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Press Release -- April 28th, 2011
Source: Infinera
Tags: 100G, 40G, Earnings, Equipment, Ethernet, Exchange

Infinera Corporation Reports First Quarter 2011 Financial Results

SUNNYVALE, CA, Apr 28, 2011 (MARKETWIRE via COMTEX) --

Infinera Corporation (NASDAQ:INFN, news, filings), a leading provider of digital optical communications systems, today released financial results for the first quarter ended March 26, 2011.

--  GAAP revenues for the first quarter of 2011 were $92.9 million
    compared to $117.1 million in the fourth quarter of 2010 and $95.8
    million in the first quarter of 2010.

--  GAAP gross margins for the quarter were 46% compared to 49% in the
    fourth quarter of 2010 and 39% in the first quarter of 2010. GAAP net
    loss for the quarter was $16.4 million, or $(0.16) per share, compared
    to net loss of $2.7 million, or $(0.03) per share, in the fourth
    quarter of 2010 and net loss of $20.0 million, or $(0.21) per share,
    in the first quarter of 2010.

--  Non-GAAP gross margins for the first quarter of 2011 were 48% compared
    to 51% in the fourth quarter of 2010 and 41% in the first quarter of
    2010, excluding restructuring and other related costs and non-cash
    stock-based compensation expenses. Non-GAAP net loss for the first
    quarter of 2011 was $4.0 million, or $(0.04) per share, compared to
    net income of $7.6 million, or $0.07 per diluted share, in the fourth
    quarter of 2010 and net loss of $7.0 million, or $(0.07) per share, in
    the first quarter of 2010.

Management Commentary

"Our first quarter results were achieved based on continuing demand for our product portfolio from our existing customers, which reflects continuing steady growth in end-user demand for bandwidth, but we saw slower new footprint activity in Q1 versus a year ago," said Tom Fallon, president and chief executive officer. Customers continue to show strong interest in our Photonic Integrated Circuit technology and in the field trial demonstrations of the differentiated features of our upcoming new products -- our 40G transmission solution with FlexCoherent technology and our next-generation 500Gb/s PIC solution, which will support 100G transmission applications.

"It is also important to note that we are growing the number of customers who are buying a multi-product Infinera solution. This includes customers buying either a combination of long-haul and metro solutions or a combination of terrestrial and subsea solutions. At the end of Q1, we had 26 multi-platform customers out of a total of 86 customers worldwide. This is an important trend as these customers have made a more significant architectural commitment to Infinera.

"Finally, we continue to build additional features and capabilities into our ATN metro platform, and in the second quarter we will add Ethernet aggregation functionality."

Conference Call Information:

Infinera will host a conference call for analysts and investors to discuss its first quarter results and second quarter outlook today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). A live webcast of the conference call will also be accessible from the "Investor Relations" section of the company's website at www.infinera.com. Following the webcast, an archived version will be available on the website for 90 days. To hear the replay, parties in the United States and Canada should call 1-866-395-9177. International parties can access the replay at 1-203-369-0501.

About Infinera

Infinera provides Digital Optical Networking systems to telecommunications carriers worldwide. Infinera's systems are unique in their use of a breakthrough semiconductor technology: the photonic integrated circuit (PIC). Infinera's systems and PIC technology are designed to provide customers with simpler and more flexible engineering and operations, faster time-to-service, and the ability to rapidly deliver differentiated services without reengineering their optical infrastructure. For more information, please visit http://www.infinera.com/.

Forward-Looking Statements

This press release contains forward-looking statements, including statements about the interest in our PIC-based technology and differentiated features of our products, the timing of the introduction of the Ethernet aggregation functionality of our ATN System, and the growth in and commitment made by customers. These forward-looking statements involve risks and uncertainties, as well as assumptions that if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include our ability to react to trends and challenges in our business and the markets in which we operate; our ability to anticipate market needs and develop new or enhanced products to meet those needs; the adoption rate of our products; our ability to establish and maintain successful relationships with our customers; our ability to reduce customer concentration; our ability to compete in our industry; fluctuations in demand, sales cycles and prices for our products and services; shortages or price fluctuations in our supply chain; our ability to protect our intellectual property rights; general political, economic and market conditions and events; and other risks and uncertainties described more fully in our documents filed with or furnished to the U.S. Securities and Exchange Commission (SEC). More information about these and other risks that may impact Infinera's business are set forth in our annual report on Form 10-K, which was filed with the SEC on March 1, 2011, as well as subsequent reports filed with the SEC. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.

Use of Non-GAAP financial information

In addition to disclosing financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain certain non-GAAP measures that exclude non-cash stock-based compensation expenses and non-recurring restructuring and other related costs. We believe these adjustments are appropriate to enhance an overall understanding of our underlying financial performance and also our prospects for the future and are considered by management for the purpose of making operational decisions. In addition, these results are the primary indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income (loss), basic and diluted net income (loss) per share, or gross margin prepared in accordance with GAAP. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and are subject to limitations. For a description of these non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial measures, please see the section titled, "GAAP to Non-GAAP Reconciliations." We anticipate disclosing forward-looking non-GAAP information in our conference call to discuss our first quarter results, including an estimate of non-GAAP earnings for the second quarter of 2011 that excludes non-cash stock-based compensation expenses.

A copy of this press release can be found on the investor relations page of Infinera's website at www.infinera.com.

Infinera Corporation and the Infinera logo are trademarks or registered trademarks of Infinera Corporation. All other trademarks used or mentioned herein belong to their respective owners.

----------------------------------------------------------------------------
Infinera Corporation
GAAP Condensed Consolidated Statements of Operations
(In thousands, except share amounts)
(Unaudited)
                                                      Three Months Ended
                                                   ------------------------
                                                    March 26,    March 27,
                                                       2011         2010
                                                   -----------  -----------
Revenue:
   Product                                         $    82,528  $    86,167
   Ratable product and related support and services        922        1,614
   Services                                              9,440        7,979
                                                   -----------  -----------
      Total revenue                                     92,890       95,760

Cost of revenue (1):
   Cost of product                                      46,618       55,440
   Cost of ratable product and related support and
    services                                               385          755
   Cost of services                                      3,143        2,542
   Restructuring credit related to cost of revenue           -          (93)
                                                   -----------  -----------
      Total cost of revenue                             50,146       58,644

Gross profit                                            42,744       37,116

Operating expenses (1):
   Research and development                             31,309       28,483
   Sales and marketing                                  13,935       13,037
   General and administrative                           13,509       15,737
   Restructuring and other costs                             -          161
                                                   -----------  -----------
      Total operating expenses                          58,753       57,418

Loss from operations                                   (16,009)     (20,302)

Other income (expense), net:
   Interest income                                         312          485
   Other gain (loss), net:                                (411)        (316)
                                                   -----------  -----------
      Total other income (expense), net                    (99)         169

Loss before income taxes                               (16,108)     (20,133)
Provision for (benefit from) income taxes                  286         (142)
                                                   -----------  -----------
Net loss                                           $   (16,394) $   (19,991)
                                                   ===========  ===========
Net loss per common share, basic and diluted       $     (0.16) $     (0.21)
                                                   ===========  ===========

Weighted average shares used in computing basic and
 diluted net loss per common share                     103,426       97,276
                                                   ===========  ===========

-------------------------
(1)  The following table summarizes the effects of stock-based compensation
     related to employees and non-employees for the three months ended March
     26, 2011 and March 27, 2010:

                                                       Three Months Ended
                                                   ------------------------
                                                     March 26,    March 27,
                                                       2011         2010
                                                   -----------  -----------
     Cost of revenue                               $       731  $       569
     Research and development                            3,826        3,423
     Sales and marketing                                 2,060        1,847
     General and administration                          4,783        5,709
                                                   -----------  -----------
                                                        11,400       11,548
     Cost of revenue - amortization from balance
      sheet*                                               965        1,362
                                                   -----------  -----------
     Total stock-based compensation expense        $    12,365  $    12,910
                                                   ===========  ===========

*    Stock-based compensation expense deferred to inventory and deferred
     inventory costs in prior periods and recognized in the current period.

----------------------------------------------------------------------------
Infinera Corporation
GAAP to Non-GAAP Reconciliations
(In thousands, except per share data)
(Unaudited)

                                   Three Months Ended
                        ---------------------------------------
                         March 26,    December 25,   March 27,
                            2011          2010          2010
                        -----------  -------------  -----------
Reconciliation of Gross
 Profit:
U.S. GAAP as reported   $    42,744  $      57,292  $    37,116
Restructuring and other
 related costs(1)                 -              -          (93)
Stock-based
 compensation(2)              1,696          2,195        1,931
                        -----------  -------------  -----------
Non-GAAP as adjusted    $    44,440  $      59,487  $    38,954
                        ===========  =============  ===========

Reconciliation of Gross
 Margin:
U.S. GAAP as reported            46%            49%          39%
Restructuring and other
 related costs(1)                 -%             -%           -%
Stock-based
 compensation(2)                  2%             2%           2%
                        -----------  -------------  -----------
Non-GAAP as adjusted             48%            51%          41%
                        ===========  =============  ===========

Reconciliation of Income
 (Loss) from Operations:
U.S. GAAP as reported   $   (16,009) $      (2,775) $   (20,302)
Restructuring and other
 related costs(1)                 -              -           68
Stock-based
 compensation(2)             12,365         10,374       12,910
                        -----------  -------------  -----------
Non-GAAP as adjusted    $    (3,644) $       7,599  $    (7,324)
                        ===========  =============  ===========

Reconciliation of Net
 Income (Loss):
U.S. GAAP as reported   $   (16,394) $      (2,740) $   (19,991)
Restructuring and other
 related costs(1)                 -              -           68
Stock-based
 compensation(2)             12,365         10,374       12,910
                        -----------  -------------  -----------
Non-GAAP as adjusted    $    (4,029) $       7,634  $    (7,013)
                        ===========  =============  ===========

Net Income (Loss) per
 Common Share - Basic:
U.S. GAAP               $     (0.16) $       (0.03) $     (0.21)
                        ===========  =============  ===========
Non-GAAP                $     (0.04) $        0.08  $     (0.07)
                        ===========  =============  ===========

Net Income (Loss) per
 Common Share - Diluted:
U.S. GAAP               $     (0.16) $       (0.03) $     (0.21)
                        ===========  =============  ===========
Non-GAAP                $     (0.04) $        0.07  $     (0.07)
                        ===========  =============  ===========

Weighted average shares
 used in computing net
 income (loss) per
 common share - U.S.
 GAAP:
Basic                       103,426        101,654       92,276
                        ===========  =============  ===========
Diluted                     103,426        101,654       92,276
                        ===========  =============  ===========

Weighted average shares
 used in computing net
 income (loss) per
 common share - Non-
 GAAP:
Basic                       103,426        101,654       92,276
                        ===========  =============  ===========
Diluted                     103,426        108,393       92,276
                        ===========  =============  ===========

(1)  Adjustment amount represents restructuring and other related costs
     (credit) recorded in relation to the closure of our Maryland FAB
     announced on July 21, 2009. These amounts have been adjusted in
     arriving at our non-GAAP results as they are non-recurring in nature
     and the adjusted numbers provide a better indication of our underlying
     business performance.

                                   Three Months Ended
                                     March 27, 2010
                        ---------------------------------------
                           Cost of      Operating
                           Revenue      Expenses        Total
                        -----------  -------------  -----------
     Severance and
      related expenses  $       (15) $          55  $        40
     Equipment and
      facility-related
      costs                     (78)             -          (78)
     Lease termination            -            106          106
                        -----------  -------------  -----------
     Total              $       (93) $         161  $        68
                        ===========  =============  ===========

(2)  Stock-based compensation expense is calculated in accordance with the
     fair value recognition provisions of Financial Accounting Standards
     Board Accounting Standards Codification (ASC) Topic 718, Compensation
     -- Stock Compensation effective January 1, 2006. The following table
     summarizes the effects of stock-based compensation related to employees
     and non-employees:

                                               Three Months Ended
                                   -----------------------------------------
                                      March 26,    December 25,    March 27,
                                        2011           2010          2010
                                   -------------  -------------  -----------
     Cost of revenue               $         731  $         740  $       569
     Research and development              3,826          3,755        3,423
     Sales and marketing                   2,060          1,709        1,847
     General and
      administration                       4,783          2,715        5,709
                                   -------------  -------------  -----------
                                          11,400          8,919       11,548
     Cost of revenue -
      amortization from balance
      sheet*                                 965          1,455        1,362
                                   -------------  -------------  -----------
     Total stock-based
      compensation expense         $      12,365  $      10,374  $    12,910
                                   =============  =============  ===========

-------------------------
*    Stock-based compensation expense deferred to inventory and deferred
     inventory costs in prior periods and recognized in the current period.

----------------------------------------------------------------------------
Infinera Corporation
Condensed Consolidated Balance Sheets
(In thousands, except par values)
(Unaudited)

                                                 March 26,     December 25,
                                                    2011           2010
                                               -------------  -------------
ASSETS

Current assets:
  Cash and cash equivalents                    $     111,352  $     113,649
  Short-term investments                             163,850        168,013
  Short-term restricted cash                           1,690          1,856
  Accounts receivable                                 60,923         75,931
  Other receivables                                    1,829          4,420
  Inventories, net                                    78,331         81,893
  Deferred inventory costs                             5,737          6,715
  Prepaid expenses and other current assets           12,959          9,118
                                               -------------  -------------
    Total current assets                             436,671        461,595

Property, plant and equipment, net                    56,431         51,740
Deferred inventory costs, non-current                  3,686          2,512
Long-term investments                                  7,897          9,953
Cost-method investment                                 4,500          4,500
Long-term restricted cash                              2,334          2,235
Deferred tax asset                                     8,982         11,882
Other non-current assets                               5,831          7,108
                                               -------------  -------------
    Total assets                               $     526,332  $     551,525
                                               =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                             $      28,015  $      35,658
  Accrued expenses                                    18,352         19,790
  Accrued compensation and related benefits           11,969         25,098
  Accrued warranty                                     4,677          5,696
  Deferred revenue                                    22,536         21,958
  Deferred tax liability                               8,982         11,882
                                               -------------  -------------
    Total current liabilities                         94,531        120,082

  Accrued warranty, non-current                        5,483          5,726
  Deferred revenue, non-current                        4,040          4,633
  Other long-term liabilities                         10,138         10,335

Commitments and contingencies

Stockholders' equity:
  Preferred stock, $0.001 par value
    Authorized shares - 25,000 and no shares
     issued and outstanding                                -              -
  Common stock, $0.001 par value
    Authorized shares - 500,000 as of March 26,
     2011 and December 25, 2010
    Issued and outstanding shares - 104,042 as
     of March 26, 2011 and 102,492 as of
     December 25, 2010                                   104            102
  Additional paid-in capital                         834,684        817,200
  Accumulated other comprehensive loss                  (962)        (1,261)
  Accumulated deficit                               (421,686)      (405,292)
                                               -------------  -------------
  Total stockholders' equity                         412,140        410,749
                                               -------------  -------------
    Total liabilities and stockholders' equity $     526,332  $     551,525
                                               =============  =============

----------------------------------------------------------------------------
Infinera Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

                                                      Three Months Ended
                                                   ------------------------
                                                    March 26,    March 27,
                                                       2011         2010
                                                   -----------  -----------
Cash Flows from Operating Activities:
Net loss                                           $   (16,394) $   (19,991)
Adjustments to reconcile net loss to net cash
 provided by (used in) operating activities:
  Depreciation and amortization                          4,215        3,983
  Amortization of premium on investments                   987          540
  Stock-based compensation expense                      12,365       12,910
  Unrealized loss on Put Rights                              -        2,104
  Unrealized holding gain for trading securities             -       (2,104)
  Non-cash tax benefit                                     (78)        (270)
  Loss (gain) on disposal of assets                       (104)          60
  Other gain                                               (19)         (25)
  Changes in assets and liabilities:
    Accounts receivable                                 18,897       11,028
    Inventories, net                                     3,986       (3,209)
    Prepaid expenses and other current assets           (3,357)        (708)
    Deferred inventory costs                              (278)      (1,555)
    Other non-current assets                             4,482        1,627
    Accounts payable                                    (8,750)       2,624
    Accrued liabilities and other expenses             (15,528)      (6,502)
    Deferred revenue                                       (16)       2,254
    Accrued warranty                                    (1,262)        (489)
                                                   -----------  -----------
      Net cash provided by (used in) operating
       activities                                         (854)       2,277

Cash Flows from Investing Activities:
  Purchase of available-for-sale investments          (107,049)     (75,656)
  Proceeds from sale of available-for-sale
   investments                                           3,035            -
  Proceeds from maturities and calls of investments    109,416       68,598
  Proceeds from disposal of assets                         104           85
  Purchase of property and equipment                   (10,602)      (4,692)
  Advance to secure manufacturing capacity              (1,500)           -
  Reimbursement of manufacturing capacity advance           75            -
  Change in restricted cash                                 68           99
                                                   -----------  -----------
      Net cash used in investing activities             (6,453)     (11,566)

Cash Flows from Financing Activities:
  Proceeds from issuance of common stock                 4,909        4,397
  Repurchase of common stock                                 -           (2)
  Payments for purchase of assets under financing
   arrangement                                             (87)         (87)
                                                   -----------  -----------
      Net cash provided by financing activities          4,822        4,308

Effect of exchange rate changes on cash                    188          (61)

Net change in cash and cash equivalents                 (2,297)      (5,042)
Cash and cash equivalents at beginning of period       113,649      109,859
                                                   -----------  -----------
Cash and cash equivalents at end of period         $   111,352  $   104,817
                                                   ===========  ===========

Supplemental disclosures of cash flow information:
  Cash paid for income taxes                       $       442  $       335

 ---------------------------------------------------------------------------
 Infinera Corporation
 Supplemental Financial Information
 (Unaudited)

 ---------------------------------------------------------------------------
                     Q2'09  Q3'09  Q4'09  Q1'10  Q2'10  Q3'10  Q4'10  Q1'11
 ---------------------------------------------------------------------------
 Revenue ($ Mil)     $68.9  $83.4  $90.2  $95.8  $111.4 $130.1 $117.1 $92.9
 Gross Margin % (1)   31%    38%    40%    41%    44%    51%    51%    48%
 ---------------------------------------------------------------------------
 Invoiced Shipment
  Composition:
 Domestic %           64%    63%    74%    79%    81%    73%    70%    74%
 International %      36%    37%    26%    21%    19%    27%    30%    26%
 Largest Customer %   20%    15%    17%    22%    13%    19%    10%    14%
 ---------------------------------------------------------------------------
 Cash Related
  Information:
 Cash from
  Operations
   ($ Mil)          $(18.8) $(8.3) $(2.7)  $2.3  $11.2  $10.0   $7.0  $(0.9)
 Capital
  Expenditures
  ($ Mil)             $2.8   $2.8   $4.4   $4.7   $5.0   $5.9   $5.0  $10.6
 Depreciation &
  Amortization
   ($ Mil)            $4.0   $4.2   $4.5   $4.0   $3.7   $3.9   $4.0   $4.2
 DSO's                 72     61     71     56     45     45     59     60
 ---------------------------------------------------------------------------
 Inventory Metrics:
 Raw Materials
  ($ Mil)            $10.1   $7.4   $6.9   $7.5   $9.1  $11.0  $23.1  $20.1
 Work in Process
  ($ Mil)            $40.1  $36.2  $32.1  $31.5  $29.2  $36.5  $14.8  $17.2
 Finished Goods
  ($ Mil)            $22.3  $29.3  $29.9  $33.0  $45.9  $41.2  $44.0  $41.0
 ---------------------------------------------------------------------------
 Total Inventory
  ($ Mil)            $72.5  $72.9  $68.9  $72.0  $84.2  $88.7  $81.9  $78.3
 Inventory Turns (1)  2.6    3.0    3.2    3.2    3.0    2.9    2.8    2.5
 ---------------------------------------------------------------------------
 Worldwide Headcount  973    970    974    999   1,028  1,040  1,072  1,118
 ---------------------------------------------------------------------------

 -------------------------
 (1)  Amounts reflect non-GAAP results. Non-GAAP adjustments include
      restructuring and other related costs and non-cash stock-based
      compensation.
Contacts:

Press:
Jeff Ferry
jferry@infinera.com
Infinera Corporation
408-572-5213

Investors/Analysts:
Bob Blair
bblair@infinera.com
Infinera Corporation
408-716-4879

SOURCE: Infinera

mailto:jferry@infinera.com
mailto:bblair@infinera.com

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