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Infinera Corporation Reports Third Quarter 2015 Financial Results

October 27, 2015 4:15 PM EDT

SUNNYVALE, CA -- (Marketwired) -- 10/27/15 -- Infinera Corporation (NASDAQ: INFN), provider of Intelligent Transport Networks, today released financial results for the third quarter of 2015 ended September 26, 2015. Infinera's financial results for the third quarter of 2015 include the operating results of Transmode from the date the acquisition closed on August 20, 2015.

GAAP financial results for the quarter were impacted by certain purchase accounting adjustments and one-time acquisition-related costs related to the Transmode acquisition. Additionally, GAAP results include non-cash stock-based compensation expenses and the amortization of debt discount on Infinera's convertible senior notes. The foregoing items have been excluded from Infinera's non-GAAP results.

GAAP revenue for the quarter was $232.5 million compared to $207.3 million in the second quarter of 2015 and $173.6 million in the third quarter of 2014.

GAAP gross margin for the quarter was 44.2% compared to 46.7% in the second quarter of 2015 and 43.4% in the third quarter of 2014. GAAP operating margin for the quarter was 6.1% compared to 8.0% in the second quarter of 2015 and 4.3% in the third quarter of 2014.

GAAP net income for the quarter was $8.5 million, or $0.06 per diluted share, compared to $17.9 million, or $0.13 per diluted share, in the second quarter of 2015, and $4.8 million, or $0.04 per diluted share, in the third quarter of 2014.

Non-GAAP revenue for the quarter was $233.2 million compared to $207.3 million in the second quarter of 2015 and $173.6 million in the third quarter of 2014.

Non-GAAP gross margin for the quarter was 47.5% compared to 47.4% in the second quarter of 2015 and 44.2% in the third quarter of 2014. Non-GAAP operating margin for the quarter was 14.4% compared to 13.0% in the second quarter of 2015 and 8.6% in the third quarter of 2014.

Non-GAAP net income for the quarter was $32.2 million, or $0.22 per diluted share, compared to $25.7 million, or $0.18 per diluted share, in the second quarter of 2015, and $14.2 million, or $0.11 per diluted share, in the third quarter of 2014.

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 excellent third quarter results reflect continued strength across our core business, including growing Cloud Xpress revenues as well as the initial contribution from the new metro business. Adding the recently announced metro core and long haul interconnect products along with Transmode's suite of metro solutions enables Infinera to further enhance the superior experience we deliver to our customers," said Tom Fallon, Infinera's Chief Executive Officer. "As the most vertically integrated transport provider in the world, now armed with a broad end-to-end portfolio, Infinera is in a terrific position to continue to deliver differentiated financial results on both the top and bottom lines."

Conference Call Information

Infinera will host a conference call for analysts and investors to discuss its third quarter of 2015 results and its outlook for the fourth quarter of 2015 today at 5:00 p.m. Eastern Time (2:00 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 1-800-884-1527. International parties can access the replay at 1-203-369-3842.

About Infinera

Infinera (NASDAQ: INFN) provides Intelligent Transport Networks, enabling carriers, cloud operators, governments and enterprises to scale network bandwidth, accelerate service innovation and simplify optical network operations. Infinera's end-to-end packet-optical portfolio is designed for long-haul, subsea, datacenter interconnect and metro applications. Infinera's unique large scale photonic integrated circuits enable innovative optical networking solutions for the most demanding networks. To learn more about Infinera visit www.infinera.com, follow us on Twitter @Infinera and read our 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. Such forward-looking statements include, without limitation, Infinera's ability to provide a superior experience to its customers and Infinera's ability to continue to deliver differentiated financial results on both the top and bottom lines. Forward-looking statements can also be identified by forward-looking words such as "anticipated," "believed," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or similar words. These statements are based on information available to Infinera as of the date hereof and actual results could differ materially from those stated or implied due to risks and uncertainties. The risks and uncertainties that could cause Infinera's results to differ materially from those expressed or implied by such forward-looking statements include delays in the development and introduction of Infinera's products and market acceptance of these products; Infinera's ability to successfully integrate the Infinera and Transmode businesses; the effect that 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 and uncertainties detailed in Infinera's SEC filings from time to time. More information on potential factors that may impact Infinera's business are set forth in its Quarterly Report on Form 10-Q for the quarter ended on June 27, 2015 as filed with the SEC on July 31, 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, certain purchase accounting adjustments 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 third quarter 2015 results, including an estimate of certain non-GAAP financial measures for the fourth quarter of 2015 that excludes non-cash stock-based compensation expenses, acquisition-related costs, certain purchase accounting adjustments 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.

                                                                            
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Infinera Corporation                                                        
GAAP Condensed Consolidated Statements of Operations                        
(In thousands, except per share data)                                       
(Unaudited)                                                                 
                                                                            
                      Three Months Ended            Nine Months Ended       
                 ----------------------------- -----------------------------
                 September 26,  September 27,  September 26,  September 27, 
                     2015           2014           2015           2014      
                 -------------- -------------- -------------- --------------
Revenue:                                                                    
 Product         $     202,365  $     147,178  $     542,190  $     413,784 
 Services               30,107         26,381         84,490         67,989 
                 -------------- -------------- -------------- --------------
  Total revenue        232,472        173,559        626,680        481,773 
                                                                            
Cost of revenue:                                                            
 Cost of product       117,154         86,703        306,151        251,047 
 Cost of                                                                    
  services              12,513         11,554         32,816         26,765 
                 -------------- -------------- -------------- --------------
  Total cost of                                                             
   revenue             129,667         98,257        338,967        277,812 
                                                                            
Gross profit           102,805         75,302        287,713        203,961 
                                                                            
Operating                                                                   
 expenses:                                                                  
 Research and                                                               
  development           45,466         35,051        128,144         96,135 
 Sales and                                                                  
  marketing             24,721         20,794         67,298         56,738 
 General and                                                                
  administrative        18,358         11,977         46,324         36,612 
                 -------------- -------------- -------------- --------------
  Total                                                                     
   operating                                                                
   expenses             88,545         67,822        241,766        189,485 
                                                                            
Income from                                                                 
 operations             14,260          7,480         45,947         14,476 
                                                                            
Other income                                                                
 (expense), net:                                                            
 Interest income           406            373          1,371          1,046 
 Interest                                                                   
  expense               (3,014)        (2,781)        (8,851)        (8,186)
 Other gain                                                                 
  (loss), net           (3,293)           (24)         1,788         (1,017)
                 -------------- -------------- -------------- --------------
  Total other                                                               
   income                                                                   
   (expense),                                                               
   net                  (5,901)        (2,432)        (5,692)        (8,157)
                                                                            
Income before                                                               
 income taxes            8,359          5,048         40,255          6,319 
Provision for                                                               
 (benefit from)                                                             
 income taxes             (151)           205          1,473          1,070 
                 -------------- -------------- -------------- --------------
 Net income      $       8,510  $       4,843  $      38,782  $       5,249 
                 ============== ============== ============== ==============
                                                                            
Net income per                                                              
 common share:                                                              
 Basic           $        0.06  $        0.04  $        0.30  $        0.04 
                 ============== ============== ============== ==============
 Diluted         $        0.06  $        0.04  $        0.27  $        0.04 
                 ============== ============== ============== ==============
                                                                            
Weighted average                                                            
 shares used in                                                             
 computing net                                                              
 income per                                                                 
 common share:                                                              
 Basic                 134,834        124,378        131,007        122,953 
                 ============== ============== ============== ==============
                                                                            
                                                                            
 Diluted               145,300        128,964        141,082        127,062 
                 ============== ============== ============== ==============
                                                                            
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Infinera Corporation                                                        
GAAP to Non-GAAP Reconciliations                                            
(In thousands, except percentages and per share data)                       
(Unaudited)                                                                 
                                                                            
                                                                            
                                         Three Months        
                                         Ended               
                            ---------------------------------
                             September 26,      June 27,     
                                 2015             2015       
                            ---------------- ----------------
Reconciliation of Revenue:                                   
U.S. GAAP as reported       $ 232,472        $ 207,346       
Acquisition-related                                          
 deferred revenue                                            
 adjustment(1)                    721                -       
                            ----------       ----------      
Non-GAAP as adjusted        $ 233,193        $ 207,346       
                            ==========       ==========      
                                                             
Reconciliation of Gross                                      
 Profit:                                                     
U.S. GAAP as reported       $ 102,805  44.2% $  96,796  46.7%
Acquisition-related                                          
 deferred revenue                                            
 adjustment(1)                    721                -       
Stock-based compensation(2)     1,621            1,493       
Amortization of acquired                                     
 intangible assets(3)           1,922                -       
Acquisition-related                                          
 inventory step-up                                           
 expense(4)                     3,620                -       
                            ---------- ----- ---------- -----
Non-GAAP as adjusted        $ 110,689  47.5% $  98,289  47.4%
                            ========== ===== ========== =====
                                                             
Reconciliation of Income                                     
 from Operations:                                            
U.S. GAAP as reported       $  14,260   6.1% $  16,530   8.0%
Acquisition-related                                          
 deferred revenue                                            
 adjustment(1)                    721                -       
Stock-based compensation(2)     8,451            8,209       
Amortization of acquired                                     
 intangible assets(3)           2,608                -       
Acquisition-related                                          
 inventory step-up                                           
 expense(4)                     3,620                -       
Acquisition-related                                          
 costs(5)                       3,950            2,264       
                            ---------- ----- ---------- -----
Non-GAAP as adjusted        $  33,610  14.4% $  27,003  13.0%
                            ========== ===== ========== =====
                                                             
Reconciliation of Net                                        
 Income:                                                     
U.S. GAAP as reported       $   8,510        $  17,906       
Acquisition-related                                          
 deferred revenue                                            
 adjustment(1)                    721                -       
Stock-based compensation(2)     8,451            8,209       
Amortization of acquired                                     
 intangible assets(3)           2,608                -       
Acquisition-related                                          
 inventory step-up                                           
 expense(4)                     3,620                -       
Acquisition-related                                          
 costs(5)                       3,950            2,264       
Acquisition-related forward                                  
 contract (gain) loss(6)        3,728           (4,782)      
Amortization of debt                                         
 discount(7)                    2,162            2,109       
Income tax effects(8)          (1,529)               -       
                            ----------       ----------      
Non-GAAP as adjusted        $  32,221        $  25,706       
                            ==========       ==========      
                                                             
Net Income per Common                                        
 Share - Basic:                                              
U.S. GAAP as reported       $    0.06        $    0.14       
                            ==========       ==========      
Non-GAAP as adjusted        $    0.24        $    0.20       
                            ==========       ==========      
                                                             
Net Income per Common                                        
 Share - Diluted:                                            
U.S. GAAP as reported       $    0.06        $    0.13       
                            ==========       ==========      
Non-GAAP as adjusted        $    0.22        $    0.18       
                            ==========       ==========      
                                                             
Weighted Average Shares                                      
 Used in Computing Net                                       
  Income per Common Share:                                   
Basic                         134,834          130,349       
                            ==========       ==========      
Diluted                       145,300          140,642       
                            ==========       ==========      
                                                             
                                                             
                                                             
                                  Three                                     
                               Months                Nine Months            
                               Ended                   Ended                
                           --------------- ---------------------------------
                            September 27,   September 26,    September 27,  
                                2014             2015             2014      
                           --------------- ----------------- ---------------
Reconciliation of Revenue:                                                  
U.S. GAAP as reported       $173,559        $ 626,680        $ 481,773      
Acquisition-related                                                         
 deferred revenue                                                           
 adjustment(1)                     -              721                -      
                            --------       -----------       ---------      
Non-GAAP as adjusted        $173,559        $ 627,401        $ 481,773      
                            ========       ===========       =========      
                                                                            
Reconciliation of Gross                                                     
 Profit:                                                                    
U.S. GAAP as reported       $ 75,302 43.4%  $ 287,713  45.9% $ 203,961 42.3%
Acquisition-related                                                         
 deferred revenue                                                           
 adjustment(1)                     -              721                -      
Stock-based compensation(2)    1,491            4,357            4,135      
Amortization of acquired                                                    
 intangible assets(3)              -            1,922                -      
Acquisition-related                                                         
 inventory step-up                                                          
 expense(4)                        -            3,620                -      
                            -------- ----- ----------- ----- --------- -----
Non-GAAP as adjusted        $ 76,793 44.2%    298,333  47.6% $ 208,096 43.2%
                            ======== ===== =========== ===== ========= =====
                                                                            
Reconciliation of Income                                                    
 from Operations:                                                           
U.S. GAAP as reported       $  7,480  4.3%  $  45,947   7.3% $  14,476  3.0%
Acquisition-related                                                         
 deferred revenue                                                           
 adjustment(1)                     -              721                -      
Stock-based compensation(2)    7,371           23,868           20,847      
Amortization of acquired                                                    
 intangible assets(3)              -            2,608                -      
Acquisition-related                                                         
 inventory step-up                                                          
 expense(4)                        -            3,620                -      
Acquisition-related                                                         
 costs(5)                          -            6,676                -      
                            -------- ----- ----------- ----- --------- -----
Non-GAAP as adjusted        $ 14,851  8.6%     83,440  13.3% $  35,323  7.3%
                            ======== ===== =========== ===== ========= =====
                                                                            
Reconciliation of Net                                                       
 Income:                                                                    
U.S. GAAP as reported       $  4,843        $  38,782        $   5,249      
Acquisition-related                                                         
 deferred revenue                                                           
 adjustment(1)                     -              721                -      
Stock-based compensation(2)    7,371           23,868           20,847      
Amortization of acquired                                                    
 intangible assets(3)              -            2,608                -      
Acquisition-related                                                         
 inventory step-up                                                          
 expense(4)                        -            3,620                -      
Acquisition-related                                                         
 costs(5)                          -            6,676                -      
Acquisition-related forward                                                 
 contract (gain) loss(6)           -           (1,054)               -      
Amortization of debt                                                        
 discount(7)                   1,956            6,328            5,724      
Income tax effects(8)              -           (1,529)               -      
                            --------       -----------       ---------      
Non-GAAP as adjusted        $ 14,170        $  80,020        $  31,820      
                            ========       ===========       =========      
                                                                            
Net Income per Common                                                       
 Share - Basic:                                                             
U.S. GAAP as reported       $   0.04        $    0.30        $    0.04      
                            ========       ===========       =========      
Non-GAAP as adjusted        $   0.11        $    0.61        $    0.26      
                            ========       ===========       =========      
                                                                            
Net Income per Common                                                       
 Share - Diluted:                                                           
U.S. GAAP as reported       $   0.04        $    0.27        $    0.04      
                            ========       ===========       =========      
Non-GAAP as adjusted        $   0.11        $    0.57        $    0.25      
                            ========       ===========       =========      
                                                                            
Weighted Average Shares                                                     
 Used in Computing Net                                                      
  Income per Common Share:                                                  
Basic                        124,378          131,007          122,953      
                            ========       ===========       =========      
Diluted                      128,964          141,082          127,062      
                            ========       ===========       =========      
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
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(1) Business combination accounting principles require Infinera to write    
    down to fair value its maintenance support contracts assumed in the     
    Transmode acquisition. The revenue for these support contracts is       
    deferred and typically recognized over a one year period, so Infinera's 
    GAAP revenue for the one year period 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 the revenue from these   
    support contracts are useful to investors as an additional means to     
    reflect revenue trends of Infinera's business.                          
                                                                            
(2) 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          Nine Months Ended  
                      -------------------------------- ---------------------
                       September             September  September  September
                         26,      June 27,     27,        26,        27,    
                         2015       2015       2014       2015       2014   
                      ---------- ---------- ---------- ---------- ----------
Cost of revenue       $      645 $      613 $      492 $    1,740 $    1,421
Research and                                                                
 development               2,788      2,817      2,270      8,183      6,488
Sales and marketing        2,131      2,070      1,982      5,922      5,517
General and                                                                 
 administration            1,911      1,829      1,628      5,406      4,707
                      ---------- ---------- ---------- ---------- ----------
                           7,475      7,329      6,372     21,251     18,133
Cost of revenue -                                                           
 amortization from                                                          
 balance sheet*              976        880        999      2,617      2,714
                      ---------- ---------- ---------- ---------- ----------
Total stock-based                                                           
 compensation expense $    8,451 $    8,209 $    7,371 $   23,868 $   20,847
                      ========== ========== ========== ========== ==========
                                                                            
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    * Stock-based compensation expense deferred to inventory and deferred   
    inventory costs in prior periods and recognized in the current period.  
                                                                            
(3) Amortization of acquisition-related intangible assets consists of       
    amortization of developed technology, trade names, and customer         
    relationships acquired in connection with the Transmode acquisition.    
    U.S. GAAP accounting requires that acquired intangible assets are       
    recorded at fair value and amortized over their useful lives. As this   
    amortization is non-cash, Infinera has excluded the effect in           
    calculating its non-GAAP operating expenses, gross margin and net income
    measures. Management believes the amortization of acquired intangible   
    assets are not indicative of ongoing operating performance and their    
    exclusion provide a better indication of Infinera's underlying business 
    performance.                                                            
                                                                            
(4) 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 step-up in carrying value for    
    units sold in the quarter. Management believes the adjustment is useful 
    to investors as an additional means to reflect cost of sales and gross  
    margin trends of Infinera's business.                                   
                                                                            
(5) Acquisition-related costs related to Transmode acquisition, which closed
    during the third quarter of 2015, include legal, financial and other    
    professional fees incurred in connection with the transaction. 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) In April 2015, Infinera entered into a foreign currency forward contract
    and in July 2015, Infinera entered into a series of foreign currency    
    exchange option contracts to hedge currency exposures associated with   
    the cash portion of the offer to acquire Transmode. The forward contract
    and option contracts were subsequently closed during the third quarter  
    of 2015. The net change in the fair value of the forward contract and   
    option contracts impacted Infinera's financial statements for the       
    current interim reporting period. Management has excluded the impact of 
    these gains and losses in arriving at Infinera's non-GAAP results       
    because they are non-recurring and management believes that these gains 
    are not indicative of ongoing operating performance.                    
                                                                            
(7) 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. Interest expense has 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.                                                            
                                                                            
(8) The difference between the GAAP and non-GAAP tax rates were due to the  
    net tax effects of the purchase accounting adjustments related to the   
    Transmode acquisition, which closed during the third quarter of 2015.   
                                                                            
                                                                            
                                                                            
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Infinera Corporation                                                        
Condensed Consolidated Balance Sheets                                       
(In thousands, except par values)                                           
(Unaudited)                                                                 
                                                                            
                                               September 26,  December 27,  
                                                   2015           2014      
                                               -------------- --------------
ASSETS                                                                      
                                                                            
Current assets:                                                             
 Cash and cash equivalents                     $     161,103  $      86,495 
 Short-term investments                              126,218        239,628 
 Accounts receivable, net of allowance for                                  
  doubtful accounts of $630 in 2015 and $38 in                              
  2014                                               141,586        154,596 
 Inventory                                           169,875        146,500 
 Prepaid expenses and other current assets            31,780         24,636 
                                               -------------- --------------
  Total current assets                               630,562        651,855 
                                                                            
Property, plant and equipment, net                    98,720         81,566 
Intangible assets, net                               162,082            361 
Goodwill                                             190,119              - 
Long-term investments                                 51,422         59,233 
Cost-method investment                                14,500         14,500 
Long-term restricted cash                              5,319          5,460 
Other non-current assets                               6,867          5,041 
                                               -------------- --------------
  Total assets                                 $   1,159,591  $     818,016 
                                               ============== ==============
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
                                                                            
Current liabilities:                                                        
 Accounts payable                              $      69,983  $      61,533 
 Accrued expenses                                     35,704         26,441 
 Accrued compensation and related benefits            40,586         38,795 
 Accrued warranty                                     17,802         12,241 
 Deferred revenue                                     31,411         35,321 
                                               -------------- --------------
  Total current liabilities                          195,486        174,331 
                                                                            
 Long-term debt, net                                 123,222        116,894 
 Accrued warranty, non-current                        18,939         14,799 
 Deferred revenue, non-current                        15,368         10,758 
 Other long-term liabilities                          53,661         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 September                                
  26, 2015 and December 27, 2014                                            
 Issued and outstanding shares - 139,785 as of                              
  September 26, 2015 and 126,160 as of                                      
  December 27, 2014                                      140            126 
 Additional paid-in capital                        1,289,087      1,077,225 
 Accumulated other comprehensive income (loss)           360         (4,618)
 Accumulated deficit                                (552,044)      (590,826)
                                               -------------- --------------
 Total Infinera stockholders' equity                 737,543        481,907 
                                               -------------- --------------
Noncontrolling interest                               15,372              - 
                                               -------------- --------------
 Total stockholder's equity                          752,915        481,907 
                                               -------------- --------------
                                                                            
                                                                            
  Total liabilities and stockholders' equity   $   1,159,591  $     818,016 
                                               ============== ==============
                                                                            
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Infinera Corporation                                                        
Condensed Consolidated Statements of Cash Flows                             
(In thousands)                                                              
(Unaudited)                                                                 
                                                                            
                                                    Nine Months Ended       
                                               -----------------------------
                                               September 26,  September 27, 
                                                   2015           2014      
                                               -------------- --------------
Cash Flows from Operating Activities:                                       
Net income                                     $      38,782  $       5,249 
Adjustments to reconcile net income to net                                  
 cash provided by operating activities:                                     
 Depreciation and amortization                        22,094         19,340 
 Amortization of debt discount and issuance                                 
  costs                                                6,873          6,217 
 Amortization of premium on investments                2,405          2,720 
 Realized gain from forward contract                  (1,053)             - 
 Stock-based compensation expense                     23,868         20,847 
 Other loss                                              605             15 
 Changes in assets and liabilities:                                         
  Accounts receivable                                 28,838        (35,463)
  Inventory                                           (8,901)        (9,015)
  Prepaid expenses and other assets                   (6,058)        (4,965)
  Accounts payable                                    (2,339)        11,009 
  Accrued liabilities and other expenses              (7,196)           657 
  Deferred revenue                                       700         (4,272)
  Accrued warranty                                     8,742          4,898 
                                               -------------- --------------
   Net cash provided by operating activities         107,360         17,237 
                                                                            
Cash Flows from Investing Activities:                                       
 Purchase of available-for-sale investments         (126,940)      (214,272)
 Acquisition of business, net of cash acquired      (144,038)             - 
 Realized gain from forward contract for                                    
  business acquisition                                 1,053              - 
 Purchase of cost-method investment                        -         (5,500)
 Proceeds from sale of available-for-sale                                   
  investments                                         67,303         17,876 
 Proceeds from maturities and sales of                                      
  investments                                        178,717        168,137 
 Purchase of property and equipment                  (26,710)       (14,364)
 Change in restricted cash                               127           (320)
                                               -------------- --------------
   Net cash used in investing activities             (50,488)       (48,443)
                                                                            
Cash Flows from Financing Activities:                                       
 Proceeds from issuance of common stock               23,433         19,683 
 Minimum tax withholding paid on behalf of                                  
  employees for net share settlement                  (5,043)        (1,846)
                                               -------------- --------------
   Net cash provided by financing activities          18,390         17,837 
                                                                            
Effect of exchange rate changes on cash                 (654)           (97)
                                                                            
Net change in cash and cash equivalents               74,608        (13,466)
Cash and cash equivalents at beginning of                                   
 period                                               86,495        124,330 
                                               -------------- --------------
Cash and cash equivalents at end of period     $     161,103  $     110,864 
                                               ============== ==============
                                                                            
Supplemental disclosures of cash flow                                       
 information:                                                               
 Cash paid for income taxes, net of refunds    $       2,301  $       1,056 
 Cash paid for interest                        $       1,313  $       1,313 
Supplemental schedule of non-cash investing                                 
 and financing activities:                                                  
 Transfer of inventory to fixed assets         $       5,861  $       1,838 
 Common stock issued in connection with                                     
  acquisition                                  $     169,507  $           - 
                                                                            
----------------------------------------------------------------------------
Infinera Corporation                                                        
Supplemental Financial Information                                          
(Unaudited)                                                                 
                                                                            
----------------------------------------------------------------------------
                    Q4'13  Q1'14  Q2'14  Q3'14  Q4'14  Q1'15  Q2'15  Q3'15  
----------------------------------------------------------------------------
Revenue ($ Mil)     $139.1 $142.8 $165.4 $173.6 $186.3 $186.9 $207.3 $232.5 
GAAP Gross Margin %   40.2%  40.9%  42.5%  43.4%  45.3%  47.2%  46.7%  44.2%
Non-GAAP Gross                                                              
 Margin % (1)         41.4%  41.8%  43.3%  44.2%  46.1%  47.8%  47.4%  47.5%
----------------------------------------------------------------------------
Revenue                                                                     
 Composition:                                                               
Domestic %              54%    78%    82%    70%    58%    68%    75%    68%
International %         46%    22%    18%    30%    42%    32%    25%    32%
Customers >10% of                                                           
 Revenue                 1      2      2      1      1      2      3      2 
----------------------------------------------------------------------------
Cash Related                                                                
 Information:                                                               
Cash from (Used in)                                                         
Operations ($ Mil)  $ 25.8 $(15.4)$ 10.3 $ 22.3 $ 18.7 $ 19.8 $ 55.0 $ 32.5 
Capital                                                                     
 Expenditures ($                                                            
 Mil)               $  7.5 $  5.6 $  4.4 $  4.4 $  8.8 $  7.4 $  8.7 $ 10.6 
Depreciation &                                                              
 Amortization ($                                                            
 Mil)               $  6.0 $  6.3 $  6.5 $  6.5 $  6.6 $  6.6 $  6.3 $  9.2 
DSO's                   66     68     66     71     76     64     48     55 
----------------------------------------------------------------------------
Inventory Metrics:                                                          
Raw Materials ($                                                            
 Mil)               $ 14.3 $ 13.2 $ 11.2 $ 11.6 $ 15.2 $ 22.4 $ 30.2 $ 24.2 
Work in Process ($                                                          
 Mil)               $ 49.2 $ 47.8 $ 40.6 $ 44.4 $ 50.0 $ 45.9 $ 43.9 $ 48.5 
Finished Goods ($                                                           
 Mil)               $ 60.2 $ 65.5 $ 79.1 $ 74.8 $ 81.3 $ 88.9 $ 83.1 $ 97.2 
----------------------------------------------------------------------------
Total Inventory ($                                                          
 Mil)               $123.7 $126.5 $130.9 $130.8 $146.5 $157.2 $157.2 $169.9 
Inventory Turns (2)    2.6    2.6    2.9    3.0    2.7    2.5    2.8    2.9 
----------------------------------------------------------------------------
Worldwide Headcount  1,318  1,346  1,396  1,456  1,495  1,530  1,598  1,978 
----------------------------------------------------------------------------
                                                                            
                                                                            
                                                                            
                                                                            
----------------------------------------------------------------------------
                                                                            
(1) Non-GAAP adjustments include non-cash stock-based compensation expense, 
    certain purchase accounting adjustments and amortization of acquired    
    intangible assets. For a description of this non-GAAP financial measure,
    please see the section titled, "GAAP to Non-GAAP Reconciliations" of    
    this press release for a reconciliation to the most directly comparable 
    GAAP financial measures.                                                
(2) Infinera calculates non-GAAP inventory turns as annualized non-GAAP cost
    of revenue before adjustments for non-cash stock-based compensation     
    expense and certain purchase accounting adjustments, divided by the     
    average inventory for the quarter.                                      
                                                                            
   Contacts:   Media: Anna VueTel. +1 (916) [email protected]:Jeff HustisTel. +1 (408) [email protected]  

Source: Infinera



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