Infinera Corp - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - FORM 8-K - Infinera Corp	d8k.htm

Exhibit 99.1


Contacts:

Media:		Investors/Analysts:
Anna Vue		Bob Blair
avue@infinera.com		bblair@infinera.com
Infinera Corporation		Infinera Corporation
916-595-8157		408-716-4879

Infinera Corporation Reports Second Quarter 2011 Financial Results

Sunnyvale, CA, July 19, 2011 – Infinera Corporation (NASDAQ: INFN), a leading provider of digital optical communications systems, today released financial results for the second quarter ended June 25, 2011.

•

GAAP revenues for the second quarter of 2011 were $96.0 million compared to $92.9 million in the first quarter of 2011 and $111.4 million in the second quarter of 2010.

•

GAAP gross margin for the quarter was 39% compared to 46% in the first quarter of 2011 and 42% in the second quarter of 2010. GAAP net loss for the quarter was $24.2 million, or $(0.23) per share, compared to net loss of $16.4 million, or $(0.16) per share, in the first quarter of 2011 and net loss of $9.6 million, or $(0.10) per share, in the second quarter of 2010.

•

Non-GAAP gross margin for the second quarter of 2011 was 41% compared to 48% in the first quarter of 2011 and 44% in the second quarter of 2010, excluding restructuring and other related costs and non-cash stock-based compensation expenses. Non-GAAP net loss for the second quarter of 2011 was $11.7 million, or $(0.11) per share, compared to net loss of $4.0 million, or $(0.04) per share, in the first quarter of 2011 and net income of $3.0 million, or $0.03 per diluted share, in the second quarter of 2010.

Management Commentary

“We are encouraged by our second quarter performance, including an improvement in bookings momentum,” said Tom Fallon, president and chief executive officer. “We saw a continuation of healthy tributary adapter module purchases by a broad base of customers looking to meet their current bandwidth growth needs. The MSO space—which we placed a strategic focus on several years ago—was especially strong with two customers from that category in our top 5 customer count. In addition, we saw growth in new optical capacity deployments by our customers, establishing a base for future TAM purchases.

“On the new product front, we made excellent progress in the development of our next-generation 500Gbs/s PIC solution which will support 100G transmissions and on our 40G product with FlexCoherent technology. During this period of significant product development investment and transition to new products, we remain focused on delivering on our PIC-based digital optical strategy and product roadmap in order to generate the revenue growth necessary to achieve our long-term business model objectives.”

Conference Call Information:

Infinera will host a conference call for analysts and investors to discuss its second quarter results and third quarter outlook today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). A live webcast of the conference call will also be accessible from the “Investor Relations” section of the company’s website at www.infinera.com. Following the webcast, an archived version will be available on the website for 90 days. To hear the replay, parties in the United States and Canada should call 1-800-262-4947. International parties can access the replay at 1-402-220-9707.

About Infinera

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

Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding future TAM purchases, prospects for our next-generation 500Gbs/s PIC solution, and our ability to generate the revenue growth necessary to achieve our long-term business model objectives. These forward-looking statements involve risks and uncertainties, as well as assumptions that if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include our ability to react to trends and challenges in our business and the markets in which we operate; our ability to anticipate market needs and develop new or enhanced products to meet those needs; the adoption rate of our products; our ability to establish and maintain successful relationships with our customers; our ability to reduce customer concentration; our ability to compete in our industry; fluctuations in demand, sales cycles and prices for our products and services; our ability to operate profitably; aggressive business tactics by our competitors; our reliance on single-source suppliers; shortages or price fluctuations in our supply chain; our ability to protect our intellectual property rights; and general political, economic and market conditions and events. Further information about these risks and uncertainties, and other risks and uncertainties that affect our business, are contained in the risk factors section and other sections of our annual report on Form 10-K filed with the Securities Exchange Commission on March 1, 2011, as well subsequent reports filed with or furnished to the SEC. These reports are available on our website at www.infinera.com and the SEC’s website at www.sec.gov. We assume no obligation to, and do not currently intend to, update any such forward-looking statements.

Use of Non-GAAP Financial Information

In addition to disclosing financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain certain non-GAAP measures that exclude non-cash stock-based compensation expenses and non-recurring restructuring and other related costs. We believe these adjustments are appropriate to enhance an overall understanding of our underlying financial performance and also our prospects for the future and are considered by management for the purpose of making operational decisions. In addition, these results are the primary indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income (loss), basic and diluted net income (loss) per share, or gross margin prepared in accordance with GAAP. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and are subject to limitations. For a description of these non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial measures, please see the section titled, “GAAP to Non-GAAP Reconciliations.” We anticipate disclosing forward-looking non-GAAP information in our conference call to discuss our second quarter results, including an estimate of non-GAAP earnings for the third quarter of 2011 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 per share data)

(Unaudited)


	Three Months Ended						Six Months Ended
	June 25, 2011			June 26, 2010			June 25, 2011			June 26, 2010
Revenue:
Product	$	84,361		$	98,035		$	166,889		$	184,202
Ratable product and related support and services		814			1,664			1,736			3,278
Services		10,781			11,699			20,221			19,678

Total revenue		95,956			111,398			188,846			207,158

Cost of revenue⁽¹⁾:
Cost of product		54,540			57,668			101,158			113,108
Cost of ratable product and related support and services		294			929			679			1,684
Cost of services		3,708			5,520			6,851			8,062
Restructuring credit related to cost of revenue		—			(29	)		—			(122	)

Total cost of revenue		58,542			64,088			108,688			122,732

Gross profit		37,414			47,310			80,158			84,426

Operating expenses⁽¹⁾:
Research and development		32,899			28,923			64,208			57,406
Sales and marketing		14,957			13,682			28,892			26,719
General and administrative		13,635			14,448			27,144			30,185
Restructuring and other costs (credit)		—			(2	)		—			159

Total operating expenses		61,491			57,051			120,244			114,469

Loss from operations		(24,077	)		(9,741	)		(40,086	)		(30,043	)

Other income (expense), net:
Interest income		225			325			537			810
Other gain (loss), net		20			(208	)		(391	)		(524	)

Total other income (expense), net		245			117			146			286

Loss before provision of income taxes		(23,832	)		(9,624	)		(39,940	)		(29,757	)
Provision for (benefit from) income taxes		362			(63	)		648			(205	)

Net loss	$	(24,194	)	$	(9,561	)	$	(40,588	)	$	(29,552	)


Net loss per common share, basic and diluted	$	(0.23	)	$	(0.10	)	$	(0.39	)	$	(0.30	)


Weighted average shares used in computing basic and diluted net loss per common share		105,165			98,777			104,272			98,026

⁽¹⁾	The following table summarizes the effects of stock-based compensation related to employees and non-employees for the three and six months ended June 25, 2011 and June 26, 2010:


	Three Months Ended				Six Months Ended
	June 25, 2011		June 26, 2010		June 25, 2011		June 26, 2010
Cost of revenue	$	760	$	564	$	1,491	$	1,133
Research and development		3,504		3,350		7,330		6,773
Sales and marketing		2,225		2,192		4,285		4,039
General and administration		4,828		5,198		9,611		10,907

		11,317		11,304		22,717		22,852
Cost of revenue - amortization from balance sheet*		1,165		1,303		2,130		2,665

Total stock-based compensation expense	$	12,482	$	12,607	$	24,847	$	25,517

*	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									Six Months Ended
	June 25, 2011			March 26, 2011			June 26, 2010			June 25, 2011			June 26, 2010
Reconciliation of Gross Profit:
U.S. GAAP as reported	$	37,414		$	42,744		$	47,310		$	80,158		$	84,426
Restructuring and other related credit⁽¹⁾		—			—			(29	)		—			(122	)
Stock-based compensation⁽²⁾		1,925			1,696			1,867			3,621			3,798

Non-GAAP as adjusted	$	39,339		$	44,440		$	49,148		$	83,779		$	88,102


Reconciliation of Gross Margin:
U.S. GAAP as reported		39	%		46	%		42	%		42	%		41	%
Restructuring and other related credit⁽¹⁾		—	%		—	%		—	%		—	%		—	%
Stock-based compensation⁽²⁾		2	%		2	%		2	%		2	%		2	%

Non-GAAP as adjusted		41	%		48	%		44	%		44	%		43	%


Reconciliation of Income (Loss) from Operations:
U.S. GAAP as reported	$	(24,077	)	$	(16,009	)	$	(9,741	)	$	(40,086	)	$	(30,043	)
Restructuring and other related costs (credit)⁽¹⁾		—			—			(31	)		—			37
Stock-based compensation⁽²⁾		12,482			12,365			12,607			24,847			25,517

Non-GAAP as adjusted	$	(11,595	)	$	(3,644	)	$	2,835		$	(15,239	)	$	(4,489	)


Reconciliation of Net Income (Loss):
U.S. GAAP as reported	$	(24,194	)	$	(16,394	)	$	(9,561	)	$	(40,588	)	$	(29,552	)
Restructuring and other related costs (credit)⁽¹⁾		—			—			(31	)		—			37
Stock-based compensation⁽²⁾		12,482			12,365			12,607			24,847			25,517

Non-GAAP as adjusted	$	(11,712	)	$	(4,029	)	$	3,015		$	(15,741	)	$	(3,998	)


Net Income (Loss) per Common Share - Basic:
U.S. GAAP	$	(0.23	)	$	(0.16	)	$	(0.10	)	$	(0.39	)	$	(0.30	)

Non-GAAP	$	(0.11	)	$	(0.04	)	$	0.03		$	(0.15	)	$	(0.04	)


Net Income (Loss) per Common Share - Diluted:
U.S. GAAP	$	(0.23	)	$	(0.16	)	$	(0.10	)	$	(0.39	)	$	(0.30	)

Non-GAAP	$	(0.11	)	$	(0.04	)	$	0.03		$	(0.15	)	$	(0.04	)


Weighted average shares used in computing net income (loss) per common share - U.S. GAAP:
Basic		105,165			103,426			98,777			104,272			98,026

Diluted		105,165			103,426			98,777			104,272			98,026


Weighted average shares used in computing net income (loss) per common share - Non-GAAP:
Basic		105,165			103,426			98,777			104,272			98,026

Diluted		105,165			103,426			103,945			104,272			98,026

⁽¹⁾

Adjustment amount represents restructuring and other related costs (credit) recorded in relation to the closure of our Maryland FAB announced on July 21, 2009. These amounts have been adjusted in arriving at our non-GAAP results as they are non-recurring in nature and the adjusted numbers provide a better indication of our underlying business performance.


	Three Months Ended									Six Months Ended
	June 26, 2010									June 26, 2010
	Cost of Revenue			Operating Expenses			Total			Cost of Revenue			Operating Expenses		Total
Severance and related expenses (credits)	$	(129	)	$	—		$	(129	)	$	(144	)	$	55	$	(89	)
Equipment and facility-related costs (credits)		100			—			100			22			—		22
Lease termination		—			(2	)		(2	)		—			104		104

Total	$	(29	)	$	(2	)	$	(31	)	$	(122	)	$	159	$	37

⁽²⁾

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						Six Months Ended
	June 25, 2011		March 26, 2011		June 26, 2010		June 25, 2011		June 26, 2010
Cost of revenue	$	760	$	731	$	564	$	1,491	$	1,133
Research and development		3,504		3,826		3,350		7,330		6,773
Sales and marketing		2,225		2,060		2,192		4,285		4,039
General and administration		4,828		4,783		5,198		9,611		10,907

		11,317		11,400		11,304		22,717		22,852
Cost of revenue - amortization from balance sheet*		1,165		965		1,303		2,130		2,665

Total stock-based compensation expense	$	12,482	$	12,365	$	12,607	$	24,847	$	25,517

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

Infinera Corporation

Condensed Consolidated Balance Sheets

(In thousands, except par values)

(Unaudited)


	June 25, 2011			December 25, 2010
ASSETS

Current assets:
Cash and cash equivalents	$	100,926		$	113,649
Short-term investments		167,667			168,013
Short-term restricted cash		157			1,856
Accounts receivable		73,684			75,931
Other receivables		1,739			4,420
Inventories, net		69,377			81,893
Deferred inventory costs		6,540			6,715
Prepaid expenses and other current assets		14,451			9,118

Total current assets		434,541			461,595

Property, plant and equipment, net		58,298			51,740
Deferred inventory costs, non-current		3,165			2,512
Long-term investments		7,903			9,953
Cost-method investment		4,500			4,500
Long-term restricted cash		2,361			2,235
Deferred tax asset		6,082			11,882
Other non-current assets		8,049			7,108

Total assets	$	524,899		$	551,525


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	28,645		$	35,658
Accrued expenses		24,518			19,790
Accrued compensation and related benefits		18,054			25,098
Accrued warranty		5,049			5,696
Deferred revenue		22,444			21,958
Deferred tax liability		6,082			11,882

Total current liabilities		104,792			120,082

Accrued warranty, non-current		5,645			5,726
Deferred revenue, non-current		3,454			4,633
Other long-term liabilities		10,659			10,335

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 25, 2011 and December 25, 2010 Issued and outstanding shares – 105,702 as of June 25, 2011 and 102,492 as of December 25, 2010		106			102
Additional paid-in capital		847,051			817,200
Accumulated other comprehensive loss		(928	)		(1,261	)
Accumulated deficit		(445,880	)		(405,292	)

Total stockholders’ equity		400,349			410,749

Total liabilities and stockholders’ equity	$	524,899		$	551,525

Infinera Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Six Months Ended
	June 25, 2011			June 26, 2010
Cash Flows from Operating Activities:
Net loss	$	(40,588	)	$	(29,552	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		8,434			7,719
Non-cash restructuring and other costs		—			100
Amortization of premium on investments		2,218			1,521
Stock-based compensation expense		24,847			25,517
Unrealized loss on Put Rights		—			1,696
Unrealized holding gain for trading securities		—			(1,696	)
Non-cash tax benefit		(121	)		(364	)
Other gain		(293	)		(81	)
Changes in assets and liabilities:
Accounts receivable		6,077			14,791
Inventories, net		13,269			(15,034	)
Prepaid expenses and other assets		(536	)		3,616
Deferred inventory costs		(604	)		(2,049	)
Accounts payable		(7,772	)		5,037
Accrued liabilities and other expenses		(4,500	)		(3,161	)
Deferred revenue		(693	)		5,265
Accrued warranty		(727	)		182

Net cash provided by (used in) operating activities		(989	)		13,507

Cash Flows from Investing Activities:
Purchase of available-for-sale investments		(153,034	)		(120,235	)
Purchase of cost-method investment		—			(4,500	)
Proceeds from sale of available-for-sale investments		3,035			—
Proceeds from maturities and calls of investments		150,511			108,483
Proceeds from disposal of assets		262			176
Purchase of property and equipment		(17,322	)		(9,697	)
Advance to secure manufacturing capacity		(1,500	)		—
Reimbursement of manufacturing capacity advance		225			—
Change in restricted cash		1,573			47

Net cash used in investing activities		(16,250	)		(25,726	)

Cash Flows from Financing Activities:
Proceeds from issuance of common stock		5,712			6,718
Repurchase of common stock		(1,200	)		(2	)
Payments for purchase of assets under financing arrangement		(174	)		(175	)

Net cash provided by financing activities		4,338			6,541

Effect of exchange rate changes on cash		178			(113	)

Net change in cash and cash equivalents		(12,723	)		(5,791	)
Cash and cash equivalents at beginning of period		113,649			109,859

Cash and cash equivalents at end of period	$	100,926		$	104,068


Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	565		$	447

Infinera

Corporation

Supplemental

Financial Information

(Unaudited)


	Q3’09			Q4’09			Q1’10			Q2’10			Q3’10			Q4’10			Q1’11			Q2’11
Revenue ($ Mil)	$	83.4		$	90.2		$	95.8		$	111.4		$	130.1		$	117.1		$	92.9		$	96.0
Gross Margin % ⁽¹⁾		38	%		40	%		41	%		44	%		51	%		51	%		48	%		41	%

Invoiced Shipment Composition:
Domestic %		63	%		74	%		79	%		81	%		73	%		70	%		74	%		72	%
International %		37	%		26	%		21	%		19	%		27	%		30	%		26	%		28	%
Largest Customer %		15	%		17	%		22	%		13	%		19	%		10	%		14	%		10	%

Cash Related Information:
Cash from Operations ($ Mil)	($	8.3	)	($	2.7	)	$	2.3		$	11.2		$	10.0		$	7.0		($	0.9	)	($	0.1	)
Capital Expenditures ($ Mil)	$	2.8		$	4.4		$	4.7		$	5.0		$	5.9		$	5.0		$	10.6		$	6.7
Depreciation & Amortization ($ Mil)	$	4.2		$	4.5		$	4.0		$	3.7		$	3.9		$	4.0		$	4.2		$	4.2
DSO’s		61			71			56			45			45			59			60			70

Inventory Metrics:
Raw Materials ($ Mil)	$	7.4		$	6.9		$	7.5		$	9.1		$	11.0		$	23.1		$	20.1		$	7.3
Work in Process ($ Mil)	$	36.2		$	32.1		$	31.5		$	29.2		$	36.5		$	14.8		$	17.2		$	27.7
Finished Goods ($ Mil)	$	29.3		$	29.9		$	33.0		$	45.9		$	41.2		$	44.0		$	41.0		$	34.4

Total Inventory ($ Mil)	$	72.9		$	68.9		$	72.0		$	84.2		$	88.7		$	81.9		$	78.3		$	69.4
Inventory Turns ⁽¹⁾		3.0			3.2			3.2			3.0			2.9			2.8			2.5			3.3

Worldwide Headcount		970			974			999			1,028			1,040			1,072			1,118			1,136

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

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