Good day, ladies and gentlemen. Welcome to Fabrinet's Financial Results Conference Call for the 2nd quarter of fiscal year 20 and instructions on how to participate will be given at that time. As a reminder today's call is being recorded. I would now like to turn the call over to your host, Garo Tumaginian, Investor Relations.
Thank you, operator, and good afternoon, everyone. Thank you for joining us on today's conference call to discuss Avinet's financial and operating results for the second quarter of fiscal year 2020, which ended December 27, 2019. With me on the call today are Seamus Grady, Chief Executive Officer TSN, Chief Financial Officer, and Travis Ferra, Vice President of Operations Finance And CFO designate. This call is being webcast and a replay will be available on the section of our website located at investor. Fabrinet.com.
Please refer to our website for important information, including our earnings press release and investor presentation, which include our GAAP to non GAAP reconciliations. I would like to remind you that today's discussion will contain forward statements about the future financial performance of the company. Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from management's current expectations. These statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise them in light of any information or future events, except as required by law. For a description of the risk factors that may affect our results, please refer to our recent SEC filings in particular the section captioned risk factors in our Form 10 Q filed on November 5, 2019.
Will begin the call with remarks from Shannett, TS, and Chava, followed by time for questions. I would now like to turn the call over to Fabrinet's CEO, Shannick Grady. Jimus?
Thank you, Carol, and good afternoon, everyone. We had a very strong second quarter with financial results that exceeded all of our guidance metrics. Including record quarterly revenue. This performance was driven by sequential growth in nearly all areas of our business, with end market demand stabilizing we expect to see continued year over year growth in the 3rd quarter. Revenue in the second quarter was $426,000,000, up 7% from the 1st quarter and 6% from a year ago.
Revenue upside largely fell to the bottom line with non GAAP net income of $1 per share, which was also above the top end of our guidance range. Gross margin was 11.9% and we continue to anticipate non GAAP gross margins to be within our target range of 12% to 12.5% for the full year. Looking at our business by end markets, optical communications revenue was $322,000,000, up 6% from the first quarter. This represented 76% of total revenue, consistent with the first quarter. Within optical communications, telecom revenue was $248,000,000, up 8% from the first quarter, and 20% from a year ago and represented 77% of optical revenue.
On growth and the program was fully ramped at the end of the quarter as anticipated. Datacom revenue in the second quarter was 74,000,000 slight increase from Q1, which was better than we had anticipated as demand trends for these products continued to stabilize. Datadigm represented 23 percent of optical communications revenue. By technology, Silicon Photonics Based optical communications revenue increased by communications revenue. Revenue from QSFP28 and QSFP56 transceivers was $48,000,000, up $3,000,000 from the first quarter.
By data rate, 100 gig programs represented 49 percent of optical communications revenue at 159,000,000. And products rated at speeds of 400 gig and above continued to see rapid growth up 31% from the first quarter to 49,000,000. Looking at our non optical communications business, revenue of $104,000,000 was up from $97,000,000 in the first quarter, which was also better than expected. We were pleased to see the demand for industrial lasers improve. And as a result, revenue for these products was also better than expected at $46,000,000 compared to $41,000,000 in the first quarter.
We remain optimistic that over the longer term Industry laser manufacturers will increasingly leverage outsourcing to remain globally competitive. And we believe we are uniquely positioned to be a leader in serving this market as the opportunity evolves. Automotive revenue moderated to $21,000,000, reflecting normal quarter to quarter variability from next generation automotive programs, and which we expect to return to growth in the 3rd quarter. Sensor revenue increased slightly to $3,900,000 from $3,500,000. Finally, revenue generated from other non optical applications grew 20 percent sequentially to $33,000,000, mainly from Fabrinet West.
During the quarter, we saw additional programs that had ramps production at Fairnered West transferred to Bangkok where we anticipate their volumes will continue to grow. This is another illustration of the success of and we are gearing up to extend to Israel in the coming months. At the same time, success of our program with Infinera demonstrates our ability to build complete network systems while offering economic advantages to our customers. We believe there could be additional opportunities for us to vertically integrate from the component level up to the systems level that can provide additional business to Fabrinet while simplifying the supply chain for our customers. And we have been actively pursuing these opportunities.
And today I'm pleased to announce that after the close of the second quarter, we were awarded significant new project by Cisco, which will further build on our successful partnership. While it is still early days, We believe that if this program ramps as anticipated, that Cisco could represent 10% of revenue or more for Fabrinet in fiscal 2021. We look forward to sharing more on this program as it progresses. Finally, we also announced today after more than a year of evaluating internal and external candidates, we are pleased to welcome Travis Ferra as our new Chief Financial Officer, effective February 17th. With TS stepping down from the role nearly 18 months after initially announcing his intention to retire.
We're extremely grateful to TS, for his contributions over the years to Fabrinet and for his commitment to ensuring a smooth transition. TS will be reporting to me as EVP Special Projects during this transition period. His dedication and positive attitudes are a model for us all, and we wish him the best in his well deserved retirement. Chauva has been Vice President of Operations Finance at Fabrinet for almost 2 years now. And I have had the pleasure of working directly with Java in the past.
He displays all the characteristics that have had a meaningful hand in Fabienne's past success, including integrity, collaboration, and commitment to success. I'm confident that Cava will play a leading role in helping Fabrinet get to our next level of performance. Before I turn the call over to TS and Chaba, I would like to address the coronavirus outbreak that I'm sure you're all concerned about. While our third quarter results often reflect a small seasonal downtick, guidance that we are providing for third quarter also includes the anticipated impact from extended shutdowns in China due to the coronavirus outbreak. Specifically the lunar New Year weeklong shutdown at our K6 facility in Fuzhou, China, which manufactures custom optics components.
Has been extended from 1 week to 2 weeks ending February 10th. In addition, some of our third party suppliers in China are also impacted by shutdowns. This has a direct impact on our top and bottom line expectations and is considered in the guidance we are providing for the 3rd quarter. News related to the coronavirus is rapidly evolving and our top priority is to keep our employees safe and we'll continue to monitor the situation. In summary, we're pleased with our stronger than expected performance in the second quarter and we're excited about our new business activity.
While we anticipate that the coronavirus outbreak will result in a larger than normal sequential revenue decline in the 3rd quarter, I believe we remain well positioned to extend our business success and market leadership as we look ahead. Now let me turn the call over to TS and Chaba to discuss the details of our second quarter performance and our outlook. TS?
Thank you for the Chambers, and good afternoon, everyone. I would like to congratulate Shava on his appointment and I'm committed to making sure the transition to the CFO position is smooth. Now turning to our results. I will provide you with more details on our financial results for the second quarter and then we'll introduce Java to provide our guidance for the third quarter of fiscal year 2020. Total revenue in the second quarter of fiscal year 2020 was $426,200,000, above the upper end of our guidance range and a quarterly record.
Non GAAP net income was $1 per share and was also above our guidance range even after a foreign exchange headwind of $1,000,000 or approximately $0.03 per share. Now turning to the details of our P and L, our reconciliations of GAAP to non GAAP measures is included in our earnings press release and investor presentation which you can find on our website. Non GAAP gross margin in the second quarter was 11.9%, we continue to expect gross margin to be within our target range for the year. Non GAAP operating expense was $12,300,000 in the 2nd quarter As a result, non GAAP operating income was $38,500,000 and non GAAP operating margin was 9%. Access in the quarter was $2,000,000 and our normalized effective tax rate was less than 5%.
We continue to expect our effective tax rate to net income was above our guidance range at $37,700,000 in the 2nd quarter or $1 per diluted share as I indicated earlier. On a GAAP basis, which includes share based compensation expenses and amortization of debt issuing costs. Net income for the second quarter was $31,200,000 or $0.83 per diluted share also above the high end of our guidance. Turning to the balance sheet and cash flow statement. At the end of second quarter, cash restricted cash and investment were $453,500,000 compared to $436,400,000 at the end of the first quarter.
Operating cash flow in the quarter was $50,000,000 and with CapEx of $9,100,000, free cash flow was $40,900,000 in the 2nd quarter. During the quarter, our working capital returned to neutral level as we began consuming the transfer inventory and collecting receivable We did not repurchase any share during the quarter. $62,200,000 remain in our share repurchase program. We will continue to evaluate market conditions to opportunistically purchase shares when possible. Before I turn the call to Chaba to provide our third quarter guidance, I would like to take this opportunity to thank all our investors on the buy side and our sales side analysts for your support and all the work you have done over the years.
I appreciate your professionalism and have enjoyed working with all of you. I wish you all nothing but the best. I will now invite Shaba to give our FQ3 guidance
Thank you, TS, and good afternoon to those of you listening to our call. I'm looking forward to stepping up as the next CFO at Auburnette. ES has been a great mentor and my aim is to maintain the transparent and open level of dialogue with the investors that TS has had. I'm looking forward to a smooth transition, including getting to know those of you attending OFC in March or other investor events in the coming months. I would now like to turn to our guidance for the third quarter of fiscal year 2020.
After the record quarter, the revenue performance in Q2 we expect to maintain our year over year growth in the third quarter. We anticipate that third quarter revenue will moderate more than the usual seasonal impact a result of the coronavirus outbreak in China. For the third quarter, we anticipate revenue to be between $410,000,000 $418,000,000. From an EPS perspective, we anticipate non GAAP net income per share in the third quarter to be in and GAAP net income per share of $0.75 to $0.78 based on approximately $37,900,000 fully diluted shares outstanding. In conclusion, we are pleased with our strong performance in the quarter.
We are excited about our business momentum. And despite the small near term impact of Corona virus outbreak, we remain optimistic that we can continue to build shareholder value over the longer term. Operator, we are now ready to open the call for
First question comes from Alex Henderson of Needham. Your question, please.
Well, before I get into a question, TS, thank you very much for all the work you've put in with us and we really appreciate your professionalism and superb job you did running the company's finance operations. And, welcome to your replacement.
Thanks, Alex.
So, the first question I wanted to ask was, obviously, your hedge forward a quarter. I mean, the other side of the corona event was the, fall off of tourism in in Thailand and the very sharp correction in the bot that has occurred. Obviously, you were expecting some pressure from the strong bot before now that it's corrected, are you changing any of your steps in terms of, your hedging policies, where you typically hedge 1 quarter fully, 2 quarters half, I think, is the way you do it and then lesser and then the back half, will you lock in these lower rates? Or how do you think you'll handle it?
Yeah. Alex, let me tell you the answer that, okay, we did not change our policy of hedging example, like exactly what you say 100% for the current quarter, then 50% for the out quarter and then 25% for the for the out quarter. The only thing we are looking at is to document it as a cash flow hedge. That's what we did for the interest rate swap contract. So this quarter, all the interest rates are mark to market.
Interest swap, mark to market is all going to OCI, you know, go other comprehensive income, this equity, and then you roll out over time. So we're going to do the same thing for, you know, cash flow hedge depend on PwC approval, we might get it done this quarter or maybe next quarter. But for sure next quarter, we'll get it done. So in that case then, all the gain and loss exactly what you advised before, we'll go into the equity.
So just to be clear though, I was really talking about the longer term implications of the change rate, And do you do you plan to lock that in at all so that you can, in case the corona issue goes away and we end up with, you know, rebound in the bot?
Yes. The bot has not really totally rebound yet. We see a short term weakening Okay? Right now, the forecast is 30.5. We've been a mark to market at 30.2 last quarter.
So again, in the long run, you know, we'll we'll believe that bug will continue to under pressure to be strengthened. So we take 4% to just make sure that, you know, we probably hedge them and obviously the best hedge will be natural hedge. If I can sell in Thai, that'll be perfect, but then the industry won't allow me to do that. So, yeah, we we watch it very closely. Again, if Thai continues to strengthen, really nothing much you can do.
At some point in time, you gotta buy the bullet, you know. So and taking into the OCI will release the immediate pressure a little bit But in the long run, if that continues to strengthen, then you had to face the fact that it's increased cost for a pressure on the gross margin.
So if I could ask one more question, the comments you made about Cisco, I'm assuming that you're not including the acquisition of Acacia in those numbers. Otherwise, would have been over 10% either way. So I assume this is just Cisco prior to that acquisition going to 10% And could you quantify that? Is that a doubling of your business with Cisco? Is it 20% improvement in your business with Cisco?
What is this project that you're talking about, in terms of scale compared to what you're currently doing? Is it a significant increase modest increase, some characterization?
Thanks Alex. I would I think first of all, you're correct. The numbers we talked about are Cisco alone, it doesn't include the let's say the Acacia business, which of course would would be significant on its own. So looking at Cisco, I mean, this is a significant, I would characterize it as a significant new business award for us. It's a very large piece of business and it's very important for us because it's right in I suppose in our wheelhouse, in our sweet spot, We've talked maybe at some of the investor meetings and the road shows about the importance for us of penetrating some of the system companies from the component level up, we produce a lot of components that go into these products.
So to us, it seemed to make sense in order to simplify the supply chain for our customers, while at the same time growing the business ourselves, it seems to make sense for us to go after this type of business. And we've been fortunate with this one. It's a vertical, what I would call a vertical up deal. So it's from the component level up. Like I say, it simplifies and streamlines the supply chain for the customers.
Yeah, the 10% metric is for Cisco as a whole, which we hope we expect when the when the deal with Acacia goes through will be a combination of Cisco and Acacia, but certainly the business on its own is a significant piece of business.
So is it similar in size to the increase you got off of the systems business from Infinera or is it smaller than that? I mean, can you give us some as bigger than a bread box kind of comment to help us frame it?
I would say it's in a similar kind of range We don't want to put a number on it right now, but it's a significant piece of business. I mean, we win business all the time. We generally don't call out specific program. So the fact that we're calling it out means it's a significant piece of business. So it will be of a, I suppose, of a similar scale.
Okay. One last question, I'll see the floor. Can you break out your expectation for datacom and telecom, in the upcoming guidance? Thanks.
In the upcoming guidance,
I think the telecom is down for a couple of reasons. The virus, coronavirus, doesn't help us. But again, we see strength on the datacom, you know, I mean, this quarter, past quarter, we expect to be down, but we kind of flat and up a little bit. And we see the momentum will continue. So I think most of the datacom guys are outside.
China. Lucky, okay. So most of the China are mostly telecom. So we expect telecom to be down.
Great. Thank you very much.
Thanks Alex.
Thank you. Our next question comes from Troy Jensen of Piper Sandler. Your line is open.
Hey gentlemen, congrats on the nice results and TS, good luck. We definitely all enjoyed working with you over the years and wish you the best.
Thank you so much. Thank you, Troy.
Hey, gentlemen, could you guys dive in on the coronavirus. I guess I'm just curious if you could kind of quantify how much of an impact that is. I'd just be curious, your thoughts to just on those China supply chain and how resilient is it right now? And what are your expectations for the virus going forward, so to speak?
The coronavirus outbreak itself, the 1st week of the coronavirus outbreak coincided with lunar new year, which meant that many of the facilities, many of our own facility in China in K6 in Fuzhou was already shut down. As were many of our component suppliers. And the impact, it's not a huge impact if I had to put a number on it I would say it's in the $8,000,000 to $10,000,000 range for the quarter. And it's largely driven by the fact that government mandated shutdowns for an additional week for example, our own operation in the case of separation in Fuzhou, we had planned to be back on February 3rd and that got pushed out by because of the government mandated shutdown to February 10th. So we lose a week's production.
And some of our several of our suppliers are in the same situation. Like I said, we estimate the impact of this extended shutdown to be about $8,000,000 to $10,000,000 for the quarter. So in effect, our guidance would have been roughly flat sequentially which would have been in line with or maybe a little bit better than a seasonal Q3 for us, let's say, calendar fiscal Q3 calendar Q1, which would be seasonally down for us. So without this coronavirus impact, we would have been kind of flat to slightly up, I would say. So about to answer your direct question about an $8,000,000 to $10,000,000 impact.
And just thoughts on just like just the recent couple of days or a week or so, have you gotten more concerned about are there been more conversations and just your thoughts on how resilient the supply chain is right now for you guys so much good visibility do you have on supply?
We think it's pretty resilient and we think if, of course, none of us know when we could find ourselves here a quarter from now saying we we were too conservative and overestimated the impact or we could find ourselves saying we weren't conservative enough and we underestimated the impact. It's really very difficult to say. I think our working assumption is that all the our own operation as well as the suppliers who are affected that they all get back to work a week from today on February 10th. If something happens this week, if that changes, then the impact could be greater. Similarly, so I think it's we're not I mean, obviously our primary concern is for the health and welfare of our employees and we're taking great precautions to make sure everyone is well, both in our operation in K6, but also in our our large campus in Thailand.
And as you can imagine, we have a lot of visitors who come through. It's a ten thousand person campus. We have a lot of people who come through there. So we're taking great precautions to make sure everyone's safe and well. So that's our first concern.
But nevertheless, we think the supply chain is actually quite resilient And if businesses get back to back into operation, a week from today, we should be okay. But we're going to keep a very, very close eye on it for sure as everyone.
Perfect. Yes.
Understood. And just one last question, I'll see the floor. Just your comments on industrial laser strength, I'm curious to know is that existing programs getting better or is that some of these new design wins that you guys have been targeting?
It's a combination of both actually. We continue to penetrate that market and win business there with a number of companies. But I would say the strength in the quarter was mostly with existing customers, existing programs.
Understood. TS hope to see you down in San Diego. Thank you.
Our next question comes from Samik Chatterjee of JPMorgan. Your question, please. Hi,
thanks for taking my question. So I appreciate your comments about telecom and the supply side there. Just wanted to understand how you're thinking about the demand side as well because even before the coronavirus impact, I think we saw a couple of industry players kind of sign the warning signs on 5g network deployment. In the different geographies, including China. So just wanted to understand beyond kind of the supply constraints, how you're thinking about demand, if there is a slowdown how long would it take in the supply chain to kind of show up in your demand level or autos?
And so any insights on that would be helpful.
Yes. So the demand, sorry, the telecom demand that TS talked about was more focused on the demand side the supply than the supply side. So we are seeing some softness. But for us, it's nothing I would say greater than the normal seasonal soft that we would see in this quarter. We do and again, we don't, we don't claim to represent the industry or have any great insights.
But certainly from what we see, we don't see any huge change other than what we would normally see as a seasonal slowdown, a little bit of a slowdown this quarter. The other thing is as many of our customers have not announced, yes, we don't want to be, seem to be speaking for them. So what I would say
like I
said, I don't we don't believe there's anything, other than the normal seasonal slowdown. TS, what do you think?
Believe we cannot see beyond 1 or 2 quarters, but for the coming quarter, essentially, we expect it by the same
Okay, got it. And if I can just follow-up on the 400 gig, the growth that you had, which pretty strong 31% growth. As you're kind of looking through the end of the year, right now, the growth of a small base, how you're thinking about, do you think that kind of growth rate is sustainable on the 400 gig products, 4 hand gig and above products?
Yes, so it's for we group together 400 gig and above. I mean, at some we may get a bit more granular with that. But right now, we see that continuing to be quite strong. We don't guide beyond 1 quarter, but we do see demand for that 400 gig and above continuing to certainly outpace the growth of the rest of the business. It's growing quite strongly for us.
Great. Thank you.
Thank you,
Our next question comes from the line of John Machete of Stifel. Your question please.
Hey guys, this is Scott on for John. Congrats on the great quarter and thank you TS again. On the systems opportunity discussed, could you maybe touch on how that affects margins going forward?
Yes. Well, we're not going to we're not going to break out margins by customer or program. It's not something we've done and we don't plan to start doing that now. I'm sure our customers wouldn't be too happy with this if we start to break that out. It's I would say it's a it's obviously a piece of business where we're very happy about.
We're very, very proud to be expanding our partnership and our relationship with Cisco, but, we're not really prepared to talk about the margins on that program.
I mean, so not necessarily on the Cisco 1 specifically, but I mean, as you move forward and look for more opportunities of that kind, Could you give some color on how that overall should impact margins?
Yes, I think as we look at expanding into system business and we couple of, I would say, significant wins under our belt. We're I suppose we're in the fortunate position of being able to be somewhat selective about which particular pieces of business we go after in that space. So we're not chasing everybody. We're not chasing every we're not chasing every customer. We're not chasing every product or every opportunity with every customer.
We are being selective. And really for us, where it makes a lot of sense, is where we're already making some of the optical component that optical components that are already in the BOM for those systems. That allows us to be, 1st of all, very competitive for our customers And also we can build the products in a way that that simplifies the supply chain for our customers. They can just deal with one one stop shop, one supplier rather than having to deal with several suppliers. It also it helps us to help the customer to eliminate the margin stack that they have to deal with if they're if they have a stack supply chain.
So we're really flattening the supply chain in a way that allows us to make a respectable margin that we're happy with and allows the customer to save a lot of money because they eliminate a lot of the margin stack that they have to deal with if they use multiple suppliers. So that's really the if you like the secret sauce, you know, is that we eliminate the margin stack for the customers, but we do it in a way that we're able to produce the products at a price and at a margin that's acceptable to us.
Thank you. Our next question comes from Alex Henderson of Needham. Your line is open.
I wasn't going to let you get off with only a couple of questions tonight. Them. Wanted to just talk a little bit about, the Infinera business coming in. Obviously, that's a fairly new program. Have you, you say it's fully in the numbers now, has there been any production issues or any other issues with, with that in the move during the fourth quarter calendar.
That we should be aware of. Did it perturb the numbers as a result of startup or ramp up costs, that'll fall out? Or any additional commentary around that would be helpful.
I would say we're fully ramped in the sense that all of the products are transferred, as you can appreciate, Alex, it's not a simple thing to transfer an entire factory from, Berlin to Bangkok. But we're fully ramped in the sense that all the products are transferred. We're fully up to speed. The yields are at an acceptable level. We have capacity installed as regards, the demand, let's say the intra quarter kind of demand variability that might exist there, I know in Finera announced within the next few days, I think, next week.
So we'd really let them talk about, what the demand profile looks like. It's not really our place to talk about that. But all I would say is we're very happy with how the program has gone. We're very happy with the relationship with Infinera. We're very excited to be making sure we're building the new programs and the right programs for Infinera.
And the transfer has just gone very, very well. So there was no
production issues in the 4th quarter calendar that impacted the gross margins, bring down a little bit or anything of that sort that we should be aware of?
No, I mean, the gross margin, the 11.9% was really a mix, an overall mix And again, the difference between 12% 11.9%, it's not very significant, but it was really just an overall product mix certainly nothing related to delays or anything like that within Finera, no.
Great. Going back to the Cisco announcement, when do you think that that might start to, articulate into the numbers?
I think it's early to say. I mean, it's, I think we've we've shown, I suppose, from our past track record, we're able to go very fast and transfer these programs very quickly. But at the end of the day, the The PACE is essentially set by the customer in these cases. We have to go to PACE that the customer is comfortable with. So, it's a very recent win it's actually we won the business since we closed the quarter.
So we're just really in the throes right now of putting the timelines together and agreeing with the customer on the transfer plan. So it's really too early to say, Alex, when the revenue might hit. Is that
going into the new facility as opposed to in the pinehurst?
Yes. Yes.
Great. And any commentary about utilization rates and how you're doing on all those programs?
In a yes, I mean, I think we did break out a couple of quarters ago. We used to break out the degree to which Chombardy was occupied and spoken for. We stopped doing that because it's not a meaningful it's not really a meaningful indicator of anything actually. Because we've been so successful as expanding the space in Pinehurst. So we don't really talk about that metric anymore again because it's not really meaningful.
We do continue obviously the new business win will be all destined for the Chonburry operation. And we continue to find more space and expand the manufacturing footprint in Pinders. So we need You needed no concerns about her ability to expand and grow the business. And then of course, we're always ready to pull the trigger on the next building. In Chonder, and we have room for another probably 5 buildings, of the same.
And again, each building, it's about a half 1000000 square feet. And would have revenue capacity of about $500,000,000. So we have ample room to expand in Chonburi.
On the K-six delays in terms of re ramping, I mean, I'm pretty sure K-six is one of your highest margin business. To the extent that that gets delayed, that probably has a bigger impact, not just on the revenues, but also on the margin mix, I would think. Is it reasonable to think that that's pressuring the gross margins a little bit in the over the very short term and then you'll get that back?
Yes, a little bit. That's a fair way to think about it, Alex. Obviously, components, optical components Given the nature of these products, they're more like juice than the electronic products. Certainly, the margin profile is quite different. It's a higher margin product than, let's say, a typical EMS type product.
So yeah, the margin impact is higher and every dollar of revenue, we don't get out of K-six. But we haven't seen again, you're right as well. It's more of a delay than a cancellation, if you like. If you lose capacity, week or 10 days of capacity, it's hard to get that back. So, but it would then push to the next quarter.
One more question, if I could. The, Fabrinet West's, success, ramping other products up to $33,000,000, up 20%, pretty, pretty strong results. Is that production that's anticipating a move of the line. And therefore, we ought to expect a fall off in the other, or would the line already be moved and we should see that continuing to ramp as we start to get it into, full production in Thailand. And therefore, the other line will accelerate.
What's the shape of that curve?
So the $30,000,000 or $33,000,000 of other that would be a combination. That's not just Fairnet West. It will be a combination of Fairnet West, but also programs that were maybe previously ramped in Fairnet that are now ramping in Thailand. As we ramp business in Travel And West and then transfer it to Bangkok, yes, we will transfer our production and we should start to see a nice uptick in the other. And as that other category grows, it may get recategorized when it becomes more meaningful into one of the other areas.
But as that business grows, in Bangkok, we work hard to backfill, if you like, with new business and new customers into Farbernet West.
Right. So the production already moved to Thailand and it is already ramping. It's just been moved from Fabrinet West.
Correct. Correct.
Okay. I thought you were saying it was going to be moved in the third quarter.
Well, there's a combination that there's a constant flow, I would say, through at any point in time, you'll have a mix of business that's being ramped in Fermit West and being transferred and has already transferred. So that's that and that for us as a measure of success is success for us in Travel Midwest is if we transfer everything and end up having to backfill Fairwind West with your business. It's a bit counterintuitive for our business, but we really view Fairwind West as it's an infeed to Bangkok and success means that the revenue is a bit volatile in Farm And West because it means we're being successful at convincing customers to transfer an entire program. To Bangkok.
Yes, I got it. Thanks.
Thanks, Alex.
Thank you. Our next question comes from Fahad Majamp of Cowen. Your line is open.
Thank you for taking my question. First, I wanted to thank TS for all your support over the years. It was a pleasure working with you. Enjoy your retirement. Thank you.
My question goes to, on diversification, I get this Cisco announcement, it's going to be another 10% customer along with Lumentum. Can you speak to the revenue diversification? It seems like your top 3, 4 customers may account for greater than 50 percent of your total revenue, if my math is right. So just help me understand if I'm thinking about it the right way.
Yes. So we historically, we've had 1 the last few years, we've had 1 10% customer. Again, of course, we report to customers on a full year basis when we look back. If we were successful with our current plans, we go from having 1 10% customer to 310 percent customers. So there's always a trade off, of course, between being over concentrators, but at the same time, you do need sufficient scale with any one customer to serve the customer correctly and proper So we're very happy with, I suppose, the trajectory we're on, the way we've been able to penetrate some new markets for us new opportunity for us and really show the customer value, the value that we can bring in simplifying their supply chain.
So it's we see it as a real win win And we'll have 3 certainly 3, 10% customers as we hopefully as we look back in FY 'twenty one.
And these are all quality customer. I'm not worried about their credit, you know, default or whatever.
So we feel Can
you remind us the number of silicon photonics customers you guys have? And if that number is growing, just trying to get a sense of the diversification beyond the top 3 customers?
Yes, we have 5 or 6 silicon customers. I mean, some of them would be big, big household lens, but there's also some smaller startup type, silicon photonics customers in there as well. So 5 or 6 in total.
Appreciate the answers. Thank you very much and congratulations again, TS.
Thank you. At this time, I'd like to turn the call back over to CEO, Seamus Grady, for closing remarks. Sir?
Thank you. So thank you for joining our call today. Everyone, we're pleased to again exceed our guidance for revenue and EPS in the second quarter, and we're well positioned to deliver another strong performance in Q3. We're looking forward to seeing those of you who will be attending our Q And A session at OFC and at other events.
Ladies and gentlemen this concludes today's conference call. Thank you for participating. You may now disconnect.