EX-99.1 2 infn-08072018xex991.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
image0.jpg

Infinera Corporation Reports Second Quarter 2018 Financial Results

Sunnyvale, Calif., August 7, 2018 - Infinera Corporation, provider of Intelligent Transport Networks, today released financial results for its second quarter ended June 30, 2018.
GAAP revenue for the quarter was $208.2 million compared to $202.7 million in the first quarter of 2018 and $176.8 million in the second quarter of 2017.
GAAP gross margin for the quarter was 40.5% compared to 40.5% in the first quarter of 2018 and 36.7% in the second quarter of 2017. GAAP operating margin for the quarter was (10.4)% compared to (12.2)% in the first quarter of 2018 and (22.9)% in the second quarter of 2017.
GAAP net loss for the quarter was $(21.9) million, or $(0.14) per share, compared to a net loss of $(26.3) million, or $(0.17) per share, in the first quarter of 2018, and net loss of $(42.8) million, or $(0.29) per share, in the second quarter of 2017.
Non-GAAP gross margin for the quarter was 43.9% compared to 43.7% in the first quarter of 2018 and 40.7% in the second quarter of 2017. Non-GAAP operating margin for the quarter was (0.7)% compared to (3.4)% in the first quarter of 2018 and (12.2)% in the second quarter of 2017.
Non-GAAP net loss for the quarter was $(1.3) million, or $(0.01) per share, compared to a net loss of $(7.2) million, or $(0.05) per share, in the first quarter of 2018, and net loss of $(22.8) million, or $(0.15) per share, in the second quarter of 2017.
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 Q2, we delivered strong margins and our fifth consecutive quarter of revenue growth, as customers continued to adopt our next-generation products,” said Tom Fallon, Infinera CEO. “In the second half, we expect to deploy several new opportunities that will drive multi-year growth. We believe adding Coriant’s capabilities and extensive customer base to our vertically integrated operating model and refreshed product portfolio, will allow us to enter 2019 in a position of strength. I really like our opportunity and am very excited for what the future holds.”

Financial Outlook
Infinera reaffirms the following expectations from its first quarter 2018 conference call on May 9, 2018:
•
We continue to expect revenue in the second half of 2018 will be 2% to 4% higher than revenue in the first half of 2018. This expectation implies a revenue range in the second half of 2018 of approximately $420 million to $430 million and full fiscal year 2018 revenue growth of approximately 13% compared to the prior fiscal year.
•
We continue to expect to achieve non-GAAP profitability in the fourth quarter of 2018.
For the quarter ending September 29, 2018:
We expect several new customer footprint deployments in the third quarter of 2018. We expect these new deployments will drive multi-year revenue growth and strong margins moving forward. However, as is typical with new deployments of network infrastructure, these will have lower margins initially.
•
Revenue is expected to be $210 million +/- $10 million. This expectation implies 9% year-over-year growth at the midpoint.
•
GAAP gross margin is expected to be 35% +/- 200 bps. Non-GAAP gross margin is expected to be 38% +/- 200 bps.
•
GAAP operating expenses are expected to be $97 million +/- $2 million. Non-GAAP operating expenses are expected to be $86 million +/- $2 million.
•
GAAP operating margin is expected to be approximately (12)%. Non-GAAP operating margin is expected to be approximately (3)%.
•
GAAP EPS is expected to be $(0.16) +/- $0.02. Non-GAAP EPS is expected to be $(0.05) +/- $0.02.




Infinera's Financial Outlook does not include the potential impact of the pending Coriant acquisition, including any associated prospective debt financing and other significant transactions that may be completed after August 7, 2018. Actual results may differ materially from Infinera's Financial Outlook as a result of, among other things, the factors described under “Forward-Looking Statements” below.
Second Quarter 2018 Financial Commentary Available Online
A CFO Commentary reviewing Infinera's second quarter of 2018 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 second quarter 2018 results and its outlook for the third 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. 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 expectations regarding the deployment of several new opportunities in the second half of 2018; Infinera’s ability to drive multi-year growth; Infinera’s expectations regarding its ability to enter 2019 in a position of strength; and Infinera's expectations regarding its financial outlook for the second half and third quarter of 2018. 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, the timing to consummate the proposed acquisition of Coriant; the parties’ ability to promptly and effectively integrate the businesses of Infinera and Coriant; the diversion of management time on issues related to the acquisition; the failure to consummate or any delay in consummating the acquisition for other reasons; delays in the development and introduction of new products or updates to existing products and market acceptance of these products; 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; the effects of increased customer consolidation; Infinera’s ability to respond to rapid technological changes; aggressive business tactics by Infinera’s competitors; Infinera's reliance on single and limited source suppliers; Infinera's ability to adequately respond to demand as a result of the restructuring plan; 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 March 30, 2018 as filed with the SEC on May 10, 2018, 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 related costs (credits), 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. 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 has included forward-looking non-GAAP information in this press release, including an estimate of certain non-GAAP financial measures for the third quarter of 2018 that exclude non-cash stock-based compensation expenses, and amortization of acquired intangible assets and related tax effects. Please see the section titled, “GAAP to Non-GAAP Reconciliations of Financial Outlook” below on specific adjustments. Infinera has also included an estimate of non-GAAP profitability for the fourth quarter of 2018 that excludes non-cash stock-based compensation expenses, and amortization of acquired intangible assets and related tax effects. Infinera is unable to provide a reconciliation of this non-GAAP financial measure to its corresponding GAAP measure on a forward-looking basis without unreasonable effort due to the overall high variability and low visibility of most of the foregoing items that have been excluded.
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 loss, basic and diluted net 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.
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
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited) 
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30, 2018
 
July 1, 2017
 
June 30, 2018
 
July 1, 2017
Revenue:
 
 
 
 
 
 
 
 
Product
 
$
175,288

 
$
143,360

 
$
346,917

 
$
290,413

Services
 
32,939

 
33,461

 
63,991

 
61,930

Total revenue
 
208,227

 
176,821

 
410,908

 
352,343

Cost of revenue:
 
 
 
 
 
 
 
 
Cost of product
 
110,857

 
100,302

 
218,522

 
199,634

Cost of services
 
13,039

 
11,687

 
25,870

 
23,821

Restructuring and related
 
26

 
—

 
43

 
—

Total cost of revenue
 
123,922

 
111,989

 
244,435

 
223,455

Gross profit
 
84,305

 
64,832

 
166,473

 
128,888

Operating expenses:
 
 
 
 
 
 
 
 
Research and development
 
56,158

 
57,377

 
114,839

 
112,460

Sales and marketing
 
29,721

 
29,397

 
60,213

 
58,838

General and administrative
 
18,365

 
18,563

 
36,201

 
35,922

Restructuring and related
 
1,680

 
—

 
1,517

 
—

Total operating expenses
 
105,924

 
105,337

 
212,770

 
207,220

Loss from operations
 
(21,619
)
 
(40,505
)
 
(46,297
)
 
(78,332
)
Other income (expense), net:
 
 
 
 
 
 
 
 
Interest income
 
629

 
862

 
1,526

 
1,613

Interest expense
 
(2,501
)
 
(3,456
)
 
(6,184
)
 
(6,859
)
Other gain (loss), net:
 
1,429

 
(252
)
 
1,935

 
(382
)
Total other income (expense), net
 
(443
)
 
(2,846
)
 
(2,723
)
 
(5,628
)
Loss before income taxes
 
(22,062
)
 
(43,351
)
 
(49,020
)
 
(83,960
)
Benefit from income taxes
 
(124
)
 
(512
)
 
(802
)
 
(670
)
Net loss
 
(21,938
)
 
(42,839
)
 
(48,218
)
 
(83,290
)
 
 


 


 
 
 
 
Net loss per common share - basic and diluted:
 
$
(0.14
)
 
$
(0.29
)
 
$
(0.32
)
 
$
(0.57
)
Weighted average shares used in computing net loss
 
 
 
 
 
 
 
 
per common share - basic and diluted:
 
152,259

 
147,538

 
151,296

 
146,662

 




Infinera Corporation
GAAP to Non-GAAP Reconciliations
(In thousands, except percentages and per share data)
(Unaudited) 
 
Three Months Ended
 
Six Months Ended
 
June 30, 2018
 
 
 
March 31, 2018
 
 
 
July 1, 2017
 
 
 
June 30, 2018
 
 
 
July 1, 2017
 
 
Reconciliation of Gross Profit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. GAAP as reported
$
84,305

 
40.5
 %
 
$
82,168

 
40.5
 %
 
$
64,832

 
36.7
 %
 
$
166,473

 
40.5
 %
 
$
128,888

 
36.6
 %
Stock-based compensation(1)
2,039

 
 
 
994

 
 
 
2,071

 
 
 
3,033

 
 
 
3,902

 
 
Amortization of acquired intangible assets(2)
4,943

 
 
 
5,341

 
 
 
5,035

 
 
 
10,284

 
 
 
9,915

 
 
Acquisition-related costs(3)
—

 
 
 
—

 
 
 
6

 
 
 
—

 
 
 
46

 
 
Restructuring and related(4)
26

 
 
 
17

 
 
 
—

 
 
 
43

 
 
 
—

 
 
Non-GAAP as adjusted
$
91,313

 
43.9
 %
 
$
88,520

 
43.7
 %
 
$
71,944

 
40.7
 %
 
$
179,833

 
43.8
 %
 
$
142,751

 
40.5
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Operating Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. GAAP as reported
$
105,924

 
 
 
$
106,846

 
 
 
$
105,337

 
 
 
$
212,770

 
 
 
$
207,220

 
 
Stock-based compensation(1)
10,005

 
 
 
9,989

 
 
 
10,309

 
 
 
19,994

 
 
 
19,355

 
 
Amortization of acquired intangible assets(2)
1,487

 
 
 
1,607

 
 
 
1,515

 
 
 
3,094

 
 
 
2,983

 
 
Acquisition-related costs(3)
—

 
 
 
—

 
 
 
16

 
 
 
—

 
 
 
322

 
 
Restructuring and related(4)
1,680

 
 
 
(163
)
 
 
 
—

 
 
 
1,517

 
 
 
—

 
 
Intangible asset impairment(5)
—

 
 
 
—

 
 
 
—

 
 
 
—

 
 
 
252

 
 
Non-GAAP as adjusted
$
92,752

 
 
 
$
95,413

 
 
 
$
93,497

 
 
 
$
188,165

 
 
 
$
184,308

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Loss from Operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. GAAP as reported
$
(21,619
)
 
(10.4
)%
 
$
(24,678
)
 
(12.2
)%
 
$
(40,505
)
 
(22.9
)%
 
$
(46,297
)
 
(11.3
)%
 
$
(78,332
)
 
(22.2
)%
Stock-based compensation(1)
12,044

 
 
 
10,983

 
 
 
12,380

 
 
 
23,027

 
 
 
23,257

 
 
Amortization of acquired intangible assets(2)
6,430

 
 
 
6,948

 
 
 
6,550

 
 
 
13,378

 
 
 
12,898

 
 
Acquisition-related costs(3)
—

 
 
 
—

 
 
 
22

 
 
 
—

 
 
 
368

 
 
Restructuring and related(4)
1,706

 
 
 
(146
)
 
 
 
—

 
 
 
1,560

 
 
 
—

 
 
Intangible asset impairment(5)
—

 
 
 
—

 
 
 
—

 
 
 
—

 
 
 
252

 
 
Non-GAAP as adjusted
$
(1,439
)
 
(0.7
)%
 
$
(6,893
)
 
(3.4
)%
 
$
(21,553
)
 
(12.2
)%
 
$
(8,332
)
 
(2.0
)%
 
$
(41,557
)
 
(11.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Net Loss:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. GAAP as reported
$
(21,938
)
 
 
 
$
(26,280
)
 
 
 
$
(42,839
)
 
 
 
$
(48,218
)
 
 
 
$
(83,290
)
 
 
Stock-based compensation(1)
12,044

 
 
 
10,983

 
 
 
12,380

 
 
 
23,027

 
 
 
23,257

 
 
Amortization of acquired intangible assets(2)
6,430

 
 
 
6,948

 
 
 
6,550

 
 
 
13,378

 
 
 
12,898

 
 
Acquisition-related costs(3)
—

 
 
 
—

 
 
 
(4
)
 
 
 
—

 
 
 
257

 
 
Restructuring and related(4)
1,706

 
 
 
(146
)
 
 
 
—

 
 
 
1,560

 
 
 
—

 
 
Intangible asset impairment(5)
—

 
 
 
—

 
 
 
—

 
 
 
—

 
 
 
252

 
 
Amortization of debt discount(6)
1,892

 
 
 
2,779

 
 
 
2,577

 
 
 
4,671

 
 
 
5,091

 
 
Income tax effects(7)
(1,415
)
 
 
 
(1,529
)
 
 
 
(1,450
)
 
 
 
(2,944
)
 
 
 
(2,924
)
 
 
Non-GAAP as adjusted
$
(1,281
)
 
 
 
$
(7,245
)
 
 
 
$
(22,786
)
 
 
 
$
(8,526
)
 
 
 
$
(44,459
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Loss per Common Share - Basic and Diluted:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. GAAP as reported
$
(0.14
)
 
 
 
$
(0.17
)
 
 
 
$
(0.29
)
 
 
 
$
(0.32
)
 
 
 
$
(0.57
)
 
 
Non-GAAP as adjusted
$
(0.01
)
 
 
 
$
(0.05
)
 
 
 
$
(0.15
)
 
 
 
$
(0.06
)
 
 
 
$
(0.30
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares Used in Computing Net Loss per Common Share - Basic and Diluted:
152,259

 
 
 
150,333

 
 
 
147,538

 
 
 
151,296

 
 
 
146,662

 
 
____________________________

(1) 
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 stock-based compensation related to employees and non-employees (in thousands):
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30, 2018
 
March 31, 2018
 
July 1, 2017
 
June 30, 2018
 
July 1, 2017
Cost of revenue
 
$
624

 
$
(122
)
 
$
834

 
$
502

 
$
1,558

Research and development
 
4,192

 
4,324

 
4,184

 
8,516

 
7,964

Sales and marketing
 
3,046

 
2,898

 
3,273

 
5,944

 
5,999

General and administration
 
2,767

 
2,767

 
2,852

 
5,534

 
5,392

 
 
10,629

 
9,867

 
11,143

 
20,496

 
20,913

Cost of revenue - amortization from balance sheet*
 
1,415

 
1,116

 
1,237

 
2,531

 
2,344

Total stock-based compensation expense
 
$
12,044

 
$
10,983

 
$
12,380

 
$
23,027

 
$
23,257

 _____________________________
*
Stock-based compensation expense deferred to inventory and deferred inventory costs in prior periods and recognized in the current period.
(2) 
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.
(3) 
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.
(4) 
Restructuring and related costs (credits) are related to Infinera's plan to restructure its worldwide operations, which was implemented during the fourth quarter of 2017. 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.
(5) 
Intangible asset impairment is associated with previously acquired intangibles, which Infinera has determined that the carrying value will not be recoverable. Management has excluded the impact of this charge 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.
(6) 
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.
(7) 
The difference between the GAAP and non-GAAP tax is due to the net tax effects of the purchase accounting adjustments, acquisition-related costs and amortization of acquired intangible assets.





Infinera Corporation
Condensed Consolidated Balance Sheets
(In thousands, except par values)
(Unaudited)
 
 
June 30, 2018
 
December 30, 2017
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
63,308

 
$
116,345

Short-term investments
 
58,860

 
147,596

Accounts receivable, net of allowance for doubtful accounts of $869 in 2018 and $892 in 2017
 
148,026

 
126,152

Inventory
 
219,343

 
214,704

Prepaid expenses and other current assets
 
46,102

 
43,140

Total current assets
 
535,639

 
647,937

Property, plant and equipment, net
 
136,769

 
135,942

Intangible assets
 
71,795

 
92,188

Goodwill
 
179,165

 
195,615

Long-term investments
 
6,586

 
36,129

Other non-current assets
 
11,026

 
9,859

Total assets
 
$
940,980

 
$
1,117,670

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
80,345

 
$
58,124

Accrued expenses
 
48,180

 
39,782

Accrued compensation and related benefits
 
44,352

 
45,751

Short-term debt
 
—

 
144,928

Accrued warranty
 
13,670

 
13,670

Deferred revenue
 
54,556

 
72,421

Total current liabilities
 
241,103

 
374,676

Accrued warranty, non-current
 
16,567

 
17,239

Deferred revenue, non-current
 
14,932

 
22,502

Deferred tax liability
 
16,247

 
21,609

Other long-term liabilities
 
14,719

 
16,279

Commitments and contingencies
 
 
 
 
Stockholders’ equity:
 
 
 
 
Preferred stock, $0.001 par value
 
 
 
 
Authorized shares - 25,000 and no shares issued and outstanding
 
—

 
—

Common stock, $0.001 par value
 
 
 
 
Authorized shares - 500,000 as of June 30, 2018 and December 30, 2017
 
 
 
 
Issued and outstanding shares - 152,940 as of June 30, 2018 and 149,471 as of December 30, 2017
 
153

 
149

Additional paid-in capital
 
1,450,136

 
1,417,043

Accumulated other comprehensive income (loss)
 
(21,984
)
 
6,254

Accumulated deficit
 
(790,893
)
 
(758,081
)
Total stockholders’ equity
 
637,412

 
665,365

Total liabilities and stockholders’ equity
 
$
940,980

 
$
1,117,670





Infinera Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
Six Months Ended
 
 
June 30, 2018
 
July 1, 2017
Cash Flows from Operating Activities:
 
 
 
 
Net loss
 
$
(48,218
)
 
$
(83,290
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
33,250

 
32,623

Non-cash restructuring and related credits
 
(81
)
 
—

Amortization of debt discount and issuance costs
 
5,072

 
5,529

Impairment of intangible assets
 
—

 
252

Stock-based compensation expense
 
23,027

 
23,257

Other loss
 
167

 
320

Changes in assets and liabilities:
 
 
 
 
Accounts receivable
 
(22,015
)
 
27,629

Inventory
 
(8,703
)
 
(12,700
)
Prepaid expenses and other assets
 
(1,809
)
 
(8,127
)
Accounts payable
 
24,458

 
16,927

Accrued liabilities and other expenses
 
(14,617
)
 
(12,503
)
Deferred revenue
 
2,351

 
10,065

Net cash used in operating activities
 
(7,118
)
 
(18
)
Cash Flows from Investing Activities:
 
 
 
 
Purchase of available-for-sale investments
 
(2,986
)
 
(107,854
)
Proceeds from sales of available-for-sale investments
 
23,114

 
3,998

Proceeds from maturities of investments
 
98,112

 
79,003

Purchase of property and equipment
 
(21,503
)
 
(39,200
)
Net cash provided by (used in) investing activities
 
96,737

 
(64,053
)
Cash Flows from Financing Activities:
 
 
 
 
Repayment of debt
 
(150,000
)
 
—

Acquisition of noncontrolling interest
 
—

 
(471
)
Proceeds from issuance of common stock
 
11,066

 
11,115

Minimum tax withholding paid on behalf of employees for net share settlement
 
(964
)
 
(823
)
Net cash provided by (used in) financing activities
 
(139,898
)
 
9,821

Effect of exchange rate changes on cash and restricted cash
 
(2,218
)
 
2,943

Net change in cash, cash equivalents and restricted cash
 
(52,497
)
 
(51,307
)
Cash, cash equivalents and restricted cash at beginning of period
 
121,486

 
177,580

Cash, cash equivalents and restricted cash at end of period(1)
 
$
68,989

 
$
126,273

Supplemental disclosures of cash flow information:
 
 
 
 
Cash paid for income taxes, net of refunds
 
$
2,210

 
$
2,683

Cash paid for interest
 
$
1,328

 
$
1,316

Supplemental schedule of non-cash investing activities:
 
 
 
 
Transfer of inventory to fixed assets
 
$
1,684

 
$
2,087





 
 
 

(1)     Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets:
 
June 30, 2018
 
July 1, 2017
 
 
 
 
 
(In thousands)
Cash and cash equivalents
$
63,308

 
$
119,820

Short-term restricted cash
308

 
1,423

Long-term restricted cash
5,373

 
5,030

Total cash, cash equivalents and restricted cash
$
68,989

 
$
126,273






Infinera Corporation
Supplemental Financial Information
(Unaudited)

 
 
Q3'16
 
Q4'16
 
Q1'17
 
Q2'17
 
Q3'17
 
Q4'17
 
Q1'18
 
Q2'18
GAAP Revenue ($ Mil)
 

$185.5

 

$181.0

 

$175.5

 

$176.8

 

$192.6

 

$195.8

 

$202.7

 

$208.2

GAAP Gross Margin %
 
45.6
%
 
38.1
%
 
36.5
%
 
36.7
%
 
35.2
%
 
24.1
%
 
40.5
%
 
40.5
%
Non-GAAP Gross Margin %(1)
 
49.2
%
 
41.8
%
 
40.3
%
 
40.7
%
 
39.1
%
 
37.5
%
 
43.7
%
 
43.9
%
Revenue Composition:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic %
 
56
%
 
53
%
 
57
%
 
63
%
 
59
%
 
53
%
 
64
%
 
58
%
International %
 
44
%
 
47
%
 
43
%
 
37
%
 
41
%
 
47
%
 
36
%
 
42
%
Customers >10% of Revenue
 
2

 
2

 
1

 
3

 
2

 
1

 
2

 
2

Cash Related Information:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash from Operations ($ Mil)
 

$5.2

 

($5.0
)
 

$3.0

 

($3.0
)
 

($20.9
)
 

($1.0
)
 

($14.1
)
 

$7.0

Capital Expenditures ($ Mil)
 

$9.6

 

$10.4

 

$14.7

 

$24.5

 

$11.0

 

$7.8

 

$8.0

 

$13.5

Depreciation & Amortization ($ Mil)
 

$15.9

 

$15.7

 

$16.0

 

$16.6

 

$16.8

 

$16.6

 

$17.0

 

$16.3

DSOs
 
75

 
81

 
64

 
64

 
65

 
59

 
73

 
65

Inventory Metrics:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Raw Materials ($ Mil)
 

$37.2

 

$33.2

 

$34.8

 

$36.7

 

$35.8

 

$27.4

 

$30.3

 

$30.5

Work in Process ($ Mil)
 

$65.5

 

$74.5

 

$81.1

 

$91.6

 

$84.3

 

$59.6

 

$66.5

 

$61.6

Finished Goods ($ Mil)
 

$128.8

 

$125.3

 

$118.0

 

$117.7

 

$122.7

 

$127.7

 

$119.1

 

$127.2

Total Inventory ($ Mil)
 

$231.5

 

$233.0

 

$233.9

 

$246.0

 

$242.8

 

$214.7

 

$215.9

 

$219.3

Inventory Turns(2)
 
1.6

 
1.8

 
1.8

 
1.7

 
1.9

 
2.3

 
2.1

 
2.1

Worldwide Headcount
 
2,262

 
2,240

 
2,245

 
2,272

 
2,296

 
2,145

 
2,084

 
2,070

Weighted Average Shares Outstanding (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
143,850

 
144,770

 
145,786

 
147,538

 
148,777

 
149,412

 
150,333

 
152,259

Diluted
 
144,993

 
145,497

 
147,017

 
148,662

 
149,714

 
150,098

 
151,633

 
154,777

  
 
 
 
 
 
(1) 
Non-GAAP adjustments include restructuring and related 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 related costs, non-cash stock-based compensation expense, and certain purchase accounting adjustments, divided by the average inventory for the quarter.





Infinera Corporation
GAAP to Non-GAAP Reconciliation of Financial Outlook
(In millions, except percentages and per share data)
(Unaudited) 

The following amounts represent the midpoint of the expected range:
 
 
Q3'18
 
 
Outlook
Reconciliation of Gross Margin:
 
 
U.S. GAAP
 
35
 %
Stock-based compensation
 
1
 %
Amortization of acquired intangible assets
 
2
 %
Non-GAAP
 
38
 %
 
 
 
Reconciliation of Operating Expenses:
 
 
U.S. GAAP
 
$
97

Stock-based compensation
 
(9
)
Amortization of acquired intangible assets
 
(2
)
Non-GAAP
 
$
86

 
 
 
Reconciliation of Operating Margin:
 
 
U.S. GAAP
 
(12
)%
Stock-based compensation
 
5
 %
Amortization of acquired intangible assets
 
4
 %
Non-GAAP
 
(3
)%
 
 
 
Reconciliation of Net Loss per Common Share:
 
 
U.S. GAAP
 
$
(0.16
)
Stock-based compensation
 
0.07

Amortization of acquired intangible assets
 
0.05

Income tax effects
 
(0.01
)
Non-GAAP
 
$
(0.05
)