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This Prospectus has been prepared and is made available solely for the purpose of the Offer to Infinera’s employees in Sweden to participate in the ESPP. The information in the Prospectus is only provided in contemplation of the Offer and may not be used for any other purpose. Consequently, this Prospectus is not addressed to persons in, and the Prospectus may not be published or distributed in or into, any country or other jurisdiction where such action would require additional prospectuses, registration or measures besides those required by Swedish law, or otherwise would be in conflict with applicable regulations. Any failure to comply with such restrictions may result in a violation of applicable securities regulations.

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Infinera Corporation Reports Fourth Quarter and Fiscal Year 2020 Financial Results

February 23, 2021

SAN JOSE, Calif., Feb. 23, 2021 (GLOBE NEWSWIRE) -- Infinera Corporation (NASDAQ: INFN) today released financial results for its fourth quarter and fiscal year ended December 26, 2020.

GAAP revenue for the quarter was $353.5 million compared to $340.2 million in the third quarter of 2020 and $384.6 million in the fourth quarter of 2019.

GAAP gross margin for the quarter was 35.7% compared to 31.8% in the third quarter of 2020 and 29.0% in the fourth quarter of 2019. GAAP operating margin for the quarter was (1.9)% compared to (7.9)% in the third quarter of 2020 and (15.8)% in the fourth quarter of 2019.

GAAP net loss for the quarter was $(9.9) million, or $(0.05) per share, compared to $(35.9) million, or $(0.19) per share, in the third quarter of 2020, and $(66.6) million, or $(0.37) per share, in the fourth quarter of 2019.

Non-GAAP revenue for the quarter was $354.4 million compared to $341.2 million in the third quarter of 2020 and $386.5 million in the fourth quarter of 2019.

Non-GAAP gross margin for the quarter was 37.6% compared to 35.2% in the third quarter of 2020 and 35.2% in the fourth quarter of 2019. Non-GAAP operating margin for the quarter was 6.6% compared to 2.2% in the third quarter of 2020 and 2.3% in the fourth quarter of 2019.

Non-GAAP net income for the quarter was $26.3 million, or $0.13 per share, compared to a net income of $4.2 million, or $0.02 per share, in the third quarter of 2020, and $6.4 million, or $0.03 per share, in the fourth quarter of 2019.

GAAP revenue for the year was $1,355.6 million compared to $1,298.9 million in 2019. GAAP gross margin for the year was 30.2% compared to 25.1% in 2019. GAAP operating margin for the year was (11.4)% compared to (27.0)% in 2019. GAAP net loss for the year was $(206.7) million, or $(1.10) per share, compared to $(386.6) million, or $(2.16) per share, in 2019.

Non-GAAP revenue for the year was $1,359.7 million compared to $1,316.6 million in 2019. Non-GAAP gross margin for the year was 33.8% compared to 33.6% in 2019. Non-GAAP operating margin for the year was (0.5)% compared to (6.3)% in 2019. Non-GAAP net loss for the year was $(36.1) million, or $(0.19) per share, compared to $(107.3) million, or $(0.60) per share, in 2019.

A further explanation of the use of non-GAAP financial information and a reconciliation of each of the non-GAAP financial measures to the most directly comparable GAAP financial measure can be found at the end of this press release.

“We ended the year with another quarter of strong performance marked by solid execution across the board. Fourth quarter non-GAAP revenue was in line with our outlook, with non-GAAP gross margin and non-GAAP operating margin coming in above the guidance range. Further, we generated free cash flow in the quarter,” said David Heard, Infinera CEO. “I am encouraged by the financial progress, operational improvements, and technology innovation delivered by the Infinera team in 2020. We believe our team’s focused execution in 2020 positions us well towards achieving our target business model.”

Financial Outlook

Infinera's outlook for the quarter ending March 27, 2021 is as follows:

  • GAAP revenue is expected to be $329 million +/- $10 million. Non-GAAP revenue is expected to be $330 million +/- $10 million.
  • GAAP gross margin is expected to be 32.5% +/- 150 bps. Non-GAAP gross margin is expected to be 35.5% +/- 150 bps.
  • GAAP operating expenses are expected to be $144 million +/- $2.0 million. Non-GAAP operating expenses are expected to be $123 million +/- $2.0 million.
  • GAAP operating margin is expected to be (11.5)% +/- 200 bps. Non-GAAP operating margin is expected to be (2.0)% +/- 200 bps.

Fourth Quarter 2020 Investor Slides Available Online

Investor slides reviewing Infinera's fourth quarter of 2020 financial results will be furnished to the Securities and Exchange Commission (SEC) on a Current Report on Form 8-K and published on Infinera's Investor Relations website at investors.infinera.com prior to the fourth quarter of 2020 earnings conference call. Analysts and investors are encouraged to review these slides prior to participating in the conference call webcast.

Conference Call Information

Infinera will host a conference call for analysts and investors to discuss its results for the fourth quarter of 2020 and its outlook for the first quarter of 2021 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 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:
Amitabh Passi, Head of Investor Relations
apassi@infinera.com

Michael Bowen, ICR, Inc.
Tel. +1 (203) 682-8299
Michael.Bowen@icrinc.com 

Marc P. Griffin, ICR, Inc.
Tel. +1 (646) 277-1290
Marc.Griffin@icrinc.com

About Infinera

Infinera is a global supplier of innovative networking solutions that enable carriers, cloud operators, governments, and enterprises to scale network bandwidth, accelerate service innovation, and automate network operations. The Infinera end-to-end packet-optical portfolio delivers industry-leading economics and performance in long-haul, submarine, data center interconnect, and metro transport applications. To learn more about Infinera, visit www.infinera.com, follow us on Twitter @Infinera, and read Infinera's latest blog posts at www.infinera.com/blog.

Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements generally relate to future events or Infinera's future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or the negative of these words or similar terms or expressions that concern Infinera's expectations, strategy, priorities, plans or intentions. Such forward-looking statements in this press release include, without limitation, Infinera's positioning for achievement of its target business model and Infinera's financial outlook for the first quarter of 2021. These forward-looking statements are based on estimates and information available to Infinera as of the date hereof and are not guarantees of future performance; 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 effect of the COVID-19 pandemic on Infinera’s business, results of operations, financial condition, stock price and personnel; the effect of global and regional economic conditions on Infinera’s business, including effects on purchasing decisions by customers; Infinera’s future capital needs and its ability to generate the cash flow or otherwise secure the capital necessary to make anticipated capital expenditures; Infinera's ability to service its debt obligations and pursue its strategic plan; delays in the development and introduction of new products or updates to existing products; market acceptance of Infinera’s end-to-end portfolio; Infinera's reliance on single and limited source suppliers; 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; Infinera’s ability to respond to rapid technological changes; aggressive business tactics by Infinera’s competitors; the effects of customer consolidation; our ability to identify, attract and retain qualified personnel; the impacts of foreign currency fluctuations; Infinera’s ability to protect its intellectual property; claims by others that Infinera infringes their intellectual property; impacts of the recent presidential administration change in the United States; 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 Infinera's periodic reports filed with the SEC, including its Annual Report on Form 10-K for the year ended on December 28, 2019 as filed with the SEC on March 4, 2020, and its Quarterly Report on Form 10-Q for the quarter ended September 26, 2020 as filed with the SEC on November 5, 2020, 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 financial measures, including measures that exclude acquisition-related deferred revenue, other customer related charges, stock-based compensation expenses, amortization of acquired intangible assets, acquisition and integration costs, acquisition-related inventory adjustments, restructuring and related costs, COVID-19 related costs, litigation charges, amortization of debt discount on Infinera’s convertible senior notes, gain/loss on non-marketable equity investments, and income 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” below.

Infinera has included forward-looking non-GAAP information in this press release, including an estimate of certain non-GAAP financial measures for the first quarter of 2021 that exclude acquisition-related deferred revenue adjustments, stock-based compensation expenses, amortization of acquired intangible assets, acquisition and integration costs related to Infinera's acquisition of Coriant, and restructuring and related expenses. Please see the section titled “GAAP to Non-GAAP Reconciliation of Financial Outlook” below on specific adjustments.

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 revenue, gross margin, operating expenses, operating margin, and net income (loss) 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 investors.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   Twelve Months Ended
  December 26,
2020
  December 28,
2019
  December 26,
2020
  December 28,
2019
Revenue:              
Product $ 267,226       $ 307,861       $ 1,045,551       $ 1,011,488    
Services 86,299       76,706       310,045       287,377    
Total revenue 353,525       384,567       1,355,596       1,298,865    
Cost of revenue:              
Cost of product 178,153       213,536       751,465       735,059    
Cost of services 44,724       38,543       160,118       146,916    
Amortization of intangible assets 4,611       8,437       29,247       32,583    
Acquisition and integration costs       7,238       1,828       28,449    
Restructuring and related (106 )     5,407       4,146       29,935    
Total cost of revenue 227,382       273,161       946,804       972,942    
Gross profit 126,143       111,406       408,792       325,923    
Operating expenses:              
Research and development 64,728       68,632       265,634       287,977    
Sales and marketing 32,145       37,979       129,604       151,423    
General and administrative 24,336       30,014       112,240       126,351    
Amortization of intangible assets 4,745       6,617       18,581       27,280    
Acquisition and integration costs (265 )     11,011       13,346       42,271    
Restructuring and related 7,230       18,024       24,586       40,851    
Total operating expenses 132,919       172,277       563,991       676,153    
Loss from operations (6,776 )     (60,871 )     (155,199 )     (350,230 )  
Other income (expense), net:              
Interest income 33       59       118       1,139    
Interest expense (12,853 )     (8,946 )     (46,728 )     (31,657 )  
Other income (loss), net 10,777       3,001       1,121       (2,907 )  
Total other income (expense), net (2,043 )     (5,886 )     (45,489 )     (33,425 )  
Loss before income taxes (8,819 )     (66,757 )     (200,688 )     (383,655 )  
Provision for/(benefit from) income taxes 1,105       (163 )     6,035       2,963    
Net loss $ (9,924 )     $ (66,594 )     $ (206,723 )     $ (386,618 )  
Net loss per common share:              
Basic $ (0.05 )     $ (0.37 )     $ (1.10 )     $ (2.16 )  
Diluted $ (0.05 )     $ (0.37 )     $ (1.10 )     $ (2.16 )  
Weighted average shares used in computing net loss per common share:              
Basic 195,655       180,864       188,216       178,984    
Diluted 195,655       180,864       188,216       178,984    
                               

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

       
  Three Months Ended   Twelve Months Ended
  December
26, 2020
      September
26, 2020
      December
28, 2019
      December
26, 2020
      December
28, 2019
   
Reconciliation of Revenue:                                      
U.S. GAAP as reported $ 353,525           $ 340,211           $ 384,567           $ 1,355,596           $ 1,298,865        
Acquisition-related deferred revenue adjustment(1) 892           1,037           1,891           4,089           9,631        
Other customer related charges(2)                                         8,100        
Non-GAAP as adjusted $ 354,417           $ 341,248           $ 386,458           $ 1,359,685           $ 1,316,596        
                                       
Reconciliation of Gross Profit:                                      
U.S. GAAP as reported $ 126,143       35.7 %   $ 108,276       31.8 %   $ 111,406       29.0 %   $ 408,792       30.2 %   $ 325,923       25.1 %
Acquisition-related deferred revenue adjustment(1) 892           1,037           1,891           4,089           9,631        
Other customer related charges(2)                                         8,100        
Stock-based compensation(3) 1,742           1,878           1,752           7,785           6,449        
Amortization of acquired intangible assets(4) 4,611           7,287           8,437           29,247           32,583        
Acquisition and integration costs(5)           43           7,238           1,828           28,449        
Acquisition-related inventory adjustments(6)                                         1,778        
Restructuring and related(7) (106 )         1,504           5,407           4,146           29,935        
COVID-19 related costs(8)                               3,641                  
Non-GAAP as adjusted $ 133,282       37.6 %   $ 120,025       35.2 %   $ 136,131       35.2 %   $ 459,528       33.8 %   $ 442,848       33.6 %
                                       
Reconciliation of Operating Expenses:                                      
U.S. GAAP as reported $ 132,919           $ 135,193           $ 172,277           563,991           $ 676,153        
Stock-based compensation(3) 11,177           10,185           9,321           41,676           36,330        
Amortization of acquired intangible assets(4) 4,745           4,696           6,617           18,581           27,280        
Acquisition and integration costs(5) (265 )         1,045           11,011           13,346           42,271        
Restructuring and related(7) 7,230           6,679           18,024           24,586           40,851        
Litigation charges(9)                                         4,100        
Non-GAAP as adjusted $ 110,032           $ 112,588           $ 127,304           $ 465,802           $ 525,321        
                                       
Reconciliation of Income/(Loss) from Operations:                                      
U.S. GAAP as reported $ (6,776 )     (1.9 )%   $ (26,917 )     (7.9 )%   $ (60,871 )     (15.8 )%   $ (155,199 )     (11.4 )%   $ (350,230 )     (27.0 )%
Acquisition-related deferred revenue adjustment(1) 892           1,037           1,891           4,089           9,631        
Other customer related charges(2)                                         8,100        
Stock-based compensation(3) 12,919           12,063           11,073           49,461           42,779        
Amortization of acquired intangible assets(4) 9,356           11,983           15,054           47,828           59,863        
Acquisition and integration costs(5) (265 )         1,088           18,249           15,174           70,720        
Acquisition-related inventory adjustments(6)                                         1,778        
Restructuring and related(7) 7,124           8,183           23,431           28,732           70,786        
COVID-19 related costs(8)                               3,641                  
Litigation charges(9)                                         4,100        
Non-GAAP as adjusted $ 23,250       6.6 %   $ 7,437       2.2 %   $ 8,827       2.3 %   $ (6,274 )     (0.5 )%   $ (82,473 )     (6.3 )%
                                                                               


       
  Three Months Ended   Twelve Months Ended
  December
26, 2020
  September
26, 2020
  December
28, 2019
  December
26, 2020
  December
28, 2019
Reconciliation of Net Income/ (Loss):                  
U.S. GAAP as reported $ (9,924 )     $ (35,896 )     $ (66,594 )     $ (206,723 )     (386,618 )  
Acquisition-related deferred revenue adjustment(1) 892       1,037       1,891       4,089       9,631    
Other customer related charges(2)                         8,100    
Stock-based compensation(3) 12,919       12,063       11,073       49,461       42,779    
Amortization of acquired intangible assets(4) 9,356       11,983       15,054       47,828       59,863    
Acquisition and integration costs(5) (265 )     1,088       18,249       15,174       70,720    
Acquisition-related inventory adjustments(6)                         1,778    
Restructuring and related(7) 7,124       8,183       23,431       28,732       70,786    
COVID-19 related costs(8)                   3,641          
Litigation charges(9)                         4,100    
Amortization of debt discount(10) 6,910       6,741       4,567       25,349       17,612    
Gain/Loss on non-marketable equity investment(11)                         (1,009 )  
Income tax effects(12) (691 )     (991 )     (1,268 )     (3,688 )     (5,037 )  
Non-GAAP as adjusted $ 26,321       $ 4,208       $ 6,403       $ (36,137 )     $ (107,295 )  
                   
Net Income/(Loss) per Common Share - Basic and Diluted:                  
U.S. GAAP as reported $ (0.05 )     $ (0.19 )     $ (0.37 )     $ (1.10 )     $ (2.16 )  
Non-GAAP as adjusted(13) $ 0.13       $ 0.02       $ 0.03       $ (0.19 )     $ (0.60 )  
                   
Weighted Average Shares Used in Computing Net Loss per Common Share - Basic and Diluted:                  
Basic 195,655       189,589       180,864       188,216       178,984    
Diluted(14) 203,259       195,868       186,349       188,216       178,984    
                                       


(1) Business combination accounting principles require Infinera to write down to fair value its maintenance support contracts assumed in Infinera's acquisition of Coriant, which closed during the fourth quarter of 2018. The revenue for these support contracts is deferred and typically recognized over a period of time after the Coriant acquisition, so Infinera's GAAP revenue for a period of time after the acquisition will not reflect the full amount of revenue that would have been reported if the acquired deferred revenue was not written down to fair value. The non-GAAP adjustment eliminates the effect of the deferred revenue write-down. Management believes these adjustments to revenue from support contracts assumed in the Coriant acquisition are useful to investors as an additional means to reflect revenue trends in Infinera's business.
   
(2) Other customer-related charges include one-time benefits and charges that are not directly related to Infinera’s ongoing or core business results. During the second quarter of 2019, Infinera agreed to reimburse a customer for certain expenses incurred by them in connection with a network service outage that occurred during the fourth quarter of fiscal 2018. 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 this reimbursement is not indicative of ongoing operating performance.
   
(3) 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   Twelve Months Ended
    December
26, 2020
  September
26, 2020
  December
28, 2019
  December
26, 2020
  December
28, 2019
Cost of revenue   $ 1,742     $ 1,878     $ 1,752     $ 7,785     $ 6,449  
Total Cost of revenue   1,742     1,878     1,752     7,785     6,449  
Research and development   4,501     4,209     3,574     16,863     17,457  
Sales and marketing   2,771     2,706     2,578     10,907     8,413  
General and administration   3,905     3,270     3,169     13,906     10,460  
Total Operating expenses   $ 11,177     $ 10,185     $ 9,321     $ 41,676     $ 36,330  
Total stock-based compensation expense   $ 12,919     $ 12,063     $ 11,073     $ 49,461     $ 42,779  
                                         


(4) Amortization of acquired intangible assets consists of developed technology, trade names, customer relationships and backlog acquired in connection with the Coriant acquisition. Amortization of acquired intangible assets also consists of amortization of developed technology, trade names and customer relationships acquired in connection with the Transmode AB 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 gross profit, operating expenses 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.
   
(5) Acquisition and integration costs consist of legal, financial, IT, manufacturing-related costs, employee-related costs and professional fees incurred in connection with the Coriant acquisition. 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.
   
(6) Business combination accounting principles require Infinera to measure acquired inventory at fair value. The fair value of inventory reflects the acquired company’s cost of manufacturing plus a portion of the expected profit margin. The non-GAAP adjustment to Infinera's cost of sales excludes the amortization of the acquisition-related step-up in carrying value for units sold in the quarter. Additionally, in connection with the Coriant acquisition, cost of sales excludes a one-time adjustment in inventory as a result of renegotiated supplier agreements that contained unusually higher than market pricing. Management believes these adjustments are useful to investors as an additional means to reflect ongoing cost of sales and gross margin trends of Infinera's business.
   
(7) Restructuring and related costs are primarily associated with the reduction of operating costs, the closure of Infinera's Berlin, Germany site, the reduction of headcount at Infinera's Munich, Germany site and other sites, and Coriant's historical restructuring plan associated with its early retirement plan. In addition, this includes accelerated amortization on operating lease right-of-use assets due to the cessation of use of certain facilities. 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.
   
(8) COVID-19 related costs consist of higher replacement costs associated with certain warranty parts customers were unable to return for repair due to logistics issues and mobility issues related to COVID-19 public health mandates and restrictions. In addition, Infinera needed to source certain key components from an alternate supplier at substantially higher cost in order to fulfill delivery commitments in the normal course of business. Management has excluded these expenses from non-GAAP financial measures because they were caused by atypical circumstances during the COVID-19 pandemic, as their exclusion provides a better indication of Infinera's underlying business performance.
   
(9) Litigation charges are associated with the preliminary settlement of a litigation matter agreed to during the quarter ended June 29, 2019. 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 this expense is not indicative of ongoing operating performance.
   
(10) 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 the $402.5 million in aggregate principal amount of its 2.125% convertible debt issuance in September 2018 due September 2024 and $200 million in aggregate principal amount of 2.50% convertible debt issued in March 9, 2020 due March 2027. 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 its exclusion provides a better indication of Infinera's underlying business performance.
   
(11) Management has excluded the gain on the sale related to non-marketable equity investments in arriving at Infinera's non-GAAP results because it is non-recurring, and management believes that this income is not indicative of ongoing operating performance
   
(12) The difference between the GAAP and non-GAAP tax provision is due to the net tax effects of the purchase accounting adjustments, acquisition-related costs and amortization of acquired intangible assets.
   
(13) Non-GAAP EPS as adjusted did not exclude the impact of foreign currency. Had the impact of foreign currency been excluded for the three months ended December 26, 2020, September 26, 2020 and December 28, 2019, non-GAAP EPS as adjusted would have been $0.08, loss of less than one cent, and $0.02, respectively, and for the twelve months ended December 26, 2020 and December 28, 2019, non-GAAP EPS as adjusted would have been $(0.19) and $(0.57), respectively.
   
(14) The non-GAAP diluted shares include the potentially dilutive securities from Infinera's stock-based benefit plans excluded from the computation of dilutive net loss per share attributable to common stockholders on a GAAP basis because the effect would have been anti-dilutive. These potentially dilutive securities are added for the computation of diluted net income per share on a non-GAAP basis in periods when Infinera has net income on a non-GAAP basis. During the three months ended December 26, 2020, the Company included the dilutive effects of the 2027 Notes in the calculation of diluted net income per common share as the average market price was above the conversion price of the Notes. The dilutive impact of the Notes was based on the difference between the Company's average stock price during the period and the conversion price of the Notes.


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

  December 26,
2020
  December 28,
2019
ASSETS      
Current assets:      
Cash $ 298,014       $ 109,201    
Short-term restricted cash 3,293       4,339    
Accounts receivable, net of allowance for doubtful accounts of $2,912 in 2020 and $4,005 in 2019 319,428       349,645    
Inventory 269,307       340,429    
Prepaid expenses and other current assets 171,831       139,217    
Total current assets 1,061,873       942,831    
Property, plant and equipment, net 153,133       150,793    
Operating lease right-of-use assets 68,851       68,081    
Intangible assets 124,882       170,346    
Goodwill 273,426       249,848    
Long-term restricted cash 14,076       19,257    
Other non-current assets 36,256       27,182    
Total assets $ 1,732,497       $ 1,628,338    
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 175,762       $ 273,397    
Accrued expenses and other current liabilities 150,550       193,168    
Accrued compensation and related benefits 52,976       92,221    
Short-term debt, net 101,983       31,673    
Accrued warranty 19,369       21,107    
Deferred revenue 133,246       103,753    
Total current liabilities 633,886       715,319    
Long-term debt, net 445,996       323,678    
Long-term financing lease obligations 1,383       2,394    
Accrued warranty, non-current 21,339       22,241    
Deferred revenue, non-current 29,810       36,067    
Deferred tax liability 4,164       8,700    
Operating lease liabilities 76,126       64,210    
Other long-term liabilities 93,509       69,194    
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 December 26, 2020
and December 28, 2019
Issued and outstanding shares – 201,397 as of December 26, 2020 and
181,134 as of December 28, 2019
201       181    
Additional paid-in capital 1,965,245       1,740,884    
Accumulated other comprehensive loss (11,898 )     (34,639 )  
Accumulated deficit (1,527,264 )     (1,319,891 )  
Total stockholders' equity 426,284       386,535    
Total liabilities and stockholders’ equity $ 1,732,497       $ 1,628,338    
                   

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

  Twelve Months Ended
  December 26,
2020
  December 28,
2019
Cash Flows from Operating Activities:      
Net loss $ (206,723 )     $ (386,618 )  
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and amortization 100,140       119,824    
Non-cash restructuring charges and related costs 5,471       13,937    
Amortization of debt discount and issuance costs 28,115       19,162    
Operating lease expense 18,556       31,141    
Stock-based compensation expense 49,461       43,294    
Other, net 4,438       178    
Changes in assets and liabilities:      
Accounts receivable 32,150       (35,395 )  
Inventory 71,424       (42,840 )  
Prepaid expenses and other assets (36,127 )     (93,621 )  
Accounts payable (93,411 )     83,272    
Accrued liabilities and other expenses (107,704 )     54,658    
Deferred revenue 21,910       25,658    
Net cash used in operating activities (112,300 )     (167,350 )  
Cash Flows from Investing Activities:      
Proceeds from sales of available-for-sale investments       1,499    
Proceeds from sale of non-marketable equity investments       1,009    
Proceeds from maturities of investments       25,085    
Acquisition of business, net of cash acquired       (10,000 )  
Purchase of property and equipment, net (39,009 )     (30,202 )  
Net cash used in investing activities (39,009 )     (12,609 )  
Cash Flows from Financing Activities:      
Proceeds from issuance of common stock from at-the-market equity offering, net of issuance costs of $3,380 92,916          
Proceeds from issuance of 2027 Notes 194,500          
Proceeds from revolving line of credit 55,000       48,125    
Proceeds from short-term borrowings       24,310    
Proceeds from mortgage payable       8,584    
Repayment of revolving line of credit (8,000 )     (20,000 )  
Repayment of third party manufacturing funding (5,346 )        
Payment of debt issuance cost (2,455 )     (273 )  
Repayment of mortgage payable (233 )     (300 )  
Principal payments on financing lease obligations (1,587 )     (163 )  
Payment of term license obligation (5,692 )        
Proceeds from issuance of common stock 17,072       12,053    
Minimum tax withholding paid on behalf of employees for net share settlement (2,013 )     (426 )  
Net cash provided by financing activities 334,162       71,910    
Effect of exchange rate changes on cash and restricted cash (267 )     (1,491 )  
Net change in cash, cash equivalents and restricted cash 182,586       (109,540 )  
Cash, cash equivalents and restricted cash at beginning of period 132,797       242,337    
Cash and restricted cash at end of period(1) $ 315,383       $ 132,797    
       
Supplemental disclosures of cash flow information:      
Cash paid for income taxes, net $ 5,039       $ 16,944    
Cash paid for interest $ 15,638
      $ 9,564    
Supplemental schedule of non-cash investing and financing activities:      
Unpaid debt issuance cost $       $ 2,493    
Third-party manufacturer funding for transfer expenses incurred $       $ 6,960    
Transfer of inventory to fixed assets $ 1,083       $ 2,961    
Property and equipment included in accounts payable and accrued liabilities $       $ 3,838    
Unpaid term licenses (included in accounts payable, accrued liabilities and other long term liabilities) $ 12,478       $    
                   


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


       
  December 26,
2020
  December 28,
2019
       
  (In thousands)
Cash $ 298,014     $ 109,201  
Short-term restricted cash 3,293     $ 4,339  
Long-term restricted cash 14,076     $ 19,257  
Total cash and restricted cash $ 315,383     $ 132,797  
               

Infinera Corporation
Supplemental Financial Information
(Unaudited)

                                 
    Q1'19   Q2'19   Q3'19   Q4'19   Q1'20   Q2'20   Q3'20   Q4'20
GAAP Revenue ($ Mil)   $292.7     $296.3     $325.3     $384.6     $330.3     $331.6     $340.2     $353.5  
GAAP Gross Margin %   22.7  %   20.7  %   26.7  %   29.0  %   23.3  %   29.4  %   31.8  %   35.7  %
Non-GAAP Gross Margin %(1)   35.3  %    30.7  %    33.1  %   35.2  %   28.3  %   33.8  %   35.2  %   37.6  %
Revenue Composition:                                
Domestic %   45  %   45  %   51  %   52  %   52  %   50  %   49  %   36  %
International %   55  %    55  %   49  %   48  %   48  %   50  %   51  %   64  %
Customers >10% of Revenue   1     1     1     1     1     1     1      
Cash Related Information:                                
Cash from Operations ($ Mil)   ($56.2 )   ($63.8 )   ($37.2 )   ($10.2 )   ($91.5 )   ($36.6 )   ($36.4 )   $52.2  
Capital Expenditures ($ Mil)   $6.6     $9.2     $12.5     $2.7     $8.5     $10.5     $8.1     $11.9  
Depreciation & Amortization ($ Mil)   $31.0     $31.2     $29.0     $28.6     $25.4     $25.9     $22.9     $25.9  
DSOs   83     80     80     83     75     79     78     82  
Inventory Metrics:                                
Raw Materials ($ Mil)   $82.5     $70.4     $47.2     $47.4     $50.0     $43.4     $39.3     $34.7  
Work in Process ($ Mil)   $63.0     $59.5     $52.2     $48.8     $52.0     $50.9     $51.6     $55.8  
Finished Goods ($ Mil)   $187.0     $208.9     $225.4     $244.1     $217.7     $193.9     $185.0     $178.8  
Total Inventory ($ Mil)   $332.5     $338.8     $324.8     $340.3     $319.7     $288.2     $275.9     $269.3  
Inventory Turns(2)   2.3     2.5     2.7     2.9     3.0     3.1     3.2     3.3  
Worldwide Headcount   3,708     3,632     3,557     3,261     3,302     3,209     3,074     3,050  
Weighted Average Shares Outstanding (in thousands):                                
Basic   176,406     178,677     179,988     180,864     182,024     185,596     189,589     195,655  
Diluted   176,602     179,343     182,073     186,349     189,246     190,127     195,868     203,259  
                                 


(1) Non-GAAP adjustments include acquisition-related deferred revenue and inventory adjustments, other customer related charges, stock-based compensation expenses, amortization of acquired intangible assets, acquisition and integration costs, restructuring and related costs, and COVID-19 related costs. For a description of this non-GAAP financial measure, please see the section titled “GAAP to Non-GAAP Reconciliations” in 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:

    Q1'21
    Outlook
Reconciliation of Revenue:    
U.S. GAAP   $ 329.0    
Acquisition-related deferred revenue adjustment   1.0    
Non-GAAP   $ 330.0    
     
Reconciliation of Gross Margin:    
U.S. GAAP   32.5  %  
Acquisition-related deferred revenue adjustment   0.5  %  
Stock-based compensation   1.0  %  
Amortization of acquired intangible assets   1.0  %  
Restructuring and related costs   0.5  %  
Non-GAAP   35.5  %  
     
Reconciliation of Operating Expenses:    
U.S. GAAP   $ 144.0    
Stock-based compensation   (14.0 )  
Amortization of acquired intangible assets   (4.0 )  
Restructuring and related costs   (2.0 )  
Acquisition and integration costs   (1.0 )  
Non-GAAP   $ 123.0    
     
Reconciliation of Operating Margin:    
U.S. GAAP   (11.5 )%  
Acquisition-related deferred revenue adjustment   0.5  %  
Stock-based compensation   5.0  %  
Amortization of acquired intangible assets   2.5  %  
Acquisition and integration costs   0.5  %  
Restructuring and related costs   1.0  %  
Non-GAAP   (2.0 )%  
     

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Source: Infinera Corporation