SOURCE: Infinera

Infinera

April 21, 2009 16:10 ET

Infinera Corporation Reports First Quarter 2009 Financial Results

Revenues of $66.6 Million for the Quarter; Selected by Two Additional European Tier-One Customers

SUNNYVALE, CA--(Marketwire - April 21, 2009) - Infinera Corporation (NASDAQ: INFN), a leading provider of digital optical communications systems, today released financial results for the first quarter ended March 28, 2009.

--  GAAP revenues for the first quarter of 2009 were $66.6 million
    compared to $86.2 million on an adjusted GAAP basis for the fourth quarter
    of 2008 and $95.5 million on an invoiced shipment basis in the first
    quarter of 2008.
--  GAAP gross margins for the quarter were 30%.  Excluding non-cash stock-
    based compensation, non-GAAP gross margins were 31% in the first quarter of
    2009 compared to 36% on an adjusted GAAP basis for the fourth quarter of
    2008 and 45% on an invoiced shipments basis in the first quarter of 2008.
--  The GAAP net loss for the quarter was $24.3 million, or $0.26 per
    share.  Excluding non-cash stock-based compensation, the net loss on a non-
    GAAP basis was $17.6 million or $0.19 per share, in the first quarter of
    2009 compared to a net loss of $9.0 million, or $0.10 per share, on an
    adjusted GAAP basis in the fourth quarter of 2008 and net income of $12.6
    million, or $0.13 per diluted share, on an invoiced shipments basis, for
    the first quarter of 2008.
    

Management Commentary

"The combination of macroeconomic effects and timing associated with some large deployments put downward pressure on our revenue and gross margins for the first quarter," said Jagdeep Singh, president and chief executive officer of Infinera. "However, we saw continued momentum with tier-one carriers, as Infinera was selected by two additional European PTTs.

"In addition, we continue to experience a robust level of DWDM activity with carriers worldwide and see additional evidence that our unique PIC-based value proposition is resonating with existing customers and prospects," said Singh. "We also continue to make significant strides in advancing our technology lead. As a result, we believe that we are well-positioned to resume top-line growth and improved bottom-line performance as the macroeconomic environment improves."

The company noted the following Q1 highlights:

--  The selection of Infinera by the two new European-based Tier 1
    carriers continues the company's string of successes in Europe, begun
    almost 11 months ago with its win at Deutsche Telecom.
    
--  At the OFC tradeshow last month, Infinera successfully demonstrated
    its 400 Gbps PIC integrating ten 40Gbps channels.
    
--  Enabled by its new ILS2 line system, the company also won new deals
    that included submarine network routes, an important growth segment in the
    DWDM space.
    

Footnote: For an explanation of our use of Non-GAAP, Invoiced Shipments and Adjusted GAAP measures and a full reconciliation of these measures to our GAAP results, please see the section of the accompanying tables titled "GAAP to Non-GAAP, Invoiced Shipment and Adjusted GAAP Reconciliations." We have not shown comparisons to our first quarter 2008 GAAP results because those results were significantly affected by the recognition of ratable product and related support and services revenue from shipments made prior to the first quarter of 2008, which we believe makes those comparisons less useful for investors. See our GAAP Condensed Consolidated Statements of Operations attached to this release for these GAAP to GAAP comparisons.

Conference Call Information:

Infinera will host a conference call for analysts and investors to discuss its first quarter results and second 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 30 days. To hear the replay, parties in the United States and Canada should call 1-866-457-5717. International parties can access the replay at +1-203-369-1295.

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 optical networks 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 about our products and business and statements about our experiencing a robust level of DWDM activity with carriers worldwide, our seeing evidence that our PIC-based value proposition is resonating with existing customers and prospects, our continuing to make significant strides in advancing our technology lead, and our belief that we are well-positioned to resume top-line growth and improved bottom-line performance as the macroeconomic environment improves. 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; shortages or price fluctuations in our supply chain; our ability to protect our intellectual property rights; general political, economic and market conditions and events; and other risks and uncertainties described more fully in our documents filed with or furnished to the Securities and Exchange Commission (SEC). More information about these and other risks that may impact Infinera's business are set forth in our annual report on Form 10-K, which was filed with the SEC on February 17, 2009, as well as subsequent reports filed with the SEC. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.

Non-GAAP and other Financial Measures

In addition to disclosing financial measures prepared in accordance with United States Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain certain non-GAAP and other financial measures that reflect invoiced shipments, adjusted GAAP revenue and exclude non-GAAP non-cash stock-based compensation. For a description of these non-GAAP financial measures, including the reasons why management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled "GAAP to Non-GAAP, Invoiced Shipments and Adjusted GAAP Reconciliations" as well as the accompanying notes on the use of certain non-GAAP measures. We anticipate disclosing forward-looking non-GAAP and other financial information in our conference call to discuss our first quarter of 2009 results, including an estimate of non-GAAP earnings for the second quarter of 2009 that excludes non-cash stock-based compensation expenses related to our equity awards and the right to purchase common stock under our Employee Stock Purchase Plan in the period.

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
                                                      --------------------
                                                      March 28,  March 29,
                                                        2009       2008
                                                      ---------  ---------

Revenue:
  Product                                             $  59,148  $  64,128
  Ratable product and related support and services        1,469     72,386
  Services                                                5,963      1,739
                                                      ---------  ---------
    Total revenue                                        66,580    138,253

Cost of revenue (1):
  Cost of product                                        43,865     39,665
  Cost of ratable product and related support
   and services                                             730     35,831
  Cost of services                                        2,015      1,190
                                                      ---------  ---------
    Total cost of revenue                                46,610     76,686

Gross profit                                             19,970     61,567

Operating expenses (1):
  Sales and marketing                                    11,123     10,246
  Research and development                               21,997     18,293
  General and administrative                             10,127      8,417
  Amortization of intangible assets                          37         37
                                                      ---------  ---------
    Total operating expenses                             43,284     36,993

Income (loss) from operations                           (23,314)    24,574

Other income (expense), net:
  Interest income                                           918      3,303
  Interest expense                                            -         (3)
  Other gain (loss), net:                                (1,814)       880
                                                      ---------  ---------
    Total other income (expense), net                      (896)     4,180

Income (loss) before provision of income taxes          (24,210)    28,754
Provision for income taxes                                  118      1,160
                                                      ---------  ---------
Net income (loss)                                     $ (24,328) $  27,594
                                                      =========  =========

Net income (loss) per common share
  Basic                                               $   (0.26) $    0.30
                                                      =========  =========
  Diluted                                             $   (0.26) $    0.29
                                                      =========  =========

Weighted average shares used in computing net
 income (loss) per common share
  Basic                                                  94,275     91,250
                                                      =========  =========
  Diluted                                                94,275     96,692
                                                      =========  =========

(1)  The following table summarizes the effects of stock-based compensation
related to employees and non-employees for the three months ended March 28,
2009 and March 29, 2008:


                                                       Three Months Ended
                                                      --------------------
                                                       March 28,  March 29,
                                                         2009       2008
                                                      ---------  ---------
  Cost of revenue                                     $     379  $     208
  Research and development                                1,732      1,223
  Sales and marketing                                     1,414        850
  General and administration                              2,645      1,502
                                                      ---------  ---------
                                                          6,170      3,783
  Cost of revenue - amortization from balance sheet*        566      1,150
                                                      ---------  ---------
  Total stock-based compensation expense              $   6,736 $    4,933
                                                      =========  =========

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



GAAP to Non-GAAP, Invoiced Shipment and Adjusted GAAP Reconciliations:

Infinera Corporation
GAAP to Non-GAAP Reconciliation
(In thousands, except per share amounts)
(Unaudited)

                                      Three Months Ended March 28, 2009
                                    -------------------------------------
                                                    Stock
                                       GAAP        Comp(1)      Non-GAAP
                                    ----------   ----------    ----------
Revenue
  Product and ratable revenue       $   60,617  $         -    $   60,617
  Services revenue                       5,963            - (a)     5,963
                                    ----------   ----------    ----------
Total revenue                           66,580            -        66,580
Cost of revenue                         46,610         (945)(d)    45,665
                                    ----------   ----------    ----------
Gross profit                            19,970          945        20,915
Gross margin                                30%                        31%
Operating expenses                      43,284       (5,791)       37,493
                                    ----------   ----------    ----------
Loss from operations                   (23,314)       6,736       (16,578)
Other income (expense), net               (896)           -          (896)
                                    ----------   ----------    ----------
Loss before provision for income
 taxes                                 (24,210)       6,736       (17,474)
Provision for income taxes                 118            -           118
                                    ----------   ----------    ----------
Net loss                            $  (24,328)  $    6,736    $  (17,592)
                                    ==========   ==========    ==========
Net loss per common share:
  Basic                             $    (0.26)                $    (0.19)
                                    ==========                 ==========
  Diluted                           $    (0.26)                $    (0.18)*
                                    ==========                 ==========
Weighted average shares used in
 computing net loss per common
 share:
  Basic                                 94,275                     94,275
                                    ==========                 ==========
  Diluted                              94,275                      97,592*
                                    ==========                 ==========

(1) See footnote to the Condensed Consolidated Statements of Operations for
a summary of the effects of stock-based compensation related to employees
and non-employees for the three months ended March 28, 2009.

* Diluted shares used to calculate net loss per share on a non-GAAP basis
provided for informational purposes only.


Infinera Corporation
GAAP to Adjusted GAAP Reconciliation
(In thousands, except per share data)
(Unaudited)

                              Three Months Ended December 27, 2008
                     -----------------------------------------------------
                                                                 Adjusted
                                                     Adjusted      GAAP
                                           Adjusted    GAAP      Excluding
                               Deferral     GAAP      Stock       Stock
                       GAAP  Adjustments   Results     Comp        Comp
                     --------  --------    --------  ---------    --------
Revenue

  Product and ratable
   revenue           $ 92,288  $(13,102)(b)$ 79,186  $       -    $ 79,186
  Services revenue      7,056         -       7,056          -       7,056
                     --------  --------    --------  ---------    --------
Total revenue          99,344   (13,102)     86,242          -      86,242
Cost of revenue        61,378    (4,951)(e)  56,427       (904)(f)  55,523
                     --------  --------    --------  ---------    --------
Gross profit           37,966    (8,151)     29,815        904      30,719
Gross margin               38%                                          36%

Operating expenses     44,930         -      44,930     (4,930)(f)  40,000
                     --------  --------    --------  ---------    --------
Income (loss) from
 operations            (6,964)   (8,151)    (15,115)     5,834      (9,281)
Other income
 (expense), net          (428)        -        (428)         -        (428)
                     --------  --------    --------  ---------    --------
Income (loss) before
 income taxes          (7,392)   (8,151)    (15,543)     5,834      (9,709)
Provision for
 (benefit from)
 income taxes            (704)        -        (704)         -       (704)
                     --------  --------    --------  ---------   --------
Net income (loss)    $ (6,688) $ (8,151)   $(14,839) $   5,834   $ (9,005)
                     ========  ========    ========  =========   ========
Net income (loss) per
 common share:
  Basic              $  (0.07)                                   $  (0.10)
                     ========                                    ========
  Diluted            $  (0.07)                                   $  (0.09)*
                     ========                                    ========

Weighted average
 shares used in
 computing net
 income (loss) per
 common share:
  Basic                93,449                                      93,449
                     ========                                    ========
  Diluted              93,449                                      97,167*
                     ========                                    ========

* Diluted shares used to calculate net loss per share on an Adjusted GAAP
basis provided for informational purposes only.



Infinera Corporation
GAAP to Non-GAAP Invoiced Shipment Reconciliation
(In thousands, except per share amounts)
(Unaudited)


                               Three Months Ended March 29, 2008
                     -----------------------------------------------------
                                                                 Non-GAAP
                                                                 Invoiced
                                                                 Shipments
                                                      Non-GAAP   Excluding
                               Deferral    Invoiced    Stock      Stock
                       GAAP   Adjustments Shipments    Comp       Comp
                     --------  --------    --------  ---------    --------
Revenue
  Product and
   ratable revenue   $136,514  $(42,747)(c)$ 93,767 $        -    $ 93,767
  Services revenue      1,739                 1,739          -       1,739
                     --------  --------    --------  ---------    --------
Total revenue         138,253   (42,747)     95,506          -      95,506
Cost of revenue        76,686   (23,022)(e)  53,664     (1,141)(f)  52,523
                     --------  --------    --------  ---------    --------
Gross profit           61,567   (19,725)     41,842      1,141      42,983
Gross margin               45%                                          45%
Operating expenses     36,993         -      36,993     (3,575)(f)  33,418
                     --------  --------    --------  ---------    --------
Income (loss) from
 operations            24,574   (19,725)      4,849      4,716       9,565
Other income
 (expense), net         4,180         -       4,180          -       4,180
                     --------  --------    --------  ---------    --------
Income (loss) before
 provision for income
 taxes                 28,754   (19,725)      9,029      4,716      13,745
Provision for income
 taxes                  1,160         -       1,160          -       1,160
                     --------  --------    --------  ---------    --------

Net income (loss)    $ 27,594  $(19,725)   $  7,869  $   4,716   $ 12,585
                     ========  ========    ========  =========   ========
Net income (loss) per
 common share:
  Basic              $   0.30                                    $   0.14
                     ========                                    ========
  Diluted            $   0.29                                    $   0.13
                     ========                                    ========
Weighted average
 shares used in
 computing net income
  (loss) per common
   share:
  Basic                91,250                                      91,250
                     ========                                    ========
  Diluted              96,692                                      96,692
                     ========                                    ========

Use of Non-GAAP, Invoiced Shipments and Adjusted GAAP Information:

As described below, Infinera uses various non-GAAP, invoiced shipments and adjusted GAAP financial measures to supplement our condensed consolidated financial statements presented on a GAAP basis. 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 or basic and diluted net income per share 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.

Our usage of these non-GAAP, invoiced shipments and adjusted GAAP measures are further explained below:

--  Prior to the second quarter of 2008, in order to supplement our
    condensed consolidated financial statements presented on a GAAP basis,
    Infinera used invoiced shipment measures of operating results, net income
    and net income per share, which are adjusted to reflect invoiced shipments
    and exclude non-GAAP stock-based compensation and warrant revaluation
    expenses.  Invoiced shipment measures reflected GAAP results adjusted for
    changes in our deferred revenue and deferred cost of inventory balances
    from the prior period.  These adjustments to our GAAP results were made to
    provide both management and investors with an understanding of Infinera's
    underlying operating results and trends as they would have been reflected
    had we established vendor specific objective evidence (VSOE) of fair value
    for our service offerings and not been required to recognize revenue
    ratably.
    
--  Effective April 2008, we had established VSOE of fair value for most
    of our service offerings. From the second quarter of 2008 to the fourth
    quarter of 2008, we have used adjusted GAAP measures of operating results,
    net income and net income per share.  Adjusted GAAP results reflected our
    GAAP results reduced for amounts released from deferred revenue and
    deferred cost of inventory balances recorded prior to the second quarter of
    2008 and previously reported in our invoiced shipment results.  Deferred
    services and deferred ratable and product revenue and cost amounts recorded
    after March 29, 2008 were not adjusted and were recognized on a GAAP basis
    in arriving at the adjusted GAAP results.  We presented these non-GAAP
    measures of operating results, net income and net income per share, which
    included adjusted GAAP results and excluded non-GAAP stock-based
    compensation expense for these periods.
    
--  Beginning in the first quarter of 2009, we will use non-GAAP financial
    measures, which reflect our GAAP results and exclude stock-based
    compensation related expenses.  All material deferred revenue and deferred
    cost of inventory balances recorded prior to the second quarter of 2008 and
    previously reported in our invoiced shipment results have been recognized
    in our GAAP results prior to December 27, 2008. Therefore, no further
    adjustments, other than the exclusion of stock-based compensation expense
    as described above, will be made to our GAAP revenue and cost of revenue on
    a go-forward basis.
    

(a) As described above, no adjustments have been made to our GAAP revenue as recorded in our condensed consolidated statements of operations for the period ended March 28, 2009.

The table below provides a breakdown of our deferred revenue balance as recorded on our balance sheet as of March 28, 2009 for informational purposes only:

                                  Three Months Ended March 28, 2009
                            ----------------------------------------------
                             Pre Mar      Post Mar
                             29, 2008     29, 2008
                            Ratable and  Ratable and
                              Product      Product
Deferred Revenue              Revenue      Revenue    Services     Total
                            -----------  -----------  ---------  ---------
(In thousands)
Beginning balance           $     8,650  $     4,177  $   9,580  $  22,407
Additions to deferred
 revenue                              -          209      5,453      5,662
Amortization to revenue          (1,944)        (945)    (4,586)    (7,475)
                            -----------  -----------  ---------  ---------
Ending balance              $     6,706  $     3,441  $  10,447  $  20,594
                            ===========  ===========  =========  =========
Change in deferred revenue
 balance                    $    (1,944) $      (736) $     867  $  (1,813)
                            ===========  ===========  =========  =========

(b) Adjustment amount represents the release of ratable and product deferred revenue amounts related to periods prior to March 29, 2008 as these amounts have been previously reported as invoiced shipments. No adjustment has been made for changes in deferred services revenue as these amounts relate to future service deliverables and are appropriately deferred. Deferred ratable and product amounts recorded after March 29, 2008 have not been adjusted as these amounts are recognized on a GAAP basis in arriving at the adjusted GAAP results.

The deferred revenue adjustments recorded above are reconciled to the deferred revenue balance on our balance sheet in the table below:

                                Three Months Ended December 27, 2008
                            ----------------------------------------------
                             Pre Mar      Post Mar
                             29, 2008      29, 2008
                            Ratable and  Ratable and
                              Product      Product
Deferred Revenue              Revenue      Revenue    Services     Total
                            -----------  -----------  ---------  ---------
(In thousands)
Beginning balance           $    21,752  $     4,296  $   6,408  $  32,456
Additions to deferred
 revenue                              -        1,086      7,577      8,663
Amortization to revenue         (13,102)      (1,205)    (4,405)   (18,712)
                            -----------  -----------  ---------  ---------
Ending balance              $     8,650  $     4,177  $   9,580  $  22,407
                            ===========  ===========  =========  =========

                                     -----------  -----------  -----------
Change in deferred revenue
 balance                    $   (13,102) $      (119) $   3,172  $ (10,049)
                            ===========  ===========  =========  =========

(c) Adjustment amount represents the release of ratable and deferred product revenue amounts related to periods prior to March 29, 2008 as these amounts have been previously reported as invoiced shipments. No adjustment has been made for changes in deferred services revenue as these amounts relate to future service deliverables and are appropriately deferred.

The deferred revenue adjustments recorded above are reconciled to the deferred revenue balance on our balance sheet in the table below:

                                       Three Months Ended March 29, 2008
                                     -------------------------------------
                                     Ratable and
                                       Product      Services
Deferred Revenue                       Revenue      Revenue       Total
                                     -----------  -----------  -----------
(In thousands)
Beginning balance                    $   174,437  $         -  $   174,437
Additions to deferred revenue             29,639        4,561       34,200
Amortization to revenue                  (72,386)        (756)     (73,142)
                                     -----------  -----------  -----------
Ending balance                       $   131,690  $     3,805  $   135,495
                                     ===========  ===========  ===========

                                     -----------  -----------  -----------
Change in deferred revenue balance   $   (42,747) $     3,805  $   (38,942)
                                     ===========  ===========  ===========

(d) No adjustments, other than the exclusion of stock-based compensation expense, as described above have been made to our GAAP cost of revenue as recorded in our condensed consolidated statements of operations for the period ended March 28, 2009.

The table below provides a breakdown of our deferred inventory cost balance as recorded on our balance sheet as of March 28, 2009 for informational purposes only:

                                       Three Months Ended March 28, 2009
                                     -------------------------------------
                                      Pre Mar      Post Mar
                                      29, 2008     29, 2008
                                     Ratable and  Ratable and
                                       Product      Product
Deferred Inventory Cost                  Cost         Cost        Total
                                     -----------  -----------  -----------
(In thousands)
Beginning balance                    $     3,221  $     1,016  $     4,237
Additions to deferred cost of
 revenue                                       -            1            1
Amortized to cost of revenue                (419)        (317)        (736)
                                     -----------  -----------  -----------
Ending balance                       $     2,802  $       700  $     3,502
                                     ===========  ===========  ===========

                                     -----------  -----------  -----------
Change in deferred inventory cost
 balance                             $      (419) $      (316) $      (735)
                                     ===========  ===========  ===========

(e) Adjustment amount represents the release of ratable and deferred product cost amounts related to periods prior to March 29, 2008 as these amounts have been previously included as invoiced shipments. Deferred ratable and product amounts recorded after March 29, 2008 have not been adjusted as these amounts are recognized on a GAAP basis in arriving at the adjusted GAAP results.

The deferred cost of inventory adjustments recorded above are reconciled to the deferred cost of inventory balance on our balance sheet in the table below:

                                                               Three Months
                                                                  Ended
                                      Three Months Ended         March 29,
                                       December 27, 2008           2008
                                -------------------------------  ---------
                                 Pre Mar   Post Mar
                                29, 2008   29, 2008
                                 Ratable    Ratable
                                   and        and
                                 Product    Product
Deferred Inventory Cost           Cost       Cost       Total      Total
                                ---------  ---------  ---------  ---------
(In thousands)
Beginning balance               $   8,172  $   1,120  $   9,292  $  81,622
Additions to deferred cost of
 revenue                                -         32         32     11,162
Amortized to cost of revenue       (4,951)      (136)    (5,087)   (34,184)
                                ---------  ---------  ---------  ---------
Ending balance                  $   3,221  $   1,016  $   4,237  $  58,600
                                =========  =========  =========  =========

                                ---------  ---------  ---------  ---------
Change in deferred inventory
 cost balance                   $  (4,951) $    (104) $  (5,055) $ (23,022)
                                =========  =========  =========  =========

(f) Excluded amount represents stock-based compensation expense on a non-GAAP basis. Stock-based compensation is a non-cash expense accounted for in accordance with the fair value recognition provisions of Statement of Financial Accounting Standards No. 123(R). While this is a large component of our expense, we believe investors want to evaluate our financial results both including and excluding the effects of stock-based compensation expense in order to compare our financial performance with that of other companies and between time periods.

The stock-based compensation expense excluded from cost of revenue is a non-GAAP financial measure and is reconciled to the corresponding GAAP amount in the table below:


                                                     Three Months Ended
                                                  ------------------------
                                                  December 27,   March 29,
                                                      2008         2008
                                                  -----------  -----------
(In thousands)
GAAP stock-based compensation in cost of revenue  $       308  $       208
GAAP stock-based compensation in cost of revenue
 - amortization from balance sheet                        739        1,150
  Stock-based compensation not deferred to
   deferred inventory cost                                  -          215
  Stock-based compensation previously recognized
   on invoiced shipment basis                            (143)        (432)
                                                  -----------  -----------
Non-GAAP stock-based compensation in cost of
 revenue                                          $       904  $     1,141
                                                  ===========  ===========



Infinera Corporation
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)

                                                    March 28,  December 27,
                                                      2009         2008
                                                  -----------  -----------
ASSETS

Current assets:
  Cash and cash equivalents                       $   153,371  $   166,770
  Short-term investments                               79,927       68,232
  Short-term restricted cash                               31          720
  Accounts receivable, net of allowance for
   doubtful accounts of $1,700 as of
   March 28, 2009 and December 27, 2008                44,837       69,354
  Other receivables                                       952        1,085
  Inventory                                            64,481       58,986
  Deferred inventory costs                              1,321        1,744
  Prepaid expenses and other current assets             6,751        6,311
                                                  -----------  -----------
    Total current assets                              351,671      373,202

Property, plant and equipment, net                     48,583       46,820
Intangible assets                                       1,209        1,276
Deferred inventory costs, non-current                   2,181        2,493
Long-term investments                                  70,651       74,684
Long-term restricted cash                               2,483        2,179
Other non-current assets                                6,341        6,413
                                                  -----------  -----------
    Total assets                                  $   483,119  $   507,067
                                                  ===========  ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                $    28,258  $    34,048
  Accrued expenses                                     16,275       16,092
  Accrued compensation and related benefits             9,453       13,472
  Accrued warranty                                      5,392        5,205
  Deferred revenue                                     13,708       14,683
                                                  -----------  -----------
    Total current liabilities                          73,086       83,500

  Accrued warranty, non-current                         4,310        4,735
  Deferred revenue, non-current                         6,886        7,724
  Other long-term liabilities                           6,551        5,645

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 28,
     2009 and December 27, 2008
    Issued and outstanding shares - 95,077 as of
     March 28, 2009 and 94,163 as of December 27,
     2008                                                  95           94
  Additional paid-in capital                          711,510      699,705
  Accumulated other comprehensive loss                 (4,253)      (3,598)
  Accumulated deficit                                (315,066)    (290,738)
                                                  -----------  -----------
  Total stockholders' equity                          392,286      405,463
                                                  -----------  -----------
  Total liabilities and stockholders' equity      $   483,119  $   507,067
                                                  ===========  ===========



Infinera Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
                                                       Three Months Ended
                                                      --------------------
                                                      March 28,  March 29,
                                                        2009       2008
                                                      ---------  ---------
Cash Flows from Operating Activities:
Net income (loss)                                     $ (24,328) $  27,594
Adjustments to reconcile net income (loss) to net
 cash provided by (used in) operating activities:
  Depreciation and amortization                           3,878      2,616
  Accretion of investment discount                           14       (461)
  Stock-based compensation expense                        6,736      4,933
  Put Rights                                              1,967          -
  Unrealized holding gains for trading securities          (972)         -
  Tax benefit from stock option transactions                  -        235
  Excess tax benefit from stock option transactions           -        (71)
  Gain on disposal of assets                                (15)      (332)
  Other gain                                                  -        (33)
  Changes in assets and liabilities:
    Accounts receivable                                  24,659     (3,989)
    Inventory                                            (4,880)    (1,023)
    Prepaid expenses and other current assets              (491)       410
    Deferred inventory costs                                668     22,805
    Other non-current assets                                 59     (1,220)
    Accounts payable                                     (5,276)     5,792
    Accrued liabilities and other expenses               (2,899)    (9,529)
    Deferred revenue                                     (1,813)   (38,943)
    Accrued warranty                                       (238)     1,035
                                                      ---------  ---------
      Net cash provided by (used in) operating
       activities                                        (2,931)     9,819

Cash Flows from Investing Activities:
  Purchases of available-for-sale investments and
   restricted cash                                      (31,629)   (78,300)
  Proceeds from sales of investments                          -     58,636
  Proceeds from maturities of investments                22,804     36,600
  Proceeds from disposal of assets                           49        332
  Purchase of property and equipment                     (5,960)    (2,481)
                                                      ---------  ---------
      Net cash provided by (used in) investing
       activities                                       (14,736)    14,787

Cash Flows from Financing Activities:
  Proceeds from issuance of common stock                  4,335      6,044
  Excess tax benefit from stock option transactions           -         71
  Repurchase of common stock                                 (8)        (3)
                                                      ---------  ---------
      Net cash provided by financing activities           4,327      6,112
                                                      ---------  ---------

Effect of exchange rate changes on cash                     (59)         3
                                                      ---------  ---------

Net change in cash and cash equivalents                 (13,399)    30,721
Cash and cash equivalents at beginning of period        166,770     91,209
                                                      ---------  ---------
Cash and cash equivalents at end of period            $ 153,371  $ 121,930
                                                      =========  =========

Supplemental disclosures of cash flow information:
  Cash paid for interest                              $       -  $       3
  Cash paid for income taxes                          $     942  $      63




Infinera Corporation
Supplemental Financial Information


             Q1'07  Q2'07  Q3'07  Q4'07  Q1'08  Q2'08  Q3'08  Q4'08  Q1'09
             -----  -----  -----  -----  -----  -----  -----  -----  -----
Revenue      $66.7  $69.0  $80.4  $93.4  $95.5  $90.8  $80.9  $86.2  $66.6
Gross
 Margin %       35%    37%    43%    47%    45%    47%    42%    36%    31%
             -----  -----  -----  -----  -----  -----  -----  -----  -----
Invoiced
Shipment
Composition:
Domestic %      89%    84%    81%    81%    82%    78%    81%    73%    74%
International
 %              11%    16%    19%    19%    18%    22%    19%    27%    26%
Largest
 Customer %     57%    48%    28%    18%    31%    21%    27%    23%    30%
             -----  -----  -----  -----  -----  -----  -----  -----  -----
Cash Related
 Information:
Cash from
 Operations  $ 6.9  ($0.8) ($2.0) $18.9  $ 9.8  $ 5.6  $ 9.9  ($5.4) ($2.9)
Capital
Expenditures $ 5.2  $ 3.6  $ 3.0  $ 8.5  $ 4.5  $ 4.8  $ 5.9  $ 7.8  $ 6.0
Depreciation
&
Amortization $ 2.1  $ 2.0  $ 2.7  $ 2.7  $ 2.6  $ 2.9  $ 3.4  $ 4.1  $ 3.9
DSO's           27     36     47     39     42     57     55     74     61
             -----  -----  -----  -----  -----  -----  -----  -----  -----
Inventory
 Metrics:
Raw
 Materials   $ 7.4  $ 8.8  $ 7.5  $10.5  $ 7.9  $ 9.2  $10.0  $ 9.1  $ 7.7
Work in
 Process     $31.6  $36.0  $34.8  $35.1  $40.6  $34.6  $35.8  $37.9  $43.2
Finished
 Goods       $18.4  $13.7  $14.8  $13.0  $10.7  $13.8  $12.8  $12.0  $13.6
             -----  -----  -----  -----  -----  -----  -----  -----  -----
Total
 Inventory   $57.3  $58.5  $57.1  $58.6  $59.2  $57.6  $58.6  $59.0  $64.5
Inventory
 Turns         3.0    3.0    3.2    3.4    3.5    3.3    3.2    3.8    2.8
             -----  -----  -----  -----  -----  -----  -----  -----  -----
Worldwide
 Headcount     617    646    668    711    799    853    889    937    962
             -----  -----  -----  -----  -----  -----  -----  -----  -----


Periods prior to Q2'08 reflect invoiced shipments results; periods from
 Q2'08 through Q4'08 reflect adjusted GAAP results; and Q1'09 reflects
 non-GAAP results.

Contact Information