Infinera Corporation Reports First Quarter 2013 Financial Results

Infinera Corporation Reports First Quarter 2013 Financial Results 
SUNNYVALE, CA -- (Marketwired) -- 04/24/13 --  Infinera Corporation
(NASDAQ: INFN), a leading provider of digital optical communications
systems, today released financial results for the first quarter ended
March 30, 2013.  
GAAP revenues for the first quarter of 2013 were $124.6 million
compared to $128.1 million in the fourth quarter of 2012 and $104.7
million in the first quarter of 2012. 
GAAP gross margin for the first quarter of 2013 was 34% compared to
34% in the fourth quarter of 2012 and 39% in the first quarter of
2012. GAAP net loss for the quarter was $(15.3) million, or $(0.13)
per share, compared to net loss of $(16.1) million, or $(0.14) per
share, in the fourth quarter of 2012 and net loss of $(20.6) million,
or $(0.19) per share, in the first quarter of 2012.  
Non-GAAP gross margin for the first quarter of 2013 was 36% compared
to 36% in the fourth quarter of 2012 and 40% in the first quarter of
2012, excluding non-cash stock-based compensation expenses. Non-GAAP
net loss for the first quarter of 2013 was $(7.3) million, or $(0.06)
per share, compared to net loss of $(6.0) million, or $(0.05) per
share, in the fourth quarter of 2012 and net loss of $(11.2) million,
or $(0.10) per share, in the first quarter of 2012. 
Management Commentary  
"Our first quarter performance demonstrated solid execution in a
traditionally slow quarter for the industry," said Tom Fallon,
president and chief executive officer. "The DTN-X platform continued
to gain traction in the market. During the quarter, we received
purchase commitments from six additional customers, including two new
to Infinera, for a total of 27 DTN-X customer commitments to date.
Customer deployments were strong and we shipped a record number of
100G ports.  
"The economic value proposition offered by Infinera's photonic
integration and long-haul 500G super-channels has generated
significant interest among potential customers. As a result, our new
business pipeline is extremely active and we are pursuing global
opportunities in a wide variety of markets. 
"We are increasingly confident in our outlook for Infinera. We exited
the first quarter with an increased backlog and a robust pipeline of
potential new business, positioning us well for 2013." 
Conference Call Information:  
Infinera will host a conference call for analysts and investors to
discuss its first quarter results and its outlook for the second
quarter today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). A
live webcast of the conference call will also be accessible from the
Investor Relations' section of the company's website at
www.infinera.com. Following the webcast, an archived version will be
available on the website for 90 days. To hear the replay, parties in
the United States and Canada should call 1-866-459-3539.
International parties can access the replay at 1-203-369-1328. 
About Infinera  
Infinera provides Digital Optical Networking systems to
telecommunications carriers worldwide. Infinera's systems are unique
in their use of a breakthrough semiconductor technology: the photonic
integrated circuit (PIC). Infinera's systems and PIC technology are
designed to provide customers with simpler and more flexible
engineering and operations, faster time-to-service, and the ability
to rapidly deliver differentiated services without reengineering
their optical infrastructure. For more information, please visit
www.infinera.com. 
Forward-Looking Statements  
This press release contains certain forward-looking statements based
on current expectations, forecasts and assumptions that involve risks
and uncertainties. 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. Forward-looking statements include statements
regarding Infinera's expectations, beliefs, intentions or strategies
regarding the future including statements that the economic value
proposition offered by Infinera's photonic integration and long-haul
500G super-channels has generated significant interest among
potential customers; that our new business pipeline is extremely
active and we are pursuing global opportunities in a wide variety of
markets; that we are increasingly optimistic about the outlook for
Infinera; and that we exited the first quarter with an increased
backlog, strong bookings, and a robust pipeline of potential new
business, positioning us well for 2013. Such forward-looking
statements can be identified by forward-looking words such as
"anticipated," "believed," "could," "estimate," "expect," "intend,"
"may," "should," "will," and "would" or similar words. The risks and
uncertainties that could cause our results to differ materially from
those expressed or implied by such forward-looking statements include
aggressive business tactics by our competitors, our reliance on
single-source suppliers, our ability to protect our intellectual
property, claims by others that we infringe their intellectual
property, and our ability to respond to rapid technological changes,
and other risks that may impact our business are set forth in our
annual reports on Form 10-K filed with the Securities and Exchange
Commission (SEC) on March 5, 2013, as well as subsequent reports
filed with or furnished to the SEC. These reports are available on
our website at www.infinera.com and the SEC's website at www.sec.gov.
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 non-cash stock-based compensation expenses and
non-recurring restructuring and other related costs. We believe these
adjustments are appropriate to enhance an overall understanding of
our underlying financial performance and also our prospects for the
future and are considered by management for the purpose of making
operational decisions. In addition, these results are the primary
indicators management uses as a basis for our planning and
forecasting of future periods. The presentation of this additional
information is not meant to be considered in isolation or as a
substitute for net income (loss), basic and diluted net income (loss)
per share, or gross margin prepared in accordance with GAAP. Non-GAAP
financial measures are not based on a comprehensive set of accounting
rules or principles and are subject to limitations. For a description
of these non-GAAP financial measures and a reconciliation to the most
directly comparable GAAP financial measures, please see the section
titled, "GAAP to Non-GAAP Reconciliations." We anticipate disclosing
forward-looking non-GAAP information in our conference call to
discuss our first quarter results, including an estimate of non-GAAP
earnings for the second quarter of 2013 that excludes non-cash
stock-based compensation expenses.  
A copy of this press release can be found on the Investor Relations'
page of Infinera's website at www.infinera.com.  
Infinera Corporation and the Infinera logo are trademarks or
registered trademarks of Infinera Corporation. All other trademarks
used or mentioned herein belong to their respective owners.  


 
                                                                            
                                                                            
Infinera Corporation                                                        
GAAP Condensed Consolidated Statements of Operations                        
(In thousands, except share data)                                           
(Unaudited)                                                                 
                                                      Three Months Ended    
                                                   ------------------------ 
                                                    March 30,    March 31,  
                                                       2013         2012    
                                                   -----------  ----------- 
Revenue:                                                                    
  Product                                          $   107,809  $    92,391 
  Ratable product and related support and services         534          531 
  Services                                              16,282       11,779 
                                                   -----------  ----------- 
    Total revenue                                      124,625      104,701 
                                                                            
Cost of revenue (1):                                                        
  Cost of product                                       75,352       59,324 
  Cost of ratable product and related support and                           
   services                                                 95          191 
  Cost of services                                       6,476        4,759 
                                                   -----------  ----------- 
    Total cost of revenue                               81,923       64,274 
                                                                            
Gross profit                                            42,702       40,427 
                                                                            
Operating expenses (1):                                                     
  Research and development                              29,726       30,985 
  Sales and marketing                                   18,046       18,242 
  General and administrative                             9,872       11,084 
                                                   -----------  ----------- 
    Total operating expenses                            57,644       60,311 
                                                                            
Loss from operations                                   (14,942)     (19,884)
                                                                            
Other income (expense), net:                                                
  Interest income                                          197          275 
  Other gain (loss), net:                                 (203)        (424)
                                                   -----------  ----------- 
    Total other income (expense), net                       (6)        (149)
                                                                            
Loss before income taxes                               (14,948)     (20,033)
Provision for income taxes                                 331          579 
                                                   -----------  ----------- 
Net loss                                           $   (15,279) $   (20,612)
                                                   ===========  =========== 
                                                                            
Net loss per common share, basic and diluted       $     (0.13) $     (0.19)
                                                   ===========  =========== 
                                                                            
Weighted average shares used in computing basic                             
 and diluted net loss per common share                 114,308      108,666 
                                                   ===========  =========== 
                                                                            
                                                                            
(1) The following table summarizes the effects of stock-based compensation  
 related to employees and non-employees for the three months ended March    
 30, 2013 and March 31, 2012:                                               
                                                                            
                                                      Three Months Ended    
                                                   ------------------------ 
                                                    March 30,    March 31,  
                                                       2013         2012    
                                                   -----------  ----------- 
  Cost of revenue                                  $       486  $       606 
  Research and development                               3,119        3,320 
  Sales and marketing                                    1,999        2,219 
  General and administration                               769        2,223 
                                                   -----------  ----------- 
                                                         6,373        8,368 
  Cost of revenue - amortization from balance                               
   sheet*                                                1,602        1,069 
                                                   -----------  ----------- 
  Total stock-based compensation expense           $     7,975  $     9,437 
                                                   ===========  =========== 
                                                                            
* Stock-based compensation expense deferred to inventory and deferred       
 inventory costs in prior periods and recognized in the current period.     
                                                                            
                                                                            
                                                                            
                                                                            
Infinera Corporation                                                        
GAAP to Non-GAAP Reconciliations                                            
(In thousands, except per share data)                                       
(Unaudited)                                                                 
                                                                            
                                                Three Months Ended          
                                      ------------------------------------- 
                                       March 30,   December 29,  March 31,  
                                          2013         2012         2012    
                                      -----------  -----------  ----------- 
Reconciliation of Gross Profit:                                             
U.S. GAAP as reported                 $    42,702  $    43,268  $    40,427 
Stock-based compensation(1)                 2,088        2,684        1,675 
                
                      -----------  -----------  ----------- 
Non-GAAP as adjusted                  $    44,790  $    45,952  $    42,102 
                                      ===========  ===========  =========== 
                                                                            
Reconciliation of Gross Margin:                                             
U.S. GAAP as reported                          34%          34%          39%
Stock-based compensation(1)                     2%           2%           1%
                                      -----------  -----------  ----------- 
Non-GAAP as adjusted                           36%          36%          40%
                                      ===========  ===========  =========== 
                                                                            
Reconciliation of Loss from                                                 
 Operations:                                                                
U.S. GAAP as reported                 $   (14,942) $   (15,513) $   (19,884)
Stock-based compensation(1)                 7,975       10,135        9,437 
                                      -----------  -----------  ----------- 
Non-GAAP as adjusted                  $    (6,967) $    (5,378) $   (10,447)
                                      ===========  ===========  =========== 
                                                                            
Reconciliation of Net Loss:                                                 
U.S. GAAP as reported                 $   (15,279) $   (16,088) $   (20,612)
Stock-based compensation(1)                 7,975       10,135        9,437 
                                      -----------  -----------  ----------- 
Non-GAAP as adjusted                  $    (7,304) $    (5,953) $   (11,175)
                                      ===========  ===========  =========== 
                                                                            
Net Loss per Common Share - Basic:                                          
U.S. GAAP as reported                 $     (0.13) $     (0.14) $     (0.19)
Stock-based compensation(1)                  0.07         0.09         0.09 
                                      -----------  -----------  ----------- 
Non-GAAP as adjusted                  $     (0.06) $     (0.05) $     (0.10)
                                      ===========  ===========  =========== 
                                                                            
Net Loss per Common Share - Diluted:                                        
U.S. GAAP as reported                 $     (0.13) $     (0.14) $     (0.19)
Stock-based compensation(1)                  0.07         0.09         0.09 
                                      -----------  -----------  ----------- 
Non-GAAP as adjusted(2)               $     (0.06) $     (0.05) $     (0.10)
                                      ===========  ===========  =========== 
                                                                            
Weighted average shares used in                                             
 computing net loss per common share                                        
 - U.S. GAAP:                                                               
Basic                                     114,308      112,311      108,666 
                                      ===========  ===========  =========== 
Diluted                                   114,308      112,311      108,666 
                                      ===========  ===========  =========== 
                                                                            
Weighted average shares used in                                             
 computing net loss per common share                                        
 - Non-GAAP:                                                                
Basic                                     114,308      112,311      108,666 
                                      ===========  ===========  =========== 
Diluted(2)                                117,602      114,115      112,007 
                                      ===========  ===========  =========== 
                                                                            
                                                                            
(1) Stock-based compensation expense is calculated in accordance with the   
 fair value recognition provisions of Financial Accounting Standards Board  
 Accounting Standards Codification (ASC) Topic 718, Compensation-Stock      
 Compensation effective January 1, 2006. The following table summarizes the 
 effects of stock-based compensation related to employees and non-          
 employees:                                                                 
                                                                            
                                                Three Months Ended          
                                      ------------------------------------- 
                                       March 30,   December 29,  March 31,  
                                          2013         2012         2012    
                                      -----------  -----------  ----------- 
Cost of revenue                       $       486  $       735  $       606 
Research and development                    3,119        2,852        3,320 
Sales and marketing                         1,999        2,802        2,219 
General and administration                    769        1,797        2,223 
                                      -----------  -----------  ----------- 
                                            6,373        8,186        8,368 
Cost of revenue - amortization from                                         
 balance sheet*                             1,602        1,949        1,069 
                                      -----------  -----------  ----------- 
Total stock-based compensation                                              
 expense                              $     7,975  $    10,135  $     9,437 
                                      ===========  ===========  =========== 
                                                                            
-------------------------------------                                       
* Stock-based compensation expense deferred to inventory and deferred       
 inventory costs in prior periods and recognized in the current period.     
                                                                            
(2) Diluted shares used to calculate net loss per share on a non-GAAP basis 
 provided for informational purposes only.                                  
                                                                            
                                                                            
                                                                            
                                                                            
Infinera Corporation                                                        
Condensed Consolidated Balance Sheets                                       
(In thousands, except par values)                                           
(Unaudited)                                                                 
                                                                            
                                                    March 30,   December 29,
                                                       2013         2012    
                                                   -----------  ----------- 
ASSETS                                                                      
                                                                            
Current assets:                                                             
  Cash and cash equivalents                        $    98,998  $   104,666 
  Short-term investments                                62,108       76,146 
  Accounts receiva
ble, net of allowance for                                 
   doubtful accounts of $100 in 2013 and $94 in                             
   2012                                                112,133      107,039 
  Other receivables                                      3,298        2,909 
  Inventory                                            130,991      127,809 
  Deferred inventory costs                                 413        1,029 
  Prepaid expenses and other current assets             10,284        9,899 
                                                   -----------  ----------- 
    Total current assets                               418,225      429,497 
                                                                            
Property, plant and equipment, net                      77,155       80,343 
Deferred inventory costs, non-current                       68          100 
Long-term investments                                        -        2,874 
Cost-method investment                                   9,000        9,000 
Long-term restricted cash                                3,826        3,868 
Deferred tax asset                                         745          805 
Other non-current assets                                 1,779        1,683 
                                                   -----------  ----------- 
    Total assets                                   $   510,798  $   528,170 
                                                   ===========  =========== 
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
                                                                            
Current liabilities:                                                        
  Accounts payable                                 $    52,104  $    61,428 
  Accrued expenses                                      19,940       25,483 
  Accrued compensation and related benefits             18,694       22,325 
  Accrued warranty                                       7,027        7,262 
  Deferred revenue                                      31,234       26,744 
  Deferred tax liability                                   745          805 
                                                   -----------  ----------- 
    Total current liabilities                          129,744      144,047 
                                                                            
  Accrued warranty, non-current                          9,645        9,220 
  Deferred revenue, non-current                          3,059        3,210 
  Other long-term liabilities                           15,909       15,557 
                                                                            
Commitments and contingencies                                               
                                                                            
Stockholders' equity:                                                       
  Preferred stock, $0.001 par value                                         
    Authorized shares - 25,000 and no shares                                
     issued and outstanding                                  -            - 
  Common stock, $0.001 par value                                            
    Authorized shares - 500,000 as of March 30,                             
     2013 and December 29, 2012                                             
    Issued and outstanding shares - 115,617 as of                           
     March 30, 2013 and 112,461 as of December 29,                          
     2012                                                  116          112 
  Additional paid-in capital                           942,490      930,618 
  Accumulated other comprehensive loss                  (2,520)      (2,228)
  Accumulated deficit                                 (587,645)    (572,366)
                                                   -------
----  ----------- 
  Total stockholders' equity                           352,441      356,136 
                                                   -----------  ----------- 
    Total liabilities and stockholders' equity     $   510,798  $   528,170 
                                                   ===========  =========== 
                                                                            
                                                                            
                                                                            
                                                                            
Infinera Corporation                                                        
Condensed Consolidated Statements of Cash Flows                             
(In thousands)                                                              
(Unaudited)                                                                 
                                                                            
                                                      Three Months Ended    
                                                   ------------------------ 
                                                    March 30,    March 31,  
                                                       2013         2012    
                                                   -----------  ----------- 
Cash Flows from Operating Activities:                                       
Net loss                                           $   (15,279) $   (20,612)
Adjustments to reconcile net loss to net cash used                          
 in operating activities:                                                   
  Depreciation and amortization                          6,334        5,528 
  (Recovery of) provision for other receivables            (88)           - 
  Amortization of premium on investments                   314          618 
  Stock-based compensation expense                       7,975        9,437 
  Non-cash tax benefit                                       -          (59)
  Other gain                                              (243)         (22)
  Changes in assets and liabilities:                                        
    Accounts receivable                                 (5,094)      15,172 
    Other receivables                                     (558)         422 
    Inventory                                           (5,041)     (12,050)
    Prepaid expenses and other assets                     (432)       2,173 
    Deferred inventory costs                               629        1,167 
    Accounts payable                                    (8,045)      (7,266)
    Accrued liabilities and other expenses              (6,301)      (1,010)
    Deferred revenue                                     4,340          624 
    Accrued warranty                                       190          121 
                                                   -----------  ----------- 
      Net cash used in operating activities            (21,299)      (5,757)
                                                                            
Cash Flows from Investing Activities:                                       
  Purchase of available-for-sale investments           (20,023)     (21,907)
  Proceeds from sale of available-for-sale                                  
   investments                                           2,850        5,194 
  Proceeds from maturities and calls of                                     
   investments                                          33,835       32,034 
  Purchase of property and equipment                    (4,936)     (13,649)
  Reimbursement of manufacturing capacity advance            -           50 
  Change in restricted cash                                 44         (193)
                                                   -----------  ----------- 
      Net cash provided by investing activities         11,770        1,529 
                    
                                                        
Cash Flows from Financing Activities:                                       
  Proceeds from issuance of common stock                 5,560        7,005 
  Repurchase of common stock                            (1,493)        (832)
                                                   -----------  ----------- 
    Net cash provided by financing activities            4,067        6,173 
                                                                            
Effect of exchange rate changes on cash                   (206)         306 
                                                                            
Net change in cash and cash equivalents                 (5,668)       2,251 
Cash and cash equivalents at beginning of period       104,666       94,458 
                                                   -----------  ----------- 
Cash and cash equivalents at end of period         $    98,998  $    96,709 
                                                   ===========  =========== 
                                                                            
Supplemental disclosures of cash flow information:                          
  Cash paid for income taxes                       $       210  $       329 
Supplemental schedule of non-cash financing                                 
 activities:                                                                
  Non-cash settlement for manufacturing capacity                            
   advance                                         $         -  $       275 
                                                                            
                                                                            
                                                                            
                                                                            
Infinera Corporation                                                        
Supplemental Financial Information                                          
(Unaudited)                                                                 
                                                                            
----------------------------------------------------------------------------
                     Q2'11  Q3'11  Q4'11  Q1'12  Q2'12  Q3'12  Q4'12  Q1'13 
----------------------------------------------------------------------------
Revenue ($ Mil)      $96.0  $104.0 $112.0 $104.7 $93.5  $112.2 $128.1 $124.6
Gross Margin % (1)    41%    41%    42%    40%    37%    39%    36%    36%  
----------------------------------------------------------------------------
Invoiced Shipment                                                           
Composition:                                                                
Domestic %            72%    65%    70%    71%    70%    70%    63%    63%  
International %       28%    35%    30%    29%    30%    30%    37%    37%  
Largest Customer %    10%  < 10%   14%    13%    15%    13%    13%    14%  
----------------------------------------------------------------------------
Cash Related                                                                
Information:                                                                
Cash from (used in)                                                         
Operations ($ Mil)   ($0.1)  $4.1  ($5.1) ($5.8)($22.7)($29.3)  $8.3 ($21.3)
Capital Expenditures                                                        
($ Mil)               $6.7   $5.9  $16.1  $13.6   $6.1   $2.5   $3.2   $4.9 
Depreciation &                                                              
Amortization ($ Mil)  $4.2   $4.9   $4.5   $5.5   $5.7   $6.1   $6.4   $6.3 
DSO's                  70     60     65     57     55     74     76     82  
----------------------------------------------------------------------------
Inventory Metrics:                                                          
Raw Materials ($                                                            
Mil)                  $7.3   $7.0  $12.1  $15.3  $14.8  $12.4  $13.0  $12.2 
Work in Process ($                                                          
Mil)                 $27.7  $26.9  $37.0  $41.6  $49.4  $59.8  $57.3  $53.1 
Finished Goods ($                                                           
Mil)                 $34.4  $36.4  $39.9  $44.7  $50.9  $46.3  $57.5  $65.7 
----------------------------------------------------------------------------
Total Inventory ($                                                          
Mil)                 $69.4  $70.3  $89.0  $101.6 $115.1 $118.5 $127.8 $131.0
Inventory Turns (1)   3.3    3.5    2.9    2.5    2.1    2.3    2.6    2.4  
----------------------------------------------------------------------------
Worldwide Headcount  1,136  1,151  1,181  1,210  1,228  1,235  1,242  1,219 
----------------------------------------------------------------------------
                                                                            
                                                                            
(1) Amounts reflect non-GAAP results. Non-GAAP adjustments include non-cash 
stock-based compensation expense.                                           

  
Contacts: 
Media:
Anna Vue
avue@infinera.com
Infinera Corporation
916-595-8157 
Investors/Analysts:
Jenifer Kirtland/Bob Jones 
jkirtland@infinera.com / bjones@infinera.com
Infinera Corporation
408-543-8139/408-543-8140