Infinera Corporation (Nasdaq:INFN), provider of Intelligent
Transport Networks, today released financial results for its second
quarter ended July 1, 2017.
GAAP revenue for the quarter was $176.8 million compared to
$175.5 million in the first quarter of 2017 and $258.8 million in
the second quarter of 2016.
GAAP gross margin for the quarter was 36.7% compared to 36.5% in
the first quarter of 2017 and 47.8% in the second quarter of 2016.
GAAP operating margin for the quarter was (22.9)% compared to
(21.6)% in the first quarter of 2017 and 6.2% in the second quarter
of 2016.
GAAP net loss for the quarter was $(42.8) million, or $(0.29)
per share, compared to a net loss of $(40.5) million, or $(0.28)
per share, in the first quarter of 2017, and net income of $11.5
million, or $0.08 per diluted share, in the second quarter of
2016.
Non-GAAP gross margin for the quarter was 40.7% compared to
40.3% in the first quarter of 2017 and 50.4% in the second quarter
of 2016. Non-GAAP operating margin for the quarter was (12.2)%
compared to (11.4)% in the first quarter of 2017 and 13.2% in the
second quarter of 2016.
Non-GAAP net loss for the quarter was $(22.8) million, or
$(0.15) per share, compared to a net loss of $(21.7) million, or
$(0.15) per share, in the first quarter of 2017, and net income of
$30.9 million, or $0.21 per diluted share, in the second quarter of
2016.
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.
“Highlighted by delivery of ICE4 products to market, I was
pleased with our performance in the second quarter,” said Tom
Fallon, Infinera's Chief Executive Officer. “We
delivered the Cloud Xpress 2 to three customers and had early
deployments of the XT-3300. As we continue to deliver on a
suite of new products over the upcoming quarters, I believe we are
well positioned to grow market share and to gradually improve our
financial performance.”
Conference Call Information
Infinera will host a conference call for analysts and investors
to discuss its second quarter 2017 results and its outlook for the
third quarter of 2017 today at 5:30 p.m. Eastern Time (2:30 p.m.
Pacific Time). Interested parties may join the conference call by
dialing 1-866-373-6878 (toll free) or 1-412-317-5101
(international). A live webcast of the conference call will also be
accessible from the Events & Webcasts section of Infinera’s
website at investors.infinera.com. Replay of the audio webcast will
be available at investors.infinera.com approximately two hours
after the end of the live call.
About Infinera
Infinera provides Intelligent Transport Networks, enabling
carriers, cloud operators, governments and enterprises to scale
network bandwidth, accelerate service innovation and automate
optical network operations. Infinera’s end-to-end packet-optical
portfolio is designed for long-haul, subsea, data center
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 www.infinera.com/blog.
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 continue to
deliver on a suite of new products over the upcoming quarters;
Infinera's belief that it is well positioned to grow market share;
and Infinera's ability to gradually improve its financial
performance. Forward-looking statements can also be identified by
forward-looking words such as "anticipate," "believe," "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 new products or updates to existing
products and market acceptance of these products; the effects of
increased customer consolidation; fluctuations in demand, sales
cycles and prices for products and services, including discounts
given in response to competitive pricing pressures, as well as the
timing of purchases by our key customers; the effect that changes
in product pricing or mix, and/or increases in component costs
could have on Infinera’s gross margin; Infinera’s ability to
respond to rapid technological changes; aggressive business tactics
by Infinera’s competitors; Infinera's reliance on single and
limited source suppliers; Infinera’s ability to protect Infinera’s
intellectual property; claims by others that Infinera infringes
their intellectual property; the effect of global macroeconomic
conditions on Infinera's business; war, terrorism, public health
issues, natural disasters and other circumstances that could
disrupt the supply, delivery or demand of Infinera's products; and
other risks and uncertainties detailed in Infinera’s SEC filings
from time to time. More information on potential factors that may
impact Infinera’s business are set forth in its Quarterly Report on
Form 10-Q for the quarter ended on April 1, 2017 as filed with the
SEC on May 10, 2017, 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, amortization of debt discount on Infinera’s
convertible senior notes, amortization and impairment of acquired
intangible assets, acquisition-related costs, and certain purchase
accounting adjustments related to Infinera's acquisition of
Transmode AB, which closed during the third quarter of 2015, along
with related tax effects. 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, 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 2017 results, including an estimate of certain non-GAAP
financial measures for the third quarter of 2017 that excludes
non-cash stock-based compensation expenses, amortization of
acquired intangible assets and related tax effects, 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 CorporationCondensed
Consolidated Statements of Operations(In
thousands, except per share
data)(Unaudited)
|
|
Three Months Ended |
|
Six Months Ended |
|
|
July 1, 2017 |
|
June 25, 2016 |
|
July 1, 2017 |
|
June 25, 2016 |
Revenue: |
|
|
|
|
|
|
|
|
Product |
|
$ |
143,360 |
|
|
$ |
227,532 |
|
|
$ |
290,413 |
|
|
$ |
443,614 |
|
Services |
|
33,461 |
|
|
31,290 |
|
|
61,930 |
|
|
60,026 |
|
Total
revenue |
|
176,821 |
|
|
258,822 |
|
|
352,343 |
|
|
503,640 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
Cost of
product |
|
100,302 |
|
|
122,438 |
|
|
199,634 |
|
|
240,500 |
|
Cost of
services |
|
11,687 |
|
|
12,638 |
|
|
23,821 |
|
|
23,056 |
|
Total
cost of revenue |
|
111,989 |
|
|
135,076 |
|
|
223,455 |
|
|
263,556 |
|
Gross profit |
|
64,832 |
|
|
123,746 |
|
|
128,888 |
|
|
240,084 |
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Research
and development |
|
57,377 |
|
|
59,541 |
|
|
112,460 |
|
|
113,686 |
|
Sales and
marketing |
|
29,397 |
|
|
30,465 |
|
|
58,838 |
|
|
60,474 |
|
General
and administrative |
|
18,563 |
|
|
17,658 |
|
|
35,922 |
|
|
34,971 |
|
Total
operating expenses |
|
105,337 |
|
|
107,664 |
|
|
207,220 |
|
|
209,131 |
|
Income (loss) from
operations |
|
(40,505 |
) |
|
16,082 |
|
|
(78,332 |
) |
|
30,953 |
|
Other income (expense),
net: |
|
|
|
|
|
|
|
|
Interest
income |
|
862 |
|
|
595 |
|
|
1,613 |
|
|
1,117 |
|
Interest
expense |
|
(3,456 |
) |
|
(3,176 |
) |
|
(6,859 |
) |
|
(6,331 |
) |
Other
gain (loss), net: |
|
(252 |
) |
|
(714 |
) |
|
(382 |
) |
|
(928 |
) |
Total
other income (expense), net |
|
(2,846 |
) |
|
(3,295 |
) |
|
(5,628 |
) |
|
(6,142 |
) |
Income (loss) before
income taxes |
|
(43,351 |
) |
|
12,787 |
|
|
(83,960 |
) |
|
24,811 |
|
Provision for (benefit
from) income taxes |
|
(512 |
) |
|
1,475 |
|
|
(670 |
) |
|
1,691 |
|
Net income (loss) |
|
(42,839 |
) |
|
11,312 |
|
|
(83,290 |
) |
|
23,120 |
|
Less: Net
loss attributable to noncontrolling interest |
|
— |
|
|
(171 |
) |
|
— |
|
|
(378 |
) |
Net income (loss)
attributable to Infinera Corporation |
|
$ |
(42,839 |
) |
|
$ |
11,483 |
|
|
$ |
(83,290 |
) |
|
$ |
23,498 |
|
Net income (loss) per
common share attributable to Infinera Corporation: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.29 |
) |
|
$ |
0.08 |
|
|
$ |
(0.57 |
) |
|
$ |
0.17 |
|
Diluted |
|
$ |
(0.29 |
) |
|
$ |
0.08 |
|
|
$ |
(0.57 |
) |
|
$ |
0.16 |
|
Weighted average shares
used in computing net income (loss) per common share:
|
|
|
|
|
|
|
|
|
Basic |
|
147,538 |
|
|
142,396 |
|
|
146,662 |
|
|
141,600 |
|
Diluted |
|
147,538 |
|
|
145,891 |
|
|
146,662 |
|
|
146,385 |
|
Infinera CorporationGAAP to Non-GAAP
Reconciliations(In thousands, except percentages
and per share data)(Unaudited)
|
Three Months Ended |
|
Six Months Ended |
|
July 1, 2017 |
|
|
|
April 1, 2017 |
|
|
|
June 25, 2016 |
|
|
|
July 1, 2017 |
|
|
|
June 25, 2016 |
|
|
Reconciliation
of Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as
reported |
$ |
176,821 |
|
|
|
|
$ |
175,522 |
|
|
|
|
$ |
258,822 |
|
|
|
|
$ |
352,343 |
|
|
|
|
$ |
503,640 |
|
|
|
Acquisition-related
deferred revenue adjustment(1) |
— |
|
|
|
|
— |
|
|
|
|
174 |
|
|
|
|
— |
|
|
|
|
400 |
|
|
|
Non-GAAP as
adjusted |
$ |
176,821 |
|
|
|
|
$ |
175,522 |
|
|
|
|
$ |
258,996 |
|
|
|
|
$ |
352,343 |
|
|
|
|
$ |
504,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Gross Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as
reported |
$ |
64,832 |
|
|
36.7 |
% |
|
$ |
64,056 |
|
|
36.5 |
% |
|
$ |
123,746 |
|
|
47.8 |
% |
|
$ |
128,888 |
|
|
36.6 |
% |
|
$ |
240,084 |
|
|
47.7 |
% |
Acquisition-related
deferred revenue adjustment(1) |
— |
|
|
|
|
— |
|
|
|
|
174 |
|
|
|
|
— |
|
|
|
|
400 |
|
|
|
Stock-based
compensation(2) |
2,071 |
|
|
|
|
1,831 |
|
|
|
|
1,658 |
|
|
|
|
3,902 |
|
|
|
|
3,190 |
|
|
|
Amortization of
acquired intangible assets(3) |
5,035 |
|
|
|
|
4,880 |
|
|
|
|
4,998 |
|
|
|
|
9,915 |
|
|
|
|
9,868 |
|
|
|
Acquisition-related
costs(4) |
6 |
|
|
|
|
40 |
|
|
|
|
40 |
|
|
|
|
46 |
|
|
|
|
79 |
|
|
|
Non-GAAP as
adjusted |
$ |
71,944 |
|
|
40.7 |
% |
|
$ |
70,807 |
|
|
40.3 |
% |
|
$ |
130,616 |
|
|
50.4 |
% |
|
$ |
142,751 |
|
|
40.5 |
% |
|
$ |
253,621 |
|
|
50.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as
reported |
$ |
105,337 |
|
|
|
|
$ |
101,883 |
|
|
|
|
$ |
107,664 |
|
|
|
|
$ |
207,220 |
|
|
|
|
$ |
209,131 |
|
|
|
Stock-based
compensation(2) |
10,309 |
|
|
|
|
9,046 |
|
|
|
|
9,335 |
|
|
|
|
19,355 |
|
|
|
|
15,790 |
|
|
|
Amortization of
acquired intangible assets(3) |
1,515 |
|
|
|
|
1,468 |
|
|
|
|
1,584 |
|
|
|
|
2,983 |
|
|
|
|
3,216 |
|
|
|
Acquisition-related
costs(4) |
16 |
|
|
|
|
306 |
|
|
|
|
402 |
|
|
|
|
322 |
|
|
|
|
890 |
|
|
|
Intangible asset
impairment(5) |
— |
|
|
|
|
252 |
|
|
|
|
— |
|
|
|
|
252 |
|
|
|
|
— |
|
|
|
Non-GAAP as
adjusted |
$ |
93,497 |
|
|
|
|
$ |
90,811 |
|
|
|
|
$ |
96,343 |
|
|
|
|
$ |
184,308 |
|
|
|
|
$ |
189,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Income (Loss) from Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as
reported |
$ |
(40,505 |
) |
|
(22.9 |
)% |
|
$ |
(37,827 |
) |
|
(21.6 |
)% |
|
$ |
16,082 |
|
|
6.2 |
% |
|
$ |
(78,332 |
) |
|
(22.2 |
)% |
|
$ |
30,953 |
|
|
6.1 |
% |
Acquisition-related
deferred revenue adjustment(1) |
— |
|
|
|
|
— |
|
|
|
|
174 |
|
|
|
|
— |
|
|
|
|
400 |
|
|
|
Stock-based
compensation(2) |
12,380 |
|
|
|
|
10,877 |
|
|
|
|
10,993 |
|
|
|
|
23,257 |
|
|
|
|
18,980 |
|
|
|
Amortization of
acquired intangible assets(3) |
6,550 |
|
|
|
|
6,348 |
|
|
|
|
6,582 |
|
|
|
|
12,898 |
|
|
|
|
13,084 |
|
|
|
Acquisition-related
costs(4) |
22 |
|
|
|
|
346 |
|
|
|
|
442 |
|
|
|
|
368 |
|
|
|
|
969 |
|
|
|
Intangible asset
impairment(5) |
— |
|
|
|
|
252 |
|
|
|
|
— |
|
|
|
|
252 |
|
|
|
|
— |
|
|
|
Non-GAAP as
adjusted |
$ |
(21,553 |
) |
|
(12.2 |
)% |
|
$ |
(20,004 |
) |
|
(11.4 |
)% |
|
$ |
34,273 |
|
|
13.2 |
% |
|
$ |
(41,557 |
) |
|
(11.8 |
)% |
|
$ |
64,386 |
|
|
12.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
July 1,2017 |
|
|
|
April 1,2017 |
|
|
|
June 25,2016 |
|
|
|
July 1, 2017 |
|
|
|
June 25, 2016 |
|
|
Reconciliation
of Net Income (Loss) Attributable to Infinera
Corporation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as
reported |
$ |
(42,839 |
) |
|
|
|
$ |
(40,451 |
) |
|
|
|
$ |
11,483 |
|
|
|
|
$ |
(83,290 |
) |
|
|
|
$ |
23,498 |
|
|
|
Acquisition-related
deferred revenue adjustment(1) |
— |
|
|
|
|
— |
|
|
|
|
174 |
|
|
|
|
— |
|
|
|
|
400 |
|
|
|
Stock-based
compensation(2) |
12,380 |
|
|
|
|
10,877 |
|
|
|
|
10,993 |
|
|
|
|
23,257 |
|
|
|
|
18,980 |
|
|
|
Amortization of
acquired intangible assets(3) |
6,550 |
|
|
|
|
6,348 |
|
|
|
|
6,582 |
|
|
|
|
12,898 |
|
|
|
|
13,084 |
|
|
|
Acquisition-related
costs(4) |
(4 |
) |
|
|
|
261 |
|
|
|
|
862 |
|
|
|
|
257 |
|
|
|
|
1,389 |
|
|
|
Intangible asset
impairment(5) |
— |
|
|
|
|
252 |
|
|
|
|
— |
|
|
|
|
252 |
|
|
|
|
— |
|
|
|
Amortization of debt
discount(6) |
2,577 |
|
|
|
|
2,514 |
|
|
|
|
2,331 |
|
|
|
|
5,091 |
|
|
|
|
4,605 |
|
|
|
Income tax
effects(7) |
(1,450 |
) |
|
|
|
(1,474 |
) |
|
|
|
(1,510 |
) |
|
|
|
(2,924 |
) |
|
|
|
(3,012 |
) |
|
|
Non-GAAP as
adjusted |
$ |
(22,786 |
) |
|
|
|
$ |
(21,673 |
) |
|
|
|
$ |
30,915 |
|
|
|
|
$ |
(44,459 |
) |
|
|
|
$ |
58,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
(Loss) per Common Share Attributable to Infinera Corporation -
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as
reported |
$ |
(0.29 |
) |
|
|
|
$ |
(0.28 |
) |
|
|
|
$ |
0.08 |
|
|
|
|
$ |
(0.57 |
) |
|
|
|
$ |
0.17 |
|
|
|
Non-GAAP as
adjusted |
$ |
(0.15 |
) |
|
|
|
$ |
(0.15 |
) |
|
|
|
$ |
0.22 |
|
|
|
|
$ |
(0.30 |
) |
|
|
|
$ |
0.42 |
|
|
|
Net Income
(Loss) per Common Share Attributable to Infinera Corporation -
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as
reported |
$ |
(0.29 |
) |
|
|
|
$ |
(0.28 |
) |
|
|
|
$ |
0.08 |
|
|
|
|
$ |
(0.57 |
) |
|
|
|
$ |
0.16 |
|
|
|
Non-GAAP as
adjusted |
$ |
(0.15 |
) |
|
|
|
$ |
(0.15 |
) |
|
|
|
$ |
0.21 |
|
|
|
|
$ |
(0.30 |
) |
|
|
|
$ |
0.40 |
|
|
|
Weighted
Average Shares Used in Computing Net Income (Loss) per Common
Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
147,538 |
|
|
|
|
145,786 |
|
|
|
|
142,396 |
|
|
|
|
146,662 |
|
|
|
|
141,600 |
|
|
|
Diluted |
147,538 |
|
|
|
|
145,786 |
|
|
|
|
145,891 |
|
|
|
|
146,662 |
|
|
|
|
146,385 |
|
|
|
____________________________
(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 non-cash stock-based
compensation related to employees and non-employees (in
thousands):
|
|
Three Months Ended |
|
Six Months Ended |
|
|
July 1, 2017 |
|
April 1, 2017 |
|
June 25, 2016 |
|
July 1, 2017 |
|
June 25, 2016 |
Cost of revenue |
|
$ |
834 |
|
|
$ |
724 |
|
|
$ |
746 |
|
|
$ |
1,558 |
|
|
$ |
1,419 |
|
Research and
development |
|
4,184 |
|
|
3,780 |
|
|
3,904 |
|
|
7,964 |
|
|
6,225 |
|
Sales and
marketing |
|
3,273 |
|
|
2,726 |
|
|
2,945 |
|
|
5,999 |
|
|
5,180 |
|
General and
administration |
|
2,852 |
|
|
2,540 |
|
|
2,486 |
|
|
5,392 |
|
|
4,385 |
|
|
|
11,143 |
|
|
9,770 |
|
|
10,081 |
|
|
20,913 |
|
|
17,209 |
|
Cost of revenue -
amortization from balance sheet* |
|
1,237 |
|
|
1,107 |
|
|
912 |
|
|
2,344 |
|
|
1,771 |
|
Total stock-based
compensation expense |
|
$ |
12,380 |
|
|
$ |
10,877 |
|
|
$ |
10,993 |
|
|
$ |
23,257 |
|
|
$ |
18,980 |
|
_____________________________
* 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 it
from its non-GAAP operating expenses, gross margin and net income
measures. Management believes the amortization of acquired
intangible assets is not indicative of ongoing operating
performance and its exclusion provides a better indication of
Infinera's underlying business performance.
(4)
Acquisition-related costs associated with the Transmode acquisition
include legal, financial, employee retention costs and other
professional fees incurred in connection with the transaction,
including squeeze-out proceedings. 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.
(5)
Intangible asset impairment is associated with previously acquired
intangibles, which Infinera has determined that the carrying value
will not be recoverable. Management has excluded the impact of this
charge in arriving at Infinera's non-GAAP results because it is
non-recurring and management believes that these expenses are not
indicative of ongoing operating performance.
(6) Under
GAAP, certain convertible debt instruments that may be settled in
cash on conversion are required to be separately accounted for as
liability (debt) and equity (conversion option) components of the
instrument in a manner that reflects the issuer's non-convertible
debt borrowing rate. Accordingly, for GAAP purposes, Infinera is
required to amortize as debt discount an amount equal to the fair
value of the conversion option that was recorded in equity as
interest expense on its $150 million in aggregate principal amount
of 1.75% convertible debt issuance in May 2013 over the term of the
notes. Interest expense has been excluded from Infinera's non-GAAP
results because management believes that this non-cash expense is
not indicative of ongoing operating performance and provides a
better indication of Infinera's underlying business
performance.
(7) The
difference between the GAAP and non-GAAP tax is due to the net tax
effects of the purchase accounting adjustments, acquisition-related
costs and amortization of acquired intangible assets.
Infinera CorporationCondensed
Consolidated Balance Sheets(In thousands, except
par values)(Unaudited)
|
|
July 1, 2017 |
|
December 31, 2016 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
119,820 |
|
|
$ |
162,641 |
|
Short-term investments |
|
137,929 |
|
|
141,697 |
|
Short-term restricted cash |
|
1,423 |
|
|
8,490 |
|
Accounts
receivable, net of allowance for doubtful accounts of $918 in 2017
and $772 in 2016 |
|
123,903 |
|
|
150,370 |
|
Inventory |
|
245,976 |
|
|
232,955 |
|
Prepaid
expenses and other current assets |
|
42,885 |
|
|
34,270 |
|
Total
current assets |
|
671,936 |
|
|
730,423 |
|
Property, plant and
equipment, net |
|
142,424 |
|
|
124,800 |
|
Intangible assets |
|
102,933 |
|
|
108,475 |
|
Goodwill |
|
189,989 |
|
|
176,760 |
|
Long-term
investments |
|
69,105 |
|
|
40,779 |
|
Cost-method
investment |
|
7,000 |
|
|
7,000 |
|
Long-term restricted
cash |
|
5,030 |
|
|
6,449 |
|
Other non-current
assets |
|
4,201 |
|
|
3,897 |
|
Total
assets |
|
$ |
1,192,618 |
|
|
$ |
1,198,583 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts
payable |
|
$ |
80,684 |
|
|
$ |
62,486 |
|
Accrued
expenses |
|
32,018 |
|
|
31,580 |
|
Accrued
compensation and related benefits |
|
43,625 |
|
|
46,637 |
|
Short-term debt, net |
|
139,115 |
|
|
— |
|
Accrued
warranty |
|
14,078 |
|
|
16,930 |
|
Deferred
revenue |
|
64,723 |
|
|
58,900 |
|
Total
current liabilities |
|
374,243 |
|
|
216,533 |
|
Long-term
debt, net |
|
— |
|
|
133,586 |
|
Accrued
warranty, non-current |
|
18,322 |
|
|
23,412 |
|
Deferred
revenue, non-current |
|
23,723 |
|
|
19,362 |
|
Deferred
tax liability |
|
24,185 |
|
|
25,327 |
|
Other
long-term liabilities |
|
14,558 |
|
|
18,035 |
|
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 July 1, 2017 and December 31,
2016 |
|
|
|
|
Issued
and outstanding shares - 148,189 as of July 1, 2017 and 145,021 as
of December 31, 2016 |
|
148 |
|
|
145 |
|
Additional paid-in capital |
|
1,388,045 |
|
|
1,354,082 |
|
Accumulated other comprehensive loss |
|
(3,741 |
) |
|
(28,324 |
) |
Accumulated deficit |
|
(646,865 |
) |
|
(563,575 |
) |
Total
stockholders’ equity |
|
737,587 |
|
|
762,328 |
|
Total
liabilities and stockholders’ equity |
|
$ |
1,192,618 |
|
|
$ |
1,198,583 |
|
Infinera CorporationCondensed
Consolidated Statements of Cash Flows(In
thousands)(Unaudited)
|
|
Six Months Ended |
|
|
July 1, 2017 |
|
June 25, 2016 |
Cash Flows from
Operating Activities: |
|
|
|
|
Net income (loss) |
|
$ |
(83,290 |
) |
|
$ |
23,120 |
|
Adjustments to
reconcile net income (loss) to net cash provided by (used in)
operating activities: |
|
|
|
|
Depreciation and amortization |
|
32,623 |
|
|
29,891 |
|
Amortization of debt discount and issuance costs |
|
5,529 |
|
|
5,001 |
|
Amortization of premium on investments |
|
234 |
|
|
733 |
|
Impairment of intangible assets |
|
252 |
|
|
— |
|
Stock-based compensation expense |
|
23,257 |
|
|
18,980 |
|
Other
loss |
|
86 |
|
|
84 |
|
Changes
in assets and liabilities: |
|
|
|
|
Accounts
receivable |
|
27,629 |
|
|
(7,404 |
) |
Inventory |
|
(12,700 |
) |
|
(31,304 |
) |
Prepaid
expenses and other assets |
|
(8,127 |
) |
|
(328 |
) |
Accounts
payable |
|
16,927 |
|
|
(7,339 |
) |
Accrued
liabilities and other expenses |
|
(4,392 |
) |
|
(5,528 |
) |
Deferred
revenue |
|
10,065 |
|
|
10,129 |
|
Accrued
warranty |
|
(8,111 |
) |
|
2,165 |
|
Net cash
provided by (used in) operating activities |
|
(18 |
) |
|
38,200 |
|
Cash Flows from
Investing Activities: |
|
|
|
|
Purchase
of available-for-sale investments |
|
(107,854 |
) |
|
(97,051 |
) |
Proceeds
from sales of available-for-sale investments |
|
3,998 |
|
|
— |
|
Proceeds
from maturities of investments |
|
79,003 |
|
|
91,714 |
|
Purchase
of property and equipment |
|
(39,200 |
) |
|
(23,278 |
) |
Change in
restricted cash |
|
2,974 |
|
|
(60 |
) |
Net cash
used in investing activities |
|
(61,079 |
) |
|
(28,675 |
) |
Cash Flows from
Financing Activities: |
|
|
|
|
Security
pledge to acquire noncontrolling interest |
|
5,596 |
|
|
(24,942 |
) |
Acquisition of noncontrolling interest |
|
(471 |
) |
|
— |
|
Proceeds
from issuance of common stock |
|
11,115 |
|
|
8,586 |
|
Minimum
tax withholding paid on behalf of employees for net share
settlement |
|
(823 |
) |
|
(3,082 |
) |
Net cash
provided by (used in) financing activities |
|
15,417 |
|
|
(19,438 |
) |
Effect of exchange rate
changes on cash |
|
2,859 |
|
|
(808 |
) |
Net change in cash and
cash equivalents |
|
(42,821 |
) |
|
(10,721 |
) |
Cash and cash
equivalents at beginning of period |
|
162,641 |
|
|
149,101 |
|
Cash and cash
equivalents at end of period |
|
$ |
119,820 |
|
|
$ |
138,380 |
|
Supplemental
disclosures of cash flow information: |
|
|
|
|
Cash paid
for income taxes, net of refunds |
|
$ |
2,683 |
|
|
$ |
3,237 |
|
Cash paid
for interest |
|
$ |
1,316 |
|
|
$ |
1,410 |
|
Supplemental
schedule of non-cash investing activities: |
|
|
|
|
Transfer
of inventory to fixed assets |
|
$ |
2,087 |
|
|
$ |
4,009 |
|
Infinera CorporationSupplemental
Financial Information(Unaudited)
|
|
Q3'15 |
|
Q4'15 |
|
Q1'16 |
|
Q2'16 |
|
Q3'16 |
|
Q4'16 |
|
Q1'17 |
|
Q2'17 |
GAAP Revenue ($
Mil) |
|
$ |
232.5 |
|
|
$ |
260.0 |
|
|
$ |
244.8 |
|
|
$ |
258.8 |
|
|
$ |
185.5 |
|
|
$ |
181.0 |
|
|
$ |
175.5 |
|
|
$ |
176.8 |
|
GAAP Gross Margin
% |
|
|
44.2 |
% |
|
|
44.5 |
% |
|
|
47.5 |
% |
|
|
47.8 |
% |
|
|
45.6 |
% |
|
|
38.1 |
% |
|
|
36.5 |
% |
|
|
36.7 |
% |
Non-GAAP Gross Margin
%(1) |
|
|
47.5 |
% |
|
|
48.3 |
% |
|
|
50.2 |
% |
|
|
50.4 |
% |
|
|
49.2 |
% |
|
|
41.8 |
% |
|
|
40.3 |
% |
|
|
40.7 |
% |
Revenue
Composition: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic % |
|
|
68 |
% |
|
|
62 |
% |
|
|
71 |
% |
|
|
64 |
% |
|
|
56 |
% |
|
|
53 |
% |
|
|
57 |
% |
|
|
63 |
% |
International % |
|
|
32 |
% |
|
|
38 |
% |
|
|
29 |
% |
|
|
36 |
% |
|
|
44 |
% |
|
|
47 |
% |
|
|
43 |
% |
|
|
37 |
% |
Customers >10% of
Revenue |
|
|
2 |
|
|
|
2 |
|
|
|
3 |
|
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
|
|
1 |
|
|
|
3 |
|
Cash Related
Information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from Operations ($
Mil) |
|
$ |
32.5 |
|
|
$ |
25.8 |
|
|
$ |
10.0 |
|
|
$ |
28.2 |
|
|
$ |
5.2 |
|
|
$ |
(5.0 |
) |
|
$ |
3.0 |
|
|
$ |
(3.0 |
) |
Capital Expenditures ($
Mil) |
|
$ |
10.6 |
|
|
$ |
15.3 |
|
|
$ |
10.8 |
|
|
$ |
12.5 |
|
|
$ |
9.6 |
|
|
$ |
10.4 |
|
|
$ |
14.7 |
|
|
$ |
24.5 |
|
Depreciation &
Amortization ($ Mil) |
|
$ |
9.2 |
|
|
$ |
13.7 |
|
|
$ |
14.7 |
|
|
$ |
15.2 |
|
|
$ |
15.9 |
|
|
$ |
15.7 |
|
|
$ |
16.0 |
|
|
$ |
16.6 |
|
DSOs |
|
|
55 |
|
|
|
65 |
|
|
|
69 |
|
|
|
68 |
|
|
|
75 |
|
|
|
81 |
|
|
|
64 |
|
|
|
64 |
|
Inventory
Metrics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw Materials ($
Mil) |
|
$ |
24.2 |
|
|
$ |
27.9 |
|
|
$ |
33.1 |
|
|
$ |
39.1 |
|
|
$ |
37.2 |
|
|
$ |
33.2 |
|
|
$ |
34.8 |
|
|
$ |
36.7 |
|
Work in Process ($
Mil) |
|
$ |
48.5 |
|
|
$ |
52.6 |
|
|
$ |
59.4 |
|
|
$ |
61.0 |
|
|
$ |
65.5 |
|
|
$ |
74.5 |
|
|
$ |
81.1 |
|
|
$ |
91.6 |
|
Finished Goods ($
Mil) |
|
$ |
97.2 |
|
|
$ |
94.2 |
|
|
$ |
97.2 |
|
|
$ |
102.2 |
|
|
$ |
128.8 |
|
|
$ |
125.3 |
|
|
$ |
118.0 |
|
|
$ |
117.7 |
|
Total Inventory
($ Mil) |
|
$ |
169.9 |
|
|
$ |
174.7 |
|
|
$ |
189.7 |
|
|
$ |
202.3 |
|
|
$ |
231.5 |
|
|
$ |
233.0 |
|
|
$ |
233.9 |
|
|
$ |
246.0 |
|
Inventory Turns(2) |
|
|
2.9 |
|
|
|
3.1 |
|
|
|
2.6 |
|
|
|
2.5 |
|
|
|
1.6 |
|
|
|
1.8 |
|
|
|
1.8 |
|
|
|
1.7 |
|
Worldwide
Headcount |
|
|
1,978 |
|
|
|
2,056 |
|
|
|
2,128 |
|
|
|
2,218 |
|
|
|
2,262 |
|
|
|
2,240 |
|
|
|
2,245 |
|
|
|
2,272 |
|
Weighted
Average Shares Outstanding (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
134,834 |
|
|
|
140,015 |
|
|
|
140,805 |
|
|
|
142,396 |
|
|
|
143,850 |
|
|
|
144,770 |
|
|
|
145,786 |
|
|
|
147,538 |
|
Diluted |
|
|
145,300 |
|
|
|
149,439 |
|
|
|
146,880 |
|
|
|
145,891 |
|
|
|
144,993 |
|
|
|
145,497 |
|
|
|
147,017 |
|
|
|
148,662 |
|
_____________________________
(1)
Non-GAAP adjustments include non-cash stock-based compensation
expense, certain purchase accounting adjustments related to
Infinera's acquisition of Transmode 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 Vue
Tel. +1 (916) 595-8157
avue@infinera.com
Investors:
Jeff Hustis
Tel. +1 (408) 213-7150
jhustis@infinera.com
Infinera (NASDAQ:INFN)
Historical Stock Chart
From Mar 2024 to Apr 2024
Infinera (NASDAQ:INFN)
Historical Stock Chart
From Apr 2023 to Apr 2024