Infinera Corporation Reports Second Quarter 2015 Financial Results
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SUNNYVALE, CA -- (Marketwired) -- 07/22/15 -- Infinera Corporation (NASDAQ: INFN), provider of Intelligent Transport Networks, today released financial results for the second quarter of 2015 ended June 27, 2015.
Revenue for the quarter was $207.3 million compared to $186.9 million in the first quarter of 2015 and $165.4 million in the second quarter of 2014.
GAAP gross margin for the quarter was 46.7% compared to 47.2% in the first quarter of 2015 and 42.5% in the second quarter of 2014. GAAP operating margin for the quarter was 8.0% compared to an operating margin of 8.1% in the first quarter of 2015 and an operating margin of 4.9% in the second quarter of 2014.
GAAP net income for the quarter was $17.9 million, or $0.13 per diluted share, compared to $12.4 million, or $0.09 per diluted share, in the first quarter of 2015, and $4.8 million, or $0.04 per diluted share, in the second quarter of 2014.
Non-GAAP gross margin for the quarter was 47.4% compared to 47.8% in the first quarter of 2015 and 43.3% in the second quarter of 2014. Non-GAAP operating margin for the quarter was 13.0% compared to 12.2% in the first quarter of 2015 and 9.0% in the second quarter of 2014.
Non-GAAP net income for the quarter was $25.7 million, or $0.18 per diluted share, compared to $22.1 million, or $0.16 per diluted share, in the first quarter of 2015, and $13.5 million, or $0.11 per diluted share, in the second quarter of 2014.
The above non-GAAP measures exclude non-cash stock-based compensation expenses, acquisition-related costs, acquisition-related forward contract gains and the amortization of debt discount on Infinera's convertible senior notes. 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.
"Our outstanding second quarter results were driven by robust demand across multiple verticals, as customers continued to build next generation networks with Infinera. Differentiated products, exceptional customer experience and a vertical business model enable us to continue to grow our top line rapidly and our bottom line even faster," said Tom Fallon, Infinera's Chief Executive Officer. "With the emergence of new cloud architectures, the strategic importance of optical transport has never been higher. Our technology leadership and superior service experience, puts Infinera in a particularly favorable position to benefit from this ongoing evolution in optical networking."
Conference Call Information Infinera will host a conference call for analysts and investors to discuss its second quarter of 2015 results and its outlook for the third quarter of 2015 today at 5:30 p.m. Eastern Time (2:30 p.m. Pacific Time). Interested parties may join the conference call by dialing 1-800-593-9940 (toll free) or 1-630-395-0029 (international), pass-code PIC. A live webcast of the conference call will also be accessible from the Investor Relations section of Infinera'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 1-800-677-1310. International parties can access the replay at 1-203-369-3644.
About Infinera Infinera provides Intelligent Transport Networks for network operators, enabling reliable, easy to operate, high-capacity optical networks. Infinera leverages its unique large scale photonic integrated circuits to deliver innovative optical networking solutions for the most demanding network environments. Intelligent Transport Networks enable carriers, Cloud network operators, governments and enterprises to automate, converge and scale their data center, metro, long-haul and subsea optical networks. To learn more about Infinera visit www.infinera.com, follow us on Twitter @Infinera and read Infinera's latest blog posts at blog.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, including Infinera's ability to continue to grow its top line rapidly and its bottom line even faster; Infinera's belief that the strategic importance of optical transport has never been higher; and Infinera's ability to remain in a particularly favorable position to benefit from this ongoing evolution in optical networking. 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. 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 Infinera's results to differ materially from those expressed or implied by such forward-looking statements include delays in the development and introduction of Infinera's products and market acceptance of these products; the effect of changes in product pricing or mix, and/or increases in component costs could have on Infinera's gross margin; Infinera's reliance on single-source suppliers; aggressive business tactics by Infinera's competitors; Infinera's ability to protect Infinera's intellectual property; claims by others that Infinera infringes their intellectual property; war, terrorism, public health issues, natural disasters, and other circumstances that could disrupt supply, delivery or demand of products; Infinera's ability to respond to rapid technological changes; and other risks 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 28, 2015 as filed with the SEC on May 4, 2015, 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 non-cash stock-based compensation expenses, acquisition-related costs, acquisition-related forward contract gains and amortization of debt discount on Infinera's convertible senior notes. 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 income, basic and diluted net income 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. 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 anticipates disclosing forward-looking non-GAAP information in its conference call to discuss its second quarter 2015 results, including an estimate of non-GAAP earnings for the third quarter of 2015 that excludes non-cash stock-based compensation expenses, acquisition-related costs, acquisition-related forward contract gains or losses, and amortization of debt discount on Infinera's convertible senior notes.
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
GAAP Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
------------------------ ------------------------
June 27, June 28, June 27, June 28,
2015 2014 2015 2014
----------- ----------- ----------- -----------
Revenue:
Product $ 178,982 $ 142,364 $ 339,825 $ 266,606
Services 28,364 23,035 54,383 41,608
----------- ----------- ----------- -----------
Total revenue 207,346 165,399 394,208 308,214
Cost of revenue:
Cost of product 99,491 85,906 188,997 164,344
Cost of services 11,059 9,240 20,303 15,211
----------- ----------- ----------- -----------
Total cost of revenue 110,550 95,146 209,300 179,555
Gross profit 96,796 70,253 184,908 128,659
Operating expenses:
Research and
development 43,421 31,738 82,678 61,084
Sales and marketing 21,535 18,082 42,577 35,944
General and
administrative 15,310 12,381 27,966 24,635
----------- ----------- ----------- -----------
Total operating
expenses 80,266 62,201 153,221 121,663
Income from operations 16,530 8,052 31,687 6,996
Other income (expense),
net:
Interest income 551 337 965 673
Interest expense (2,947) (2,728) (5,837) (5,405)
Other gain (loss), net 4,780 (264) 5,081 (993)
----------- ----------- ----------- -----------
Total other income
(expense), net 2,384 (2,655) 209 (5,725)
Income before income
taxes 18,914 5,397 31,896 1,271
Provision for income
taxes 1,008 617 1,624 865
----------- ----------- ----------- -----------
Net income $ 17,906 $ 4,780 $ 30,272 $ 406
=========== =========== =========== ===========
Net income per common
share:
Basic $ 0.14 $ 0.04 $ 0.23 $ 0.00
=========== =========== =========== ===========
Diluted $ 0.13 $ 0.04 $ 0.22 $ 0.00
=========== =========== =========== ===========
Weighted average shares
used in computing
net income per common
share:
Basic 130,349 123,128 129,094 122,240
=========== =========== =========== ===========
Diluted 140,642 126,758 138,973 126,112
=========== =========== =========== ===========
Infinera Corporation
GAAP to Non-GAAP Reconciliations
(In thousands, except percentages and per share data)
(Unaudited)
Three Months Ended Six Months Ended
----------------------------- -------------------
June 27, March 28, June 28, June 27, June 28,
2015 2015 2014 2015 2014
--------- --------- --------- --------- ---------
Reconciliation of Gross
Profit:
U.S. GAAP as reported $ 96,796 $ 88,112 $ 70,253 $ 184,908 $ 128,659
Stock-based
compensation(1) 1,493 1,243 1,360 2,736 2,644
--------- --------- --------- --------- ---------
Non-GAAP as adjusted $ 98,289 $ 89,355 $ 71,613 $ 187,644 $ 131,303
========= ========= ========= ========= =========
Reconciliation of Gross
Margin:
U.S. GAAP as reported 46.7% 47.2% 42.5% 46.9% 41.7%
Stock-based
compensation(1) 0.7% 0.6% 0.8% 0.7% 0.9%
--------- --------- --------- --------- ---------
Non-GAAP as adjusted 47.4% 47.8% 43.3% 47.6% 42.6%
========= ========= ========= ========= =========
Reconciliation of Income
from Operations:
U.S. GAAP as reported $ 16,530 $ 15,157 $ 8,052 $ 31,687 $ 6,996
Stock-based
compensation(1) 8,209 7,208 6,804 15,417 13,476
Acquisition-related
costs(2) 2,264 462 - 2,726 -
--------- --------- --------- --------- ---------
Non-GAAP as adjusted $ 27,003 $ 22,827 $ 14,856 $ 49,830 $ 20,472
========= ========= ========= ========= =========
Reconciliation of
Operating Margin:
U.S. GAAP as reported 8.0% 8.1% 4.9% 8.0% 2.3%
Stock-based
compensation(1) 3.9% 3.9% 4.1% 3.9% 4.3%
Acquisition-related
costs(2) 1.1% 0.2% 0.0% 0.7% 0.0%
--------- --------- --------- --------- ---------
Non-GAAP as adjusted 13.0% 12.2% 9.0% 12.6% 6.6%
========= ========= ========= ========= =========
Reconciliation of Net
Income:
U.S. GAAP as reported $ 17,906 $ 12,366 $ 4,780 $ 30,272 $ 406
Stock-based
compensation(1) 8,209 7,208 6,804 15,417 13,476
Acquisition-related
costs(2) 2,264 462 - 2,726 -
Acquisition-related
forward contract gain(3) (4,782) - - (4,782) -
Amortization of debt
discount(4) 2,109 2,057 1,908 4,166 3,768
--------- --------- --------- --------- ---------
Non-GAAP as adjusted $ 25,706 $ 22,093 $ 13,492 $ 47,799 $ 17,650
========= ========= ========= ========= =========
Net Income per Common
Share - Basic:
U.S. GAAP as reported $ 0.14 $ 0.10 $ 0.04 $ 0.23 $ 0.00
========= ========= ========= ========= =========
Non-GAAP as adjusted $ 0.20 $ 0.17 $ 0.11 $ 0.37 $ 0.14
========= ========= ========= ========= =========
Net Income per Common
Share - Diluted:
U.S. GAAP as reported $ 0.13 $ 0.09 $ 0.04 $ 0.22 $ 0.00
========= ========= ========= ========= =========
Non-GAAP as adjusted $ 0.18 $ 0.16 $ 0.11 $ 0.34 $ 0.14
========= ========= ========= ========= =========
Weighted Average Shares
Used in Computing Net
Income
per Common Share - U.S.
GAAP:
Basic 130,349 127,840 123,128 129,094 122,240
========= ========= ========= ========= =========
Diluted 140,642 137,304 126,758 138,973 126,112
========= ========= ========= ========= =========
Weighted Average Shares
Used in Computing Net
Income
per Common Share - Non-
GAAP:
Basic 130,349 127,840 123,128 129,094 122,240
========= ========= ========= ========= =========
Diluted 140,642 137,304 126,758 138,973 126,112
========= ========= ========= ========= =========
--------------------------
(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 27, March 28, June 28, June 27, June 28,
2015 2015 2014 2015 2014
---------- ---------- ---------- ---------- ----------
Cost of revenue $ 613 $ 482 $ 477 $ 1,095 $ 929
Research and
development 2,817 2,578 2,080 5,395 4,218
Sales and marketing 2,070 1,721 1,815 3,791 3,535
General and
administration 1,829 1,666 1,549 3,495 3,079
---------- ---------- ---------- ---------- ----------
7,329 6,447 5,921 13,776 11,761
Cost of revenue -
amortization from
balance sheet* 880 761 883 1,641 1,715
---------- ---------- ---------- ---------- ----------
Total stock-based
compensation expense $ 8,209 $ 7,208 $ 6,804 $ 15,417 $ 13,476
========== ========== ========== ========== ==========
----------------------
* Stock-based compensation expense deferred to inventory and
deferred inventory costs in prior periods and recognized in the
current period.
(2) In April 2015, Infinera announced its offer to acquire Transmode, a
leader in metro packet-optical networking. Acquisition-related costs
include legal and other professional fees and have been adjusted in
arriving at Infinera's non-GAAP results because management believes that
these expenses are not indicative of ongoing operating performance and
provides a better indication of Infinera's underlying business performance.
(3) In April 2015, Infinera entered into a foreign currency forward contract
with a notional amount of SEK 831 million ($95.3 million) at an exchange
rate of 8.7210 to hedge currency exposures associated with the cash portion
of the offer to acquire Transmode. Changes in the fair value of this
forward contract will impact Infinera's financial statements for the
interim reporting periods prior to the close of the offer. As a result,
these gains have been adjusted in arriving at Infinera's non-GAAP results
because management believes that these gains are not indicative of ongoing
operating performance and provides a better indication of Infinera's
underlying business performance.
(4) 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 a 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 1.75%
convertible debt issuance in May 2013 over the term of the notes. These
amounts have been adjusted in arriving at 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.
Infinera Corporation
Condensed Consolidated Balance Sheets
(In thousands, except par values)
(Unaudited)
June 27, December 27,
2015 2014
----------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 198,018 $ 86,495
Short-term investments 199,204 239,628
Accounts receivable, net of allowance for
doubtful accounts
of $47 in 2015 and $38 in 2014 109,448 154,596
Inventory 157,181 146,500
Prepaid expenses and other current assets 29,368 24,636
----------- ------------
Total current assets 693,219 651,855
Property, plant and equipment, net 86,981 81,566
Long-term investments 57,519 59,233
Cost-method investment 14,500 14,500
Long-term restricted cash 5,171 5,460
Other non-current assets 6,150 5,402
----------- ------------
Total assets $ 863,540 $ 818,016
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 38,807 $ 61,533
Accrued expenses 30,114 26,441
Accrued compensation and related benefits 33,856 38,795
Accrued warranty 12,576 12,241
Deferred revenue 37,261 35,321
----------- ------------
Total current liabilities 152,614 174,331
Long-term debt, net 121,059 116,894
Accrued warranty, non-current 15,863 14,799
Deferred revenue, non-current 13,035 10,758
Other long-term liabilities 21,179 19,327
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 27, 2015
and December 27, 2014
Issued and outstanding shares - 131,164 as of
June 27, 2015 and 126,160 as of December 27,
2014 131 126
Additional paid-in capital 1,104,672 1,077,225
Accumulated other comprehensive loss (4,459) (4,618)
Accumulated deficit (560,554) (590,826)
----------- ------------
Total stockholders' equity 539,790 481,907
----------- ------------
Total liabilities and stockholders' equity $ 863,540 $ 818,016
=========== ============
Infinera Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
-----------------------------
June 27, June 28,
2015 2014
-------------- --------------
Cash Flows from Operating Activities:
Net income $ 30,272 $ 406
Adjustments to reconcile net income to net
cash
provided by (used in) operating activities:
Depreciation and amortization 12,850 12,813
Amortization of debt discount and issuance
costs 4,524 4,092
Amortization of premium on investments 1,792 1,747
Unrealized gain from forward contract (4,782) -
Stock-based compensation expense 15,417 13,476
Other loss (gain) 2 (22)
Changes in assets and liabilities:
Accounts receivable 45,140 (20,043)
Inventory (12,774) (8,107)
Prepaid expenses and other assets (1,080) (3,389)
Accounts payable (23,597) (6,428)
Accrued liabilities and other expenses 1,491 (3,318)
Deferred revenue 4,216 (1,448)
Accrued warranty 1,399 5,040
-------------- --------------
Net cash provided by (used in)
operating activities 74,870 (5,181)
Cash Flows from Investing Activities:
Purchase of available-for-sale investments (112,940) (158,496)
Proceeds from sale of available-for-sale
investments 9,998 9,824
Proceeds from maturities and calls of
investments 143,483 116,290
Purchase of property and equipment (16,098) (9,985)
Change in restricted cash 290 (491)
-------------- --------------
Net cash provided by (used in)
investing activities 24,733 (42,858)
Cash Flows from Financing Activities:
Proceeds from issuance of common stock 16,488 8,401
Minimum tax withholding paid on behalf of
employees for net share settlement (4,561) (1,619)
-------------- --------------
Net cash provided by financing
activities 11,927 6,782
Effect of exchange rate changes on cash (7) 234
Net change in cash and cash equivalents 111,523 (41,023)
Cash and cash equivalents at beginning of
period 86,495 124,330
-------------- --------------
Cash and cash equivalents at end of period $ 198,018 $ 83,307
============== ==============
Supplemental disclosures of cash flow
information:
Cash paid for income taxes, net of refunds $ 1,481 $ 482
Cash paid for interest $ 1,313 $ 1,313
Supplemental schedule of non-cash financing
activities:
Transfer of inventory to fixed assets $ 2,205 $ 978
Infinera Corporation
Supplemental Financial Information
(Unaudited)
----------------------------------------------------------------------------
Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
----------------------------------------------------------------------------
Revenue ($ Mil) $142.0 $139.1 $142.8 $165.4 $173.6 $186.3 $186.9 $207.3
Gross Margin % (1) 49.2% 41.4% 41.8% 43.3% 44.2% 46.1% 47.8% 47.4%
----------------------------------------------------------------------------
Revenue Composition:
Domestic % 73% 54% 78% 82% 70% 58% 68% 75%
International % 27% 46% 22% 18% 30% 42% 32% 25%
Customers >10% of
Revenue 3 1 2 2 1 1 2 3
----------------------------------------------------------------------------
Cash Related
Information:
Cash from (Used
in) Operations ($
Mil) $12.8 $25.8 $(15.4) $10.3 $22.3 $18.7 $19.8 $55.0
Capital
Expenditures ($
Mil) $4.2 $7.5 $5.6 $4.4 $4.4 $8.8 $7.4 $8.7
Depreciation &
Amortization ($
Mil) $5.9 $6.0 $6.3 $6.5 $6.5 $6.6 $6.6 $6.3
DSO's 56 66 68 66 71 76 64 48
----------------------------------------------------------------------------
Inventory Metrics:
Raw Materials ($
Mil) $12.1 $14.3 $13.2 $11.2 $11.6 $15.2 $22.4 $30.2
Work in Process ($
Mil) $45.7 $49.2 $47.8 $40.6 $44.4 $50.0 $45.9 $43.9
Finished Goods ($
Mil) $65.7 $60.2 $65.5 $79.1 $74.8 $81.3 $88.9 $83.1
----------------------------------------------------------------------------
Total Inventory ($
Mil) $123.5 $123.7 $126.5 $130.9 $130.8 $146.5 $157.2 $157.2
Inventory Turns (2) 2.3 2.6 2.6 2.9 3.0 2.7 2.5 2.8
----------------------------------------------------------------------------
Worldwide Headcount 1,296 1,318 1,346 1,396 1,456 1,495 1,530 1,598
----------------------------------------------------------------------------
(1) Amounts reflect non-GAAP results. Non-GAAP adjustments include non-cash
stock-based compensation expense.
(2) Infinera calculates non-GAAP inventory turns as annualized non-GAAP cost
of revenue before adjustments for non-cash stock-based compensation expense
divided by the average inventory for the quarter.
Contacts: Media: Anna Vue Tel. +1 (916) 595-8157 [email protected] Investors: Jeff Hustis Tel. +1 (408) 213-7150 [email protected]
Source: Infinera
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