Infinera Corporation, provider of Intelligent Transport Networks,
today released financial results for its fourth quarter and fiscal
year ended December 30, 2017.
GAAP revenue for the quarter was $195.8 million compared to
$192.6 million in the third quarter of 2017 and $181.0 million in
the fourth quarter of 2016.
GAAP gross margin for the quarter was 24.1% compared to 35.2% in
the third quarter of 2017 and 38.1% in the fourth quarter of 2016.
GAAP operating margin for the quarter was (36.0)% compared to
(17.8)% in the third quarter of 2017 and (25.3)% in the fourth
quarter of 2016.
GAAP net loss for the quarter was $(74.0) million, or $(0.50)
per share, compared to $(37.2) million, or $(0.25) per share, in
the third quarter of 2017 and $(36.3) million, or $(0.25) per
share, in the fourth quarter of 2016.
Non-GAAP gross margin for the quarter was 37.5% compared to
39.1% in the third quarter of 2017 and 41.8% in the fourth quarter
of 2016. Non-GAAP operating margin for the quarter was (9.3)%
compared to (7.8)% in the third quarter of 2017 and (9.2)% in the
fourth quarter of 2016.
Non-GAAP net loss for the quarter was $(18.6) million, or
$(0.12) per share, compared to $(17.0) million, or $(0.11) per
share, in the third quarter of 2017, and $(17.0) million, or
$(0.12) per share, in the fourth quarter of 2016.
GAAP gross margin for the year was 32.9% compared to 45.2% in
2016. GAAP operating margin for the year was (24.7)% compared to
(3.0)% in 2016. GAAP net loss for the year was $(194.5) million, or
$(1.32) per share, compared to $(23.9) million, or $(0.17) per
share, in 2016.
Non-GAAP gross margin for the year was 39.3% compared to 48.3%
in 2016. Non-GAAP operating margin for the year was (10.1)%
compared to 6.2% in 2016. Non-GAAP net loss for the year was
$(80.0) million, or $(0.54) per share, compared to net income of
$49.4 million, or $0.34 per diluted share, in 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.
“In Q4 we made some difficult but necessary decisions to
reposition the company for crisper execution and increased
focus on our go to market strategy,” said Tom Fallon, Infinera’s
Chief Executive Officer. “With our full product refresh nearing
completion, positive sales momentum ending the year, and a
significant pipeline of opportunities, we enter 2018 with
confidence that our recent positive revenue trajectory will
continue.”
Fourth Quarter 2017 Financial Commentary Available
Online
A CFO Commentary reviewing the Company's fourth quarter of 2017
financial results will be furnished to the SEC on Form 8-K and
published on Infinera's Investor Relations website at
investors.infinera.com. Analysts and investors are encouraged to
review this commentary prior to participating in the conference
call webcast.
Conference Call Information
Infinera will host a conference call for analysts and investors
to discuss its fourth quarter and fiscal year 2017 results and its
outlook for the first quarter of 2018 today at 5:00 p.m. Eastern
Time (2:00 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.
Contacts:
Media:Anna VueTel. +1 (916) 595-8157avue@infinera.com
Investors:Jeff HustisTel. +1 (408)
213-7150jhustis@infinera.com
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 execute and
deliver on its got to market strategy; and Infinera’s ability to
continue to grow revenue. 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 Infinera's
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 ability to adequately respond to demand as a result of
the restructuring plan; 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 September 30, 2017 as filed with
the SEC on November 8, 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 restructuring and other
costs, gain on the sale and impairment of cost-method investments,
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 fourth quarter and fiscal year 2017 results,
including an estimate of certain non-GAAP financial measures for
the first quarter of 2018 that excludes restructuring and related
costs, 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 CorporationGAAP Condensed
Consolidated Statements of Operations(In
thousands, except per share
data)(Unaudited) |
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 30, 2017 |
|
December 31, 2016 |
|
December 30, 2017 |
|
December 31, 2016 |
Revenue: |
|
|
|
|
|
|
|
|
Product |
|
$ |
160,543 |
|
|
$ |
151,365 |
|
|
$ |
610,535 |
|
|
$ |
751,167 |
|
Services |
|
35,273 |
|
|
29,678 |
|
|
130,204 |
|
|
118,968 |
|
Total
revenue |
|
195,816 |
|
|
181,043 |
|
|
740,739 |
|
|
870,135 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
Cost of
product |
|
115,681 |
|
|
101,702 |
|
|
427,118 |
|
|
433,266 |
|
Cost of
services |
|
13,708 |
|
|
10,309 |
|
|
50,480 |
|
|
43,151 |
|
Restructuring and other costs |
|
19,141 |
|
|
— |
|
|
19,141 |
|
|
— |
|
Total
cost of revenue |
|
148,530 |
|
|
112,011 |
|
|
496,739 |
|
|
476,417 |
|
Gross profit |
|
47,286 |
|
|
69,032 |
|
|
244,000 |
|
|
393,718 |
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Research
and development |
|
55,223 |
|
|
67,750 |
|
|
224,299 |
|
|
232,291 |
|
Sales and
marketing |
|
29,395 |
|
|
30,424 |
|
|
116,057 |
|
|
118,858 |
|
General
and administrative |
|
17,069 |
|
|
16,726 |
|
|
70,625 |
|
|
68,343 |
|
Restructuring and other costs |
|
16,106 |
|
|
— |
|
|
16,106 |
|
|
— |
|
Total
operating expenses |
|
117,793 |
|
|
114,900 |
|
|
427,087 |
|
|
419,492 |
|
Loss from
operations |
|
(70,507 |
) |
|
(45,868 |
) |
|
(183,087 |
) |
|
(25,774 |
) |
Other income (expense),
net: |
|
|
|
|
|
|
|
|
Interest
income |
|
858 |
|
|
714 |
|
|
3,328 |
|
|
2,478 |
|
Interest
expense |
|
(3,609 |
) |
|
(3,243 |
) |
|
(14,017 |
) |
|
(12,887 |
) |
Other
gain (loss), net: |
|
(1,698 |
) |
|
8,118 |
|
|
(2,160 |
) |
|
7,002 |
|
Total
other income (expense), net |
|
(4,449 |
) |
|
5,589 |
|
|
(12,849 |
) |
|
(3,407 |
) |
Loss before income
taxes |
|
(74,956 |
) |
|
(40,279 |
) |
|
(195,936 |
) |
|
(29,181 |
) |
Benefit from income
taxes |
|
(971 |
) |
|
(4,026 |
) |
|
(1,430 |
) |
|
(4,751 |
) |
Net loss |
|
(73,985 |
) |
|
(36,253 |
) |
|
(194,506 |
) |
|
(24,430 |
) |
Less: Net
loss attributable to noncontrolling interest |
|
— |
|
|
— |
|
|
— |
|
|
(503 |
) |
Net loss attributable
to Infinera Corporation |
|
$ |
(73,985 |
) |
|
$ |
(36,253 |
) |
|
$ |
(194,506 |
) |
|
$ |
(23,927 |
) |
Net loss per common
share attributable to Infinera Corporation: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.50 |
) |
|
$ |
(0.25 |
) |
|
$ |
(1.32 |
) |
|
$ |
(0.17 |
) |
Diluted |
|
$ |
(0.50 |
) |
|
$ |
(0.25 |
) |
|
$ |
(1.32 |
) |
|
$ |
(0.17 |
) |
Weighted average shares
used in computing net loss per common share: |
|
|
|
|
|
|
|
|
Basic |
|
149,412 |
|
|
144,770 |
|
|
147,878 |
|
|
142,989 |
|
Diluted |
|
149,412 |
|
|
144,770 |
|
|
147,878 |
|
|
142,989 |
|
|
Infinera CorporationGAAP to Non-GAAP
Reconciliations(In thousands, except percentages
and per share data)(Unaudited) |
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
December 30, 2017 |
|
|
|
September 30, 2017 |
|
|
|
December 31, 2016 |
|
|
|
December 30, 2017 |
|
|
|
December 31, 2016 |
|
|
Reconciliation
of Gross Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as
reported |
$ |
47,286 |
|
|
24.1 |
% |
|
$ |
67,826 |
|
|
35.2 |
% |
|
$ |
69,032 |
|
|
38.1 |
% |
|
$ |
244,000 |
|
|
32.9 |
% |
|
$ |
393,718 |
|
|
45.2 |
% |
Acquisition-related
deferred revenue adjustment(1) |
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
400 |
|
|
|
Stock-based
compensation(2) |
1,846 |
|
|
|
|
2,063 |
|
|
|
|
1,849 |
|
|
|
|
7,811 |
|
|
|
|
6,463 |
|
|
|
Amortization of
acquired intangible assets(3) |
5,169 |
|
|
|
|
5,390 |
|
|
|
|
4,745 |
|
|
|
|
20,474 |
|
|
|
|
19,715 |
|
|
|
Acquisition-related
costs(4) |
— |
|
|
|
|
— |
|
|
|
|
27 |
|
|
|
|
46 |
|
|
|
|
144 |
|
|
|
Restructuring and other
costs(5) |
19,141 |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
19,141 |
|
|
|
|
— |
|
|
|
Non-GAAP as
adjusted |
$ |
73,442 |
|
|
37.5 |
% |
|
$ |
75,279 |
|
|
39.1 |
% |
|
$ |
75,653 |
|
|
41.8 |
% |
|
$ |
291,472 |
|
|
39.3 |
% |
|
$ |
420,440 |
|
|
48.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as
reported |
$ |
117,793 |
|
|
|
|
$ |
102,074 |
|
|
|
|
$ |
114,900 |
|
|
|
|
$ |
427,087 |
|
|
|
|
$ |
419,492 |
|
|
|
Stock-based
compensation(2) |
8,450 |
|
|
|
|
10,104 |
|
|
|
|
9,493 |
|
|
|
|
37,909 |
|
|
|
|
34,070 |
|
|
|
Amortization of
acquired intangible assets(3) |
1,555 |
|
|
|
|
1,622 |
|
|
|
|
1,436 |
|
|
|
|
6,160 |
|
|
|
|
6,189 |
|
|
|
Acquisition-related
costs(4) |
— |
|
|
|
|
— |
|
|
|
|
416 |
|
|
|
|
322 |
|
|
|
|
1,869 |
|
|
|
Restructuring and other
costs(5) |
16,106 |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
16,106 |
|
|
|
|
— |
|
|
|
Intangible asset
impairment(6) |
— |
|
|
|
|
— |
|
|
|
|
11,295 |
|
|
|
|
252 |
|
|
|
|
11,295 |
|
|
|
Non-GAAP as
adjusted |
$ |
91,682 |
|
|
|
|
$ |
90,348 |
|
|
|
|
$ |
92,260 |
|
|
|
|
$ |
366,338 |
|
|
|
|
$ |
366,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Income (Loss) from Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as
reported |
$ |
(70,507 |
) |
|
(36.0 |
)% |
|
$ |
(34,248 |
) |
|
(17.8 |
)% |
|
$ |
(45,868 |
) |
|
(25.3 |
)% |
|
$ |
(183,087 |
) |
|
(24.7 |
)% |
|
$ |
(25,774 |
) |
|
(3.0 |
)% |
Acquisition-related
deferred revenue adjustment(1) |
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
400 |
|
|
|
Stock-based
compensation(2) |
10,296 |
|
|
|
|
12,167 |
|
|
|
|
11,342 |
|
|
|
|
45,720 |
|
|
|
|
40,533 |
|
|
|
Amortization of
acquired intangible assets(3) |
6,724 |
|
|
|
|
7,012 |
|
|
|
|
6,181 |
|
|
|
|
26,634 |
|
|
|
|
25,904 |
|
|
|
Acquisition-related
costs(4) |
— |
|
|
|
|
— |
|
|
|
|
443 |
|
|
|
|
368 |
|
|
|
|
2,013 |
|
|
|
Restructuring and other
costs(5) |
35,247 |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
35,247 |
|
|
|
|
— |
|
|
|
Intangible asset
impairment(6) |
— |
|
|
|
|
— |
|
|
|
|
11,295 |
|
|
|
|
252 |
|
|
|
|
11,295 |
|
|
|
Non-GAAP as
adjusted |
$ |
(18,240 |
) |
|
(9.3 |
)% |
|
$ |
(15,069 |
) |
|
(7.8 |
)% |
|
$ |
(16,607 |
) |
|
(9.2 |
)% |
|
$ |
(74,866 |
) |
|
(10.1 |
)% |
|
$ |
54,371 |
|
|
6.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Net Income (Loss) Attributable to Infinera
Corporation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as
reported |
$ |
(73,985 |
) |
|
|
|
$ |
(37,231 |
) |
|
|
|
$ |
(36,253 |
) |
|
|
|
$ |
(194,506 |
) |
|
|
|
$ |
(23,927 |
) |
|
|
Acquisition-related
deferred revenue adjustment(1) |
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
400 |
|
|
|
Stock-based
compensation(2) |
10,296 |
|
|
|
|
12,167 |
|
|
|
|
11,342 |
|
|
|
|
45,720 |
|
|
|
|
40,533 |
|
|
|
Amortization of
acquired intangible assets(3) |
6,724 |
|
|
|
|
7,012 |
|
|
|
|
6,181 |
|
|
|
|
26,634 |
|
|
|
|
25,904 |
|
|
|
Acquisition-related
costs(4) |
— |
|
|
|
|
— |
|
|
|
|
818 |
|
|
|
|
257 |
|
|
|
|
3,081 |
|
|
|
Restructuring and other
costs(5) |
35,247 |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
35,247 |
|
|
|
|
— |
|
|
|
Intangible asset
impairment(6) |
— |
|
|
|
|
— |
|
|
|
|
11,295 |
|
|
|
|
252 |
|
|
|
|
11,295 |
|
|
|
Amortization of debt
discount(7) |
2,710 |
|
|
|
|
2,643 |
|
|
|
|
2,451 |
|
|
|
|
10,444 |
|
|
|
|
9,447 |
|
|
|
Gain on sale of
cost-method investment(8) |
— |
|
|
|
|
— |
|
|
|
|
(8,983 |
) |
|
|
|
— |
|
|
|
|
(8,983 |
) |
|
|
Impairment of
cost-method investment(9) |
1,890 |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
1,890 |
|
|
|
|
— |
|
|
|
Income tax
effects(10) |
(1,479 |
) |
|
|
|
(1,543 |
) |
|
|
|
(3,829 |
) |
|
|
|
(5,946 |
) |
|
|
|
(8,360 |
) |
|
|
Non-GAAP as
adjusted |
$ |
(18,597 |
) |
|
|
|
$ |
(16,952 |
) |
|
|
|
$ |
(16,978 |
) |
|
|
|
$ |
(80,008 |
) |
|
|
|
$ |
49,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
(Loss) per Common Share Attributable to Infinera Corporation -
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as
reported |
$ |
(0.50 |
) |
|
|
|
$ |
(0.25 |
) |
|
|
|
$ |
(0.25 |
) |
|
|
|
$ |
(1.32 |
) |
|
|
|
$ |
(0.17 |
) |
|
|
Non-GAAP as
adjusted |
$ |
(0.12 |
) |
|
|
|
$ |
(0.11 |
) |
|
|
|
$ |
(0.12 |
) |
|
|
|
$ |
(0.54 |
) |
|
|
|
$ |
0.35 |
|
|
|
Net Income
(Loss) per Common Share Attributable to Infinera Corporation -
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as
reported |
$ |
(0.50 |
) |
|
|
|
$ |
(0.25 |
) |
|
|
|
$ |
(0.25 |
) |
|
|
|
$ |
(1.32 |
) |
|
|
|
$ |
(0.17 |
) |
|
|
Non-GAAP as
adjusted |
$ |
(0.12 |
) |
|
|
|
$ |
(0.11 |
) |
|
|
|
$ |
(0.12 |
) |
|
|
|
$ |
(0.54 |
) |
|
|
|
$ |
0.34 |
|
|
|
Weighted
Average Shares Used in Computing Net Income (Loss) per Common
Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
149,412 |
|
|
|
|
148,777 |
|
|
|
|
144,770 |
|
|
|
|
147,878 |
|
|
|
|
142,989 |
|
|
|
Diluted |
149,412 |
|
|
|
|
148,777 |
|
|
|
|
144,770 |
|
|
|
|
147,878 |
|
|
|
|
145,800 |
|
|
|
_____________________________
(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 |
|
Twelve Months Ended |
|
|
December 30, 2017 |
|
September 30, 2017 |
|
December 31, 2016 |
|
December 30, 2017 |
|
December 31, 2016 |
Cost of revenue |
|
$ |
728 |
|
|
$ |
779 |
|
|
$ |
791 |
|
|
$ |
3,065 |
|
|
$ |
2,966 |
|
Research and
development |
|
3,841 |
|
|
4,040 |
|
|
4,011 |
|
|
15,845 |
|
|
13,732 |
|
Sales and
marketing |
|
2,264 |
|
|
3,025 |
|
|
3,037 |
|
|
11,288 |
|
|
11,043 |
|
General and
administration |
|
2,345 |
|
|
3,039 |
|
|
2,445 |
|
|
10,776 |
|
|
9,295 |
|
|
|
9,178 |
|
|
10,883 |
|
|
10,284 |
|
|
40,974 |
|
|
37,036 |
|
Cost of revenue -
amortization from balance sheet* |
|
1,118 |
|
|
1,284 |
|
|
1,058 |
|
|
4,746 |
|
|
3,497 |
|
Total stock-based
compensation expense |
|
$ |
10,296 |
|
|
$ |
12,167 |
|
|
$ |
11,342 |
|
|
$ |
45,720 |
|
|
$ |
40,533 |
|
_____________________________
* 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) Restructuring and other costs are related to
Infinera's plan to restructure its worldwide operations, which was
announced during the fourth quarter of 2017. These costs consist of
$13.6 million of inventory write-downs as a result of Infinera's
product rationalization efforts, $9.4 million of severance and
related costs, $7.3 million of facilities-related costs and $4.9
million of manufacturing and test asset impairments. Management has
excluded the impact of these charges in arriving at Infinera's
non-GAAP results as they are non-recurring in nature and its
exclusion provides a better indication of Infinera's underlying
business performance.
(6) Intangible asset impairments are associated with
previously acquired intangibles and acquired in-process research
and development (“IPR&D”). The impairment of previously
acquired intangibles was the result of management determining that
the carrying value will not be recoverable. Acquired IPR&D
impairment is associated with intangibles acquired with the
Transmode acquisition, which Infinera does not anticipate utilizing
in future products. Management has excluded the impact of these
charges 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.
(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 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.
(8) The gain on sale of a cost-method investment has
been excluded in arriving at Infinera's non-GAAP results because it
is non-recurring and management believes that this gain is not
indicative of ongoing operating performance.
(9) The impairment of cost-method investment has been
excluded in arriving at Infinera's non-GAAP results because it is
non-recurring and management believes that this non-cash expense is
not indicative of ongoing operating performance.
(10) The difference between the GAAP and non-GAAP tax
is due to the net tax effects of the purchase accounting
adjustments, acquisition-related costs, amortization of acquired
intangible assets and the IPR&D impairment related to the
Transmode acquisition.
|
Infinera CorporationCondensed Consolidated
Balance Sheets(In thousands, except par
values)(Unaudited) |
|
|
|
December 30, 2017 |
|
December 31, 2016 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
116,345 |
|
|
$ |
162,641 |
|
Short-term investments |
|
147,596 |
|
|
141,697 |
|
Short-term restricted cash |
|
544 |
|
|
8,490 |
|
Accounts
receivable, net of allowance for doubtful accounts of $892 in 2017
and $772 in 2016 |
|
126,152 |
|
|
150,370 |
|
Inventory |
|
214,704 |
|
|
232,955 |
|
Prepaid
expenses and other current assets |
|
42,596 |
|
|
34,270 |
|
Total
current assets |
|
647,937 |
|
|
730,423 |
|
Property, plant and
equipment, net |
|
135,942 |
|
|
124,800 |
|
Intangible assets |
|
92,188 |
|
|
108,475 |
|
Goodwill |
|
195,615 |
|
|
176,760 |
|
Long-term
investments |
|
31,019 |
|
|
40,779 |
|
Cost-method
investment |
|
5,110 |
|
|
7,000 |
|
Long-term restricted
cash |
|
4,597 |
|
|
6,449 |
|
Other non-current
assets |
|
5,262 |
|
|
3,897 |
|
Total
assets |
|
$ |
1,117,670 |
|
|
$ |
1,198,583 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts
payable |
|
$ |
58,124 |
|
|
$ |
62,486 |
|
Accrued
expenses |
|
39,782 |
|
|
31,580 |
|
Accrued
compensation and related benefits |
|
45,751 |
|
|
46,637 |
|
Short-term debt, net |
|
144,928 |
|
|
— |
|
Accrued
warranty |
|
13,670 |
|
|
16,930 |
|
Deferred
revenue |
|
72,421 |
|
|
58,900 |
|
Total
current liabilities |
|
374,676 |
|
|
216,533 |
|
Long-term
debt, net |
|
— |
|
|
133,586 |
|
Accrued
warranty, non-current |
|
17,239 |
|
|
23,412 |
|
Deferred
revenue, non-current |
|
22,502 |
|
|
19,362 |
|
Deferred
tax liability |
|
21,609 |
|
|
25,327 |
|
Other
long-term liabilities |
|
16,279 |
|
|
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 December 30, 2017 and December
31, 2016 |
|
|
|
|
Issued
and outstanding shares - 149,471 as of December 30, 2017 and
145,021 as of December 31, 2016 |
|
149 |
|
|
145 |
|
Additional paid-in capital |
|
1,417,043 |
|
|
1,354,082 |
|
Accumulated other comprehensive income (loss) |
|
6,254 |
|
|
(28,324 |
) |
Accumulated deficit |
|
(758,081 |
) |
|
(563,575 |
) |
Total
stockholders’ equity |
|
665,365 |
|
|
762,328 |
|
Total
liabilities and stockholders’ equity |
|
$ |
1,117,670 |
|
|
$ |
1,198,583 |
|
|
Infinera CorporationCondensed Consolidated
Statements of Cash Flows(In
thousands)(Unaudited) |
|
|
|
|
|
Twelve Months Ended |
|
|
December 30, 2017 |
|
December 31, 2016 |
Cash Flows from
Operating Activities: |
|
|
|
|
Net loss |
|
$ |
(194,506 |
) |
|
$ |
(24,430 |
) |
Adjustments to
reconcile net loss to net cash provided by operating
activities: |
|
|
|
|
Depreciation and amortization |
|
65,997 |
|
|
61,489 |
|
Non-cash
restructuring and other costs |
|
29,237 |
|
|
— |
|
Amortization of debt discount and issuance costs |
|
11,342 |
|
|
10,260 |
|
Amortization of premium on investments |
|
463 |
|
|
1,069 |
|
Impairment of acquired in-process research and development |
|
252 |
|
|
11,295 |
|
Realized
gain on sale of cost-method investment |
|
— |
|
|
(8,983 |
) |
Impairment of cost-method investment |
|
1,890 |
|
|
— |
|
Stock-based compensation expense |
|
45,720 |
|
|
40,533 |
|
Other
loss |
|
40 |
|
|
672 |
|
Changes
in assets and liabilities: |
|
|
|
|
Accounts
receivable |
|
25,849 |
|
|
33,895 |
|
Inventory |
|
2,727 |
|
|
(64,095 |
) |
Prepaid
expenses and other assets |
|
(8,194 |
) |
|
(5,501 |
) |
Accounts
payable |
|
(4,763 |
) |
|
(28,254 |
) |
Accrued
liabilities and other expenses |
|
(14,395 |
) |
|
(11,012 |
) |
Deferred
revenue |
|
16,416 |
|
|
21,439 |
|
Net cash
provided by (used in) operating activities |
|
(21,925 |
) |
|
38,377 |
|
Cash Flows from
Investing Activities: |
|
|
|
|
Purchase
of available-for-sale investments |
|
(160,215 |
) |
|
(124,077 |
) |
Proceeds
from sales of available-for-sale investments |
|
10,531 |
|
|
— |
|
Proceeds
from maturities and calls of investments |
|
152,876 |
|
|
142,898 |
|
Purchase
of cost-method investment |
|
— |
|
|
(7,000 |
) |
Proceeds
from sale of cost-method investment |
|
— |
|
|
23,483 |
|
Purchase
of property and equipment |
|
(58,041 |
) |
|
(43,335 |
) |
Change in
restricted cash |
|
4,296 |
|
|
(4,084 |
) |
Net cash
used in investing activities |
|
(50,553 |
) |
|
(12,115 |
) |
Cash Flows from
Financing Activities: |
|
|
|
|
Security
pledge to acquire noncontrolling interest |
|
5,596 |
|
|
(6,086 |
) |
Acquisition of noncontrolling interest |
|
(471 |
) |
|
(16,771 |
) |
Proceeds
from issuance of common stock |
|
17,991 |
|
|
17,648 |
|
Minimum
tax withholding paid on behalf of employees for net share
settlement |
|
(1,034 |
) |
|
(3,657 |
) |
Net cash
provided by (used in) financing activities |
|
22,082 |
|
|
(8,866 |
) |
Effect of exchange rate
changes on cash |
|
4,100 |
|
|
(3,856 |
) |
Net change in cash and
cash equivalents |
|
(46,296 |
) |
|
13,540 |
|
Cash and cash
equivalents at beginning of period |
|
162,641 |
|
|
149,101 |
|
Cash and cash
equivalents at end of period |
|
$ |
116,345 |
|
|
$ |
162,641 |
|
Supplemental
disclosures of cash flow information: |
|
|
|
|
Cash paid
for income taxes, net of refunds |
|
$ |
5,690 |
|
|
$ |
6,625 |
|
Cash paid
for interest |
|
$ |
2,639 |
|
|
$ |
2,776 |
|
Supplemental
schedule of non-cash investing activities: |
|
|
|
|
Transfer
of inventory to fixed assets |
|
$ |
4,950 |
|
|
$ |
5,597 |
|
|
|
|
|
|
|
|
|
|
Infinera CorporationSupplemental Financial
Information(Unaudited) |
|
|
|
Q1'16 |
|
Q2'16 |
|
Q3'16 |
|
Q4'16 |
|
Q1'17 |
|
Q2'17 |
|
Q3'17 |
|
Q4'17 |
GAAP Revenue ($
Mil) |
|
$244.8 |
|
|
$258.8 |
|
|
$185.5 |
|
|
$181.0 |
|
|
$175.5 |
|
|
$176.8 |
|
|
$192.6 |
|
|
$195.8 |
|
GAAP Gross Margin
% |
|
|
47.5 |
% |
|
|
47.8 |
% |
|
|
45.6 |
% |
|
|
38.1 |
% |
|
|
36.5 |
% |
|
|
36.7 |
% |
|
|
35.2 |
% |
|
|
24.1 |
% |
Non-GAAP Gross Margin
%(1) |
|
|
50.2 |
% |
|
|
50.4 |
% |
|
|
49.2 |
% |
|
|
41.8 |
% |
|
|
40.3 |
% |
|
|
40.7 |
% |
|
|
39.1 |
% |
|
|
37.5 |
% |
Revenue
Composition: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic % |
|
|
71 |
% |
|
|
64 |
% |
|
|
56 |
% |
|
|
53 |
% |
|
|
57 |
% |
|
|
63 |
% |
|
|
59 |
% |
|
|
53 |
% |
International % |
|
|
29 |
% |
|
|
36 |
% |
|
|
44 |
% |
|
|
47 |
% |
|
|
43 |
% |
|
|
37 |
% |
|
|
41 |
% |
|
|
47 |
% |
Customers >10% of
Revenue |
|
|
3 |
|
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
|
|
1 |
|
|
|
3 |
|
|
|
2 |
|
|
|
1 |
|
Cash Related
Information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from Operations ($
Mil) |
|
$10.0 |
|
|
$28.2 |
|
|
$5.2 |
|
|
($5.0 |
) |
|
$3.0 |
|
|
($3.0 |
) |
|
($20.9 |
) |
|
($1.0 |
) |
Capital Expenditures ($
Mil) |
|
$10.8 |
|
|
$12.5 |
|
|
$9.6 |
|
|
$10.4 |
|
|
$14.7 |
|
|
$24.5 |
|
|
$11.0 |
|
|
$7.8 |
|
Depreciation &
Amortization ($ Mil) |
|
$14.7 |
|
|
$15.2 |
|
|
$15.9 |
|
|
$15.7 |
|
|
$16.0 |
|
|
$16.6 |
|
|
$16.8 |
|
|
$16.6 |
|
DSOs |
|
|
69 |
|
|
|
68 |
|
|
|
75 |
|
|
|
81 |
|
|
|
64 |
|
|
|
64 |
|
|
|
65 |
|
|
|
59 |
|
Inventory
Metrics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw Materials ($
Mil) |
|
$33.1 |
|
|
$39.1 |
|
|
$37.2 |
|
|
$33.2 |
|
|
$34.8 |
|
|
$36.7 |
|
|
$35.8 |
|
|
$27.4 |
|
Work in Process ($
Mil) |
|
$59.4 |
|
|
$61.0 |
|
|
$65.5 |
|
|
$74.5 |
|
|
$81.1 |
|
|
$91.6 |
|
|
$84.3 |
|
|
$59.6 |
|
Finished Goods ($
Mil) |
|
$97.2 |
|
|
$102.2 |
|
|
$128.8 |
|
|
$125.3 |
|
|
$118.0 |
|
|
$117.7 |
|
|
$122.7 |
|
|
$127.7 |
|
Total Inventory
($ Mil) |
|
$189.7 |
|
|
$202.3 |
|
|
$231.5 |
|
|
$233.0 |
|
|
$233.9 |
|
|
$246.0 |
|
|
$242.8 |
|
|
$214.7 |
|
Inventory Turns(2) |
|
|
2.6 |
|
|
|
2.5 |
|
|
|
1.6 |
|
|
|
1.8 |
|
|
|
1.8 |
|
|
|
1.7 |
|
|
|
1.9 |
|
|
|
2.3 |
|
Worldwide
Headcount |
|
|
2,128 |
|
|
|
2,218 |
|
|
|
2,262 |
|
|
|
2,240 |
|
|
|
2,245 |
|
|
|
2,272 |
|
|
|
2,296 |
|
|
|
2,145 |
|
Weighted
Average Shares Outstanding (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
140,805 |
|
|
|
142,396 |
|
|
|
143,850 |
|
|
|
144,770 |
|
|
|
145,786 |
|
|
|
147,538 |
|
|
|
148,777 |
|
|
|
149,412 |
|
Diluted |
|
|
146,880 |
|
|
|
145,891 |
|
|
|
144,993 |
|
|
|
145,497 |
|
|
|
147,017 |
|
|
|
148,662 |
|
|
|
149,714 |
|
|
|
150,098 |
|
____________________
(1) Non-GAAP adjustments include restructuring and
other costs, 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
restructuring and other costs, non-cash stock-based compensation
expense, and certain purchase accounting adjustments, divided by
the average inventory for the quarter.
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