Infinera Corporation Reports First Quarter 2013 Financial Results

Marketwired

SUNNYVALE, CA--(Marketwired - Apr 24, 2013) - Infinera Corporation (NASDAQ: INFN), a leading provider of digital optical communications systems, today released financial results for the first quarter ended March 30, 2013.

GAAP revenues for the first quarter of 2013 were $124.6 million compared to $128.1 million in the fourth quarter of 2012 and $104.7 million in the first quarter of 2012.

GAAP gross margin for the first quarter of 2013 was 34% compared to 34% in the fourth quarter of 2012 and 39% in the first quarter of 2012. GAAP net loss for the quarter was $(15.3) million, or $(0.13) per share, compared to net loss of $(16.1) million, or $(0.14) per share, in the fourth quarter of 2012 and net loss of $(20.6) million, or $(0.19) per share, in the first quarter of 2012.

Non-GAAP gross margin for the first quarter of 2013 was 36% compared to 36% in the fourth quarter of 2012 and 40% in the first quarter of 2012, excluding non-cash stock-based compensation expenses. Non-GAAP net loss for the first quarter of 2013 was $(7.3) million, or $(0.06) per share, compared to net loss of $(6.0) million, or $(0.05) per share, in the fourth quarter of 2012 and net loss of $(11.2) million, or $(0.10) per share, in the first quarter of 2012.

Management Commentary

"Our first quarter performance demonstrated solid execution in a traditionally slow quarter for the industry," said Tom Fallon, president and chief executive officer. "The DTN-X platform continued to gain traction in the market. During the quarter, we received purchase commitments from six additional customers, including two new to Infinera, for a total of 27 DTN-X customer commitments to date. Customer deployments were strong and we shipped a record number of 100G ports.

"The economic value proposition offered by Infinera's photonic integration and long-haul 500G super-channels has generated significant interest among potential customers. As a result, our new business pipeline is extremely active and we are pursuing global opportunities in a wide variety of markets.

"We are increasingly confident in our outlook for Infinera. We exited the first quarter with an increased backlog and a robust pipeline of potential new business, positioning us well for 2013."

Conference Call Information:

Infinera will host a conference call for analysts and investors to discuss its first quarter results and its outlook for the second quarter today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). A live webcast of the conference call will also be accessible from the Investor Relations' section of the company's website at www.infinera.com. Following the webcast, an archived version will be available on the website for 90 days. To hear the replay, parties in the United States and Canada should call 1-866-459-3539. International parties can access the replay at 1-203-369-1328.

About Infinera

Infinera provides Digital Optical Networking systems to telecommunications carriers worldwide. Infinera's systems are unique in their use of a breakthrough semiconductor technology: the photonic integrated circuit (PIC). Infinera's systems and PIC technology are designed to provide customers with simpler and more flexible engineering and operations, faster time-to-service, and the ability to rapidly deliver differentiated services without reengineering their optical infrastructure. For more information, please visit www.infinera.com.

Forward-Looking Statements

This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties. 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. Forward-looking statements include statements regarding Infinera's expectations, beliefs, intentions or strategies regarding the future including statements that the economic value proposition offered by Infinera's photonic integration and long-haul 500G super-channels has generated significant interest among potential customers; that our new business pipeline is extremely active and we are pursuing global opportunities in a wide variety of markets; that we are increasingly optimistic about the outlook for Infinera; and that we exited the first quarter with an increased backlog, strong bookings, and a robust pipeline of potential new business, positioning us well for 2013. Such forward-looking statements can be identified by forward-looking words such as "anticipated," "believed," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or similar words. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include aggressive business tactics by our competitors, our reliance on single-source suppliers, our ability to protect our intellectual property, claims by others that we infringe their intellectual property, and our ability to respond to rapid technological changes, and other risks that may impact our business are set forth in our annual reports on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 5, 2013, as well as subsequent reports filed with or furnished to the SEC. These reports are available on our website at www.infinera.com and the SEC's website at www.sec.gov. 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 non-cash stock-based compensation expenses and non-recurring restructuring and other related costs. We believe these adjustments are appropriate to enhance an overall understanding of our underlying financial performance and also our prospects for the future and are considered by management for the purpose of making operational decisions. In addition, these results are the primary indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income (loss), basic and diluted net income (loss) per share, or gross margin prepared in accordance with GAAP. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and are subject to limitations. For a description of these non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial measures, please see the section titled, "GAAP to Non-GAAP Reconciliations." We anticipate disclosing forward-looking non-GAAP information in our conference call to discuss our first quarter results, including an estimate of non-GAAP earnings for the second quarter of 2013 that excludes non-cash stock-based compensation expenses.

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

Infinera Corporation and the Infinera logo are trademarks or registered trademarks of Infinera Corporation. All other trademarks used or mentioned herein belong to their respective owners.

 
 
Infinera Corporation      
GAAP Condensed Consolidated Statements of Operations      
(In thousands, except share data)      
(Unaudited)      
    Three Months Ended  
    March 30,     March 31,  
    2013     2012  
Revenue:                
  Product   $ 107,809     $ 92,391  
  Ratable product and related support and services     534       531  
  Services     16,282       11,779  
    Total revenue     124,625       104,701  
                 
Cost of revenue (1):                
  Cost of product     75,352       59,324  
  Cost of ratable product and related support and services    
95
     
191
 
  Cost of services     6,476       4,759  
    Total cost of revenue     81,923       64,274  
                 
Gross profit     42,702       40,427  
                 
Operating expenses (1):                
  Research and development     29,726       30,985  
  Sales and marketing     18,046       18,242  
  General and administrative     9,872       11,084  
    Total operating expenses     57,644       60,311  
                 
Loss from operations     (14,942 )     (19,884 )
                 
Other income (expense), net:                
  Interest income     197       275  
  Other gain (loss), net:     (203 )     (424 )
    Total other income (expense), net     (6 )     (149 )
                 
Loss before income taxes     (14,948 )     (20,033 )
Provision for income taxes     331       579  
Net loss   $ (15,279 )   $ (20,612 )
                 
Net loss per common share, basic and diluted   $ (0.13 )   $ (0.19 )
                 
Weighted average shares used in computing basic and diluted net loss per common share    
114,308
     
108,666
 
                 
                 
(1) The following table summarizes the effects of stock-based compensation related to employees and non-employees for the three months ended March 30, 2013 and March 31, 2012:  
             
    Three Months Ended  
    March 30,     March 31,  
    2013     2012  
  Cost of revenue   $ 486     $ 606  
  Research and development     3,119       3,320  
  Sales and marketing     1,999       2,219  
  General and administration     769       2,223  
      6,373       8,368  
  Cost of revenue - amortization from balance sheet*     1,602       1,069  
  Total stock-based compensation expense   $ 7,975     $ 9,437  
                 
* Stock-based compensation expense deferred to inventory and deferred inventory costs in prior periods and recognized in the current period.  
   
   
   
   
Infinera Corporation  
GAAP to Non-GAAP Reconciliations  
(In thousands, except per share data)  
(Unaudited)  
   
    Three Months Ended  
    March 30,    December 29,   March 31,  
    2013     2012     2012  
Reconciliation of Gross Profit:                        
U.S. GAAP as reported   $ 42,702     $ 43,268     $ 40,427  
Stock-based compensation(1)     2,088       2,684       1,675  
Non-GAAP as adjusted   $ 44,790     $ 45,952     $ 42,102  
                         
Reconciliation of Gross Margin:                        
U.S. GAAP as reported     34 %     34 %     39 %
Stock-based compensation(1)     2 %     2 %     1 %
Non-GAAP as adjusted     36 %     36 %     40 %
                         
Reconciliation of Loss from Operations:                        
U.S. GAAP as reported   $ (14,942 )   $ (15,513 )   $ (19,884 )
Stock-based compensation(1)     7,975       10,135       9,437  
Non-GAAP as adjusted   $ (6,967 )   $ (5,378 )   $ (10,447 )
                         
Reconciliation of Net Loss:                        
U.S. GAAP as reported   $ (15,279 )   $ (16,088 )   $ (20,612 )
Stock-based compensation(1)     7,975       10,135       9,437  
Non-GAAP as adjusted   $ (7,304 )   $ (5,953 )   $ (11,175 )
                         
Net Loss per Common Share - Basic:                        
U.S. GAAP as reported   $ (0.13 )   $ (0.14 )   $ (0.19 )
Stock-based compensation(1)     0.07       0.09       0.09  
Non-GAAP as adjusted   $ (0.06 )   $ (0.05 )   $ (0.10 )
                         
Net Loss per Common Share - Diluted:                        
U.S. GAAP as reported   $ (0.13 )   $ (0.14 )   $ (0.19 )
Stock-based compensation(1)     0.07       0.09       0.09  
Non-GAAP as adjusted(2)   $ (0.06 )   $ (0.05 )   $ (0.10 )
                         
Weighted average shares used in computing net loss per common share - U.S. GAAP:                        
Basic     114,308       112,311       108,666  
Diluted     114,308       112,311       108,666  
                         
Weighted average shares used in computing net loss per common share - Non-GAAP:                        
Basic     114,308       112,311       108,666  
Diluted(2)     117,602       114,115       112,007  
                         
                         
(1) Stock-based compensation expense is calculated in accordance with the fair value recognition provisions of Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 718, Compensation-Stock Compensation effective January 1, 2006. The following table summarizes the effects of stock-based compensation related to employees and non-employees:  
                   
    Three Months Ended  
    March 30,    December 29,   March 31,  
    2013     2012     2012  
Cost of revenue   $ 486     $ 735     $ 606  
Research and development     3,119       2,852       3,320  
Sales and marketing     1,999       2,802       2,219  
General and administration     769       1,797       2,223  
      6,373       8,186       8,368  
Cost of revenue - amortization from balance sheet*     1,602       1,949       1,069  
Total stock-based compensation expense   $ 7,975     $ 10,135     $ 9,437  
                         
* Stock-based compensation expense deferred to inventory and deferred inventory costs in prior periods and recognized in the current period.  
                         
(2) Diluted shares used to calculate net loss per share on a non-GAAP basis provided for informational purposes only.  
   
   
             
             
Infinera Corporation            
Condensed Consolidated Balance Sheets            
(In thousands, except par values)            
(Unaudited)            
             
    March 30,   December 29, 
    2013     2012  
ASSETS                
                 
Current assets:                
  Cash and cash equivalents   $ 98,998     $ 104,666  
  Short-term investments     62,108       76,146  
  Accounts receivable, net of allowance for doubtful accounts of $100 in 2013 and $94 in 2012    
112,133
     
107,039
 
  Other receivables     3,298       2,909  
  Inventory     130,991       127,809  
  Deferred inventory costs     413       1,029  
  Prepaid expenses and other current assets     10,284       9,899  
    Total current assets     418,225       429,497  
                 
Property, plant and equipment, net     77,155       80,343  
Deferred inventory costs, non-current     68       100  
Long-term investments     -       2,874  
Cost-method investment     9,000       9,000  
Long-term restricted cash     3,826       3,868  
Deferred tax asset     745       805  
Other non-current assets     1,779       1,683  
    Total assets   $ 510,798     $ 528,170  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
                 
Current liabilities:                
  Accounts payable   $ 52,104     $ 61,428  
  Accrued expenses     19,940       25,483  
  Accrued compensation and related benefits     18,694       22,325  
  Accrued warranty     7,027       7,262  
  Deferred revenue     31,234       26,744  
  Deferred tax liability     745       805  
    Total current liabilities     129,744       144,047  
                 
  Accrued warranty, non-current     9,645       9,220  
  Deferred revenue, non-current     3,059       3,210  
  Other long-term liabilities     15,909       15,557  
                 
Commitments and contingencies                
                 
Stockholders' equity:                
  Preferred stock, $0.001 par value                
    Authorized shares - 25,000 and no shares issued and outstanding     -       -  
  Common stock, $0.001 par value                
    Authorized shares - 500,000 as of March 30, 2013 and December 29, 2012                
    Issued and outstanding shares - 115,617 as of March 30, 2013 and 112,461 as of December 29, 2012    
116
     
 112
 
  Additional paid-in capital     942,490       930,618  
  Accumulated other comprehensive loss     (2,520 )     (2,228 )
  Accumulated deficit     (587,645 )     (572,366 )
  Total stockholders' equity     352,441       356,136  
    Total liabilities and stockholders' equity   $ 510,798     $ 528,170  
                 
                 
   
   
Infinera Corporation  
Condensed Consolidated Statements of Cash Flows  
(In thousands)  
(Unaudited)  
   
    Three Months Ended  
    March 30,     March 31,  
    2013     2012  
Cash Flows from Operating Activities:                
Net loss   $ (15,279 )   $ (20,612 )
Adjustments to reconcile net loss to net cash used in operating activities:                
  Depreciation and amortization     6,334       5,528  
  (Recovery of) provision for other receivables     (88 )     -  
  Amortization of premium on investments     314       618  
  Stock-based compensation expense     7,975       9,437  
  Non-cash tax benefit     -       (59 )
  Other gain     (243 )     (22 )
  Changes in assets and liabilities:                
    Accounts receivable     (5,094 )     15,172  
    Other receivables     (558 )     422  
    Inventory     (5,041 )     (12,050 )
    Prepaid expenses and other assets     (432 )     2,173  
    Deferred inventory costs     629       1,167  
    Accounts payable     (8,045 )     (7,266 )
    Accrued liabilities and other expenses     (6,301 )     (1,010 )
    Deferred revenue     4,340       624  
    Accrued warranty     190       121  
      Net cash used in operating activities     (21,299 )     (5,757 )
                 
Cash Flows from Investing Activities:                
  Purchase of available-for-sale investments     (20,023 )     (21,907 )
  Proceeds from sale of available-for-sale investments     2,850       5,194  
  Proceeds from maturities and calls of investments     33,835       32,034  
  Purchase of property and equipment     (4,936 )     (13,649 )
  Reimbursement of manufacturing capacity advance     -       50  
  Change in restricted cash     44       (193 )
      Net cash provided by investing activities     11,770       1,529  
                 
Cash Flows from Financing Activities:                
  Proceeds from issuance of common stock     5,560       7,005  
  Repurchase of common stock     (1,493 )     (832 )
    Net cash provided by financing activities     4,067       6,173  
                 
Effect of exchange rate changes on cash     (206 )     306  
                 
Net change in cash and cash equivalents     (5,668 )     2,251  
Cash and cash equivalents at beginning of period     104,666       94,458  
Cash and cash equivalents at end of period   $ 98,998     $ 96,709  
                 
Supplemental disclosures of cash flow information:                
  Cash paid for income taxes   $ 210     $ 329  
Supplemental schedule of non-cash financing activities:                
  Non-cash settlement for manufacturing capacity advance   $ -     $ 275  
                   
                   
 
 
Infinera Corporation
Supplemental Financial Information
(Unaudited)
 
  Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13
Revenue ($ Mil) $96.0 $104.0 $112.0 $104.7 $93.5 $112.2 $128.1 $124.6
Gross Margin % (1) 41% 41% 42% 40% 37% 39% 36% 36%
Invoiced Shipment Composition:                
Domestic % 72% 65% 70% 71% 70% 70% 63% 63%
International % 28% 35% 30% 29% 30% 30% 37% 37%
Largest Customer % 10% 14% 13% 15% 13% 13% 14%
Cash Related Information:                
Cash from (used in) Operations ($ Mil) ($0.1) $4.1 ($5.1) ($5.8) ($22.7) ($29.3) $8.3 ($21.3)
Capital Expenditures ($ Mil) $6.7 $5.9 $16.1 $13.6 $6.1 $2.5 $3.2 $4.9
Depreciation & Amortization ($ Mil) $4.2 $4.9 $4.5 $5.5 $5.7 $6.1 $6.4 $6.3
DSO's 70 60 65 57 55 74 76 82
Inventory Metrics:                
Raw Materials ($ Mil) $7.3 $7.0 $12.1 $15.3 $14.8 $12.4 $13.0 $12.2
Work in Process ($ Mil) $27.7 $26.9 $37.0 $41.6 $49.4 $59.8 $57.3 $53.1
Finished Goods ($ Mil) $34.4 $36.4 $39.9 $44.7 $50.9 $46.3 $57.5 $65.7
Total Inventory ($ Mil) $69.4 $70.3 $89.0 $101.6 $115.1 $118.5 $127.8 $131.0
Inventory Turns (1) 3.3 3.5 2.9 2.5 2.1 2.3 2.6 2.4
Worldwide Headcount 1,136 1,151 1,181 1,210 1,228 1,235 1,242 1,219
                 
                 
(1) Amounts reflect non-GAAP results. Non-GAAP adjustments include non-cash stock-based compensation expense.
 
 
Contact:

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

Investors/Analysts:
Jenifer Kirtland/Bob Jones
jkirtland@infinera.com / bjones@infinera.com
Infinera Corporation
408-543-8139/408-543-8140
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