SUNNYVALE, CA–(Marketwire -07/24/12)- Infinera Corporation (INFN), a leading provider of digital optical communications systems, today released financial results for the second quarter ended June 30, 2012.
GAAP revenues for the second quarter of 2012 were $93.5 million compared to $104.7 million in the first quarter of 2012 and $96.0 million in the second quarter of 2011.
GAAP gross margin for the second quarter of 2012 was 35% compared to 39% in the first quarter of 2012 and 39% in the second quarter of 2011. GAAP net loss for the 2012 second quarter was $(29.5) million, or $(0.27) per share, compared to net loss of $(20.6) million, or $(0.19) per share, in the first quarter of 2012 and net loss of $(24.2) million, or $(0.23) per share, in the second quarter of 2011.
Non-GAAP gross margin for the second quarter of 2012 was 37% compared to 40% in the first quarter of 2012 and 41% in the second quarter of 2011, excluding non-cash stock-based compensation expenses. Non-GAAP net loss for the second quarter of 2012 was $(18.6) million, or $(0.16) per share, compared to net loss of $(11.2) million, or $(0.10) per share, in the first quarter of 2012 and net loss of $(11.7) million, or $(0.11) per share, in the second quarter of 2011.
Management Commentary
“We executed well on our commitment to deliver the DTN-X to the market in the second quarter, completing critical customer trials and shipping the platform to customers for deployment as promised,” said Tom Fallon, president and chief executive officer. “Reception to the DTN-X, featuring 500 Gb/s long haul super-channels along with WDM and integrated OTN switching, has been very positive and broad-based.
“To date, we have received purchase commitments for the DTN-X from ten customers, including three customers new to Infinera. These customers represent a cross section of our markets, including cable, subsea, internet content, research & education, and Tier 1 providers. Adoption of the DTN-X demonstrates customers’ recognition of the unique differentiation of our leading next-generation platform which provides unparalleled scale, efficiency, simplicity and reliability at a reduced total cost of ownership. We remain on track to recognize revenues from DTN-X sales beginning in the third quarter. While we are growing more cautious regarding the macro-economic environment and the outlook for capex spending in the second half of 2012, we are pleased with the market acceptance of the DTN-X.”
Conference Call Information:
Infinera will host a conference call for analysts and investors to discuss its second quarter results and its outlook for the third quarter today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). A live webcast of the conference call will 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 1-800-570-8795. International parties can access the replay at 1-402-220-2264.
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 our expectations for customer interest in and adoption of our DTN-X product, and expectations for the timing of revenue recognition related to 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 unexpected delays in the development, production or availability of the DTN-X product, decisions by customers to delay orders of the product, changes in the marketplace that would affect customer demand for the product, as well as our general 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 6, 2012, 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 second quarter results, including an estimate of non-GAAP earnings for the third quarter of 2012 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 atwww.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.
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Infinera Corporation
GAAP Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
------------------------ ------------------------
June 30, June 25, June 30, June 25,
2012 2011 2012 2011
----------- ----------- ----------- -----------
Revenue:
Product $ 77,843 $ 84,361 $ 170,234 $ 166,889
Ratable product and
related support and
services 523 814 1,054 1,736
Services 15,092 10,781 26,871 20,221
----------- ----------- ----------- -----------
Total revenue 93,458 95,956 198,159 188,846
Cost of revenue (1):
Cost of product 56,017 54,540 115,341 101,158
Cost of ratable
product and related
support and services 166 294 357 679
Cost of services 4,901 3,708 9,660 6,851
----------- ----------- ----------- -----------
Total cost of
revenue 61,084 58,542 125,358 108,688
Gross profit 32,374 37,414 72,801 80,158
Operating expenses (1):
Research and
development 31,676 32,899 62,661 64,208
Sales and marketing 17,777 14,957 36,019 28,892
General and
administrative 12,320 13,635 23,404 27,144
----------- ----------- ----------- -----------
Total operating
expenses 61,773 61,491 122,084 120,244
Loss from operations (29,399) (24,077) (49,283) (40,086)
Other income (expense),
net:
Interest income 228 225 503 537
Other gain (loss), net 149 20 (275) (391)
----------- ----------- ----------- -----------
Total other income
(expense), net 377 245 228 146
Loss before income taxes (29,022) (23,832) (49,055) (39,940)
Provision for income
taxes 527 362 1,106 648
----------- ----------- ----------- -----------
Net loss $ (29,549) $ (24,194) $ (50,161) $ (40,588)
=========== =========== =========== ===========
Net loss per common
share, basic and
diluted $ (0.27) $ (0.23) $ (0.46) $ (0.39)
=========== =========== =========== ===========
Weighted average shares
used in computing basic
and diluted net loss
per common share 110,403 105,165 109,534 104,272
=========== =========== =========== ===========
------------------------
(1) The following table summarizes the effects of stock-based compensation
related to employees and non-employees for the three and six months ended
June 30, 2012 and June 25, 2011:
Three Months Ended Six Months Ended
------------------------ ------------------------
June 30, June 25, June 30, June 25,
2012 2011 2012 2011
----------- ----------- ----------- -----------
Cost of revenue $ 686 $ 760 $ 1,292 $ 1,491
Research and
development 3,695 3,504 7,015 7,330
Sales and marketing 2,744 2,225 4,963 4,285
General and
administration 2,705 4,828 4,928 9,611
----------- ----------- ----------- -----------
9,830 11,317 18,198 22,717
Cost of revenue -
amortization from
balance sheet* 1,100 1,165 2,169 2,130
----------- ----------- ----------- -----------
Total stock-based
compensation expense $ 10,930 $ 12,482 $ 20,367 $ 24,847
=========== =========== =========== ===========
* Stock-based compensation expense deferred to inventory and deferred
inventory costs in prior periods and recognized in the current period.
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Infinera Corporation
GAAP to Non-GAAP Reconciliations
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
------------------------------- --------------------
June 30, March 31, June 25, June 30, June 25,
2012 2012 2011 2012 2011
--------- --------- --------- --------- ---------
Reconciliation of
Gross Profit:
U.S. GAAP as reported $ 32,374 $ 40,427 $ 37,414 $ 72,801 $ 80,158
Stock-based
compensation(1) 1,786 1,675 1,925 3,461 3,621
--------- --------- --------- --------- ---------
Non-GAAP as adjusted $ 34,160 $ 42,102 $ 39,339 $ 76,262 $ 83,779
========= ========= ========= ========= =========
Reconciliation of
Gross Margin:
U.S. GAAP as reported 35% 39% 39% 37% 42%
Stock-based
compensation(1) 2% 1% 2% 2% 2%
--------- --------- --------- --------- ---------
Non-GAAP as adjusted 37% 40% 41% 39% 44%
========= ========= ========= ========= =========
Reconciliation of
Loss from
Operations:
U.S. GAAP as reported $ (29,399) $ (19,884) $ (24,077) $ (49,283) $ (40,086)
Stock-based
compensation(1) 10,930 9,437 12,482 20,367 24,847
--------- --------- --------- --------- ---------
Non-GAAP as adjusted $ (18,469) $ (10,447) $ (11,595) $ (28,916) $ (15,239)
========= ========= ========= ========= =========
Reconciliation of Net
Loss:
U.S. GAAP as reported $ (29,549) $ (20,612) $ (24,194) $ (50,161) $ (40,588)
Stock-based
compensation(1) 10,930 9,437 12,482 20,367 24,847
--------- --------- --------- --------- ---------
Non-GAAP as adjusted $ (18,619) $ (11,175) $ (11,712) $ (29,794) $ (15,741)
========= ========= ========= ========= =========
Net Loss per Common
Share - Basic:
U.S. GAAP as reported $ (0.27) $ (0.19) $ (0.23) $ (0.46) $ (0.39)
========= ========= ========= ========= =========
Non-GAAP as adjusted $ (0.17) $ (0.10) $ (0.11) $ (0.27) $ (0.15)
========= ========= ========= ========= =========
Net Loss per Common
Share - Diluted:
U.S. GAAP as reported $ (0.27) $ (0.19) $ (0.23) $ (0.46) $ (0.39)
========= ========= ========= ========= =========
Non-GAAP as
adjusted(2) $ (0.16) $ (0.10) $ (0.11) $ (0.26) $ (0.15)
========= ========= ========= ========= =========
Weighted average
shares used in
computing net loss
per common share -
U.S. GAAP:
Basic 110,403 108,666 105,165 109,534 104,272
========= ========= ========= ========= =========
Diluted 110,403 108,666 105,165 109,534 104,272
========= ========= ========= ========= =========
Weighted average
shares used in
computing net loss
per common share -
Non-GAAP:
Basic 110,403 108,666 105,165 109,534 104,272
========= ========= ========= ========= =========
Diluted(2) 112,931 112,007 108,330 112,469 108,076
========= ========= ========= ========= =========
(1) 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 Six Months Ended
------------------------------- --------------------
June 31, March 31, June 25, June 30, June 25,
2012 2012 2011 2012 2011
--------- --------- --------- --------- ---------
Cost of revenue $ 686 $ 606 $ 760 $ 1,292 $ 1,491
Research and
development 3,695 3,320 3,504 7,015 7,330
Sales and marketing 2,744 2,219 2,225 4,963 4,285
General and
administration 2,705 2,223 4,828 4,928 9,611
--------- --------- --------- --------- ---------
9,830 8,368 11,317 18,198 22,717
Cost of revenue -
amortization from
balance sheet* 1,100 1,069 1,165 2,169 2,130
--------- --------- --------- --------- ---------
Total stock-based
compensation expense $ 10,930 $ 9,437 $ 12,482 $ 20,367 $ 24,847
========= ========= ========= ========= =========
---------------------
* Stock-based compensation expense deferred to inventory and deferred
inventory costs in prior periods and recognized in the current period.
(2) Diluted shares used to calculate net loss per share on a non-GAAP basis
provided for informational purposes only.
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Infinera Corporation
Condensed Consolidated Balance Sheets
(In thousands, except par values)
(Unaudited)
June 30, December 31,
2012 2011
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 84,988 $ 94,458
Short-term investments 105,046 101,296
Accounts receivable 56,200 80,616
Other receivables 1,492 1,346
Inventory 115,117 88,996
Deferred inventory costs 2,853 5,987
Prepaid expenses and other current assets 10,217 10,532
------------ ------------
Total current assets 375,913 383,231
Property, plant and equipment, net 82,396 76,753
Deferred inventory costs, non-current 173 1,020
Long-term investments 17,057 54,315
Cost-method investment 9,000 9,000
Long-term restricted cash 3,263 3,047
Deferred tax asset 822 822
Other non-current assets 2,137 3,516
------------ ------------
Total assets $ 490,761 $ 531,704
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 37,679 $ 48,838
Accrued expenses 17,666 22,421
Accrued compensation and related benefits 19,391 18,966
Accrued warranty 5,929 5,692
Deferred revenue 18,507 22,781
Deferred tax liability 767 767
------------ ------------
Total current liabilities 99,939 119,465
Accrued warranty, non-current 7,773 7,173
Deferred revenue, non-current 2,732 3,410
Other long-term liabilities 15,004 13,853
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 June 30,
2012 and December 31, 2011
Issued and outstanding shares - 110,836 as of
June 30, 2012 and 106,976 as of December 31,
2011 111 107
Additional paid-in capital 904,963 876,927
Accumulated other comprehensive loss (2,564) (2,195)
Accumulated deficit (537,197) (487,036)
------------ ------------
Total stockholders' equity 365,313 387,803
------------ ------------
Total liabilities and stockholders' equity $ 490,761 $ 531,704
============ ============
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Infinera Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
--------------------------
June 30, June 25,
2012 2011
------------ ------------
Cash Flows from Operating Activities:
Net loss $ (50,161) $ (40,588)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 11,224 8,434
Amortization of premium on investments 1,098 2,218
Stock-based compensation expense 20,367 24,847
Non-cash tax benefit - (121)
Other gain (501) (293)
Changes in assets and liabilities:
Accounts receivable 24,416 2,247
Other receivables (477) 3,830
Inventory (24,770) 13,269
Prepaid expenses and other assets 1,533 (536)
Deferred inventory costs 3,910 (604)
Accounts payable (8,753) (7,772)
Accrued liabilities and other expenses (2,272) (4,500)
Deferred revenue (4,952) (693)
Accrued warranty 837 (727)
------------ ------------
Net cash used in operating activities (28,501) (989)
Cash Flows from Investing Activities:
Purchase of available-for-sale investments (42,853) (153,034)
Proceeds from sale of available-for-sale
investments 5,194 3,035
Proceeds from maturities and calls of
investments 70,464 150,511
Proceeds from disposal of assets - 262
Purchase of property and equipment (19,770) (17,322)
Advance to secure manufacturing capacity - (1,500)
Reimbursement of manufacturing capacity
advance 50 225
Change in restricted cash (230) 1,573
------------ ------------
Net cash provided by (used in) investing
activities 12,855 (16,250)
Cash Flows from Financing Activities:
Proceeds from issuance of common stock 7,093 5,712
Repurchase of common stock (839) (1,200)
Payments for purchase of assets under
financing arrangement - (174)
------------ ------------
Net cash provided by financing activities 6,254 4,338
Effect of exchange rate changes on cash (78) 178
Net change in cash and cash equivalents (9,470) (12,723)
Cash and cash equivalents at beginning of period 94,458 113,649
------------ ------------
Cash and cash equivalents at end of period $ 84,988 $ 100,926
============ ============
Supplemental disclosures of cash flow
information:
Cash paid for income taxes $ 595 $ 565
Supplemental schedule of non-cash financing
activities:
Non-cash settlement for manufacturing capacity
advance $ 275 $ -
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Infinera Corporation
Supplemental Financial Information
(Unaudited)
Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12
--------------------------------------------------------
Revenue ($ Mil) $130.1 $117.1 $92.9 $96.0 $104.0 $112.0 $104.7 $93.5
Gross Margin % (1) 51% 51% 48% 41% 41% 42% 40% 37%
--------------------------------------------------------
Invoiced Shipment
Composition:
Domestic % 73% 70% 74% 72% 65% 70% 71% 70%
International % 27% 30% 26% 28% 35% 30% 29% 30%
Largest Customer % 19% 10% 14% 10% < 10% 14% 13% 15%
--------------------------------------------------------
Cash Related
Information:
Cash from Operations
($ Mil) $10.0 $7.0 ($0.9) ($0.1) $4.1 ($5.1) ($5.8)($22.7)
Capital Expenditures
($ Mil) $5.9 $5.0 $10.6 $6.7 $5.9 $16.1 $13.6 $6.1
Depreciation &
Amortization ($
Mil) $3.9 $4.0 $4.2 $4.2 $4.9 $4.5 $5.5 $5.7
DSO's 45 59 60 70 60 65 57 55
--------------------------------------------------------
Inventory Metrics:
Raw Materials ($
Mil) $11.0 $23.1 $20.1 $7.3 $7.0 $12.1 $15.3 $14.8
Work in Process ($
Mil) $36.5 $14.8 $17.2 $27.7 $26.9 $37.0 $41.6 $49.4
Finished Goods ($
Mil) $41.2 $44.0 $41.0 $34.4 $36.4 $39.9 $44.7 $50.9
--------------------------------------------------------
Total Inventory ($
Mil) $88.7 $81.9 $78.3 $69.4 $70.3 $89.0 $101.6 $115.1
Inventory Turns (1) 2.9 2.8 2.5 3.3 3.5 2.9 2.5 2.1
--------------------------------------------------------
Worldwide Headcount 1,040 1,072 1,118 1,136 1,151 1,181 1,210 1,228
--------------------------------------------------------
--------------------
(1) Amounts reflect non-GAAP results. Non-GAAP adjustments include
restructuring and other related costs and non-cash stock-based compensation
expense.
Anna Vue
avue@infinera.com
Infinera Corporation
916-595-8157
Investors/Analysts:
Jenifer Kirtland/Bob Jones
jkirtland@infinera.com/bjones@infinera.com
Infinera Corporation
408-543-8139/408-543-8140
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