Sunnyvale, CA, October 18, 2011 – Infinera Corporation (NASDAQ:INFN, news, filings), a leading provider of digital optical communications systems, today released financial results for the third quarter ended September 24, 2011.
GAAP revenues for the third quarter of 2011 were $104.0 million compared to $96.0 million in the second quarter of 2011 and $130.1 million in the third quarter of 2010.
GAAP gross margin for the third quarter of 2011 was 39% compared to 39% in the second quarter of 2011 and 50% in the third quarter of 2010. GAAP net loss for the quarter was $21.8 million, or $(0.21) per share, compared to net loss of $24.2 million, or $(0.23) per share, in the second quarter of 2011 and net income of $4.4 million, or $0.04 per diluted share, in the third quarter of 2010.
Non-GAAP gross margin for the third quarter of 2011 was 41% compared to 41% in the second quarter of 2011 and 51% in the third quarter of 2010, excluding restructuring and other related costs and non-cash stock-based compensation expenses. Non-GAAP net loss for the third quarter of 2011 was $9.2 million, or $(0.09) per share, compared to net loss of $11.7 million, or $(0.11) per share, in the second quarter of 2011 and net income of $18.7 million, or $0.18 per diluted share, in the third quarter of 2010.
Management Commentary
“We remain encouraged by our recent revenue performance and the momentum in booking activity as customers continue to address their increased bandwidth needs with Infinera-based networks,” said Tom Fallon, president and chief executive officer. “Several factors are contributing to these trends– our significant installed base, the broader application of our product line, our expanded sales force and a stronger focus at Infinera on key vertical markets and across geographies.”
Fallon noted that the company’s top customer for the third quarter was one of North America’s leading cable companies and that the company’s pipeline remains active with opportunities in the submarine space and with wholesale carriers in North America and Europe. One of the company’s Tier 1 customers was among its top five customers in Q3.
“We were also pleased with the recent launch of the DTN-X, our new multi-terabit packet optical network platform based on our third generation 500 Gb/s PICs, a pair of chips that integrate more than 600 optical functions and will deliver the world’s first 500 Gb/s FlexCoherent super-channels,” said Fallon. “Customer response to the value proposition of the DTN-X—as well to the newly enhanced features of the DTN—has been very positive. The DTN-X reinforces Infinera’s position at the forefront of the innovation curve in the optical transport industry at a time when the industry requires the next step function in capability.”
Conference Call Information:
Infinera will host a conference call for analysts and investors to discuss its third quarter results and fourth 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 1-800-813-5525. International parties can access the replay at 1-203-369-3346.
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 www.infinera.com.
Forward-Looking Statements
This press release contains forward-looking statements, including statements regarding the key factors driving our revenue performance and bookings momentum; our sales pipeline and potential sales opportunities; and expectations for the continued success of our DTN-X product. 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; our ability to operate profitably; aggressive business tactics by our competitors; our reliance on single-source suppliers; shortages or price fluctuations in our supply chain; our ability to protect our intellectual property rights; and general, political, economic and market conditions and events. Further information about these risks and uncertainties, and other risks and uncertainties that affect our business, are contained in the risk factors section and other sections of our annual report on Form 10-K filed with the Securities Exchange Commission on March 1, 2011, as well as subsequent reports filed with or furnished to the SEC. These reports are available on our website at www.infinera.com and the SEC’s website at www.sec.gov. We assume no obligation to, and do not currently intend to, update any such 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 third quarter results, including an estimate of non-GAAP earnings for the fourth 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 GAAP Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended ------------------------ ------------------------ September September September September 24, 25, 24, 25, 2011 2010 2011 2010 ----------- ----------- ----------- ----------- Revenue: Product $ 89,554 $ 115,121 $ 256,443 $ 299,323 Ratable product and related support and services 847 1,460 2,583 4,738 Services 13,621 13,480 33,842 33,158 ----------- ----------- ----------- ----------- Total revenue 104,022 130,061 292,868 337,219 Cost of revenue (1): Cost of product 57,449 58,552 158,607 171,660 Cost of ratable product and related support and services 167 874 846 2,558 Cost of services 5,757 6,223 12,608 14,285 Restructuring credit related to cost of revenue - (60) - (182) ----------- ----------- ----------- ----------- Total cost of revenue 63,373 65,589 172,061 188,321 Gross profit 40,649 64,472 120,807 148,898 Operating expenses (1): Research and development 31,694 29,886 95,902 87,292 Sales and marketing 17,545 14,847 46,437 41,566 General and administrative 13,112 15,609 40,256 45,794 Restructuring and other costs - - - 159 ----------- ----------- ----------- ----------- Total operating expenses 62,351 60,342 182,595 174,811 Income (loss) from operations (21,702) 4,130 (61,788) (25,913) Other income (expense), net: Interest income 205 283 742 1,093 Other gain (loss), net 188 172 (203) (352) ----------- ----------- ----------- ----------- Total other income (expense), net 393 455 539 741 Income (loss) before provision of income taxes (21,309) 4,585 (61,249) (25,172) Provision for income taxes 497 225 1,145 20 ----------- ----------- ----------- ----------- Net income (loss) $ (21,806) $ 4,360 $ (62,394) $ (25,192) =========== =========== =========== =========== Net income (loss) per common share Basic $ (0.21) $ 0.04 $ (0.59) $ (0.26) =========== =========== =========== =========== Diluted $ (0.21) $ 0.04 $ (0.59) $ (0.26) =========== =========== =========== =========== Weighted average shares used in computing net income (loss) per common share Basic 106,264 99,976 104,936 98,647 =========== =========== =========== =========== Diluted 106,264 105,159 104,936 98,647 =========== =========== =========== =========== ------------------------ (1) The following table summarizes the effects of stock-based compensation related to employees and non-employees for the three and nine months ended September 24, 2011 and September 25, 2010:
Three Months Ended Nine Months Ended --------------------------- --------------------------- September 24, September 25, September 24, September 25, 2011 2010 2011 2010 ------------- ------------- ------------- ------------- Cost of revenue $ 722 $ 725 $ 2,213 $ 1,858 Research and development 3,745 3,773 11,075 10,546 Sales and marketing 2,216 2,148 6,501 6,187 General and administration 4,410 6,281 14,021 17,188 ------------- ------------- ------------- ------------- 11,093 12,927 33,810 35,779 Cost of revenue - amortization from balance sheet* 1,487 1,517 3,617 4,182 ------------- ------------- ------------- ------------- Total stock-based compensation expense $ 12,580 $ 14,444 $ 37,427 $ 39,961 ============= ============= ============= ============= * 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 Nine Months Ended ------------------------------- -------------------- September September September September 24, June 25, 25, 24, 25, 2011 2011 2010 2011 2010 --------- --------- --------- --------- --------- Reconciliation of Gross Profit: U.S. GAAP as reported $ 40,649 $ 37,414 $ 64,471 $ 120,807 $ 148,898 Restructuring and other related credit(1) - - (60) - (182) Stock-based compensation(2) 2,209 1,925 2,242 5,830 6,040 --------- --------- --------- --------- --------- Non-GAAP as adjusted $ 42,858 $ 39,339 $ 66,653 $ 126,637 $ 154,756 ========= ========= ========= ========= ========= Reconciliation of Gross Margin: U.S. GAAP as reported 39% 39% 50% 41% 44% Restructuring and other related credit(1) -% -% -% -% -% Stock-based compensation(2) 2% 2% 1% 2% 2% --------- --------- --------- --------- --------- Non-GAAP as adjusted 41% 41% 51% 43% 46% ========= ========= ========= ========= ========= Reconciliation of Income (Loss) from Operations: U.S. GAAP as reported $ (21,702) $ (24,077) $ 4,130 $ (61,788) $ (25,913) Restructuring and other related costs (credit)(1) - - (60) - (23) Stock-based compensation(2) 12,580 12,482 14,444 37,427 39,961 --------- --------- --------- --------- --------- Non-GAAP as adjusted $ (9,122) $ (11,595) $ 18,514 $ (24,361) $ 14,025 ========= ========= ========= ========= ========= Reconciliation of Net Income (Loss): U.S. GAAP as reported $ (21,806) $ (24,194) $ 4,360 $ (62,394) $ (25,192) Restructuring and other related costs (credit)(1) - - (60) - (23) Stock-based compensation(2) 12,580 12,482 14,444 37,427 39,961 --------- --------- --------- --------- --------- Non-GAAP as adjusted $ (9,226) $ (11,712) $ 18,744 $ (24,967) $ 14,746 ========= ========= ========= ========= ========= Net Income (Loss) per Common Share - Basic: U.S. GAAP $ (0.21) $ (0.23) $ 0.04 $ (0.59) $ (0.26) ========= ========= ========= ========= ========= Non-GAAP $ (0.09) $ (0.11) $ 0.19 $ (0.24) $ 0.15 ========= ========= ========= ========= ========= Net Income (Loss) per Common Share - Diluted: U.S. GAAP $ (0.21) $ (0.23) $ 0.04 $ (0.59) $ (0.26) ========= ========= ========= ========= ========= Non-GAAP $ (0.09) $ (0.11) $ 0.18 $ (0.24) $ 0.14 ========= ========= ========= ========= ========= Weighted average shares used in computing net income (loss) per common share - U.S. GAAP: Basic 106,264 105,165 99,976 104,936 98,647 ========= ========= ========= ========= ========= Diluted 106,264 105,165 105,159 104,936 98,647 ========= ========= ========= ========= ========= Weighted average shares used in computing net income (loss) per common share - Non-GAAP: Basic 106,264 105,165 99,976 104,936 98,647 ========= ========= ========= ========= ========= Diluted 106,264 105,165 105,159 104,936 103,389 ========= ========= ========= ========= ========= (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 Nine Months Ended --------------------------- --------------------------- September 25, 2010 September 25, 2010 --------------------------- --------------------------- Cost of Operating Cost of Operating Revenue Expenses Total Revenue Expenses Total -------- --------- ------- -------- --------- ------- Severance and related expenses (credits) $ - $ - $ - $ (144) $ 55 $ (89) Equipment and facility-related costs (credits) (60) - (60) (38) - (38) Lease termination - - - - 104 104 -------- --------- ------- -------- --------- ------- Total $ (60) $ - $ (60) $ (182) $ 159 $ (23) ======== ========= ======= ======== ========= ======= (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 Nine Months Ended -------------------------------- --------------------- September September September September 24, June 25, 25, 24, 25, 2011 2011 2010 2011 2010 ---------- ---------- ---------- ---------- ---------- Cost of revenue $ 722 $ 760 $ 725 $ 2,213 $ 1,858 Research and development 3,745 3,504 3,773 11,075 10,546 Sales and marketing 2,216 2,225 2,148 6,501 6,187 General and administration 4,410 4,828 6,281 14,021 17,188 ---------- ---------- ---------- ---------- ---------- 11,093 11,317 12,927 33,810 35,779 Cost of revenue - amortization from balance sheet* 1,487 1,165 1,517 3,617 4,182 ---------- ---------- ---------- ---------- ---------- Total stock-based compensation expense $ 12,580 $ 12,482 $ 14,444 $ 37,427 $ 39,961 ========== ========== ========== ========== ========== * 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) September 24, December 25, 2011 2010 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 112,641 $ 113,649 Short-term investments 132,616 168,013 Short-term restricted cash 157 1,856 Accounts receivable 68,954 75,931 Other receivables 1,259 4,420 Inventories, net 70,295 81,893 Deferred inventory costs 6,468 6,715 Prepaid expenses and other current assets 15,699 9,118 ------------- ------------- Total current assets 408,089 461,595 Property, plant and equipment, net 63,703 51,740 Deferred inventory costs, non-current 2,023 2,512 Long-term investments 27,524 9,953 Cost-method investment 9,000 4,500 Long-term restricted cash 2,637 2,235 Deferred tax asset 3,182 11,882 Other non-current assets 3,429 7,108 ------------- ------------- Total assets $ 519,587 $ 551,525 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 37,636 $ 35,658 Accrued expenses 23,373 19,790 Accrued compensation and related benefits 14,923 25,098 Accrued warranty 5,054 5,696 Deferred revenue 19,927 21,958 Deferred tax liability 3,182 11,882 ------------- ------------- Total current liabilities 104,095 120,082 Accrued warranty, non-current 6,050 5,726 Deferred revenue, non-current 3,206 4,633 Other long-term liabilities 11,607 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 September 24, 2011 and December 25, 2010 Issued and outstanding shares - 106,747 as of September 24, 2011 and 102,492 as of December 25, 2010 107 102 Additional paid-in capital 863,805 817,200 Accumulated other comprehensive loss (1,597) (1,261) Accumulated deficit (467,686) (405,292) ------------- ------------- Total stockholders' equity 394,629 410,749 ------------- ------------- Total liabilities and stockholders' equity $ 519,587 $ 551,525 ============= =============
Infinera Corporation Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Nine Months Ended ---------------------------- September 24, September 25, 2011 2010 ------------- ------------- Cash Flows from Operating Activities: Net loss $ (62,394) $ (25,192) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 13,355 11,594 Provision for other receivables 563 - Non-cash restructuring and other costs - 100 Amortization of premium on investments 3,290 2,753 Stock-based compensation expense 37,427 39,961 Unrealized loss on Put Rights - 1,696 Unrealized holding gain for trading securities - (1,696) Non-cash tax benefit (130) (411) Other gain (337) (210) Changes in assets and liabilities: Accounts receivable 6,976 5,425 Other receivables 3,622 (430) Inventories, net 12,333 (19,787) Prepaid expenses and other assets 5,471 4,932 Deferred inventory costs 549 114 Accounts payable (2,888) 15,024 Accrued liabilities and other expenses (10,946) (6,856) Deferred revenue (3,459) (3,275) Accrued warranty (316) (215) ------------- ------------- Net cash provided by operating activities 3,116 23,527 Cash Flows from Investing Activities: Purchase of available-for-sale investments (206,829) (212,307) Purchase of cost-method investment (4,500) (4,500) Proceeds from sale of available-for-sale investments 3,035 - Proceeds from maturities and calls of investments 218,798 184,662 Proceeds from disposal of assets 262 284 Purchase of property and equipment (23,236) (15,639) Advance to secure manufacturing capacity (1,500) - Reimbursement of manufacturing capacity advance 375 - Change in restricted cash 1,262 (61) ------------- ------------- Net cash used in investing activities (12,333) (47,561) Cash Flows from Financing Activities: Proceeds from issuance of common stock 9,964 12,341 Repurchase of common stock (1,239) (14) Payments for purchase of assets under financing arrangement (262) (262) ------------- ------------- Net cash provided by financing activities 8,463 12,065 Effect of exchange rate changes on cash (254) 86 Net change in cash and cash equivalents (1,008) (11,883) Cash and cash equivalents at beginning of period 113,649 109,859 ------------- ------------- Cash and cash equivalents at end of period $ 112,641 $ 97,976 ============= ============= Supplemental disclosures of cash flow information: Cash paid for income taxes $ 852 $ 882
Infinera Corporation Supplemental Financial Information (Unaudited) ---------------------------------------------------------------------------- Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 ---------------------------------------------------------------------------- Revenue ($ Mil) $90.2 $95.8 $111.4 $130.1 $117.1 $92.9 $96.0 $104.0 Gross Margin % (1) 40% 41% 44% 51% 51% 48% 41% 41% ---------------------------------------------------------------------------- Invoiced Shipment Composition: Domestic % 74% 79% 81% 73% 70% 74% 72% 65% International % 26% 21% 19% 27% 30% 26% 28% 35% Largest Customer % 17% 22% 13% 19% 10% 14% 10% < 10% ---------------------------------------------------------------------------- Cash Related Information: Cash from Operations ($ Mil) ($2.7) $2.3 $11.2 $10.0 $7.0 ($0.9) ($0.1) $4.1 Capital Expenditures ($ Mil) $4.4 $4.7 $5.0 $5.9 $5.0 $10.6 $6.7 $5.9 Depreciation & Amortization ($ Mil) $4.5 $4.0 $3.7 $3.9 $4.0 $4.2 $4.2 $4.9 DSO's 71 56 45 45 59 60 70 60 ---------------------------------------------------------------------------- Inventory Metrics: Raw Materials ($ Mil) $6.9 $7.5 $9.1 $11.0 $23.1 $20.1 $7.3 $7.0 Work in Process ($ Mil) $32.1 $31.5 $29.2 $36.5 $14.8 $17.2 $27.7 $26.9 Finished Goods ($ Mil) $29.9 $33.0 $45.9 $41.2 $44.0 $41.0 $34.4 $36.4 ---------------------------------------------------------------------------- Total Inventory ($ Mil) $68.9 $72.0 $84.2 $88.7 $81.9 $78.3 $69.4 $70.3 Inventory Turns (1) 3.2 3.2 3.0 2.9 2.8 2.5 3.3 3.5 ---------------------------------------------------------------------------- Worldwide Headcount 974 999 1,028 1,040 1,072 1,118 1,136 1,151 ---------------------------------------------------------------------------- (1) Amounts reflect non-GAAP results. Non-GAAP adjustments include restructuring and other related costs and non-cash stock-based compensation expense.
Contact:
Media: Anna Vue avue@infinera.com Infinera Corporation 916-595-8157 Investors/Analysts: Bob Blair bblair@infinera.com Infinera Corporation 408-716-4879
PR Archives: Latest, By Company, By Date