Record Revenue of $111.4 Million, Representing 62% Year-Over-Year Revenue Growth; Non-GAAP Profit of $0.03 per Diluted Share; Non-GAAP Gross Margin at 44 Percent
SUNNYVALE, CA, Jul 22, 2010 (MARKETWIRE via COMTEX) — Infinera Corporation (NASDAQ:INFN, news, filings), a leading provider of digital optical communications systems, today released financial results for the second quarter ended June 26, 2010.
- GAAP revenues for the quarter were $111.4 million compared to $95.8 million in the first quarter of 2010 and $68.9 million in the second quarter of 2009.
- GAAP gross margins for the quarter were 42% compared to 39% in the first quarter of 2010 and 29% in the second quarter of 2009. GAAP net loss for the quarter was $9.6 million, or $(0.10) per share, compared to $20.0 million, or $(0.21) per share, in the first quarter of 2010 and $27.1 million, or $(0.28) per share, in the second quarter of 2009.
- Non-GAAP gross margins for the quarter were 44% compared to 41% in the first quarter of 2010 and 31% in the second quarter of 2009, excluding restructuring and other related costs and non-cash stock-based compensation. Non-GAAP net income for the quarter was $3.0 million, or $0.03 per diluted share, compared to net loss of $7.0 million, or $(0.07) per share in the first quarter of 2010 and net loss of $18.2 million, or $(0.19) per share, in the second quarter of 2009.
Management Commentary
“I am delighted with the performance delivered by the Infinera team in the second quarter — one of the strongest in the company’s history,” said Tom Fallon, president and chief executive officer. “We achieved new records for overall quarterly revenue and bookings, including increased shipments of tributary adapter modules, and we posted higher gross margins, achieved positive cash flow, and earned a profit on a non-GAAP basis.
“The second quarter represents the company’s fifth consecutive quarter of improving revenue, our third straight quarter of increasing bookings and our fourth quarter of sequentially improving gross margins,” Fallon noted. “Demand remains robust for our PIC-based networks, which we believe provide the most efficient, flexible and cost-effective way to manage Internet bandwidth growth. Furthermore, we have been pleased with the broad-based positive customer reception that we have received to our recently announced plans to accelerate our PIC-based, 100-G transmission system development with planned volume production in 2012.
“Our financial results and industry data provide clear evidence that Infinera is gaining share in both North America and on a worldwide basis and doing so in a rapidly growing market for long-haul DWDM networks,” said Fallon.
The company also noted the following developments in the second quarter:
- Positive cash from operations of $11.2 million;
- TAM Shipments of 2,400 units;
- Strengthened DWDM market share positions in North America (#1 at 39%) and worldwide (#2 at 15%) based on Dell’Oro market data as of end of Q1 CY2010; and
- Four greater than 10 percent customers including one of the world’s leading internet content providers as the top customer, two wholesale carriers, Level 3 and Global Crossing, and one of the largest cable companies in North America.
Conference Call Information:
Infinera will host a conference call for analysts and investors to discuss its second quarter results and third 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 1-866-435-5408. International parties can access the replay at 1-203-369-1028.
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 about demand remains robust for our PIC-based networks, which we believe provide the most efficient, flexible and cost-effective way to manage Internet bandwidth growth; our belief that customer reception has been broad-based and positive for our recently announced plans to accelerate our PIC-based, 100-G transmission system development with planned volume production in 2012; and our belief that our financial results and industry data provide clear evidence that we are gaining share in both North America and on a worldwide basis and doing so in a rapidly growing market for long-haul DWDM networks. 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, 2010, 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 or basic and diluted net income per share 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 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 2010 results, including an estimate of non-GAAP earnings for the third quarter of 2010 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 per share data)
(Unaudited)
Three Months Ended Six Months Ended
-------------------- --------------------
June 26, June 27, June 26, June 27,
2010 2009 2010 2009
--------- --------- --------- ---------
Revenue:
Product $ 98,035 $ 61,074 $ 184,202 $ 120,222
Ratable product and related
support and services 1,664 845 3,278 2,314
Services 11,699 7,013 19,678 12,976
--------- --------- --------- ---------
Total revenue 111,398 68,932 207,158 135,512
Cost of revenue (1):
Cost of product 57,668 45,699 113,108 89,564
Cost of ratable product and
related support and services 929 358 1,684 1,088
Cost of services 5,520 2,617 8,062 4,632
Restructuring credit related
to cost of revenue (29) - (122) -
--------- --------- --------- ---------
Total cost of revenue 64,088 48,674 122,732 95,284
Gross profit 47,310 20,258 84,426 40,228
Operating expenses (1):
Research and development 28,923 24,800 57,406 46,834
Sales and marketing 13,682 11,458 26,719 22,581
General and administrative 14,448 11,478 30,185 21,605
Restructuring and other
costs (credit) (2) - 159 -
--------- --------- --------- ---------
Total operating expenses 57,051 47,736 114,469 91,020
Loss from operations (9,741) (27,478) (30,043) (50,792)
Other income (expense), net:
Interest income 325 597 810 1,515
Total other-than-temporary
impairment losses - (2,747) - (2,747)
Portion of loss recognized
in other comprehensive loss - 1,814 - 1,814
--------- --------- --------- ---------
Net credit impairment losses
recognized in earnings - (933) - (933)
Other gain (loss), net (208) 806 (524) (1,008)
--------- --------- --------- ---------
Total other income
(expense), net 117 470 286 (426)
Loss before provision of income
taxes (9,624) (27,008) (29,757) (51,218)
Provision for (benefit from)
income taxes (63) 103 (205) 221
--------- --------- --------- ---------
Net loss $ (9,561) $ (27,111) $ (29,552) $ (51,439)
========= ========= ========= =========
Net loss per common share,
basic and diluted $ (0.10) $ (0.28) $ (0.30) $ (0.54)
========= ========= ========= =========
Weighted average shares used in
computing basic and diluted
net loss per common share 98,777 95,161 98,026 94,718
========= ========= ========= =========
(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 26, 2010 and June 27, 2009:
Three Months Ended Six Months Ended
-------------------- --------------------
June 26, June 27, June 26, June 27,
2010 2009 2010 2009
--------- --------- --------- ---------
Cost of revenue $ 564 $ 477 $ 1,133 $ 856
Research and development 3,350 2,419 6,773 4,151
Sales and marketing 2,192 1,599 4,039 3,013
General and administration 5,198 3,513 10,907 6,158
--------- --------- --------- ---------
11,304 8,008 22,852 14,178
Cost of revenue -
amortization from balance
sheet* 1,303 904 2,665 1,470
--------- --------- --------- ---------
Total stock-based
compensation expense $ 12,607 $ 8,912 $ 25,517 $ 15,648
========= ========= ========= =========
* 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 Six Months Ended
---------------------------------- ----------------------
June 26, March 27, June 27, June 26, June 27,
2010 2010 2009 2010 2009
---------- ---------- ---------- ---------- ----------
Reconciliation
of Gross Profit:
U.S. GAAP as
reported $ 47,310 $ 37,116 $ 20,258 $ 84,426 $ 40,228
Restructuring
and other
related costs(1) (29) (93) - (122) -
Stock-based
compensation(2) 1,867 1,931 1,381 3,798 2,326
---------- ---------- ---------- ---------- ----------
Non-GAAP as
adjusted $ 49,148 $ 38,954 $ 21,639 $ 88,102 $ 42,554
========== ========== ========== ========== ==========
Reconciliation
of Gross Margin:
U.S. GAAP as
reported 42% 39% 29% 41% 30%
Restructuring
and other
related costs(1) -% -% -% -% -%
Stock-based
compensation(2) 2% 2% 2% 2% 1%
---------- ---------- ---------- ---------- ----------
Non-GAAP as
adjusted 44% 41% 31% 43% 31%
========== ========== ========== ========== ==========
Reconciliation of
Net Income
(Loss):
U.S. GAAP as
reported $ (9,561) $ (19,991) $ (27,111) $ (29,552) $ (51,439)
Restructuring
and other
related costs(1) (31) 68 - 37 -
Stock-based
compensation(2) 12,607 12,910 8,912 25,517 15,648
---------- ---------- ---------- ---------- ----------
Non-GAAP as
adjusted $ 3,015 $ (7,013) $ (18,199) $ (3,998) $ (35,791)
========== ========== ========== ========== ==========
Reconciliation of
Net Income (Loss)
per Common Share
- Basic:
U.S. GAAP as
reported $ (0.10) $ (0.21) $ (0.28) $ (0.30) $ (0.54)
Restructuring
and other
related costs(1) - - - - -
Stock-based
compensation(2) 0.13 0.14 0.09 0.26 0.16
---------- ---------- ---------- ---------- ----------
Non-GAAP as
adjusted $ 0.03 $ (0.07) $ (0.19) $ (0.04) $ (0.38)
========== ========== ========== ========== ==========
Weighted
average shares
used in
computing net
income (loss)
per common
share - basic 98,777 97,276 95,161 98,026 94,718
========== ========== ========== ========== ==========
For information purpose only, for the three months ended June 26, 2010, the
diluted Non-GAAP net income per common share was $0.03 calculated based on
weighted average shares outstanding of 103.9 million.
(1) Adjustment amount represents restructuring and other related costs
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
---------------------------------------------------
June 26, 2010 March 27, 2010
------------------------- ------------------------
Cost of Operating Cost of Operating
Revenue Expenses Total Revenue Expenses Total
------- ------- ------- ------- -------- ------
Severance and
related
expenses $ (129) $ - $ (129) $ (15) $ 55 $ 40
Equipment and
facility-
related costs 100 - 100 (78) - (78)
Lease
termination - (2) (2) - 106 106
------- ------- ------- ------- -------- ------
Total $ (29) $ (2) $ (31) $ (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 Six Months Ended
-------------------------------- ---------------------
June 26, March 27, June 27, June 26, June 27,
2010 2010 2009 2010 2009
---------- ---------- ---------- ---------- ----------
Cost of revenue $ 564 $ 569 $ 477 $ 1,133 $ 856
Research and
development 3,350 3,423 2,419 6,773 4,151
Sales and
marketing 2,192 1,847 1,599 4,039 3,013
General and
administration 5,198 5,709 3,513 10,907 6,158
---------- ---------- ---------- ---------- ----------
11,304 11,548 8,008 22,852 14,178
Cost of
revenue -
amortization
from balance
sheet* 1,303 1,362 904 2,665 1,470
---------- ---------- ---------- ---------- ----------
Total stock-
based
compensation
expense $ 12,607 $ 12,910 $ 8,912 $ 25,517 $ 15,648
========== ========== ========== ========== ==========
* 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)
June 26, December 26,
2010 2009
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 104,068 $ 109,859
Short-term investments 163,876 143,350
Short-term restricted cash 1,690 1,533
Accounts receivable 55,619 70,410
Inventories, net 84,183 68,872
Deferred inventory costs 6,778 5,891
Prepaid expenses and other current assets 10,305 8,313
------------ ------------
Total current assets 426,519 408,228
Property, plant and equipment, net 45,061 43,656
Deferred inventory costs, non-current 5,502 4,438
Long-term investments 7,709 18,255
Cost-method investment 4,500 -
Long-term restricted cash 2,277 2,480
Deferred tax asset 9,249 12,449
Other non-current assets 2,454 2,439
------------ ------------
Total assets $ 503,271 $ 491,945
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 36,007 $ 31,129
Accrued expenses 14,609 13,929
Accrued compensation and related benefits 20,077 19,248
Accrued warranty 6,071 6,091
Deferred revenue 23,314 18,295
Deferred tax liability 9,249 12,649
------------ ------------
Total current liabilities 109,327 101,341
Accrued warranty, non-current 5,251 5,049
Deferred revenue, non-current 8,327 8,080
Other long-term liabilities 8,366 8,968
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 26, 2010 and December 26, 2009
Issued and outstanding shares -
99,234 as of June 26, 2010 and
96,874 as of December 26, 2009 99 97
Additional paid-in capital 780,115 747,580
Accumulated other comprehensive loss (1,302) (1,810)
Accumulated deficit (406,912) (377,360)
------------ ------------
Total stockholders' equity 372,000 368,507
------------ ------------
Total liabilities and stockholders'
equity $ 503,271 $ 491,945
============ ============
Infinera Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
---------------------------
June 26, June 27,
2010 2009
------------ ------------
Cash Flows from Operating Activities:
Net loss $ (29,552) $ (51,439)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 7,719 7,898
Non-cash restructuring and other costs 100 -
Net credit impairment losses in earnings - 933
Amortization of premium on investments 1,521 95
Stock-based compensation expense 25,517 15,648
Unrealized loss on Put Rights 1,696 1,549
Unrealized holding gain for trading
securities (1,696) (1,522)
Non-cash tax benefit (364) -
Gain on disposal of assets (31) (46)
Other gain (50) -
Changes in assets and liabilities:
Accounts receivable 14,791 15,770
Inventories, net (15,034) (12,563)
Prepaid expenses and other current assets 515 (1,088)
Deferred inventory costs (2,049) (1,172)
Other non-current assets 3,101 241
Accounts payable 5,037 (81)
Accrued liabilities and other expenses (3,161) 2,983
Deferred revenue 5,265 636
Accrued warranty 182 430
------------ ------------
Net cash provided by (used in)
operating activities 13,507 (21,728)
Cash Flows from Investing Activities:
Purchase of available-for-sale investments (120,235) (83,937)
Purchase of cost-method investment (4,500) -
Proceeds from maturities and calls of
investments 108,483 38,007
Proceeds from disposal of assets 176 103
Purchase of property and equipment (9,697) (8,759)
Change in restricted cash 47 (1,168)
------------ ------------
Net cash used in investing activities (25,726) (55,754)
Cash Flows from Financing Activities:
Proceeds from issuance of common stock 6,718 4,762
Repurchase of common stock (2) (15)
Payments for purchase of assets under
financing arrangement (175) -
------------ ------------
Net cash provided by financing
activities 6,541 4,747
Effect of exchange rate changes on cash (113) 116
Net change in cash and cash equivalents (5,791) (72,619)
Cash and cash equivalents at beginning of
period 109,859 166,770
------------ ------------
Cash and cash equivalents at end of period $ 104,068 $ 94,151
============ ============
Supplemental disclosures of cash flow
information:
Cash paid for income taxes $ 447 $ 1,113
Infinera Corporation
Supplemental Financial Information
(Unaudited)
Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10
----- ----- ----- ----- ----- ----- ----- ------
Revenue
($ Mil) (1) $80.9 $86.2 $66.6 $68.9 $83.4 $90.2 $95.8 $111.4
Gross
Margin % (1) 42% 36% 31% 31% 38% 40% 41% 44%
----- ----- ----- ----- ----- ----- ----- ------
Invoiced
Shipment
Composition:
Domestic % 81% 73% 74% 64% 63% 74% 79% 81%
Inter-
national % 19% 27% 26% 36% 37% 26% 21% 19%
Largest
Customer % 27% 23% 30% 20% 15% 17% 22% 13%
----- ----- ----- ----- ----- ----- ----- -----
Cash Related
Information:
Cash from
Operations
($ Mil) $ 9.9 ($ 5.4) ($ 2.9) ($18.8) ($ 8.3) ($ 2.7) $ 2.3 $11.2
Capital
Expenditures
($ Mil) $ 5.9 $ 7.8 $ 6.0 $ 2.8 $ 2.8 $ 4.4 $ 4.7 $ 5.0
Depreciation
& Amortiz-
ation
($ Mil) $ 3.4 $ 4.1 $ 3.9 $ 4.0 $ 4.2 $ 4.5 $ 4.0 $ 3.7
DSO's 55 74 61 72 61 71 56 45
----- ----- ----- ----- ----- ----- ----- -----
Inventory
Metrics:
Raw
Materials
($ Mil) $10.0 $ 9.1 $ 7.7 $10.1 $ 7.4 $ 6.9 $ 7.5 $ 9.1
Work in
Process
($ Mil) $35.8 $37.9 $43.2 $40.1 $36.2 $32.1 $31.5 $29.2
Finished
Goods
($ Mil) $12.8 $12.0 $13.6 $22.3 $29.3 $29.9 $33.0 $45.9
----- ----- ----- ----- ----- ----- ----- -----
Total
Inventory
($ Mil) $58.6 $59.0 $64.5 $72.5 $72.9 $68.9 $72.0 $84.2
Inventory
Turns (1) 3.2 3.8 2.8 2.6 3.0 3.2 3.2 3.0
----- ----- ----- ----- ----- ----- ----- -----
Worldwide
Headcount 889 937 962 973 970 974 999 1,028
----- ----- ----- ----- ----- ----- ----- -----
(1) Periods Q3'08 and Q4'08 reflect Adjusted GAAP results and non-GAAP
adjustments. Periods Q1'09 and going forward reflect non-GAAP results.
Adjusted GAAP results reflect our GAAP results reduced for amounts
released from deferred revenue and deferred cost of inventory balances
recorded prior to the second quarter of 2008 and previously reported
in our invoiced shipment 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
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