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Infinera Corporation Reports Second Quarter 2022 Financial Results

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Infinera Corporation
Infinera Corporation

SAN JOSE, Calif., July 28, 2022 (GLOBE NEWSWIRE) -- Infinera Corporation (NASDAQ: INFN) today released financial results for its second quarter ended June 25, 2022.

GAAP revenue for the quarter was $358.0 million compared to $338.9 million in the first quarter of 2022 and $338.2 million in the second quarter of 2021.

GAAP gross margin for the quarter was 30.5% compared to 32.9% in the first quarter of 2022 and 35.6% in the second quarter of 2021. GAAP operating margin for the quarter was (11.1)% compared to (10.8)% in the first quarter of 2022 and (6.9)% in the second quarter of 2021.

GAAP net loss for the quarter was $(55.7) million, or $(0.26) per share, compared to $(41.9) million, or $(0.20) per share, in the first quarter of 2022, and $(35.6) million, or $(0.17) per share, in the second quarter of 2021.

Non-GAAP gross margin for the quarter was 36.1% compared to 36.2% in the first quarter of 2022 and 37.7% in the second quarter of 2021. Non-GAAP operating margin for the quarter was 0.4% compared to (1.0)% in the first quarter of 2022 and 0.8% in the second quarter of 2021.

Non-GAAP net loss for the quarter was $(10.1) million, or $(0.05) per share, compared to net loss of $(14.0) million, or $(0.07) per share, in the first quarter of 2022, and $(6.0) million, or $(0.03) per share, in the second quarter of 2021.

A further explanation of the use of non-GAAP financial information and a reconciliation of each of the non-GAAP financial measures to the most directly comparable GAAP financial measure can be found at the end of this press release.

Infinera CEO David Heard said, “Our second quarter results were encouraging in a challenging environment, with revenue beating the midpoint of our outlook range, non-GAAP operating margin at the upper end of the range, and non-GAAP gross margin near the midpoint of the range due to higher supply chain costs. Strong demand resulted in greater than 80% year-over-year growth in total backlog, which includes product backlog growth exceeding 100%, and a quarterly book-to-bill ratio above 1."

“We are executing well against our 8x4x1 strategy as we scale ICE6 globally, expand our metro footprint, and prepare to bring our pluggables business online, all while planning to deliver continued growth and margin expansion in the second half of 2022. The timing of our refreshed portfolio allows us to take advantage of the accelerated shift to open architectures and our customers’ growing requirement to bring on new vendors to improve their supply chain resilience.”

Financial Outlook

Infinera's outlook for the quarter ending September 24, 2022 is as follows:

  • Revenue is expected to be $380 million +/- $20 million.

  • GAAP gross margin is expected to be 36.0% +/- 150 bps. Non-GAAP gross margin is expected to be 38.0% +/- 150 bps.

  • GAAP operating expenses are expected to be $151 million +/- $2 million. Non-GAAP operating expenses are expected to be $133 million +/- $2 million.

  • GAAP operating margin is expected to be (4.0)% +/- 300 bps. Non-GAAP operating margin is expected to be 3.0% +/- 300 bps.

Second Quarter 2022 Investor Slides Available Online

Investor slides reviewing Infinera's second quarter of 2022 financial results will be furnished to the Securities and Exchange Commission (SEC) on a Current Report on Form 8-K and published on Infinera's Investor Relations website at investors.infinera.com prior to the second quarter of 2022 earnings conference call. Analysts and investors are encouraged to review these slides prior to participating in the conference call webcast. A copy of this press release can be found at investors.infinera.com.

Conference Call Information

Infinera will host a conference call for analysts and investors to discuss its results for the second quarter of 2022 and its outlook for the third quarter of 2022 today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). Interested parties may register for the conference call at https://conferencingportals.com/event/PUIteabr. A live webcast of the conference call will also be accessible from the Events 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
Tel. +1 (916) 595-8157
avue@infinera.com

Investors:
Amitabh Passi, Head of Investor Relations
Tel. +1 (669) 295-1489
apassi@infinera.com

About Infinera

Infinera is a global supplier of innovative open optical networking solutions that enable carriers, cloud operators, governments, and enterprises to scale network bandwidth, accelerate service innovation, and automate network operations. Infinera solutions deliver industry-leading economics and performance in long-haul, submarine, data center interconnect, and metro transport applications. To learn more about Infinera, visit www.infinera.com, follow us on Twitter and LinkedIn, and subscribe for updates. Infinera and the Infinera logo are registered trademarks of Infinera Corporation.

Forward-Looking Statements
This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements generally relate to future events or Infinera's future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or the negative of these words or similar terms or expressions that concern Infinera's expectations, strategy, priorities, plans or intentions. Such forward-looking statements in this press release include, without limitation, Infinera’s future business plans, Infinera's future growth opportunities, and margin expansion, Infinera's ability to leverage market and customer trends for its business objectives, and Infinera's financial outlook for the third quarter of 2022. These forward-looking statements are based on estimates and information available to Infinera as of the date hereof and are not guarantees of future performance; 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 supply chain issues, including delays, shortages and increased costs, and Infinera's dependency on sole source, limited source or high-cost suppliers; the adverse impact inflation may have on Infinera by increasing costs beyond what it can recover through price increases; delays in the development, introduction or acceptance of new products or updates to existing 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; aggressive business tactics by Infinera’s competitors and Infinera's ability to compete in a highly competitive market; the effect of the COVID-19 pandemic on Infinera’s business, results of operations, financial condition, stock price and personnel; produce performance problems; Infinera's ability to identify, attract and retain qualified personnel; the partial or complete loss of Infinera's manufacturing facilities, a reduction in yield of PICs or an inability to scale to meet customer demands; the effects of customer and supplier consolidation; Infinera’s ability to respond to rapid technological changes; failure to accurately forecast Infinera's manufacturing requirements or customer demand; Infinera’s future capital needs and its ability to generate the cash flow or otherwise secure the capital necessary to meet such capital needs; the effect of global and regional economic conditions on Infinera’s business, including effects on purchasing decisions by customers; risks and compliance obligations relating to Infinera's international operations as well as actions by the U.S. or foreign governments, including with respect to Russia's military operations in Ukraine; the effective tax rate of Infinera, which may increase or fluctuate; the impacts of foreign currency fluctuations; Infinera's ability to service its debt obligations and pursue its strategic plan; potential dilution from the issuance of additional shares of common stock in connection with the conversion of Infinera's convertible senior notes; Infinera’s ability to protect its intellectual property; claims by others that Infinera infringes on their intellectual property rights; security incidents, such as data breaches or cyber-attacks; Infinera's ability to comply with various rules and regulations, including with respect to export control and trade compliance, environmental, privacy and data protection matters; events that are outside of Infinera's control, such as natural disasters, human violence or other catastrophic events that could harm Infinera's operations; 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 Infinera's periodic reports filed with the SEC, including its Annual Report on Form 10-K for the year ended December 25, 2021, as filed with the SEC on February 23, 2022, and its Quarterly Report on Form 10-Q for the quarter ended March 26, 2022, as filed with the SEC on May 3, 2022, 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 financial measures that exclude in certain cases acquisition-related deferred revenue adjustment, stock-based compensation expenses, amortization of acquired intangible assets, acquisition and integration costs, restructuring and other related costs, inventory related charges, litigation charges, amortization of debt discount on Infinera’s convertible senior notes, foreign exchange (gains) losses, net, and income 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 table titled “GAAP to Non-GAAP Reconciliations” and related footnotes.

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 2022 that exclude stock-based compensation expense, amortization of acquired intangible assets, and restructuring and other related costs. Please see the section titled “GAAP to Non-GAAP Reconciliation of Financial Outlook” below for specific adjustments.

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, the non-GAAP financial measures presented in this press release 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 revenue, gross margin, operating expenses, operating margin, and net income (loss) 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.

Infinera Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

 

June 25,
2022

 

June 26,
2021

 

June 25,
2022

 

June 26,
2021

Revenue:

 

 

 

 

 

 

 

 

Product

 

$

284,852

 

 

$

257,441

 

 

$

552,305

 

 

$

511,602

 

Services

 

 

73,133

 

 

 

80,786

 

 

 

144,554

 

 

 

157,532

 

   Total revenue

 

 

357,985

 

 

 

338,227

 

 

 

696,859

 

 

 

669,134

 

Cost of revenue:

 

 

 

 

 

 

 

 

Cost of product

 

 

204,122

 

 

 

172,053

 

 

 

387,009

 

 

 

337,538

 

Cost of services

 

 

38,421

 

 

 

41,446

 

 

 

76,380

 

 

 

84,706

 

Amortization of intangible assets

 

 

6,229

 

 

 

4,614

 

 

 

12,460

 

 

 

9,230

 

Restructuring and other related costs

 

 

13

 

 

 

(269

)

 

 

163

 

 

 

245

 

   Total cost of revenue

 

 

248,785

 

 

 

217,844

 

 

 

476,012

 

 

 

431,719

 

Gross profit

 

 

109,200

 

 

 

120,383

 

 

 

220,847

 

 

 

237,415

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

78,635

 

 

 

73,934

 

 

 

152,046

 

 

 

147,463

 

Sales and marketing

 

 

35,329

 

 

 

33,782

 

 

 

71,153

 

 

 

66,554

 

General and administrative

 

 

30,150

 

 

 

32,197

 

 

 

58,040

 

 

 

58,703

 

Amortization of intangible assets

 

 

3,667

 

 

 

4,392

 

 

 

7,413

 

 

 

8,797

 

Acquisition and integration costs

 

 

 

 

 

 

 

 

 

 

 

614

 

Restructuring and other related costs

 

 

1,133

 

 

 

(674

)

 

 

8,403

 

 

 

1,645

 

   Total operating expenses

 

 

148,914

 

 

 

143,631

 

 

 

297,055

 

 

 

283,776

 

Loss from operations

 

 

(39,714

)

 

 

(23,248

)

 

 

(76,208

)

 

 

(46,361

)

Other income (expense), net:

 

 

 

 

 

 

 

 

Interest income

 

 

104

 

 

 

27

 

 

 

157

 

 

 

67

 

Interest expense

 

 

(7,252

)

 

 

(12,017

)

 

 

(12,244

)

 

 

(23,860

)

Other gain (loss), net

 

 

(3,520

)

 

 

2,719

 

 

 

2,500

 

 

 

(9,676

)

   Total other income (expense), net

 

 

(10,668

)

 

 

(9,271

)

 

 

(9,587

)

 

 

(33,469

)

Loss before income taxes

 

 

(50,382

)

 

 

(32,519

)

 

 

(85,795

)

 

 

(79,830

)

Provision for income taxes

 

 

5,339

 

 

 

3,075

 

 

 

11,776

 

 

 

4,086

 

Net loss

 

$

(55,721

)

 

$

(35,594

)

 

$

(97,571

)

 

$

(83,916

)

Net loss per common share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.26

)

 

$

(0.17

)

 

$

(0.46

)

 

$

(0.41

)

Diluted

 

$

(0.26

)

 

$

(0.17

)

 

$

(0.46

)

 

$

(0.41

)

Weighted average shares used in computing net loss per common share:

 

 

 

 

 

 

 

 

Basic

 

 

215,509

 

 

 

206,780

 

 

 

213,846

 

 

 

204,709

 

Diluted

 

 

215,509

 

 

 

206,780

 

 

 

213,846

 

 

 

204,709

 

 

 

Infinera Corporation
GAAP to Non-GAAP Reconciliations
(In thousands, except percentages)
(Unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

 

June 25,
2022

 

 

 

March 26,
2022

 

 

 

June 26,
2021

 

 

 

June 25,
2022

 

 

 

June 26,
2021

 

 

Reconciliation of Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP as reported

 

$

357,985

 

 

 

 

$

338,874

 

 

 

 

$

338,227

 

 

 

 

$

696,859

 

 

 

 

$

669,134

 

 

 

Acquisition-related deferred revenue adjustment(1)

 

 

 

 

 

 

 

 

 

 

 

 

978

 

 

 

 

 

 

 

 

 

 

1,956

 

 

 

Non-GAAP as adjusted

 

$

357,985

 

 

 

 

$

338,874

 

 

 

 

$

339,205

 

 

 

 

$

696,859

 

 

 

 

$

671,090

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Gross Profit and Gross Margin:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP as reported

 

$

109,200

 

 

30.5

%

 

$

111,647

 

 

32.9

%

 

$

120,383

 

 

35.6

%

 

$

220,847

 

 

31.7

%

 

$

237,415

 

 

35.5

%

Acquisition-related deferred revenue adjustment(1)

 

 

 

 

 

 

 

 

 

 

 

 

978

 

 

 

 

 

 

 

 

 

 

1,956

 

 

 

Stock-based compensation expense(2)

 

 

2,594

 

 

 

 

 

1,889

 

 

 

 

 

2,130

 

 

 

 

 

4,483

 

 

 

 

 

3,926

 

 

 

Amortization of acquired intangible assets(3)

 

 

6,229

 

 

 

 

 

6,231

 

 

 

 

 

4,614

 

 

 

 

 

12,460

 

 

 

 

 

9,230

 

 

 

Restructuring and other related costs(5)

 

 

13

 

 

 

 

 

150

 

 

 

 

 

(269

)

 

 

 

 

163

 

 

 

 

 

245

 

 

 

Inventory related charges(6)

 

 

11,045

 

 

 

 

 

2,667

 

 

 

 

 

 

 

 

 

 

13,712

 

 

 

 

 

 

 

 

Non-GAAP as adjusted

 

$

129,081

 

 

36.1

%

 

$

122,584

 

 

36.2

%

 

$

127,836

 

 

37.7

%

 

$

251,665

 

 

36.1

%

 

$

252,772

 

 

37.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP as reported

 

$

148,914

 

 

 

 

$

148,141

 

 

 

 

$

143,631

 

 

 

 

$

297,055

 

 

 

 

$

283,776

 

 

 

Stock-based compensation expense(2)

 

 

15,189

 

 

 

 

 

11,050

 

 

 

 

 

11,809

 

 

 

 

 

26,239

 

 

 

 

 

20,987

 

 

 

Amortization of acquired intangible assets(3)

 

 

3,667

 

 

 

 

 

3,746

 

 

 

 

 

4,392

 

 

 

 

 

7,413

 

 

 

 

 

8,797

 

 

 

Acquisition and integration costs(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

614

 

 

 

Restructuring and other related costs(5)

 

 

1,133

 

 

 

 

 

7,270

 

 

 

 

 

(674

)

 

 

 

 

8,403

 

 

 

 

 

1,645

 

 

 

Litigation charges (7)

 

 

1,350

 

 

 

 

 

 

 

 

 

 

2,885

 

 

 

 

 

1,350

 

 

 

 

 

2,885

 

 

 

Non-GAAP as adjusted

 

$

127,575

 

 

 

 

$

126,075

 

 

 

 

$

125,219

 

 

 

 

$

253,650

 

 

 

 

$

248,848

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Income/(Loss) from Operations and Operating Margin:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP as reported

 

$

(39,714

)

 

(11.1

)%

 

$

(36,494

)

 

(10.8

)%

 

$

(23,248

)

 

(6.9

)%

 

$

(76,208

)

 

(10.9

)%

 

$

(46,361

)

 

(6.9

)%

Acquisition-related deferred revenue adjustment(1)

 

 

 

 

 

 

 

 

 

 

 

 

978

 

 

 

 

 

 

 

 

 

 

1,956

 

 

 

Stock-based compensation expense(2)

 

 

17,783

 

 

 

 

 

12,939

 

 

 

 

 

13,939

 

 

 

 

 

30,722

 

 

 

 

 

24,913

 

 

 

Amortization of acquired intangible assets(3)

 

 

9,896

 

 

 

 

 

9,977

 

 

 

 

 

9,006

 

 

 

 

 

19,873

 

 

 

 

 

18,027

 

 

 

Acquisition and integration costs(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

614

 

 

 

Restructuring and other related costs(5)

 

 

1,146

 

 

 

 

 

7,420

 

 

 

 

 

(943

)

 

 

 

 

8,566

 

 

 

 

 

1,890

 

 

 

Inventory related charges(6)

 

 

11,045

 

 

 

 

 

2,667

 

 

 

 

 

 

 

 

 

 

13,712

 

 

 

 

 

 

 

 

Litigation charges (7)

 

 

1,350

 

 

 

 

 

 

 

 

 

 

2,885

 

 

 

 

 

1,350

 

 

 

 

 

2,885

 

 

 

Non-GAAP as adjusted

 

$

1,506

 

 

0.4

%

 

$

(3,491

)

 

(1.0

)%

 

$

2,617

 

 

0.8

%

 

$

(1,985

)

 

(0.3

)%

 

$

3,924

 

 

0.6

%


 

 

Three Months Ended

 

Six Months Ended

 

 

June 25,
2022

 

 

 

March 26,
2022

 

 

 

June 26,
2021

 

 

 

June 25,
2022

 

 

 

June 26,
2021

 

 

Reconciliation of Net Income/(Loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP as reported

 

$

(55,721

)

 

 

 

$

(41,850

)

 

 

 

$

(35,594

)

 

 

 

$

(97,571

)

 

 

 

$

(83,916

)

 

 

Acquisition-related deferred revenue adjustment(1)

 

 

 

 

 

 

 

 

 

 

 

 

978

 

 

 

 

 

 

 

 

 

 

1,956

 

 

 

Stock-based compensation expense(2)

 

 

17,783

 

 

 

 

 

12,939

 

 

 

 

 

13,939

 

 

 

 

 

30,722

 

 

 

 

 

24,913

 

 

 

Amortization of acquired intangible assets(3)

 

 

9,896

 

 

 

 

 

9,977

 

 

 

 

 

9,006

 

 

 

 

 

19,873

 

 

 

 

 

18,027

 

 

 

Acquisition and integration costs(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

614

 

 

 

Restructuring and other related costs(5)

 

 

1,146

 

 

 

 

 

7,420

 

 

 

 

 

(943

)

 

 

 

 

8,566

 

 

 

 

 

1,890

 

 

 

Inventory related charges(6)

 

 

11,045

 

 

 

 

 

2,667

 

 

 

 

 

 

 

 

 

 

13,712

 

 

 

 

 

 

 

 

Litigation charges (7)

 

 

1,350

 

 

 

 

 

 

 

 

 

 

2,885

 

 

 

 

 

1,350

 

 

 

 

 

2,885

 

 

 

Amortization of debt discount on convertible senior notes(8)

 

 

 

 

 

 

 

 

 

 

 

 

7,259

 

 

 

 

 

 

 

 

 

 

14,342

 

 

 

Foreign exchange (gains) losses, net(9)

 

 

3,778

 

 

 

 

 

(5,589

)

 

 

 

 

(3,382

)

 

 

 

 

(1,811

)

 

 

 

 

8,324

 

 

 

Income tax effects(10)

 

 

650

 

 

 

 

 

416

 

 

 

 

 

(152

)

 

 

 

 

1,066

 

 

 

 

 

(505

)

 

 

Non-GAAP as adjusted

 

$

(10,073

)

 

 

 

$

(14,020

)

 

 

 

$

(6,004

)

 

 

 

$

(24,093

)

 

 

 

$

(11,470

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Adjusted EBITDA (11):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net Income (Loss)

 

$

(10,073

)

 

 

 

$

(14,020

)

 

 

 

$

(6,004

)

 

 

 

$

(24,093

)

 

 

 

$

(11,470

)

 

 

Non-GAAP Interest expense

 

 

7,252

 

 

 

 

 

4,992

 

 

 

 

 

4,758

 

 

 

 

 

12,244

 

 

 

 

 

9,518

 

 

 

Non-GAAP Income tax effects

 

 

4,689

 

 

 

 

 

6,021

 

 

 

 

 

3,227

 

 

 

 

 

10,710

 

 

 

 

 

4,591

 

 

 

Non-GAAP Depreciation and Amortization

 

 

11,238

 

 

 

 

 

11,595

 

 

 

 

 

9,756

 

 

 

 

 

22,833

 

 

 

 

 

21,281

 

 

 

Non-GAAP as adjusted

 

$

13,106

 

 

 

 

$

8,588

 

 

 

 

$

11,737

 

 

 

 

$

21,694

 

 

 

 

$

23,920

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income/(Loss) per Common Share - Basic and Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP as reported

 

$

(0.26

)

 

 

 

$

(0.20

)

 

 

 

$

(0.17

)

 

 

 

$

(0.46

)

 

 

 

$

(0.41

)

 

 

Non-GAAP as adjusted

 

$

(0.05

)

 

 

 

$

(0.07

)

 

 

 

$

(0.03

)

 

 

 

$

(0.11

)

 

 

 

$

(0.06

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Used in Computing Net Income/(Loss) per Common Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

215,509

 

 

 

 

 

212,182

 

 

 

 

 

206,780

 

 

 

 

 

213,846

 

 

 

 

 

204,709

 

 

 

Diluted(12)

 

 

215,509

 

 

 

 

 

212,182

 

 

 

 

 

206,780

 

 

 

 

 

213,846

 

 

 

 

 

204,709

 

 

 

(1) The non-GAAP adjustments were related to maintenance support contracts assumed in the acquisition of Coriant, and the revenue was recognized through fiscal year 2021 to eliminate the effect of the deferred revenue fair value adjustment.

(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 stock-based compensation related to employees and non-employees (in thousands):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 25,
2022

 

March 26,
2022

 

June 26,
2021

 

June 25,
2022

 

June 26,
2021

Cost of revenue

 

$

2,594

 

$

1,889

 

$

2,130

 

$

4,483

 

$

3,926

Total cost of revenue

 

 

2,594

 

 

1,889

 

 

2,130

 

 

4,483

 

 

3,926

Research and development

 

 

6,652

 

 

4,841

 

 

5,071

 

 

11,493

 

 

9,368

Sales and marketing

 

 

4,047

 

 

2,767

 

 

2,811

 

 

6,814

 

 

6,010

General and administration

 

 

4,490

 

 

3,442

 

 

3,927

 

 

7,932

 

 

5,609

Total operating expenses

 

 

15,189

 

 

11,050

 

 

11,809

 

 

26,239

 

 

20,987

Total stock-based compensation expense

 

$

17,783

 

$

12,939

 

$

13,939

 

$

30,722

 

$

24,913

(3) Amortization of acquired intangible assets consists of developed technology, trade names, customer relationships and backlog acquired in connection with the acquisition of Coriant. Amortization of acquired intangible assets also consists of amortization of developed technology and customer relationships acquired in connection with the acquisition of Transmode AB. 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 gross profit, operating expenses 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 and integration costs consisted of legal, financial, IT, manufacturing-related costs, employee-related costs and professional fees incurred in connection with the acquisition of Coriant.

(5) Restructuring and other related costs are primarily associated with Infinera's plan to restructure certain international research and development operations, the reduction of operating costs and the reduction of headcount. In addition, this includes accelerated amortization on operating lease right-of-use assets due to the cessation of use of certain facilities. 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) Inventory related charges were incurred as a result of the exit from certain product lines in connection with restructuring initiatives. Management has excluded the impact of these charges in arriving at Infinera's non-GAAP results as they are non-recurring in nature and their exclusion provides a better indication of Infinera's underlying business performance.

(7) Litigation charges are associated with the settlement of litigation matters. 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 this expense is not indicative of ongoing operating performance.

(8) Effective the first quarter of 2022, Infinera no longer recognizes interest expense for amortization of debt discount as a result of the adoption of new debt guidance.

(9) Foreign exchange (gains) and losses have been excluded from Infinera's non-GAAP results because management believes that this expense is not indicative of ongoing operating performance and its exclusion provides a better indication of Infinera's underlying business performance.

(10) The difference between the GAAP and non-GAAP tax provision is due to the net tax effects of the purchase accounting adjustments, acquisition-related costs and amortization of acquired intangible assets. Management believes the exclusion of these tax effects provides a better indication of Infinera's underlying business performance.

(11) Adjusted EBITDA is a non-GAAP supplemental measure of operating performance that does not represent and should not be considered an alternative to operating loss or cash flow from operations, as determined by GAAP. Infinera's adjusted EBITDA is calculated by excluding the above non-GAAP adjustments, interest expenses, income tax effects and depreciation and amortization expenses. Management believes that adjusted EBITDA is an important financial measure for use in evaluating Infinera's financial performance, as it measures the ability of our business operations to generate cash.

(12) The non-GAAP diluted shares include the potentially dilutive securities from Infinera's stock-based benefit plans and convertible senior notes excluded from the computation of dilutive net loss per share attributable to common stockholders on a GAAP basis because the effect would have been anti-dilutive. These potentially dilutive securities are added for the computation of diluted net income per share on a non-GAAP basis in periods when Infinera has net income on a non-GAAP basis as its inclusion provides a better indication of Infinera's underlying business performance.

Infinera Corporation
GAAP to Non-GAAP Reconciliations
(In thousands)
(Unaudited)

Free Cash Flow

We define free cash flow as net cash provided by (used in) operating activities in the period minus the purchase of property and equipment, net made in the period.

Free cash flow is considered a non-GAAP financial measure under the SEC’s rules. Management believes that free cash flow is an important financial measure for use in evaluating Infinera's financial performance, as it measures our ability to generate additional cash from our business operations. Free cash flow should be considered in addition to, rather than as a substitute for, net loss as a measure of our performance or net cash provided by (used in) operating activities as a measure of our liquidity. Additionally, our definition of free cash flow is limited and does not represent residual cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt service and other obligations. Therefore, we believe it is important to view free cash flow as supplemental to our entire statement of cash flows.

 

 

Three Months Ended

 

Six Months Ended

 

 

June 25,
2022

 

March 26,
2022

 

June 26,
2021

 

June 25,
2022

 

June 26,
2021

Net cash (used in) provided by operating activities

 

$

(72,419

)

 

$

15,788

 

 

$

21,304

 

 

$

(56,631

)

 

$

39,934

 

Purchase of property and equipment, net

 

 

(10,667

)

 

 

(16,059

)

 

 

(14,068

)

 

 

(26,726

)

 

 

(25,789

)

Free cash flow

 

$

(83,086

)

 

$

(271

)

 

$

7,236

 

 

$

(83,357

)

 

$

14,145

 

 

 

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

 

 

June 25,
2022

 

December 25,
2021

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash

 

$

130,856

 

 

$

190,611

 

Short-term restricted cash

 

 

21,142

 

 

 

2,840

 

Accounts receivable, net

 

 

302,928

 

 

 

358,954

 

Inventory

 

 

309,602

 

 

 

291,367

 

Prepaid expenses and other current assets

 

 

161,480

 

 

 

147,989

 

   Total current assets

 

 

926,008

 

 

 

991,761

 

Property, plant and equipment, net

 

 

157,665

 

 

 

160,218

 

Operating lease right-of-use assets

 

 

39,055

 

 

 

45,338

 

Intangible assets

 

 

65,832

 

 

 

86,574

 

Goodwill

 

 

237,246

 

 

 

255,788

 

Long-term restricted cash

 

 

3,184

 

 

 

9,070

 

Other long-term assets

 

 

39,810

 

 

 

38,475

 

   Total assets

 

$

1,468,800

 

 

$

1,587,224

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

208,882

 

 

$

216,404

 

Accrued expenses and other current liabilities

 

 

141,965

 

 

 

147,029

 

Accrued compensation and related benefits

 

 

68,549

 

 

 

88,021

 

Short-term debt, net

 

 

540

 

 

 

533

 

Accrued warranty

 

 

19,203

 

 

 

23,204

 

Deferred revenue

 

 

116,043

 

 

 

137,297

 

   Total current liabilities

 

 

555,182

 

 

 

612,488

 

Long-term debt, net

 

 

640,076

 

 

 

476,789

 

Long-term accrued warranty

 

 

17,566

 

 

 

21,106

 

Long-term deferred revenue

 

 

29,130

 

 

 

31,612

 

Long-term deferred tax liability

 

 

2,115

 

 

 

2,364

 

Long-term operating lease liabilities

 

 

50,839

 

 

 

54,326

 

Other long-term liabilities

 

 

57,334

 

 

 

64,768

 

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 25, 2022 and December 25, 2021
Issued and outstanding shares - 216,431 as of June 25, 2022 and 211,381 as of December 25, 2021

 

 

216

 

 

 

211

 

Additional paid-in capital

 

 

1,867,000

 

 

 

2,026,098

 

Accumulated other comprehensive loss

 

 

(29,537

)

 

 

(4,496

)

Accumulated deficit

 

 

(1,721,121

)

 

 

(1,698,042

)

Total stockholders' equity

 

 

116,558

 

 

 

323,771

 

   Total liabilities and stockholders’ equity

 

$

1,468,800

 

 

$

1,587,224

 

 

 

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

 

 

Six Months Ended

 

 

June 25,
2022

 

June 26,
2021

Cash Flows from Operating Activities:

 

 

 

 

Net loss

 

$

(97,571

)

 

$

(83,916

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

 

Depreciation and amortization

 

 

42,706

 

 

 

39,308

 

Non-cash restructuring charges and other related costs

 

 

5,657

 

 

 

824

 

Amortization of debt discount and issuance costs

 

 

4,124

 

 

 

15,834

 

Operating lease expense

 

 

4,987

 

 

 

8,526

 

Stock-based compensation expense

 

 

30,722

 

 

 

24,913

 

Other, net

 

 

868

 

 

 

3,090

 

Changes in assets and liabilities:

 

 

 

 

Accounts receivable

 

 

50,396

 

 

 

36,293

 

Inventory

 

 

(22,225

)

 

 

(6,120

)

Prepaid expenses and other current assets

 

 

(31,934

)

 

 

21,332

 

Accounts payable

 

 

2,120

 

 

 

(2,085

)

Accrued expenses and other current liabilities

 

 

(24,335

)

 

 

(3,754

)

Deferred revenue

 

 

(22,146

)

 

 

(14,311

)

Net cash (used in) provided by operating activities

 

 

(56,631

)

 

 

39,934

 

Cash Flows from Investing Activities:

 

 

 

 

Purchase of property and equipment, net

 

 

(26,726

)

 

 

(25,789

)

Net cash used in investing activities

 

 

(26,726

)

 

 

(25,789

)

Cash Flows from Financing Activities:

 

 

 

 

Proceeds from asset-based revolving line of credit

 

 

80,000

 

 

 

 

Repayment of asset-based revolving line of credit

 

 

(40,000

)

 

 

(77,000

)

Repayment of third-party manufacturing funding

 

 

 

 

 

(24,610

)

Repayment of mortgage payable

 

 

(245

)

 

 

(130

)

Payment of debt issuance cost

 

 

(783

)

 

 

 

Payment of term license obligation

 

 

(3,643

)

 

 

(3,930

)

Principal payments on finance lease obligations

 

 

(577

)

 

 

(819

)

Proceeds from issuance of common stock

 

 

8,875

 

 

 

9,344

 

Tax withholding paid on behalf of employees for net share settlement

 

 

(2,384

)

 

 

(3,398

)

Net cash provided by (used in) financing activities

 

 

41,243

 

 

 

(100,543

)

Effect of exchange rate changes on cash and restricted cash

 

 

(5,225

)

 

 

4,245

 

Net change in cash and restricted cash

 

 

(47,339

)

 

 

(82,153

)

Cash and restricted cash at beginning of period

 

 

202,521

 

 

 

315,383

 

Cash and restricted cash at end of period(1)

 

$

155,182

 

 

$

233,230

 

 

 

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

 

 

Six Months Ended

 

 

June 25, 2022

 

June 26, 2021

Supplemental disclosures of cash flow information:

 

 

 

 

Cash paid for income taxes

 

$

4,435

 

$

13,162

Cash paid for interest

 

$

7,995

 

$

9,862

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

Unpaid debt issuance cost

 

$

365

 

$

Transfer of inventory to fixed assets

 

$

3,705

 

$

1,735

Unpaid term licenses (included in accounts payable, accrued liabilities and other long-term liabilities)

 

$

7,343

 

$

9,807

(1) Reconciliation of cash and restricted cash to the condensed consolidated balance sheets:

 

 

 

June 25, 2022

 

June 26, 2021

 

 

 

 

 

Cash

 

$

130,856

 

$

219,735

Short-term restricted cash

 

 

21,142

 

 

2,840

Long-term restricted cash

 

 

3,184

 

 

10,655

Total cash and restricted cash

 

$

155,182

 

$

233,230

 

 

Infinera Corporation
Supplemental Financial Information
(Unaudited)

 

 

Q3'20

 

Q4'20

 

Q1'21

 

Q2'21

 

Q3'21

 

Q4'21

 

Q1'22

 

Q2'22

GAAP Revenue $(Mil)

 

$

340.2

 

 

$

353.5

 

 

$

330.9

 

 

$

338.2

 

 

$

355.8

 

 

$

400.3

 

 

$

338.9

 

 

$

358.0

 

GAAP Gross Margin %

 

 

31.8

%

 

 

35.7

%

 

 

35.4

%

 

 

35.6

%

 

 

33.2

%

 

 

35.6

%

 

 

32.9

%

 

 

30.5

%

Non-GAAP Gross Margin %(1)

 

 

35.2

%

 

 

37.6

%

 

 

37.6

%

 

 

37.7

%

 

 

38.0

%

 

 

37.2

%

 

 

36.2

%

 

 

36.1

%

GAAP Revenue Composition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic %

 

 

49

%

 

 

36

%

 

 

48

%

 

 

52

%

 

 

46

%

 

 

42

%

 

 

50

%

 

 

51

%

International %

 

 

51

%

 

 

64

%

 

 

52

%

 

 

48

%

 

 

54

%

 

 

58

%

 

 

50

%

 

 

49

%

Customers >10% of Revenue

 

 

1

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Cash Related Information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash from Operations $(Mil)

 

$

(36.4

)

 

$

52.2

 

 

$

18.6

 

 

$

21.3

 

 

$

(13.2

)

 

$

1.4

 

 

$

15.8

 

 

$

(72.4

)

Capital Expenditures $(Mil)

 

$

8.1

 

 

$

11.9

 

 

$

11.7

 

 

$

14.1

 

 

$

6.5

 

 

$

9.1

 

 

$

16.1

 

 

$

10.6

 

Depreciation & Amortization $(Mil)

 

$

22.9

 

 

$

25.9

 

 

$

20.5

 

 

$

18.8

 

 

$

20.9

 

 

$

23.4

 

 

$

21.6

 

 

$

21.1

 

DSOs

 

 

78

 

 

 

82

 

 

 

76

 

 

 

76

 

 

 

70

 

 

 

82

 

 

 

74

 

 

 

77

 

Inventory Metrics:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Raw Materials $(Mil)

 

$

39.3

 

 

$

34.7

 

 

$

31.8

 

 

$

33.3

 

 

$

37.4

 

 

$

39.4

 

 

$

41.2

 

 

$

50.4

 

Work in Process $(Mil)

 

$

51.6

 

 

$

55.8

 

 

$

55.5

 

 

$

55.1

 

 

$

54.4

 

 

$

53.9

 

 

$

55.4

 

 

$

58.9

 

Finished Goods $(Mil)

 

$

185.0

 

 

$

178.8

 

 

$

175.5

 

 

$

185.6

 

 

$

197.8

 

 

$

198.1

 

 

$

195.1

 

 

$

200.3

 

Total Inventory $(Mil)

 

$

275.9

 

 

$

269.3

 

 

$

262.8

 

 

$

274.0

 

 

$

289.6

 

 

$

291.4

 

 

$

291.7

 

 

$

309.6

 

Inventory Turns(2)

 

 

3.2

 

 

 

3.3

 

 

 

3.1

 

 

 

3.1

 

 

 

3.1

 

 

 

3.5

 

 

 

3.0

 

 

 

3.0

 

Worldwide Headcount

 

 

3,074

 

 

 

3,050

 

 

 

3,041

 

 

 

3,108

 

 

 

3,205

 

 

 

3,225

 

 

 

3,206

 

 

 

3,186

 

Weighted Average Shares Outstanding (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

189,589

 

 

 

195,655

 

 

 

202,638

 

 

 

206,780

 

 

 

209,183

 

 

 

210,908

 

 

 

212,182

 

 

 

215,509

 

Diluted

 

 

195,868

 

 

 

203,259

 

 

 

217,970

 

 

 

219,459

 

 

 

219,262

 

 

 

218,009

 

 

 

287,588

 

 

 

285,968

 

(1) Non-GAAP adjustments include acquisition-related deferred revenue, stock-based compensation expenses, amortization of acquired intangible assets, restructuring and other related costs and inventory related charges. 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. For reconciliations of prior periods that are not otherwise provided herein, see the prior period earnings releases available on our Investor Relations webpage.

(2) Infinera calculates non-GAAP inventory turns as annualized non-GAAP cost of revenue, which is calculated as GAAP cost of revenue less the adjustments for acquisition-related deferred revenue, stock-based compensation expense, amortization of acquired intangible assets, restructuring and other related costs and inventory related charges, as illustrated in the reconciliation of gross profit above, divided by the average inventory for the quarter.

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

The following amounts represent the midpoint of the expected range:

 

 

Q3'22

 

 

Outlook

Reconciliation of Gross Margin:

 

 

GAAP

 

 

36.0

%

Stock-based compensation expense

 

 

0.5

%

Amortization of acquired intangible assets

 

 

1.5

%

Non-GAAP

 

 

38.0

%

 

 

 

Reconciliation of Operating Expenses:

 

 

GAAP

 

$

151.0

 

Stock-based compensation expense

 

 

(14.0

)

Amortization of acquired intangible assets

 

 

(3.9

)

Restructuring and other related costs

 

 

(0.1

)

Non-GAAP

 

$

133.0

 

 

 

 

Reconciliation of Operating Margin:

 

 

GAAP

 

 

(4.0

)%

Stock-based compensation expense

 

 

4.3

%

Amortization of acquired intangible assets

 

 

2.6

%

Restructuring and other related costs

 

 

0.1

%

Non-GAAP

 

 

3.0

%