the Borrower about the services, supporting the Bank’s service operations, for the benefit of debts collection process, and for the benefit of data processing. In addition, Borrower grants consent to the Bank to make copy or duplicate the documents showing source of income of the Borrower. The Borrower agrees that the consent given hereunder shall be effective until Borrower informs the Bank of its intention to revoke this consent unless there is restriction (either by law or contractual) prohibiting the revocation of consent. Further the Borrower agrees to be responsible for any actual fee and expenses incurred including the collateral survey and evaluation and agrees not to claim for any compensation or damages incurred as a result of any actions of the Bank or persons receiving these information with consent given by the Borrower.

10.Insertion of new Clause 14.9A (Disclosure for assignment):

14.9A     Disclosure for assignment

The Borrower agrees and consents that the Bank has the right to disclose any information and details of the Borrower under this Agreement, Security Documents or any documents relating to this Agreement to its successors or assignees.

11.Insertion of new Clause 14.9B (Personal Data Protection Act):

14.9B    Personal Data Protection Act

Where the Borrower has provided to the Bank personal data of any other person:

(a)    the Borrower undertakes to verify the accuracy and completeness of such person’s personal data provided by the Borrower to the Bank, and to notify the Bank of any change to the personal data provided;

(b)    the Borrower warrants that the Borrower has obtained consent or can rely on other legal basis for the collection, use, disclosure and/or transfer of such personal data in compliance with applicable laws;

(c)    the Borrower warrants that the Borrower has informed such person of the Bank’s privacy notice; and

(d)    the Borrower warrants that the Bank can lawfully collect, use, and further disclose and/or transfer of such personal data for the purposes set out in the Bank’s privacy notice (as may be amended from time to time), including the purposes set out in the Finance Document.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Seamus Grady, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Fabrinet;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2023
	/s/ SEAMUSGRADY
	Seamus Grady
	Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Csaba Sverha, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Fabrinet;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2023
	/s/ CSABA SVERHA
	Csaba Sverha
	Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Seamus Grady, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Fabrinet for the fiscal quarter ended March 31, 2023 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Fabrinet.

	By:	/s/ SEAMUS GRADY
Date: May 9, 2023	Name:	Seamus Grady
	Title:	Chief Executive Officer (Principal Executive Officer)

I, Csaba Sverha, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Fabrinet for the fiscal quarter ended March 31, 2023 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Fabrinet.

	By:	/s/ CSABA SVERHA
Date: May 9, 2023	Name:	Csaba Sverha
	Title:	Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)

XML

Cover - shares	9 Months Ended
	Mar. 31, 2023	Apr. 28, 2023
Cover [Abstract]
Document type	10-Q
Document quarterly report	true
Document period end date	Mar. 31, 2023
Document transition report	false
Entity file number	001-34775
Entity registrant name	FABRINET
Entity incorporation, state or country code	E9
Entity tax identification number	98-1228572
Entity address, address line one	c/o Intertrust Corporate Services
Entity address, address line two	One Nexus Way, Camana Bay
Entity address, city or town	Grand Cayman
Entity address, country	KY
Entity address, postal zip code	KY1-9005
City area code	66 2
Local phone number	524-9600
Title of 12(b) security	Ordinary Shares, $0.01 par value
Trading symbol	FN
Security exchange name	NYSE
Entity current reporting status	Yes
Entity interactive data current	Yes
Entity filer category	Large Accelerated Filer
Entity small business	false
Entity emerging growth company	false
Entity shell company	false
Entity common stock, shares outstanding (in shares)		36,297,059
Current fiscal year end date	--06-30
Amendment flag	false
Document fiscal year focus	2023
Document fiscal period focus	Q3
Entity central index key	0001408710

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($) $ in Thousands	Mar. 31, 2023	Jun. 24, 2022
Current assets
Cash and cash equivalents	$ 230,743	$ 197,996
Short-term restricted cash	0	220
Short-term investments	307,980	280,157
Trade accounts receivable, net of allowance for doubtful accounts of $1,031 and $1,271, respectively	540,343	439,330
Contract assets	21,081	13,464
Inventories	554,247	557,145
Prepaid expenses	10,606	11,626
Other current assets	39,610	25,233
Total current assets	1,704,610	1,525,171
Non-current assets
Long-term restricted cash	0	149
Property, plant and equipment, net	308,365	292,277
Intangibles, net	2,471	3,508
Operating right-of-use assets	2,210	4,084
Deferred tax assets	10,487	9,800
Other non-current assets	658	652
Total non-current assets	324,191	310,470
Total Assets	2,028,801	1,835,641
Current liabilities
Long-term borrowings, current portion, net	12,156	12,156
Trade accounts payable	436,085	439,684
Fixed assets payable	20,116	9,085
Contract liabilities	3,249	1,982
Operating lease liabilities, current portion	1,634	2,319
Income tax payable	2,785	2,898
Accrued payroll, bonus and related expenses	28,899	20,374
Accrued expenses	23,428	24,758
Other payables	26,637	25,231
Total current liabilities	554,989	538,487
Non-current liabilities
Long-term borrowings, non-current portion, net	3,039	15,202
Deferred tax liability	6,159	6,001
Operating lease liability, non-current portion	235	1,476
Severance liabilities	21,267	18,384
Other non-current liabilities	1,531	2,409
Total non-current liabilities	32,231	43,472
Total Liabilities	587,220	581,959
Commitments and contingencies (Note 15)
Shareholders’ equity
Preferred shares (5,000,000 shares authorized, $0.01 par value; no shares issued and outstanding as of March 31, 2023 and June 24, 2022)	0	0
Ordinary shares (500,000,000 shares authorized, $0.01 par value; 39,274,783 shares and 39,048,700 shares issued at March 31, 2023 and June 24, 2022, respectively; and 36,578,909 shares and 36,436,683 shares outstanding at March 31, 2023 and June 24, 2022, respectively)	393	390
Additional paid-in capital	200,141	196,667
Less: Treasury shares (2,695,874 shares and 2,612,017 shares as of March 31, 2023 and June 24, 2022, respectively)	(156,475)	(147,258)
Accumulated other comprehensive income (loss)	(6,281)	(12,793)
Retained earnings	1,403,803	1,216,676
Total Shareholders’ Equity	1,441,581	1,253,682
Total Liabilities and Shareholders’ Equity	$ 2,028,801	$ 1,835,641

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2023	Jun. 24, 2022
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 1,031	$ 1,271
Preferred shares, shares authorized (in shares)	5,000,000	5,000,000
Preferred shares, par value (in USD per share)	$ 0.01	$ 0.01
Preferred shares, shares issued (in shares)	0	0
Preferred shares, shares outstanding (in shares)	0	0
Ordinary shares, shares authorized (in shares)	500,000,000	500,000,000
Ordinary shares, par value (in USD per share)	$ 0.01	$ 0.01
Ordinary shares, shares issued (in shares)	39,274,783	39,048,700
Ordinary shares, shares outstanding (in shares)	36,578,909	36,436,683
Treasury stocks, shares (in shares)	2,695,874	2,612,017

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2023	Mar. 25, 2022	Mar. 31, 2023	Mar. 25, 2022
Income Statement [Abstract]
Revenues	$ 665,281	$ 564,395	$ 1,989,366	$ 1,674,350
Cost of revenues	(579,274)	(493,702)	(1,735,388)	(1,470,689)
Gross profit	86,007	70,693	253,978	203,661
Selling, general and administrative expenses	(18,309)	(17,034)	(57,804)	(55,412)
Restructuring and other related costs	(5,872)	0	(5,872)	(135)
Operating income	61,826	53,659	190,302	148,114
Interest income	3,317	414	7,210	1,470
Interest expense	(399)	(73)	(1,179)	(347)
Foreign exchange gain (loss), net	(1,303)	(410)	(3,122)	998
Other income (expense), net	31	(36)	(178)	(1,351)
Income before income taxes	63,472	53,554	193,033	148,884
Income tax expense	(4,117)	(2,893)	(5,906)	(4,693)
Net income	59,355	50,661	187,127	144,191
Other comprehensive income (loss), net of tax:
Change in net unrealized gain (loss) on available-for-sale securities	2,046	(2,455)	1,768	(3,615)
Change in net unrealized gain (loss) on derivative instruments	(5,535)	666	4,435	2,743
Change in net retirement benefits plan – prior service cost	113	124	338	448
Change in foreign currency translation adjustment	(191)	(34)	(29)	(198)
Total other comprehensive income (loss), net of tax	(3,567)	(1,699)	6,512	(622)
Net comprehensive income	$ 55,788	$ 48,962	$ 193,639	$ 143,569
Earnings per share
Basic (in USD per share)	$ 1.62	$ 1.37	$ 5.12	$ 3.90
Diluted (in USD per share)	$ 1.60	$ 1.35	$ 5.07	$ 3.85
Weighted-average number of ordinary shares outstanding (thousands of shares)
Basic (in shares)	36,608	36,940	36,575	36,945
Diluted (in shares)	36,989	37,473	36,895	37,451

XML

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited) - USD ($) $ in Thousands	Total	Ordinary Share	Additional Paid-in Capital	Treasury Shares	Accumulated Other Comprehensive Income (Loss)	Retained Earnings
Beginning balance (in shares) at Jun. 25, 2021		38,749,045
Beginning balance at Jun. 25, 2021	$ 1,112,520	$ 388	$ 189,445	$ (87,343)	$ (6,266)	$ 1,016,296
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	144,191					144,191
Other comprehensive income (loss)	(622)				(622)
Share-based compensation	21,701		21,701
Issuance of ordinary shares (in shares)		290,680
Issuance of ordinary shares	0	$ 2	(2)
Repurchase of shares held as treasury shares	(28,624)			(28,624)
Tax withholdings related to net share settlement of restricted share units	(20,439)		(20,439)
Ending balance (in shares) at Mar. 25, 2022		39,039,725
Ending balance at Mar. 25, 2022	1,228,727	$ 390	190,705	(115,967)	(6,888)	1,160,487
Beginning balance (in shares) at Dec. 24, 2021		39,008,996
Beginning balance at Dec. 24, 2021	1,199,191	$ 390	185,940	(91,776)	(5,189)	1,109,826
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	50,661					50,661
Other comprehensive income (loss)	(1,699)				(1,699)
Share-based compensation	5,723		5,723
Issuance of ordinary shares (in shares)		30,729
Issuance of ordinary shares	0
Repurchase of shares held as treasury shares	(24,191)			(24,191)
Tax withholdings related to net share settlement of restricted share units	(958)		(958)
Ending balance (in shares) at Mar. 25, 2022		39,039,725
Ending balance at Mar. 25, 2022	1,228,727	$ 390	190,705	(115,967)	(6,888)	1,160,487
Beginning balance (in shares) at Jun. 24, 2022		39,048,700
Beginning balance at Jun. 24, 2022	1,253,682	$ 390	196,667	(147,258)	(12,793)	1,216,676
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	187,127					187,127
Other comprehensive income (loss)	6,512				6,512
Share-based compensation	21,217		21,217
Issuance of ordinary shares (in shares)		226,083
Issuance of ordinary shares	0	$ 3	(3)
Repurchase of shares held as treasury shares	(9,217)			(9,217)
Tax withholdings related to net share settlement of restricted share units	(17,740)		(17,740)
Ending balance (in shares) at Mar. 31, 2023		39,274,783
Ending balance at Mar. 31, 2023	1,441,581	$ 393	200,141	(156,475)	(6,281)	1,403,803
Beginning balance (in shares) at Dec. 30, 2022		39,251,581
Beginning balance at Dec. 30, 2022	1,384,131	$ 393	194,366	(152,362)	(2,714)	1,344,448
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	59,355					59,355
Other comprehensive income (loss)	(3,567)				(3,567)
Share-based compensation	6,719		6,719
Issuance of ordinary shares (in shares)		23,202
Issuance of ordinary shares	0
Repurchase of shares held as treasury shares	(4,113)			(4,113)
Tax withholdings related to net share settlement of restricted share units	(944)		(944)
Ending balance (in shares) at Mar. 31, 2023		39,274,783
Ending balance at Mar. 31, 2023	$ 1,441,581	$ 393	$ 200,141	$ (156,475)	$ (6,281)	$ 1,403,803

XML

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited) (Parenthetical) - shares	3 Months Ended		9 Months Ended
	Mar. 31, 2023	Mar. 25, 2022	Mar. 31, 2023	Mar. 25, 2022
Statement of Stockholders' Equity [Abstract]
Treasury stock acquired (in shares)	35,232	237,339	83,857	275,608

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) $ in Thousands	9 Months Ended
	Mar. 31, 2023	Mar. 25, 2022
Cash flows from operating activities
Net income for the period	$ 187,127	$ 144,191
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	32,504	28,907
Non-cash restructuring charges and other related costs	2,201	0
(Gain) loss on disposal and impairment of property, plant and equipment	(1,630)	(175)
(Gain) loss from sales and maturities of available-for-sale securities	92	(13)
Amortization of discount (premium) of short-term investments	300	3,038
Amortization of deferred debt issuance costs	24	24
(Reversal of) allowance for doubtful accounts	(240)	(39)
Unrealized loss (gain) on exchange rate and fair value of foreign currency forward contracts	693	(1,422)
Amortization of fair value at hedge inception of interest rate swaps	(478)	(736)
Share-based compensation	21,217	21,701
Deferred income tax	(276)	563
Other non-cash expenses	(151)	1,067
Changes in operating assets and liabilities
Trade accounts receivable	(98,212)	(109,334)
Contract assets	(7,617)	(1,690)
Inventories	2,720	(30,503)
Other current assets and non-current assets	(11,807)	(11,221)
Trade accounts payable	(5,028)	55,333
Contract liabilities	1,267	243
Income tax payable	(262)	(872)
Severance liabilities	1,917	1,883
Other current liabilities and non-current liabilities	17,861	6,952
Net cash provided by operating activities	142,222	107,897
Cash flows from investing activities
Purchase of short-term investments	(154,033)	(119,853)
Proceeds from sales of short-term investments	30,179	19,463
Proceeds from maturities of short-term investments	97,408	92,862
Purchase of property, plant and equipment	(43,422)	(75,327)
Purchase of intangibles	(698)	(592)
Proceeds from disposal of property, plant and equipment	117	229
Net cash used in investing activities	(70,449)	(83,218)
Cash flows from financing activities
Repayment of long-term borrowings	(12,187)	(9,141)
Repayment of finance lease liability	(7)	0
Repurchase of ordinary shares	(9,217)	(28,624)
Withholding tax related to net share settlement of restricted share units	(17,740)	(20,439)
Net cash used in financing activities	(39,151)	(58,204)
Net increase (decrease) in cash, cash equivalents and restricted cash	32,622	(33,525)
Movement in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at the beginning of period	198,365	303,123
Increase (decrease) in cash, cash equivalents and restricted cash	32,622	(33,525)
Effect of exchange rate on cash, cash equivalents and restricted cash	(244)	(301)
Cash, cash equivalents and restricted cash at the end of period	230,743	269,297
Non-cash investing and financing activities
Construction, software and equipment-related payables	$ 20,116	$ 14,060

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2023	Mar. 25, 2022
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents	$ 230,743	$ 269,140
Restricted cash	0	157
Cash, cash equivalents and restricted cash	$ 230,743	$ 269,297

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Business and organization

9 Months Ended

Mar. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business and organization

Business and organization

General

Fabrinet (“Fabrinet” or the “Parent Company”) was incorporated on August 12, 1999, and commenced operations on January 1, 2000. The Parent Company is an exempted company incorporated in the Cayman Islands, British West Indies. The “Company” refers to Fabrinet and its subsidiaries as a group.

The Company provides advanced optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers (“OEMs”) of complex products, such as optical communication components, modules and sub-systems, industrial lasers, automotive components, medical devices and sensors. The Company offers a broad range of advanced optical and electro-mechanical capabilities across the entire manufacturing process, including process design and engineering, supply chain management, manufacturing, complex printed circuit board assembly, advanced packaging, integration, final assembly and testing. The Company focuses primarily on the production of low-volume, high-mix products. The principal subsidiaries of Fabrinet include Fabrinet Co., Ltd. (“Fabrinet Thailand”), Casix, Inc. (“Casix”), Fabrinet West, Inc. (“Fabrinet West”) and Fabrinet Israel Ltd. (“Fabrinet Israel”).

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Accounting policies

9 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Accounting policies

Accounting policies

Basis of presentation

The accompanying unaudited condensed consolidated financial statements for Fabrinet as of March 31, 2023 and for the three and nine months ended March 31, 2023 and March 25, 2022 include normal recurring adjustments necessary for a fair statement of the financial statements set forth herein, in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or "GAAP") for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such information does not include all of the information and footnotes required by U.S. GAAP for annual financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in Fabrinet’s Annual Report on Form 10-K for the year ended June 24, 2022.

The balance sheet as of June 24, 2022 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

The results for the three and nine months ended March 31, 2023 may not be indicative of results for the year ending June 30, 2023 or any future periods.

Use of Estimates

The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amount of total revenues and expenses during the year. The Company bases estimates on historical experience and various assumptions about the future that are believed to be reasonable based on available information. The Company’s reported financial position or results of operations may be materially different under different conditions or when using different estimates and assumptions, particularly with respect to significant accounting policies, which are discussed below. Significant assumptions are used in accounting for share-based compensation, allowance for doubtful accounts, allowance for expected credit losses, income taxes, inventory obsolescence, goodwill and valuation of intangible assets related to business acquisition, among others. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates. In the event that the Company's estimates or assumptions prove to be different from actual results, adjustments will be made in subsequent periods to reflect more current information. Additionally, the extent to which the evolving COVID-19 pandemic impacts the Company’s unaudited condensed consolidated financial statements will depend on a number of factors, including the magnitude and duration of the pandemic. These estimates may change, as new events occur and additional information is obtained, or based upon the occurrence of other factors related to the COVID-19 pandemic that could result in material impacts to the Company's unaudited condensed consolidated financial statements in future reporting periods.

Fiscal years

The Company utilizes a 52-53 week fiscal year ending on the Friday in June closest to June 30. The three months ended March 31, 2023 and March 25, 2022 consisted of 13 weeks. The nine months ended March 31, 2023 and March 25, 2022 consisted of 40 weeks and 39 weeks, respectively. Fiscal year 2023 will comprise 53 weeks and will end on June 30, 2023.

Adoption of New Accounting Standards

In November 2021, the Financial Accounting Standard Board issued Accounting Standards Update ("ASU") 2021-10, “Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance,” which requires annual disclosures that increase the transparency of transactions involving government assistance, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity’s financial statements. The amendments in this update are effective for all entities within the ASU's scope for financial statements issued for annual periods beginning after December 15, 2021. The Company adopted this standard in the first quarter of fiscal year 2023 with no material impact on its unaudited condensed consolidated financial statements.

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Revenues from contracts with customers

9 Months Ended

Mar. 31, 2023

Revenue from Contract with Customer [Abstract]

Revenues from contracts with customers

Revenues from contracts with customers

Revenue by Geographic Area and End Market

Revenues are attributed to a particular geographic area based on the bill-to-location of the Company’s customers. The Company operates in three geographic regions: North America; Asia-Pacific and others; and Europe.

The following table presents total revenues by geographic region:

(in thousands, except percentages)	Three Months Ended March 31, 2023		As a % of Total Revenues		Nine Months Ended March 31, 2023		As a % of Total Revenues
North America
U.S.	$	310,100			$	975,098
Others (1)	6,035				13,693
Total revenue in North America	316,135		47.5	%	988,791		49.7	%
Asia-Pacific and others
India	85,731				247,942
Israel	85,562				182,732
Hong Kong	37,120				109,315
Malaysia	30,688				130,402
Thailand	16,706				45,420
China	11,194				60,738
Japan	10,044				32,129
Others	2,896				7,957
Total revenue in Asia-Pacific and others	279,941		42.1	%	816,635		41.1	%
Europe
U.K.	40,292				103,440
Germany	14,532				40,975
Ireland (2)	176				438
Others	14,205				39,087
Total revenue in Europe	$	69,205	10.4	%	$	183,940	9.2	%
Total revenue	$	665,281	100.0	%	$	1,989,366	100.0	%

(in thousands, except percentages)	Three Months Ended March 25, 2022		As a % of Total Revenues		Nine Months Ended March 25, 2022		As a % of Total Revenues
North America
U.S.	$	292,475			$	781,469
Others (1)	4,123				8,996
Total revenue in North America	296,598		52.5	%	790,465		47.2	%
Asia-Pacific and others
India	70,956				210,009
Malaysia	51,188				163,306
Hong Kong	17,338				61,575
Israel	16,883				67,318
Japan	16,449				47,258
China	12,843				40,624
Others	10,559				34,349
Total revenue in Asia-Pacific and others	196,216		34.8	%	624,439		37.3	%
Europe
Ireland (2)	28,640				133,024
U.K.	21,632				64,151
Germany	10,688				28,098
Others	10,621				34,173
Total revenue in Europe	$	71,581	12.7	%	$	259,446	15.5	%
Total revenue	$	564,395	100.0	%	$	1,674,350	100.0	%

(1)Others includes revenues from external customers based in our country of domicile, the Cayman Islands, which for each year presented is $0.

(2)Due to change in bill-to-location for a certain customer.

The following table presents revenues by end market:

(in thousands, except percentages)	Three Months Ended March 31, 2023		As a % of Total Revenues		Nine Months Ended March 31, 2023		As a % of Total Revenues
Optical communications	$	502,615	75.5	%	$	1,506,232	75.7	%
Lasers, sensors and other	162,666		24.5	%	483,134		24.3	%
Total	$	665,281	100.0	%	$	1,989,366	100.0	%

(in thousands, except percentages)	Three Months Ended March 25, 2022		As a % of Total Revenues		Nine Months Ended March 25, 2022		As a % of Total Revenues
Optical communications	$	440,003	78.0	%	$	1,318,087	78.7	%
Lasers, sensors and other	124,392		22.0	%	356,263		21.3	%
Total	$	564,395	100.0	%	$	1,674,350	100.0	%

Contract Assets and Liabilities

A contract asset is recognized when the Company has recognized revenues prior to generating an invoice for payment. Contract assets are classified separately within the unaudited condensed consolidated balance sheets and transferred to accounts receivable when rights to payment become unconditional.

A contract liability is recognized when the Company has advance payment arrangements with customers. The contract liabilities balance is normally recognized as revenue within six months.

The following tables summarize the activity in the Company’s contract assets and contract liabilities during the nine months ended March 31, 2023:

(in thousands)	Contract Assets
Beginning balance, June 24, 2022	$	13,464
Revenue recognized	57,617
Amounts collected or invoiced	(50,000)
Ending balance, March 31, 2023	$	21,081

(in thousands)	Contract Liabilities
Beginning balance, June 24, 2022	$	1,982
Advance payment received during the period	13,073
Revenue recognized	(11,806)
Ending balance, March 31, 2023	$	3,249

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Earnings per ordinary share

9 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Earnings per ordinary share

Earnings per ordinary share

Basic earnings per ordinary share is computed by dividing reported net income by the weighted-average number of ordinary shares outstanding during each period. Diluted earnings per ordinary share is computed by calculating the effect of potential dilutive ordinary shares outstanding during the period using the treasury stock method. Dilutive ordinary equivalent shares consist of restricted share units and performance share units.

Earnings per ordinary share was calculated as follows:

	Three Months Ended				Nine Months Ended
(in thousands, except per share data)	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
Net income attributable to shareholders	$	59,355	$	50,661	$	187,127	$	144,191
Weighted-average number of ordinary shares outstanding	36,608		36,940		36,575		36,945
Incremental shares arising from the assumed vesting of restricted share units and performance share units	381		533		320		506
Weighted-average number of ordinary shares for diluted earnings per ordinary share	36,989		37,473		36,895		37,451
Basic earnings per ordinary share	$	1.62	$	1.37	$	5.12	$	3.90
Diluted earnings per ordinary share	$	1.60	$	1.35	$	5.07	$	3.85

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Cash, cash equivalents and short-term investments

9 Months Ended

Mar. 31, 2023

Cash and Cash Equivalents [Abstract]

Cash, cash equivalents and short-term investments

Cash, cash equivalents and short-term investments

The Company’s cash, cash equivalents, and short-term investments are as follows:

					Fair Value
(in thousands)	Carrying Cost		Unrealized Gain/ (Loss)		Cash and Cash Equivalents		Marketable Securities		Other Investments
As of March 31, 2023
Cash	$	211,433	$	—	$	211,433	$	—	$	—
Cash equivalents	19,320		(10)		19,310		—		—
Liquidity funds	40,528		—		—		—		40,528
Certificates of deposit and time deposits	44,341		43		—		44,384		—
Corporate debt securities	215,295		(4,127)		—		211,168		—
U.S. agency and U.S. treasury securities	12,054		(154)		—		11,900		—
Total	$	542,971	$	(4,248)	$	230,743	$	267,452	$	40,528
As of June 24, 2022
Cash	$	187,630	$	—	$	187,630	$	—	$	—
Cash equivalents	10,367		(1)		10,366		—		—
Liquidity funds	31,477		—		—		—		31,477
Corporate debt securities	234,689		(5,671)		—		229,018		—
U.S. agency and U.S. treasury securities	20,007		(345)		—		19,662		—
Total	$	484,170	$	(6,017)	$	197,996	$	248,680	$	31,477

All highly liquid investments with original maturities of three months or less at the date of purchase are classified as cash equivalents. Management determines the appropriate classification of its investments at the time of purchase and reevaluates the designations at each balance sheet date. The Company may sell certain of its short-term investments prior to their stated maturities for strategic reasons including, but not limited to, anticipation of credit deterioration and duration management. The maturities of the Company’s short-term investments generally range from three months to three years.

The following table summarizes the cost and estimated fair value of short-term investments classified as available-for-sale securities based on stated effective maturities as of March 31, 2023 and June 24, 2022:

	March 31, 2023				June 24, 2022
(in thousands)	Carrying Cost		Fair Value		Carrying Cost		Fair Value
Due within one year	$	150,720	$	150,547	$	101,976	$	101,400
Due between one to five years	161,498		157,433		184,197		178,757
Total	$	312,218	$	307,980	$	286,173	$	280,157

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Fair value of financial instruments

9 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Fair value of financial instruments

Fair value of financial instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value hierarchy is established, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs for the valuation of an asset or liability as of the measurement date. The three levels of inputs that may be used to measure fair value are defined as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for assets or liabilities, either directly or indirectly. If the assets or liabilities have a specified (contractual) term, Level 2 inputs must be observable for substantially the full term of assets or liabilities.

Level 3 inputs are unobservable inputs for assets or liabilities, which require the reporting entity to develop its own valuation techniques and assumptions.

The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

The following table provides details of the financial instruments measured at fair value on a recurring basis, including:

	Fair Value Measurements at Reporting Date Using
(in thousands)	Level 1		Level 2			Level 3		Total
As of March 31, 2023
Assets
Cash equivalents	$	—	$	19,310		$	—	$	19,310
Liquidity funds	—		40,528			—		40,528
Certificates of deposit and time deposits	—		44,384			—		44,384
Corporate debt securities	—		211,168			—		211,168
U.S. agency and U.S. treasury securities	—		11,900			—		11,900
Derivative assets – current portion	—		2,078		(1)	—		2,078
Derivative assets – non-current portion	—		10		(2)	—		10
Total	$	—	$	329,378		$	—	$	329,378
Liabilities
Derivative liabilities – current portion	$	—	$	(1,794)		$	—	$	(1,794)
Total	$	—	$	(1,794)	(3)	$	—	$	(1,794)

	Fair Value Measurements at Reporting Date Using
(in thousands)	Level 1		Level 2			Level 3		Total
As of June 24, 2022
Assets
Cash equivalents	$	—	$	10,366		$	—	$	10,366
Liquidity funds	—		31,477			—		31,477
Corporate debt securities	—		229,018			—		229,018
U.S. agency and U.S. treasury securities	—		19,662			—		19,662
Derivative assets – current portion	—		110		(4)	—		110
Total	$	—	$	290,633		$	—	$	290,633
Liabilities
Derivative liabilities – current portion	$	—	$	(7,345)		$	—	$	(7,345)
Derivative liabilities – non-current portion	—		(234)			—		(234)
Total	$	—	$	(7,579)	(5)	$	—	$	(7,579)

(1)Foreign currency forward contracts with an aggregate notional amount of $78.0 million and an interest rate swap agreement with a notional amount of $64.2 million.

(2)Interest rate swap agreement with notional amount of $60.9 million.

(3)Foreign currency forward contracts with an aggregate notional amount of $52.0 million and 0.4 million Canadian dollars and an interest rate swap agreement with a notional amount of $60.9 million.

(4)Interest rate swap agreement with a notional amount of $64.2 million.

(5)Foreign currency forward contracts with an aggregate notional amount of $135.0 million and 0.5 million Canadian dollars and an interest rate swap agreement with a notional amount of $60.9 million.

Derivative Financial Instruments

The Company utilizes derivative financial instruments to hedge (i) foreign exchange risk associated with certain foreign currency denominated assets and liabilities and other foreign currency transactions, and (ii) interest rate risk associated with its long-term debt.

The Company minimizes the credit risk associated with its derivative instruments by limiting the exposure to any single counterparty and by entering into derivative instruments only with counterparties that meet the Company’s minimum credit quality standard.

Foreign currency forward and option contracts

As a result of foreign currency rate fluctuations, the U.S. dollar equivalent values of the Company’s foreign currency denominated assets and liabilities fluctuate. The Company uses foreign currency forward and option contracts to manage the foreign exchange risk associated with a portion of its foreign currency denominated assets and liabilities and other foreign currency transactions. The Company enters into foreign currency forward and option contracts to hedge fluctuations in the U.S. dollar value of forecasted transactions denominated in Thai baht and Canadian dollars with counterparties that meet the Company’s minimum credit quality standard.

The Company may enter into foreign currency forward contracts with maturities of up to 12 months to hedge fluctuations in the U.S. dollar value of forecasted transactions denominated in Thai baht, including inventory purchases, payroll and other operating expenses. The Company considers these forward contracts as dual-purpose hedges, that hedge both the foreign exchange fluctuation (i) from inception through the forecasted expenditure, and (ii) any subsequent revaluation of the account payable or accrual. The Company may designate the forward contracts that hedge the foreign exchange fluctuation from inception through the forecasted expenditure as cash flow hedges. The gain or loss on a derivative instrument designated and qualified as a cash flow hedging instrument is recorded as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. The reclassified amounts are presented in the same income statement line item as the earnings effect of the hedged item. Once the forecasted transactions are recorded, the Company will discontinue the hedging relationship by de-designating the derivative instrument and recording subsequent changes in fair value through contract maturity to foreign exchange gain (loss), net in the unaudited condensed consolidated statements of operations and comprehensive income as a natural hedge against the Thai baht denominated assets and liabilities.

The Company may also enter into non-designated foreign currency forward and option contracts to provide an offset to the re-measurement of foreign currency denominated assets and liabilities and to hedge certain forecasted exposures. Changes in the fair value of these non-designated derivatives are recorded as foreign exchange gain (loss), net in the unaudited condensed consolidated statements of operations and comprehensive income.

As of March 31, 2023, the Company had 130 outstanding U.S. dollar foreign currency forward contracts against Thai baht, with an aggregate notional amount of $130.0 million and maturity dates ranging from April 2023 through October 2023 and one outstanding Canadian dollar foreign currency forward contract with a notional amount of 0.4 million Canadian dollars and a maturity date in June 2023.

As of June 24, 2022, the Company had 135 outstanding U.S. dollar foreign currency forward contracts against Thai baht with an aggregate notional amount of $135.0 million and maturity dates ranging from July 2022 through January 2023, and one foreign currency contract with a notional amount of 0.5 million Canadian dollars and with a maturity date in September 2022.

As of March 31, 2023, the hedging relationship over foreign currency forward contracts that were designated for hedge accounting was determined to be highly effective based on the performance of retrospective and prospective regression testing. As of March 31, 2023, the amount in accumulated other comprehensive income (“AOCI”) that is expected to be reclassified into earnings within 12 months was a loss of $1.0 million.

As of June 24, 2022, the hedging relationship over foreign currency forward contracts that were designated for hedge accounting had been tested to be highly effective based on the performance of retrospective and prospective regression testing. As of June 24, 2022, the amount in AOCI that is expected to be reclassified into earnings within 12 months was a loss of $4.8 million.

During the three and nine months ended March 31, 2023, the Company included an unrealized loss of $2.1 million and unrealized gain of $1.8 million, respectively, from changes in the fair value of a foreign currency forward contract that was not designated for hedge accounting in earnings as foreign exchange gain (loss), net in the unaudited condensed consolidated statements of operations and comprehensive income.

During the three and nine months ended March 25, 2022, the Company included an unrealized gain of $0.1 million and $0.6 million, respectively, from changes in the fair value of a foreign currency forward contract that was not designated for hedge accounting in earnings as foreign exchange gain (loss), net in the unaudited condensed consolidated statements of operations and comprehensive income.

Interest Rate Swap Agreements

The Company entered into interest rate swap agreements to mitigate interest rate risk and improve the interest rate profile of the Company’s debt obligations. As of March 31, 2023 and June 24, 2022, the Company had two outstanding interest rate swap agreements with an aggregate notional amount of $125.1 million.

On July 25, 2018, Fabrinet Thailand entered into an interest rate swap agreement to effectively convert the floating interest rate of the term loan under the Company's previous syndicated senior credit facility agreement to a fixed interest rate of 2.86% per annum through the scheduled maturity of the term loan in June 2023 (see Note 10). The Company did not designate this interest rate swap for hedge accounting.

On September 3, 2019, Fabrinet Thailand entered into a term loan agreement under a credit facility agreement with Bank of Ayudhya Public Company Limited, and on September 10, 2019, the Company repaid in full the outstanding term loan under the Company's previous syndicated senior credit facility agreement (see Note 10). In conjunction with the funding of the new term loan, the Company entered into a second interest rate swap agreement. The combination of both of these interest rate swaps effectively converts the floating interest rate of the Company’s term loan with Bank of Ayudhya Public Company Limited to a fixed interest rate of 4.36% per annum through the maturity of the term loan in June 2024.

On September 27, 2019, the Company designated these two interest rate swaps as a cash flow hedge for the Company’s term loan under the credit facility agreement with Bank of Ayudhya Public Company Limited. The combination of these two interest rate swaps qualified for hedge accounting because the hedges are highly effective, and the Company has designated and documented contemporaneously the hedging relationships involving these interest rate swaps. While the Company intends to continue to meet the conditions for hedge accounting, if hedges do not qualify as highly effective, the changes in the fair value of the derivatives used as hedges would be reflected in earnings. From September 27, 2019, any gains or losses related to these interest rate swaps are recorded in AOCI in the unaudited condensed consolidated balance sheets. The Company reclassifies a portion of the gains or losses from AOCI into earnings at each reporting period based on either the accrued interest amount or the interest payment.

As of March 31, 2023, the amount in AOCI that is expected to be reclassified into earnings within 12 months was a gain of $0.3 million.

As of June 24, 2022, the amount in AOCI that is expected to be reclassified into earnings within 12 months was a loss of $0.5 million.

The following table provides a summary of the impact of derivative gain (loss) of the Company’s foreign currency forward contracts and interest rate swaps which were designated as cash flow hedges on the unaudited condensed consolidated statements of operations and other comprehensive income:

		Three Months Ended				Nine Months Ended
(in thousands)	Financial statements line item	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
Derivatives gain (loss) recognized in other comprehensive income (loss):
Foreign currency forward contracts	Other comprehensive income	$	(5,068)	$	1,009	$	6,694	$	2,558
Interest rate swaps	Other comprehensive income	242		882		1,068		1,885
Total derivatives gain (loss) recognized in other comprehensive income (loss)		$	(4,826)	$	1,891	$	7,762	$	4,443
Derivatives (gain) loss reclassified from accumulated other comprehensive income (loss) into earnings:
Foreign currency forward contracts	Cost of revenues	$	(3,245)	$	1,117	$	6,083	$	6,216
Foreign currency forward contracts	SG&A	(140)		46		250		258
Foreign currency forward contracts	Foreign exchange loss, net	2,807		(2,165)		(9,183)		(7,438)
Interest rate swaps	Interest expense	(131)		(223)		(477)		(736)
Total derivatives (gain) loss reclassified from accumulated other comprehensive income (loss) into earnings		$	(709)	$	(1,225)	$	(3,327)	$	(1,700)
Change in net unrealized gain (loss) on derivatives instruments		$	(5,535)	$	666	$	4,435	$	2,743

Fair Value of derivatives

The following table provides the fair values of the Company’s derivative financial instruments for the periods presented:

	March 31, 2023				June 24, 2022
(in thousands)	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Derivatives not designated as hedging instruments
Foreign currency forward and option contracts	$	1,378	$	(7)	$	—	$	(1,561)
Derivatives designated as hedging instruments
Foreign currency forward contracts	511		(1,569)		—		(4,821)
Interest rate swaps	199		(218)		110		(1,197)
Derivatives, gross balances	$	2,088	$	(1,794)	$	110	$	(7,579)

The Company recorded the fair value of derivative financial instruments in the unaudited condensed consolidated balance sheets as follows:

Derivative Financial Instruments	Balance Sheet line item
Fair Value of Derivative Assets	Other current assets, Other non-current assets
Fair Value of Derivative Liabilities	Accrued expenses, Other non-current liabilities

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Inventories

9 Months Ended

Mar. 31, 2023

Inventory Disclosure [Abstract]

Inventories

Inventories

(in thousands)	As of March 31, 2023		As of June 24, 2022
Raw materials	$	174,047	$	275,730
Work in progress	321,908		217,638
Finished goods	30,244		15,203
Goods in transit	28,048		48,574
Total inventories	$	554,247	$	557,145

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Leases

9 Months Ended

Mar. 31, 2023

Leases [Abstract]

Leases

Leases

The Company leases facilities under non-cancelable operating lease agreements. The Company leases a portion of its capital equipment and vehicles, certain land and buildings for its facilities in Thailand, the Cayman Islands, the PRC, the U.S., the U.K., Israel and Singapore under operating lease arrangements that expire at various dates through 2025. Certain of these lease arrangements provide the Company the ability to extend the lease from one to five years following the expiration of the current term. However, the Company has excluded all lease extension options from its right of use (“ROU”) assets and lease liabilities as the Company is not reasonably assured that it will exercise these options. None of the lease agreements contain residual value guarantees provided by the lessee. The Company also has one intercompany lease transaction in the form of a lease of office and manufacturing space.

Operating leases

As of March 31, 2023, the maturities of the Company’s operating lease liabilities were as follows:

(in thousands)
2023 (remaining three months)	$	644
2024	1,213
2025	45
Total undiscounted lease payments	1,902
Less imputed interest	(33)
Total present value of lease liabilities	$	1,869	(1)

(1)Includes current portion of operating lease liabilities of $1.6 million.

Rental expense related to the Company’s operating leases is recognized on a straight-line basis over the lease term.

Rental expense for long-term leases for the three and nine months ended March 31, 2023 was $0.6 million and $1.8 million, respectively, and for the three and nine months ended March 25, 2022 was $0.7 million and $2.1 million, respectively. Rental expense for short-term leases for the three and nine months ended March 31, 2023 was $0.2 million and $0.3 million, respectively, and for the three and nine months ended March 25, 2022 was $0.1 million and $0.2 million, respectively.

Finance leases

As of March 31, 2023, the Company had one finance lease agreement with a de minimis amount.

The following summarizes additional information related to the Company’s operating leases:

	As of March 31, 2023		As of June 24, 2022
Weighted-average remaining lease term (in years)	1.3		1.8
Weighted-average discount rate	3.4	%	3.4	%

The following table presents supplemental disclosure for the unaudited condensed consolidated statement of cash flows related to operating and finance leases for the three and nine months ended March 31, 2023 and March 25, 2022:

	Three Months Ended				Nine Months Ended
(in thousands)	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	575	$	678	$	1,877	$	2,076
Financing cash flows from finance leases	$	2	$	—	$	7	$	—
ROU assets obtained in exchange for lease liabilities	$	—	$	—	$	79	$	38

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Intangibles

9 Months Ended

Mar. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Intangibles

Intangibles

The following tables present details of the Company’s intangibles:

(in thousands)	Gross Carrying Amount		Accumulated Amortization		Foreign Currency Translation Adjustment		Net
As of March 31, 2023
Software	$	10,379	$	(7,908)	$	—	$	2,471
Total intangibles (1)	$	10,379	$	(7,908)	$	—	$	2,471

(1)Customer relationships and backlog were written-off in March 2023.

(in thousands)	Gross Carrying Amount		Accumulated Amortization		Foreign Currency Translation Adjustment		Net
As of June 24, 2022
Software	$	10,484	$	(7,681)	$	—	$	2,803
Customer relationships	4,373		(3,610)		(58)		705
Backlog	119		(119)		—		—
Total intangibles	$	14,976	$	(11,410)	$	(58)	$	3,508

The Company recorded amortization expense relating to intangibles of $0.3 million and $0.4 million for the three months ended March 31, 2023 and March 25, 2022, respectively, and $1.1 million and $1.2 million for the nine months ended March 31, 2023 and March 25, 2022, respectively.

The weighted-average remaining life of software and customer relationships was:

(years)	As of March 31, 2023	As of June 24, 2022
Software	3.2	3.8
Customer relationships	—	3.1
Total intangibles	3.2	3.8

Based on the carrying amount of intangibles as of March 31, 2023, and assuming no future impairment of the underlying assets, the estimated future amortization during each fiscal year was as follows:

(in thousands)
2023 (remaining three months)	$	235
2024	847
2025	660
2026	438
2027	230
Thereafter	61
Total	$	2,471

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Borrowings

9 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Borrowings

Borrowings 

The Company’s total borrowings, including current and non-current portions of long-term borrowings, consisted of the following:

(in thousands of U.S. dollars)
Rate	Conditions	Maturity	As of March 31, 2023		As of June 24, 2022
Long-term borrowings, current portion, net:
Long-term borrowings, current portion			$	12,188	$	12,188
Less: Unamortized debt issuance costs, current portion			(32)		(32)
Long-term borrowings, current portion, net			$	12,156	$	12,156
Long-term borrowings, non-current portion, net:
Term loan borrowings:
3-month LIBOR +1.35% per annum (1)	Repayable in quarterly installments	June 2024	$	15,234	$	27,421
Less: Current portion			(12,187)		(12,188)
Less: Unamortized debt issuance costs, non-current portion			(8)		(31)
Long-term borrowings, non-current portion, net			$	3,039	$	15,202

(1)The Company has entered into interest rate swaps that effectively fix a series of future interest payments on its term loans. Refer to Note 6.

The movements of long-term borrowings for the nine months ended March 31, 2023 and March 25, 2022 were as follows:

	Nine Months Ended
(in thousands)	March 31, 2023		March 25, 2022
Opening balance	$	27,421	$	39,609
Repayments during the period	(12,187)		(9,141)
Closing balance	$	15,234	$	30,468

As of March 31, 2023, future maturities of long-term borrowings during each fiscal year were as follows:

(in thousands)
2023 (remaining three months)	$	3,047
2024	12,187
Total	$	15,234

Credit facility agreements:

On August 20, 2019, Fabrinet Thailand (the “Borrower”) and Bank of Ayudhya Public Company Limited (the “Bank”) entered into a credit facility agreement (the “2019 Credit Facility Agreement”), which provides for a facility of 110.0 million Thai baht (approximately $3.6 million based on the applicable exchange rate as of September 27, 2019) and $160.9 million that may be used for, among other things, an overdraft facility, short-term loans against promissory notes, a letter of guarantee facility, a term loan facility and foreign exchange facilities. The Bank may approve any request for extension of credit under the 2019 Credit Facility Agreement and may increase or decrease any facility amount in its sole discretion.

Under the 2019 Credit Facility Agreement, on August 20, 2019, the Borrower and the Bank entered into a term loan agreement (the "Term Loan Agreement") pursuant to which the Borrower drew down on September 3, 2019 a term loan in the original principal amount of $60.9 million. The proceeds from the term loan, together with cash on hand, were used to repay outstanding obligations under the Company's previous syndicated senior credit facility agreement.

The term loan accrues interest at 3-month LIBOR plus 1.35% and is repayable in quarterly installments of $3.0 million, commencing on September 30, 2019. On March 9, 2023, the Borrower and the Bank amended the Term Loan Agreement to replace the interest rate reference from LIBOR to the Secured Overnight Financing Rate ("SOFR") effective from September 29, 2023. The term loan will mature on June 30, 2024. The Borrower may prepay the term loan in whole or in part at any time without premium or penalty. Any portion of the term loan repaid or prepaid may not be borrowed

again. During the three and nine months ended March 31, 2023, the Company recorded $0.6 million and $1.7 million, respectively, of interest expense in connection with this term loan, including the impact from interest rate swaps.

Any borrowings under the 2019 Credit Facility Agreement, including those borrowings under the Term Loan Agreement, are guaranteed by Fabrinet and secured by land and buildings owned by the Borrower in the Pathumthani and Chonburi Provinces in Thailand.

The Term Loan Agreement contains affirmative and negative covenants applicable to the Borrower, including delivery of financial statements and other information, compliance with laws, maintenance of insurance, and restrictions on granting security interests or liens on its assets, disposing of its assets, incurring indebtedness and making acquisitions. While the term loan is outstanding, the Borrower is required to maintain a loan to value of the mortgaged real property ratio of not greater than 65%. If the loan to value ratio is not maintained, the Borrower will be required to provide additional security or prepay a portion of the term loan in order to restore the required ratio. The Company is also required to maintain a debt service coverage ratio of at least 1.25 times and a debt-to-equity ratio of less than or equal to 1.0 times. In the case of any payment of a dividend by the Company, its debt service coverage ratio must be at least 1.50 times. As of March 31, 2023, the Company was in compliance with all of its financial covenants under the Term Loan Agreement.

The events of default under the Term Loan Agreement include failure to timely pay amounts due under the Term Loan Agreement or the related finance documents, failure to comply with the covenants under the Term Loan Agreement or the related finance documents, cross default with other indebtedness of the Borrower, events of bankruptcy or insolvency in respect of the Borrower, and the occurrence of any event or series of events that in the opinion of the Bank has or is reasonably likely to have a material adverse effect.

As of March 31, 2023, there was $15.2 million outstanding under the term loan.

On March 9, 2023, Fabrinet Thailand and the Parent Company (the “Borrowers”) and the Bank entered into a credit facility agreement (the “2023 Credit Facility Agreement”), which provides a facility of $55.0 million.

Any borrowings under the 2023 Credit Facility Agreement are secured by land and buildings owned by the Borrowers in the Pathumthani and Chonburi Provinces in Thailand.

Under the 2023 Credit Facility Agreement, the Borrowers are required to maintain a loan to value of the mortgaged real property ratio of not greater than 60%. The Borrowers are also required to maintain a debt service coverage ratio of at least 1.25 times and a debt-to-equity ratio of less than or equal to 1.0 times. In the case of any payment of a dividend by the Company, its debt service coverage ratio must be at least 1.50 times.

As of March 31, 2023, there was no amount outstanding under the 2023 Credit Facility.

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Income taxes

9 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Income taxes

Income taxes

As of March 31, 2023 and June 24, 2022, the liability for uncertain tax positions including accrued interest and penalties was $0.9 million and $1.6 million, respectively. The Company expects the estimated amount of liability associated with its uncertain tax positions to decrease within the next 12 months due to the expiration of statutes of limitations with respect to these positions.

The Company files income tax returns in the United States and foreign tax jurisdictions. The tax years from 2015 to 2021 remain open to examination by U.S. federal and state, and foreign tax authorities. The Company’s income tax is recognized based on the best estimate of the expected annual effective tax rate for the full financial year of each entity in the Company, adjusted for discrete items arising in that quarter. If the Company’s estimated annual effective tax rate changes, the Company makes a cumulative adjustment in that quarter.

The effective tax rate for the Company for the three months ended March 31, 2023 and March 25, 2022 was 6.5% and 5.4%, respectively, of net income. The increase was primarily due to an increase in income subject to tax during the three months ended March 31, 2023 as compared to the three months ended March 25, 2022.

The effective tax rate for the Company for the nine months ended March 31, 2023 and March 25, 2022 was 3.1% and 3.2%, respectively, of net income. The decrease was primarily due to lower annualized effective tax rate offset by an increase in income subject to tax during the nine months ended March 31, 2023 as compared to the nine months ended March 25, 2022.

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Share-based compensation

9 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Share-based compensation

Share-based compensation

Share-based compensation

The grant date fair value of restricted share units and performance share units is based on the market value of the Company's ordinary shares on the date of grant.

The effect of recording share-based compensation expense for the three and nine months ended March 31, 2023 and March 25, 2022 was as follows:

	Three Months Ended				Nine Months Ended
(in thousands)	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
Share-based compensation expense by type of award:
Restricted share units	$	3,945	$	3,126	$	12,845	$	11,720
Performance share units	2,774		2,597		8,372		9,981
Total share-based compensation expense	6,719		5,723		21,217		21,701
Tax effect on share-based compensation expense	—		—		—		—
Net effect on share-based compensation expense	$	6,719	$	5,723	$	21,217	$	21,701

Share-based compensation expense was recorded in the unaudited condensed consolidated statements of operations and comprehensive income as follows:

	Three Months Ended				Nine Months Ended
(in thousands)	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
Cost of revenue	$	1,453	$	1,183	$	5,028	$	4,579
Selling, general and administrative expense	5,080		4,540		16,003		17,122
Restructuring and other related costs	186		—		186		—
Total share-based compensation expense	$	6,719	$	5,723	$	21,217	$	21,701

The Company did not capitalize any share-based compensation expense as part of any asset costs during the three and nine months ended March 31, 2023 and March 25, 2022.

Share-based award activity

On December 12, 2019, the Company’s shareholders approved Fabrinet’s 2020 Equity Incentive Plan (the “2020 Plan”). Upon the approval of the 2020 Plan, Fabrinet’s Amended and Restated 2010 Performance Incentive Plan (the “2010 Plan”) was simultaneously terminated. The 2020 Plan provides for the grant of equity awards thereunder with respect to (i) 1,700,000 ordinary shares, plus (ii) up to 1,300,000 ordinary shares that, as of immediately prior to the termination of the 2010 Plan, had been reserved but not issued pursuant to any awards granted under the 2010 Plan and are not subject to any awards thereunder. Upon termination of the 2010 Plan, 1,281,619 ordinary shares were reserved for issuance under the 2020 Plan pursuant to clause (ii) of the preceding sentence.

As of March 31, 2023, there were 343,211 restricted share units outstanding, 204,016 performance share units outstanding and 1,958,203 ordinary shares available for future grant under the 2020 Plan.

As of March 31, 2023, there were 30,827 restricted share units outstanding under the 2010 Plan. No ordinary shares are available for future grant under the 2010 Plan.

On November 2, 2017, the Company adopted the 2017 Inducement Equity Incentive Plan (the “2017 Inducement Plan”) with a reserve of 160,000 ordinary shares authorized for future issuance solely for the granting of inducement share options and equity awards to new employees. The 2017 Inducement Plan was adopted without shareholder approval in reliance on the “employment inducement exemption” provided under the New York Stock Exchange Listed Company Manual. As of March 31, 2023, there were no awards outstanding and 111,347 ordinary shares available for future grant under the 2017 Inducement Plan.

The 2020 Plan, 2010 Plan and 2017 Inducement Plan are collectively referred to as the “Equity Incentive Plans.”

The following table summarizes the number of equity awards outstanding and ordinary shares available for grant under each of the Equity Incentive Plans as of March 31, 2023:

(share units)	Restricted Share Units outstanding	Performance Share Units outstanding	Ordinary Shares available for future grant
2020 Plan	343,211	204,016	1,958,203
2010 Plan	30,827	—	—
2017 Inducement Plan	—	—	111,347
Total	374,038	204,016	2,069,550

Restricted share units and performance share units

Restricted share units and performance share units have been granted under the Equity Incentive Plans.

Restricted share units granted to employees generally vest in equal installments over three or four years on each anniversary of the vesting commencement date. Restricted share units granted to non-employee directors generally cliff vest 100% on the first of January, approximately one year from the grant date, provided the director continues to serve through such date.

Performance share units granted to executives will vest, if at all, at the end of a two-year performance period based on the Company’s achievement of pre-defined performance criteria, which consist of revenue and non-GAAP operating margin targets. The actual number of performance share units that may vest at the end of the performance period ranges from 0% to 100% of the award grant.

The following table summarizes restricted share unit activity under the Equity Incentive Plans:

	Number of Shares	Weighted- Average Grant Date Fair Value Per Share
Balance as of June 24, 2022	459,626	$	75.14
Granted	154,113	$	119.23
Vested	(220,004)	$	67.23
Forfeited	(19,697)	$	91.84
Balance as of March 31, 2023	374,038	$	97.08

	Number of Shares	Weighted- Average Grant Date Fair Value Per Share
Balance as of June 25, 2021	641,875	$	55.74
Granted	165,684	$	102.74
Vested	(310,473)	$	51.12
Forfeited	(36,158)	$	69.84
Balance as of March 25, 2022	460,928	$	73.96

The following table summarizes performance share unit activity under the Equity Incentive Plans:

	Number of Shares	Weighted- Average Grant Date Fair Value Per Share
Balance as of June 24, 2022	285,882	$	81.64
Granted	97,142	$	117.35
Vested	(179,008)	$	70.05
Forfeited	—	$	—
Balance as of March 31, 2023	204,016	$	108.81

	Number of Shares	Weighted- Average Grant Date Fair Value Per Share
Balance as of June 25, 2021	427,028	$	57.82
Granted	110,832	$	101.05
Vested	(190,213)	48.65
Forfeited	(61,765)	$	53.38
Balance as of March 25, 2022	285,882	$	81.64

The fair value of restricted share units and performance share units is based on the market value of Fabrinet's ordinary shares on the date of grant.

As of March 31, 2023, there was $15.1 million and $9.4 million of unrecognized share-based compensation expense related to restricted share units and performance share units, respectively, under the Equity Incentive Plans that is expected to be recorded over a weighted-average period of 2.6 and 1.2 years, respectively.

For the nine months ended March 31, 2023 and March 25, 2022, the Company withheld an aggregate of 172,929 shares and 210,006 shares, respectively, upon the vesting of restricted share units and performance shares units, based upon the closing share price on the vesting date to settle employee tax withholding obligations. For the nine months ended March 31, 2023 and March 25, 2022, the Company then remitted cash of $17.7 million and $20.4 million, respectively, to the appropriate taxing authorities and presented it as a financing activity within the unaudited condensed consolidated statements of cash flows. The payment was recorded as a reduction of additional paid-in capital.

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Shareholders' equity

9 Months Ended

Mar. 31, 2023

Equity [Abstract]

Shareholders' equity

Shareholders’ equity

Share capital

Fabrinet’s authorized share capital is 500,000,000 ordinary shares, par value of $0.01 per ordinary share, and 5,000,000 preferred shares, par value of $0.01 per preferred share.

For the three and nine months ended March 31, 2023, Fabrinet issued 23,202 and 226,083 ordinary shares, respectively, upon the vesting of restricted share units and performance share units under the Equity Incentive Plans, net of shares withheld.

For the three and nine months ended March 25, 2022, Fabrinet issued 30,729 and 290,680 ordinary shares, respectively, upon the vesting of restricted share units and performance share units under the Equity Incentive Plans, net of shares withheld.

All such issued shares are fully paid.

Treasury shares

In August 2017, the Company’s board of directors approved a share repurchase program to permit the Company to repurchase up to $30.0 million worth of its issued and outstanding ordinary shares in the open market in accordance with applicable rules and regulations. In February 2018, May 2019, August 2020 and August 2022, the Company’s board of directors approved an increase of $30.0 million, $50.0 million, $58.5 million and $78.7 million, respectively, to the original share repurchase authorization, bringing the aggregate authorization to $247.2 million.

During the nine months ended March 31, 2023, the Company repurchased 83,857 shares under the program at an average price per share (excluding other direct costs) of $109.89 totaling $9.2 million. As of March 31, 2023, the Company had a remaining authorization to repurchase up to $90.8 million worth of its ordinary shares under the share repurchase program. Shares repurchased under the share repurchase program are held as treasury shares.

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Accumulated other comprehensive income (loss)

9 Months Ended

Mar. 31, 2023

Equity [Abstract]

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income (loss)

The changes in AOCI for the nine months ended March 31, 2023 and March 25, 2022 were as follows:

(in thousands)	Unrealized net (Losses)/Gains on Available-for-sale Securities		Unrealized net (Losses)/Gains on Derivative Instruments		Retirement benefit plan - Prior service cost		Foreign Currency Translation Adjustment		Total
Balance as of June 24, 2022	$	(6,018)	$	(5,082)	$	(803)	$	(890)	$	(12,793)
Other comprehensive income (loss) before reclassification adjustment	1,675		7,762		—		(29)		9,408
Amounts reclassified out of AOCI to the unaudited condensed consolidated statements of operations and comprehensive income	93		(3,327)		338		—		(2,896)
Tax effects	—		—		—		—		—
Other comprehensive income (loss)	$	1,768	$	4,435	$	338	$	(29)	$	6,512
Balance as of March 31, 2023	$	(4,250)	$	(647)	$	(465)	$	(919)	$	(6,281)

(in thousands)	Unrealized net (Losses)/Gains on Available-for-sale Securities		Unrealized net (Losses)/Gains on Derivative Instruments		Retirement benefit plan - Prior service cost		Foreign Currency Translation Adjustment		Total
Balance as of June 25, 2021	$	308	$	(4,504)	$	(1,425)	$	(645)	$	(6,266)
Other comprehensive income (loss) before reclassification adjustment	(3,602)		4,443		—		(198)		643
Amounts reclassified out of AOCI to the unaudited condensed consolidated statements of operations and comprehensive income	(13)		(1,700)		448		—		(1,265)
Tax effects	—		—		—		—		—
Other comprehensive income (loss)	$	(3,615)	$	2,743	$	448	$	(198)	$	(622)
Balance as of March 25, 2022	$	(3,307)	$	(1,761)	$	(977)	$	(843)	$	(6,888)

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Commitments and contingencies

9 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments and contingencies

Commitments and contingencies

Bank guarantees

As of March 31, 2023 and June 24, 2022, there were outstanding bank guarantees on behalf of the Company's subsidiary in Thailand for electricity usage and other normal business expenses totaling $1.6 million and $1.4 million, respectively, or Thai baht 53.0 million and 50.2 million, respectively. In addition, there were other immaterial bank guarantees on behalf of the Company's subsidiary in Israel to support the operations related to the Customs department.

As of June 24, 2022, there was an outstanding bank guarantee on behalf of the Company's subsidiary in the PRC to support the subsidiary's operations totaling Renminbi 1.0 million, which bank guarantee was backed by cash collateral of $0.1 million. This bank guarantee was released in December 2022. In addition, there were other immaterial bank guarantees on behalf of the Company's subsidiary in the U.K. to support its operations.

Purchase obligations

Purchase obligations represent legally binding commitments to purchase inventory and other commitments made in the normal course of business to meet operational requirements. Although open purchase orders are considered enforceable and legally binding, their terms generally give the Company the option to cancel, reschedule and/or adjust its requirements based on its business needs prior to the delivery of goods or performance of services. Obligations to purchase inventory and other commitments are generally expected to be fulfilled within one year.

As of March 31, 2023, the Company had a purchase obligation and other commitments to third parties of $1.09 billion.

Capital expenditures

As of March 31, 2023, the Company had total capital expenditure commitments to third parties of $18.3 million.

Indemnification of directors and officers

Cayman Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of directors and officers, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Fabrinet’s amended and restated memorandum and articles of association provide for indemnification of directors and officers for actions, costs, charges, losses, damages and expenses incurred in their capacities as such, except that such indemnification does not extend to any matter in respect of any fraud or dishonesty that may attach to any of them.

In accordance with Fabrinet’s form of indemnification agreement for its directors and officers, Fabrinet has agreed to indemnify its directors and officers against certain liabilities and expenses incurred by such persons in connection with claims by reason of their being such a director or officer. Fabrinet maintains a director and officer liability insurance policy that may enable it to recover a portion of any future amounts paid under the indemnification agreements.

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Restructuring and other related costs	9 Months Ended
	Mar. 31, 2023
Restructuring and Related Activities [Abstract]
Restructuring and other related costs	Restructuring and other related costsRestructuring and other related costs may consist of voluntary or involuntary severance-related charges, asset-related charges and other costs due to exit activities. We recognize voluntary severance-related charges when an employee accepts the offered benefit arrangement. We recognize involuntary severance-related charges depending on whether the termination benefits are provided under an ongoing benefit arrangement or under a one-time benefit arrangement. If the former, we recognize the charges once they are probable and the amounts are estimable. If the latter, we recognize the charges once the benefits have been communicated to employees.

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Business segments and geographic information

9 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Business segments and geographic information

Business segments and geographic information

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is Fabrinet’s Chief Executive Officer. As of March 31, 2023, the Company operated and internally managed a single operating segment. Accordingly, the Company does not accumulate discrete information with respect to separate product lines and does not have separate reportable segments.

For the Company’s revenues by geographic region, see “Revenue by Geographic Area and End Market” in Note 3.

The following table presents long-lived assets by the country in which they are based:

(in thousands)	March 31, 2023		June 24, 2022
Long-Lived Assets:
Thailand	$	261,506	$	240,750
U.S.	25,669		25,938
China	17,651		19,686
Israel	3,023		4,025
Others	516		1,878
Total	$	308,365	$	292,277

Significant customers

The Company had three customers that each contributed to 10% or more of the Company's total trade accounts receivable as of March 31, 2023 and June 24, 2022.

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Accounting policies (Policies)

9 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Basis of presentation

Basis of presentation

The accompanying unaudited condensed consolidated financial statements for Fabrinet as of March 31, 2023 and for the three and nine months ended March 31, 2023 and March 25, 2022 include normal recurring adjustments necessary for a fair statement of the financial statements set forth herein, in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or "GAAP") for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such information does not include all of the information and footnotes required by U.S. GAAP for annual financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in Fabrinet’s Annual Report on Form 10-K for the year ended June 24, 2022.

The balance sheet as of June 24, 2022 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

The results for the three and nine months ended March 31, 2023 may not be indicative of results for the year ending June 30, 2023 or any future periods.

Use of Estimates

Use of Estimates

The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amount of total revenues and expenses during the year. The Company bases estimates on historical experience and various assumptions about the future that are believed to be reasonable based on available information. The Company’s reported financial position or results of operations may be materially different under different conditions or when using different estimates and assumptions, particularly with respect to significant accounting policies, which are discussed below. Significant assumptions are used in accounting for share-based compensation, allowance for doubtful accounts, allowance for expected credit losses, income taxes, inventory obsolescence, goodwill and valuation of intangible assets related to business acquisition, among others. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates. In the event that the Company's estimates or assumptions prove to be different from actual results, adjustments will be made in subsequent periods to reflect more current information. Additionally, the extent to which the evolving COVID-19 pandemic impacts the Company’s unaudited condensed consolidated financial statements will depend on a number of factors, including the magnitude and duration of the pandemic. These estimates may change, as new events occur and additional information is obtained, or based upon the occurrence of other factors related to the COVID-19 pandemic that could result in material impacts to the Company's unaudited condensed consolidated financial statements in future reporting periods.

Fiscal years

Fiscal years

The Company utilizes a 52-53 week fiscal year ending on the Friday in June closest to June 30. The three months ended March 31, 2023 and March 25, 2022 consisted of 13 weeks. The nine months ended March 31, 2023 and March 25, 2022 consisted of 40 weeks and 39 weeks, respectively. Fiscal year 2023 will comprise 53 weeks and will end on June 30, 2023.

Adoption of New Accounting Standards

Adoption of New Accounting StandardsIn November 2021, the Financial Accounting Standard Board issued Accounting Standards Update ("ASU") 2021-10, “Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance,” which requires annual disclosures that increase the transparency of transactions involving government assistance, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity’s financial statements. The amendments in this update are effective for all entities within the ASU's scope for financial statements issued for annual periods beginning after December 15, 2021. The Company adopted this standard in the first quarter of fiscal year 2023 with no material impact on its unaudited condensed consolidated financial statements.

Contract Assets and Liabilities

Contract Assets and Liabilities

A contract asset is recognized when the Company has recognized revenues prior to generating an invoice for payment. Contract assets are classified separately within the unaudited condensed consolidated balance sheets and transferred to accounts receivable when rights to payment become unconditional.

A contract liability is recognized when the Company has advance payment arrangements with customers. The contract liabilities balance is normally recognized as revenue within six months.

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Revenues from contracts with customers (Tables)

9 Months Ended

Mar. 31, 2023

Revenue from Contract with Customer [Abstract]

Schedule of Disaggregation of Revenue by Geographical Regions

The following table presents total revenues by geographic region:

(in thousands, except percentages)	Three Months Ended March 31, 2023		As a % of Total Revenues		Nine Months Ended March 31, 2023		As a % of Total Revenues
North America
U.S.	$	310,100			$	975,098
Others (1)	6,035				13,693
Total revenue in North America	316,135		47.5	%	988,791		49.7	%
Asia-Pacific and others
India	85,731				247,942
Israel	85,562				182,732
Hong Kong	37,120				109,315
Malaysia	30,688				130,402
Thailand	16,706				45,420
China	11,194				60,738
Japan	10,044				32,129
Others	2,896				7,957
Total revenue in Asia-Pacific and others	279,941		42.1	%	816,635		41.1	%
Europe
U.K.	40,292				103,440
Germany	14,532				40,975
Ireland (2)	176				438
Others	14,205				39,087
Total revenue in Europe	$	69,205	10.4	%	$	183,940	9.2	%
Total revenue	$	665,281	100.0	%	$	1,989,366	100.0	%

(in thousands, except percentages)	Three Months Ended March 25, 2022		As a % of Total Revenues		Nine Months Ended March 25, 2022		As a % of Total Revenues
North America
U.S.	$	292,475			$	781,469
Others (1)	4,123				8,996
Total revenue in North America	296,598		52.5	%	790,465		47.2	%
Asia-Pacific and others
India	70,956				210,009
Malaysia	51,188				163,306
Hong Kong	17,338				61,575
Israel	16,883				67,318
Japan	16,449				47,258
China	12,843				40,624
Others	10,559				34,349
Total revenue in Asia-Pacific and others	196,216		34.8	%	624,439		37.3	%
Europe
Ireland (2)	28,640				133,024
U.K.	21,632				64,151
Germany	10,688				28,098
Others	10,621				34,173
Total revenue in Europe	$	71,581	12.7	%	$	259,446	15.5	%
Total revenue	$	564,395	100.0	%	$	1,674,350	100.0	%

(1)Others includes revenues from external customers based in our country of domicile, the Cayman Islands, which for each year presented is $0.

(2)Due to change in bill-to-location for a certain customer.

Schedule of Revenues by End Market

The following table presents revenues by end market:

(in thousands, except percentages)	Three Months Ended March 31, 2023		As a % of Total Revenues		Nine Months Ended March 31, 2023		As a % of Total Revenues
Optical communications	$	502,615	75.5	%	$	1,506,232	75.7	%
Lasers, sensors and other	162,666		24.5	%	483,134		24.3	%
Total	$	665,281	100.0	%	$	1,989,366	100.0	%

(in thousands, except percentages)	Three Months Ended March 25, 2022		As a % of Total Revenues		Nine Months Ended March 25, 2022		As a % of Total Revenues
Optical communications	$	440,003	78.0	%	$	1,318,087	78.7	%
Lasers, sensors and other	124,392		22.0	%	356,263		21.3	%
Total	$	564,395	100.0	%	$	1,674,350	100.0	%

Schedule of Activity in the Company's Contract Assets and Liabilities

The following tables summarize the activity in the Company’s contract assets and contract liabilities during the nine months ended March 31, 2023:

(in thousands)	Contract Assets
Beginning balance, June 24, 2022	$	13,464
Revenue recognized	57,617
Amounts collected or invoiced	(50,000)
Ending balance, March 31, 2023	$	21,081

(in thousands)	Contract Liabilities
Beginning balance, June 24, 2022	$	1,982
Advance payment received during the period	13,073
Revenue recognized	(11,806)
Ending balance, March 31, 2023	$	3,249

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Earnings per ordinary share (Tables)

9 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Schedule of Earnings Per Ordinary Share

Earnings per ordinary share was calculated as follows:

	Three Months Ended				Nine Months Ended
(in thousands, except per share data)	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
Net income attributable to shareholders	$	59,355	$	50,661	$	187,127	$	144,191
Weighted-average number of ordinary shares outstanding	36,608		36,940		36,575		36,945
Incremental shares arising from the assumed vesting of restricted share units and performance share units	381		533		320		506
Weighted-average number of ordinary shares for diluted earnings per ordinary share	36,989		37,473		36,895		37,451
Basic earnings per ordinary share	$	1.62	$	1.37	$	5.12	$	3.90
Diluted earnings per ordinary share	$	1.60	$	1.35	$	5.07	$	3.85

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Cash, cash equivalents and short-term investments (Tables)

9 Months Ended

Mar. 31, 2023

Cash and Cash Equivalents [Abstract]

Summary of Components of Cash, Cash Equivalents, and Short-Term Investments

The Company’s cash, cash equivalents, and short-term investments are as follows:

					Fair Value
(in thousands)	Carrying Cost		Unrealized Gain/ (Loss)		Cash and Cash Equivalents		Marketable Securities		Other Investments
As of March 31, 2023
Cash	$	211,433	$	—	$	211,433	$	—	$	—
Cash equivalents	19,320		(10)		19,310		—		—
Liquidity funds	40,528		—		—		—		40,528
Certificates of deposit and time deposits	44,341		43		—		44,384		—
Corporate debt securities	215,295		(4,127)		—		211,168		—
U.S. agency and U.S. treasury securities	12,054		(154)		—		11,900		—
Total	$	542,971	$	(4,248)	$	230,743	$	267,452	$	40,528
As of June 24, 2022
Cash	$	187,630	$	—	$	187,630	$	—	$	—
Cash equivalents	10,367		(1)		10,366		—		—
Liquidity funds	31,477		—		—		—		31,477
Corporate debt securities	234,689		(5,671)		—		229,018		—
U.S. agency and U.S. treasury securities	20,007		(345)		—		19,662		—
Total	$	484,170	$	(6,017)	$	197,996	$	248,680	$	31,477

Schedule of Available-for-Sale Securities Based on Stated Effective Maturities

The following table summarizes the cost and estimated fair value of short-term investments classified as available-for-sale securities based on stated effective maturities as of March 31, 2023 and June 24, 2022:

	March 31, 2023				June 24, 2022
(in thousands)	Carrying Cost		Fair Value		Carrying Cost		Fair Value
Due within one year	$	150,720	$	150,547	$	101,976	$	101,400
Due between one to five years	161,498		157,433		184,197		178,757
Total	$	312,218	$	307,980	$	286,173	$	280,157

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Fair value of financial instruments (Tables)

9 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Schedule of Financial Instruments Measured at Fair Value on Recurring Basis

The following table provides details of the financial instruments measured at fair value on a recurring basis, including:

	Fair Value Measurements at Reporting Date Using
(in thousands)	Level 1		Level 2			Level 3		Total
As of March 31, 2023
Assets
Cash equivalents	$	—	$	19,310		$	—	$	19,310
Liquidity funds	—		40,528			—		40,528
Certificates of deposit and time deposits	—		44,384			—		44,384
Corporate debt securities	—		211,168			—		211,168
U.S. agency and U.S. treasury securities	—		11,900			—		11,900
Derivative assets – current portion	—		2,078		(1)	—		2,078
Derivative assets – non-current portion	—		10		(2)	—		10
Total	$	—	$	329,378		$	—	$	329,378
Liabilities
Derivative liabilities – current portion	$	—	$	(1,794)		$	—	$	(1,794)
Total	$	—	$	(1,794)	(3)	$	—	$	(1,794)

	Fair Value Measurements at Reporting Date Using
(in thousands)	Level 1		Level 2			Level 3		Total
As of June 24, 2022
Assets
Cash equivalents	$	—	$	10,366		$	—	$	10,366
Liquidity funds	—		31,477			—		31,477
Corporate debt securities	—		229,018			—		229,018
U.S. agency and U.S. treasury securities	—		19,662			—		19,662
Derivative assets – current portion	—		110		(4)	—		110
Total	$	—	$	290,633		$	—	$	290,633
Liabilities
Derivative liabilities – current portion	$	—	$	(7,345)		$	—	$	(7,345)
Derivative liabilities – non-current portion	—		(234)			—		(234)
Total	$	—	$	(7,579)	(5)	$	—	$	(7,579)

(1)Foreign currency forward contracts with an aggregate notional amount of $78.0 million and an interest rate swap agreement with a notional amount of $64.2 million.

(2)Interest rate swap agreement with notional amount of $60.9 million.

(3)Foreign currency forward contracts with an aggregate notional amount of $52.0 million and 0.4 million Canadian dollars and an interest rate swap agreement with a notional amount of $60.9 million.

(4)Interest rate swap agreement with a notional amount of $64.2 million.

(5)Foreign currency forward contracts with an aggregate notional amount of $135.0 million and 0.5 million Canadian dollars and an interest rate swap agreement with a notional amount of $60.9 million.

Schedule of Impacts of Derivative Gain (Loss) of Cash Flow Hedges

The following table provides a summary of the impact of derivative gain (loss) of the Company’s foreign currency forward contracts and interest rate swaps which were designated as cash flow hedges on the unaudited condensed consolidated statements of operations and other comprehensive income:

		Three Months Ended				Nine Months Ended
(in thousands)	Financial statements line item	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
Derivatives gain (loss) recognized in other comprehensive income (loss):
Foreign currency forward contracts	Other comprehensive income	$	(5,068)	$	1,009	$	6,694	$	2,558
Interest rate swaps	Other comprehensive income	242		882		1,068		1,885
Total derivatives gain (loss) recognized in other comprehensive income (loss)		$	(4,826)	$	1,891	$	7,762	$	4,443
Derivatives (gain) loss reclassified from accumulated other comprehensive income (loss) into earnings:
Foreign currency forward contracts	Cost of revenues	$	(3,245)	$	1,117	$	6,083	$	6,216
Foreign currency forward contracts	SG&A	(140)		46		250		258
Foreign currency forward contracts	Foreign exchange loss, net	2,807		(2,165)		(9,183)		(7,438)
Interest rate swaps	Interest expense	(131)		(223)		(477)		(736)
Total derivatives (gain) loss reclassified from accumulated other comprehensive income (loss) into earnings		$	(709)	$	(1,225)	$	(3,327)	$	(1,700)
Change in net unrealized gain (loss) on derivatives instruments		$	(5,535)	$	666	$	4,435	$	2,743

Schedule of Derivative Financial Instruments

The following table provides the fair values of the Company’s derivative financial instruments for the periods presented:

	March 31, 2023				June 24, 2022
(in thousands)	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Derivatives not designated as hedging instruments
Foreign currency forward and option contracts	$	1,378	$	(7)	$	—	$	(1,561)
Derivatives designated as hedging instruments
Foreign currency forward contracts	511		(1,569)		—		(4,821)
Interest rate swaps	199		(218)		110		(1,197)
Derivatives, gross balances	$	2,088	$	(1,794)	$	110	$	(7,579)

Schedule of Derivative Financial Instruments in the Unaudited Condensed Consolidated Balance Sheets

The Company recorded the fair value of derivative financial instruments in the unaudited condensed consolidated balance sheets as follows:

Derivative Financial Instruments	Balance Sheet line item
Fair Value of Derivative Assets	Other current assets, Other non-current assets
Fair Value of Derivative Liabilities	Accrued expenses, Other non-current liabilities

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Inventories (Tables)

9 Months Ended

Mar. 31, 2023

Inventory Disclosure [Abstract]

Schedule of Inventory

(in thousands)	As of March 31, 2023		As of June 24, 2022
Raw materials	$	174,047	$	275,730
Work in progress	321,908		217,638
Finished goods	30,244		15,203
Goods in transit	28,048		48,574
Total inventories	$	554,247	$	557,145

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Leases (Tables)

9 Months Ended

Mar. 31, 2023

Leases [Abstract]

Schedule of Operating Lease Liabilities

As of March 31, 2023, the maturities of the Company’s operating lease liabilities were as follows:

(in thousands)
2023 (remaining three months)	$	644
2024	1,213
2025	45
Total undiscounted lease payments	1,902
Less imputed interest	(33)
Total present value of lease liabilities	$	1,869	(1)

(1)Includes current portion of operating lease liabilities of $1.6 million.

Summary of Additional Information Related to Operating and Finance Lease

The following summarizes additional information related to the Company’s operating leases:

	As of March 31, 2023		As of June 24, 2022
Weighted-average remaining lease term (in years)	1.3		1.8
Weighted-average discount rate	3.4	%	3.4	%

Schedule of Supplemental Cash Flow and Other Information Related to Leases

The following table presents supplemental disclosure for the unaudited condensed consolidated statement of cash flows related to operating and finance leases for the three and nine months ended March 31, 2023 and March 25, 2022:

	Three Months Ended				Nine Months Ended
(in thousands)	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	575	$	678	$	1,877	$	2,076
Financing cash flows from finance leases	$	2	$	—	$	7	$	—
ROU assets obtained in exchange for lease liabilities	$	—	$	—	$	79	$	38

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Intangibles (Tables)

9 Months Ended

Mar. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets

The following tables present details of the Company’s intangibles:

(in thousands)	Gross Carrying Amount		Accumulated Amortization		Foreign Currency Translation Adjustment		Net
As of March 31, 2023
Software	$	10,379	$	(7,908)	$	—	$	2,471
Total intangibles (1)	$	10,379	$	(7,908)	$	—	$	2,471

(1)Customer relationships and backlog were written-off in March 2023.

(in thousands)	Gross Carrying Amount		Accumulated Amortization		Foreign Currency Translation Adjustment		Net
As of June 24, 2022
Software	$	10,484	$	(7,681)	$	—	$	2,803
Customer relationships	4,373		(3,610)		(58)		705
Backlog	119		(119)		—		—
Total intangibles	$	14,976	$	(11,410)	$	(58)	$	3,508

Schedule of Weighted-Average Remaining Life of Intangible Assets

The weighted-average remaining life of software and customer relationships was:

(years)	As of March 31, 2023	As of June 24, 2022
Software	3.2	3.8
Customer relationships	—	3.1
Total intangibles	3.2	3.8

Schedule of Estimated Future Amortization of Intangibles Assets

Based on the carrying amount of intangibles as of March 31, 2023, and assuming no future impairment of the underlying assets, the estimated future amortization during each fiscal year was as follows:

(in thousands)
2023 (remaining three months)	$	235
2024	847
2025	660
2026	438
2027	230
Thereafter	61
Total	$	2,471

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Borrowings (Tables)

9 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Schedule of Total Borrowings, Including Revolving and Long-Term Borrowings

The Company’s total borrowings, including current and non-current portions of long-term borrowings, consisted of the following:

(in thousands of U.S. dollars)
Rate	Conditions	Maturity	As of March 31, 2023		As of June 24, 2022
Long-term borrowings, current portion, net:
Long-term borrowings, current portion			$	12,188	$	12,188
Less: Unamortized debt issuance costs, current portion			(32)		(32)
Long-term borrowings, current portion, net			$	12,156	$	12,156
Long-term borrowings, non-current portion, net:
Term loan borrowings:
3-month LIBOR +1.35% per annum (1)	Repayable in quarterly installments	June 2024	$	15,234	$	27,421
Less: Current portion			(12,187)		(12,188)
Less: Unamortized debt issuance costs, non-current portion			(8)		(31)
Long-term borrowings, non-current portion, net			$	3,039	$	15,202

(1)The Company has entered into interest rate swaps that effectively fix a series of future interest payments on its term loans. Refer to Note 6.

Schedule of Movements of Long-Term Loans

The movements of long-term borrowings for the nine months ended March 31, 2023 and March 25, 2022 were as follows:

	Nine Months Ended
(in thousands)	March 31, 2023		March 25, 2022
Opening balance	$	27,421	$	39,609
Repayments during the period	(12,187)		(9,141)
Closing balance	$	15,234	$	30,468

Schedule of Future Maturities of Long-Term Debt

As of March 31, 2023, future maturities of long-term borrowings during each fiscal year were as follows:

(in thousands)
2023 (remaining three months)	$	3,047
2024	12,187
Total	$	15,234

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Share-based compensation (Tables)

9 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Summary of Effect of Recording Share-Based Compensation Expense

The effect of recording share-based compensation expense for the three and nine months ended March 31, 2023 and March 25, 2022 was as follows:

	Three Months Ended				Nine Months Ended
(in thousands)	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
Share-based compensation expense by type of award:
Restricted share units	$	3,945	$	3,126	$	12,845	$	11,720
Performance share units	2,774		2,597		8,372		9,981
Total share-based compensation expense	6,719		5,723		21,217		21,701
Tax effect on share-based compensation expense	—		—		—		—
Net effect on share-based compensation expense	$	6,719	$	5,723	$	21,217	$	21,701

Schedule of Share-Based Compensation Expense Recorded in Condensed Consolidated Statements of Operations and Comprehensive Income

Share-based compensation expense was recorded in the unaudited condensed consolidated statements of operations and comprehensive income as follows:

	Three Months Ended				Nine Months Ended
(in thousands)	March 31, 2023		March 25, 2022		March 31, 2023		March 25, 2022
Cost of revenue	$	1,453	$	1,183	$	5,028	$	4,579
Selling, general and administrative expense	5,080		4,540		16,003		17,122
Restructuring and other related costs	186		—		186		—
Total share-based compensation expense	$	6,719	$	5,723	$	21,217	$	21,701

Share-Based Payment Arrangement, Activity

The following table summarizes the number of equity awards outstanding and ordinary shares available for grant under each of the Equity Incentive Plans as of March 31, 2023:

(share units)	Restricted Share Units outstanding	Performance Share Units outstanding	Ordinary Shares available for future grant
2020 Plan	343,211	204,016	1,958,203
2010 Plan	30,827	—	—
2017 Inducement Plan	—	—	111,347
Total	374,038	204,016	2,069,550

Schedule of Restricted Share Unit Activity

The following table summarizes restricted share unit activity under the Equity Incentive Plans:

	Number of Shares	Weighted- Average Grant Date Fair Value Per Share
Balance as of June 24, 2022	459,626	$	75.14
Granted	154,113	$	119.23
Vested	(220,004)	$	67.23
Forfeited	(19,697)	$	91.84
Balance as of March 31, 2023	374,038	$	97.08

	Number of Shares	Weighted- Average Grant Date Fair Value Per Share
Balance as of June 25, 2021	641,875	$	55.74
Granted	165,684	$	102.74
Vested	(310,473)	$	51.12
Forfeited	(36,158)	$	69.84
Balance as of March 25, 2022	460,928	$	73.96

Schedule of Performance Share Unit Activity

The following table summarizes performance share unit activity under the Equity Incentive Plans:

	Number of Shares	Weighted- Average Grant Date Fair Value Per Share
Balance as of June 24, 2022	285,882	$	81.64
Granted	97,142	$	117.35
Vested	(179,008)	$	70.05
Forfeited	—	$	—
Balance as of March 31, 2023	204,016	$	108.81

	Number of Shares	Weighted- Average Grant Date Fair Value Per Share
Balance as of June 25, 2021	427,028	$	57.82
Granted	110,832	$	101.05
Vested	(190,213)	48.65
Forfeited	(61,765)	$	53.38
Balance as of March 25, 2022	285,882	$	81.64

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Accumulated other comprehensive income (loss) (Tables)

9 Months Ended

Mar. 31, 2023

Equity [Abstract]

Schedue of Changes in AOCI

The changes in AOCI for the nine months ended March 31, 2023 and March 25, 2022 were as follows:

(in thousands)	Unrealized net (Losses)/Gains on Available-for-sale Securities		Unrealized net (Losses)/Gains on Derivative Instruments		Retirement benefit plan - Prior service cost		Foreign Currency Translation Adjustment		Total
Balance as of June 24, 2022	$	(6,018)	$	(5,082)	$	(803)	$	(890)	$	(12,793)
Other comprehensive income (loss) before reclassification adjustment	1,675		7,762		—		(29)		9,408
Amounts reclassified out of AOCI to the unaudited condensed consolidated statements of operations and comprehensive income	93		(3,327)		338		—		(2,896)
Tax effects	—		—		—		—		—
Other comprehensive income (loss)	$	1,768	$	4,435	$	338	$	(29)	$	6,512
Balance as of March 31, 2023	$	(4,250)	$	(647)	$	(465)	$	(919)	$	(6,281)

(in thousands)	Unrealized net (Losses)/Gains on Available-for-sale Securities		Unrealized net (Losses)/Gains on Derivative Instruments		Retirement benefit plan - Prior service cost		Foreign Currency Translation Adjustment		Total
Balance as of June 25, 2021	$	308	$	(4,504)	$	(1,425)	$	(645)	$	(6,266)
Other comprehensive income (loss) before reclassification adjustment	(3,602)		4,443		—		(198)		643
Amounts reclassified out of AOCI to the unaudited condensed consolidated statements of operations and comprehensive income	(13)		(1,700)		448		—		(1,265)
Tax effects	—		—		—		—		—
Other comprehensive income (loss)	$	(3,615)	$	2,743	$	448	$	(198)	$	(622)
Balance as of March 25, 2022	$	(3,307)	$	(1,761)	$	(977)	$	(843)	$	(6,888)

XML

Business segments and geographic information (Tables)

9 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Schedule of Long-lived Assets by Geographic Areas

The following table presents long-lived assets by the country in which they are based:

(in thousands)	March 31, 2023		June 24, 2022
Long-Lived Assets:
Thailand	$	261,506	$	240,750
U.S.	25,669		25,938
China	17,651		19,686
Israel	3,023		4,025
Others	516		1,878
Total	$	308,365	$	292,277

XML

Revenues from contracts with customers - Narrative (Details)	9 Months Ended
	Mar. 31, 2023 region
Revenue from Contract with Customer [Abstract]
Number of geographic regions	3

XML

Revenues from contracts with customers - Schedule of Disaggregation of Revenue by Geographical Regions (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2023	Mar. 25, 2022	Mar. 31, 2023	Mar. 25, 2022
Disaggregation of Revenue [Line Items]
Revenues	$ 665,281	$ 564,395	$ 1,989,366	$ 1,674,350
Geographic concentration risk | Revenue from contract with customer benchmark
Disaggregation of Revenue [Line Items]
Revenues, percentage	100.00%	100.00%	100.00%	100.00%
North America
Disaggregation of Revenue [Line Items]
Revenues	$ 316,135	$ 296,598	$ 988,791	$ 790,465
North America | Geographic concentration risk | Revenue from contract with customer benchmark
Disaggregation of Revenue [Line Items]
Revenues, percentage	47.50%	52.50%	49.70%	47.20%
U.S.
Disaggregation of Revenue [Line Items]
Revenues	$ 310,100	$ 292,475	$ 975,098	$ 781,469
Others
Disaggregation of Revenue [Line Items]
Revenues	6,035	4,123	13,693	8,996
CAYMAN ISLANDS
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Asia-Pacific and others
Disaggregation of Revenue [Line Items]
Revenues	$ 279,941	$ 196,216	$ 816,635	$ 624,439
Asia-Pacific and others | Geographic concentration risk | Revenue from contract with customer benchmark
Disaggregation of Revenue [Line Items]
Revenues, percentage	42.10%	34.80%	41.10%	37.30%
India
Disaggregation of Revenue [Line Items]
Revenues	$ 85,731	$ 70,956	$ 247,942	$ 210,009
Israel
Disaggregation of Revenue [Line Items]
Revenues	85,562	16,883	182,732	67,318
Hong Kong
Disaggregation of Revenue [Line Items]
Revenues	37,120	17,338	109,315	61,575
Malaysia
Disaggregation of Revenue [Line Items]
Revenues	30,688	51,188	130,402	163,306
Thailand
Disaggregation of Revenue [Line Items]
Revenues	16,706		45,420
China
Disaggregation of Revenue [Line Items]
Revenues	11,194	12,843	60,738	40,624
Japan
Disaggregation of Revenue [Line Items]
Revenues	10,044	16,449	32,129	47,258
Others
Disaggregation of Revenue [Line Items]
Revenues	2,896	10,559	7,957	34,349
Europe
Disaggregation of Revenue [Line Items]
Revenues	$ 69,205	$ 71,581	$ 183,940	$ 259,446
Europe | Geographic concentration risk | Revenue from contract with customer benchmark
Disaggregation of Revenue [Line Items]
Revenues, percentage	10.40%	12.70%	9.20%	15.50%
U.K.
Disaggregation of Revenue [Line Items]
Revenues	$ 40,292	$ 21,632	$ 103,440	$ 64,151
Germany
Disaggregation of Revenue [Line Items]
Revenues	14,532	10,688	40,975	28,098
Ireland
Disaggregation of Revenue [Line Items]
Revenues	176	28,640	438	133,024
Others
Disaggregation of Revenue [Line Items]
Revenues	$ 14,205	$ 10,621	$ 39,087	$ 34,173

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Revenues from contracts with customers - Schedule of Revenues by End Market (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2023	Mar. 25, 2022	Mar. 31, 2023	Mar. 25, 2022
Disaggregation of Revenue [Line Items]
Revenues	$ 665,281	$ 564,395	$ 1,989,366	$ 1,674,350
Revenue from contract with customer benchmark | Geographic concentration risk
Disaggregation of Revenue [Line Items]
Revenues, percentage	100.00%	100.00%	100.00%	100.00%
Optical communications
Disaggregation of Revenue [Line Items]
Revenues	$ 502,615	$ 440,003	$ 1,506,232	$ 1,318,087
Optical communications | Revenue from contract with customer benchmark | Geographic concentration risk
Disaggregation of Revenue [Line Items]
Revenues, percentage	75.50%	78.00%	75.70%	78.70%
Lasers, sensors and other
Disaggregation of Revenue [Line Items]
Revenues	$ 162,666	$ 124,392	$ 483,134	$ 356,263
Lasers, sensors and other | Revenue from contract with customer benchmark | Geographic concentration risk
Disaggregation of Revenue [Line Items]
Revenues, percentage	24.50%	22.00%	24.30%	21.30%

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Revenues from contracts with customers - Schedule of Activity in the Company's Contract Assets and Liabilities (Details) $ in Thousands	9 Months Ended
	Mar. 31, 2023 USD ($)
Contract Assets
Beginning balance, June 24, 2022	$ 13,464
Revenue recognized	57,617
Amounts collected or invoiced	(50,000)
Ending balance, March 31, 2023	21,081
Contract Liabilities
Beginning balance, June 24, 2022	1,982
Advance payment received during the period	13,073
Revenue recognized	(11,806)
Ending balance, March 31, 2023	$ 3,249

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Earnings per ordinary share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2023	Mar. 25, 2022	Mar. 31, 2023	Mar. 25, 2022
Earnings Per Share [Abstract]
Net income attributable to shareholders	$ 59,355	$ 50,661	$ 187,127	$ 144,191
Weighted-average number of ordinary shares outstanding (in shares)	36,608	36,940	36,575	36,945
Incremental shares arising from the assumed vesting of restricted share units and performance share units (in shares)	381	533	320	506
Weighted-average number of ordinary shares for diluted earnings per ordinary share (in shares)	36,989	37,473	36,895	37,451
Basic earnings per ordinary share (in USD per share)	$ 1.62	$ 1.37	$ 5.12	$ 3.90
Diluted earnings per ordinary share (in USD per share)	$ 1.60	$ 1.35	$ 5.07	$ 3.85

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Cash, cash equivalents and short-term investments - Summary of Components of Cash, Cash Equivalents, and Short-Term Investments (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Jun. 24, 2022	Mar. 25, 2022
Cash and Cash Equivalents [Line Items]
Carrying cost, total	$ 312,218	$ 286,173
Cash and cash equivalents and marketable securities, carrying cost	542,971	484,170
Unrealized Gain/ (Loss)	(4,248)	(6,017)
Cash and cash equivalents	230,743	197,996	$ 269,140
Marketable Securities	267,452	248,680
Other Investments	40,528	31,477
Cash
Cash and Cash Equivalents [Line Items]
Carrying Cost	211,433	187,630
Cash and cash equivalents	211,433	187,630
Cash equivalents
Cash and Cash Equivalents [Line Items]
Carrying Cost	19,320	10,367
Unrealized Gain/ (Loss)	(10)	(1)
Cash and cash equivalents	19,310	10,366
Liquidity funds
Cash and Cash Equivalents [Line Items]
Carrying Cost	40,528	31,477
Unrealized Gain/ (Loss)		0
Other Investments	40,528	31,477
Certificates of deposit and time deposits
Cash and Cash Equivalents [Line Items]
Carrying cost, total	44,341
Unrealized Gain/ (Loss)	43
Marketable Securities	44,384
Corporate debt securities
Cash and Cash Equivalents [Line Items]
Carrying cost, total	215,295	234,689
Unrealized Gain/ (Loss)	(4,127)	(5,671)
Marketable Securities	211,168	229,018
U.S. agency and U.S. treasury securities
Cash and Cash Equivalents [Line Items]
Carrying cost, total	12,054	20,007
Unrealized Gain/ (Loss)	(154)	(345)
Marketable Securities	$ 11,900	$ 19,662

XML

Cash, cash equivalents and short-term investments - Narrative (Details)	9 Months Ended
	Mar. 31, 2023
Minimum
Cash, cash equivalents and marketable securities [Line Items]
Maturities period of marketable securities	3 months
Maximum
Cash, cash equivalents and marketable securities [Line Items]
Maturities period of marketable securities	3 years

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Cash, cash equivalents and short-term investments - Schedule of Available-for-Sale Securities Based on Stated Effective Maturities (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Jun. 24, 2022
Investments Classified by Contractual Maturity Date [Line Items]
Carrying cost, total	$ 312,218	$ 286,173
Fair value, total	267,452	248,680
Carrying Cost
Investments Classified by Contractual Maturity Date [Line Items]
Carrying cost, due within one year	150,720	101,976
Carrying cost, due between one to five years	161,498	184,197
Fair Value
Investments Classified by Contractual Maturity Date [Line Items]
Fair value, due within one year	150,547	101,400
Fair value, due between one to five years	157,433	178,757
Fair value, total	$ 307,980	$ 280,157

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Fair value of financial instruments - Schedule of Financial Instruments Measured at Fair Value on Recurring Basis (Details) $ in Thousands, $ in Millions	Mar. 31, 2023 USD ($)	Mar. 31, 2023 CAD ($)	Jun. 24, 2022 USD ($)	Jun. 24, 2022 CAD ($)
Foreign currency forward contracts
Liabilities
Derivative assets, notional amount	$ 78,000	$ 0.4	$ 64,200
Derivative liabilities, notional amount	52,000		135,000	$ 0.5
Fair value, measurements, recurring
Assets
Derivative assets – current portion	2,078		110
Derivative assets – non-current portion	10
Total	329,378		290,633
Liabilities
Derivative liabilities – current portion	(1,794)		(7,345)
Derivative liabilities – non-current portion			(234)
Total	(1,794)		(7,579)
Fair value, measurements, recurring | Interest rate swaps
Liabilities
Derivative assets, notional amount	64,200
Derivative liabilities, notional amount	60,900		60,900
Fair value, measurements, recurring | Cash equivalents
Assets
Marketable securities	19,310		10,366
Fair value, measurements, recurring | Liquidity funds
Assets
Marketable securities	40,528		31,477
Fair value, measurements, recurring | Certificates of deposit and time deposits
Assets
Marketable securities	44,384
Fair value, measurements, recurring | Corporate debt securities
Assets
Marketable securities	211,168		229,018
Fair value, measurements, recurring | U.S. agency and U.S. treasury securities
Assets
Marketable securities	11,900		19,662
Level 1 | Fair value, measurements, recurring
Assets
Derivative assets – current portion	0		0
Derivative assets – non-current portion	0
Total	0		0
Liabilities
Derivative liabilities – current portion	0		0
Derivative liabilities – non-current portion			0
Total	0		0
Level 1 | Fair value, measurements, recurring | Cash equivalents
Assets
Marketable securities	0		0
Level 1 | Fair value, measurements, recurring | Liquidity funds
Assets
Marketable securities	0		0
Level 1 | Fair value, measurements, recurring | Certificates of deposit and time deposits
Assets
Marketable securities	0
Level 1 | Fair value, measurements, recurring | Corporate debt securities
Assets
Marketable securities	0		0
Level 1 | Fair value, measurements, recurring | U.S. agency and U.S. treasury securities
Assets
Marketable securities	0		0
Level 2 | Fair value, measurements, recurring
Assets
Derivative assets – current portion	2,078		110
Derivative assets – non-current portion	10
Total	329,378		290,633
Liabilities
Derivative liabilities – current portion	(1,794)		(7,345)
Derivative liabilities – non-current portion			(234)
Total	(1,794)		(7,579)
Level 2 | Fair value, measurements, recurring | Cash equivalents
Assets
Marketable securities	19,310		10,366
Level 2 | Fair value, measurements, recurring | Liquidity funds
Assets
Marketable securities	40,528		31,477
Level 2 | Fair value, measurements, recurring | Certificates of deposit and time deposits
Assets
Marketable securities	44,384
Level 2 | Fair value, measurements, recurring | Corporate debt securities
Assets
Marketable securities	211,168		229,018
Level 2 | Fair value, measurements, recurring | U.S. agency and U.S. treasury securities
Assets
Marketable securities	11,900		19,662
Level 3 | Fair value, measurements, recurring
Assets
Derivative assets – current portion	0		0
Derivative assets – non-current portion	0
Total	0		0
Liabilities
Derivative liabilities – current portion	0		0
Derivative liabilities – non-current portion			0
Total	0		0
Level 3 | Fair value, measurements, recurring | Cash equivalents
Assets
Marketable securities	0		0
Level 3 | Fair value, measurements, recurring | Liquidity funds
Assets
Marketable securities	0		0
Level 3 | Fair value, measurements, recurring | Certificates of deposit and time deposits
Assets
Marketable securities	0
Level 3 | Fair value, measurements, recurring | Corporate debt securities
Assets
Marketable securities	0		0
Level 3 | Fair value, measurements, recurring | U.S. agency and U.S. treasury securities
Assets
Marketable securities	$ 0		$ 0

XML

Fair value of financial instruments - Narrative (Details) $ in Millions, $ in Millions	3 Months Ended		9 Months Ended		12 Months Ended
	Mar. 31, 2023 USD ($) contract	Mar. 25, 2022 USD ($)	Mar. 31, 2023 USD ($) contract	Mar. 25, 2022 USD ($)	Jun. 24, 2022 USD ($) contract	Mar. 31, 2023 CAD ($) contract	Jun. 24, 2022 CAD ($) contract	Sep. 27, 2019 contract	Sep. 03, 2019	Jul. 25, 2018
Foreign Currency Fair Value Hedge Derivative [Line Items]
Fixed interest rate										2.86%
Foreign currency forward contracts
Foreign Currency Fair Value Hedge Derivative [Line Items]
Gain (loss) from accumulated other comprehensive income expected to be reclassified			$ (1.0)		$ (4.8)
Unrealized gain (loss) on derivatives	$ (2.1)	$ 0.1	$ 1.8	$ 0.6
Foreign currency forward contracts | Designated as hedging instrument | Thailand, baht
Foreign Currency Fair Value Hedge Derivative [Line Items]
Number of forward contracts outstanding | contract	130		130		135,000	130	135,000
Derivative, notional amount	$ 130.0		$ 130.0		$ 135.0
Foreign currency forward contracts | Designated as hedging instrument | Canada, dollars
Foreign Currency Fair Value Hedge Derivative [Line Items]
Number of forward contracts outstanding | contract	1		1		1	1	1
Derivative, notional amount						$ 0.4	$ 0.5
Interest rate swaps
Foreign Currency Fair Value Hedge Derivative [Line Items]
Number of forward contracts outstanding | contract	2		2		2	2	2	2
Derivative, notional amount	$ 125.1		$ 125.1		$ 125.1
Gain (loss) from accumulated other comprehensive income expected to be reclassified			$ 0.3		$ (0.5)
Interest rate swaps | Bank of Ayudhya Public Company | Bank of America Credit Facility
Foreign Currency Fair Value Hedge Derivative [Line Items]
Debt instrument stated interest percentage									4.36%

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Fair value of financial instruments - Schedule of Impacts of Derivative Gain (Loss) of Cash Flow Hedges (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2023	Mar. 25, 2022	Mar. 31, 2023	Mar. 25, 2022
Derivatives gain (loss) recognized in other comprehensive income (loss):
Total derivatives gain (loss) recognized in other comprehensive income (loss)	$ (4,826)	$ 1,891	$ 7,762	$ 4,443
Derivatives (gain) loss reclassified from accumulated other comprehensive income (loss) into earnings:
Total derivatives (gain) loss reclassified from accumulated other comprehensive income (loss) into earnings	(709)	(1,225)	(3,327)	(1,700)
Change in net unrealized gain (loss) on derivatives instruments	(5,535)	666	4,435	2,743
Foreign currency forward contracts | Cost of revenues
Derivatives (gain) loss reclassified from accumulated other comprehensive income (loss) into earnings:
Total derivatives (gain) loss reclassified from accumulated other comprehensive income (loss) into earnings	(3,245)	1,117	6,083	6,216
Foreign currency forward contracts | SG&A
Derivatives (gain) loss reclassified from accumulated other comprehensive income (loss) into earnings:
Total derivatives (gain) loss reclassified from accumulated other comprehensive income (loss) into earnings	(140)	46	250	258
Foreign currency forward contracts | Foreign exchange loss, net
Derivatives (gain) loss reclassified from accumulated other comprehensive income (loss) into earnings:
Total derivatives (gain) loss reclassified from accumulated other comprehensive income (loss) into earnings	2,807	(2,165)	(9,183)	(7,438)
Foreign currency forward contracts | Other comprehensive income
Derivatives gain (loss) recognized in other comprehensive income (loss):
Total derivatives gain (loss) recognized in other comprehensive income (loss)	(5,068)	1,009	6,694	2,558
Interest rate swaps | Interest expense
Derivatives (gain) loss reclassified from accumulated other comprehensive income (loss) into earnings:
Total derivatives (gain) loss reclassified from accumulated other comprehensive income (loss) into earnings	(131)	(223)	(477)	(736)
Interest rate swaps | Other comprehensive income
Derivatives gain (loss) recognized in other comprehensive income (loss):
Total derivatives gain (loss) recognized in other comprehensive income (loss)	$ 242	$ 882	$ 1,068	$ 1,885

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Fair value of financial instruments - Schedule of Derivative Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Jun. 24, 2022
Derivatives designates as hedging instruments:
Derivative assets, gross balances	$ 2,088	$ 110
Derivative liabilities, gross balances	(1,794)	(7,579)
Foreign currency forward and option contracts
Derivatives not designated as hedging instruments
Derivative Assets	1,378	0
Derivative Liabilities	(7)	(1,561)
Foreign currency forward contracts
Derivatives designates as hedging instruments:
Derivative Assets	511	0
Derivative Liabilities	(1,569)	(4,821)
Interest rate swaps
Derivatives designates as hedging instruments:
Derivative Assets	199	110
Derivative Liabilities	$ (218)	$ (1,197)

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Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Jun. 24, 2022
Inventory Disclosure [Abstract]
Raw materials	$ 174,047	$ 275,730
Work in progress	321,908	217,638
Finished goods	30,244	15,203
Goods in transit	28,048	48,574
Total inventories	$ 554,247	$ 557,145

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Leases - Narrative (Details) $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2023 USD ($) Agreements	Mar. 25, 2022 USD ($)	Mar. 31, 2023 USD ($) Agreements lease	Mar. 25, 2022 USD ($)
Number of intercompany lease | lease			1
Operating lease rental expense	$ 0.6	$ 0.7	$ 1.8	$ 2.1
Short-term lease, cost	$ 0.2	$ 0.1	$ 0.3	$ 0.2
Number finance lease agreement, minimis amount | Agreements	1		1
Minimum
Lessee operating lease option to extend term			1 year
Maximum
Lessee operating lease option to extend term			5 years

XML

Leases - Schedule of Operating Lease Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Jun. 24, 2022
Leases [Abstract]
2023 (remaining three months)	$ 644
2024	1,213
2025	45
Total undiscounted lease payments	1,902
Less imputed interest	(33)
Total present value of lease liabilities	1,869
Operating lease liabilities, current portion	$ 1,634	$ 2,319

XML

Leases - Summary of Additional Information Related to Operating and Finance Lease (Details)	Mar. 31, 2023	Jun. 24, 2022
Leases [Abstract]
Weighted-average remaining lease term (in years)	1 year 3 months 18 days	1 year 9 months 18 days
Weighted-average discount rate	3.40%	3.40%

XML

Leases - Schedule of Supplemental Cash Flow and Other Information Related to Leases (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2023	Mar. 25, 2022	Mar. 31, 2023	Mar. 25, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$ 575	$ 678	$ 1,877	$ 2,076
Financing cash flows from finance leases	2	0	7	0
ROU assets obtained in exchange for lease liabilities	$ 0	$ 0	$ 79	$ 38

XML

Intangibles - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Mar. 31, 2023	Jun. 24, 2022
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 10,379	$ 14,976
Accumulated Amortization	(7,908)	(11,410)
Foreign Currency Translation Adjustment	0	(58)
Intangibles, net	2,471	3,508
Software
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	10,379	10,484
Accumulated Amortization	(7,908)	(7,681)
Intangibles, net	$ 2,471	2,803
Customer relationships (1)
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount		4,373
Accumulated Amortization		(3,610)
Foreign Currency Translation Adjustment		(58)
Intangibles, net		705
Backlog
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount		119
Accumulated Amortization		$ (119)

XML

Intangibles - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2023	Mar. 25, 2022	Mar. 31, 2023	Mar. 25, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense related to intangibles	$ 0.3	$ 0.4	$ 1.1	$ 1.2

XML

Intangibles - Schedule of Weighted-Average Remaining Life of Intangible Assets (Details)	9 Months Ended	12 Months Ended
	Mar. 31, 2023	Jun. 24, 2022
Software
Finite-Lived Intangible Liabilities [Line Items]
Weighted average remaining life of acquired intangible assets	3 years 2 months 12 days	3 years 9 months 18 days
Customer relationships (1)
Finite-Lived Intangible Liabilities [Line Items]
Weighted average remaining life of acquired intangible assets	0 years	3 years 1 month 6 days
Total intangibles
Finite-Lived Intangible Liabilities [Line Items]
Weighted average remaining life of acquired intangible assets	3 years 2 months 12 days	3 years 9 months 18 days

XML

Intangibles - Schedule of Estimated Future Amortization of Intangibles Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Jun. 24, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
2023 (remaining three months)	$ 235
2024	847
2025	660
2026	438
2027	230
Thereafter	61
Total	$ 2,471	$ 3,508

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Borrowings - Schedule of Total Borrowings, Including Revolving and Long-Term Borrowings (Details) - USD ($) $ in Thousands	9 Months Ended
	Mar. 31, 2023	Jun. 24, 2022
Debt Instrument [Line Items]
Long-term borrowings, current portion	$ 12,188	$ 12,188
Less: Unamortized debt issuance costs, current portion	(32)	(32)
Long-term borrowings, current portion, net	12,156	12,156
Less: Current portion	(12,187)	(12,188)
Less: Unamortized debt issuance costs, non-current portion	(8)	(31)
Long-term borrowings, non-current portion, net	3,039	15,202
Loan payable due June 2024
Debt Instrument [Line Items]
Long-term debt	$ 15,234	$ 27,421
Loan payable due June 2024 | LIBOR
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate	1.35%

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Borrowings - Schedule of Movements of Long-Term Loans (Details) - USD ($) $ in Thousands	9 Months Ended
	Mar. 31, 2023	Mar. 25, 2022
Debt Disclosure [Abstract]
Opening balance	$ 27,421	$ 39,609
Repayments during the period	(12,187)	(9,141)
Closing balance	$ 15,234	$ 30,468

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Borrowings - Schedule of Future Maturities of Long-Term Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Jun. 24, 2022	Mar. 25, 2022	Jun. 25, 2021
Debt Disclosure [Abstract]
2023 (remaining three months)	$ 3,047
2024	12,187
Total	$ 15,234	$ 27,421	$ 30,468	$ 39,609

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Borrowings - Narrative (Details) $ in Thousands, ฿ in Millions	3 Months Ended	9 Months Ended
	Mar. 31, 2023 USD ($)	Mar. 31, 2023 USD ($)	Mar. 09, 2023 USD ($)	Jun. 24, 2022 USD ($)	Sep. 27, 2019 USD ($)	Sep. 03, 2019 USD ($)	Aug. 20, 2019 USD ($)	Aug. 20, 2019 THB (฿)
Loan Payable Due June Twenty Twenty Four [Member]
Line of Credit Facility [Line Items]
Long term debt outstanding	$ 15,234	$ 15,234		$ 27,421
Loan Payable Due June Twenty Twenty Four [Member] | LIBOR
Line of Credit Facility [Line Items]
Debt instrument, basis spread on variable rate		1.35%
Line of Credit | 2023 Credit Facility Agreement
Line of Credit Facility [Line Items]
Line of credit facility borrowing capacity			$ 55,000
Loan to value ratio			0.60
Minimum service coverage ratio			1.25
Maximum debt to equity ratio			1.0
Service coverage ratio, minimum at payment of a dividend			1.50
Long term debt outstanding	0	$ 0
Term loan agreement
Line of Credit Facility [Line Items]
Long term debt outstanding	15,200	15,200
Bank of Ayudhya Public Company Limited
Line of Credit Facility [Line Items]
Debt Instrument, Periodic Payment		3,000
Interest expense on debt	$ 600	$ 1,700
Bank of Ayudhya Public Company Limited | Term loan agreement
Line of Credit Facility [Line Items]
Loan to value ratio	0.65	0.65
Minimum service coverage ratio	1.25	1.25
Maximum debt to equity ratio	1.0	1.0
Service coverage ratio, minimum at payment of a dividend	1.50	1.50
Bank of Ayudhya Public Company Limited | 2019 Credit Facility Agreement
Line of Credit Facility [Line Items]
Line of credit facility borrowing capacity					$ 3,600		$ 160,900	฿ 110.0
Bank of Ayudhya Public Company Limited | Term loan agreement
Line of Credit Facility [Line Items]
Debt instrument, face amount						$ 60,900

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Income taxes (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2023	Mar. 25, 2022	Mar. 31, 2023	Mar. 25, 2022	Jun. 24, 2022
Income Tax Disclosure [Abstract]
Liability for uncertain tax positions including accrued interest and penalties	$ 0.9		$ 0.9		$ 1.6
Corporate effective income tax rate	6.50%	5.40%	3.10%	3.20%

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Share-based compensation - Summary of Effect of Recording Share-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2023	Mar. 25, 2022	Mar. 31, 2023	Mar. 25, 2022
Share-based compensation expense by type of award:
Restricted share units	$ 3,945	$ 3,126	$ 12,845	$ 11,720
Performance share units	2,774	2,597	8,372	9,981
Total share-based compensation expense	6,719	5,723	21,217	21,701
Tax effect on share-based compensation expense	0	0	0	0
Net effect on share-based compensation expense	$ 6,719	$ 5,723	$ 21,217	$ 21,701

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Share-based compensation - Schedule of Share-Based Compensation Expense Recorded in Condensed Consolidated Statements of Operations and Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2023	Mar. 25, 2022	Mar. 31, 2023	Mar. 25, 2022
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total share-based compensation expense	$ 6,719	$ 5,723	$ 21,217	$ 21,701
Cost of revenue
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total share-based compensation expense	1,453	1,183	5,028	4,579
Selling, general and administrative expense
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total share-based compensation expense	5,080	4,540	16,003	17,122
Restructuring and other related costs
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total share-based compensation expense	$ 186	$ 0	$ 186	$ 0

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Share-based compensation - Narrative (Details) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2023	Mar. 25, 2022	Mar. 31, 2023	Mar. 25, 2022	Jun. 24, 2022	Jun. 25, 2021	Dec. 12, 2019	Nov. 02, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation costs capitalized	$ 0	$ 0	$ 0	$ 0
Number of ordinary shares available for future grant (in shares)	2,069,550		2,069,550
Shares authorized for future issuance (in shares)							1,281,619
Shares withheld to settle employee minimum statutory obligation for applicable income and other employment taxes (in shares)			172,929	210,006
Tax withholdings related to net share settlement of restricted share units			$ 17,740,000	$ 20,439,000
Equity Incentive 2020 plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of ordinary shares available for future grant (in shares)							1,700,000
Shares reserved for future issuance (in shares)							1,300,000
2020 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of ordinary shares available for future grant (in shares)	1,958,203		1,958,203
2010 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of ordinary shares available for future grant (in shares)	0		0
2017 Inducement Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of ordinary shares available for future grant (in shares)	111,347		111,347
Shares authorized for future issuance (in shares)								160,000
Restricted share units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units outstanding (in shares)	374,038	460,928	374,038	460,928	459,626	641,875
Unrecognized share-based compensation expense	$ 15,100,000		$ 15,100,000
Unrecognized compensation expense, weighted-average period for recognition			2 years 7 months 6 days
Restricted share units | 2020 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units outstanding (in shares)	343,211		343,211
Restricted share units | 2010 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units outstanding (in shares)	30,827		30,827
Restricted share units | 2017 Inducement Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units outstanding (in shares)	0		0
Restricted share units | Vesting option one
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award granted vesting period, year			3 years
Restricted share units | Vesting option two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award granted vesting period, year			4 years
Restricted share units | Non-employee director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award granted vesting period, year			1 year
Restricted share units | Non-employee director | Vest on the first of January
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting percentage			100.00%
Performance share units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units outstanding (in shares)	204,016	285,882	204,016	285,882	285,882	427,028
Unrecognized share-based compensation expense	$ 9,400,000		$ 9,400,000
Unrecognized compensation expense, weighted-average period for recognition			1 year 2 months 12 days
Performance share units | 2020 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units outstanding (in shares)	204,016		204,016
Performance share units | 2010 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units outstanding (in shares)	0		0
Performance share units | 2017 Inducement Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units outstanding (in shares)	0		0
Performance share units | Executive of the Company
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award granted vesting period, year			2 years
Performance share units | Executive of the Company | Vest at the end of the performance period | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting percentage			0.00%
Performance share units | Executive of the Company | Vest at the end of the performance period | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting percentage			100.00%

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Share-based compensation - Share-based award activity (Details) - shares	Mar. 31, 2023	Jun. 24, 2022	Mar. 25, 2022	Jun. 25, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of ordinary shares available for future grant (in shares)	2,069,550
2020 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of ordinary shares available for future grant (in shares)	1,958,203
2010 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of ordinary shares available for future grant (in shares)	0
2017 Inducement Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of ordinary shares available for future grant (in shares)	111,347
Restricted share units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units outstanding (in shares)	374,038	459,626	460,928	641,875
Restricted share units | 2020 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units outstanding (in shares)	343,211
Restricted share units | 2010 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units outstanding (in shares)	30,827
Restricted share units | 2017 Inducement Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units outstanding (in shares)	0
Performance share units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units outstanding (in shares)	204,016	285,882	285,882	427,028
Performance share units | 2020 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units outstanding (in shares)	204,016
Performance share units | 2010 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units outstanding (in shares)	0
Performance share units | 2017 Inducement Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units outstanding (in shares)	0

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Share-based compensation - Schedule of Restricted Share Unit Activity (Details) - Restricted share units - $ / shares	9 Months Ended
	Mar. 31, 2023	Mar. 25, 2022
Number of Shares
Number of share units, beginning balance (in shares)	459,626	641,875
Number of share units, granted (in shares)	154,113	165,684
Number of share units, vested (in shares)	(220,004)	(310,473)
Number of share units, forfeited (in shares)	(19,697)	(36,158)
Number of share units, ending balance (in shares)	374,038	460,928
Weighted- Average Grant Date Fair Value Per Share
Weighted-average grant date fair value per share, beginning balance (in USD per share)	$ 75.14	$ 55.74
Weighted-average grant date fair value per share, granted (in USD per share)	119.23	102.74
Weighted-average grant date fair value per share, vested (in USD per share)	67.23	51.12
Weighted-average grant date fair value per share, forfeited (in USD per share)	91.84	69.84
Weighted-average grant date fair value per share, ending balance (in USD per share)	$ 97.08	$ 73.96

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Share-based compensation - Schedule of Performance Share Unit Activity (Details) - Performance share units - $ / shares	9 Months Ended
	Mar. 31, 2023	Mar. 25, 2022
Number of Shares
Number of share units, beginning balance (in shares)	285,882	427,028
Number of share units, granted (in shares)	97,142	110,832
Number of share units, vested (in shares)	(179,008)	(190,213)
Number of share units, forfeited (in shares)	0	(61,765)
Number of share units, ending balance (in shares)	204,016	285,882
Weighted- Average Grant Date Fair Value Per Share
Weighted-average grant date fair value per share, beginning balance (in USD per share)	$ 81.64	$ 57.82
Weighted-average grant date fair value per share, granted (in USD per share)	117.35	101.05
Weighted-average grant date fair value per share, vested (in USD per share)	70.05	48.65
Weighted-average grant date fair value per share, forfeited (in USD per share)	0	53.38
Weighted-average grant date fair value per share, ending balance (in USD per share)	$ 108.81	$ 81.64

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Shareholders' equity (Details) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2023	Mar. 25, 2022	Mar. 31, 2023	Mar. 25, 2022	Aug. 31, 2022	Jun. 24, 2022	Aug. 31, 2020	May 31, 2019	Feb. 28, 2018	Aug. 31, 2017
Shareholders Equity [Line Items]
Ordinary shares, authorized share capital (in shares)	500,000,000		500,000,000			500,000,000
Ordinary shares, par value (in USD per share)	$ 0.01		$ 0.01			$ 0.01
Preferred shares, shares authorized (in shares)	5,000,000		5,000,000			5,000,000
Preferred shares, par value (in USD per share)	$ 0.01		$ 0.01			$ 0.01
Share repurchase program, approved amount										$ 30,000,000
Share repurchase program, increase in shares authorized for repurchase					$ 78,700,000		$ 58,500,000	$ 50,000,000	$ 30,000,000
Treasury stock, carrying basis	$ 90,800,000		$ 90,800,000			$ 247,200,000
Treasury stock acquired (in shares)	35,232	237,339	83,857	275,608
Treasury stock acquired, average cost (in USD per share)			$ 109.89
Treasury stock, value, acquired	$ 4,113,000	$ 24,191,000	$ 9,217,000	$ 28,624,000
1999 and 2010 Stock Plan
Shareholders Equity [Line Items]
Ordinary shares issued upon vesting of restricted shares (in shares)	23,202	30,729	226,083	290,680

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Accumulated other comprehensive income (loss) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2023	Mar. 25, 2022	Mar. 31, 2023	Mar. 25, 2022
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	$ 1,384,131	$ 1,199,191	$ 1,253,682	$ 1,112,520
Other comprehensive income (loss) before reclassification adjustment			9,408	643
Amounts reclassified out of AOCI to the unaudited condensed consolidated statements of operations and comprehensive income			(2,896)	(1,265)
Tax effects			0	0
Total other comprehensive income (loss), net of tax	(3,567)	(1,699)	6,512	(622)
Ending balance	1,441,581	1,228,727	1,441,581	1,228,727
Unrealized net (Losses)/Gains on Available-for-sale Securities
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance			(6,018)	308
Other comprehensive income (loss) before reclassification adjustment			1,675	(3,602)
Amounts reclassified out of AOCI to the unaudited condensed consolidated statements of operations and comprehensive income			93	(13)
Tax effects			0	0
Total other comprehensive income (loss), net of tax			1,768	(3,615)
Ending balance	(4,250)	(3,307)	(4,250)	(3,307)
Unrealized net (Losses)/Gains on Derivative Instruments
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance			(5,082)	(4,504)
Other comprehensive income (loss) before reclassification adjustment			7,762	4,443
Amounts reclassified out of AOCI to the unaudited condensed consolidated statements of operations and comprehensive income			(3,327)	(1,700)
Tax effects			0	0
Total other comprehensive income (loss), net of tax			4,435	2,743
Ending balance	(647)	(1,761)	(647)	(1,761)
Retirement benefit plan - Prior service cost
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance			(803)	(1,425)
Other comprehensive income (loss) before reclassification adjustment			0	0
Amounts reclassified out of AOCI to the unaudited condensed consolidated statements of operations and comprehensive income			338	448
Tax effects			0	0
Total other comprehensive income (loss), net of tax			338	448
Ending balance	(465)	(977)	(465)	(977)
Foreign Currency Translation Adjustment
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance			(890)	(645)
Other comprehensive income (loss) before reclassification adjustment			(29)	(198)
Amounts reclassified out of AOCI to the unaudited condensed consolidated statements of operations and comprehensive income			0	0
Tax effects			0	0
Total other comprehensive income (loss), net of tax			(29)	(198)
Ending balance	(919)	(843)	(919)	(843)
AOCI Attributable to parent
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	(2,714)	(5,189)	(12,793)	(6,266)
Total other comprehensive income (loss), net of tax	(3,567)	(1,699)	6,512	(622)
Ending balance	$ (6,281)	$ (6,888)	$ (6,281)	$ (6,888)

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Commitments and contingencies (Details) ฿ in Millions, ¥ in Millions, $ in Millions	Mar. 31, 2023 USD ($)	Mar. 31, 2023 THB (฿)	Jun. 24, 2022 USD ($)	Jun. 24, 2022 THB (฿)	Jun. 24, 2022 CNY (¥)
Commitments and Contingencies Disclosure [Line Items]
Outstanding bank guarantees given by banks on behalf of the company	$ 1.6	฿ 53.0	$ 1.4	฿ 50.2
Financial Guarantee
Commitments and Contingencies Disclosure [Line Items]
Outstanding bank guarantees given by banks on behalf of the company | ¥					¥ 1.0
Inventories
Commitments and Contingencies Disclosure [Line Items]
Outstanding commitment to third parties	1,090.0
Bank guarantees
Commitments and Contingencies Disclosure [Line Items]
Amount of cash collateral			$ 0.1
Thailand
Commitments and Contingencies Disclosure [Line Items]
Outstanding commitment to third parties	$ 18.3

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Business segments and geographic information - Schedule of Long-lived Assets by Geographic Areas (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Jun. 24, 2022
Segment Reporting Information [Line Items]
Long-lived assets	$ 308,365	$ 292,277
Thailand
Segment Reporting Information [Line Items]
Long-lived assets	261,506	240,750
U.S.
Segment Reporting Information [Line Items]
Long-lived assets	25,669	25,938
China
Segment Reporting Information [Line Items]
Long-lived assets	17,651	19,686
Israel
Segment Reporting Information [Line Items]
Long-lived assets	3,023	4,025
Others
Segment Reporting Information [Line Items]
Long-lived assets	$ 516	$ 1,878

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Business segments and geographic information - Narrative (Details) - customer	9 Months Ended	12 Months Ended
	Mar. 31, 2023	Jun. 24, 2022
Segment Reporting [Abstract]
Number of customers that contributed to more than 10% of trade accounts receivable	3	3
Largest Customer 1 | Trade Accounts Receivable | Customer Concentration Risk
Segment Reporting Information [Line Items]
Revenues, percentage	10.00%	10.00%
Largest Customer 2 | Trade Accounts Receivable | Customer Concentration Risk
Segment Reporting Information [Line Items]
Revenues, percentage	10.00%	10.00%
Largest Customer 3 | Trade Accounts Receivable | Customer Concentration Risk
Segment Reporting Information [Line Items]
Revenues, percentage	10.00%	10.00%