Infinera Corporation (NASDAQ: INFN), provider of Intelligent
Transport Networks, today released financial results for the second
quarter of 2014 ended June 28, 2014.
GAAP revenue for the quarter was $165.4 million compared to
$142.8 million in the first quarter of 2014 and $138.4 million in
the second quarter of 2013.
GAAP gross margin for the quarter was 42.5% compared to 40.9% in
the first quarter of 2014 and 37.3% in the second quarter of
2013.
GAAP net income for the quarter was $4.8 million, or $0.04 per
diluted share, compared to net loss of $(4.4) million, or $(0.04)
per share, in the first quarter of 2014, and a net loss of $(10.0)
million, or $(0.09) per share, in the second quarter of 2013.
Non-GAAP gross margin for the quarter was 43.3% compared to
41.8% in the first quarter of 2014 and 38.9% in the second quarter
of 2013.
Non-GAAP net income for the quarter was $13.5 million, or $0.11
per diluted share, compared to net income of $4.2 million, or $0.03
per diluted share in the first quarter of 2014, and net loss of
$(1.2) million, or $(0.01) per share, in the second quarter of
2013.
These non-GAAP measures exclude non-cash stock-based
compensation expenses 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.
Management Commentary:
"We continued the strong momentum from our solid first quarter
results delivering record quarterly revenue, an expanded gross
margin and significant earnings growth in the second quarter. We
had record 100G port shipments as we experienced excellent DTN-X
deployments across a broad base of customer verticals. We were
pleased to add four new invoiced DTN-X customers this quarter,
including a new customer to Infinera, allowing us to further
capitalize on the 100G technology cycle with this new footprint"
said Tom Fallon, Infinera’s Chief Executive Officer. "We see video
and cloud driving bandwidth growth across our markets as well as
Internet Content Providers building significant amounts of new
capacity. Our technological innovation and proven operating
excellence supports continued growth in the long haul
market as we enter the second half of the year and positions us
well as we begin the process of expanding into new adjacent high
capacity transport markets.”
Conference Call
Information:
Infinera will host a conference call for analysts and investors
to discuss its second quarter of 2014 results and its outlook for
the third quarter of 2014 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 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
1-866-423-4837. International parties can access the replay at
1-203-369-0849.
About Infinera
Infinera provides Intelligent Transport Networks to help
carriers exploit the increasing demand for cloud-based services and
data center connectivity as they advance into the Terabit Era.
Infinera is unique in its use of breakthrough semiconductor
technology to deliver large scale Photonic Integrated Circuit
(PICs) and the application of PICs to vertically integrated optical
networking solutions that deliver the industry’s only commercially
available 500 Gb/s FlexCoherent super-channels. Infinera
Intelligent Transport Network solutions include the DTN-X, DTN and
ATN platforms. Find more at 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 including statements regarding Infinera’s
expectations for continued bandwidth growth across Infinera’s
markets as well as Internet Content Providers building significant
amounts of new capacity; Infinera’s ability to support continued
growth; and Infinera’s ability to expand into new adjacent high
capacity transport markets. 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 aggressive business tactics by Infinera’s
competitors; 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; 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 March 29, 2014 and filed with the SEC on April 30,
2014, 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 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 (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.” Infinera anticipates disclosing forward-looking
non-GAAP information in its conference call to discuss its second
quarter results, including an estimate of non-GAAP earnings for the
third quarter of 2014 that excludes non-cash stock-based
compensation expenses 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 share data) (Unaudited) Three
Months Ended Six Months Ended June 28, June
29, June 28, June 29, 2014 2013
2014 2013 Revenue: Product $ 142,364 $ 120,647 $
266,606 $ 228,990 Services 23,035 17,738
41,608 34,020 Total revenue
165,399 138,385 308,214 263,010 Cost of revenue: Cost of
product 85,906 80,198 164,344 155,645 Cost of services 9,240
6,533 15,211 13,009
Total cost of revenue 95,146 86,731 179,555 168,654
Gross profit 70,253 51,654 128,659 94,356 Operating
expenses: Research and development 31,738 31,681 61,084 61,407
Sales and marketing 18,082 17,155 35,944 35,201 General and
administrative 12,381 11,426
24,635 21,298 Total operating expenses 62,201
60,262 121,663 117,906 Income (loss) from operations 8,052
(8,608 ) 6,996 (23,550 ) Other income (expense), net:
Interest income 337 207 673 404 Interest expense (2,728 ) (849 )
(5,405 ) (849 ) Other gain (loss), net (264 ) (158 )
(993 ) (361 ) Total other income (expense), net
(2,655 ) (800 ) (5,725 ) (806 ) Income (loss) before income
taxes 5,397 (9,408 ) 1,271 (24,356 ) Provision for income taxes
617 601 865 932
Net income (loss) $ 4,780 $ (10,009 ) $ 406 $
(25,288 ) Net income (loss) per common share Basic $ 0.04
$ (0.09 ) $ 0.00 $ (0.22 ) Diluted $ 0.04 $
(0.09 ) $ 0.00 $ (0.22 )
Weighted average shares used in computing
net income (loss) per common share
Basic 123,128 116,911
122,240 115,609 Diluted 126,758
116,911 126,112 115,609
Infinera Corporation
GAAP to Non-GAAP
Reconciliations (In thousands, except percentages and per
share data) (Unaudited) Three Months
Ended Six Months Ended June 28, March 29,
June 29, June 28, June 29, 2014
2014 2013
2014 2013 Reconciliation of
Gross Profit: U.S. GAAP as reported $ 70,253 $ 58,406 $ 51,654
$ 128,659 $ 94,356 Stock-based compensation(1) 1,360
1,284 2,164 2,644
4,252 Non-GAAP as adjusted $ 71,613 $ 59,690 $
53,818 $ 131,303 $ 98,608
Reconciliation of Gross Margin: U.S. GAAP as reported 42.5 %
40.9 % 37.3 % 41.7 % 35.9 % Stock-based compensation(1) 0.8
% 0.9 % 1.6 % 0.9 % 1.6 % Non-GAAP as
adjusted 43.3 % 41.8 % 38.9 % 42.6 %
37.5 %
Reconciliation of Income (Loss) from
Operations: U.S. GAAP as reported $ 8,052 $ (1,056 ) $
(8,608 ) $ 6,996 $ (23,550 ) Stock-based compensation(1)
6,804 6,672 8,184 13,476
16,159 Non-GAAP as adjusted $ 14,856 $
5,616 $ (424 ) $ 20,472 $ (7,391 )
Reconciliation of Net Income (Loss): U.S. GAAP as reported $
4,780 $ (4,374 ) $ (10,009 ) $ 406 $ (25,288 ) Stock-based
compensation(1) 6,804 6,672 8,184 13,476 16,159 Amortization of
debt discount(2) 1,908 1,860 580
3,768 580 Non-GAAP as adjusted $
13,492 $ 4,158 $ (1,245 ) $ 17,650 $ (8,549 )
Net Income (Loss) per Common Share - Basic:
U.S. GAAP as reported $ 0.04 $ (0.04 ) $ (0.09 ) $
0.00 $ (0.22 ) Non-GAAP as adjusted $ 0.11 $ 0.03
$ (0.01 ) $ 0.14 $ (0.07 )
Net Income (Loss) per Common
Share - Diluted:
U.S. GAAP as reported $ 0.04 $ (0.04 ) $ (0.09 ) $
0.00 $ (0.22 ) Non-GAAP as adjusted(3) $ 0.11 $ 0.03
$ (0.01 ) $ 0.14 $ (0.07 )
Weighted average
shares used in computing net income (loss) per common
share - U.S. GAAP: Basic 123,128
121,352 116,911 122,240
115,609 Diluted 126,758 121,352
116,911 126,112 115,609
Weighted average shares used in computing
net income (loss) per common share - Non-GAAP:
Basic 123,128 121,352
116,911 122,240 115,609
Diluted(3) 126,758 125,435
121,254 126,112 119,428
(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 (in thousands):
Three Months Ended Six Months Ended June 28,
March 29, June 29, June 28, June 29,
2014 2014 2013 2014 2013 Cost of
revenue $ 477 $ 452 $ 474 $ 929 $ 960 Research and development
2,080 2,138 2,622 4,218 5,741 Sales and marketing 1,815 1,720 1,807
3,535 3,806 General and administration 1,549 1,530
1,591 3,079 2,360 5,921 5,840 6,494 11,761
12,867 Cost of revenue - amortization from balance sheet*
883 832 1,690 1,715 3,292 Total
stock-based compensation expense $ 6,804 $ 6,672 $ 8,184 $ 13,476 $
16,159 * Stock-based compensation expense deferred to
inventory and deferred inventory costs in prior periods and
recognized in the current period.
(2)
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.
(3)
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) June 28, December 28,
2014 2013 ASSETS Current assets:
Cash and cash equivalents $ 83,307 $ 124,330 Short-term investments
230,694 172,660
Accounts receivable, net of allowance for
doubtful accounts of $41 in 2014 and $43 in 2013
120,686 100,643 Inventory 130,853 123,685 Prepaid expenses and
other current assets 20,167 17,752
Total current assets 585,707 539,070 Property, plant and
equipment, net 76,886 79,668 Long-term investments 37,086 64,419
Cost-method investment 9,000 9,000 Long-term restricted cash 4,404
3,904 Other non-current assets 5,571 4,865
Total assets
$ 718,654 $ 700,926
LIABILITIES AND
STOCKHOLDERS’ EQUITY Current liabilities: Accounts
payable $ 33,162 $ 39,843 Accrued expenses 22,546 22,431 Accrued
compensation and related benefits 28,742 33,899 Accrued warranty
13,860 12,374 Deferred revenue 29,657 32,402
Total current liabilities 127,967 140,949 Long-term
debt, net 112,932 109,164 Accrued warranty, non-current 14,088
10,534 Deferred revenue, non-current 6,187 4,888 Other long-term
liabilities 18,173 17,581 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 28,
2014 and December 28, 2013Issued and outstanding shares – 123,615
as of June 28, 2014 and 119,887 as of December 28, 2013
124 120 Additional paid-in capital 1,046,375 1,025,661
Accumulated other comprehensive loss (3,113 ) (3,486 ) Accumulated
deficit (604,079 ) (604,485 ) Total stockholders’
equity 439,307 417,810 Total
liabilities and stockholders’ equity $ 718,654 $ 700,926
Infinera
Corporation Condensed Consolidated Statements of Cash
Flows (In thousands) (Unaudited) Six
Months Ended June 28, June 29, 2014
2013 Cash Flows from Operating Activities: Net income
(loss) $ 406 $ (25,288 )
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 12,813 12,621 (Recovery of) provision
for other receivables - (88 ) Provision for doubtful accounts - 40
Amotization of debt discount and issuance costs 4,092 630
Amortization of premium on investments 1,747 450 Stock-based
compensation expense 13,476 16,159 Other gain (22 ) (243 ) Changes
in assets and liabilities: Accounts receivable (20,043 ) 10,332
Inventory (8,107 ) 791 Prepaid expenses and other assets (3,389 )
(2,238 ) Accounts payable (6,428 ) (23,980 ) Accrued liabilities
and other expenses (3,318 ) (220 ) Deferred revenue (1,448 ) 4,440
Accrued warranty 5,040 3,219 Net cash
used in operating activities (5,181 ) (3,375 ) Cash Flows
from Investing Activities: Purchase of available-for-sale
investments (158,496 ) (130,828 ) Proceeds from sale of
available-for-sale investments 9,824 2,850 Proceeds from maturities
and calls of investments 116,290 62,647 Purchase of property and
equipment (9,985 ) (9,431 ) Change in restricted cash (491 )
(6 ) Net cash used in investing activities (42,858 ) (74,768
) Cash Flows from Financing Activities: Proceeds from
issuance of debt, net - 144,469 Proceeds from issuance of common
stock 8,401 12,496 Minimum tax withholding paid on behalf of
employees for net share settlement (1,619 ) (1,499 )
Net cash provided by financing activities 6,782 155,466
Effect of exchange rate changes on cash 234 (778 ) Net
change in cash and cash equivalents (41,023 ) 76,545 Cash and cash
equivalents at beginning of period 124,330
104,666 Cash and cash equivalents at end of period $ 83,307
$ 181,211
Supplemental disclosures of cash
flow information: Cash paid for income taxes, net of refunds $
482 $ 1,148 Cash paid for interest $ 1,313 $ -
Supplemental
schedule of non-cash financing activities: Transfer of
inventory to fixed assets $ 978 $ 4,684
Infinera Corporation
Supplemental
Financial Information (Unaudited)
Q3'12
Q4'12 Q1'13 Q2'13
Q3'13 Q4'13 Q1'14
Q2'14 Revenue ($ Mil) $112.2 $128.1 $124.6 $138.4
$142.0 $139.1 $142.8 $165.4 Gross Margin % (1) 39.1%
35.9% 35.9% 38.9% 49.2% 41.4%
41.8% 43.3%
Revenue Composition: Domestic % 70% 63%
63% 64% 73% 54% 78% 82% International % 30% 37% 37% 36% 27% 46% 22%
18% Customers >10% of Revenue 1 1 1
- 3 1 2 2
Cash Related
Information: Cash from (Used in) Operations ($ Mil) $(29.3)
$8.3 $(21.3) $17.9 $12.8 $25.8 $(15.4) $10.3 Capital Expenditures
($ Mil) $2.5 $3.2 $4.9 $4.5 $4.2 $7.5 $5.6 $4.4 Depreciation &
Amortization ($ Mil) $6.1 $6.4 $6.3 $6.3 $5.9 $6.0 $6.3 $6.5 DSO's
74 76 82 64 56 66
68 66
Inventory Metrics: Raw Materials ($ Mil) $12.4
$13.0 $12.2 $9.8 $12.1 $14.3 $13.2 $11.2 Work in Process ($ Mil)
$59.8 $57.3 $53.1 $41.0 $45.7 $49.2 $47.8 $40.6 Finished Goods ($
Mil) $46.3 $57.5 $65.7 $70.5
$65.7 $60.2 $65.5 $79.1
Total Inventory ($
Mil) $118.5 $127.8 $131.0 $121.3 $123.5 $123.7 $126.5 $130.9
Inventory Turns (2) 2.3 2.6 2.4 2.8
2.3 2.6 2.6 2.9
Worldwide
Headcount 1,235 1,242 1,219 1,238
1,296 1,318 1,346 1,396
(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.
Infinera CorporationMedia and analysts:Anna Vue, +1
916-595-8157avue@infinera.comorInvestors:Bob Jones, +1
408-543-8140bjones@infinera.com
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