SOURCE: Infinera

Infinera

October 20, 2009 16:10 ET

Infinera Corporation Reports Third Quarter 2009 Financial Results

Revenues of $83.4 Million; Four New Customers Added; New ATN Platform Has Six Wins to Date

SUNNYVALE, CA--(Marketwire - October 20, 2009) - Infinera Corporation (NASDAQ: INFN), a leading provider of digital optical communications systems, today released financial results for the third quarter ended September 26, 2009.

--  GAAP revenues for the third quarter of 2009 were $83.4 million
    compared to $68.9 million for the second quarter of 2009 and $80.9 million
    on an adjusted GAAP basis in the third quarter of 2008.
--  GAAP gross margins for the quarter were 33%. Excluding restructuring
    and other related costs and non-cash stock-based compensation expense, non-
    GAAP gross margins were 38% in the third quarter of 2009 compared to 31% in
    the second quarter of 2009 and 42% on an adjusted GAAP basis in the third
    quarter of 2008.
--  GAAP net loss for the quarter was $16.5 million, or $0.17 per share.
    Excluding restructuring and other related costs and non-cash stock-based
    compensation expense, net loss on a non-GAAP basis was $3.1 million, or
    $0.03 per share, in the third quarter of 2009 compared to a net loss of
    $18.2 million, or $0.19 per share, on a non-GAAP basis in the second
    quarter of 2009 and net income of $0.0 million, or $0.00 per diluted share,
    on an adjusted GAAP basis, for the third quarter of 2008.
    

Management Commentary

"In the third quarter, we continued our positive revenue growth trajectory and our new customer win momentum with the addition of four customers to our roster, while diversifying our customer base and reducing our reliance on any single account," said Jagdeep Singh, president and chief executive officer at Infinera. "Our ability to grow our revenue and expand our customer base in the current environment validates that customers are investing in the optical network again and that Infinera is winning its fair share of this spending.

"We have expanded our total addressable market with the addition of submarine and metro edge products, and believe that our differentiated, PIC-based disruptive technology continues to resonate with customers and prospects alike as the industry's best, most cost-effective solution to solve their business challenges," said Singh.

The company noted the following Q3 highlights:

--  The addition of four new customers this quarter brings the company's
    total customer count to 66. With the addition of incumbent service
    providers Telefonica and Teliasonera, Infinera's Tier-1 carrier customer
    count is now six, of which three -- NTT Communications, Deutsche Telecom
    and Telefonica -- are among the top five players in the world.
    
--  The company achieved greater customer diversification as three
    customers accounted for 10% or more of revenue this quarter and the largest
    customer for the quarter was an existing, but unannounced, cable MSO
    customer. Level 3 was slightly less than 10 percent of revenue.
    
--  International revenue grew for the fourth quarter in a row, reaching
    37 percent of revenue in Q3.
    
--  The company won a new eight-figure opportunity with another major
    internet content provider.
    
--  With the introduction of its recently announced ATN metro edge
    product, the company now addresses all major categories within the $8
    billion dollar DWDM space including submarine, ultra-long haul, long-haul,
    regional, metro core and metro access. To date the company has six wins for
    its new ATN platform, including the recently announced ATN deployment at
    Deltacomm.
    
--  The company significantly strengthened its technology resources with
    the addition of an experienced engineering team in its new Ottawa
    development center. This team has deep expertise in signal processing and
    complex modulation schemes, important building blocks for the next
    generation of optical transport products.
    

Note: For an explanation of our use of Non-GAAP 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 and Adjusted GAAP Reconciliations." We have not shown comparisons to our third quarter 2008 GAAP results in the body of this press release because those results were significantly affected by the recognition of ratable product and related support and services revenue from shipments made prior to the third 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 third quarter results and fourth 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 1-800-685-9501. International parties can access the replay at 1-203-369-3318.

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, business, customer reaction to our products and our view on customer spending. 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 adjusted GAAP revenue and exclude non-cash stock-based compensation expenses and non-recurring restructuring and other related costs. 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 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 third quarter of 2009 results, including an estimate of non-GAAP earnings for the fourth quarter of 2009 that excludes non-cash stock-based compensation expenses and non-recurring restructuring and other related costs.

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      Nine Months Ended
                            ----------------------  ----------------------
                            September   September   September   September
                                26,         27,         26,         27,
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------

Revenue:
  Product                   $   73,690  $   76,130  $  193,912  $  226,763
  Ratable product and
   related support and
   services                        892      39,495       3,206     181,462
  Services                       8,826       4,881      21,802      11,643
                            ----------  ----------  ----------  ----------
     Total revenue              83,408     120,506     218,920     419,868

Cost of revenue (1):
  Cost of product               47,473      45,139     137,037     131,928
  Cost of ratable product
   and related support
   and services                    444      18,537       1,532      86,537
  Cost of services               5,049       2,592       9,681       5,814
  Restructuring and other
   costs related to
   cost of revenue               2,736           -       2,736           -
                            ----------  ----------  ----------  ----------
     Total cost of
      revenue                   55,702      66,268     150,986     224,279

Gross profit                    27,706      54,238      67,934     195,589

Operating expenses (1):
  Sales and marketing           12,364      11,171      34,945      32,277
  Research and development      23,589      21,092      70,349      57,172
  General and
   administrative               10,373       8,713      31,978      25,632
  Restructuring and other
   costs                           601           -         601           -
  Amortization of
   intangible assets                22          37          96         111
                            ----------  ----------  ----------  ----------
     Total operating
      expenses                  46,949      41,013     137,969     115,192

Income (loss) from
 operations                    (19,243)     13,225     (70,035)     80,397

Other income (expense),
 net:
  Interest income                  441       1,675       1,956       7,236
  Interest expense                   -           -           -          (3)
  Net impairment
   losses recognized
   in earnings (2)                (161)          -      (1,094)          -
  Other gain (loss), net           870          37        (138)      1,213
                            ----------  ----------  ----------  ----------
     Total other income
      (expense), net             1,150       1,712         724       8,446

Income (loss) before
 income taxes                  (18,093)     14,937     (69,311)     88,843
Provision for (benefit
 from) income taxes             (1,561)          -      (1,340)      3,427
                            ----------  ----------  ----------  ----------
Net income (loss)           $  (16,532) $   14,937  $  (67,971) $   85,416
                            ==========  ==========  ==========  ==========

Net income (loss)
 per common share:
  Basic                     $    (0.17) $     0.16  $    (0.71) $     0.93
                            ==========  ==========  ==========  ==========
  Diluted                   $    (0.17) $     0.15  $    (0.71) $     0.88
                            ==========  ==========  ==========  ==========

Weighted average shares
 used in computing net
 income (loss) per common
 share:
   Basic                        95,864      92,888      95,100      92,087
                            ==========  ==========  ==========  ==========
   Diluted                      95,864      97,208      95,100      97,061
                            ==========  ==========  ==========  ==========


(1) The following table summarizes the effects of stock-based compensation
    related to employees and non-employees for the three and nine months
    ended September 26, 2009 and September 27, 2008:


                              Three Months Ended      Nine Months Ended
                            ----------------------  ----------------------
                            September   September   September   September
                                26,         27,         26,         27,
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------
  Cost of revenue           $      490  $      299  $    1,346  $      778
  Sales and marketing            1,710       1,250       4,723       3,264
  Research and development       2,915       1,870       7,066       4,722
  General and
   administration                3,984       1,956      10,142       5,530
                            ----------  ----------  ----------  ----------
                                 9,099       5,375      23,277      14,294
  Cost of revenue -
   amortization from
   balance sheet*                  987       1,180       2,457       3,549
                            ----------  ----------  ----------  ----------
  Total stock-based
   compensation expense     $   10,086  $    6,555  $   25,734  $   17,843
                            ==========  ==========  ==========  ==========

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


(2) The following table summarizes the components of net impairment losses
    recognized in earnings:


                              Three Months Ended      Nine Months Ended
                            ----------------------  ----------------------
                            September   September   September   September
                                26,         27,         26,         27,
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------
  Total
   other-than-temporary
   impairment loss          $       -  $         -  $   (2,747) $        -
  Portion of gain (loss)
   recognized in other
   comprehensive loss            (161)           -       1,653           -
                            ----------  ----------  ----------  ----------
  Net impairment losses
   recognized in earnings   $    (161)  $        -  $   (1,094) $        -
                            ==========  ==========  ==========  ==========




Infinera Corporation
GAAP to Non-GAAP and Adjusted GAAP Reconciliations:




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


                         Three Months Ended September 26, 2009
               ----------------------------------------------------------
                                          Non-GAAP
                          Restruc-        excluding
                           turing         Restruc-    Stock
                 GAAP     Charges(1)       turing     Comp(2)   Non-GAAP
               ---------  ---------       ---------  ---------  ---------

Revenue
  Product
   and ratable
   revenue     $  74,582  $       -       $  74,582  $       -  $  74,582
  Services
   revenue         8,826          -           8,826          -      8,826
               ---------  ---------       ---------  ---------  ---------
Total revenue     83,408          -          83,408          -     83,408
Cost of revenue   55,702     (2,736) (a)     52,966     (1,477)    51,489
               ---------  ---------       ---------  ---------  ---------
Gross profit      27,706      2,736          30,442      1,477     31,919
Gross margin          33%                                              38%
Operating
 expenses         46,949       (601) (a)     46,348     (8,609)    37,739
               ---------  ---------       ---------  ---------  ---------
Loss from
 operations      (19,243)     3,337         (15,906)    10,086     (5,820)
Other income
 (expense),
 net               1,150          -           1,150          -      1,150
               ---------  ---------       ---------  ---------  ---------
Loss before
 provision
 for income
 taxes           (18,093)     3,337         (14,756)    10,086     (4,670)
Benefit from
 income taxes     (1,561)         -          (1,561)         -     (1,561)
               ---------  ---------       ---------  ---------  ---------
Net loss       $ (16,532) $   3,337       $ (13,195) $  10,086  $  (3,109)
               =========  =========       =========  =========  =========
Net loss per
 common share:
  Basic        $   (0.17)                                       $   (0.03)
               =========                                        =========
  Diluted      $   (0.17)                                       $   (0.03)*
               =========                                        =========
Weighted
 average shares
 used in
 computing net
 loss per
 common share:
  Basic           95,864                                           95,864
               =========                                        =========
  Diluted         95,864                                           99,293*
               =========                                        =========

(1) In the third quarter of 2009, we recorded restructuring and other
    related costs of $3.3 million pursuant to our plan announced on
    July 21, 2009, involving the closure of our Maryland based
    semi-conductor fabrication plant ("FAB") and the consolidation of
    these activities into our primary FAB location in Sunnyvale,
    California.

(2) 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 September 26,
    2009.

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





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


                    Three Months Ended June 27, 2009
                ---------------------------------------
                   GAAP     Stock Comp        Non-GAAP
                ----------  ----------       ----------

Revenue
  Product
   and ratable
   revenue      $   61,919  $        -       $   61,919
  Services
   revenue           7,013           -            7,013
                ----------  ----------       ----------
Total revenue       68,932           -           68,932
Cost of revenue     48,674      (1,381) (b)      47,293
                ----------  ----------       ----------
Gross profit        20,258       1,381           21,639
Gross margin            29%                          31%
Operating
 expenses           47,736      (7,531) (b)      40,205
                ----------  ----------       ----------
Loss from
 operations        (27,478)      8,912          (18,566)
Other income
 (expense), net        470           -              470
                ----------  ----------       ----------
Loss before
 provision
 for income
 taxes             (27,008)      8,912          (18,096)
Provision for
 income taxes          103           -              103
                ----------  ----------       ----------
Net loss        $  (27,111) $    8,912       $  (18,199)
                ==========  ==========       ==========
Net loss per
 common share:
  Basic         $    (0.28)                  $    (0.19)
                ==========                   ==========
  Diluted       $    (0.28)                  $    (0.18)*
                ==========                   ==========
Weighted
 average shares
 used in
 computing net
 loss per
 common share:
  Basic             95,161                       95,161
                ==========                   ==========
  Diluted           95,161                       98,960*
                ==========                   ==========

* 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 September 27, 2008
             -------------------------------------------------------------
                                                                 Adjusted
                                                  Adjusted         GAAP
                        Deferral       Adjusted     GAAP         Excluding
                         Adjust-         GAAP       Stock          Stock
               GAAP       ments         Results     Comp           Comp
             ---------  ---------      ---------  ---------      ---------

Revenue
  Product
   and
   ratable
   revenue   $ 115,625  $ (39,588) (c) $  76,037  $       -      $  76,037
  Services
   revenue       4,881          -          4,881          -          4,881
             ---------  ---------      ---------  ---------      ---------
Total
 revenue       120,506    (39,588)        80,918          -         80,918
Cost of
 revenue        66,268    (18,338) (d)    47,930     (1,270) (e)    46,660
             ---------  ---------      ---------  ---------      ---------
Gross profit    54,238    (21,250)        32,988      1,270         34,258
Gross margin        45%                                                 42%
Operating
 expenses       41,013          -         41,013     (5,076) (e)    35,937
             ---------  ---------      ---------  ---------      ---------
Income from
 operations     13,225    (21,250)        (8,025)     6,346         (1,679)
Other income
 (expense),
 net             1,712          -          1,712          -          1,712
             ---------  ---------      ---------  ---------      ---------
Income
 before
 provision
 for
 income
 taxes          14,937    (21,250)        (6,313)     6,346             33
Provision
 for income
 taxes               -          -              -          -              -
             ---------  ---------      ---------  ---------      ---------
Net income   $  14,937  $ (21,250)     $  (6,313) $   6,346      $      33
             =========  =========      =========  =========      =========
Net income
 per common
 share:
  Basic      $    0.16                                           $    0.00
             =========                                           =========
  Diluted    $    0.15                                           $    0.00
             =========                                           =========
Weighted
 average
 shares used
 in computing
 net income
 per common
 share:
  Basic         92,888                                              92,888
             =========                                           =========
  Diluted       97,208                                              97,208
             =========                                           =========





Use of Non-GAAP and Adjusted GAAP Information:

As described below, Infinera uses various non-GAAP 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 and adjusted GAAP measures are further
explained below:

    --  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.

    --  In the first quarter of 2009, we began using more traditional
        non-GAAP financial measures, which reflect our GAAP results and
        exclude non-recurring restructuring and other related costs and
        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 non-recurring restructuring and other
        related costs and stock-based compensation expense will be made
        to our GAAP results on a go-forward basis.


(a) Adjustment amount represents restructuring and other related costs
    recorded in the third quarter of 2009 related 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
                                                 September 26, 2009
                                           --------------------------------
                                            Cost of   Operating
                                            Revenue    Expenses    Total
                                           ---------- ---------- ----------
    (In thousands)
    Severance and related expenses         $      804 $       97 $      901
    Equipment and facility-related costs        1,900        415      2,315
    Other                                          32         89        121
                                           ---------- ---------- ----------
    Total                                  $    2,736 $      601 $    3,337
                                           ========== ========== ==========

    Restructuring and other related costs include non-cash charges of
    $2.4 million.


(b) The following table summarizes the effects of stock-based compensation
    related to employees and non-employees for the three months ended
    June 27, 2009:


                                                               Three Months
                                                                  Ended
                                                              -------------
                                                                 June 27,
                                                                   2009
                                                              -------------
    (In thousands)
    Cost of revenue                                           $         477
    Sales and marketing                                               1,599
    Research and development                                          2,419
    General and administration                                        3,513
                                                              -------------
                                                                      8,008
    Cost of revenue - amortization from balance sheet*                  904
                                                              -------------
    Total stock-based compensation expense                    $      8,912
                                                              =============

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


(c) 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 September 27, 2008
                    ------------------------------------------------------
                    Pre Mar 29,   Post Mar 29,
                    2008 Ratable  2008 Ratable
    Deferred        and Product   and Product
     Revenue          Revenue       Revenue       Services       Total
                    ------------  ------------  ------------  ------------
    (In thousands)
    Beginning
     balance        $     61,340  $      3,113  $      5,456  $     69,909
    Additions to
     deferred
     revenue                   -         2,075         3,567         5,642
    Amortization to
     revenue             (39,588)         (891)       (2,616)      (43,095)
                    ------------  ------------  ------------  ------------
    Ending balance  $     21,752  $      4,297  $      6,407  $     32,456
                    ============  ============  ============  ============

                    ------------  ------------  ------------  ------------
    Change in
     deferred
     revenue
     balance        $    (39,588) $      1,184  $        951  $    (37,453)
                    ============  ============  ============  ============


(d) 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 September 27, 2008
                                  ----------------------------------------
                                  Pre Mar 29,   Post Mar 29,
                                  2008 Ratable  2008 Ratable
                                  and Product   and Product
    Deferred Inventory Cost           Cost          Cost         Total
                                  ------------  ------------  ------------
    (In thousands)
    Beginning balance             $     26,510  $        450  $     26,960
    Additions to deferred
     cost of revenue                         -           710           710
    Amortized to cost of revenue       (18,338)          (40)      (18,378)
                                  ------------  ------------  ------------
    Ending balance                $      8,172  $      1,120  $      9,292
                                  ============  ============  ============

                                  ------------  ------------  ------------
    Change in deferred inventory
     cost balance                 $    (18,338) $        670  $    (17,668)
                                  ============  ============  ============


(e) 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 the Equity Topic of the Accounting Standards Codification. 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
                                                             -------------
                                                             September 27,
                                                                 2008
                                                             -------------
    (In thousands)
    GAAP stock-based compensation in cost of revenue         $         299
    GAAP stock-based compensation in cost of revenue
     - amortization from balance sheet                               1,180
      Stock-based compensation not deferred to deferred
       inventory cost                                                    -
      Stock-based compensation previously recognized on
       invoiced shipment basis                                        (209)
                                                             -------------
    Non-GAAP stock-based compensation in cost of revenue     $       1,270
                                                             =============





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


                                             September 26,   December 27,
                                                 2009            2008
                                             -------------   -------------
ASSETS

Current assets:
  Cash and cash equivalents                  $      90,945   $     166,770
  Short-term investments                           178,107          68,232
  Short-term restricted cash                         1,533             720
  Accounts receivable, net of allowance
   for doubtful accounts of $606 as of
   September 26, 2009 and $1,700 as of
   December 27, 2008                                54,030          69,354
  Other receivables                                  2,199           1,085
  Inventories, net                                  72,915          58,986
  Deferred inventory costs                           2,376           1,744
  Prepaid expenses and other current
   assets                                            8,417           6,311
                                             -------------   -------------
     Total current assets                          410,522         373,202

Property, plant and equipment, net                  44,363          46,820
Intangible assets                                    1,004           1,276
Deferred inventory costs, non-current                1,768           2,493
Long-term investments                                7,423          74,684
Long-term restricted cash                            2,514           2,179
Other non-current assets                            11,213           6,413
                                             -------------   -------------
     Total assets                            $     478,807   $     507,067
                                             =============   =============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                           $      31,617   $      34,048
  Accrued expenses                                  23,822          16,092
  Accrued compensation and related
   benefits                                         13,050          13,472
  Accrued warranty                                   5,612           5,205
  Deferred revenue                                  11,681          14,683
                                             -------------   -------------
     Total current liabilities                      85,782          83,500

  Accrued warranty, non-current                      4,526           4,735
  Deferred revenue, non-current                      6,805           7,724
  Other long-term liabilities                        7,119           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
     September 26, 2009 and December 27,
     2008
    Issued and outstanding shares --
     96,436 as of September 26, 2009 and
     94,163 as of December 27, 2008                     96              94
  Additional paid-in capital                       735,031         699,705
  Accumulated other comprehensive loss              (1,843)         (3,598)
  Accumulated deficit                             (358,709)       (290,738)
                                             -------------   -------------
  Total stockholders' equity                       374,575         405,463
                                             -------------   -------------
  Total liabilities and stockholders'
   equity                                    $     478,807   $     507,067
                                             =============   =============





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


                                                   Nine Months Ended
                                             -----------------------------
                                             September 26,   September 27,
                                                 2009            2008
                                             -------------   -------------
Cash Flows from Operating Activities:
Net income (loss)                            $     (67,971)  $      85,416
Adjustments to reconcile net income (loss)
 to net cash provided by (used in)
 operating activities:
   Depreciation and amortization                    12,064           8,877
   Non-cash restructuring and other costs            2,404               -
   Net credit impairment losses in earnings          1,094               -
   Accretion of investment discount                    289            (881)
   Stock-based compensation expense                 25,733          17,843
   Put Rights                                        2,540               -
   Unrealized holding gains for trading
    securities                                      (3,141)              -
   Tax benefit (reversal) from stock option
    transactions                                      (593)          2,588
   (Excess) reduction of tax benefit from
    stock option transactions                          248          (2,588)
   Gain on disposal of assets                         (117)         (1,006)
   Other (gain) loss                                  (113)              7
   Changes in assets and liabilities:
       Accounts receivable                          14,219          (8,478)
       Inventories, net                            (12,728)           (701)
       Prepaid expenses and other current
        assets                                      (2,331)         (3,142)
       Deferred inventory costs                         21          71,626
       Other non-current assets                     (4,795)         (1,964)
       Accounts payable                             (1,875)          7,777
       Accrued liabilities and other
        expenses                                     8,749          (8,723)
       Deferred revenue                             (3,922)       (141,981)
       Accrued warranty                                197             684
                                             -------------   -------------
         Net cash provided by (used in)
          operating activities                     (30,028)         25,354

Cash Flows from Investing Activities:
   Purchase of available-for-sale
    investments                                   (136,338)       (172,875)
   Proceeds from sale of available-for-sale
    investments                                      1,536         103,190
   Proceeds from maturities and call of
    investments and restricted cash                 92,009         122,899
   Proceeds from disposal of assets                    206           1,080
   Purchase of property and equipment              (11,599)        (15,152)
                                             -------------   -------------
         Net cash provided by (used in)
          investing activities                     (54,186)         39,142

Cash Flows from Financing Activities:
   Proceeds from issuance of common stock            8,545          11,242
   Excess (reduction of) tax benefit from
    stock option transactions                         (248)          2,588
   Repurchase of common stock                          (19)            (30)
                                             -------------   -------------
         Net cash provided by financing
          activities                                 8,278          13,800
                                             -------------   -------------
Effect of exchange rate changes on cash                111             (66)
Net change in cash and cash equivalents            (75,825)         78,230
Cash and cash equivalents at beginning of
 period                                            166,770          91,209
                                             -------------   -------------
Cash and cash equivalents at end of period   $      90,945   $     169,439
                                             =============   =============

Supplemental disclosures of cash flow
 information:
   Cash paid for interest                    $           -   $           3
   Cash paid for income taxes                $       1,245   $         858





Infinera Corporation
Supplemental Financial Information


                     Q1'08   Q2'08   Q3'08   Q4'08   Q1'09   Q2'09   Q3'09
                    ------  ------  ------  ------  ------  ------  ------
Revenue             $ 95.5  $ 90.8  $ 80.9  $ 86.2  $ 66.6  $ 68.9  $ 83.4
Gross Margin %         45%     47%     42%     36%     31%     31%     38%
                    ------  ------  ------  ------  ------  ------  ------
Invoiced Shipment
 Composition:
Domestic %             82%     78%     81%     73%     74%     64%     63%
International %        18%     22%     19%     27%     26%     36%     37%
Largest Customer %     31%     21%     27%     23%     30%     20%     15%
                    ------  ------  ------  ------  ------  ------  ------
Cash Related
 Information:
Cash from
 Operations         $  9.8  $  5.6  $  9.9  $ (5.4) $ (2.9) $(18.8) $ (8.3)
Capital
 Expenditures       $  4.5  $  4.8  $  5.9  $  7.8  $  6.0  $  2.8  $  2.8
Depreciation &
 Amortization       $  2.6  $  2.9  $  3.4  $  4.1  $  3.9  $  4.0  $  4.2
DSO's                   42      57      55      74      61      72      61
                    ------  ------  ------  ------  ------  ------  ------
Inventory Metrics:
Raw Materials       $  7.9  $  9.2  $ 10.0  $  9.1  $  7.7  $ 10.1  $  7.4
Work in Process     $ 40.6  $ 34.6  $ 35.8  $ 37.9  $ 43.2  $ 40.1  $ 36.2
Finished Goods      $ 10.7  $ 13.8  $ 12.8  $ 12.0  $ 13.6  $ 22.3  $ 29.3
                    ------  ------  ------  ------  ------  ------  ------
Total Inventory     $ 59.2  $ 57.6  $ 58.6  $ 59.0  $ 64.5  $ 72.5  $ 72.9
Inventory Turns        3.5     3.3     3.2     3.8     2.8     2.6     3.0
                    ------  ------  ------  ------  ------  ------  ------
Worldwide Headcount    799     853     889     937     962     973     970
                    ------  ------  ------  ------  ------  ------  ------

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

Non-GAAP results exclude restructuring and other related costs and non-cash
stock-based compensation.

Contact Information