Nasdaq: INFN 8.78 +0.05 ( +0.57% ) Volume: 945,600 Delayed 20 minutes August 20, 2018

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Infinera Corporation Reports Second Quarter 2018 Financial Results

August 07, 2018

SUNNYVALE, Calif., Aug. 07, 2018 (GLOBE NEWSWIRE) -- Infinera Corporation, provider of Intelligent Transport Networks, today released financial results for its second quarter ended June 30, 2018.

GAAP revenue for the quarter was $208.2 million compared to $202.7 million in the first quarter of 2018 and $176.8 million in the second quarter of 2017.

GAAP gross margin for the quarter was 40.5% compared to 40.5% in the first quarter of 2018 and 36.7% in the second quarter of 2017. GAAP operating margin for the quarter was (10.4)% compared to (12.2)% in the first quarter of 2018 and (22.9)% in the second quarter of 2017.

GAAP net loss for the quarter was $(21.9) million, or $(0.14) per share, compared to a net loss of $(26.3) million, or $(0.17) per share, in the first quarter of 2018, and net loss of $(42.8) million, or $(0.29) per share, in the second quarter of 2017.

Non-GAAP gross margin for the quarter was 43.9% compared to 43.7% in the first quarter of 2018 and 40.7% in the second quarter of 2017. Non-GAAP operating margin for the quarter was (0.7)% compared to (3.4)% in the first quarter of 2018 and (12.2)% in the second quarter of 2017.

Non-GAAP net loss for the quarter was $(1.3) million, or $(0.01) per share, compared to a net loss of $(7.2) million, or $(0.05) per share, in the first quarter of 2018, and net loss of $(22.8) million, or $(0.15) per share, in the second quarter of 2017.

A further explanation of the use of non-GAAP financial information and a reconciliation of the non-GAAP financial measures to the GAAP equivalents can be found at the end of this release.

“In Q2, we delivered strong margins and our fifth consecutive quarter of revenue growth, as customers continued to adopt our next-generation products,” said Tom Fallon, Infinera CEO. “In the second half, we expect to deploy several new opportunities that will drive multi-year growth. We believe adding Coriant’s capabilities and extensive customer base to our vertically integrated operating model and refreshed product portfolio, will allow us to enter 2019 in a position of strength. I really like our opportunity and am very excited for what the future holds.”

Financial Outlook

Infinera reaffirms the following expectations from its first quarter 2018 conference call on May 9, 2018:

  • We continue to expect revenue in the second half of 2018 will be 2% to 4% higher than revenue in the first half of 2018. This expectation implies a revenue range in the second half of 2018 of approximately $420 million to $430 million and full fiscal year 2018 revenue growth of approximately 13% compared to the prior fiscal year.
  • We continue to expect to achieve non-GAAP profitability in the fourth quarter of 2018.

For the quarter ending September 29, 2018:

We expect several new customer footprint deployments in the third quarter of 2018. We expect these new deployments will drive multi-year revenue growth and strong margins moving forward. However, as is typical with new deployments of network infrastructure, these will have lower margins initially.

  • Revenue is expected to be $210 million +/- $10 million. This expectation implies 9% year-over-year growth at the midpoint.
  • GAAP gross margin is expected to be 35% +/- 200 bps. Non-GAAP gross margin is expected to be 38% +/- 200 bps.
  • GAAP operating expenses are expected to be $97 million +/- $2 million. Non-GAAP operating expenses are expected to be $86 million +/- $2 million.
  • GAAP operating margin is expected to be approximately (12)%. Non-GAAP operating margin is expected to be approximately (3)%.
  • GAAP EPS is expected to be $(0.16)+/- $0.02. Non-GAAP EPS is expected to be $(0.05) +/- $0.02.

Infinera's Financial Outlook does not include the potential impact of the pending Coriant acquisition, including any associated prospective debt financing and other significant transactions that may be completed after August 7, 2018. Actual results may differ materially from Infinera's Financial Outlook as a result of, among other things, the factors described under “Forward-Looking Statements” below.

Second Quarter 2018 Financial Commentary Available Online

A CFO Commentary reviewing Infinera's second quarter of 2018 financial results will be furnished to the SEC on Form 8-K and published on Infinera's Investor Relations website at investors.infinera.com. Analysts and investors are encouraged to review this commentary prior to participating in the conference call webcast.

Conference Call Information

Infinera will host a conference call for analysts and investors to discuss its second quarter 2018 results and its outlook for the third quarter of 2018 today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). Interested parties may join the conference call by dialing 1-866-373-6878 (toll free) or 1-412-317-5101 (international). A live webcast of the conference call will also be accessible from the Events & Webcasts section of Infinera’s website at investors.infinera.com. Replay of the audio webcast will be available at investors.infinera.com approximately two hours after the end of the live call.

Contacts:
Media:
Anna Vue
Tel. +1 (916) 595-8157
avue@infinera.com

Investors:
Jeff Hustis
Tel. +1 (408) 213-7150
jhustis@infinera.com

About Infinera

Infinera provides Intelligent Transport Networks, enabling carriers, cloud operators, governments and enterprises to scale network bandwidth, accelerate service innovation and automate optical network operations. Infinera’s end-to-end packet-optical portfolio is designed for long-haul, subsea, data center interconnect and metro applications. To learn more about Infinera visit www.infinera.com, follow us on Twitter @Infinera and read our latest blog posts at www.infinera.com/blog.

Forward-Looking Statements

This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties. Such forward-looking statements include, without limitation, Infinera’s expectations regarding the deployment of several new opportunities in the second half of 2018; Infinera’s ability to drive multi-year growth; Infinera’s expectations regarding its ability to enter 2019 in a position of strength; and Infinera's expectations regarding its financial outlook for the second half and third quarter of 2018. Forward-looking statements can also be identified by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” and "would” or similar words. These statements are based on information available to Infinera as of the date hereof and actual results could differ materially from those stated or implied due to risks and uncertainties. The risks and uncertainties that could cause Infinera’s results to differ materially from those expressed or implied by such forward-looking statements include, the timing to consummate the proposed acquisition of Coriant; the parties’ ability to promptly and effectively integrate the businesses of Infinera and Coriant; the diversion of management time on issues related to the acquisition; the failure to consummate or any delay in consummating the acquisition for other reasons; delays in the development and introduction of new products or updates to existing products and market acceptance of these products; fluctuations in demand, sales cycles and prices for products and services, including discounts given in response to competitive pricing pressures, as well as the timing of purchases by Infinera's key customers; the effect that changes in product pricing or mix, and/or increases in component costs could have on Infinera’s gross margin; the effects of increased customer consolidation; Infinera’s ability to respond to rapid technological changes; aggressive business tactics by Infinera’s competitors; Infinera's reliance on single and limited source suppliers; Infinera's ability to adequately respond to demand as a result of the restructuring plan; Infinera’s ability to protect Infinera’s intellectual property; claims by others that Infinera infringes their intellectual property; the effect of global macroeconomic conditions on Infinera's business; war, terrorism, public health issues, natural disasters and other circumstances that could disrupt the supply, delivery or demand of Infinera's products; and other risks and uncertainties detailed in Infinera’s SEC filings from time to time. More information on potential factors that may impact Infinera’s business are set forth in its Quarterly Report on Form 10-Q for the quarter ended on March 30, 2018 as filed with the SEC on May 10, 2018, as well as subsequent reports filed with or furnished to the SEC from time to time. These reports are available on Infinera’s website at www.infinera.com and the SEC’s website at www.sec.gov. Infinera assumes no obligation to, and does 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 restructuring and related costs (credits), non-cash stock-based compensation expenses, amortization of debt discount on Infinera’s convertible senior notes, amortization and impairment of acquired intangible assets, acquisition-related costs, and certain purchase accounting adjustments related to Infinera's acquisition of Transmode AB, which closed during the third quarter of 2015, along with related tax effects. 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.”

Infinera has included forward-looking non-GAAP information in this press release, including an estimate of certain non-GAAP financial measures for the third quarter of 2018 that exclude non-cash stock-based compensation expenses, and amortization of acquired intangible assets and related tax effects. Please see the section titled, “GAAP to Non-GAAP Reconciliations of Financial Outlook” below on specific adjustments. Infinera has also included an estimate of non-GAAP profitability for the fourth quarter of 2018 that excludes non-cash stock-based compensation expenses, and amortization of acquired intangible assets and related tax effects. Infinera is unable to provide a reconciliation of this non-GAAP financial measure to its corresponding GAAP measure on a forward-looking basis without unreasonable effort due to the overall high variability and low visibility of most of the foregoing items that have been excluded.

Infinera believes these adjustments are appropriate to enhance an overall understanding of its underlying financial performance and also its 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 its 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 loss, basic and diluted net loss per share, gross margin or operating 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.

A copy of this press release can be found on the Investor Relations page of Infinera’s website at www.infinera.com.

Infinera 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
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited) 

    Three Months Ended   Six Months Ended
    June 30, 2018   July 1, 2017   June 30, 2018   July 1, 2017
Revenue:                
Product   $ 175,288     $ 143,360     $ 346,917     $ 290,413  
Services   32,939     33,461     63,991     61,930  
Total revenue   208,227     176,821     410,908     352,343  
Cost of revenue:                
Cost of product   110,857     100,302     218,522     199,634  
Cost of services   13,039     11,687     25,870     23,821  
Restructuring and related   26         43      
Total cost of revenue   123,922     111,989     244,435     223,455  
Gross profit   84,305     64,832     166,473     128,888  
Operating expenses:                
Research and development   56,158     57,377     114,839     112,460  
Sales and marketing   29,721     29,397     60,213     58,838  
General and administrative   18,365     18,563     36,201     35,922  
Restructuring and related   1,680         1,517      
Total operating expenses   105,924     105,337     212,770     207,220  
Loss from operations   (21,619 )   (40,505 )   (46,297 )   (78,332 )
Other income (expense), net:                
Interest income   629     862     1,526     1,613  
Interest expense   (2,501 )   (3,456 )   (6,184 )   (6,859 )
Other gain (loss), net:   1,429     (252 )   1,935     (382 )
Total other income (expense), net   (443 )   (2,846 )   (2,723 )   (5,628 )
Loss before income taxes   (22,062 )   (43,351 )   (49,020 )   (83,960 )
Benefit from income taxes   (124 )   (512 )   (802 )   (670 )
Net loss   (21,938 )   (42,839 )   (48,218 )   (83,290 )
                 
Net loss per common share - basic and diluted:   $ (0.14 )   $ (0.29 )   $ (0.32 )   $ (0.57 )
Weighted average shares used in computing net loss                
per common share - basic and diluted:   152,259     147,538     151,296     146,662  
                         

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

  Three Months Ended   Six Months Ended
  June 30, 2018       March 31, 2018       July 1, 2017       June 30, 2018       July 1, 2017    
Reconciliation of Gross Profit:                                      
U.S. GAAP as reported $ 84,305     40.5 %   $ 82,168     40.5 %   $ 64,832     36.7 %   $ 166,473     40.5 %   $ 128,888     36.6 %
Stock-based compensation(1) 2,039         994         2,071         3,033         3,902      
Amortization of acquired intangible assets(2) 4,943         5,341         5,035         10,284         9,915      
Acquisition-related costs(3)                 6                 46      
Restructuring and related(4) 26         17                 43              
Non-GAAP as adjusted $ 91,313     43.9 %   $ 88,520     43.7 %   $ 71,944     40.7 %   $ 179,833     43.8 %   $ 142,751     40.5 %
                                       
Reconciliation of Operating Expenses:                                      
U.S. GAAP as reported $ 105,924         $ 106,846         $ 105,337         $ 212,770         $ 207,220      
Stock-based compensation(1) 10,005         9,989         10,309         19,994         19,355      
Amortization of acquired intangible assets(2) 1,487         1,607         1,515         3,094         2,983      
Acquisition-related costs(3)                 16                 322      
Restructuring and related(4) 1,680         (163 )               1,517              
Intangible asset impairment(5)                                 252      
Non-GAAP as adjusted $ 92,752         $ 95,413         $ 93,497         $ 188,165         $ 184,308      
                                       
Reconciliation of Loss from Operations:                                      
U.S. GAAP as reported $ (21,619 )   (10.4 )%   $ (24,678 )   (12.2 )%   $ (40,505 )   (22.9 )%   $ (46,297 )   (11.3 )%   $ (78,332 )   (22.2 )%
Stock-based compensation(1) 12,044         10,983         12,380         23,027         23,257      
Amortization of acquired intangible assets(2) 6,430         6,948         6,550         13,378         12,898      
Acquisition-related costs(3)                 22                 368      
Restructuring and related(4) 1,706         (146 )               1,560              
Intangible asset impairment(5)                                 252      
Non-GAAP as adjusted $ (1,439 )   (0.7 )%   $ (6,893 )   (3.4 )%   $ (21,553 )   (12.2 )%   $ (8,332 )   (2.0 )%   $ (41,557 )   (11.8 )%
                                       
Reconciliation of Net Loss:                                      
U.S. GAAP as reported $ (21,938 )       $ (26,280 )       $ (42,839 )       $ (48,218 )       $ (83,290 )    
Stock-based compensation(1) 12,044         10,983         12,380         23,027         23,257      
Amortization of acquired intangible assets(2) 6,430         6,948         6,550         13,378         12,898      
Acquisition-related costs(3)                 (4 )               257      
Restructuring and related(4) 1,706         (146 )               1,560              
Intangible asset impairment(5)                                 252      
Amortization of debt discount(6) 1,892         2,779         2,577         4,671         5,091      
Income tax effects(7) (1,415 )       (1,529 )       (1,450 )       (2,944 )       (2,924 )    
Non-GAAP as adjusted $ (1,281 )       $ (7,245 )       $ (22,786 )       $ (8,526 )       $ (44,459 )    
                                       
Net Loss per Common Share - Basic and Diluted:                                      
U.S. GAAP as reported $ (0.14 )       $ (0.17 )       $ (0.29 )       $ (0.32 )       $ (0.57 )    
Non-GAAP as adjusted $ (0.01 )       $ (0.05 )       $ (0.15 )       $ (0.06 )       $ (0.30 )    
                                       
Weighted Average Shares Used in Computing Net Loss per Common Share - Basic and Diluted: 152,259         150,333         147,538         151,296         146,662      
                                                 

____________________________

(1) Stock-based compensation expense is calculated in accordance with the fair value recognition provisions of Financial Accounting Standards Board Accounting Standards Codification 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 (in thousands):

         
    Three Months Ended   Six Months Ended
    June 30, 2018   March 31, 2018   July 1, 2017   June 30, 2018   July 1, 2017
Cost of revenue   $ 624     $ (122 )   $ 834     $ 502     $ 1,558  
Research and development   4,192     4,324     4,184     8,516     7,964  
Sales and marketing   3,046     2,898     3,273     5,944     5,999  
General and administration   2,767     2,767     2,852     5,534     5,392  
    10,629     9,867     11,143     20,496     20,913  
Cost of revenue - amortization from balance sheet*   1,415     1,116     1,237     2,531     2,344  
Total stock-based compensation expense   $ 12,044     $ 10,983     $ 12,380     $ 23,027     $ 23,257  
                                         

_____________________________

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

(2) Amortization of acquisition-related intangible assets consists of amortization of developed technology, trade names, and customer relationships acquired in connection with the Transmode acquisition. U.S. GAAP accounting requires that acquired intangible assets are recorded at fair value and amortized over their useful lives. As this amortization is non-cash, Infinera has excluded it from its non-GAAP operating expenses, gross margin and net income measures. Management believes the amortization of acquired intangible assets is not indicative of ongoing operating performance and its exclusion provides a better indication of Infinera's underlying business performance.

(3) Acquisition-related costs associated with the Transmode acquisition include legal, financial, employee retention costs and other professional fees incurred in connection with the transaction, including squeeze-out proceedings. These amounts have been adjusted in arriving at Infinera's non-GAAP results because management believes that these expenses are non-recurring, not indicative of ongoing operating performance and their exclusion provides a better indication of Infinera's underlying business performance.

(4) Restructuring and related costs (credits) are related to Infinera's plan to restructure its worldwide operations, which was implemented during the fourth quarter of 2017. Management has excluded the impact of these charges in arriving at Infinera's non-GAAP results as they are non-recurring in nature and its exclusion provides a better indication of Infinera's underlying business performance.

(5) Intangible asset impairment is associated with previously acquired intangibles, which Infinera has determined that the carrying value will not be recoverable. Management has excluded the impact of this charge in arriving at Infinera's non-GAAP results because it is non-recurring, and management believes that these expenses are not indicative of ongoing operating performance.

(6) Under GAAP, certain convertible debt instruments that may be settled in cash on conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate. Accordingly, for GAAP purposes, Infinera is required to amortize as debt discount an amount equal to the fair value of the conversion option that was recorded in equity as interest expense on its $150 million in aggregate principal amount of 1.75% convertible debt issuance in May 2013 over the term of the notes. Interest expense has been excluded from Infinera's non-GAAP results because management believes that this non-cash expense is not indicative of ongoing operating performance and provides a better indication of Infinera's underlying business performance.

(7) The difference between the GAAP and non-GAAP tax is due to the net tax effects of the purchase accounting adjustments, acquisition-related costs and amortization of acquired intangible assets.

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

    June 30, 2018   December 30, 2017
ASSETS        
Current assets:        
Cash and cash equivalents   $ 63,308     $ 116,345  
Short-term investments   58,860     147,596  
Accounts receivable, net of allowance for doubtful accounts of $869 in 2018 and $892 in 2017   148,026     126,152  
Inventory   219,343     214,704  
Prepaid expenses and other current assets   46,102     43,140  
     Total current assets   535,639     647,937  
Property, plant and equipment, net   136,769     135,942  
Intangible assets   71,795     92,188  
Goodwill   179,165     195,615  
Long-term investments   6,586     36,129  
Other non-current assets   11,026     9,859  
     Total assets   $ 940,980     $ 1,117,670  
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable   $ 80,345     $ 58,124  
Accrued expenses   48,180     39,782  
Accrued compensation and related benefits   44,352     45,751  
Short-term debt       144,928  
Accrued warranty   13,670     13,670  
Deferred revenue   54,556     72,421  
     Total current liabilities   241,103     374,676  
Accrued warranty, non-current   16,567     17,239  
Deferred revenue, non-current   14,932     22,502  
Deferred tax liability   16,247     21,609  
Other long-term liabilities   14,719     16,279  
Commitments and contingencies        
Stockholders’ equity:        
Preferred stock, $0.001 par value        
     Authorized shares - 25,000 and no shares issued and outstanding        
Common stock, $0.001 par value        
     Authorized shares - 500,000 as of June 30, 2018 and December 30, 2017        
     Issued and outstanding shares - 152,940 as of June 30, 2018 and 149,471 as of December 30, 2017   153     149  
Additional paid-in capital   1,450,136     1,417,043  
Accumulated other comprehensive income (loss)   (21,984 )   6,254  
Accumulated deficit   (790,893 )   (758,081 )
Total stockholders’ equity   637,412     665,365  
     Total liabilities and stockholders’ equity   $ 940,980     $ 1,117,670  
                 

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

    Six Months Ended
    June 30, 2018   July 1, 2017
Cash Flows from Operating Activities:        
Net loss   $ (48,218 )   $ (83,290 )
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization   33,250     32,623  
Non-cash restructuring and related credits   (81 )    
Amortization of debt discount and issuance costs   5,072     5,529  
Impairment of intangible assets       252  
Stock-based compensation expense   23,027     23,257  
Other loss   167     320  
Changes in assets and liabilities:        
Accounts receivable   (22,015 )   27,629  
Inventory   (8,703 )   (12,700 )
Prepaid expenses and other assets   (1,809 )   (8,127 )
Accounts payable   24,458     16,927  
Accrued liabilities and other expenses   (14,617 )   (12,503 )
Deferred revenue   2,351     10,065  
     Net cash used in operating activities   (7,118 )   (18 )
Cash Flows from Investing Activities:        
Purchase of available-for-sale investments   (2,986 )   (107,854 )
Proceeds from sales of available-for-sale investments   23,114     3,998  
Proceeds from maturities of investments   98,112     79,003  
Purchase of property and equipment   (21,503 )   (39,200 )
     Net cash provided by (used in) investing activities   96,737     (64,053 )
Cash Flows from Financing Activities:        
Repayment of debt   (150,000 )    
Acquisition of noncontrolling interest       (471 )
Proceeds from issuance of common stock   11,066     11,115  
Minimum tax withholding paid on behalf of employees for net share settlement   (964 )   (823 )
     Net cash provided by (used in) financing activities   (139,898 )   9,821  
Effect of exchange rate changes on cash and restricted cash   (2,218 )   2,943  
Net change in cash, cash equivalents and restricted cash   (52,497 )   (51,307 )
Cash, cash equivalents and restricted cash at beginning of period   121,486     177,580  
Cash, cash equivalents and restricted cash at end of period(1)   $ 68,989     $ 126,273  
Supplemental disclosures of cash flow information:        
Cash paid for income taxes, net of refunds   $ 2,210     $ 2,683  
Cash paid for interest   $ 1,328     $ 1,316  
Supplemental schedule of non-cash investing activities:        
Transfer of inventory to fixed assets   $ 1,684     $ 2,087  
                 

_____________________________

(1) Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets:

       
  June 30, 2018   July 1, 2017
       
  (In thousands)
Cash and cash equivalents $ 63,308     $ 119,820  
Short-term restricted cash 308     1,423  
Long-term restricted cash 5,373     5,030  
Total cash, cash equivalents and restricted cash $ 68,989     $ 126,273  
               

Infinera Corporation
Supplemental Financial Information
(Unaudited)

    Q3'16   Q4'16   Q1'17   Q2'17   Q3'17   Q4'17   Q1'18   Q2'18
GAAP Revenue ($ Mil)     $185.5       $181.0       $175.5       $176.8       $192.6       $195.8       $202.7       $208.2  
GAAP Gross Margin %     45.6 %     38.1 %     36.5 %     36.7 %     35.2 %     24.1 %     40.5 %     40.5 %
Non-GAAP Gross Margin %(1)     49.2 %     41.8 %     40.3 %     40.7 %     39.1 %     37.5 %     43.7 %     43.9 %
Revenue Composition:                                
Domestic %     56 %     53 %     57 %     63 %     59 %     53 %     64 %     58 %
International %     44 %     47 %     43 %     37 %     41 %     47 %     36 %     42 %
Customers >10% of Revenue     2       2       1       3       2       1       2       2  
Cash Related Information:                                
Cash from Operations ($ Mil)     $5.2       ($5.0 )     $3.0       ($3.0 )     ($20.9 )     ($1.0 )     ($14.1 )     $7.0  
Capital Expenditures ($ Mil)     $9.6       $10.4       $14.7       $24.5       $11.0       $7.8       $8.0       $13.5  
Depreciation & Amortization ($ Mil)     $15.9       $15.7       $16.0       $16.6       $16.8       $16.6       $17.0       $16.3  
DSOs     75       81       64       64       65       59       73       65  
Inventory Metrics:                                
Raw Materials ($ Mil)     $37.2       $33.2       $34.8       $36.7       $35.8       $27.4       $30.3       $30.5  
Work in Process ($ Mil)     $65.5       $74.5       $81.1       $91.6       $84.3       $59.6       $66.5       $61.6  
Finished Goods ($ Mil)     $128.8       $125.3       $118.0       $117.7       $122.7       $127.7       $119.1       $127.2  
Total Inventory ($ Mil)     $231.5       $233.0       $233.9       $246.0       $242.8       $214.7       $215.9       $219.3  
Inventory Turns(2)     1.6       1.8       1.8       1.7       1.9       2.3       2.1       2.1  
Worldwide Headcount     2,262       2,240       2,245       2,272       2,296       2,145       2,084       2,070  
Weighted Average Shares Outstanding (in thousands):                                
Basic     143,850       144,770       145,786       147,538       148,777       149,412       150,333       152,259  
Diluted     144,993       145,497       147,017       148,662       149,714       150,098       151,633       154,777  
                                                                 

_____________________________

(1) Non-GAAP adjustments include restructuring and related costs, non-cash stock-based compensation expense, certain purchase accounting adjustments related to Infinera's acquisition of Transmode and amortization of acquired intangible assets. For a description of this non-GAAP financial measure, please see the section titled, “GAAP to Non-GAAP Reconciliations” of this press release for a reconciliation to the most directly comparable GAAP financial measures.

(2) Infinera calculates non-GAAP inventory turns as annualized non-GAAP cost of revenue before adjustments for restructuring and related costs, non-cash stock-based compensation expense, and certain purchase accounting adjustments, divided by the average inventory for the quarter.

Infinera Corporation
GAAP to Non-GAAP Reconciliation of Financial Outlook
(In millions, except percentages and per share data)
(Unaudited)

The following amounts represent the midpoint of the expected range:

    Q3'18
    Outlook
Reconciliation of Gross Margin:    
U.S. GAAP   35 %
Stock-based compensation   1 %
Amortization of acquired intangible assets   2 %
Non-GAAP   38 %
     
Reconciliation of Operating Expenses:    
U.S. GAAP   $ 97  
Stock-based compensation   (9 )
Amortization of acquired intangible assets   (2 )
Non-GAAP   $ 86  
     
Reconciliation of Operating Margin:    
U.S. GAAP   (12 )%
Stock-based compensation   5 %
Amortization of acquired intangible assets   4 %
Non-GAAP   (3 )%
     
Reconciliation of Net Loss per Common Share:    
U.S. GAAP   $ (0.16 )
Stock-based compensation   0.07  
Amortization of acquired intangible assets   0.05  
Income tax effects   (0.01 )
Non-GAAP   $ (0.05 )
     

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Source: Infinera Corporation