Infinera Corporation, provider of Intelligent Transport Networks,
today released financial results for its second quarter ended June
29, 2019.
GAAP revenue for the quarter was $296.3 million compared to
$292.7 million in the first quarter of 2019 and $208.2 million in
the second quarter of 2018.
GAAP gross margin for the quarter was 20.7% compared to 22.7% in
the first quarter of 2019 and 40.5% in the second quarter of 2018.
GAAP operating margin for the quarter was (36.6)% compared to
(38.2)% in the first quarter of 2019 and (10.4)% in the second
quarter of 2018.
GAAP net loss for the quarter was $113.7 million, or $(0.64) per
share, compared to a net loss of $121.6 million, or $(0.69) per
share, in the first quarter of 2019, and net loss of $21.9 million,
or $(0.14) per share, in the second quarter of 2018.
Non-GAAP revenue for the quarter was $306.9 million compared to
$295.6 million in the first quarter of 2019 and $208.2 million in
the second quarter of 2018.
Non-GAAP gross margin for the quarter was 30.7% compared to
35.3% in the first quarter of 2019 and 43.9% in the second quarter
of 2018. Non-GAAP operating margin for the quarter was (12.3)%
compared to (11.9)% in the first quarter of 2019 and (0.7)% in the
second quarter of 2018.
Non-GAAP net loss for the quarter was $42.0 million, or $(0.24)
per share, compared to a net loss of $41.2 million, or $(0.23) per
share, in the first quarter of 2019, and net loss of $1.3 million,
or $(0.01) per share, in the second quarter of 2018.
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.
“During the quarter, we significantly enhanced the longer-term
position of the New Infinera with strong customer traction led by
bookings from several new Tier-1 wins and the initial ramp of a new
internet content provider,” said Tom Fallon, Infinera CEO.
“Continued progress on our integration program, which we expect to
largely complete in the fourth quarter of 2019, is enabling
synergies to track ahead of prior commitments. Based on this
foundation, we expect to return to non-GAAP profitability and
positive cash flow in the fourth quarter of 2019."
Financial Outlook
Infinera's outlook for the quarter ending September
28, 2019 is as follows:
- GAAP revenue is expected to be $328
million +/- $10 million. Non-GAAP revenue is expected to be $330
million +/- $10 million.
- GAAP gross margin is expected to be
27% +/- 200 bps. Non-GAAP gross margin is expected to be 32% +/-
200 bps.
- GAAP operating expenses are expected
to be $150 million +/- $3 million. Non-GAAP operating
expenses are expected to be $130 million +/- $3
million.
- GAAP operating margin is expected to
be approximately (19)%. Non-GAAP operating margin is expected to be
approximately (7)%.
- GAAP EPS is expected to be $(0.40)
+/- $0.02. Non-GAAP EPS is expected to be $(0.17)
+/- $0.02.
Second Quarter 2019 Financial Commentary Available
Online
A CFO Commentary reviewing Infinera's second quarter of 2019
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 results for the second quarter of 2019 and its
outlook for the third quarter of 2019 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 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. 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 expectations regarding
integration; the level of synergies to be achieved; its ability to
return to non-GAAP profitability and positive cash flow in the
fourth quarter of 2019; and its financial outlook for the third
quarter of 2019.
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, the combined
company's ability to promptly and effectively integrate the
businesses; Infinera's ability to realize synergies in a timely
manner; market acceptance of the combined company's end-to-end
portfolio; Infinera’s future capital needs and its ability to
generate the cash flow or otherwise secure the capital necessary to
make anticipated capital expenditures; Infinera's ability to
service its debt obligations and pursue its strategic plan; the
diversion of management time on issues related to the integration;
delays in the development and introduction of new products or
updates to existing products and market acceptance of these
products; 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; the effects of customer consolidation;
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; Infinera’s ability
to successfully integrate its enterprise resource planning system
and other management systems; the effect of global macroeconomic
conditions, including tariffs, 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 March
30, 2019 as filed with the SEC on May 9, 2019, 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 acquisition-related deferred
revenue and inventory adjustments, other customer related charges,
non-cash stock-based compensation expenses, amortization of
acquired intangible assets, acquisition and integration costs,
restructuring and related costs (credits), litigation charges,
amortization of debt discount on Infinera’s convertible senior
notes, impairment charge of non-marketable equity investments, gain
on non-marketable equity investments, and certain purchase
accounting adjustments related to Infinera's acquisitions, along
with related tax effects. 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 has included forward-looking non-GAAP information in
this press release, including an estimate of certain non-GAAP
financial measures for the third quarter of 2019 that exclude
non-cash stock-based compensation expenses, acquisition related
deferred revenue adjustments, acquisition and integration costs
related to Infinera's acquisition of Coriant, restructuring and
related expenses, amortization of acquired intangible assets and
related tax effects. Please see the section titled, “GAAP to
Non-GAAP Reconciliations of Financial Outlook” below on specific
adjustments.
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 gross margin,
operating margin, net loss, or basic and diluted net loss per share
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.
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 |
|
|
June 29, 2019 |
|
June 30, 2018 |
|
June 29, 2019 |
|
June 30, 2018 |
Revenue: |
|
|
|
|
|
|
|
|
Product |
|
$ |
226,866 |
|
|
$ |
175,288 |
|
|
$ |
449,873 |
|
|
$ |
346,917 |
|
Services |
|
69,384 |
|
|
32,939 |
|
|
139,084 |
|
|
63,991 |
|
Total revenue |
|
296,250 |
|
|
208,227 |
|
|
588,957 |
|
|
410,908 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product |
|
177,501 |
|
|
105,914 |
|
|
335,318 |
|
|
208,238 |
|
Cost of services |
|
36,831 |
|
|
13,039 |
|
|
73,507 |
|
|
25,870 |
|
Amortization of intangible assets |
|
8,098 |
|
|
4,943 |
|
|
16,350 |
|
|
10,284 |
|
Acquisition and integration costs |
|
10,700 |
|
|
— |
|
|
12,764 |
|
|
— |
|
Restructuring and related |
|
1,864 |
|
|
26 |
|
|
23,330 |
|
|
43 |
|
Total cost of revenue |
|
234,994 |
|
|
123,922 |
|
|
461,269 |
|
|
244,435 |
|
Gross profit |
|
61,256 |
|
|
84,305 |
|
|
127,688 |
|
|
166,473 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
Research and development |
|
73,937 |
|
|
56,158 |
|
|
147,597 |
|
|
114,839 |
|
Sales and marketing |
|
37,651 |
|
|
28,234 |
|
|
77,688 |
|
|
57,119 |
|
General and administrative |
|
35,672 |
|
|
18,365 |
|
|
68,716 |
|
|
36,201 |
|
Amortization of intangible assets |
|
6,745 |
|
|
1,487 |
|
|
13,802 |
|
|
3,094 |
|
Acquisition and integration costs |
|
12,164 |
|
|
— |
|
|
19,298 |
|
|
— |
|
Restructuring and related |
|
3,471 |
|
|
1,680 |
|
|
20,659 |
|
|
1,517 |
|
Total operating expenses |
|
169,640 |
|
|
105,924 |
|
|
347,760 |
|
|
212,770 |
|
Loss from operations |
|
(108,384 |
) |
|
(21,619 |
) |
|
(220,072 |
) |
|
(46,297 |
) |
Other income (expense), net: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
183 |
|
|
629 |
|
|
949 |
|
|
1,526 |
|
Interest expense |
|
(7,280 |
) |
|
(2,501 |
) |
|
(14,843 |
) |
|
(6,184 |
) |
Other gain (loss), net: |
|
3,210 |
|
|
1,429 |
|
|
287 |
|
|
1,935 |
|
Total other income (expense), net |
|
(3,887 |
) |
|
(443 |
) |
|
(13,607 |
) |
|
(2,723 |
) |
Loss before income taxes |
|
(112,271 |
) |
|
(22,062 |
) |
|
(233,679 |
) |
|
(49,020 |
) |
Provision for (benefit from) income taxes |
|
1,385 |
|
|
(124 |
) |
|
1,578 |
|
|
(802 |
) |
Net loss |
|
(113,656 |
) |
|
(21,938 |
) |
|
(235,257 |
) |
|
(48,218 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share - basic and diluted: |
|
$ |
(0.64 |
) |
|
$ |
(0.14 |
) |
|
$ |
(1.33 |
) |
|
$ |
(0.32 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing net loss per common share
- basic and diluted: |
|
178,677 |
|
|
152,259 |
|
|
177,542 |
|
|
151,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Infinera CorporationGAAP to Non-GAAP
Reconciliations(In thousands, except percentages
and per share data)(Unaudited)
|
Three Months Ended |
|
Six Months Ended |
|
June 29, 2019 |
|
|
|
March 30, 2019 |
|
|
|
June 30, 2018 |
|
|
|
June 29, 2019 |
|
|
|
June 30, 2018 |
|
|
Reconciliation of Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as reported |
$ |
296,250 |
|
|
|
|
$ |
292,707 |
|
|
|
|
$ |
208,227 |
|
|
|
|
$ |
588,957 |
|
|
|
|
$ |
410,908 |
|
|
|
Acquisition-related deferred revenue adjustment(1) |
2,530 |
|
|
|
|
2,905 |
|
|
|
|
— |
|
|
|
|
5,435 |
|
|
|
|
— |
|
|
|
Other customer related charges(2) |
|
8,100 |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
8,100 |
|
|
|
|
|
— |
|
|
|
Non-GAAP as adjusted |
$ |
306,880 |
|
|
|
|
$ |
295,612 |
|
|
|
|
$ |
208,227 |
|
|
|
|
$ |
602,492 |
|
|
|
|
$ |
410,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Gross Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as reported |
$ |
61,256 |
|
|
20.7 |
% |
|
$ |
66,432 |
|
|
22.7 |
% |
|
$ |
84,305 |
|
|
40.5 |
% |
|
$ |
127,688 |
|
|
21.7 |
% |
|
$ |
166,473 |
|
|
40.5 |
% |
Acquisition-related deferred revenue adjustment(1) |
2,530 |
|
|
|
|
2,905 |
|
|
|
|
— |
|
|
|
|
5,435 |
|
|
|
|
— |
|
|
|
Other customer related charges(2) |
8,100 |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
8,100 |
|
|
|
|
|
— |
|
|
|
Stock-based compensation(3) |
1,591 |
|
|
|
|
1,328 |
|
|
|
|
2,039 |
|
|
|
|
2,919 |
|
|
|
|
3,033 |
|
|
|
Amortization of acquired intangible assets(4) |
8,098 |
|
|
|
|
8,252 |
|
|
|
|
4,943 |
|
|
|
|
16,350 |
|
|
|
|
10,284 |
|
|
|
Acquisition and integration costs(5) |
10,700 |
|
|
|
|
2,064 |
|
|
|
|
— |
|
|
|
|
12,764 |
|
|
|
|
— |
|
|
|
Acquisition-related inventory adjustments(6) |
— |
|
|
|
|
1,778 |
|
|
|
|
— |
|
|
|
|
1,778 |
|
|
|
|
— |
|
|
|
Restructuring and related(7) |
1,864 |
|
|
|
|
21,466 |
|
|
|
|
26 |
|
|
|
|
23,330 |
|
|
|
|
43 |
|
|
|
Non-GAAP as adjusted |
$ |
94,139 |
|
|
30.7 |
% |
|
$ |
104,225 |
|
|
35.3 |
% |
|
$ |
91,313 |
|
|
43.9 |
% |
|
$ |
198,364 |
|
|
32.9 |
% |
|
$ |
179,833 |
|
|
43.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as reported |
$ |
169,640 |
|
|
|
|
$ |
178,120 |
|
|
|
|
$ |
105,924 |
|
|
|
|
$ |
347,760 |
|
|
|
|
$ |
212,770 |
|
|
|
Stock-based compensation(3) |
11,456 |
|
|
|
|
7,385 |
|
|
|
|
10,005 |
|
|
|
|
18,841 |
|
|
|
|
19,994 |
|
|
|
Amortization of acquired intangible assets(4) |
6,745 |
|
|
|
|
7,057 |
|
|
|
|
1,487 |
|
|
|
|
13,802 |
|
|
|
|
3,094 |
|
|
|
Acquisition and integration costs(5) |
12,164 |
|
|
|
|
7,134 |
|
|
|
|
— |
|
|
|
|
19,298 |
|
|
|
|
— |
|
|
|
Restructuring and related(7) |
3,471 |
|
|
|
|
17,188 |
|
|
|
|
1,680 |
|
|
|
|
20,659 |
|
|
|
|
1,517 |
|
|
|
Litigation charges(8) |
4,050 |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
4,050 |
|
|
|
|
— |
|
|
|
Non-GAAP as adjusted |
$ |
131,754 |
|
|
|
|
$ |
139,356 |
|
|
|
|
$ |
92,752 |
|
|
|
|
$ |
271,110 |
|
|
|
|
$ |
188,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Loss from Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as reported |
$ |
(108,384 |
) |
|
(36.6 |
)% |
|
$ |
(111,688 |
) |
|
(38.2 |
)% |
|
$ |
(21,619 |
) |
|
(10.4 |
)% |
|
$ |
(220,072 |
) |
|
(37.4 |
)% |
|
$ |
(46,297 |
) |
|
(11.3 |
)% |
Acquisition-related deferred revenue adjustment(1) |
2,530 |
|
|
|
|
2,905 |
|
|
|
|
— |
|
|
|
|
5,435 |
|
|
|
|
— |
|
|
|
Other customer related charges(2) |
|
8,100 |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
8,100 |
|
|
|
|
— |
|
|
|
Stock-based compensation(3) |
13,047 |
|
|
|
|
8,713 |
|
|
|
|
12,044 |
|
|
|
|
21,760 |
|
|
|
|
23,027 |
|
|
|
Amortization of acquired intangible assets(4) |
14,843 |
|
|
|
|
15,309 |
|
|
|
|
6,430 |
|
|
|
|
30,152 |
|
|
|
|
13,378 |
|
|
|
Acquisition and integration costs(5) |
22,864 |
|
|
|
|
9,198 |
|
|
|
|
— |
|
|
|
|
32,062 |
|
|
|
|
— |
|
|
|
Acquisition-related inventory adjustments(6) |
— |
|
|
|
|
1,778 |
|
|
|
|
— |
|
|
|
|
1,778 |
|
|
|
|
— |
|
|
|
Restructuring and related(7) |
5,335 |
|
|
|
|
38,654 |
|
|
|
|
1,706 |
|
|
|
|
43,989 |
|
|
|
|
1,560 |
|
|
|
Litigation charges(8) |
4,050 |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
4,050 |
|
|
|
|
— |
|
|
|
Non-GAAP as adjusted |
$ |
(37,615 |
) |
|
(12.3 |
)% |
|
$ |
(35,131 |
) |
|
(11.9 |
)% |
|
$ |
(1,439 |
) |
|
(0.7 |
)% |
|
$ |
(72,746 |
) |
|
(12.1 |
)% |
|
$ |
(8,332 |
) |
|
(2.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
Six Months Ended |
|
June 29, 2019 |
|
|
|
|
March 30, 2019 |
|
|
|
|
June 30, 2018 |
|
|
|
|
June 29, 2019 |
|
|
|
|
June 30, 2018 |
|
|
|
Reconciliation of Net Loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as reported |
$ |
(113,656 |
) |
|
|
|
|
$ |
(121,601 |
) |
|
|
|
|
$ |
(21,938 |
) |
|
|
|
|
$ |
(235,257 |
) |
|
|
|
|
(48,218 |
) |
|
|
|
Acquisition-related deferred revenue adjustment(1) |
2,530 |
|
|
|
|
|
2,905 |
|
|
|
|
|
— |
|
|
|
|
|
5,435 |
|
|
|
|
|
— |
|
|
|
|
Other customer related charges(2) |
8,100 |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
8,100 |
|
|
|
|
|
— |
|
|
|
|
Stock-based compensation(3) |
13,047 |
|
|
|
|
|
8,713 |
|
|
|
|
|
12,044 |
|
|
|
|
|
21,760 |
|
|
|
|
|
23,027 |
|
|
|
|
Amortization of acquired intangible assets(4) |
14,843 |
|
|
|
|
|
15,309 |
|
|
|
|
|
6,430 |
|
|
|
|
|
30,152 |
|
|
|
|
|
13,378 |
|
|
|
|
Acquisition and integration costs(5) |
22,864 |
|
|
|
|
|
9,198 |
|
|
|
|
|
— |
|
|
|
|
|
32,062 |
|
|
|
|
|
— |
|
|
|
|
Acquisition-related inventory adjustments(6) |
— |
|
|
|
|
|
1,778 |
|
|
|
|
|
— |
|
|
|
|
|
1,778 |
|
|
|
|
|
— |
|
|
|
|
Restructuring and related(7) |
5,335 |
|
|
|
|
|
38,654 |
|
|
|
|
|
1,706 |
|
|
|
|
|
43,989 |
|
|
|
|
|
1,560 |
|
|
|
|
Litigation charges(8) |
4,050 |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
4,050 |
|
|
|
|
|
|
— |
|
|
|
|
Amortization of debt discount(9) |
4,348 |
|
|
|
|
|
4,241 |
|
|
|
|
|
1,892 |
|
|
|
|
|
8,589 |
|
|
|
|
|
4,671 |
|
|
|
|
Gain/Loss on non-marketable equity investment(10) |
(1,009 |
) |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
(1,009 |
) |
|
|
|
|
— |
|
|
|
|
Income tax effects(11) |
(2,470 |
) |
|
|
|
|
(426 |
) |
|
|
|
|
(1,415 |
) |
|
|
|
|
(2,896 |
) |
|
|
|
|
(2,944 |
) |
|
|
|
Non-GAAP as adjusted |
$ |
(42,018 |
) |
|
|
|
|
$ |
(41,229 |
) |
|
|
|
|
$ |
(1,281 |
) |
|
|
|
|
$ |
(83,247 |
) |
|
|
|
|
$ |
(8,526 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss per Common Share - Basic and
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as reported |
$ |
(0.64 |
) |
|
|
|
|
$ |
(0.69 |
) |
|
|
|
|
$ |
(0.14 |
) |
|
|
|
|
$ |
(1.33 |
) |
|
|
|
|
$ |
(0.32 |
) |
|
|
|
Non-GAAP as adjusted |
$ |
(0.24 |
) |
|
|
|
|
$ |
(0.23 |
) |
|
|
|
|
$ |
(0.01 |
) |
|
|
|
|
$ |
(0.47 |
) |
|
|
|
|
$ |
(0.06 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Used in Computing Net Loss per Common Share
- Basic and Diluted: |
178,677 |
|
|
|
|
|
176,406 |
|
|
|
|
|
152,259 |
|
|
|
|
|
177,542 |
|
|
|
|
|
151,296 |
|
|
|
|
_____________________________________ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Business combination accounting principles require Infinera to
write down to fair value its maintenance support contracts assumed
in the Coriant 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) Other customer related charges include one-time benefits and
charges that are not directly related to Infinera’s ongoing or core
business results. During the quarter, Infinera agreed to
reimburse a customer for certain expenses incurred by them in
connection with a network service outage that occurred during the
fourth quarter of fiscal 2018. 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 this
reimbursement is not indicative of ongoing operating
performance. |
|
(3) Stock-based compensation expense is calculated in accordance
with the fair value recognition provisions of Financial Accounting
Standards Board Accounting Standards Codification Topic 718,
Compensation – Stock Compensation effective January 1, 2006.
The following table summarizes the effects of stock-based
compensation related to employees and non-employees (in
thousands): |
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 29,2019 |
|
March 30, 2019 |
|
June 30,2018 |
|
June 29,2019 |
|
June 30,2018 |
Cost of revenue |
|
$ |
663 |
|
|
$ |
538 |
|
|
$ |
624 |
|
|
$ |
1,201 |
|
|
$ |
502 |
|
Research and development |
|
6,127 |
|
|
3,603 |
|
|
4,192 |
|
|
9,730 |
|
|
8,516 |
|
Sales and marketing |
|
2,099 |
|
|
1,547 |
|
|
3,046 |
|
|
3,646 |
|
|
5,944 |
|
General and administration |
|
3,230 |
|
|
2,235 |
|
|
2,767 |
|
|
5,465 |
|
|
5,534 |
|
|
|
12,119 |
|
|
7,923 |
|
|
10,629 |
|
|
20,042 |
|
|
20,496 |
|
Cost of revenue - amortization from balance sheet* |
|
928 |
|
|
790 |
|
|
1,415 |
|
|
1,718 |
|
|
2,531 |
|
Total stock-based compensation expense |
|
$ |
13,047 |
|
|
$ |
8,713 |
|
|
$ |
12,044 |
|
|
$ |
21,760 |
|
|
$ |
23,027 |
|
______________________________________ |
* Stock-based compensation expense deferred to inventory and
deferred inventory costs in prior periods recognized in the current
period. |
|
(4) Amortization of acquired intangible assets consists of
developed technology, trade names, customer relationships and
backlog acquired in connection with the Coriant acquisition, which
closed during the fourth quarter of 2018. Amortization of acquired
intangible assets also consists of amortization of developed
technology, trade names and customer relationships acquired in
connection with the Transmode AB 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 gross profit,
operating expenses 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. |
|
(5) Acquisition and integration costs consist of legal,
financial, IT, manufacturing-related costs, employee-related costs
and professional fees incurred in connection with Infinera's
acquisition of Coriant. 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) 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 acquisition-related step-up in carrying value
for units sold in the quarter. Additionally, in connection with the
Coriant acquisition, cost of sales excludes a one-time adjustment
in inventory as a result of renegotiated supplier agreements that
contained unusually higher than market pricing. Management believes
these adjustments are useful to investors as an additional means to
reflect ongoing cost of sales and gross margin trends of Infinera's
business. |
|
(7) Restructuring and related costs are associated with
Infinera's two restructuring initiatives implemented during the
fourth quarter of 2018 and during the fourth quarter of 2017, the
planned closure of the Company's Berlin, Germany manufacturing
facility and Coriant's historical restructuring plan associated
with their early retirement plan. In addition, management included
accelerated amortization on operating lease right-of-use assets due
to the cease use of certain facilities. 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. |
|
(8) Litigation charges are associated with the preliminary
settlement of a litigation matter agreed to during the quarter
ended June 29, 2019. 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 this expense is not
indicative of ongoing operating performance. |
|
(9) 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 the $402.5 million in
aggregate principal amount of its 2.125% convertible debt issuance
in September 2018 due September 2024 and the $150 million in
aggregate principal amount of its 1.75% convertible debt issuance
in May 2013 due June 2018, over the term of the respective 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. |
|
(10) Management has excluded the gain on the sale related to
non-marketable equity investments in arriving at Infinera's
non-GAAP results because it is non-recurring, and management
believes that this income is not indicative of ongoing operating
performance |
|
(11) The difference between the GAAP and non-GAAP tax
provision 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)
|
June 29, 2019 |
|
December 29, 2018 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
109,034 |
|
|
$ |
202,954 |
|
Short-term investments |
1,497 |
|
|
26,511 |
|
Short-term restricted cash |
2,742 |
|
|
13,229 |
|
Accounts receivable, net of allowance for doubtful accounts of
$4,129 in 2019 and $3,680 in 2018 |
260,352 |
|
|
317,115 |
|
Inventory |
338,793 |
|
|
311,888 |
|
Prepaid expenses and other current assets |
109,817 |
|
|
85,400 |
|
Total current assets |
822,235 |
|
|
957,097 |
|
Property, plant and equipment, net |
159,210 |
|
|
342,820 |
|
Operating lease right-of-use assets |
64,740 |
|
|
— |
|
Intangible assets |
200,991 |
|
|
233,119 |
|
Goodwill |
229,281 |
|
|
227,231 |
|
Long-term restricted cash |
26,745 |
|
|
26,154 |
|
Other non-current assets |
10,817 |
|
|
14,849 |
|
Total assets |
$ |
1,514,019 |
|
|
$ |
1,801,270 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
194,882 |
|
|
$ |
191,187 |
|
Accrued expenses and other current liabilities |
158,617 |
|
|
131,891 |
|
Accrued compensation and related benefits |
77,152 |
|
|
71,152 |
|
Accrued warranty |
23,364 |
|
|
20,103 |
|
Deferred revenue |
78,417 |
|
|
88,534 |
|
Total current liabilities |
532,432 |
|
|
502,867 |
|
Long-term debt, net |
284,270 |
|
|
266,929 |
|
Long-term financing lease obligation |
1,413 |
|
|
193,538 |
|
Accrued warranty, non-current |
20,782 |
|
|
20,918 |
|
Deferred revenue, non-current |
28,510 |
|
|
31,768 |
|
Deferred tax liability |
10,094 |
|
|
13,347 |
|
Operating lease liabilities |
58,631 |
|
|
— |
|
Other long-term liabilities |
62,817 |
|
|
68,082 |
|
Commitments and contingencies (Note 19) |
|
|
|
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 29, 2019 and December 29, 2018 |
|
|
|
Issued and outstanding shares – 179,339 as of June 29, 2019 and
175,452 as of December 29, 2018 |
179 |
|
|
175 |
|
Additional paid-in capital |
1,715,657 |
|
|
1,685,916 |
|
Accumulated other comprehensive loss |
(32,236 |
) |
|
(25,300 |
) |
Accumulated deficit |
(1,168,530 |
) |
|
(956,970 |
) |
Total stockholders' equity |
515,070 |
|
|
703,821 |
|
Total liabilities and stockholders’ equity |
$ |
1,514,019 |
|
|
$ |
1,801,270 |
|
|
|
|
|
|
|
|
|
Infinera CorporationCondensed
Consolidated Statements of Cash Flows(In
thousands)(Unaudited)
|
|
Six Months Ended |
|
|
June 29, 2019 |
|
June 30, 2018 |
Cash Flows from Operating Activities: |
|
|
|
|
Net loss |
|
$ |
(235,257 |
) |
|
$ |
(48,218 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
Depreciation and amortization |
|
62,143 |
|
|
33,250 |
|
Non-cash restructuring charges and related (credits) |
|
18,172 |
|
|
(81 |
) |
Amortization of debt discount and issuance costs |
|
9,245 |
|
|
5,072 |
|
Operating lease amortization, net of accretion |
|
23,355 |
|
|
— |
|
Stock-based compensation expense |
|
21,760 |
|
|
23,027 |
|
Other loss |
|
10 |
|
|
167 |
|
Changes in assets and liabilities: |
|
|
|
|
Accounts receivable |
|
55,216 |
|
|
(22,015 |
) |
Inventory |
|
(30,640 |
) |
|
(8,703 |
) |
Prepaid expenses and other assets |
|
(30,958 |
) |
|
(1,809 |
) |
Accounts payable |
|
4,726 |
|
|
24,458 |
|
Accrued liabilities and other expenses |
|
(5,472 |
) |
|
(14,617 |
) |
Deferred revenue |
|
(12,267 |
) |
|
2,351 |
|
Net cash used in operating activities |
|
(119,967 |
) |
|
(7,118 |
) |
Cash Flows from Investing Activities: |
|
|
|
|
Purchase of available-for-sale investments |
|
— |
|
|
(2,986 |
) |
Proceeds from sales of available-for-sale investments |
|
— |
|
|
23,114 |
|
Proceeds from sale of non-marketable equity investments |
|
1,009 |
|
|
— |
|
Proceeds from maturities of investments |
|
25,085 |
|
|
98,112 |
|
Acquisition of business, net of cash acquired |
|
(10,000 |
) |
|
— |
|
Purchase of property and equipment |
|
(15,784 |
) |
|
(21,503 |
) |
Net cash provided by (used in) investing activities |
|
310 |
|
|
96,737 |
|
Cash Flows from Financing Activities: |
|
|
|
|
Proceeds from issuance of debt, net |
|
8,584 |
|
|
— |
|
Repayment of debt |
|
(96 |
) |
|
(150,000 |
) |
Proceeds from issuance of common stock |
|
7,740 |
|
|
11,066 |
|
Minimum tax withholding paid on behalf of employees for net share
settlement |
|
(354 |
) |
|
(964 |
) |
Net cash provided by (used in) financing activities |
|
15,874 |
|
|
(139,898 |
) |
Effect of exchange rate changes on cash and restricted cash |
|
(33 |
) |
|
(2,218 |
) |
Net change in cash, cash equivalents and restricted cash |
|
(103,816 |
) |
|
(52,497 |
) |
Cash, cash equivalents and restricted cash at beginning of
period |
|
242,337 |
|
|
121,486 |
|
Cash, cash equivalents and restricted cash at end of period(1) |
|
$ |
138,521 |
|
|
$ |
68,989 |
|
Supplemental disclosures of cash flow
information: |
|
|
|
|
Cash paid for income taxes, net of refunds |
|
$ |
13,606 |
|
|
$ |
2,210 |
|
Cash paid for interest |
|
$ |
4,687 |
|
|
$ |
1,328 |
|
Supplemental schedule of non-cash investing and financing
activities: |
|
|
|
|
Third-party manufacturer funding for transfer expenses
incurred |
|
$ |
3,327 |
|
|
$ |
— |
|
Transfer of inventory to fixed assets |
|
$ |
2,195 |
|
|
$ |
1,684 |
|
|
(1) Reconciliation of cash, cash equivalents and restricted cash to
the condensed consolidated balance sheets: |
|
June 29, 2019 |
|
June 30, 2018 |
|
|
|
|
|
(In thousands) |
Cash and cash equivalents |
$ |
109,034 |
|
|
$ |
63,308 |
|
Short-term restricted cash |
2,742 |
|
|
308 |
|
Long-term restricted cash |
26,745 |
|
|
5,373 |
|
Total cash, cash equivalents and restricted cash |
$ |
138,521 |
|
|
$ |
68,989 |
|
|
|
|
|
|
|
|
|
Infinera CorporationSupplemental
Financial Information(Unaudited)
|
Q3'17 |
|
Q4'17 |
|
Q1'18 |
|
Q2'18 |
|
Q3'18 |
|
Q4'18 |
|
Q1'19 |
|
Q2'19 |
GAAP Revenue ($ Mil) |
$ |
192.6 |
|
|
$ |
195.8 |
|
|
$ |
202.7 |
|
|
$ |
208.2 |
|
|
$ |
200.4 |
|
|
$ |
332.1 |
|
|
$ |
292.7 |
|
|
$ |
296.3 |
|
GAAP Gross Margin % |
|
35.2 |
% |
|
|
24.1 |
% |
|
|
40.5 |
% |
|
|
40.5 |
% |
|
|
35.0 |
% |
|
|
25.4 |
% |
|
|
22.7 |
% |
|
|
20.7 |
% |
Non-GAAP Gross Margin %(1) |
|
39.1 |
% |
|
|
37.5 |
% |
|
|
43.7 |
% |
|
|
43.9 |
% |
|
|
38.4 |
% |
|
|
31.8 |
% |
|
|
35.3 |
% |
|
|
30.7 |
% |
Revenue Composition: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic % |
|
59 |
% |
|
|
53 |
% |
|
|
64 |
% |
|
|
58 |
% |
|
|
49 |
% |
|
|
39 |
% |
|
|
45 |
% |
|
|
45 |
% |
International % |
|
41 |
% |
|
|
47 |
% |
|
|
36 |
% |
|
|
42 |
% |
|
|
51 |
% |
|
|
61 |
% |
|
|
55 |
% |
|
|
55 |
% |
Customers >10% of Revenue |
|
2 |
|
|
|
1 |
|
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
|
|
1 |
|
|
|
1 |
|
Cash Related Information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from Operations ($ Mil) |
($ |
20.9 |
) |
|
($ |
1.0 |
) |
|
($ |
14.1 |
) |
|
$ |
7.0 |
|
|
($ |
20.4 |
) |
|
($ |
71.6 |
) |
|
($ |
56.2 |
) |
|
($ |
63.8 |
) |
Capital Expenditures ($ Mil) |
$ |
11.0 |
|
|
$ |
7.8 |
|
|
$ |
8.0 |
|
|
$ |
13.5 |
|
|
$ |
5.5 |
|
|
$ |
10.7 |
|
|
$ |
6.6 |
|
|
$ |
9.2 |
|
Depreciation & Amortization ($ Mil) |
$ |
16.8 |
|
|
$ |
16.6 |
|
|
$ |
17.0 |
|
|
$ |
16.3 |
|
|
$ |
17.1 |
|
|
$ |
50.2 |
|
|
$ |
31.0 |
|
|
$ |
31.2 |
|
DSOs |
|
65 |
|
|
|
59 |
|
|
|
73 |
|
|
|
65 |
|
|
|
70 |
|
|
|
87 |
|
|
|
83 |
|
|
|
80 |
|
Inventory Metrics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw Materials ($ Mil) |
$ |
35.8 |
|
|
$ |
27.4 |
|
|
$ |
30.3 |
|
|
$ |
30.5 |
|
|
$ |
33.6 |
|
|
$ |
74.5 |
|
|
$ |
82.5 |
|
|
$ |
70.4 |
|
Work in Process ($ Mil) |
$ |
84.3 |
|
|
$ |
59.6 |
|
|
$ |
66.5 |
|
|
$ |
61.6 |
|
|
$ |
56.4 |
|
|
$ |
57.2 |
|
|
$ |
63.0 |
|
|
$ |
59.5 |
|
Finished Goods ($ Mil) |
$ |
122.7 |
|
|
$ |
127.7 |
|
|
$ |
119.1 |
|
|
$ |
127.2 |
|
|
$ |
121.9 |
|
|
$ |
180.2 |
|
|
$ |
187.0 |
|
|
$ |
208.9 |
|
Total Inventory ($ Mil) |
$ |
242.8 |
|
|
$ |
214.7 |
|
|
$ |
215.9 |
|
|
$ |
219.3 |
|
|
$ |
211.9 |
|
|
$ |
311.9 |
|
|
$ |
332.5 |
|
|
$ |
338.8 |
|
Inventory Turns(2) |
|
1.9 |
|
|
|
2.3 |
|
|
|
2.1 |
|
|
|
2.1 |
|
|
|
2.3 |
|
|
|
2.9 |
|
|
|
2.3 |
|
|
|
2.5 |
|
Worldwide Headcount |
|
2,296 |
|
|
|
2,145 |
|
|
|
2,084 |
|
|
|
2,070 |
|
|
|
2,079 |
|
|
|
3,876 |
|
|
|
3,708 |
|
|
|
3,632 |
|
Weighted Average Shares Outstanding (in
thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
148,777 |
|
|
|
149,412 |
|
|
|
150,333 |
|
|
|
152,259 |
|
|
|
153,492 |
|
|
|
174,908 |
|
|
|
176,406 |
|
|
|
178,677 |
|
Diluted(3) |
|
149,714 |
|
|
|
150,098 |
|
|
|
151,633 |
|
|
|
154,777 |
|
|
|
154,228 |
|
|
|
175,629 |
|
|
|
176,602 |
|
|
|
179,343 |
|
|
(1) Non-GAAP adjustments include restructuring and related
costs (credit), non-cash stock-based compensation expense, certain
purchase accounting adjustments related to Infinera's acquisitions,
amortization of acquired intangible assets, other customer related
charges and certain other one-time charges. 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
related costs, non-cash stock-based compensation expense, and
certain purchase accounting adjustments, divided by the average
inventory for the quarter. |
|
(3) Diluted shares presented for information only. |
|
Infinera CorporationGAAP to Non-GAAP
Reconciliation of Financial Outlook(In millions,
except percentages and per share
data)(Unaudited)
The following amounts represent the midpoint of the expected
range:
|
|
Q3'19 |
|
|
Outlook |
Reconciliation of Revenue: |
|
|
U.S. GAAP |
|
$ |
328 |
|
Acquisition-related deferred revenue adjustment |
|
2 |
|
Non-GAAP |
|
$ |
330 |
|
|
|
|
Reconciliation of Gross Margin: |
|
|
U.S. GAAP |
|
27 |
% |
Acquisition-related deferred revenue adjustment |
|
1 |
% |
Stock-based compensation |
|
1 |
% |
Amortization of acquired intangible assets |
|
2 |
% |
Restructuring and related |
|
1 |
% |
Non-GAAP |
|
32 |
% |
|
|
|
Reconciliation of Operating Expenses: |
|
|
U.S. GAAP |
|
$ |
150 |
|
Stock-based compensation |
|
(9 |
) |
Amortization of acquired intangible assets |
|
(5 |
) |
Acquisition and integration costs |
|
(5 |
) |
Restructuring and related |
|
(1 |
) |
Non-GAAP |
|
$ |
130 |
|
|
|
|
Reconciliation of Operating Margin: |
|
|
U.S. GAAP |
|
(19 |
)% |
Acquisition-related deferred revenue adjustment |
|
1 |
% |
Stock-based compensation |
|
3 |
% |
Amortization of acquired intangible assets |
|
4 |
% |
Acquisition and integration costs |
|
3 |
% |
Restructuring and related |
|
1 |
% |
Non-GAAP |
|
(7 |
)% |
|
|
|
Reconciliation of Net Loss per Common Share: |
|
|
U.S. GAAP |
|
$ |
(0.40 |
) |
Acquisition-related deferred revenue adjustment |
|
0.01 |
|
Stock-based compensation |
|
0.06 |
|
Amortization of acquired intangible assets |
|
0.07 |
|
Acquisition and integration costs |
|
0.06 |
|
Restructuring and related |
|
0.01 |
|
Amortization of debt discount |
|
0.02 |
|
Non-GAAP |
|
$ |
(0.17 |
) |
|
|
|
|
|
Contacts:
Media: Anna VueTel. +1 (916) 595-8157avue@infinera.com
Investors:Ted MoreauTel: + 1 (408)
542-6205tmoreau@infinera.com
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