Fabrinet (NYSE:FN) Q1 2023 Earnings Call dated Nov. 07, 2022.
Corporate Participants:
Garo Toomajanian — Corporate and Investor Relations
Seamus Grady — Chief Executive Officer
Csaba Sverha — Chief Financial Officer
Analysts:
Alex Henderson — Needham — Analyst
Samik Chatterjee — JPMorgan — Analyst
Fahad Najam — Loop Capital — Analyst
Presentation:
Operator
Good afternoon. Welcome to Fabrinet’s Financial Results Conference Call for the First Quarter of Fiscal Year 2023. [Operator Instructions]
I would now like to turn the call over to your host, Garo Toomajanian, VP of Investor Relations.
Garo Toomajanian — Corporate and Investor Relations
Thank you, operator. And good afternoon, everyone. Thank you for joining us on today’s conference call to discuss Fabrinet’s financial and operating results for the first quarter of fiscal year 2023, which ended September 30, 2022. With me on the call today are Seamus Grady, Chief Executive Officer; and Csaba Sverha, Chief Financial Officer. This call will be webcast and a replay will be available on the Investors section of our website located at investor.fabrinet.com. During this call, we will present both GAAP and non-GAAP financial measures.
Please refer to the Investors section of our website for important information, including our earnings press release and investor presentation, which include our GAAP to non-GAAP reconciliation. In addition, today’s discussion will contain forward-looking statements about the future financial performance of the company. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from management’s current expectations.
These statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise them in light of new information or future events, except as required by law. For a description of the risk factors that may affect our results, please refer to our recent SEC filings, in particular, the section captioned Risk Factors in our Form 10-K filed on August 16, 2022. We will begin the call with remarks from Seamus and Csaba followed by time for questions.
I would now like to turn the call over to Fabrinet’s CEO, Seamus Grady.
Seamus Grady — Chief Executive Officer
Thank you, Garo. Good afternoon, everyone, and thank you for joining us on our call today. We’re off to a strong start in fiscal 2023, with first quarter results that exceeded our guidance. Total revenue was $655.4 million, with a better supply situation than anticipated, which contributed to our strong performance. Revenue increased 21% from a year ago or 17% when we adjust for the contribution of approximately $20 million due to the 14-week quarter. In other words, revenue would have been $20 million lower if not for the additional week.
Demand remains strong across the board with sequential growth from nearly all the end markets that we serve. Supply for some automotive components saw relief in the quarter, resulting in a supply headwind to revenue that is only about half of the $25 million to $30 million we had anticipated. We also executed well to produce non-GAAP operating margins of 10.7%, consistent with our record fourth quarter and a full percentage point higher than the prior year. Revenue upside and strong margins helped drive non-GAAP EPS of $1.97. Looking at the quarter in more detail.
We delivered a record quarter for both optical communications and automotive revenue even after considering the extra week in the quarter. In the second quarter, we expect to start seeing optical communications revenue further supported by our new partnership with DZS, a global leader in access networking infrastructure, service assurance and consumer experience software solutions. Through our partnership, DZS will transition sourcing, procurement, fulfillment and manufacturing activities in its Seminole, Florida facility to Fabrinet.
We believe this new systems win has the potential to be a significant contributor to our growth when fully ramped. Turning to non-optical communications. We had an especially strong quarter. Automotive revenue was up more than $30 million or more than 50% sequentially as improved component availability allowed us to capture more revenue than anticipated in the quarter. Overall demand from our customers remains very strong, which makes us optimistic about our future.
While supply constraints remain a limiting factor on our growth, we continue to focus on managing supply conditions as effectively as possible. From a capacity perspective, we are very well positioned to serve increasing demand. Last week, we held an official ribbon-cutting ceremony for Building nine at our Chonburi campus, adding approximately one million square feet of space. While we are maintaining our practice of letting our customers take the lead and announcing relationships, we are very pleased with the early demand and traction of Building nine.
Looking at the second quarter, we remain optimistic that strong demand trends will continue to drive growth, both year-over-year and sequentially after factoring the additional week in the first quarter. We also remain confident that we can continue to realize incremental operating efficiencies as revenue grows faster than expenses. In summary, we had a strong first quarter with results that exceeded our guidance. We are optimistic about continuing to land in our markets, and we’re well positioned to extend our track record of success as we look ahead.
Now I’d like to turn the call over to Csaba for additional financial details on our first quarter and our guidance for the second quarter of fiscal 2023. Csaba?
Csaba Sverha — Chief Financial Officer
Thank you, Seamus. And good afternoon, everyone. We delivered strong first quarter results that were above our guidance ranges. Revenue in the quarter was $655.4 million and represent a strong year-over-year and sequential growth even after backing out the approximately $20 million contribution from the additional week in the first quarter. With excellent execution, we delivered our best ever non-GAAP gross and operating margin for the first quarter.
The strong margins, combined with foreign exchange tailwinds and higher interest income, produced record non-GAAP earnings per share of $1.97, which was $0.18 above the high end of our guidance range. Looking at the revenue in more detail. Optical communications revenue was $497.6 million. Note that growth comparisons to prior periods should be adjusted by the additional week in Q1, but we believe that optical communications revenue would have been up both sequentially and from a year ago, excluding the impact of the additional week. Within optical, telecom revenue was a record $404.9 million. Datacom revenue was $92.7 million.
By technology, silicon photonics revenue was $138.9 million, an increase of 3% from a year ago and a decline of 8% sequentially. The sequential decline is primarily due to approximately $15 million of revenue that had shifted from Q3 due to alternative part qualification. Although Datacom business tends to be more variable on a quarterly basis and continues to be impacted by supply chain headwinds, we anticipate that our Datacom revenue will increase sequentially in Q2. Revenue from products rated at speeds of 400 gig or more was $195.2 million, up from a year ago as well as sequentially.
Revenue from 100-gig products remained stable and was $139.6 million, up modestly from a year ago but down sequentially. Non-optical communications revenue was very strong in the first quarter at a record $157.9 million and represented 24% of total revenue. Growth in non-optical communications was driven primarily from automotive revenue of $86.8 million, up 80% from a year ago and up 55% from last quarter. During the quarter, we took advantage of availability of components that have been in short supply, enabling us to deliver meaningful growth.
While the component supply environment remains challenging and may result in declining automotive revenue in Q2, we anticipate that strong demand will produce healthy year-over-year growth. Industrial lease revenue was $35.4 million, down 5% sequentially but remaining stable in longer-term trends. Other non-optical communications revenue was $35.7 million. As I discussed the details of our P&L, expense and profitability metrics provided are on a non-GAAP basis unless otherwise noted. A reconciliation of GAAP to non-GAAP measures is included in our earnings press release and investor presentation, which you can find in the Investor Relations section of our website.
We executed very well in the first quarter to produce particularly strong gross margins for the first quarter at 12.9%, just below our fourth quarter performance. We achieved these strong results despite the headwinds from annual merit increases, which were largely offset by increasing efficiencies and continued foreign exchange tailwinds. Operating expense in the quarter were $14.7 million or 2.2% of revenue. This produced operating income of $70 million or 10.7% of revenue.
This performance represents our ninth quarter in a row of generating record operating income. As a reminder, the vast majority of our revenue is in U.S. dollars, as are the majority of material and component costs. However, a significant portion of our labor and operating costs are in Thai baht. Through the cash flow hedging program we have been following for many years, we are able to enhance our visibility and smooth out the impact of foreign exchange fluctuations over time. Nevertheless, from time to time, we would see a larger impact as a result of currency devaluation of balance sheet items.
And in Q1, this resulted in $2.1 million or $0.06 per diluted share foreign exchange gain. The current interest rate environment combined with our strong balance sheet, contributed approximately $1.2 million or approximately $0.03 per diluted share. Non-GAAP net income was $72.4 million or $1.97 per diluted share, which is another quarterly record and was above our guidance range. On a GAAP basis, net income was $1.76 per diluted share. Effective tax rate was 1.1% in the first quarter. As for the year, we anticipate an effective tax rate in the low to mid-single digits, consistent with our history. Turning to the balance sheet and cash flow statements.
At the end of the first quarter, cash, cash equivalents and restricted cash were $499.9 million, up $21.4 million from the end of the fourth quarter. Operating cash flow was $60.6 million with capex of $10.3 million. Free cash flow was a quarterly record at $50.4 million. In fiscal year 2023, we will continue to execute on our plan to return surplus cash to shareholders. During the first quarter, we repurchased approximately 47,000 shares for a total cash outlay of $4.9 million. Approximately $95 million remains in our share repurchase authorization. Now I will turn to our guidance for the second quarter.
We continue to be optimistic about demand across our business as well as our ability to effectively manage supply constraints. While the component supply environment saw specific pocket of relief in the first quarter and we continue to expect improvements over time, these supply headwinds continue to persist in many areas of our business. As such, our Q2 guidance assumes a supply chain headwind of $25 million to $30 million. For the second quarter, we anticipate revenue in the range of $640 million to $660 million.
This represents both year-over-year and sequential growth after backing out the contribution of approximately $20 million from the additional week in the first quarter. We anticipate non-GAAP net income to be in the range of $1.86 to $1.93 per diluted share. In summary, our first quarter results provided a strong start to fiscal year 2023 with record revenue and earnings, which both exceeded our guidance. With continued favorable business conditions, we are optimistic that our track record of success will extend into the second quarter.
Operator, we are now ready to open the call for questions.
Questions and Answers:
Operator
[Operator Instructions] Our first question comes from the line of Alex Henderson of Needham. Please go-ahead.
Alex Henderson — Needham — Analyst
Thanks sir and just a little clarity to start off with on the supply chain comment. So $30 million in the automotive was an impressive improvement. But I guess to a large extent, most of the people following Fabrinet are more focused on the optical side. Did your supply chain improve on the optical side? Because if I just take the $30 million out of the revenues, you’re in line with our prior forecast.
Seamus Grady — Chief Executive Officer
Yes, Alex. Yes, we called out the improvement on the automotive. And just to remind, our automotive business is made up of — the improvement was in the new automotive business, which is made up of electric vehicles and also LIDAR. We had to see some improvement. It’s too early since car victory, but we have started to see some improvement. And I think what’s particularly encouraging for us is having specific component charges get cleared, we’re seeing that demand that we’ve been — we’ve had some pent-up demand, let’s call it, for some time.
Once those component charges are clearing, we can see the revenue impact is almost immediate. So this past quarter, the most of — the biggest part of the impact was on automotive. Some on the optical side as well, but mostly on the automotive side. And as I say, as we clear those shortages that have been flagging us and taking us and everybody else for some time, it is converting to revenue very quickly.
Alex Henderson — Needham — Analyst
So does that imply that the majority of the number that you threw out, I think it was $25 million to $30 million of supply constraints in the quarter has a shift in the mix to more optical supply constraints and maybe less auto supply constraints. I mean how do we measure it? How do we think about that?
Seamus Grady — Chief Executive Officer
Yes. For last quarter, I think that would be a fair way to look at it. Most of the constraints were on the optical side.
Alex Henderson — Needham — Analyst
I see. I see. And just going back to the baseline businesses. You gave a fair amount of granularity on the outlook. But I think could you talk about what you think the datacom and telecom, 400-gig silicon photonics are going to do on a year-over-year basis since we have that extra year confusion? How do you expect those to behave year-over-year as opposed to quarter-to-quarter or adjusted for the quarter-to-quarter if there’s some way to do that?
Csaba Sverha — Chief Financial Officer
This is Csaba. Let me take that one. So I think you meant to say extra week we had in Q4 rather than extra year. So our…
Alex Henderson — Needham — Analyst
I misspoke.
Csaba Sverha — Chief Financial Officer
All right. So our silicon photonics have been very strong, both sequentially and on quarter-on-quarter — on a year-on-year basis as well. So we continue to see 400 gig growing. The primary driver that we earlier spelled out was driven by 400 ZR, which came off from a low base, obviously, this year. we continue to see very strong demand in that space. So both silicon photonics and obviously, the higher data rates remained very stable even though on a sequential basis, you see a slight decline in silicon photonics revenue, but that has to do with a $15 million extra revenue that we had in Q4 from the prior quarter. So overall, we are very optimistic about both silicon photonics and the higher data rate businesses that are coming down the track, both on telecom and datacom as well. And again, the year-on-year growth was primarily driven by the 400 ZR, which remains very strong for us.
Alex Henderson — Needham — Analyst
Yes. I was really talking about the guide for the fourth quarter, whether you thought datacom and telecom would grow on a year-over-year basis. So any calibration of that within the guide as what I was looking for.
Csaba Sverha — Chief Financial Officer
So we anticipate that the higher data rates will continue to grow. So I — in the prepared remarks, I mentioned that our datacom business remains very strong, although some of the supply constraints were mostly in our datacom business. Again, those supply headwinds are still ahead of us, but we are very optimistic about the growth rate there. So we do anticipate probably slightly higher growth rate in datacom and going into next quarter. This is subject of supply constraints.
Alex Henderson — Needham — Analyst
And telecom, any sense?
Csaba Sverha — Chief Financial Officer
I’m sorry?
Alex Henderson — Needham — Analyst
And what about telecom?
Csaba Sverha — Chief Financial Officer
Telecom also continues to be strong. Again, that’s impacted by supply cost strains, but we do anticipate that to continue to grow, yes. Again, the demand is holding very strong across the board. The caveat here is still that we are not out of the woods from a supply perspective. We still have about $25 million baked in our guidance. So that’s mostly across the board. But subject to those supply constraints, we do anticipate both segments of our business to grow.
Alex Henderson — Needham — Analyst
Thanks I’ll cede the floor.
Csaba Sverha — Chief Financial Officer
Thanks Alex thanks.
Operator
Thank you. Our next question comes from the line of Samik Chatterjee of JPMorgan. Please go-ahead.
Samik Chatterjee — JPMorgan — Analyst
Hi thanks for taking my questions. Congrats on the strong print here. I guess I had a couple, so I’ll just sort of go through those. One, I mean if you can talk a bit more about DZSI business win, and I know you said that business starts to ramp up in the fiscal second quarter. But sort of how to think about the contribution from that business or that new win for the year? How big do you see that opportunity being in the long run? Maybe if you can give some more color around that.
The second one, I did sort of adjust your fiscal first quarter revenue for the extra week, the $20 million that you said. And I think still the sequential growth that you are implying at the midpoint of your guide going into 2Q is a bit softer than what we saw you sort of execute on the last couple of years. So I’m just wondering like if you can talk to the sustainability of the non-optical revenue in the quarter. Is it that you had supply improvement and pulled through a lot of backlog, which is somewhat limiting sort of the sequential improvement that we see or the sequential growth that we see going into 2Q? Those are the two questions.
Seamus Grady — Chief Executive Officer
Thanks, Samik, and thank you for the comments. I’ll take the first question around DZS, and then I’ll turn it over to Csaba for the question about the outlook. Yes, the DZS business, as you know, we don’t sit in specific deals, but this is a meaningful program that transfers production from DZS Seminole facility and Florida to our facilities in Thailand. It’s part of our strategy. We continue to execute our strategy to add selective, complete network systems business, and we have a good track record of that now over the last couple of years. In this case, we’re transferring from high-cost location to a low-cost location.
Again, with a meaningful revenue upside, we’re not going to size it, but it’s a meaningful revenue upside and agree is a perfect fit with our strategy and capabilities and our track record of executing transfers very effectively and efficiently and allowing our customers to realize savings quickly. DZS has other manufacturing capabilities, so this represents a portion of their production, but it is a meaningful deal that we’re proud to have one. We work hard to win this deal.
The competition was strong, we believe. And we’re very, very happy to have been awarded business and look forward to engaging with DZS to transfer production. And again, it reflects the overall opportunity in the systems space, which we’ve been very optimistic about and I think we’ve proven to be effective at. If you go back to the Infinera, Coriant win a few years ago, then the Cisco business that we transferred, this will be the third that’s got it meaningful or complete network system wins that we’ve had in the last few years.
Csaba Sverha — Chief Financial Officer
So Samik, this is Csaba. Let me take the guidance section on the growth part of it. So as you mentioned, if you back out the extra $20 million from our Q1 revenue, year-on-year, you would see about 17% growth in Q1 versus last year and our guidance at the midpoint for Q2 costs for about 15% growth on a year-on-year basis. Again, as a reminder, in Q1, we saw significant improvement in supply availability, so that explains a little bit higher growth rate than what you anticipate in the Q2 guidance.
Nevertheless, again, if you go back to the supply headwind commentaries I had, we baked in about $25 million to $30 million supply headwinds. So overall, I think our growth rate is and has been consistent with our longer-term plans of about 15% growth rate, and I don’t see any major change in the trajectory of the demand environment. We are still operating in a supply constraint area. So that’s one of the reasons why we are a bit cautious about the guide, which is still very strong, 15% on a year-on-year basis.
Samik Chatterjee — JPMorgan — Analyst
Correct, Correct. Thank you thanks for taking my questions.
Csaba Sverha — Chief Financial Officer
Thanks thank you, sir.
Operator
Thank you. [Operator Instructions] Our next question comes from the line of Fahad Najam of Loop Capital. Please go-ahead.
Fahad Najam — Loop Capital — Analyst
Hey thank you for taking my question. I’m still trying to get my head around the — your comment about improved supply chain. If my math is correct, the automotive revenue grew quite intensively, probably more than the entirety of the supply chain headwinds that you’ve talked about. So is it that the automotive supply improved and the optical communication supply chain worsened? Can you just help us understand maybe clarify things a little bit more?
Seamus Grady — Chief Executive Officer
No, I think the non-automotive or the optical performed pretty much in line with our expectations, but automotive did improve better than we had anticipated, and we were able to convert those. It’s a handful of components that have been in short supply for some time. Once they became available, we’ll able to convert that kind of pent-up demand into revenue quickly. But the — I think the revenue on the optical side of the business was pretty much in line with our expectations.
Fahad Najam — Loop Capital — Analyst
Appreciate that. So given that there is a massive backlog in the automotive segment for you, how should we be thinking about growth in the automotive space? It seems like your commentary seems to suggest that optical communications supply remains challenging. But how is it looking out for automotive? And how should we be thinking about automotive revenue throughout the rest of the year?
Seamus Grady — Chief Executive Officer
I think it remains challenging for across the entire business. We — I think we’ve got a couple of breaks, let’s call it, in the automotive business, but the supply situation remains challenging across the board. If anything, the breakthrough we had in automotive last quarter, what it demonstrates, we think is I know there’s been a lot of concern about is the demand real, is the double organ going on. What we’ve been seeing is as component availability clears, that demand is converting into revenue immediately. So the demand is there. The demand is real, we believe, but the supply constraints continues to be challenging across the board. I wouldn’t see it as being really an automotive or better or worse than on optical. It’s similar across the board.
Fahad Najam — Loop Capital — Analyst
Got it. And then one last question for me and then I’ll hand it over to the floor. In Building 9, how much of the square footage is now spoken for?
Seamus Grady — Chief Executive Officer
Yes. We don’t report that metric, Fahad. We had an opening ceremony there last quarter. We’re very happy with — I’m sorry, last week. We had the opening ceremony in — actually in Thailand right now. I was here for the opening ceremony. We’re very happy with the progress there. We have a number of customers, but we’re not going to be announcing or communicating metrics like occupied spoken for those type of metrics because they don’t really mean a whole lot other than to say the vast bulk of the growth we’ll be seeing over the next while will be in the Building nine location. Our Pinehurst facility is more or less at capacity, Building eight is at capacity. So the growth over the next five will be in Building 9. But I would say — we’re happy with the progress there.
Fahad Najam — Loop Capital — Analyst
Sorry to call. I think last quarter, you guys said you had two anchor customers for building line. So anything else seasonal customer account? Just trying to measure how much better we’re getting.
Seamus Grady — Chief Executive Officer
Well, we have — yes, we have two anchor customers. We have other customers who were we’re actively working with. Nothing to announce yet, but actively working with to get capacity set up there. And again, a lot of the new business that we talked about, like for example, the DZS win, that will be ramping in Building 9. So most of the growth — as I said, there’ll be exceptions here and there, for the most part, the majority of the growth for the next five will be in Building 9.
I would say if I compare it to — maybe if I can answer it this way if I compare it this way, let’s say, the rate of expansion, the rate of revenue growth that we envisage in building which again, just remind us, is a one million square foot facility. If I compare it to where we were at the same period in Building 8. Let’s say, back in 2016, 2017 and building it, I think the rate at which we will grow in Building nine certainly right now, it feels faster. Because when we open Building 8, this was our first facility our first factory in the new campus in Chonburi.
There was a certain amount of maybe reluctance on the part of customers to be the first one to go there. So there was a little bit of reluctance. But now we’re five years to underline, that building is full. And from the customer’s point of view, they don’t really differentiate between building for Building 9. It’s all the Chonburi campus. It’s fully ramped. It’s going very, very well. So I think our — the willingness of our customers to ramp in Building nine is completely different to what we had five years ago in Building 8. So we feel very good about our ability to grow and add business limiting quickly.
Fahad Najam — Loop Capital — Analyst
It should be. Carlos, Seamus. Obviously you guys.
Seamus Grady — Chief Executive Officer
Thank you.
Operator
Thank you. Our next question comes from Alex Henderson of Needham & Company. Please go-ahead.
Alex Henderson — Needham — Analyst
Great. Thanks so I just wanted to dig into the interest line in the FX line. So when you look at the guide that you gave for the December quarter, I’m assuming that the $2 million in FX falls out of it and that it’s effectively back towards 0. And similarly, if I look at the interest line, I’m thinking that with interest rates going up certainly here but probably on a global basis, and I assume that you’ve got a fairly short-term orientation to your current massive cash balances. So should we be expecting the interest income line to go up? And will the FX zero out?
Csaba Sverha — Chief Financial Officer
Alex, so yes, your math on the FX is probably right. We typically don’t guide the revaluation below the line FX line. So we — as we realize the actual revaluation, we will — that we fall to the bottom line in the actual basis. But the interest rate — the elevated interest rates obviously are going to translate to a higher interest income for us. So the trends have been going on in the last couple of quarters. So obviously, you can see that pick up in our interest rate line. With our strong balance sheet and cash balance, we do anticipate a strong contribution going forward. So again, to simplify your question, FX out interest rate to continue to contribute.
Alex Henderson — Needham — Analyst
So just going back to the interest rate line, it’s up about $1 million sequentially. Is that predominantly a result of the change in interest rates? Or is there something else going on there? And should I be thinking of that rate of increase is what you’re likely to do over the next two to three quarters on a sequential basis given rates are up at least in the U.S., 4%, which is a pretty big increase on your cash balances? I would think that, that would have a pronounced impact on interest income. Can you just give us some sense of what the trajectory over time looks like there?
Csaba Sverha — Chief Financial Officer
So yes, indeed, the incremental sequential increase in our interest income has to do with the increased interest rates. So again, we don’t like to speculate how is that going to work out in the future. But indeed, we have a very strong balance sheet, and we do anticipate that to be a meaningful contribution as we look ahead.
Alex Henderson — Needham — Analyst
But you’re not really speculating if you just assume existing interest rates. So no further guidance, whether that magnitude increase that we saw quarter-to-quarter is at least the assumption they used in the December quarter?
Csaba Sverha — Chief Financial Officer
I’d like to stick to our core business when we give guidance out and leave the interest rates, and the exchange rate is a slight commentary. So I wouldn’t go to further details in terms of guiding interest rates.
Alex Henderson — Needham — Analyst
Okay. I just wanted to go back a little bit into the other areas. Have you seen any change in the demand as a result of your ability to supply the auto segment? I mean so with $30 million extra shipping, there could be two responses. One, oh boy, I just got all the stuff I wanted. Or two, wow, I got what I wanted, here’s some additional orders because if you can get more, I’d like more, which could certainly play into your backlog. So can you talk a little bit about whether — what happened when you delivered that extra business to that segment?
Seamus Grady — Chief Executive Officer
Yes. I think, Alex, it hasn’t resulted in really any change in the demand. Demand is just very strong. And it really is a case of once we get the components, we can convert that pent-up demand into revenue and get it shipped. We’ve had strong backlog in really all of the markets we serve, automotive in particular. And in this case, once we were have to clear that component or a couple of components, we were able to very quickly convert to revenue and get it out the door. But no, it hasn’t resulted in additional demand. I think the demand is already very strong. We’ll be happy if the demand remains and just converts over time as we’re able to get a breakthrough on these component shortages.
Alex Henderson — Needham — Analyst
And just to be clear, when you talk about your backlog, you’re not taking into account the — I don’t remember what the number was. I guess we’ll get an update on tomorrow with Lumentum, but I think there was something like $75 million worth of backlog there, and that’s not taking into account, the one point — or sorry, the $4.4 billion backlog at Sienna. None of that’s factored in, correct?
Seamus Grady — Chief Executive Officer
Yes, we don’t actually talk about our backlog, Alex. We don’t size it. We don’t really talk about our backlog other than to say it’s very strong, and we have visibility for much further out than we would normally have because of the component supply situation. But the backlog is very strong, but we don’t actually size it. And then trying to thought how much of Lumentum’s backlog is included in our backlog, how much is Sienna, we don’t know. We just go by the demand that we get from our customers. We don’t try to round it was with the numbers that they’re projecting to the Street and freight.
Alex Henderson — Needham — Analyst
I appreciate time and thanks.
Seamus Grady — Chief Executive Officer
Thanks Alex thanks.
Operator
Thank you. At this time, I’d like to turn the call back over to Seamus Grady for closing remarks.
Seamus Grady — Chief Executive Officer
Thank you for joining our call today. We’re off to a strong start in fiscal 2023 with first quarter results that exceeded our guidance ranges. We executed well to deliver strong margins despite seasonal headwinds, which increases our confidence that we can continue to deliver strong performance as we look ahead. We look forward to speaking with you again and seeing those of you who will be attending the Needham conference next week. Goodbye.
Operator
[Operator Closing Remarks]