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Infinera Corporation Reports First Quarter 2012 Financial Results

Companies mentioned in this article: Infinera

SUNNYVALE, CA -- (Marketwire) -- 04/25/12 -- Infinera Corporation (NASDAQ: INFN), a leading provider of digital optical communications systems, today released financial results for the first quarter ended March 31, 2012.

GAAP revenues for the first quarter of 2012 were $104.7 million compared to $112.0 million in the fourth quarter of 2011 and $92.9 million in the first quarter of 2011.

GAAP gross margin for the first quarter of 2012 was 39% compared to 40% in the fourth quarter of 2011 and 46% in the first quarter of 2011. GAAP net loss for the quarter was $(20.6) million, or $(0.19) per share, compared to net loss of $(19.4) million, or $(0.18) per share, in the fourth quarter of 2011 and net loss of $(16.4) million, or $(0.16) per share, in the first quarter of 2011.

Non-GAAP gross margin for the first quarter of 2012 was 40% compared to 42% in the fourth quarter of 2011 and 48% in the first quarter of 2011, excluding non-cash stock-based compensation expenses. Non-GAAP net loss for the first quarter of 2012 was $(11.2) million, or $(0.10) per share, compared to net loss of $(6.7) million, or $(0.06) per share, in the fourth quarter of 2011 and net loss of $(4.0) million, or $(0.04) per share, in the first quarter of 2011.

Management Commentary

"Activity in our first quarter reflected demand from our customers for both our existing and next generation platforms," said Tom Fallon, president and chief executive officer. "Our new 500G PIC-based DTN-X platform, with super-channels and integrated OTN switching, is generating strong interest among potential and existing customers who now have a choice between our DTN and DTN-X. As planned, we are on track to ship the new platform by the end of the June quarter and to begin revenue recognition in the second half of this calendar year.

"We are pleased to have announced our first DTN-X win, with Cable&Wireless Worldwide, a new Tier 1 UK-based customer. In total, we have received DTN-X purchase orders from four customers, including Cable&Wireless and three existing customers. We are very pleased with the early traction with this new product as we believe this is the first step toward our ushering in a new era in network optical infrastructure."

The company reported these first quarter highlights and developments:

  • The addition of four new DTN customers;
  • An internet content provider as its one greater than 10% customer;
  • Three wholesale carriers and one cable company rounding out its top five customers;
  • Telstra International as the company's first announced DTN 40G customer; and
  • Commencement of the Telcordia OSMINE certification process to satisfy a North American Tier 1 carrier request.

Conference Call Information:

Infinera will host a conference call for analysts and investors to discuss its first quarter results and to discuss its outlook for the second quarter 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 1-800-294-0997. International parties can access the replay at 1-203-369-3226.

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 development, production and availability of, the expected revenue from, the customer interest in, and the integration and functionality 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 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 first quarter results, including an estimate of non-GAAP earnings for the second 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 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 31,    March 26,
                                                       2012         2011
                                                   -----------  -----------
Revenue:
  Product                                          $    92,391  $    82,528
  Ratable product and related support and services         531          922
  Services                                              11,779        9,440
                                                   -----------  -----------
    Total revenue                                      104,701       92,890

Cost of revenue (1):
  Cost of product                                       59,324       46,618
  Cost of ratable product and related support and
   services                                                191          385
  Cost of services                                       4,759        3,143
                                                   -----------  -----------
    Total cost of revenue                               64,274       50,146

Gross profit                                            40,427       42,744

Operating expenses (1):
  Research and development                              30,985       31,309
  Sales and marketing                                   18,242       13,935
  General and administrative                            11,084       13,509
                                                   -----------  -----------
    Total operating expenses                            60,311       58,753

Loss from operations                                   (19,884)     (16,009)

Other income (expense), net:
  Interest income                                          275          312
  Other gain (loss), net:                                 (424)        (411)
                                                   -----------  -----------
    Total other income (expense), net                     (149)         (99)

Loss before income taxes                               (20,033)     (16,108)
Provision for income taxes                                 579          286
                                                   -----------  -----------
Net loss                                           $   (20,612) $   (16,394)
                                                   ===========  ===========

Net loss per common share, basic and diluted       $     (0.19) $     (0.16)
                                                   ===========  ===========

Weighted average shares used in computing basic
 and diluted net loss per common share                 108,666      103,426
                                                   ===========  ===========


--------------------------------------------------
(1) The following table summarizes the effects of stock-based compensation
 related to employees and non-employees for the three months ended March
 31, 2012 and March 26, 2011:

                                                      Three Months Ended
                                                   ------------------------
                                                    March 31,    March 26,
                                                       2012         2011
                                                   -----------  -----------
  Cost of revenue                                  $       606  $       731
  Research and development                               3,320        3,826
  Sales and marketing                                    2,219        2,060
  General and administration                             2,223        4,783
                                                   -----------  -----------
                                                         8,368       11,400
  Cost of revenue - amortization from balance
   sheet*                                                1,069          965
                                                   -----------  -----------
  Total stock-based compensation expense           $     9,437  $    12,365
                                                   ===========  ===========

* 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 31,      December 31,       March 26,
                              2012             2011             2011
                          ------------     ------------     ------------
Reconciliation of Gross
 Profit:
U.S. GAAP as reported     $     40,427     $     44,684     $     42,744
Stock-based
 compensation(1)                 1,675            2,017            1,696
                          ------------     ------------     ------------
Non-GAAP as adjusted      $     42,102     $     46,701     $     44,440
                          ============     ============     ============

Reconciliation of Gross
 Margin:
U.S. GAAP as reported               39%              40%              46%
Stock-based
 compensation(1)                     1%               2%               2%
                          ------------     ------------     ------------
Non-GAAP as adjusted                40%              42%              48%
                          ============     ============     ============

Reconciliation of Loss
 from Operations:
U.S. GAAP as reported     $    (19,884)    $    (18,860)    $    (16,009)
Restructuring and other
 related credit(2)                   -             (129)               -
Stock-based
 compensation(1)                 9,437           12,730           12,365
                          ------------     ------------     ------------
Non-GAAP as adjusted      $    (10,447)    $     (6,259)    $     (3,644)
                          ============     ============     ============

Reconciliation of Net
 Loss:
U.S. GAAP as reported     $    (20,612)    $    (19,350)    $    (16,394)
Restructuring and other
 related credit(2)                   -             (129)               -
Stock-based
 compensation(1)                 9,437           12,730           12,365
                          ------------     ------------     ------------
Non-GAAP as adjusted      $    (11,175)    $     (6,749)    $     (4,029)
                          ============     ============     ============

Net Loss per Common Share
 - Basic:
U.S. GAAP as reported     $      (0.19)    $      (0.18)    $      (0.16)
Stock-based
 compensation(1)                  0.09             0.12             0.12
                          ------------     ------------     ------------
Non-GAAP as adjusted      $      (0.10)    $      (0.06)    $      (0.04)
                          ============     ============     ============

Net Loss per Common Share
 - Diluted:
U.S. GAAP as reported     $      (0.19)    $      (0.18)    $      (0.16)
Stock-based
 compensation(1)                  0.09             0.12             0.12
                          ------------     ------------     ------------
Non-GAAP as adjusted(3)   $      (0.10)    $      (0.06)    $      (0.04)
                          ============     ============     ============

Weighted average shares
 used in computing net
 loss per common share -
 U.S. GAAP:
Basic                          108,666          106,893          103,426
                          ============     ============     ============
Diluted                        108,666          106,893          103,426
                          ============     ============     ============

Weighted average shares
 used in computing net
 loss per common share -
 Non-GAAP:
Basic                          108,666          106,893          103,426
                          ============     ============     ============
Diluted(3)                     112,007          110,018          107,868
                          ============     ============     ============


-------------------------
(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
                                      --------------------------------------
                                        March 31,  December 31,   March 26,
                                          2012         2011         2011
                                      ------------ ------------ ------------
  Cost of revenue                     $        606 $        710 $        731
  Research and development                   3,320        3,915        3,826
  Sales and marketing                        2,219        2,317        2,060
  General and administration                 2,223        4,481        4,783
                                      ------------ ------------ ------------
                                             8,368       11,423       11,400
  Cost of revenue - amortization from
   balance sheet*                            1,069        1,307          965
                                      ------------ ------------ ------------
  Total stock-based compensation
   expense                            $      9,437 $     12,730 $     12,365
                                      ============ ============ ============

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

(2) Adjustment amount represents restructuring and other related credit
 recorded in relation to the closure of our Maryland FAB announced on July
 21, 2009. This amount has 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.

(3) Diluted shares used to calculate net loss per share on a non-GAAP basis
 provided for informational purposes only.



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

                                                   March 31,   December 31,
                                                     2012          2011
                                                 ------------  ------------
ASSETS

Current assets:
  Cash and cash equivalents                      $     96,709  $     94,458
  Short-term investments                              107,169       101,296
  Accounts receivable                                  65,444        80,616
  Other receivables                                       594         1,346
  Inventory                                           101,612        88,996
  Deferred inventory costs                              5,407         5,987
  Prepaid expenses and other current assets             9,469        10,532
                                                 ------------  ------------
      Total current assets                            386,404       383,231

Property, plant and equipment, net                     82,056        76,753
Deferred inventory costs, non-current                     397         1,020
Long-term investments                                  32,672        54,315
Cost-method investment                                  9,000         9,000
Long-term restricted cash                               3,254         3,047
Deferred tax asset                                        822           822
Other non-current assets                                2,467         3,516
                                                 ------------  ------------
      Total assets                               $    517,072  $    531,704
                                                 ============  ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                               $     39,198  $     48,838
  Accrued expenses                                     19,106        22,421
  Accrued compensation and related benefits            20,067        18,966
  Accrued warranty                                      5,666         5,692
  Deferred revenue                                     23,418        22,781
  Deferred tax liability                                  767           767
                                                 ------------  ------------
      Total current liabilities                       108,222       119,465

  Accrued warranty, non-current                         7,320         7,173
  Deferred revenue, non-current                         3,397         3,410
  Other long-term liabilities                          14,265        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 March 31,
     2012 and December 31, 2011
    Issued and outstanding shares - 109,508 as
     of March 31, 2012 and 106,976 as of
     December 31, 2011                                    110           107
  Additional paid-in capital                          893,131       876,927
  Accumulated other comprehensive loss                 (1,725)       (2,195)
  Accumulated deficit                                (507,648)     (487,036)
                                                 ------------  ------------
  Total stockholders' equity                          383,868       387,803
                                                 ------------  ------------
      Total liabilities and stockholders' equity $    517,072  $    531,704
                                                 ============  ============



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

                                                        Three Months Ended
                                                       --------------------
                                                       March 31,  March 26,
                                                          2012       2011
                                                       ---------  ---------
Cash Flows from Operating Activities:
Net loss                                               $ (20,612) $ (16,394)
Adjustments to reconcile net loss to net cash used in
 operating activities:
  Depreciation and amortization                            5,528      4,215
  Amortization of premium on investments                     618        987
  Stock-based compensation expense                         9,437     12,365
  Non-cash tax benefit                                       (59)       (78)
  Gain on disposal of assets                                   -       (104)
  Other gain                                                 (22)       (19)
  Changes in assets and liabilities:
    Accounts receivable                                   15,172     15,008
    Other receivables                                        422      3,889
    Inventory                                            (12,050)     3,986
    Prepaid expenses and other assets                      2,173      1,125
    Deferred inventory costs                               1,167       (278)
    Accounts payable                                      (7,266)    (8,750)
    Accrued liabilities and other expenses                (1,010)   (15,528)
    Deferred revenue                                         624        (16)
    Accrued warranty                                         121     (1,262)
                                                       ---------  ---------
      Net cash used in operating activities               (5,757)      (854)

Cash Flows from Investing Activities:
  Purchase of available-for-sale investments             (21,907)  (107,049)
  Proceeds from sale of available-for-sale investments     5,194      3,035
  Proceeds from maturities and calls of investments       32,034    109,416
  Proceeds from disposal of assets                             -        104
  Purchase of property and equipment                     (13,649)   (10,602)
  Advance to secure manufacturing capacity                     -     (1,500)
  Reimbursement of manufacturing capacity advance             50         75
  Change in restricted cash                                 (193)        68
                                                       ---------  ---------
      Net cash provided by (used in) investing
       activities                                          1,529     (6,453)

Cash Flows from Financing Activities:
  Proceeds from issuance of common stock                   7,005      4,909
  Repurchase of common stock                                (832)         -
  Payments for purchase of assets under financing
   arrangement                                                 -        (87)
                                                       ---------  ---------
      Net cash provided by financing activities            6,173      4,822

Effect of exchange rate changes on cash                      306        188

Net change in cash and cash equivalents                    2,251     (2,297)
Cash and cash equivalents at beginning of period          94,458    113,649
                                                       ---------  ---------
Cash and cash equivalents at end of period             $  96,709  $ 111,352
                                                       =========  =========

Supplemental disclosures of cash flow information:
  Cash paid for income taxes                           $     329  $     442
Supplemental schedule of non-cash financing
 activities:
  Non-cash settlement for manufacturing capacity
   advance                                             $     275  $       -



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

                      Q2'10  Q3'10  Q4'10  Q1'11  Q2'11  Q3'11  Q4'11  Q1'12
                     ------ ------ ------ ------ ------ ------ ------ ------
Revenue ($ Mil)      $111.4 $130.1 $117.1  $92.9  $96.0 $104.0 $112.0 $104.7
Gross Margin % (1)     44%    51%    51%    48%    41%    41%    42%    40%
Invoiced Shipment
 Composition:
Domestic %             81%    73%    70%    74%    72%    65%    70%    71%
International %        19%    27%    30%    26%    28%    35%    30%    29%
Largest Customer %     13%    19%    10%    14%    10%   < 10%   14%    13%
                     ------ ------ ------ ------ ------ ------ ------ ------
Cash Related
 Information:
Cash from Operations
 ($ Mil)              $11.2  $10.0  $7.0  $(0.9) $(0.1)  $4.1  $(5.1) $(5.8)
Capital Expenditures
 ($ Mil)              $5.0   $5.9   $5.0   $10.6  $6.7   $5.9   $16.1  $13.6
Depreciation &
 Amortization ($
 Mil)                 $3.7   $3.9   $4.0   $4.2   $4.2   $4.9   $4.5   $5.5
DSO's                  45     45     59     60     70     60     65     57
                     ------ ------ ------ ------ ------ ------ ------ ------
Inventory Metrics:
Raw Materials ($
 Mil)                 $9.1   $11.0  $23.1  $20.1  $7.3   $7.0   $12.1  $15.3
Work in Process ($
 Mil)                 $29.2  $36.5  $14.8  $17.2  $27.7  $26.9  $37.0  $41.6
Finished Goods ($
 Mil)                 $45.9  $41.2  $44.0  $41.0  $34.4  $36.4  $39.9  $44.7
                     ------ ------ ------ ------ ------ ------ ------ ------
Total Inventory ($
 Mil)                 $84.2  $88.7  $81.9  $78.3  $69.4  $70.3  $89.0 $101.6
Inventory Turns (1)    3.0    2.9    2.8    2.5    3.3    3.5    2.9    2.5
                     ------ ------ ------ ------ ------ ------ ------ ------
Worldwide Headcount   1,028  1,040  1,072  1,118  1,136  1,151  1,181  1,210
                     ------ ------ ------ ------ ------ ------ ------ ------


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


Contact:

Contacts:

Media:
Anna Vue
avue@infinera.com
Infinera Corporation
916-595-8157

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