Infinera Corporation (NASDAQ: INFN) today released financial
results for its first quarter ended March 28, 2020.
GAAP revenue for the quarter was $330.3 million
compared to $384.6 million in the fourth quarter of 2019 and $292.7
million in the first quarter of 2019.
GAAP gross margin for the quarter was 23.3%
compared to 29.0% in the fourth quarter of 2019 and 22.7% in the
first quarter of 2019. GAAP operating margin for the quarter was
(23.3)% compared to (15.8)% in the fourth quarter of 2019 and
(38.2)% in the first quarter of 2019.
GAAP net loss for the quarter was $(99.3) million,
or $(0.55) per share, compared to $(66.6) million, or $(0.37) per
share, in the fourth quarter of 2019, and $(121.6) million, or
$(0.69) per share, in the first quarter of 2019.
Non-GAAP revenue for the quarter was $331.4 million
compared to $386.5 million in the fourth quarter of 2019 and $295.6
million in the first quarter of 2019.
Non-GAAP gross margin for the quarter was 28.3%
compared to 35.2% in the fourth quarter of 2019 and 35.3% in the
first quarter of 2019. Non-GAAP operating margin for the quarter
was (9.4)% compared to 2.3% in the fourth quarter of 2019 and
(11.9)% in the first quarter of 2019.
Non-GAAP net loss for the quarter was $(49.4)
million, or $(0.27) per share, compared to a net income of $6.4
million, or $0.03 per share, in the fourth quarter of 2019, and net
loss of $(41.2) million, or $(0.23) per share, in the first quarter
of 2019.
A further explanation of the use of non-GAAP
financial information and a reconciliation of each of the non-GAAP
financial measures to the most directly comparable GAAP financial
measure can be found at the end of this release.
“While facing impacts associated with the COVID-19
pandemic, we continued to service our customers and deliver
year-over-year growth in revenue and orders during the quarter,”
said Tom Fallon, Infinera CEO. “While the macro-economic
environment creates visibility challenges for the second half of
the year, we are on track for ICE6 delivery this year and remain
very optimistic about the opportunity we see for Infinera in the
medium and long term, driven by our truly differentiated
performance in the fast-growing high-capacity optical market.”
Financial Outlook
Infinera's outlook for the quarter ending June 27,
2020 is as follows:
- GAAP revenue is expected to be $319 million +/- $10 million.
Non-GAAP revenue is expected to be $320 million +/- $10
million.
- GAAP gross margin is expected to be 29% +/- 200 bps. Non-GAAP
gross margin is expected to be 33% +/- 200 bps.
- GAAP operating expenses are expected to be $142
million +/- $2 million. Non-GAAP operating expenses are
expected to be $122 million +/- $2 million.
- GAAP operating margin is expected to be approximately (15.5)%
+/- 300 bps. Non-GAAP operating margin is expected to be
approximately (4)% +/- 300 bps.
First Quarter 2020 Investor Slides
Available Online
Investor slides reviewing Infinera's first quarter
of 2020 financial results will be furnished to the SEC on a Current
Report on Form 8-K and published on Infinera's Investor Relations
website at investors.infinera.com prior to first quarter of 2020
earnings conference call. Analysts and investors are encouraged to
review these slides 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 first quarter of 2020
and its outlook for the second quarter of 2020 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.
Contacts:
Media:Anna VueTel. +1 (916)
595-8157avue@infinera.com
Investors:Michael Bowen, ICR, Inc.Tel. +1 (203)
682-8299Michael.Bowen@icrinc.com
Marc P. Griffin, ICR, Inc.Tel. +1 (646)
277-1290Marc.Griffin@icrinc.com
About Infinera
Infinera is a global supplier of innovative
networking solutions that enable carriers, cloud operators,
governments, and enterprises to scale network bandwidth, accelerate
service innovation, and automate network operations. The Infinera
end-to-end packet-optical portfolio delivers industry-leading
economics and performance in long-haul, submarine, data center
interconnect, and metro transport applications. To learn more about
Infinera, visit www.infinera.com, follow us on Twitter @Infinera,
and read Infinera's 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 visibility into
the performance of its business in the second half of 2020 based on
the unpredictability of the macro-economic environment; Infinera's
expectations related to the delivery of ICE6 in 2020; Infinera’s
medium- and long-term opportunities; and its financial outlook for
the second quarter of 2020, including the projected revenue impact
of the coronavirus for the second quarter of 2020.
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 effect of
the COVID-19 pandemic on Infinera’s business, results of
operations, financial condition, and stock price; the effect of
global and regional economic conditions on Infinera’s business,
including effects on purchasing decisions by customers; 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; delays in the development and
introduction of new products or updates to existing products;
market acceptance of Infinera’s end-to-end portfolio; Infinera's
reliance on single and limited source suppliers; 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; the
effects of customer consolidation; the impacts of foreign currency
fluctuations; Infinera’s ability to protect Infinera’s intellectual
property; claims by others that Infinera infringes their
intellectual property; war, terrorism, public health issues,
natural disasters and other circumstances that could disrupt 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 Annual Report on Form 10-K
for the year ended on December 28, 2019 as filed with the SEC on
March 4, 2020, 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 financial measures that exclude
acquisition-related deferred revenue and inventory adjustments,
stock-based compensation expenses, amortization of acquired
intangible assets, acquisition and integration costs, restructuring
and related costs, amortization of debt discount on Infinera’s
convertible senior notes, and COVID-19 related costs, along with
related income 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 second quarter of 2020 that
exclude acquisition-related deferred revenue adjustments,
stock-based compensation expenses, amortization of acquired
intangible assets, acquisition and integration costs related to
Infinera's acquisition of Coriant, and restructuring and related
expenses. Please see the section titled, “GAAP to Non-GAAP
Reconciliation 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
revenue, gross margin, operating expenses and 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.
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 |
|
|
March 28, 2020 |
|
March 30, 2019 |
Revenue: |
|
|
|
|
Product |
|
$ |
255,192 |
|
|
$ |
223,007 |
|
Services |
|
75,081 |
|
|
69,700 |
|
Total revenue |
|
330,273 |
|
|
292,707 |
|
Cost of revenue: |
|
|
|
|
Cost of product |
|
201,792 |
|
|
157,817 |
|
Cost of services |
|
40,695 |
|
|
36,676 |
|
Amortization of intangible assets |
|
8,628 |
|
|
8,252 |
|
Acquisition and integration costs |
|
1,035 |
|
|
2,064 |
|
Restructuring and related |
|
1,157 |
|
|
21,466 |
|
Total cost of revenue |
|
253,307 |
|
|
226,275 |
|
Gross profit |
|
76,966 |
|
|
66,432 |
|
Operating expenses: |
|
|
|
|
Research and development |
|
68,180 |
|
|
73,660 |
|
Sales and marketing |
|
36,689 |
|
|
40,037 |
|
General and administrative |
|
29,620 |
|
|
33,044 |
|
Amortization of intangible assets |
|
4,555 |
|
|
7,057 |
|
Acquisition and integration costs |
|
9,222 |
|
|
7,134 |
|
Restructuring and related |
|
5,580 |
|
|
17,188 |
|
Total operating expenses |
|
153,846 |
|
|
178,120 |
|
Loss from operations |
|
(76,880 |
) |
|
(111,688 |
) |
Other income (expense), net: |
|
|
|
|
Interest income |
|
24 |
|
|
766 |
|
Interest expense |
|
(8,794 |
) |
|
(7,563 |
) |
Other gain (loss), net: |
|
(12,682 |
) |
|
(2,923 |
) |
Total other income (expense), net |
|
(21,452 |
) |
|
(9,720 |
) |
Loss before income taxes |
|
(98,332 |
) |
|
(121,408 |
) |
Provision for income taxes |
|
936 |
|
|
193 |
|
Net loss |
|
(99,268 |
) |
|
(121,601 |
) |
|
|
|
|
|
Net loss per common share - basic and diluted: |
|
$ |
(0.55 |
) |
|
$ |
(0.69 |
) |
|
|
|
|
|
Weighted average shares used in computing net loss per common share
- basic and diluted: |
|
|
|
|
Basic |
|
182,024 |
|
|
176,406 |
|
Diluted |
|
182,024 |
|
|
176,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Infinera CorporationGAAP to Non-GAAP
Reconciliations(In thousands, except percentages
and per share data)(Unaudited)
|
|
Three Months Ended |
|
|
March 28, 2020 |
|
|
|
December 28, 2019 |
|
|
|
March 30, 2019 |
|
|
Reconciliation of Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as reported |
|
$ |
330,273 |
|
|
|
|
$ |
384,567 |
|
|
|
|
$ |
292,707 |
|
|
|
Acquisition-related deferred revenue adjustment(1) |
|
1,110 |
|
|
|
|
1,891 |
|
|
|
|
2,905 |
|
|
|
Non-GAAP as adjusted |
|
$ |
331,383 |
|
|
|
|
$ |
386,458 |
|
|
|
|
$ |
295,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Gross Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as reported |
|
$ |
76,966 |
|
|
23.3 |
% |
|
$ |
111,406 |
|
|
29.0 |
% |
|
$ |
66,432 |
|
|
22.7 |
% |
Acquisition-related deferred revenue adjustment(1) |
|
1,110 |
|
|
|
|
1,891 |
|
|
|
|
2,905 |
|
|
|
Stock-based compensation(2) |
|
2,102 |
|
|
|
|
1,752 |
|
|
|
|
1,328 |
|
|
|
Amortization of acquired intangible assets(3) |
|
8,628 |
|
|
|
|
8,437 |
|
|
|
|
8,252 |
|
|
|
Acquisition and integration costs(4) |
|
1,035 |
|
|
|
|
7,238 |
|
|
|
|
2,064 |
|
|
|
Acquisition-related inventory adjustments(5) |
|
— |
|
|
|
|
— |
|
|
|
|
1,778 |
|
|
|
Restructuring and related(6) |
|
1,157 |
|
|
|
|
5,407 |
|
|
|
|
21,466 |
|
|
|
COVID-19 related costs(8) |
|
2,880 |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
Non-GAAP as adjusted |
|
$ |
93,878 |
|
|
28.3 |
% |
|
$ |
136,131 |
|
|
35.2 |
% |
|
$ |
104,225 |
|
|
35.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as reported |
|
$ |
153,846 |
|
|
|
|
$ |
172,277 |
|
|
|
|
$ |
178,120 |
|
|
|
Stock-based compensation(2) |
|
9,601 |
|
|
|
|
9,321 |
|
|
|
|
7,385 |
|
|
|
Amortization of acquired intangible assets(3) |
|
4,555 |
|
|
|
|
6,617 |
|
|
|
|
7,057 |
|
|
|
Acquisition and integration costs(4) |
|
9,222 |
|
|
|
|
11,011 |
|
|
|
|
7,134 |
|
|
|
Restructuring and related costs(6) |
|
5,580 |
|
|
|
|
18,024 |
|
|
|
|
17,188 |
|
|
|
Non-GAAP as adjusted |
|
$ |
124,888 |
|
|
|
|
$ |
127,304 |
|
|
|
|
$ |
139,356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income/(Loss) from
Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as reported |
|
$ |
(76,880 |
) |
|
(23.3 |
)% |
|
$ |
(60,871 |
) |
|
(15.8 |
)% |
|
$ |
(111,688 |
) |
|
(38.2 |
)% |
Acquisition-related deferred revenue adjustment(1) |
|
1,110 |
|
|
|
|
1,891 |
|
|
|
|
2,905 |
|
|
|
Stock-based compensation(2) |
|
11,703 |
|
|
|
|
11,073 |
|
|
|
|
8,713 |
|
|
|
Amortization of acquired intangible assets(3) |
|
13,183 |
|
|
|
|
15,054 |
|
|
|
|
15,309 |
|
|
|
Acquisition and integration costs(4) |
|
10,257 |
|
|
|
|
18,249 |
|
|
|
|
9,198 |
|
|
|
Acquisition-related inventory adjustments(5) |
|
— |
|
|
|
|
— |
|
|
|
|
1,778 |
|
|
|
Restructuring and related costs(6) |
|
6,737 |
|
|
|
|
23,431 |
|
|
|
|
38,654 |
|
|
|
COVID-19 related costs(8) |
|
2,880 |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
Non-GAAP as adjusted |
|
$ |
(31,010 |
) |
|
(9.4 |
)% |
|
$ |
8,827 |
|
|
2.3 |
% |
|
$ |
(35,131 |
) |
|
(11.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income/(Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as reported |
|
$ |
(99,268 |
) |
|
|
|
$ |
(66,594 |
) |
|
|
|
$ |
(121,601 |
) |
|
|
Acquisition-related deferred revenue adjustment(1) |
|
1,110 |
|
|
|
|
1,891 |
|
|
|
|
2,905 |
|
|
|
Stock-based compensation(2) |
|
11,703 |
|
|
|
|
11,073 |
|
|
|
|
8,713 |
|
|
|
Amortization of acquired intangible assets(3) |
|
13,183 |
|
|
|
|
15,054 |
|
|
|
|
15,309 |
|
|
|
Acquisition and integration costs(4) |
|
10,257 |
|
|
|
|
18,249 |
|
|
|
|
9,198 |
|
|
|
Acquisition-related inventory adjustments(5) |
|
— |
|
|
|
|
— |
|
|
|
|
1,778 |
|
|
|
Restructuring and related costs(6) |
|
6,737 |
|
|
|
|
23,431 |
|
|
|
|
38,654 |
|
|
|
Amortization of debt discount(7) |
|
5,121 |
|
|
|
|
4,567 |
|
|
|
|
4,241 |
|
|
|
COVID-19 related costs(8) |
|
2,880 |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
Income tax effects(9) |
|
(1,170 |
) |
|
|
|
(1,268 |
) |
|
|
|
(426 |
) |
|
|
Non-GAAP as adjusted |
|
$ |
(49,447 |
) |
|
|
|
$ |
6,403 |
|
|
|
|
$ |
(41,229 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss per Common Share - Basic and
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP as reported |
|
$ |
(0.55 |
) |
|
|
|
$ |
(0.37 |
) |
|
|
|
$ |
(0.69 |
) |
|
|
Non-GAAP as adjusted(10) |
|
$ |
(0.27 |
) |
|
|
|
$ |
0.03 |
|
|
|
|
$ |
(0.23 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Used in Computing Net Loss per Common Share
- Basic and Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
182,024 |
|
|
|
|
180,864 |
|
|
|
|
176,406 |
|
|
|
Diluted(11) |
|
182,024 |
|
|
|
|
186,349 |
|
|
|
|
176,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 period of time after
the Coriant acquisition, so Infinera's GAAP revenue for a period of
time 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 revenue from support
contracts assumed in the Coriant acquisition are useful to
investors as an additional means to reflect revenue trends of
Infinera's business. |
(2) |
Stock-based compensation expense is calculated in accordance with
the fair value recognition provisions of Financial Accounting
Standards Board Accounting Standards Codification Topic 718,
Compensation – Stock Compensation effective January 1, 2006.
The following table summarizes the effects of stock-based
compensation related to employees and non-employees (in
thousands): |
|
|
Three Months Ended |
|
|
March 28,2020 |
|
December 28,2019 |
|
March 30,2019 |
Cost of revenue |
|
$ |
624 |
|
|
$ |
(120 |
) |
|
$ |
538 |
|
Research and development |
|
3,774 |
|
|
3,574 |
|
|
3,603 |
|
Sales and marketing |
|
2,644 |
|
|
2,578 |
|
|
1,547 |
|
General and administration |
|
3,183 |
|
|
3,169 |
|
|
2,235 |
|
|
|
10,225 |
|
|
9,201 |
|
|
7,923 |
|
Cost of revenue - amortization from balance sheet* |
|
1,478 |
|
|
1,872 |
|
|
790 |
|
Total stock-based compensation expense |
|
$ |
11,703 |
|
|
$ |
11,073 |
|
|
$ |
8,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Stock-based compensation expense deferred to inventory and deferred
inventory costs in prior periods recognized in the current
period. |
(3) |
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. |
(4) |
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. |
(5) |
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. |
(6) |
Restructuring and related costs are primarily associated the
closure of Infinera's Berlin, Germany site, the reduction of
headcount at Infinera's Munich, Germany site and Coriant's
historical restructuring plan associated with its 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. |
(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 the $402.5 million in
aggregate principal amount of its 2.125% convertible debt issuance
in September 2018 due September 2024 and $200 million in aggregate
principal amount of 2.50% convertible debt issued in March 9, 2020
due March 2027. 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) |
COVID-19 related costs consist of higher replacement costs
associated with certain warranty parts customers were unable to
return for repair due to logistics issues and mobility issues
related to COVID-19 public health mandates and restrictions. In
addition, we needed to source certain key components from an
alternate suppler at substantially higher cost in order for
Infinera to fulfill delivery commitments in the normal course of
business. As of result of these atypical challenges caused by the
circumstances surrounding the COVID-19 pandemic, management has
excluded these expenses from non-GAAP financial measures, as their
exclusion provides a better indication of Infinera's underlying
business performance. |
(9) |
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. |
(10) |
Non-GAAP EPS as adjusted did not exclude the impact of foreign
currency. Had the impact of foreign currency been excluded for the
three months ended March 28, 2020, December 28, 2019 and March 30,
2019, non-GAAP EPS as adjusted would have been $(0.20), $0.02 and
$(0.22), respectively. |
(11) |
The non-GAAP diluted shares include the potentially dilutive
securities from Infinera's stock-based benefit plans excluded from
the computation of dilutive net loss per share attributable to
common stockholders on a GAAP basis because the effect would have
been anti-dilutive. These potentially dilutive securities are added
for the computation of diluted net income per share on a non-GAAP
basis in periods when Infinera has net income on a non-GAAP
basis. |
|
|
Infinera
CorporationCondensed Consolidated Balance
Sheets(In thousands, except par
values)(Unaudited)
|
March 28, 2020 |
|
December 28, 2019 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash |
$ |
261,534 |
|
|
$ |
109,201 |
|
Short-term restricted cash |
4,126 |
|
|
4,339 |
|
Accounts receivable, net of allowance for doubtful accounts of and
$4,014 in 2020 and $4,005 in 2019 |
272,278 |
|
|
349,645 |
|
Inventory |
319,696 |
|
|
340,429 |
|
Prepaid expenses and other current assets |
159,845 |
|
|
139,217 |
|
Total current assets |
1,017,479 |
|
|
942,831 |
|
Property, plant and equipment, net |
148,815 |
|
|
150,793 |
|
Operating lease right-of-use assets |
61,914 |
|
|
68,081 |
|
Intangible assets |
155,356 |
|
|
170,346 |
|
Goodwill |
239,412 |
|
|
249,848 |
|
Long-term restricted cash |
17,808 |
|
|
19,257 |
|
Other non-current assets |
26,347 |
|
|
27,182 |
|
Total assets |
$ |
1,667,131 |
|
|
$ |
1,628,338 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
203,277 |
|
|
$ |
273,397 |
|
Accrued expenses and other current liabilities |
186,668 |
|
|
193,168 |
|
Accrued compensation and related benefits |
69,135 |
|
|
92,221 |
|
Short-term debt, net |
31,680 |
|
|
31,673 |
|
Accrued warranty |
18,988 |
|
|
21,107 |
|
Deferred revenue |
95,693 |
|
|
103,753 |
|
Total current liabilities |
605,441 |
|
|
715,319 |
|
Long-term debt, net |
509,564 |
|
|
323,678 |
|
Long-term financing lease obligation |
2,113 |
|
|
2,394 |
|
Accrued warranty, non-current |
20,474 |
|
|
22,241 |
|
Deferred revenue, non-current |
34,149 |
|
|
36,067 |
|
Deferred tax liability |
7,505 |
|
|
8,700 |
|
Operating lease liabilities |
60,420 |
|
|
64,210 |
|
Other long-term liabilities |
65,746 |
|
|
69,194 |
|
Commitments and contingencies (Note 13) |
|
|
|
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 March 28, 2020 and December 28, 2019 Issued and
outstanding shares – 183,198 as of March 28, 2020 and 181,134 as of
December 28, 2019 |
183 |
|
|
181 |
|
Additional paid-in capital |
1,827,484 |
|
|
1,740,884 |
|
Accumulated other comprehensive loss |
(46,139 |
) |
|
(34,639 |
) |
Accumulated deficit |
(1,419,809 |
) |
|
(1,319,891 |
) |
Total stockholders' equity |
361,719 |
|
|
386,535 |
|
Total liabilities and stockholders’ equity |
$ |
1,667,131 |
|
|
$ |
1,628,338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Infinera
CorporationCondensed Consolidated Statements of
Cash Flows(In
thousands)(Unaudited)
|
Three Months Ended |
|
March 28, 2020 |
|
March 30, 2019 |
Cash Flows from Operating Activities: |
|
|
|
Net loss |
$ |
(99,268 |
) |
|
$ |
(121,601 |
) |
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
|
|
|
Depreciation and amortization |
25,445 |
|
|
30,939 |
|
Non-cash restructuring and other related costs |
1,760 |
|
|
16,851 |
|
Amortization of debt discount and issuance costs |
5,731 |
|
|
4,614 |
|
Operating lease expense, net of accretion |
5,204 |
|
|
14,966 |
|
Stock-based compensation expense |
11,703 |
|
|
8,713 |
|
Other, net |
1,153 |
|
|
1,775 |
|
Changes in assets and liabilities: |
|
|
|
Accounts receivable |
70,238 |
|
|
49,754 |
|
Inventory |
17,737 |
|
|
(24,937 |
) |
Prepaid expenses and other assets |
(18,744 |
) |
|
(5,236 |
) |
Accounts payable |
(72,355 |
) |
|
(23,439 |
) |
Accrued liabilities and other expenses |
(32,083 |
) |
|
(15,486 |
) |
Deferred revenue |
(8,038 |
) |
|
6,933 |
|
Net cash used in operating activities |
(91,517 |
) |
|
(56,154 |
) |
Cash Flows from Investing Activities: |
|
|
|
Proceeds from maturities of investments |
— |
|
|
10,542 |
|
Acquisition of business, net of cash acquired |
— |
|
|
(10,000 |
) |
Purchase of property and equipment, net |
(8,464 |
) |
|
(6,590 |
) |
Net cash provided by (used in) investing activities |
(8,464 |
) |
|
(6,048 |
) |
Cash Flows from Financing Activities: |
|
|
|
Proceeds from issuance of 2027 Notes |
194,500 |
|
|
— |
|
Proceeds from revolving line of credit |
55,000 |
|
|
— |
|
Proceeds from issuance of debt, net |
— |
|
|
8,584 |
|
Repayment of mortgage payable |
(99 |
) |
|
— |
|
Payment of debt issuance cost |
(1,775 |
) |
|
— |
|
Proceeds from issuance of common stock |
7,395 |
|
|
7,740 |
|
Net cash provided by financing activities |
255,021 |
|
|
16,324 |
|
Effect of exchange rate changes on cash and restricted cash |
(4,369 |
) |
|
(1,213 |
) |
Net change in cash, cash equivalents and restricted cash |
150,671 |
|
|
(47,091 |
) |
Cash, cash equivalents and restricted cash at beginning of
period |
132,797 |
|
|
242,337 |
|
Cash, cash equivalents and restricted cash at end of period(1) |
$ |
283,468 |
|
|
$ |
195,246 |
|
Supplemental disclosures of cash flow
information: |
|
|
|
Cash paid for income taxes, net of refunds |
$ |
1,072 |
|
|
$ |
1,353 |
|
Cash paid for interest |
$ |
5,131 |
|
|
$ |
4,315 |
|
Supplemental schedule of non-cash investing
activities: |
|
|
|
Transfer of inventory to fixed assets |
$ |
118 |
|
|
$ |
1,805 |
|
Unpaid debt issuance cost |
$ |
1,793 |
|
|
$ |
— |
|
(1) |
Reconciliation of cash, cash equivalents and restricted cash to the
condensed consolidated balance sheets: |
|
March 28, 2020 |
|
March 30, 2019 |
|
(In thousands) |
Cash and cash equivalents |
$ |
261,534 |
|
|
$ |
167,259 |
|
Short-term restricted cash |
4,126 |
|
|
4,671 |
|
Long-term restricted cash |
17,808 |
|
|
23,316 |
|
Total cash, cash equivalents and restricted cash |
$ |
283,468 |
|
|
$ |
195,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Infinera
CorporationSupplemental Financial
Information(Unaudited)
|
|
Q2'18 |
|
Q3'18 |
|
Q4'18 |
|
Q1'19 |
|
Q2'19 |
|
Q3'19 |
|
Q4'19 |
|
Q1'20 |
GAAP Revenue ($ Mil) |
|
$ |
208.2 |
|
|
$ |
200.4 |
|
|
$ |
332.1 |
|
|
$ |
292.7 |
|
|
$ |
296.3 |
|
|
$ |
325.3 |
|
|
$ |
384.6 |
|
|
$ |
330.3 |
|
GAAP Gross Margin % |
|
|
40.5 |
% |
|
|
35.0 |
% |
|
|
25.4 |
% |
|
|
22.7 |
% |
|
|
20.7 |
% |
|
|
26.7 |
% |
|
|
29.0 |
% |
|
|
23.3 |
% |
Non-GAAP Gross Margin %(1) |
|
|
43.9 |
% |
|
|
38.4 |
% |
|
|
31.8 |
% |
|
|
35.3 |
% |
|
|
30.7 |
% |
|
|
33.1 |
% |
|
|
35.2 |
% |
|
|
28.3 |
% |
Revenue Composition: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic % |
|
|
58 |
% |
|
|
49 |
% |
|
|
39 |
% |
|
|
45 |
% |
|
|
45 |
% |
|
|
51 |
% |
|
|
52 |
% |
|
|
52 |
% |
International % |
|
|
42 |
% |
|
|
51 |
% |
|
|
61 |
% |
|
|
55 |
% |
|
|
55 |
% |
|
|
49 |
% |
|
|
48 |
% |
|
|
48 |
% |
Customers >10% of Revenue |
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
Cash Related Information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from Operations ($ Mil) |
|
$ |
7.0 |
|
|
($ |
20.4 |
) |
|
($ |
71.6 |
) |
|
($ |
56.2 |
) |
|
($ |
63.8 |
) |
|
($ |
37.2 |
) |
|
($ |
10.2 |
) |
|
($ |
91.5 |
) |
Capital Expenditures ($ Mil) |
|
$ |
13.5 |
|
|
$ |
5.5 |
|
|
$ |
10.7 |
|
|
$ |
6.6 |
|
|
$ |
9.2 |
|
|
$ |
12.5 |
|
|
$ |
2.7 |
|
|
($ |
8.5 |
) |
Depreciation & Amortization ($ Mil) |
|
$ |
16.3 |
|
|
$ |
17.1 |
|
|
$ |
50.2 |
|
|
$ |
31.0 |
|
|
$ |
31.2 |
|
|
$ |
29.0 |
|
|
$ |
28.6 |
|
|
$ |
25.4 |
|
DSOs |
|
|
65 |
|
|
|
70 |
|
|
|
87 |
|
|
|
83 |
|
|
|
80 |
|
|
|
80 |
|
|
|
83 |
|
|
|
75 |
|
Inventory Metrics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw Materials ($ Mil) |
|
$ |
30.5 |
|
|
$ |
33.6 |
|
|
$ |
74.5 |
|
|
$ |
82.5 |
|
|
$ |
70.4 |
|
|
$ |
47.2 |
|
|
$ |
47.4 |
|
|
$ |
50.0 |
|
Work in Process ($ Mil) |
|
$ |
61.6 |
|
|
$ |
56.4 |
|
|
$ |
57.2 |
|
|
$ |
63.0 |
|
|
$ |
59.5 |
|
|
$ |
52.2 |
|
|
$ |
48.8 |
|
|
$ |
52.0 |
|
Finished Goods ($ Mil) |
|
$ |
127.2 |
|
|
$ |
121.9 |
|
|
$ |
180.2 |
|
|
$ |
187.0 |
|
|
$ |
208.9 |
|
|
$ |
225.4 |
|
|
$ |
244.1 |
|
|
$ |
217.7 |
|
Total Inventory ($ Mil) |
|
$ |
219.3 |
|
|
$ |
211.9 |
|
|
$ |
311.9 |
|
|
$ |
332.5 |
|
|
$ |
338.8 |
|
|
$ |
324.8 |
|
|
$ |
340.3 |
|
|
$ |
319.7 |
|
Inventory Turns(2) |
|
|
2.1 |
|
|
|
2.3 |
|
|
|
2.9 |
|
|
|
2.3 |
|
|
|
2.5 |
|
|
|
2.7 |
|
|
|
2.9 |
|
|
|
3.0 |
|
Worldwide Headcount |
|
|
2,070 |
|
|
|
2,079 |
|
|
|
3,876 |
|
|
|
3,708 |
|
|
|
3,632 |
|
|
|
3,557 |
|
|
|
3,261 |
|
|
|
3,302 |
|
Weighted Average Shares Outstanding (in
thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
152,259 |
|
|
|
153,492 |
|
|
|
174,908 |
|
|
|
176,406 |
|
|
|
178,677 |
|
|
|
179,988 |
|
|
|
180,864 |
|
|
|
182,024 |
|
Diluted |
|
|
154,777 |
|
|
|
154,228 |
|
|
|
175,629 |
|
|
|
176,602 |
|
|
|
179,343 |
|
|
|
182,073 |
|
|
|
186,349 |
|
|
|
189,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Non-GAAP adjustments include acquisition-related deferred revenue
and inventory adjustments, stock-based compensation expenses,
amortization of acquired intangible assets, acquisition and
integration costs, restructuring and related costs, amortization of
debt discount on Infinera’s convertible senior notes, and COVID-19
related costs, along with related income tax effects. 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. |
|
|
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:
|
|
Q2'20 |
|
|
Outlook |
Reconciliation of Revenue: |
|
|
U.S. GAAP |
|
$ |
319 |
|
Acquisition-related deferred revenue adjustment |
|
|
1 |
|
Non-GAAP |
|
$ |
320 |
|
|
|
|
|
|
Reconciliation of Gross Margin: |
|
|
|
|
U.S. GAAP |
|
|
29.0 |
% |
Acquisition-related deferred revenue adjustment |
|
|
0.5 |
% |
Stock-based compensation |
|
|
0.5 |
% |
Amortization of acquired intangible assets |
|
|
3.0 |
% |
Non-GAAP |
|
|
33.0 |
% |
|
|
|
|
|
Reconciliation of Operating Expenses: |
|
|
|
|
U.S. GAAP |
|
$ |
142 |
|
Stock-based compensation |
|
|
(11 |
) |
Amortization of acquired intangible assets |
|
|
(4 |
) |
Restructuring and related costs |
|
|
(1 |
) |
Acquisition and integration costs |
|
|
(4 |
) |
Non-GAAP |
|
$ |
122 |
|
|
|
|
|
|
Reconciliation of Operating Margin: |
|
|
|
|
U.S. GAAP |
|
|
(15.5 |
)% |
Acquisition-related deferred revenue adjustment |
|
|
0.5 |
% |
Stock-based compensation |
|
|
4.5 |
% |
Amortization of acquired intangible assets |
|
|
4.5 |
% |
Acquisition and integration costs |
|
|
1.5 |
% |
Restructuring and related costs |
|
|
0.5 |
% |
Non-GAAP |
|
|
(4.0 |
)% |
|
|
|
Infinera (NASDAQ:INFN)
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