8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 7, 2018

INFINERA CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	001-33486	77-0560433
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

140 Caspian Court
Sunnyvale, CA	94089
(Address of principal executive offices)	(Zip Code)

(408) 572-5200

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Item 2.02 Results of Operations and Financial Condition.

On February 7, 2018, Infinera Corporation (the “Company”) issued a press release announcing financial results for its fourth quarter and fiscal year ended December 30, 2017. The Company also posted on the Investor Relations section of its website (www.infinera.com) a CFO Commentary with respect to the quarter and fiscal year ended December 30, 2017. Copies of the press release and CFO Commentary are furnished as Exhibits 99.1 and 99.2, respectively, to this Current Report on Form 8-K. Information on the Company’s website is not, and will not be deemed, a part of this report or incorporated into any other filings the Company makes with the Securities and Exchange Commission.

In accordance with General Instruction B.2 of Form 8-K, the information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 and Exhibit 99.2, are being furnished under Item 2.02 and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of the general incorporation language of such filing, except as shall be expressly set forth by specific reference in such a filing.

The press release and CFO Commentary furnished herewith as Exhibit 99.1 and Exhibit 99.2, respectively, refer to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in each exhibit.

Item 9.01	Financial Statements and Exhibits.
(d)	Exhibits.

Exhibit No.	Description
99.1	Press release dated February 7, 2018.
99.2	CFO Commentary dated February 7, 2018.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		INFINERA CORPORATION
Date: February 7, 2018	By:	/s/ BRAD D. FELLER
		Brad D. Feller Chief Financial Officer

EX-99.1

Exhibit 99.1

Infinera Corporation Reports Fourth Quarter and Fiscal Year 2017 Financial Results

Sunnyvale, Calif., February 7, 2018 - Infinera Corporation, provider of Intelligent Transport Networks, today released financial results for its fourth quarter and fiscal year ended December 30, 2017.

GAAP revenue for the quarter was $195.8 million compared to $192.6 million in the third quarter of 2017 and $181.0 million in the fourth quarter of 2016.

GAAP gross margin for the quarter was 24.1% compared to 35.2% in the third quarter of 2017 and 38.1% in the fourth quarter of 2016. GAAP operating margin for the quarter was (36.0)% compared to (17.8)% in the third quarter of 2017 and (25.3)% in the fourth quarter of 2016.

GAAP net loss for the quarter was $(74.0) million, or $(0.50) per share, compared to $(37.2) million, or $(0.25) per share, in the third quarter of 2017 and $(36.3) million, or $(0.25) per share, in the fourth quarter of 2016.

Non-GAAP gross margin for the quarter was 37.5% compared to 39.1% in the third quarter of 2017 and 41.8% in the fourth quarter of 2016. Non-GAAP operating margin for the quarter was (9.3)% compared to (7.8)% in the third quarter of 2017 and (9.2)% in the fourth quarter of 2016.

Non-GAAP net loss for the quarter was $(18.6) million, or $(0.12) per share, compared to $(17.0) million, or $(0.11) per share, in the third quarter of 2017, and $(17.0) million, or $(0.12) per share, in the fourth quarter of 2016.

GAAP gross margin for the year was 32.9% compared to 45.2% in 2016. GAAP operating margin for the year was (24.7)% compared to (3.0)% in 2016. GAAP net loss for the year was $(194.5) million, or $(1.32) per share, compared to $(23.9) million, or $(0.17) per share, in 2016.

Non-GAAP gross margin for the year was 39.3% compared to 48.3% in 2016. Non-GAAP operating margin for the year was (10.1)% compared to 6.2% in 2016. Non-GAAP net loss for the year was $(80.0) million, or $(0.54) per share, compared to net income of $49.4 million, or $0.34 per diluted share, in 2016.

A further explanation of the use of non-GAAP financial information and a reconciliation of the non-GAAP financial measures to the GAAP equivalents can be found at the end of this release.

“In Q4 we made some difficult but necessary decisions to reposition the company for crisper execution and increased focus on our go to market strategy,” said Tom Fallon, Infinera’s Chief Executive Officer. “With our full product refresh nearing completion, positive sales momentum ending the year, and a significant pipeline of opportunities, we enter 2018 with confidence that our recent positive revenue trajectory will continue.”

Fourth Quarter 2017 Financial Commentary Available Online

A CFO Commentary reviewing the Company's fourth quarter of 2017 financial results will be furnished to the SEC on Form 8-K and published on Infinera's Investor Relations website at investors.infinera.com. Analysts and investors are encouraged to review this commentary prior to participating in the conference call webcast.

Conference Call Information

Infinera will host a conference call for analysts and investors to discuss its fourth quarter and fiscal year 2017 results and its outlook for the first quarter of 2018 today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). Interested parties may join the conference call by dialing 1-866-373-6878 (toll free) or 1-412-317-5101 (international). A live webcast of the conference call will also be accessible from the Events & Webcasts section of Infinera’s website at investors.infinera.com. Replay of the audio webcast will be available at investors.infinera.com approximately two hours after the end of the live call.

Contacts:
Media: Anna Vue	Investors: Jeff Hustis
Tel. +1 (916) 595-8157	Tel. +1 (408) 213-7150
avue@infinera.com	jhustis@infinera.com

About Infinera

Infinera provides Intelligent Transport Networks, enabling carriers, cloud operators, governments and enterprises to scale network bandwidth, accelerate service innovation and automate optical network operations. Infinera’s end-to-end packet-optical portfolio is designed for long-haul, subsea, data center interconnect and metro applications. Infinera’s unique large scale photonic integrated circuits enable innovative optical networking solutions for the most demanding networks. To learn more about Infinera visit www.infinera.com, follow us on Twitter @Infinera and read our latest blog posts at www.infinera.com/blog.

Forward-Looking Statements

This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties. Such forward-looking statements include, without limitation, Infinera’s ability to execute and deliver on its got to market strategy; and Infinera’s ability to continue to grow revenue. Forward-looking statements can also be identified by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or similar words. These statements are based on information available to Infinera as of the date hereof and actual results could differ materially from those stated or implied due to risks and uncertainties. The risks and uncertainties that could cause Infinera’s results to differ materially from those expressed or implied by such forward-looking statements include, delays in the development and introduction of new products or updates to existing products and market acceptance of these products; the effects of increased customer consolidation; fluctuations in demand, sales cycles and prices for products and services, including discounts given in response to competitive pricing pressures, as well as the timing of purchases by Infinera's key customers; the effect that changes in product pricing or mix, and/or increases in component costs could have on Infinera’s gross margin; Infinera’s ability to respond to rapid technological changes; aggressive business tactics by Infinera’s competitors; Infinera's ability to adequately respond to demand as a result of the restructuring plan; Infinera's reliance on single and limited source suppliers; Infinera’s ability to protect Infinera’s intellectual property; claims by others that Infinera infringes their intellectual property; the effect of global macroeconomic conditions on Infinera's business; war, terrorism, public health issues, natural disasters and other circumstances that could disrupt the supply, delivery or demand of Infinera's products; and other risks and uncertainties detailed in Infinera’s SEC filings from time to time. More information on potential factors that may impact Infinera’s business are set forth in its Quarterly Report on Form 10-Q for the quarter ended on September 30, 2017 as filed with the SEC on November 8, 2017, as well as subsequent reports filed with or furnished to the SEC from time to time. These reports are available on Infinera’s website at www.infinera.com and the SEC’s website at www.sec.gov. Infinera assumes no obligation to, and does 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 restructuring and other costs, gain on the sale and impairment of cost-method investments, non-cash stock-based compensation expenses, amortization of debt discount on Infinera’s convertible senior notes, amortization and impairment of acquired intangible assets, acquisition-related costs, and certain purchase accounting adjustments related to Infinera's acquisition of Transmode AB, which closed during the third quarter of 2015, along with related tax effects. Infinera believes these adjustments are appropriate to enhance an overall understanding of its underlying financial performance and also its 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 its 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, gross margin or operating 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.” Infinera anticipates

disclosing forward-looking non-GAAP information in its conference call to discuss its fourth quarter and fiscal year 2017 results, including an estimate of certain non-GAAP financial measures for the first quarter of 2018 that excludes restructuring and related costs, non-cash stock-based compensation expenses, amortization of acquired intangible assets and related tax effects, and amortization of debt discount on Infinera’s convertible senior notes.

A copy of this press release can be found on the Investor Relations page of Infinera’s website at www.infinera.com.

Infinera 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						Twelve Months Ended
	December 30, 2017			December 31, 2016			December 30, 2017			December 31, 2016
Revenue:
Product	$	160,543		$	151,365		$	610,535		$	751,167
Services	35,273			29,678			130,204			118,968
Total revenue	195,816			181,043			740,739			870,135
Cost of revenue:
Cost of product	115,681			101,702			427,118			433,266
Cost of services	13,708			10,309			50,480			43,151
Restructuring and other costs	19,141			—			19,141			—
Total cost of revenue	148,530			112,011			496,739			476,417
Gross profit	47,286			69,032			244,000			393,718
Operating expenses:
Research and development	55,223			67,750			224,299			232,291
Sales and marketing	29,395			30,424			116,057			118,858
General and administrative	17,069			16,726			70,625			68,343
Restructuring and other costs	16,106			—			16,106			—
Total operating expenses	117,793			114,900			427,087			419,492
Loss from operations	(70,507		)	(45,868		)	(183,087		)	(25,774		)
Other income (expense), net:
Interest income	858			714			3,328			2,478
Interest expense	(3,609		)	(3,243		)	(14,017		)	(12,887		)
Other gain (loss), net:	(1,698		)	8,118			(2,160		)	7,002
Total other income (expense), net	(4,449		)	5,589			(12,849		)	(3,407		)
Loss before income taxes	(74,956		)	(40,279		)	(195,936		)	(29,181		)
Benefit from income taxes	(971		)	(4,026		)	(1,430		)	(4,751		)
Net loss	(73,985		)	(36,253		)	(194,506		)	(24,430		)
Less: Net loss attributable to noncontrolling interest	—			—			—			(503		)
Net loss attributable to Infinera Corporation	$	(73,985	)	$	(36,253	)	$	(194,506	)	$	(23,927	)
Net loss per common share attributable to Infinera Corporation:
Basic	$	(0.50	)	$	(0.25	)	$	(1.32	)	$	(0.17	)
Diluted	$	(0.50	)	$	(0.25	)	$	(1.32	)	$	(0.17	)
Weighted average shares used in computing net loss per common share:
Basic	149,412			144,770			147,878			142,989
Diluted	149,412			144,770			147,878			142,989

Infinera Corporation

GAAP to Non-GAAP Reconciliations

(In thousands, except percentages and per share data)

(Unaudited)

	Three Months Ended															Twelve Months Ended
	December 30, 2017					September 30, 2017					December 31, 2016					December 30, 2017					December 31, 2016
Reconciliation of Gross Profit:
U.S. GAAP as reported	$	47,286		24.1	%	$	67,826		35.2	%	$	69,032		38.1	%	$	244,000		32.9	%	$	393,718		45.2	%
Acquisition-related deferred revenue adjustment(1)	—					—					—					—					400
Stock-based compensation(2)	1,846					2,063					1,849					7,811					6,463
Amortization of acquired intangible assets(3)	5,169					5,390					4,745					20,474					19,715
Acquisition-related costs(4)	—					—					27					46					144
Restructuring and other costs(5)	19,141					—					—					19,141					—
Non-GAAP as adjusted	$	73,442		37.5	%	$	75,279		39.1	%	$	75,653		41.8	%	$	291,472		39.3	%	$	420,440		48.3	%
Reconciliation of Operating Expenses:
U.S. GAAP as reported	$	117,793				$	102,074				$	114,900				$	427,087				$	419,492
Stock-based compensation(2)	8,450					10,104					9,493					37,909					34,070
Amortization of acquired intangible assets(3)	1,555					1,622					1,436					6,160					6,189
Acquisition-related costs(4)	—					—					416					322					1,869
Restructuring and other costs(5)	16,106					—					—					16,106					—
Intangible asset impairment(6)	—					—					11,295					252					11,295
Non-GAAP as adjusted	$	91,682				$	90,348				$	92,260				$	366,338				$	366,069
Reconciliation of Income (Loss) from Operations:
U.S. GAAP as reported	$	(70,507	)	(36.0	)%	$	(34,248	)	(17.8	)%	$	(45,868	)	(25.3	)%	$	(183,087	)	(24.7	)%	$	(25,774	)	(3.0	)%
Acquisition-related deferred revenue adjustment(1)	—					—					—					—					400
Stock-based compensation(2)	10,296					12,167					11,342					45,720					40,533
Amortization of acquired intangible assets(3)	6,724					7,012					6,181					26,634					25,904
Acquisition-related costs(4)	—					—					443					368					2,013
Restructuring and other costs(5)	35,247					—					—					35,247					—
Intangible asset impairment(6)	—					—					11,295					252					11,295
Non-GAAP as adjusted	$	(18,240	)	(9.3	)%	$	(15,069	)	(7.8	)%	$	(16,607	)	(9.2	)%	$	(74,866	)	(10.1	)%	$	54,371		6.2	%
Reconciliation of Net Income (Loss) Attributable to Infinera Corporation:
U.S. GAAP as reported	$	(73,985	)			$	(37,231	)			$	(36,253	)			$	(194,506	)			$	(23,927	)
Acquisition-related deferred revenue adjustment(1)	—					—					—					—					400
Stock-based compensation(2)	10,296					12,167					11,342					45,720					40,533
Amortization of acquired intangible assets(3)	6,724					7,012					6,181					26,634					25,904
Acquisition-related costs(4)	—					—					818					257					3,081
Restructuring and other costs(5)	35,247					—					—					35,247					—
Intangible asset impairment(6)	—					—					11,295					252					11,295
Amortization of debt discount(7)	2,710					2,643					2,451					10,444					9,447
Gain on sale of cost-method investment(8)	—					—					(8,983		)			—					(8,983		)

	Three Months Ended									Twelve Months Ended
	December 30, 2017			September 30, 2017			December 31, 2016			December 30, 2017			December 31, 2016
Impairment of cost-method investment(9)	1,890			—			—			1,890			—
Income tax effects(10)	(1,479		)	(1,543		)	(3,829		)	(5,946		)	(8,360		)
Non-GAAP as adjusted	$	(18,597	)	$	(16,952	)	$	(16,978	)	$	(80,008	)	$	49,390
Net Income (Loss) per Common Share Attributable to Infinera Corporation - Basic:
U.S. GAAP as reported	$	(0.50	)	$	(0.25	)	$	(0.25	)	$	(1.32	)	$	(0.17	)
Non-GAAP as adjusted	$	(0.12	)	$	(0.11	)	$	(0.12	)	$	(0.54	)	$	0.35
Net Income (Loss) per Common Share Attributable to Infinera Corporation - Diluted:
U.S. GAAP as reported	$	(0.50	)	$	(0.25	)	$	(0.25	)	$	(1.32	)	$	(0.17	)
Non-GAAP as adjusted	$	(0.12	)	$	(0.11	)	$	(0.12	)	$	(0.54	)	$	0.34
Weighted Average Shares Used in Computing Net Income (Loss) per Common Share:
Basic	149,412			148,777			144,770			147,878			142,989
Diluted	149,412			148,777			144,770			147,878			145,800

_____________________________

⁽¹⁾  Business combination accounting principles require Infinera to write down to fair value its maintenance support contracts assumed in the Transmode acquisition. The revenue for these support contracts is deferred and typically recognized over a one-year period, so Infinera's GAAP revenue for the one-year period after the acquisition will not reflect the full amount of revenue that would have been reported if the acquired deferred revenue was not written down to fair value. The non-GAAP adjustment eliminates the effect of the deferred revenue write-down. Management believes these adjustments to the revenue from these support contracts are useful to investors as an additional means to reflect revenue trends of Infinera's business.

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

	Three Months Ended						Twelve Months Ended
	December 30, 2017		September 30, 2017		December 31, 2016		December 30, 2017		December 31, 2016
Cost of revenue	$	728	$	779	$	791	$	3,065	$	2,966
Research and development	3,841		4,040		4,011		15,845		13,732
Sales and marketing	2,264		3,025		3,037		11,288		11,043
General and administration	2,345		3,039		2,445		10,776		9,295
	9,178		10,883		10,284		40,974		37,036
Cost of revenue - amortization from balance sheet*	1,118		1,284		1,058		4,746		3,497
Total stock-based compensation expense	$	10,296	$	12,167	$	11,342	$	45,720	$	40,533

_____________________________

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

⁽³⁾  Amortization of acquisition-related intangible assets consists of amortization of developed technology, trade names, and customer relationships acquired in connection with the Transmode acquisition. U.S. GAAP accounting requires that acquired intangible assets are recorded at fair value and amortized over their useful lives. As this amortization is non-cash, Infinera has excluded it from its non-GAAP operating expenses, gross margin and net income measures. Management believes the amortization of acquired intangible assets is not

indicative of ongoing operating performance and its exclusion provides a better indication of Infinera's underlying business performance.

⁽⁴⁾  Acquisition-related costs associated with the Transmode acquisition include legal, financial, employee retention costs and other professional fees incurred in connection with the transaction, including squeeze-out proceedings. These amounts have been adjusted in arriving at Infinera's non-GAAP results because management believes that these expenses are non-recurring, not indicative of ongoing operating performance and their exclusion provides a better indication of Infinera's underlying business performance.

⁽⁵⁾  Restructuring and other costs are related to Infinera's plan to restructure its worldwide operations, which was announced during the fourth quarter of 2017. These costs consist of $13.6 million of inventory write-downs as a result of Infinera's product rationalization efforts, $9.4 million of severance and related costs, $7.3 million of facilities-related costs and $4.9 million of manufacturing and test asset impairments. Management has excluded the impact of these charges in arriving at Infinera's non-GAAP results as they are non-recurring in nature and its exclusion provides a better indication of Infinera's underlying business performance.

⁽⁶⁾  Intangible asset impairments are associated with previously acquired intangibles and acquired in-process research and development (“IPR&D”). The impairment of previously acquired intangibles was the result of management determining that the carrying value will not be recoverable. Acquired IPR&D impairment is associated with intangibles acquired with the Transmode acquisition, which Infinera does not anticipate utilizing in future products. Management has excluded the impact of these charges in arriving at Infinera's non-GAAP results because it is non-recurring and management believes that these expenses are not indicative of ongoing operating performance.

⁽⁷⁾  Under GAAP, certain convertible debt instruments that may be settled in cash on conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate. Accordingly, for GAAP purposes, Infinera is required to amortize as debt discount an amount equal to the fair value of the conversion option that was recorded in equity as interest expense on its $150 million in aggregate principal amount of 1.75% convertible debt issuance in May 2013 over the term of the notes. Interest expense has been excluded from Infinera's non-GAAP results because management believes that this non-cash expense is not indicative of ongoing operating performance and provides a better indication of Infinera's underlying business performance.

⁽⁸⁾  The gain on sale of a cost-method investment has been excluded in arriving at Infinera's non-GAAP results because it is non-recurring and management believes that this gain is not indicative of ongoing operating performance.

⁽⁹⁾  The impairment of cost-method investment has been excluded in arriving at Infinera's non-GAAP results because it is non-recurring and management believes that this non-cash expense is not indicative of ongoing operating performance.

⁽¹⁰⁾  The difference between the GAAP and non-GAAP tax is due to the net tax effects of the purchase accounting adjustments, acquisition-related costs, amortization of acquired intangible assets and the IPR&D impairment related to the Transmode acquisition.

Infinera Corporation

Condensed Consolidated Balance Sheets

(In thousands, except par values)

(Unaudited)

	December 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	116,345		$	162,641
Short-term investments	147,596			141,697
Short-term restricted cash	544			8,490
Accounts receivable, net of allowance for doubtful accounts of $892 in 2017 and $772 in 2016	126,152			150,370
Inventory	214,704			232,955
Prepaid expenses and other current assets	42,596			34,270
Total current assets	647,937			730,423
Property, plant and equipment, net	135,942			124,800
Intangible assets	92,188			108,475
Goodwill	195,615			176,760
Long-term investments	31,019			40,779
Cost-method investment	5,110			7,000
Long-term restricted cash	4,597			6,449
Other non-current assets	5,262			3,897
Total assets	$	1,117,670		$	1,198,583
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	58,124		$	62,486
Accrued expenses	39,782			31,580
Accrued compensation and related benefits	45,751			46,637
Short-term debt, net	144,928			—
Accrued warranty	13,670			16,930
Deferred revenue	72,421			58,900
Total current liabilities	374,676			216,533
Long-term debt, net	—			133,586
Accrued warranty, non-current	17,239			23,412
Deferred revenue, non-current	22,502			19,362
Deferred tax liability	21,609			25,327
Other long-term liabilities	16,279			18,035
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 December 30, 2017 and December 31, 2016
Issued and outstanding shares - 149,471 as of December 30, 2017 and 145,021 as of December 31, 2016	149			145
Additional paid-in capital	1,417,043			1,354,082
Accumulated other comprehensive income (loss)	6,254			(28,324		)
Accumulated deficit	(758,081		)	(563,575		)
Total stockholders’ equity	665,365			762,328
Total liabilities and stockholders’ equity	$	1,117,670		$	1,198,583

Infinera Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Twelve Months Ended
	December 30, 2017			December 31, 2016
Cash Flows from Operating Activities:
Net loss	$	(194,506	)	$	(24,430	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	65,997			61,489
Non-cash restructuring and other costs	29,237			—
Amortization of debt discount and issuance costs	11,342			10,260
Amortization of premium on investments	463			1,069
Impairment of acquired in-process research and development	252			11,295
Realized gain on sale of cost-method investment	—			(8,983		)
Impairment of cost-method investment	1,890			—
Stock-based compensation expense	45,720			40,533
Other loss	40			672
Changes in assets and liabilities:
Accounts receivable	25,849			33,895
Inventory	2,727			(64,095		)
Prepaid expenses and other assets	(8,194		)	(5,501		)
Accounts payable	(4,763		)	(28,254		)
Accrued liabilities and other expenses	(14,395		)	(11,012		)
Deferred revenue	16,416			21,439
Net cash provided by (used in) operating activities	(21,925		)	38,377
Cash Flows from Investing Activities:
Purchase of available-for-sale investments	(160,215		)	(124,077		)
Proceeds from sales of available-for-sale investments	10,531			—
Proceeds from maturities and calls of investments	152,876			142,898
Purchase of cost-method investment	—			(7,000		)
Proceeds from sale of cost-method investment	—			23,483
Purchase of property and equipment	(58,041		)	(43,335		)
Change in restricted cash	4,296			(4,084		)
Net cash used in investing activities	(50,553		)	(12,115		)
Cash Flows from Financing Activities:
Security pledge to acquire noncontrolling interest	5,596			(6,086		)
Acquisition of noncontrolling interest	(471		)	(16,771		)
Proceeds from issuance of common stock	17,991			17,648
Minimum tax withholding paid on behalf of employees for net share settlement	(1,034		)	(3,657		)
Net cash provided by (used in) financing activities	22,082			(8,866		)
Effect of exchange rate changes on cash	4,100			(3,856		)
Net change in cash and cash equivalents	(46,296		)	13,540
Cash and cash equivalents at beginning of period	162,641			149,101
Cash and cash equivalents at end of period	$	116,345		$	162,641
Supplemental disclosures of cash flow information:
Cash paid for income taxes, net of refunds	$	5,690		$	6,625
Cash paid for interest	$	2,639		$	2,776
Supplemental schedule of non-cash investing activities:
Transfer of inventory to fixed assets	$	4,950		$	5,597

Infinera Corporation

Supplemental Financial Information

(Unaudited)

	Q1'16			Q2'16			Q3'16			Q4'16			Q1'17			Q2'17			Q3'17			Q4'17
GAAP Revenue ($ Mil)		$244.8			$258.8			$185.5			$181.0			$175.5			$176.8			$192.6			$195.8
GAAP Gross Margin %	47.5		%	47.8		%	45.6		%	38.1		%	36.5		%	36.7		%	35.2		%	24.1		%
Non-GAAP Gross Margin %(1)	50.2		%	50.4		%	49.2		%	41.8		%	40.3		%	40.7		%	39.1		%	37.5		%
Revenue Composition:
Domestic %	71		%	64		%	56		%	53		%	57		%	63		%	59		%	53		%
International %	29		%	36		%	44		%	47		%	43		%	37		%	41		%	47		%
Customers >10% of Revenue	3			2			2			2			1			3			2			1
Cash Related Information:
Cash from Operations ($ Mil)		$10.0			$28.2			$5.2			($5.0	)		$3.0			($3.0	)		($20.9	)		($1.0	)
Capital Expenditures ($ Mil)		$10.8			$12.5			$9.6			$10.4			$14.7			$24.5			$11.0			$7.8
Depreciation & Amortization ($ Mil)		$14.7			$15.2			$15.9			$15.7			$16.0			$16.6			$16.8			$16.6
DSOs	69			68			75			81			64			64			65			59
Inventory Metrics:
Raw Materials ($ Mil)		$33.1			$39.1			$37.2			$33.2			$34.8			$36.7			$35.8			$27.4
Work in Process ($ Mil)		$59.4			$61.0			$65.5			$74.5			$81.1			$91.6			$84.3			$59.6
Finished Goods ($ Mil)		$97.2			$102.2			$128.8			$125.3			$118.0			$117.7			$122.7			$127.7
Total Inventory ($ Mil)		$189.7			$202.3			$231.5			$233.0			$233.9			$246.0			$242.8			$214.7
Inventory Turns(2)	2.6			2.5			1.6			1.8			1.8			1.7			1.9			2.3
Worldwide Headcount	2,128			2,218			2,262			2,240			2,245			2,272			2,296			2,145
Weighted Average Shares Outstanding (in thousands):
Basic	140,805			142,396			143,850			144,770			145,786			147,538			148,777			149,412
Diluted	146,880			145,891			144,993			145,497			147,017			148,662			149,714			150,098

⁽¹⁾  Non-GAAP adjustments include restructuring and other costs, non-cash stock-based compensation expense, certain purchase accounting adjustments related to Infinera's acquisition of Transmode and amortization of acquired intangible assets. For a description of this non-GAAP financial measure, please see the section titled, “GAAP to Non-GAAP Reconciliations” of this press release for a reconciliation to the most directly comparable GAAP financial measures.

⁽²⁾  Infinera calculates non-GAAP inventory turns as annualized non-GAAP cost of revenue before adjustments for restructuring and other costs, non-cash stock-based compensation expense, and certain purchase accounting adjustments, divided by the average inventory for the quarter.

EX-99.2

Exhibit 99.2

CFO Commentary - Fourth Quarter 2017 Preliminary Financial Results

As of this quarter, we are shifting much of our financial recap and commentary for the prior quarter away from our conference call and to this document. Consistent with historical practice, we will share our next quarter financial outlook on the conference call. The following metrics and commentary are provided by management and should be reviewed in conjunction with our fourth quarter and fiscal year 2017 preliminary financial results press release, available on the Investor Relations section of our website at http://investors.infinera.com.

Fourth Quarter 2017 Preliminary Financial Results

GAAP

(In millions, except per share amounts and percentages)	Q4'17			Q3'17			Q4'16			Q/Q Change			Y/Y Change
Revenue	$	195.8		$	192.6		$	181.0		2		%	8		%
Product	160.5			159.6			151.3			1		%	6		%
Service	35.3			33.0			29.7			7		%	19		%
Gross margin %	24.1		%	35.2		%	38.1		%	(11.1)pts			(14.0)pts
Research and development	55.2			56.6			67.8			(2		)%	(19		)%
Sales and marketing	29.4			27.9			30.4			5		%	(3		)%
General and administrative	17.1			17.6			16.7			(3		)%	2		%
Restructuring and other costs	16.1			—			—			100		%	100		%
Total operating expenses	$	117.8		$	102.1		$	114.9		15		%	3		%
Operating margin %	(36.0		)%	(17.8		)%	(25.3		)%	(18.2)pts			(10.7)pts
Net loss	$	(74.0	)	$	(37.2	)	$	(36.3	)	(99		)%	(104		)%
EPS	$	(0.50	)	$	(0.25	)	$	(0.25	)	$	(0.25	)	$	(0.25	)

Non-GAAP

(In millions, except per share amounts and percentages)	Q4'17			Q3'17			Q4'16			Q/Q Change			Y/Y Change
Revenue	$	195.8		$	192.6		$	181.0		2		%	8		%
Product	160.5			159.6			151.3			1		%	6		%
Service	35.3			33.0			29.7			7		%	19		%
Gross margin %	37.5		%	39.1		%	41.8		%	(1.6)pts			(4.3)pts
Research and development	51.4			52.5			52.4			(2		)%	(2		)%
Sales and marketing	25.6			23.2			25.8			10		%	(1		)%
General and administrative	14.7			14.6			14.1			1		%	4		%
Total operating expenses	$	91.7		$	90.3		$	92.3		2		%	(1		%)
Operating margin %	(9.3		)%	(7.8		)%	(9.2		)%	(1.5)pts			(0.1)pts
Net loss	$	(18.6	)	$	(17.0	)	$	(17.0	)	(9		)%	(9		)%
EPS	$	(0.12	)	$	(0.11	)	$	(0.12	)	$	(0.01	)	$	—

This CFO Commentary contains Non-GAAP financial measures. The reconciliation of the GAAP to non-GAAP financial measures can be found at the end of this document.

Q4’17 Overview

We exited what was a very challenging 2017, with fourth quarter results that continued our recent trend of sequential revenue improvement. We delivered revenue above our guidance range and EPS at the higher end of our guidance range. During the fourth quarter, we made some difficult but necessary decisions in implementing a

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restructuring plan, which should allow us to drive efficiencies in the business and lower our cost structure as we move forward.

Revenue:

Total revenue in the fourth quarter of 2017 was $195.8 million, up 2% sequentially and 8% year over year.

Product revenue in the fourth quarter of 2017 was $160.5 million, up 1% sequentially and 6% year over year. Growth was driven primarily by the ramp of ICE4 products, which comprised roughly 20% of product revenue in the fourth quarter. Services revenue in the fourth quarter of 2017 was $35.3 million, up 7% sequentially and 19% year over year. Growth was attributable to continued expansion of our installed base and an uptick in our installation business.

Our top five customers consisted of a recently consolidated Domestic Tier 1, two Internet Content Providers ("ICPs"), a cable operator and an International Tier 1. Our only greater than 10% customer in the fourth quarter was a Domestic Tier 1.

Geographies

• North America (53% of total revenue): In the fourth quarter of 2017, total revenue in North America declined 9% sequentially and grew 7% year over year. The sequential decline was attributable to ongoing weakness from a large recently consolidated customer and seasonal weakness in cable. Within the overall sequential decline in North America, we were pleased that revenue from ICPs was up in the fourth quarter of 2017 due to CX2 revenue ramping at one of our large customers. Despite our fiscal 2017 North America revenue being down 21% due to customer consolidation and product transitions, we are seeing spending from certain consolidated customers improve, as evidenced by North America revenue in the second half of 2017 growing 8% year over year.

• International (47% of total revenue): In the fourth quarter of 2017, total revenue from International was up 18% sequentially and 10% year over year.

• EMEA (36% of total revenue) had a strong fourth quarter, growing 22% sequentially and 6% year over year. A global ICP's European data center expansion was a major contributor to EMEA growth in the fourth quarter. Aside from a small decline in cable, we had sequential growth from all of our major customer verticals in the fourth quarter stemming from solid results in long-haul and metro.

• APAC (8% of total revenue) grew 8% sequentially and 81% year over year. Growth in the fourth quarter of 2017 was driven primarily by strength in subsea with a key International Tier 1 and an international build from a global ICP. APAC grew every quarter sequentially in fiscal 2017 and was up 29% for fiscal 2017. We are very pleased with the improvement in our subsea business and see APAC as a potential growth region going forward.

• Other Americas (LATAM) (3% of total revenue) declined 4% sequentially and 33% year over year. Consistent with the rest of fiscal 2017, the region remained light in the fourth quarter as, despite some improvement from subsea, we continued to be hindered by a challenging political climate for one of our key customers in the region.

Customer Verticals

• ICPs were our highest growth vertical in the fourth quarter of 2017, up substantially sequentially and year over year stemming largely from North America and European deployments of our new ICE4-based CX2 and XT-3300 by major ICPs. As expected, ICPs have been amongst the first adopters of our ICE4 products.

• Telecom was solid outside of continued softness at a recently consolidated Domestic Tier 1, with combined Tier 1 and Tier 2 business in the fourth quarter slightly up sequentially and year over year. We were strong in International Tier 1, with sequential growth in all our regions, driven primarily by subsea.

• Wholesale was slightly down sequentially in the fourth quarter and down year over year largely due to lingering impacts of customer consolidation.

• Cable, which tends to be seasonally lower late in the year was, as expected, sequentially down in the fourth quarter though up substantially year over year.

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Gross Margin:

• GAAP gross margin was 24.1% compared to 35.2% from the prior quarter and 38.1% from the prior year. The large decline in the fourth quarter was primarily attributable to restructuring related expenses of $19.1 million, which consisted of inventory write-downs and manufacturing asset impairments as a result of our product rationalization efforts, and employee-related costs for eliminated roles.

• Non-GAAP gross margin was 37.5%, compared to 39.1% from the prior quarter and 41.8% from the prior year. Fourth quarter gross margin was slightly lower than the midpoint of our guidance range (36-40%). As expected, we incurred high costs from early production runs of our ICE4 units, took a margin hit related to commercial deals to transition certain customers to our new products and saw growth in footprint builds, which tend to be margin dilutive initially and subsequently enable higher margin capacity adds. We believe the fourth quarter should be the low point of our gross margin as the transitory costs of early ICE4 units and commercial bridge deals are substantially behind us, and we anticipate higher volumes and the improved cost structure of ICE4 to benefit gross margin as we move forward.

Operating Expenses:

• GAAP operating expenses were $117.8 million in the fourth quarter, compared to $102.1 million from the prior quarter and $114.9 million from the prior year. The sequential increase was attributable to restructuring related expenses of $16.1 million, which consisted of employee-related costs, facilities-related charges and asset impairments. The year over year increase reflects restructuring-related expenses, offset by a broader decrease in operating expenses consistent with our cost reduction initiatives.

• Non-GAAP operating expenses were $91.7 million in the fourth quarter, at the higher end of our guidance range ($89-93 million), due to increased commissions associated with higher revenue and an increase in customer lab trial activity related to our new products. We remain on track with our cost reduction plan announced in the fourth quarter of 2017 and anticipate operating expenses will decline over the course of fiscal 2018.

Restructuring Related Costs:

During the fourth quarter, we implemented a restructuring plan. As part of the plan we are making several changes we believe will help our R&D efficiency, with consolidation of our development sites, including closure of our Beijing design center, process changes to more broadly leverage our engineering resources across regions and product line development, and prioritization of R&D initiatives. Outside of engineering, we have also made changes to allow us to operate more efficiently as we scale the business, including reducing our facilities footprint and writing off certain equipment that will not be utilized in the future. Finally, we realigned our inventory levels to match our new technology cadence and go to market strategies.

As a result of the above actions, we took charges of $19.1 million within cost of revenue, including inventory write-downs of $13.6 million, manufacturing equipment impairments of $4.0 million, and severance related charges of $1.5 million. Within operating expenses, we recorded charges of $16.1 million, including $7.9 million of severance related costs, $7.3 million of facilities impairment costs and test equipment impairments of $0.9 million. We have enacted the majority of these actions with some remaining payments in the first half of the year.

Operating Margin:

• GAAP operating margin was (36.0)%, compared to (17.8)% from the prior quarter and (25.3)% from the prior year. The decline in the fourth quarter was primarily attributable to restructuring related charges.

• Non-GAAP operating margin was (9.3)%, compared to (7.8)% from the prior quarter and (9.2)% from the prior year. The sequential decline in the fourth quarter was primarily attributable to the aforementioned decline in gross margin.

Earnings per Share:

• GAAP EPS was $(0.50), compared to $(0.25) from the prior quarter and $(0.25) from the prior year. The decline in the fourth quarter was primarily attributable to restructuring related charges.

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• Non-GAAP EPS was $(0.12), compared to $(0.11) from the prior quarter and $(0.12) from the prior year. These results reflect revenue growth offset by lower gross margins, both sequentially and year over year.

Balance Sheet and Cash Flow

(In millions)	Q4'17			Q3'17			Q4'16
Cash, investments & restricted cash, net of debt principal of $150 million	$	150.1		$	159.0		$	210.1
Accounts Receivable	$	126.2		$	137.1		$	150.4
Inventory	$	214.7		$	242.8		$	233.0
Cash from operations	$	(1.0	)	$	(20.9	)	$	(5.0	)
Capital expenditures	$	7.8		$	11.0		$	10.4

• Cash, investments and restricted cash, net of debt principal of $150 million, were $150.1 million at December 30, 2017, down $8.9 million from the prior quarter. The decrease was driven by our operating loss and partially offset by positive working capital changes in the quarter.

• Net accounts receivable was $126.2 million at December 30, 2017, down $10.9 million from the prior quarter. The lower balance was primarily driven by strong collections efforts, which exceeded our billings in the quarter.

• Net inventory was $214.7 million at December 30, 2017, down $28.1 million from the prior quarter due to higher volumes of ICE4 sales, reduction in pre-ICE4 materials and an increase of reserves on certain products driven by our product rationalization efforts.

• Cash from operations in the fourth quarter was negative $1.0 million, better than negative $20.9 million in the prior quarter, due to positive overall working capital changes. Key drivers of these working capital changes were our inventory reduction and strong collections on accounts receivable. Of note, restructuring related cash outflows were approximately $6.0 million in the fourth quarter.

• Capital Expenditures were $7.8 million in the fourth quarter, versus $11.0 million in the prior quarter, as we actively managed spending in the quarter.

Forward-Looking Statements

This CFO Commentary and related conference call contain certain forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties. Such forward-looking statements include, without limitation, our expectations concerning our overall business strategy, market conditions and growth opportunities; factors that impact our revenue, gross margin and operating expenses; views on our customers and products, including the timing of the introduction of new products; our product portfolio and success of particular products and product families; our expectations regarding the future impact of customer consolidation; our financial outlook for the first quarter of fiscal 2018; impact of tax regulations; our ability to deliver operational expense discipline; our ability to execute on our restructuring plan; and our overall future prospects. Forward-looking statements can also be identified by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or similar words. These statements are based on information available to us as of the date hereof and actual results could differ materially from those stated or implied due to risks and uncertainties. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include, delays in the development and introduction of new products or updates to existing products and market acceptance of these products; the effects of increased customer consolidation; fluctuations in demand, sales cycles and prices for products and services, including discounts given in response to competitive pricing pressures, as well as the timing of purchases by our key customers; the effect that changes in product pricing or mix, and/or increases in component costs could have on our gross margin; our ability to respond to rapid technological changes; aggressive business tactics by our competitors; our ability to adequately respond to demand as a result of the restructuring plan; our reliance on single and limited source suppliers; our ability to protect our intellectual property; claims by others that we infringe their intellectual property; the effect of global macroeconomic conditions on our business; war, terrorism, public health issues, natural disasters and other circumstances that could disrupt the supply, delivery or demand of our products; and other risks and uncertainties detailed in our SEC filings from time to time. More information on potential factors that may impact our business are set forth in our Quarterly Report on Form 10-Q for the quarter ended on September 30, 2017 as filed with the SEC on November 8, 2017, as well as subsequent reports filed with or

4

furnished to the SEC from time to time. 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

This CFO Commentary contains references to the following non-GAAP financial measures: gross margin, operating expenses, operating margin, net loss and EPS. To supplement our financial results presented on a GAAP basis, we use the non-GAAP measures indicated above, which exclude restructuring and other costs, gain on the sale and impairment of cost-method investments, non-cash stock-based compensation expenses, amortization of debt discount on our convertible senior notes, amortization and impairment of acquired intangible assets, acquisition-related costs, and certain purchase accounting adjustments related to our acquisition of Transmode AB, which closed during the third quarter of 2015, along with related tax effects. 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 its 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, gross margin or operating 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.”

5

Infinera Corporation

GAAP to Non-GAAP Reconciliations

(In thousands, except percentages and per share data)

(Unaudited)

	Three Months Ended															Twelve Months Ended
	December 30, 2017					September 30, 2017					December 31, 2016					December 30, 2017					December 31, 2016
Reconciliation of Gross Profit:
U.S. GAAP as reported	$	47,286		24.1	%	$	67,826		35.2	%	$	69,032		38.1	%	$	244,000		32.9	%	$	393,718		45.2	%
Acquisition-related deferred revenue adjustment(1)	—					—					—					—					400
Stock-based compensation(2)	1,846					2,063					1,849					7,811					6,463
Amortization of acquired intangible assets(3)	5,169					5,390					4,745					20,474					19,715
Acquisition-related costs(4)	—					—					27					46					144
Restructuring and other costs(5)	19,141					—					—					19,141					—
Non-GAAP as adjusted	$	73,442		37.5	%	$	75,279		39.1	%	$	75,653		41.8	%	$	291,472		39.3	%	$	420,440		48.3	%
Reconciliation of Research and Development Expenses:
U.S. GAAP as reported	$	55,223				56,616					67,750					224,299					232,291
Stock-based compensation(2)	3,841					4,040					4,011					15,845					13,732
Acquisition-related costs(4)	—					—					44					(70		)			147
Intangible asset impairment(6)	—					—					11,295					252					11,295
Non-GAAP as adjusted	$	51,382				$	52,576				$	52,400				$	208,272				$	207,117
Reconciliation of Sales and Marketing Expenses:
U.S. GAAP as reported	$	29,395				$	27,824				$	30,424				$	116,057				$	118,858
Stock-based compensation(2)	2,264					3,025					3,037					11,288					11,043
Amortization of acquired intangible assets(3)	1,555					1,622					1,436					6,160					6,189
Acquisition-related costs(4)	—					—					209					387					989
Non-GAAP as adjusted	$	25,576				$	23,177				$	25,742				$	98,222				$	100,637
Reconciliation of General and Administrative Expenses:
U.S. GAAP as reported	$	17,069				$	17,634				16,726					70,625					68,343
Stock-based compensation(2)	2,345					3,039					2,445					10,776					9,295
Acquisition-related costs(4)	—					—					163					5					733
Non-GAAP as adjusted	$	14,724				$	14,595				$	14,118				$	59,844				$	58,315
Reconciliation of Operating Expenses:
U.S. GAAP as reported	$	117,793				$	102,074				$	114,900				$	427,087				$	419,492
Stock-based compensation(2)	8,450					10,104					9,493					37,909					34,070
Amortization of acquired intangible assets(3)	1,555					1,622					1,436					6,160					6,189
Acquisition-related costs(4)	—					—					416					322					1,869
Restructuring and other costs(5)	16,106					—					—					16,106					—
Intangible asset impairment(6)	—					—					11,295					252					11,295
Non-GAAP as adjusted	$	91,682				$	90,348				$	92,260				$	366,338				$	366,069
Reconciliation of Income (Loss) from Operations:
U.S. GAAP as reported	$	(70,507	)	(36.0	)%	$	(34,248	)	(17.8	)%	$	(45,868	)	(25.3	)%	$	(183,087	)	(24.7	)%	$	(25,774	)	(3.0	)%
Acquisition-related deferred revenue adjustment(1)	—					—					—					—					400
Stock-based compensation(2)	10,296					12,167					11,342					45,720					40,533
Amortization of acquired intangible assets(3)	6,724					7,012					6,181					26,634					25,904

6

	Three Months Ended															Twelve Months Ended
	December 30, 2017					September 30, 2017					December 31, 2016					December 30, 2017					December 31, 2016
Acquisition-related costs(4)	—					—					443					368					2,013
Restructuring and other costs(5)	35,247					—					—					35,247					—
Intangible asset impairment(6)	—					—					11,295					252					11,295
Non-GAAP as adjusted	$	(18,240	)	(9.3	)%	$	(15,069	)	(7.8	)%	$	(16,607	)	(9.2	)%	$	(74,866	)	(10.1	)%	$	54,371		6.2	%
Reconciliation of Net Income (Loss) Attributable to Infinera Corporation:
U.S. GAAP as reported	$	(73,985	)			$	(37,231	)			$	(36,253	)			$	(194,506	)			$	(23,927	)
Acquisition-related deferred revenue adjustment(1)	—					—					—					—					400
Stock-based compensation(2)	10,296					12,167					11,342					45,720					40,533
Amortization of acquired intangible assets(3)	6,724					7,012					6,181					26,634					25,904
Acquisition-related costs(4)	—					—					818					257					3,081
Restructuring and other costs(5)	35,247					—					—					35,247					—
Intangible asset impairment(6)	—					—					11,295					252					11,295
Amortization of debt discount(7)	2,710					2,643					2,451					10,444					9,447
Gain on sale of cost-method investment(8)	—					—					(8,983		)			—					(8,983		)
Impairment of cost-method investment(9)	1,890					—					—					1,890					—
Income tax effects(10)	(1,479		)			(1,543		)			(3,829		)			(5,946		)			(8,360		)
Non-GAAP as adjusted	$	(18,597	)			$	(16,952	)			$	(16,978	)			$	(80,008	)			$	49,390
Net Income (Loss) per Common Share Attributable to Infinera Corporation - Basic:
U.S. GAAP as reported	$	(0.50	)			$	(0.25	)			$	(0.25	)			$	(1.32	)			$	(0.17	)
Non-GAAP as adjusted	$	(0.12	)			$	(0.11	)			$	(0.12	)			$	(0.54	)			$	0.35
Net Income (Loss) per Common Share Attributable to Infinera Corporation - Diluted:
U.S. GAAP as reported	$	(0.50	)			$	(0.25	)			$	(0.25	)			$	(1.32	)			$	(0.17	)
Non-GAAP as adjusted	$	(0.12	)			$	(0.11	)			$	(0.12	)			$	(0.54	)			$	0.34
Weighted Average Shares Used in Computing Net Income (Loss) per Common Share:
Basic	149,412					148,777					144,770					147,878					142,989
Diluted	149,412					148,777					144,770					147,878					145,800

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⁽¹⁾  Business combination accounting principles require us to write down to fair value our maintenance support contracts assumed in the Transmode acquisition. The revenue for these support contracts is deferred and typically recognized over a one-year period, so our GAAP revenue for the one-year period after the acquisition will not reflect the full amount of revenue that would have been reported if the acquired deferred revenue was not written down to fair value. The non-GAAP adjustment eliminates the effect of the deferred revenue write-down. Management believes these adjustments to the revenue from these support contracts are useful to investors as an additional means to reflect revenue trends of our business.

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

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	Three Months Ended						Twelve Months Ended
	December 30, 2017		September 30, 2017		December 31, 2016		December 30, 2017		December 31, 2016
Cost of revenue	$	728	$	779	$	791	$	3,065	$	2,966
Research and development	3,841		4,040		4,011		15,845		13,732
Sales and marketing	2,264		3,025		3,037		11,288		11,043
General and administration	2,345		3,039		2,445		10,776		9,295
	9,178		10,883		10,284		40,974		37,036
Cost of revenue - amortization from balance sheet*	1,118		1,284		1,058		4,746		3,497
Total stock-based compensation expense	$	10,296	$	12,167	$	11,342	$	45,720	$	40,533

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

⁽³⁾  Amortization of acquisition-related intangible assets consists of amortization of developed technology, trade names, and customer relationships acquired in connection with the Transmode acquisition. U.S. GAAP accounting requires that acquired intangible assets are recorded at fair value and amortized over their useful lives. As this amortization is non-cash, we have excluded it from our non-GAAP operating expenses, gross margin and net income measures. Management believes the amortization of acquired intangible assets is not indicative of ongoing operating performance and its exclusion provides a better indication of our underlying business performance.

⁽⁴⁾  Acquisition-related costs associated with the Transmode acquisition include legal, financial, employee retention costs and other professional fees incurred in connection with the transaction, including squeeze-out proceedings. These amounts have been adjusted in arriving at our non-GAAP results because management believes that these expenses are non-recurring, not indicative of ongoing operating performance and their exclusion provides a better indication of our underlying business performance.

⁽⁵⁾  Restructuring and other costs are related to our plan to restructure our worldwide operations, which was announced during the fourth quarter of 2017. These costs consist of $13.6 million of inventory write-downs as a result of our product rationalization efforts, $9.4 million of severance and related costs, $7.3 million of facilities-related costs and $4.9 million of manufacturing and test asset impairments. Management has excluded the impact of these charges in arriving at our non-GAAP results as they are non-recurring in nature and its exclusion provides a better indication of our underlying business performance.

⁽⁶⁾  Intangible asset impairments are associated with previously acquired intangibles and acquired in-process research and development (“IPR&D”). The impairment of previously acquired intangibles was the result of management determining that the carrying value will not be recoverable. Acquired IPR&D impairment is associated with intangibles acquired with the Transmode acquisition, which we do not anticipate utilizing in future products. Management has excluded the impact of these charges in arriving at our non-GAAP results because it is non-recurring and management believes that these expenses are not indicative of ongoing operating performance.

⁽⁷⁾  Under GAAP, certain convertible debt instruments that may be settled in cash on conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate. Accordingly, for GAAP purposes, we are required to amortize as debt discount an amount equal to the fair value of the conversion option that was recorded in equity as interest expense on our $150 million in aggregate principal amount of 1.75% convertible debt issuance in May 2013 over the term of the notes. Interest expense has been excluded from our non-GAAP results because management believes that this non-cash expense is not indicative of ongoing operating performance and provides a better indication of our underlying business performance.

⁽⁸⁾  The gain on sale of a cost-method investment has been excluded in arriving at our non-GAAP results because it is non-recurring and management believes that this gain is not indicative of ongoing operating performance.

⁽⁹⁾  The impairment of cost-method investment has been excluded in arriving at our non-GAAP results because it is non-recurring and management believes that this non-cash expense is not indicative of ongoing operating performance.

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⁽¹⁰⁾  The difference between the GAAP and non-GAAP tax is due to the net tax effects of the purchase accounting adjustments, acquisition-related costs, amortization of acquired intangible assets and the IPR&D impairment related to the Transmode acquisition.

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