SOURCE: Infinera

Infinera

February 05, 2013 16:15 ET

Infinera Corporation Reports Fourth Quarter and Fiscal Year 2012 Financial Results

SUNNYVALE, CA--(Marketwire - Feb 5, 2013) - Infinera Corporation (NASDAQ: INFN), a leading provider of digital optical networks, today released financial results for the fourth quarter and fiscal year ended December 29, 2012.

GAAP revenues for the quarter were $128.1 million compared to $112.2 million in the third quarter of 2012 and $112.0 million in the fourth quarter of 2011.

GAAP gross margins for the quarter were 34% compared to 37% in the third quarter of 2012 and 40% in the fourth quarter of 2011. GAAP net loss for the quarter was $(16.1) million, or $(0.14) per share, compared to net loss of $(19.1) million, or $(0.17) per share, in the third quarter of 2012 and a net loss of $(19.4) million, or $(0.18) per share, in the fourth quarter of 2011.

Non-GAAP gross margins for the quarter were 36% compared to 39% in the third quarter of 2012 and 42% in the fourth quarter of 2011. Non-GAAP net loss for the quarter was $(6.0) million, or $(0.05) per diluted share, compared to net loss of $(7.8) million, or $(0.07) per diluted share in the third quarter of 2012 and net loss of $(6.7) million, or $(0.06) per diluted share, in the fourth quarter of 2011. These Non-GAAP measures exclude non-cash stock-based compensation expenses and restructuring and other related costs.

GAAP revenues for the year were $438.4 million compared to $404.9 million in 2011.

GAAP gross margins for the year were 36% compared to 41% in 2011. GAAP net loss for the year was $(85.3) million, or $(0.77) per share compared to $(81.7) million, or $(0.78) per share in 2011.

Non-GAAP gross margins for the year were 38% compared to 43% in 2011. Non-GAAP net loss for the year was $(43.5) million or $(0.38) per diluted share in 2012, compared to net loss of $(31.7) million or $(0.29) per diluted share in 2011. These Non-GAAP measures exclude non-cash stock-based compensation expenses and restructuring and other related costs.

Management Commentary

"Our fourth quarter results reflected solid execution of our growth strategy and represented a strong finish to a productive year for Infinera," said Tom Fallon, president and chief executive officer. "Our DTN-X continues to gain traction and to date, we have purchase commitments from 22 customers, including seven new to Infinera. These customers represent a broad cross section of our market segments. Revenue from the DTN-X platform continues to ramp."

"During the fourth quarter, we were pleased to announce our first domestic Tier 1 backbone deployment with CenturyLink. We have also successfully completed the OSMINE certification process, another key milestone in demonstrating our US Tier 1 readiness. Our ability to fully service global Tier 1 customers essentially doubles our addressable market. We also added four new DTN customers during the quarter for a total of 111 customers worldwide," continued Mr. Fallon.

"We are optimistic about the outlook for 2013. Interest in our unique 100G converged DWDM/OTN switching solution remains strong, resulting in significant trial activity, which has helped us build a strong pipeline into 2013. A strong focus on winning footprint and gaining market share, balanced with prudent financial management remain our priorities for 2013," Mr. Fallon concluded.

Conference Call Information:

Infinera will host a conference call for analysts and investors to discuss its fourth quarter and fiscal year 2012 results and first 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 1-888-566-0401. International parties can access the replay at 1-203-369-3040.

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 our expectations for customer interest in, adoption of, and revenue and purchase commitments related to our DTN-X product, our ability to fully service Tier 1 customers and the addressable market related to Tier 1 customers, and customer interest in our 100G converged DWDM/OTN switching solution, and our building of a strong pipeline for 2013. 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 unexpected delays in the development, production or availability of our products; decisions by customers to delay orders of the product; changes in the marketplace that would affect customer demand for the product, as well as our general 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 6, 2012, as well as subsequent reports filed with or furnished to the SEC. These reports are available on our website at www.infinera.com and the SEC's website at www.sec.gov. 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. 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 fourth quarter results, including an estimate of non-GAAP earnings for the first quarter of 2013 that excludes non-cash stock-based compensation expenses.

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

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

   
   
   
Infinera Corporation  
GAAP Condensed Consolidated Statements of Operations  
(In thousands, except share amounts)  
(Unaudited)  
    Three Months Ended     Twelve Months Ended  
    December 29,     December 31,     December 29,     December 31,  
    2012     2011     2012     2011  
Revenue:                                
  Product   $ 109,051     $ 93,025     $ 378,138     $ 349,468  
  Ratable product and related support and services     393       593       1,897       3,176  
  Services     18,620       18,391       58,402       52,233  
    Total revenue     128,064       112,009       438,437       404,877  
                                 
 Cost of revenue (1):                                
  Cost of product     77,023       61,103       258,874       219,710  
  Cost of ratable product and related support and services     104       250       563       1,096  
  Cost of services     7,669       5,972       21,431       18,580  
    Total cost of revenue     84,796       67,325       280,868       239,386  
                                 
Gross profit     43,268       44,684       157,569       165,491  
                                 
Operating expenses (1):                                
  Research and development     26,660       31,218       117,233       127,120  
  Sales and marketing     20,558       18,336       75,862       64,773  
  General and administrative     11,563       14,119       47,475       54,375  
  Restructuring and other costs (credit)     -       (129 )     -       (129 )
    Total operating expenses     58,781       63,544       240,570       246,139  
                                 
Loss from operations     (15,513 )     (18,860 )     (83,001 )     (80,648 )
                                 
Other income (expense), net:                                
  Interest income     233       272       911       1,014  
  Other gain (loss), net     (158 )     (216 )     (1,050 )     (419 )
    Total other income (expense), net     75       56       (139 )     595  
                                 
Loss before income taxes     (15,438 )     (18,804 )     (83,140 )     (80,053 )
Provision for income taxes     650       546       2,190       1,691  
Net loss   $ (16,088 )   $ (19,350 )   $ (85,330 )   $ (81,744 )
                                 
Net loss per common share, basic and diluted   $ (0.14 )   $ (0.18 )   $ (0.77 )   $ (0.78 )
                                 
Weighted average shares used in computing basic and diluted net loss per common share     112,311       106,893       110,739       105,432  
     
(1)   The following table summarizes the effects of stock-based compensation related to employees and non-employees for the three and twelve months ended December 29, 2012 and December 31, 2011:
                 
    Three Months Ended   Twelve Months Ended
    December 29,   December 31,   December 29,   December 31,
    2012   2011   2012   2011
Cost of revenue   $ 735   $ 710   $ 2,710   $ 2,923
Research and development     2,852     3,915     13,306     14,990
Sales and marketing     2,802     2,317     10,450     8,818
General and administration     1,797     4,481     9,529     18,502
      8,186     11,423     35,995     45,233
Cost of revenue - amortization from balance sheet*     1,949     1,307     5,824     4,924
Total stock-based compensation expense   $ 10,135   $ 12,730   $ 41,819   $ 50,157
 
* 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     Twelve Months Ended  
 
 
  December
29,
2012
 
 
  September
29,
2012
 
 
  December
31,
2011
 
 
  December
29,
2012
 
 
  December
31,
2011
 
 
Reconciliation of Gross Profit:                                        
U.S. GAAP as reported   $ 43,268     $ 41,500     $ 44,684     $ 157,569     $ 165,491  
Stock-based compensation(1)     2,684       2,389       2,017       8,534       7,847  
Non-GAAP as adjusted   $ 45,952     $ 43,889     $ 46,701     $ 166,103     $ 173,338  
                                         
Reconciliation of Gross Margin:                                        
U.S. GAAP as reported     34 %     37 %     40 %     36 %     41 %
Stock-based compensation(1)     2 %     2 %     2 %     2 %     2 %
Non-GAAP as adjusted     36 %     39 %     42 %     38 %     43 %
                                         
Reconciliation of Loss                                        
from Operations:                                        
U.S. GAAP as reported   $ (15,513 )   $ (18,205 )   $ (18,860 )   $ (83,001 )   $ (80,648 )
Restructuring and other related costs (credit)(2)     -       -       (129 )     -       (129 )
Stock-based compensation(1)     10,135       11,317       12,730       41,819       50,157  
Non-GAAP as adjusted   $ (5,378 )   $ (6,888 )   $ (6,259 )   $ (41,182 )   $ (30,620 )
                                         
Reconciliation of Net Loss:                                        
U.S. GAAP as reported   $ (16,088 )   $ (19,081 )   $ (19,350 )   $ (85,330 )   $ (81,744 )
Restructuring and other related costs (credit)(2)     -       -       (129 )     -       (129 )
Stock-based compensation(1)     10,135       11,317       12,730       41,819       50,157  
Non-GAAP as adjusted   $ (5,953 )   $ (7,764 )   $ (6,749 )   $ (43,511 )   $ (31,716 )
                                         
Reconciliation of Net Loss per Common                                        
Share - Basic:                                        
U.S. GAAP as reported   $ (0.14 )   $ (0.17 )   $ (0.18 )   $ (0.77 )   $ (0.78 )
Non-GAAP as adjusted   $ (0.05 )   $ (0.07 )   $ (0.06 )   $ (0.39 )   $ (0.30 )
                                         
Reconciliation of Net Loss per CommonShare - Diluted:                                        
U.S. GAAP as reported   $ (0.14 )   $ (0.17 )   $ (0.18 )   $ (0.77 )   $ (0.78 )
Non-GAAP as adjusted(3)   $ (0.05 )   $ (0.07 )   $ (0.06 )   $ (0.38 )   $ (0.29 )
                                         
Weighted average shares used in computing net loss per common share - U.S. GAAP:                                        
Basic     112,311       111,579       106,893       110,739       105,432  
Diluted     112,311       111,579       106,893       110,739       105,432  
                                         
Weighted average shares used in computing net loss per common share - Non-GAAP:                                        
Basic     112,311       111,579       106,893       110,739       105,432  
Diluted(3)     114,115       113,443       110,018       113,124       108,770  
                                         
     
(1)   Stock-based compensation expense is calculated in accordance with the fair value recognition provisions of Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 718, Compensation-Stock Compensation effective January 1, 2006. The following table summarizes the effects of stock-based compensation related to employees and non-employees:
 
    Three Months Ended   Twelve Months Ended
    December 29,
2012
  September 29,
2012
  December 31,
2011
  December 29,
2012
  December 31,
2011
Cost of revenue   $ 735   $ 683   $ 710   $ 2,710   $ 2,923
Research and development     2,852     3,439     3,915     13,306     14,990
Sales and marketing     2,802     2,685     2,317     10,450     8,818
General and administration     1,797     2,804     4,481     9,529     18,502
      8,186     9,611     11,423     35,995     45,233
Cost of revenue - amortization from balance sheet*     1,949     1,706     1,307     5,824     4,924
Total stock-based compensation expense   $ 10,135   $ 11,317   $ 12,730   $ 41,819   $ 50,157
                               
* Stock-based compensation expense deferred to inventory and deferred inventory costs in prior periods and recognized in the current period.
     
(2)   Adjustment amount represents equipment and facility-related creidts associated with restructuring 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.
     
(3)   Diluted shares used to calculate net loss per share on a non-GAAP basis provided for informational purposes only.
   
   
   
Infinera Corporation  
Condensed Consolidated Balance Sheets  
(In thousands, except par values)  
(Unaudited)  
   
    December 29,     December 31,  
    2012     2011  
ASSETS                
                 
Current assets:                
  Cash and cash equivalents   $ 104,666     $ 94,458  
  Short-term investments     76,146       101,296  
  Accounts receivable, net of allowance for doubtful accounts of $94 in 2012 and $0 in 2011     107,039       80,616  
  Other receivables     2,909       1,346  
  Inventory     127,809       88,996  
  Deferred inventory costs     1,029       5,987  
  Prepaid expenses and other current assets     9,899       10,532  
      Total current assets     429,497       383,231  
                 
  Property, plant and equipment, net     80,343       76,753  
  Deferred inventory costs, non-current     100       1,020  
  Long-term investments     2,874       54,315  
  Cost-method investment     9,000       9,000  
  Long-term restricted cash     3,868       3,047  
  Deferred tax asset     805       822  
  Other non-current assets     1,683       3,516  
      Total assets   $ 528,170     $ 531,704  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
                 
Current liabilities:                
    Accounts payable   $ 61,428     $ 48,838  
    Accrued expenses     25,483       22,421  
    Accrued compensation and related benefits     22,325       18,966  
    Accrued warranty     7,262       5,692  
    Deferred revenue     26,744       22,781  
    Deferred tax liability     805       767  
      Total current liabilities     144,047       119,465  
                 
    Accrued warranty, non-current     9,220       7,173  
    Deferred revenue, non-current     3,210       3,410  
    Other long-term liabilities     15,557       13,853  
                 
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 Issued and outstanding shares - 112,461 as of December 29, 2012 and 106,976 as of December 31, 2011     112       107  
    Additional paid-in capital     930,618       876,927  
    Accumulated other comprehensive loss     (2,228 )     (2,195 )
    Accumulated deficit     (572,366 )     (487,036 )
    Total stockholders' equity     356,136       387,803  
      Total liabilities and stockholders' equity   $ 528,170     $ 531,704  
   
   
   
Infinera Corporation  
Condensed Consolidated Statements of Cash Flows  
(In thousands)  
(Unaudited)  
   
    Twelve Months Ended  
    December 29,     December 31,  
    2012     2011  
Cash Flows from Operating Activities:                
Net loss   $ (85,330 )   $ (81,744 )
Adjustments to reconcile net loss to net cash provided by operating activities:                
  Depreciation and amortization     23,661       17,859  
  Provision for doubtful accounts     94       -  
  Provision for other receivables     -       563  
  Non-cash restructuring and other costs (credit)     -       (129 )
  Amortization of premium on investments     2,068       4,215  
  Stock-based compensation expense     41,819       50,157  
  Non-cash tax benefit     (7 )     (95 )
  Other gain     (475 )     (335 )
  Changes in assets and liabilities:                
    Accounts receivable     (26,517 )     (4,686 )
    Other receivables     (1,894 )     3,440  
    Inventories, net     (40,623 )     (6,007 )
    Prepaid expenses and other assets     2,293       12,695  
    Deferred inventory costs     5,741       1,999  
    Accounts payable     15,410       9,342  
    Accrued liabilities and other expenses     6,915       (10,282 )
    Deferred revenue     3,763       (401 )
    Accrued warranty     3,616       1,444  
      Net cash used in operating activities     (49,466 )     (1,965 )
                 
Cash Flows from Investing Activities:                
  Purchase of available-for-sale investments     (54,150 )     (273,334 )
  Purchase of cost-method investment     -       (4,500 )
  Proceeds from sale of available-for-sale investments     11,584       4,072  
  Proceeds from maturities and calls of investments     117,605       287,781  
  Proceeds from disposal of assets     1       262  
  Purchase of property and equipment     (25,395 )     (39,382 )
  Advance to secure manufacturing capacity     -       (1,500 )
  Reimbursement of manufacturing capacity advance     50       450  
  Change in restricted cash     (827 )     983  
      Net cash provided by (used in) investing activities     48,868       (25,168 )
                 
Cash Flows from Financing Activities:                
  Proceeds from issuance of common stock     11,580       10,023  
  Repurchase of common stock     (882 )     (1,248 )
  Payments for purchase of assets under financing arrangement     -       (262 )
      Net cash provided by financing activities     10,698       8,513  
                 
Effect of exchange rate changes on cash     108       (571 )
                 
Net change in cash and cash equivalents     10,208       (19,191 )
Cash and cash equivalents at beginning of period     94,458       113,649  
Cash and cash equivalents at end of period   $ 104,666     $ 94,458  
                 
Supplemental disclosures of cash flow information:                
  Cash paid for income taxes   $ 923     $ 1,487  
Supplemental schedule of non-cash investing and financing activities:                
  Transfer of inventory to fixed assets   $ 3,222     $ -  
  Non-cash settlement for manufacturing capacity advance   $ 275     $ -  
 
 
 
Infinera Corporation
Supplemental Financial Information
(Unaudited)
 
    Q1'11   Q2'11   Q3'11   Q4'11   Q1'12   Q2'12   Q3'12   Q4'12
Revenue ($ Mil)   $92.9   $96.0   $104.0   $112.0   $104.7   $93.5   $112.2   $128.1
Gross Margin % (1)   48%   41%   41%   42%   40%   37%   39%   36%
Invoiced Shipment Composition:                                
Domestic %   74%   72%   65%   70%   71%   70%   70%   63%
International %   26%   28%   35%   30%   29%   30%   30%   37%
Largest Customer %   14%   10%   < 10%   14%   13%   15%   13%   13%
Cash Related Information:                                
Cash from (used in) Operations ($ Mil)   $(0.9)   $(0.1)   $4.1   $(5.1)   $(5.8)   $(22.7)   $(29.3)   $8.3
Capital Expenditures ($ Mil)   $10.6   $6.7   $5.9   $16.1   $13.6   $6.1   $2.5   $3.2
Depreciation & Amortization ($ Mil)   $4.2   $4.2   $4.9   $4.5   $5.5   $5.7   $6.1   $6.4
DSO's   60   70   60   65   57   55   74   76
Inventory Metrics:                                
Raw Materials ($ Mil)   $20.1   $7.3   $7.0   $12.1   $15.3   $14.8   $12.4   $13.0
Work in Process ($ Mil)   $17.2   $27.7   $26.9   $37.0   $41.6   $49.4   $59.8   $57.3
Finished Goods ($ Mil)   $41.0   $34.4   $36.4   $39.9   $44.7   $50.9   $46.3   $57.5
Total Inventory ($ Mil)   $78.3   $69.4   $70.3   $89.0   $101.6   $115.1   $118.5   $127.8
Inventory Turns (1)   2.5   3.3   3.5   2.9   2.5   2.1   2.3   2.6
Worldwide Headcount   1,118   1,136   1,151   1,181   1,210   1,228   1,235   1,242
                                 
(1)   Amounts reflect non-GAAP results. Non-GAAP adjustments include non-cash stock-based compensation expense.

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