Infinera Corporation (NASDAQ: INFN) today released financial
results for its first quarter ended March 27, 2021.
GAAP revenue for the quarter was $330.9 million compared to
$353.5 million in the fourth quarter of 2020 and $330.3 million in
the first quarter of 2020.
GAAP gross margin for the quarter was 35.4% compared to 35.7% in
the fourth quarter of 2020 and 23.3% in the first quarter of 2020.
GAAP operating margin for the quarter was (7.0)% compared to (1.9)%
in the fourth quarter of 2020 and (23.3)% in the first quarter of
2020.
GAAP net loss for the quarter was $(48.3) million, or $(0.24)
per share, compared to $(9.9) million, or $(0.05) per share, in the
fourth quarter of 2020, and $(99.3) million, or $(0.55) per share,
in the first quarter of 2020.
Non-GAAP revenue for the quarter was $331.9 million compared to
$354.4 million in the fourth quarter of 2020 and $331.4 million in
the first quarter of 2020.
Non-GAAP gross margin for the quarter was 37.6% compared to
37.6% in the fourth quarter of 2020 and 28.3% in the first quarter
of 2020. Non-GAAP operating margin for the quarter was 0.4%
compared to 6.6% in the fourth quarter of 2020 and (9.4)% in the
first quarter of 2020.
Non-GAAP net loss for the quarter was $(5.5) million, or $(0.03)
per share, compared to net income of $16.7 million, or $0.08 per
share, in the fourth quarter of 2020, and a net loss of $(36.5)
million, or $(0.20) per share, in the first quarter of 2020.
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 press release.
"The first quarter marked another quarter of strong performance.
Non-GAAP revenue came in ahead of the mid-point of our outlook with
both non-GAAP gross margin and non-GAAP operating margin above the
high end of our outlook,” said David Heard, Infinera CEO. “I am
encouraged by the positive start to 2021 with broad-based demand
for our differentiated open optical solutions, and remain confident
about the opportunities ahead of us as we continue to manage
through the current industry-wide supply chain challenges and
ongoing pandemic impact."
Financial Outlook
Infinera's outlook for the second quarter ending June 26,
2021 is as follows:
- GAAP revenue is expected to be $344
million +/- $10 million. Non-GAAP revenue is expected to be $345
million +/- $10 million.
- GAAP gross margin is expected to be
33.5% +/- 100 bps. Non-GAAP gross margin is expected to be 36.0%
+/- 100 bps.
- GAAP operating expenses are expected to
be $147 million +/- $2 million. Non-GAAP operating
expenses are expected to be $127 million +/- $2
million.
- GAAP operating margin is expected to be
(9.0)% +/- 200 bps. Non-GAAP operating margin is expected to be
(1.0%) +/- 200 bps.
First Quarter 2021 Investor Slides Available
Online
Investor slides reviewing Infinera's first quarter of 2021
financial results will be furnished to the Securities and Exchange
Commission (SEC) on a Current Report on Form 8-K and published on
Infinera's Investor Relations website at investors.infinera.com
prior to the first quarter of 2021 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 2021 and its
outlook for the second quarter of 2021 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:Amitabh Passi, Head of Investor RelationsTel. +1 (669)
295-1489apassi@infinera.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
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements generally relate to future events or Infinera's future
financial or operating performance. In some cases, you can identify
forward-looking statements because they contain words such as
"anticipate," "believe," "could," "estimate," "expect," "intend,"
"may," "should," "will," and "would" or the negative of these words
or similar terms or expressions that concern Infinera's
expectations, strategy, priorities, plans or intentions. Such
forward-looking statements in this press release include, without
limitation, the presence of opportunities ahead of Infinera,
including as it continues to manage industry-wide supply chain
challenges and ongoing pandemic impact, and Infinera's financial
outlook for the second quarter of 2021. These forward-looking
statements are based on estimates and information available to
Infinera as of the date hereof and are not guarantees of future
performance; 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,
stock price and personnel; 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; our
ability to identify, attract and retain qualified personnel; the
impacts of foreign currency fluctuations; Infinera’s ability to
protect its intellectual property; claims by others that Infinera
infringes their intellectual property; impacts of the recent
presidential administration change in the United States; 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 Infinera's periodic reports filed with the SEC, including its
Annual Report on Form 10-K for the year ended on December 26, 2020
as filed with the SEC on March 3, 2021, 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 adjustment, stock-based
compensation expenses, amortization of acquired intangible assets,
acquisition and integration costs, restructuring and related costs,
COVID-19 related costs, amortization of debt discount on Infinera’s
convertible senior notes, foreign exchange (gains) losses, net, and
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 table titled “GAAP to Non-GAAP
Reconciliations” and related footnotes.
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 2021 that exclude
acquisition-related deferred revenue adjustment, stock-based
compensation expense, amortization of acquired intangible assets,
acquisition and integration costs, and restructuring and related
costs. 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, operating margin, and net income (loss)
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 investors.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 27,2021 |
|
March 28,2020 |
| Revenue: |
|
|
|
|
Product |
$ |
254,161 |
|
|
$ |
255,192 |
|
|
Services |
76,746 |
|
|
75,081 |
|
|
Total revenue |
330,907 |
|
|
330,273 |
|
| Cost of revenue: |
|
|
|
|
Cost of product |
165,485 |
|
|
201,792 |
|
|
Cost of services |
43,260 |
|
|
40,695 |
|
|
Amortization of intangible assets |
4,616 |
|
|
8,628 |
|
|
Acquisition and integration costs |
— |
|
|
1,035 |
|
|
Restructuring and related |
514 |
|
|
1,157 |
|
|
Total cost of revenue |
213,875 |
|
|
253,307 |
|
| Gross profit |
117,032 |
|
|
76,966 |
|
| Operating expenses: |
|
|
|
|
Research and development |
73,529 |
|
|
68,180 |
|
|
Sales and marketing |
32,772 |
|
|
36,689 |
|
|
General and administrative |
26,506 |
|
|
29,620 |
|
|
Amortization of intangible assets |
4,405 |
|
|
4,555 |
|
|
Acquisition and integration costs |
614 |
|
|
9,222 |
|
|
Restructuring and related |
2,319 |
|
|
5,580 |
|
|
Total operating expenses |
140,145 |
|
|
153,846 |
|
| Loss from operations |
(23,113 |
) |
|
(76,880 |
) |
| Other income (expense),
net: |
|
|
|
|
Interest income |
40 |
|
|
24 |
|
|
Interest expense |
(11,843 |
) |
|
(8,794 |
) |
|
Other gain (loss), net |
(12,395 |
) |
|
(12,682 |
) |
|
Total other income (expense), net |
(24,198 |
) |
|
(21,452 |
) |
| Loss before income taxes |
(47,311 |
) |
|
(98,332 |
) |
| Provision for income
taxes |
1,011 |
|
|
936 |
|
| Net loss |
$ |
(48,322 |
) |
|
$ |
(99,268 |
) |
| Net loss per common
share: |
|
|
|
|
Basic |
$ |
(0.24 |
) |
|
$ |
(0.55 |
) |
|
Diluted |
$ |
(0.24 |
) |
|
$ |
(0.55 |
) |
| Weighted average shares used
in computing net loss per common share: |
|
|
|
|
Basic |
202,638 |
|
|
182,024 |
|
|
Diluted |
202,638 |
|
|
182,024 |
|
Infinera CorporationGAAP to Non-GAAP
Reconciliations(In thousands, except percentages
and per share data)(Unaudited)
| |
Three Months Ended |
| |
March 27, 2021 |
|
|
December 26, 2020 |
|
|
March 28, 2020 |
|
| Reconciliation of
Revenue: |
|
|
|
|
|
|
|
|
| U.S. GAAP as reported |
$ |
330,907 |
|
|
|
$ |
353,525 |
|
|
|
$ |
330,273 |
|
|
| Acquisition-related deferred
revenue adjustment(1) |
978 |
|
|
|
892 |
|
|
|
1,110 |
|
|
| Non-GAAP as adjusted |
$ |
331,885 |
|
|
|
$ |
354,417 |
|
|
|
$ |
331,383 |
|
|
| |
|
|
|
|
|
|
|
|
| Reconciliation of
Gross Profit: |
|
|
|
|
|
|
|
|
|
U.S. GAAP as reported |
$ |
117,032 |
|
35.4 |
% |
|
$ |
126,143 |
|
35.7 |
% |
|
$ |
76,966 |
|
23.3 |
% |
| Acquisition-related deferred
revenue adjustment(1) |
978 |
|
|
|
892 |
|
|
|
1,110 |
|
|
| Stock-based compensation
expense(2) |
1,796 |
|
|
|
1,742 |
|
|
|
2,102 |
|
|
| Amortization of acquired
intangible assets(3) |
4,616 |
|
|
|
4,611 |
|
|
|
8,628 |
|
|
| Acquisition and integration
costs(4) |
— |
|
|
|
— |
|
|
|
1,035 |
|
|
| Restructuring and related
costs(5) |
514 |
|
|
|
(106 |
) |
|
|
1,157 |
|
|
| COVID-19 related costs(6) |
— |
|
|
|
— |
|
|
|
2,880 |
|
|
| Non-GAAP as adjusted |
$ |
124,936 |
|
37.6 |
% |
|
$ |
133,282 |
|
37.6 |
% |
|
$ |
93,878 |
|
28.3 |
% |
| |
|
|
|
|
|
|
|
|
| Reconciliation of
Operating Expenses: |
|
|
|
|
|
|
|
|
| U.S. GAAP as reported |
$ |
140,145 |
|
|
|
$ |
132,919 |
|
|
|
$ |
153,846 |
|
|
| Stock-based compensation
expense(2) |
9,178 |
|
|
|
11,177 |
|
|
|
9,601 |
|
|
| Amortization of acquired
intangible assets(3) |
4,405 |
|
|
|
4,745 |
|
|
|
4,555 |
|
|
| Acquisition and integration
costs(4) |
614 |
|
|
|
(265 |
) |
|
|
9,222 |
|
|
| Restructuring and related
costs(5) |
2,319 |
|
|
|
7,230 |
|
|
|
5,580 |
|
|
| Non-GAAP as adjusted |
$ |
123,629 |
|
|
|
$ |
110,032 |
|
|
|
$ |
124,888 |
|
|
| |
|
|
|
|
|
|
|
|
| Reconciliation of
Income/(Loss) from Operations: |
|
|
|
|
|
|
|
|
| U.S. GAAP as reported |
$ |
(23,113 |
) |
(7.0 |
)% |
|
$ |
(6,776 |
) |
(1.9 |
)% |
|
$ |
(76,880 |
) |
(23.3 |
)% |
| Acquisition-related deferred
revenue adjustment(1) |
978 |
|
|
|
892 |
|
|
|
1,110 |
|
|
| Stock-based compensation
expense(2) |
10,974 |
|
|
|
12,919 |
|
|
|
11,703 |
|
|
| Amortization of acquired
intangible assets(3) |
9,021 |
|
|
|
9,356 |
|
|
|
13,183 |
|
|
| Acquisition and integration
costs(4) |
614 |
|
|
|
(265 |
) |
|
|
10,257 |
|
|
| Restructuring and related
costs(5) |
2,833 |
|
|
|
7,124 |
|
|
|
6,737 |
|
|
| COVID-19 related costs(6) |
— |
|
|
|
— |
|
|
|
2,880 |
|
|
| Non-GAAP as adjusted |
$ |
1,307 |
|
0.4 |
% |
|
$ |
23,250 |
|
6.6 |
% |
|
$ |
(31,010 |
) |
(9.4 |
)% |
| |
Three Months Ended |
| |
March 27, 2021 |
|
December 26, 2020 |
|
March 28, 2020 |
|
| Reconciliation of Net
Income/(Loss): |
|
|
|
|
|
|
|
|
|
U.S. GAAP as reported |
$ |
(48,322 |
) |
|
$ |
(9,924 |
) |
|
$ |
(99,268 |
) |
|
| Acquisition-related deferred
revenue adjustment(1) |
978 |
|
|
892 |
|
|
1,110 |
|
|
| Stock-based compensation
expense(2) |
10,974 |
|
|
12,919 |
|
|
11,703 |
|
|
| Amortization of acquired
intangible assets(3) |
9,021 |
|
|
9,356 |
|
|
13,183 |
|
|
| Acquisition and integration
costs(4) |
614 |
|
|
(265 |
) |
|
10,257 |
|
|
| Restructuring and related
costs(5) |
2,833 |
|
|
7,124 |
|
|
6,737 |
|
|
| COVID-19 related costs(6) |
— |
|
|
— |
|
|
2,880 |
|
|
| Amortization of debt discount
on Infinera's convertible senior notes(7) |
7,083 |
|
|
6,910 |
|
|
5,121 |
|
|
| Foreign exchange (gains)
losses, net(8) |
11,706 |
|
|
(9,671 |
) |
|
12,905 |
|
|
| Income tax effects(9) |
(353 |
) |
|
(691 |
) |
|
(1,170 |
) |
|
| Non-GAAP as adjusted |
$ |
(5,466 |
) |
|
$ |
16,650 |
|
|
$ |
(36,542 |
) |
|
| |
|
|
|
|
|
|
|
|
| Net Income/(Loss) per
Common Share - Basic and Diluted: |
|
|
|
|
|
| U.S. GAAP as reported |
$ |
(0.24 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.55 |
) |
|
| Non-GAAP as adjusted |
$ |
(0.03 |
) |
|
$ |
0.08 |
|
|
$ |
(0.20 |
) |
|
| |
|
|
|
|
|
|
|
|
| Weighted Average
Shares Used in Computing Net Income/(Loss) per Common
Share: |
|
|
|
|
|
|
|
|
| Basic |
202,638 |
|
|
195,655 |
|
|
182,024 |
|
|
| Diluted(10) |
202,638 |
|
|
203,259 |
|
|
182,024 |
|
|
|
(1) |
Business combination accounting principles require Infinera to
write down to fair value its maintenance support contracts assumed
in Infinera's acquisition of Coriant, which closed during the
fourth quarter of 2018. 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 in
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 27, 2021 |
|
December 26, 2020 |
|
March 28, 2020 |
|
Cost of revenue |
$ |
1,796 |
|
|
$ |
1,742 |
|
|
$ |
2,102 |
|
|
Total cost of revenue |
1,796 |
|
|
1,742 |
|
|
2,102 |
|
| Research and development |
4,297 |
|
|
4,501 |
|
|
3,774 |
|
| Sales and marketing |
3,199 |
|
|
2,771 |
|
|
2,644 |
|
| General and
administration |
1,682 |
|
|
3,905 |
|
|
3,183 |
|
|
Total operating expenses |
|
9,178 |
|
|
|
11,177 |
|
|
|
9,601 |
|
|
Total stock-based compensation expense |
$ |
10,974 |
|
|
$ |
12,919 |
|
|
$ |
11,703 |
|
|
(3) |
Amortization of acquired intangible assets consists of developed
technology, trade names, customer relationships and backlog
acquired in connection with the Coriant acquisition. Amortization
of acquired intangible assets also consists of amortization of
developed technology, trade names and customer relationships
acquired in connection with Infinera’s acquisition of Transmode AB,
which closed in 2015. 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 the Coriant acquisition. 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 related costs
are primarily associated with the reduction of operating costs, the
closure of Infinera's Berlin, Germany site, the reduction of
headcount at Infinera's Munich, Germany site and other sites, and
Coriant's historical restructuring plan associated with its early
retirement plan. In addition, this includes accelerated
amortization on operating lease right-of-use assets due to the
cessation of 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. |
| (6) |
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, Infinera needed to source certain key
components from an alternate supplier at substantially higher cost
in order to fulfill delivery commitments in the normal course of
business. Management has excluded these expenses from non-GAAP
financial measures because they were caused by atypical
circumstances during the COVID-19 pandemic, as their 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 its exclusion provides a better
indication of Infinera's underlying business performance. |
| (8) |
Foreign exchange gains and losses
have been excluded from Infinera's non-GAAP results because
management believes that this expense is not indicative of ongoing
operating performance and its exclusion provides a better
indication of Infinera's underlying business performance. Exclusion
of foreign exchange gains and losses from non-GAAP results
commenced in the first quarter of 2021 and prior periods have been
adjusted for comparability. |
| (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. Management believes the
exclusion of these tax effects provides a better indication of
Infinera's underlying business performance. |
| (10) |
The non-GAAP diluted shares
include the potentially dilutive securities from Infinera's
stock-based benefit plans and convertible senior notes 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
as its inclusion provides a better indication of Infinera's
underlying business performance. |
Infinera CorporationGAAP to Non-GAAP
Reconciliations(In
thousands)(Unaudited)
Free Cash Flow
We define free cash flow as net cash provided by (used in)
operating activities in the period minus the purchase of property
and equipment, net made in the period.
Free cash flow is considered a non-GAAP financial measure under
the SEC’s rules. Management believes that free cash flow is an
important financial measure for use in evaluating the Company’s
financial performance, as it measures our ability to generate
additional cash from our business operations. Free cash flow should
be considered in addition to, rather than as a substitute for, net
income as a measure of our performance or net cash provided by
operating activities as a measure of our liquidity. Additionally,
our definition of free cash flow is limited and does not represent
residual cash flows available for discretionary expenditures due to
the fact that the measure does not deduct the payments required for
debt service and other obligations. Therefore, we believe it is
important to view free cash flow as supplemental to our entire
statement of cash flows.
| |
Three Months Ended |
| |
March 27, 2021 |
|
December 26, 2020 |
|
March 28, 2020 |
|
Net cash provided by (used in) operating activities |
$ |
18,630 |
|
|
$ |
52,216 |
|
|
$ |
(91,517 |
) |
| Purchase of property and
equipment, net |
(11,721 |
) |
|
(11,861 |
) |
|
(8,464 |
) |
|
Free cash flow |
$ |
6,909 |
|
|
$ |
40,355 |
|
|
$ |
(99,981 |
) |
Infinera CorporationCondensed
Consolidated Balance Sheets(In thousands, except
par values)(Unaudited)
| |
March 27,2021 |
|
December 26,2020 |
| ASSETS |
|
|
|
| Current assets: |
|
|
|
|
Cash |
$ |
234,029 |
|
|
$ |
298,014 |
|
|
Short-term restricted cash |
3,288 |
|
|
3,293 |
|
|
Accounts receivable, net of allowance for doubtful accounts of
$3,102 in 2021 and $2,912 in 2020 |
276,855 |
|
|
319,428 |
|
|
Inventory |
262,827 |
|
|
269,307 |
|
|
Prepaid expenses and other current assets |
139,245 |
|
|
171,831 |
|
|
Total current assets |
916,244 |
|
|
1,061,873 |
|
| Property, plant and equipment,
net |
153,118 |
|
|
153,133 |
|
| Operating lease right-of-use
assets |
64,942 |
|
|
68,851 |
|
| Intangible assets |
115,164 |
|
|
124,882 |
|
| Goodwill |
265,216 |
|
|
273,426 |
|
| Long-term restricted cash |
12,228 |
|
|
14,076 |
|
| Other non-current assets |
40,043 |
|
|
36,256 |
|
|
Total assets |
$ |
1,566,955 |
|
|
$ |
1,732,497 |
|
| LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
| Current liabilities: |
|
|
|
|
Accounts payable |
$ |
151,984 |
|
|
$ |
175,762 |
|
|
Accrued expenses and other current liabilities |
129,598 |
|
|
150,550 |
|
|
Accrued compensation and related benefits |
56,050 |
|
|
52,976 |
|
|
Short-term debt, net |
25,068 |
|
|
101,983 |
|
|
Accrued warranty |
18,943 |
|
|
19,369 |
|
|
Deferred revenue |
124,285 |
|
|
133,246 |
|
|
Total current liabilities |
505,928 |
|
|
633,886 |
|
| Long-term debt, net |
453,427 |
|
|
445,996 |
|
| Long-term financing lease
obligations |
1,964 |
|
|
1,383 |
|
| Long-term accrued
warranty |
19,944 |
|
|
21,339 |
|
| Long-term deferred
revenue |
28,960 |
|
|
29,810 |
|
| Long-term deferred tax
liability |
3,681 |
|
|
4,164 |
|
| Long-term operating lease
liabilities |
72,912 |
|
|
76,126 |
|
| Other long-term
liabilities |
86,791 |
|
|
93,509 |
|
| Stockholders’ equity: |
|
|
|
|
Preferred stock, $0.001 par valueAuthorized shares – 25,000 and no
shares issued and outstanding |
— |
|
|
— |
|
|
Common stock, $0.001 par value Authorized shares –
500,000 as of March 27, 2021 and
December 26, 2020 Issued and outstanding shares –
204,812 as of March 27, 2021 and 201,397 as of
December 26, 2020 |
205 |
|
|
201 |
|
|
Additional paid-in capital |
1,983,599 |
|
|
1,965,245 |
|
|
Accumulated other comprehensive loss |
(14,870 |
) |
|
(11,898 |
) |
|
Accumulated deficit |
(1,575,586 |
) |
|
(1,527,264 |
) |
|
Total stockholders' equity |
393,348 |
|
|
426,284 |
|
|
Total liabilities and stockholders’ equity |
$ |
1,566,955 |
|
|
$ |
1,732,497 |
|
Infinera CorporationCondensed
Consolidated Statements of Cash Flows(In
thousands) (Unaudited)
| |
Three Months Ended |
| |
March 27,2021 |
|
March 28,2020 |
| Cash Flows from Operating
Activities: |
|
|
|
|
Net loss |
$ |
(48,322 |
) |
|
$ |
(99,268 |
) |
| Adjustments to reconcile net
loss to net cash provided by (used in) operating activities: |
|
|
|
|
Depreciation and amortization |
20,546 |
|
|
25,445 |
|
|
Non-cash restructuring charges and related costs |
1,410 |
|
|
1,760 |
|
|
Amortization of debt discount and issuance costs |
7,822 |
|
|
5,731 |
|
|
Operating lease expense |
5,228 |
|
|
5,204 |
|
|
Stock-based compensation expense |
10,974 |
|
|
11,703 |
|
|
Other, net |
2,065 |
|
|
1,153 |
|
|
Changes in assets and liabilities: |
|
|
|
|
Accounts receivable |
38,671 |
|
|
70,238 |
|
|
Inventory |
4,059 |
|
|
17,737 |
|
|
Prepaid expenses and other assets |
20,669 |
|
|
(18,744 |
) |
|
Accounts payable |
(23,584 |
) |
|
(72,355 |
) |
|
Accrued liabilities and other expenses |
(11,964 |
) |
|
(32,083 |
) |
|
Deferred revenue |
(8,944 |
) |
|
(8,038 |
) |
|
Net cash provided by (used in) operating
activities |
18,630 |
|
|
(91,517 |
) |
| Cash Flows from Investing
Activities: |
|
|
|
|
Purchase of property and equipment, net |
(11,721 |
) |
|
(8,464 |
) |
|
Net cash used in investing activities |
(11,721 |
) |
|
(8,464 |
) |
| Cash Flows from Financing
Activities: |
|
|
|
|
Proceeds from issuance of 2027 Notes |
— |
|
|
194,500 |
|
|
Proceeds from revolving line of credit |
— |
|
|
55,000 |
|
|
Repayment of revolving line of credit |
(77,000 |
) |
|
— |
|
|
Payment of debt issuance cost |
— |
|
|
(1,775 |
) |
|
Repayment of mortgage payable |
(22 |
) |
|
(99 |
) |
|
Payment of term license obligation |
(2,544 |
) |
|
— |
|
|
Principal payments on financing lease obligations |
(309 |
) |
|
— |
|
|
Proceeds from issuance of common stock |
9,344 |
|
|
7,395 |
|
|
Minimum tax withholding paid on behalf of employees for net share
settlement |
(1,938 |
) |
|
— |
|
|
Net cash (used in) provided by financing
activities |
(72,469 |
) |
|
255,021 |
|
| Effect of exchange rate
changes on cash and restricted cash |
(278 |
) |
|
(4,369 |
) |
| Net change in cash and
restricted cash |
(65,838 |
) |
|
150,671 |
|
| Cash and restricted cash at
beginning of period |
315,383 |
|
|
132,797 |
|
| Cash and restricted cash at
end of period(1) |
$ |
249,545 |
|
|
$ |
283,468 |
|
Infinera CorporationCondensed
Consolidated Statements of Cash Flows(In
thousands) (Unaudited)
| |
Three Months Ended |
| |
March 27,2021 |
|
March 28,2020 |
| Supplemental
disclosures of cash flow information: |
|
|
|
|
Cash paid for income taxes, net |
$ |
4,355 |
|
|
$ |
1,072 |
|
|
Cash paid for interest |
$ |
7,654 |
|
|
$ |
5,131 |
|
| Supplemental schedule
of non-cash investing and financing activities: |
|
|
|
|
Unpaid debt issuance cost |
$ |
— |
|
|
$ |
1,793 |
|
|
Property and equipment included in accounts payable and accrued
liabilities |
$ |
255 |
|
|
$ |
3,370 |
|
|
Transfer of inventory to fixed assets |
$ |
1,041 |
|
|
$ |
118 |
|
|
Unpaid term licenses (included in accounts payable, accrued
liabilities and other long-term liabilities) |
$ |
10,533 |
|
|
$ |
— |
|
(1)
Reconciliation of
cash and restricted cash to the condensed consolidated balance
sheets:
| |
March 27,2021 |
|
March 28,2020 |
| |
|
|
|
| |
(In thousands) |
|
Cash |
$ |
234,029 |
|
|
$ |
261,534 |
|
| Short-term restricted
cash |
3,288 |
|
|
4,126 |
|
| Long-term restricted cash |
12,228 |
|
|
17,808 |
|
|
Total cash and restricted cash |
$ |
249,545 |
|
|
$ |
283,468 |
|
Infinera CorporationSupplemental
Financial Information(Unaudited)
| |
Q2'19 |
|
Q3'19 |
|
Q4'19 |
|
Q1'20 |
|
Q2'20 |
|
Q3'20 |
|
Q4'20 |
|
Q1'21 |
|
GAAP Revenue ($ Mil) |
$296.3 |
|
|
$325.3 |
|
|
$384.6 |
|
|
$330.3 |
|
|
$331.6 |
|
|
$340.2 |
|
|
$353.5 |
|
|
$330.9 |
|
| GAAP Gross Margin % |
20.7 |
% |
|
26.7 |
% |
|
29.0 |
% |
|
23.3 |
% |
|
29.4 |
% |
|
31.8 |
% |
|
35.7 |
% |
|
35.4 |
% |
| Non-GAAP Gross Margin
%(1) |
30.7 |
% |
|
33.1 |
% |
|
35.2 |
% |
|
28.3 |
% |
|
33.8 |
% |
|
35.2 |
% |
|
37.6 |
% |
|
37.6 |
% |
| Revenue
Composition: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Domestic % |
45 |
% |
|
51 |
% |
|
52 |
% |
|
52 |
% |
|
50 |
% |
|
49 |
% |
|
36 |
% |
|
48 |
% |
| International % |
55 |
% |
|
49 |
% |
|
48 |
% |
|
48 |
% |
|
50 |
% |
|
51 |
% |
|
64 |
% |
|
52 |
% |
| Customers >10% of
Revenue |
1 |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
— |
|
|
1 |
|
| Cash Related
Information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash from Operations ($
Mil) |
($63.8 |
) |
|
($37.2 |
) |
|
($10.2 |
) |
|
($91.5 |
) |
|
($36.6 |
) |
|
($36.4 |
) |
|
$52.2 |
|
|
$18.6 |
|
| Capital Expenditures ($
Mil) |
$9.2 |
|
|
$12.5 |
|
|
$2.7 |
|
|
$8.5 |
|
|
$10.5 |
|
|
$8.1 |
|
|
$11.9 |
|
|
$11.7 |
|
| Depreciation &
Amortization ($ Mil) |
$31.2 |
|
|
$29.0 |
|
|
$28.6 |
|
|
$25.4 |
|
|
$25.9 |
|
|
$22.9 |
|
|
$25.9 |
|
|
$20.5 |
|
| DSOs |
80 |
|
|
80 |
|
|
83 |
|
|
75 |
|
|
79 |
|
|
78 |
|
|
82 |
|
|
76 |
|
| Inventory
Metrics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Raw Materials ($ Mil) |
$70.4 |
|
|
$47.2 |
|
|
$47.4 |
|
|
$50.0 |
|
|
$43.4 |
|
|
$39.3 |
|
|
$34.7 |
|
|
$31.8 |
|
| Work in Process ($ Mil) |
$59.5 |
|
|
$52.2 |
|
|
$48.8 |
|
|
$52.0 |
|
|
$50.9 |
|
|
$51.6 |
|
|
$55.8 |
|
|
$55.5 |
|
| Finished Goods ($ Mil) |
$208.9 |
|
|
$225.4 |
|
|
$244.1 |
|
|
$217.7 |
|
|
$193.9 |
|
|
$185.0 |
|
|
$178.8 |
|
|
$175.5 |
|
| Total Inventory ($
Mil) |
$338.8 |
|
|
$324.8 |
|
|
$340.3 |
|
|
$319.7 |
|
|
$288.2 |
|
|
$275.9 |
|
|
$269.3 |
|
|
$262.8 |
|
| Inventory Turns(2) |
2.5 |
|
|
2.7 |
|
|
2.9 |
|
|
3.0 |
|
|
3.1 |
|
|
3.2 |
|
|
3.3 |
|
|
3.1 |
|
| Worldwide
Headcount |
3,632 |
|
|
3,557 |
|
|
3,261 |
|
|
3,302 |
|
|
3,209 |
|
|
3,074 |
|
|
3,050 |
|
|
3,041 |
|
| Weighted Average
Shares Outstanding (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
178,677 |
|
|
179,988 |
|
|
180,864 |
|
|
182,024 |
|
|
185,596 |
|
|
189,589 |
|
|
195,655 |
|
|
202,638 |
|
| Diluted |
179,343 |
|
|
182,073 |
|
|
186,349 |
|
|
189,246 |
|
|
190,127 |
|
|
195,868 |
|
|
203,259 |
|
|
217,970 |
|
|
(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, and COVID-19
related costs. 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)(Unaudited)
The following amounts represent the midpoint of the expected
range:
| |
Q2'21 |
| |
Outlook |
| Reconciliation of
Revenue: |
|
|
U.S. GAAP |
$ |
344.0 |
|
|
| Acquisition-related deferred
revenue adjustment |
1.0 |
|
|
| Non-GAAP |
$ |
345.0 |
|
|
| |
|
| Reconciliation of
Gross Margin: |
|
| U.S. GAAP |
33.5 |
|
% |
| Acquisition-related deferred
revenue adjustment |
0.5 |
|
% |
| Stock-based compensation
expense |
0.5 |
|
% |
| Amortization of acquired
intangible assets |
1.0 |
|
% |
| Restructuring and related
costs |
0.5 |
|
% |
| Non-GAAP |
36.0 |
|
% |
| |
|
| Reconciliation of
Operating Expenses: |
|
| U.S. GAAP |
$ |
147.0 |
|
|
| Stock-based compensation
expense |
(12.0 |
) |
|
| Amortization of acquired
intangible assets |
(4.0 |
) |
|
| Restructuring and related
costs |
(4.0 |
) |
|
| Non-GAAP |
$ |
127.0 |
|
|
| |
|
| Reconciliation of
Operating Margin: |
|
| U.S. GAAP |
(9.0 |
) |
% |
| Acquisition-related deferred
revenue adjustment |
0.5 |
|
% |
| Stock-based compensation
expense |
4.0 |
|
% |
| Amortization of acquired
intangible assets |
2.0 |
|
% |
| Restructuring and related
costs |
1.5 |
|
% |
| Non-GAAP |
(1.0 |
) |
% |
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