SOURCE: Infinera

Infinera

April 28, 2011 16:15 ET

Infinera Corporation Reports First Quarter 2011 Financial Results

SUNNYVALE, CA--(Marketwire - Apr 28, 2011) - Infinera Corporation (NASDAQ: INFN), a leading provider of digital optical communications systems, today released financial results for the first quarter ended March 26, 2011.

  • GAAP revenues for the first quarter of 2011 were $92.9 million compared to $117.1 million in the fourth quarter of 2010 and $95.8 million in the first quarter of 2010.

  • GAAP gross margins for the quarter were 46% compared to 49% in the fourth quarter of 2010 and 39% in the first quarter of 2010. GAAP net loss for the quarter was $16.4 million, or $(0.16) per share, compared to net loss of $2.7 million, or $(0.03) per share, in the fourth quarter of 2010 and net loss of $20.0 million, or $(0.21) per share, in the first quarter of 2010.

  • Non-GAAP gross margins for the first quarter of 2011 were 48% compared to 51% in the fourth quarter of 2010 and 41% in the first quarter of 2010, excluding restructuring and other related costs and non-cash stock-based compensation expenses. Non-GAAP net loss for the first quarter of 2011 was $4.0 million, or $(0.04) per share, compared to net income of $7.6 million, or $0.07 per diluted share, in the fourth quarter of 2010 and net loss of $7.0 million, or $(0.07) per share, in the first quarter of 2010.

Management Commentary

"Our first quarter results were achieved based on continuing demand for our product portfolio from our existing customers, which reflects continuing steady growth in end-user demand for bandwidth, but we saw slower new footprint activity in Q1 versus a year ago," said Tom Fallon, president and chief executive officer. Customers continue to show strong interest in our Photonic Integrated Circuit technology and in the field trial demonstrations of the differentiated features of our upcoming new products -- our 40G transmission solution with FlexCoherent technology and our next-generation 500Gb/s PIC solution, which will support 100G transmission applications.

"It is also important to note that we are growing the number of customers who are buying a multi-product Infinera solution. This includes customers buying either a combination of long-haul and metro solutions or a combination of terrestrial and subsea solutions. At the end of Q1, we had 26 multi-platform customers out of a total of 86 customers worldwide. This is an important trend as these customers have made a more significant architectural commitment to Infinera.

"Finally, we continue to build additional features and capabilities into our ATN metro platform, and in the second quarter we will add Ethernet aggregation functionality."

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 90 days. To hear the replay, parties in the United States and Canada should call 1-866-395-9177. International parties can access the replay at 1-203-369-0501.

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 http://www.infinera.com/.

Forward-Looking Statements

This press release contains forward-looking statements, including statements about the interest in our PIC-based technology and differentiated features of our products, the timing of the introduction of the Ethernet aggregation functionality of our ATN System, and the growth in and commitment made by customers. 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 U.S. 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 March 1, 2011, 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.

Use of Non-GAAP financial information

In addition to disclosing financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain certain non-GAAP measures that exclude non-cash stock-based compensation expenses and non-recurring restructuring and other related costs. We believe these adjustments are appropriate to enhance an overall understanding of our underlying financial performance and also our prospects for the future and are considered by management for the purpose of making operational decisions. In addition, these results are the primary indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income (loss), basic and diluted net income (loss) per share, or gross margin prepared in accordance with GAAP. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and are subject to limitations. For a description of these non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial measures, please see the section titled, "GAAP to Non-GAAP Reconciliations." We anticipate disclosing forward-looking non-GAAP information in our conference call to discuss our first quarter results, including an estimate of non-GAAP earnings for the second quarter of 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 share amounts)
(Unaudited)
Three Months Ended
March 26,March 27,
20112010
Revenue:
Product$82,528$86,167
Ratable product and related support and services9221,614
Services9,4407,979
Total revenue92,89095,760
Cost of revenue (1):
Cost of product46,61855,440
Cost of ratable product and related support and services385755
Cost of services3,1432,542
Restructuring credit related to cost of revenue-(93)
Total cost of revenue50,14658,644
Gross profit42,74437,116
Operating expenses (1):
Research and development31,30928,483
Sales and marketing13,93513,037
General and administrative13,50915,737
Restructuring and other costs-161
Total operating expenses58,75357,418
Loss from operations(16,009)(20,302)
Other income (expense), net:
Interest income312485
Other gain (loss), net:(411)(316)
Total other income (expense), net(99)169
Loss before income taxes(16,108)(20,133)
Provision for (benefit from) income taxes286(142)
Net loss$(16,394)$(19,991)
Net loss per common share, basic and diluted$(0.16)$(0.21)
Weighted average shares used in computing basic and diluted net loss per common share103,42697,276
(1)The following table summarizes the effects of stock-based compensation related to employees and non-employees for the three months ended March 26, 2011 and March 27, 2010:
Three Months Ended
March 26,March 27,
20112010
Cost of revenue$731$569
Research and development3,8263,423
Sales and marketing2,0601,847
General and administration4,7835,709
11,40011,548
Cost of revenue - amortization from balance sheet*9651,362
Total stock-based compensation expense$12,365$12,910
*Stock-based compensation expense deferred to inventory and deferred inventory costs in prior periods and recognized in the current period.
Infinera Corporation
GAAP to Non-GAAP Reconciliations
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 26,December 25,March 27,
201120102010
Reconciliation of Gross Profit:
U.S. GAAP as reported$42,744$57,292$37,116
Restructuring and other related costs(1)--(93)
Stock-based compensation(2)1,6962,1951,931
Non-GAAP as adjusted$44,440$59,487$38,954
Reconciliation of Gross Margin:
U.S. GAAP as reported46%49%39%
Restructuring and other related costs(1)-%-%-%
Stock-based compensation(2)2%2%2%
Non-GAAP as adjusted48%51%41%
Reconciliation of Income (Loss) from Operations:
U.S. GAAP as reported$(16,009)$(2,775)$(20,302)
Restructuring and other related costs(1)--68
Stock-based compensation(2)12,36510,37412,910
Non-GAAP as adjusted$(3,644)$7,599$(7,324)
Reconciliation of Net Income (Loss):
U.S. GAAP as reported$(16,394)$(2,740)$(19,991)
Restructuring and other related costs(1)--68
Stock-based compensation(2)12,36510,37412,910
Non-GAAP as adjusted$(4,029)$7,634$(7,013)
Net Income (Loss) per Common Share - Basic:
U.S. GAAP$(0.16)$(0.03)$(0.21)
Non-GAAP$(0.04)$0.08$(0.07)
Net Income (Loss) per Common Share - Diluted:
U.S. GAAP$(0.16)$(0.03)$(0.21)
Non-GAAP$(0.04)$0.07$(0.07)
Weighted average shares used in computing net income (loss) per common share - U.S. GAAP:
Basic103,426101,65492,276
Diluted103,426101,65492,276
Weighted average shares used in computing net income (loss) per common share - Non-GAAP:
Basic103,426101,65492,276
Diluted103,426108,39392,276
(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
March 27, 2010
Cost of RevenueOperating ExpensesTotal
Severance and related expenses$(15)$55$40
Equipment and facility-related costs(78)-(78)
Lease termination-106106
Total$(93)$161$68
(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
March 26,December 25,March 27,
201120102010
Cost of revenue$731$740$569
Research and development3,8263,7553,423
Sales and marketing2,0601,7091,847
General and administration4,7832,7155,709
11,4008,91911,548
Cost of revenue - amortization from balance sheet*9651,4551,362
Total stock-based compensation expense$12,365$10,374$12,910
*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)
March 26,December 25,
20112010
ASSETS
Current assets:
Cash and cash equivalents$111,352$113,649
Short-term investments163,850168,013
Short-term restricted cash1,6901,856
Accounts receivable60,92375,931
Other receivables1,8294,420
Inventories, net78,33181,893
Deferred inventory costs5,7376,715
Prepaid expenses and other current assets12,9599,118
Total current assets436,671461,595
Property, plant and equipment, net56,43151,740
Deferred inventory costs, non-current3,6862,512
Long-term investments7,8979,953
Cost-method investment4,5004,500
Long-term restricted cash2,3342,235
Deferred tax asset8,98211,882
Other non-current assets5,8317,108
Total assets$526,332$551,525
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$28,015$35,658
Accrued expenses18,35219,790
Accrued compensation and related benefits11,96925,098
Accrued warranty4,6775,696
Deferred revenue22,53621,958
Deferred tax liability8,98211,882
Total current liabilities94,531120,082
Accrued warranty, non-current5,4835,726
Deferred revenue, non-current4,0404,633
Other long-term liabilities10,13810,335
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 March 26, 2011 and December 25, 2010
Issued and outstanding shares – 104,042 as of March 26, 2011 and 102,492 as of December 25, 2010104102
Additional paid-in capital834,684817,200
Accumulated other comprehensive loss(962)(1,261)
Accumulated deficit(421,686)(405,292)
Total stockholders' equity412,140410,749
Total liabilities and stockholders' equity$526,332$551,525
Infinera Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
March 26,March 27,
20112010
Cash Flows from Operating Activities:
Net loss$(16,394)$(19,991)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization4,2153,983
Amortization of premium on investments987540
Stock-based compensation expense12,36512,910
Unrealized loss on Put Rights-2,104
Unrealized holding gain for trading securities-(2,104)
Non-cash tax benefit(78)(270)
Loss (gain) on disposal of assets(104)60
Other gain(19)(25)
Changes in assets and liabilities:
Accounts receivable18,89711,028
Inventories, net3,986(3,209)
Prepaid expenses and other current assets(3,357)(708)
Deferred inventory costs(278)(1,555)
Other non-current assets4,4821,627
Accounts payable(8,750)2,624
Accrued liabilities and other expenses(15,528)(6,502)
Deferred revenue(16)2,254
Accrued warranty(1,262)(489)
Net cash provided by (used in) operating activities(854)2,277
Cash Flows from Investing Activities:
Purchase of available-for-sale investments(107,049)(75,656)
Proceeds from sale of available-for-sale investments3,035-
Proceeds from maturities and calls of investments109,41668,598
Proceeds from disposal of assets10485
Purchase of property and equipment(10,602)(4,692)
Advance to secure manufacturing capacity(1,500)-
Reimbursement of manufacturing capacity advance75-
Change in restricted cash6899
Net cash used in investing activities(6,453)(11,566)
Cash Flows from Financing Activities:
Proceeds from issuance of common stock4,9094,397
Repurchase of common stock-(2)
Payments for purchase of assets under financing arrangement(87)(87)
Net cash provided by financing activities4,8224,308
Effect of exchange rate changes on cash188(61)
Net change in cash and cash equivalents(2,297)(5,042)
Cash and cash equivalents at beginning of period113,649109,859
Cash and cash equivalents at end of period$111,352$104,817
Supplemental disclosures of cash flow information:
Cash paid for income taxes$442$335
Infinera Corporation
Supplemental Financial Information
(Unaudited)
Q2'09Q3'09Q4'09Q1'10Q2'10Q3'10Q4'10Q1'11
Revenue ($ Mil)$68.9$83.4$90.2$95.8$111.4$130.1$117.1$92.9
Gross Margin % (1)31%38%40%41%44%51%51%48%
Invoiced Shipment Composition:
Domestic %64%63%74%79%81%73%70%74%
International %36%37%26%21%19%27%30%26%
Largest Customer %20%15%17%22%13%19%10%14%
Cash Related Information:
Cash from Operations ($ Mil)$(18.8)$(8.3)$(2.7)$2.3$11.2$10.0$7.0$(0.9)
Capital Expenditures ($ Mil)$2.8$2.8$4.4$4.7$5.0$5.9$5.0$10.6
Depreciation & Amortization ($ Mil)$4.0$4.2$4.5$4.0$3.7$3.9$4.0$4.2
DSO's7261715645455960
Inventory Metrics:
Raw Materials ($ Mil)$10.1$7.4$6.9$7.5$9.1$11.0$23.1$20.1
Work in Process ($ Mil)$40.1$36.2$32.1$31.5$29.2$36.5$14.8$17.2
Finished Goods ($ Mil)$22.3$29.3$29.9$33.0$45.9$41.2$44.0$41.0
Total Inventory ($ Mil)$72.5$72.9$68.9$72.0$84.2$88.7$81.9$78.3
Inventory Turns (1)2.63.03.23.23.02.92.82.5
Worldwide Headcount9739709749991,0281,0401,0721,118
(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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