GAAP revenues for the quarter were $139.1 million compared to $142.0 million in the third quarter of 2013 and $128.1 million in the fourth quarter of 2012.
GAAP gross margins for the quarter were 40% compared to 48% in the third quarter of 2013 and 34% in the fourth quarter of 2012. GAAP net loss for the quarter was $(10.2) million, or $(0.08) per share, compared to net income of $3.3 million, or $0.03 per diluted share, in the third quarter of 2013 and a net loss of $(16.1) million, or $(0.14) per share, in the fourth quarter of 2012.
Non-GAAP gross margins for the quarter were 41% compared to 49% in the third quarter of 2013 and 36% in the fourth quarter of 2012. Non-GAAP net loss for the quarter was $(0.2) million, or breakeven on an earnings per share basis, compared to net income of $12.8 million, or $0.10 per diluted share in the third quarter of 2013 and net loss of $(6.0) million, or $(0.05) per share, in the fourth quarter of 2012. These Non-GAAP measures exclude non-cash stock-based compensation expenses and the amortization of debt discount on our convertible senior notes.
GAAP revenues for the year were $544.1 million compared to $438.4 million in 2012.
GAAP gross margins for the year were 40% compared to 36% in 2012. GAAP net loss for the year was $(32.1) million, or $(0.27) per share compared to $(85.3) million, or $(0.77) per share in 2012.
Non-GAAP gross margins for the year were 42% compared to 38% in 2012. Non-GAAP net income for the year was $4.0 million or $0.03 per diluted share in 2013, compared to net loss of $(43.5) million or $(0.38) per diluted share in 2012. These Non-GAAP measures exclude non-cash stock-based compensation expenses and the amortization of debt discount on our convertible senior notes.
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.
Management Commentary
"The fourth quarter was a solid finish to a very good year for Infinera, driven by continued acceptance of the DTN-X," said Tom Fallon, chief executive officer. "We received purchase commitments from three additional customers in the quarter, including one new to Infinera, and we set another quarterly record for 100G port shipments.
"Our financial results for 2013 demonstrate the strong potential of the DTN-X. Revenues grew 24%, at least double the long haul DWDM market growth estimated by industry analysts; gross margins expanded significantly; we achieved $4 million Non-GAAP net income compared with $43.5 million Non-GAAP net loss in 2012; and we generated $12 million in net free cash flow for the year. Since its introduction in mid 2012, we have received purchase commitments for the DTN-X from a total of 42 customers, representing a cross section of industries including Tier 1 carriers, cable operators, Internet content providers and bandwidth wholesalers. Of these, 15 are new customers to Infinera. These achievements met or exceeded the targets that we provided at our Analyst Day in December of 2012.
"As we look ahead, we believe the opportunity for the DTN-X remains wide open with the 100G cycle still in its early stages. Infinera's Intelligent Transport Network and the DTN-X offers important differentiated features, including its super-channel scale, converged OTN switching and GMPLS network automation. For 2014, we plan to continue our focus on winning new deployments and gaining market share, while driving enhanced profitability, and we remain optimistic about our outlook over the short, intermediate and long-term."
Conference Call Information:
Infinera will host a conference call for analysts and investors to discuss its fourth quarter results and its outlook for the first quarter today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). A live webcast of the conference call will also be accessible from the Investor Relations' section of the company's website at www.infinera.com. Following the webcast, an archived version will be available on the website for 90 days. To hear the replay, parties in the United States and Canada should call 1-866-379-4236. International parties can access the replay at 1-203-369-0338.
About Infinera
Infinera provides Intelligent Transport Networks to help carriers exploit the increasing demand for cloud-based services and data center connectivity as they advance into the Terabit Era. Infinera is unique in its use of breakthrough semiconductor technology to deliver large scale Photonic Integrated Circuit (PICs) and the application of PICs to vertically integrated optical networking solutions that deliver the industry's only commercially available 500 Gb/s FlexCoherent super-channels. Infinera Intelligent Transport Network solutions include the DTN-X, DTN and ATN platforms. Find more at www.infinera.com.
Forward-Looking Statements
This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties. 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. Forward-looking statements include statements regarding Infinera's expectations, beliefs, intentions or strategies including statements regarding the opportunity for DTN-X and the Company's plans for 2014. Such forward-looking statements can be identified by forward-looking words such as "anticipated," "believed," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or similar words. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include aggressive business tactics by our competitors, our reliance on single-source suppliers, our ability to protect our intellectual property, claims by others that we infringe their intellectual property, and our ability to respond to rapid technological changes, and other risks that may impact our business are set forth in our annual report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 5, 2013, as well as subsequent reports filed with or furnished to the SEC. These reports are available on our website at www.infinera.com and the SEC's website at www.sec.gov. Infinera assumes no obligation to, and does not currently intend to, update any such forward-looking statements.
Use of Non-GAAP Financial Information
In addition to disclosing financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain certain non-GAAP measures that exclude non-cash stock-based compensation expenses and amortization of debt discount on our convertible senior notes. We believe these adjustments are appropriate to enhance an overall understanding of our underlying financial performance and also our 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 our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income (loss), basic and diluted net income (loss) per share, or gross margin prepared in accordance with GAAP. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and are subject to limitations. For a description of these non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial measures, please see the section titled, "GAAP to Non-GAAP Reconciliations." We anticipate disclosing forward-looking non-GAAP information in our conference call to discuss our fourth quarter results, including an estimate of non-GAAP earnings for the first quarter of 2014 that excludes non-cash stock-based compensation expenses and amortization of debt discount on our convertible senior notes.
A copy of this press release can be found on the Investor Relations' page of Infinera's website at www.infinera.com.
Infinera Corporation 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 Corporation
GAAP Condensed Consolidated Statements of Operations
(In thousands, except share data)
(Unaudited)
Three Months Ended Twelve Months Ended
---------------------------- ----------------------------
December 28, December 29, December 28, December 29,
2013 2012 2013 2012
------------- ------------- ------------- -------------
Revenue:
Product $ 115,102 $ 109,444 $ 465,424 $ 380,035
Services 23,990 18,620 78,698 58,402
------------- ------------- ------------- -------------
Total
revenue 139,092 128,064 544,122 438,437
Cost of revenue
(1):
Cost of
product 73,385 77,127 295,715 259,437
Cost of
services 9,795 7,669 29,768 21,431
------------- ------------- ------------- -------------
Total cost
of revenue 83,180 84,796 325,483 280,868
Gross profit 55,912 43,268 218,639 157,569
Operating
expenses (1):
Research and
development 30,859 26,660 124,794 117,233
Sales and
marketing 19,857 20,558 72,778 75,862
General and
administrativ
e 12,277 11,563 45,253 47,475
------------- ------------- ------------- -------------
Total
operating
expenses 62,993 58,781 242,825 240,570
Loss from
operations (7,081) (15,513) (24,186) (83,001)
Other income
(expense), net:
Interest
income 287 233 923 911
Interest
expense (2,634) - (6,061) -
Other gain
(loss), net: (336) (158) (1,141) (1,050)
------------- ------------- ------------- -------------
Total other
income
(expense),
net (2,683) 75 (6,279) (139)
Loss before
income taxes (9,764) (15,438) (30,465) (83,140)
Provision for
income taxes 414 650 1,654 2,190
------------- ------------- ------------- -------------
Net loss $ (10,178) $ (16,088) $ (32,119) $ (85,330)
============= ============= ============= =============
Net loss per
common share,
basic and
diluted $ (0.08) $ (0.14) $ (0.27) $ (0.77)
============= ============= ============= =============
Weighted average
shares used in
computing basic
and diluted net
loss per common
share 119,743 112,311 117,425 110,739
============= ============= ============= =============
(1) The following table summarizes the effects of stock-based compensation
related to employees and non-employees for the three and twelve months
ended December 28, 2013 and December 29, 2012:
Three Months Ended Twelve Months Ended
---------------------------- ----------------------------
December 28, December 29, December 28, December 29,
2013 2012 2013 2012
------------- ------------- ------------- -------------
Cost of
revenue $ 489 $ 735 $ 1,871 $ 2,710
Research and
development 2,725 2,852 10,900 13,306
Sales and
marketing 1,965 2,802 7,624 10,450
General and
administratio
n 1,789 1,797 5,956 9,529
------------- ------------- ------------- -------------
6,968 8,186 26,351 35,995
Cost of
revenue -
amortization
from balance
sheet* 1,206 1,949 5,625 5,824
------------- ------------- ------------- -------------
Total stock-
based
compensation
expense $ 8,174 $ 10,135 $ 31,976 $ 41,819
============= ============= ============= =============
* Stock-based compensation expense deferred to inventory and deferred
inventory costs in prior periods and recognized in the current period.
Infinera Corporation
GAAP to Non-GAAP
Reconciliations
(In thousands, except per share
data)
(Unaudited)
Three Months Ended
-------------------------------------------
December 28, September 28, December 29,
2013 2013 2012
------------- ------------- -------------
Reconciliation of Gross Profit:
U.S. GAAP as reported $ 55,912 $ 68,371 $ 43,268
Stock-based compensation(1) 1,695 1,549 2,684
------------- ------------- -------------
Non-GAAP as adjusted $ 57,607 $ 69,920 $ 45,952
============= ============= =============
Reconciliation of Gross Margin:
U.S. GAAP as reported 40% 48% 34%
Stock-based compensation(1) 1% 1% 2%
------------- ------------- -------------
Non-GAAP as adjusted 41% 49% 36%
============= ============= =============
Reconciliation of Income (Loss)
from Operations:
U.S. GAAP as reported $ (7,081) $ 6,445 $ (15,513)
Stock-based compensation(1) 8,174 7,643 10,135
------------- ------------- -------------
Non-GAAP as adjusted $ 1,093 $ 14,088 $ (5,378)
============= ============= =============
Reconciliation of Net Income
(Loss):
U.S. GAAP as reported $ (10,178) $ 3,347 $ (16,088)
Stock-based compensation(1) 8,174 7,643 10,135
Amortization of debt
discount(2) 1,814 1,770 -
------------- ------------- -------------
Non-GAAP as adjusted $ (190) $ 12,760 $ (5,953)
============= ============= =============
Net Income (Loss) per Common
Share - Basic:
U.S. GAAP as reported $ (0.08) $ 0.03 $ (0.14)
============= ============= =============
Non-GAAP as adjusted $ - $ 0.11 $ (0.05)
============= ============= =============
Net Income (Loss) per Common
Share - Diluted:
U.S. GAAP as reported $ (0.08) $ 0.03 $ (0.14)
============= ============= =============
Non-GAAP as adjusted(3) $ - $ 0.10 $ (0.05)
============= ============= =============
Weighted average shares
used in computing net income
(loss)
per common share - U.S. GAAP:
Basic 119,743 118,740 112,311
============= ============= =============
Diluted 119,743 124,679 112,311
============= ============= =============
Weighted average shares
used in computing net income
(loss)
per common share - Non-GAAP:
Basic 119,743 118,740 112,311
============= ============= =============
Diluted(3) 125,134 124,679 114,115
============= ============= =============
Twelve Months Ended
----------------------------
December 28, December 29,
2013 2012
------------- -------------
Reconciliation of Gross Profit:
U.S. GAAP as reported $ 218,639 $ 157,569
Stock-based compensation(1) 7,496 8,534
------------- -------------
Non-GAAP as adjusted $ 226,135 $ 166,103
============= =============
Reconciliation of Gross Margin:
U.S. GAAP as reported 40% 36%
Stock-based compensation(1) 2% 2%
------------- -------------
Non-GAAP as adjusted 42% 38%
============= =============
Reconciliation of Income (Loss)
from Operations:
U.S. GAAP as reported $ (24,186) $ (83,001)
Stock-based compensation(1) 31,976 41,819
------------- -------------
Non-GAAP as adjusted $ 7,790 $ (41,182)
============= =============
Reconciliation of Net Income
(Loss):
U.S. GAAP as reported $ (32,119) $ (85,330)
Stock-based compensation(1) 31,976 41,819
Amortization of debt
discount(2) 4,164 -
------------- -------------
Non-GAAP as adjusted $ 4,021 $ (43,511)
============= =============
Net Income (Loss) per Common
Share - Basic:
U.S. GAAP as reported $ (0.27) $ (0.77)
============= =============
Non-GAAP as adjusted $ 0.03 $ (0.39)
============= =============
Net Income (Loss) per Common
Share - Diluted:
U.S. GAAP as reported $ (0.27) $ (0.77)
============= =============
Non-GAAP as adjusted(3) $ 0.03 $ (0.38)
============= =============
Weighted average shares
used in computing net income
(loss)
per common share - U.S. GAAP:
Basic 117,425 110,739
============= =============
Diluted 117,425 110,739
============= =============
Weighted average shares
used in computing net income
(loss)
per common share - Non-GAAP:
Basic 117,425 110,739
============= =============
Diluted(3) 122,167 113,124
============= =============
(1) Stock-based compensation expense is calculated in accordance with the
fair value recognition provisions of Financial Accounting Standards Board
Accounting Standards Codification (ASC) 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:
Three Months Ended
-----------------------------------------
December 28, September 28, December 29,
2013 2013 2012
------------- ------------- -------------
Cost of revenue $ 489 $ 422 $ 735
Research and development 2,725 2,434 2,852
Sales and marketing 1,965 1,853 2,802
General and administration 1,789 1,807 1,797
------------- ------------- -------------
6,968 6,516 8,186
Cost of revenue - amortization
from balance sheet* 1,206 1,127 1,949
------------- ------------- -------------
Total stock-based compensation
expense $ 8,174 $ 7,643 $ 10,135
============= ============= =============
Twelve Months Ended
---------------------------
December 28, December 29,
2013 2012
------------- -------------
Cost of revenue $ 1,871 $ 2,710
Research and development 10,900 13,306
Sales and marketing 7,624 10,450
General and administration 5,956 9,529
------------- -------------
26,351 35,995
Cost of revenue - amortization
from balance sheet* 5,625 5,824
------------- -------------
Total stock-based compensation
expense $ 31,976 $ 41,819
============= =============
* Stock-based compensation expense deferred to inventory and deferred inventory costs in prior periods and recognized in the current period.
(2) 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, we are required to amortize as a debt discount an amount equal to the fair value of the conversion option that was recorded in equity as interest expense on our $150 million 1.75% convertible debt issuance in May 2013 over the term of the notes. These amounts have been adjusted in arriving at our non-GAAP results because management believes that this non-cash expense is not indicative of ongoing operating performance and provides a better indication of our underlying business performance.
(3) Diluted shares used to calculate net loss per share on a non-GAAP basis provided for informational purposes only.
Infinera Corporation
Condensed Consolidated Balance Sheets
(In thousands, except par values)
(Unaudited)
December 28, December 29,
2013 2012
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 124,330 $ 104,666
Short-term investments 172,660 76,146
Accounts receivable, net of allowance for
doubtful accounts of $43 in 2013 and $147
in 2012 100,643 107,039
Other receivables 1,313 2,909
Inventory 123,685 127,809
Deferred inventory costs 705 1,029
Deferred tax asset 1,322 155
Prepaid expenses and other current assets 14,412 9,744
------------- -------------
Total current assets 539,070 429,497
Property, plant and equipment, net 79,668 80,343
Deferred inventory costs, non-current 2 100
Long-term investments 64,419 2,874
Cost-method investment 9,000 9,000
Long-term restricted cash 3,904 3,868
Other non-current assets 4,863 2,488
------------- -------------
Total assets $ 700,926 $ 528,170
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 39,843 $ 61,428
Accrued expenses 22,431 26,288
Accrued compensation and related benefits 33,899 22,325
Accrued warranty 12,374 7,262
Deferred revenue 32,402 26,744
------------- -------------
Total current liabilities 140,949 144,047
Long-term debt 109,164 -
Accrued warranty, non-current 10,534 9,220
Deferred revenue, non-current 4,888 3,210
Deferred tax liability 1,364 117
Other long-term liabilities 16,217 15,440
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value
Authorized shares - 25,000 and no shares
issued and outstanding - -
Common stock, $0.001 par value
Authorized shares - 500,000 as of December
28, 2013 and December 29, 2012
Issued and outstanding shares - 119,887 as
of December 28, 2013 and 112,461 as of
December 29, 2012 120 112
Additional paid-in capital 1,025,661 930,618
Accumulated other comprehensive loss (3,486) (2,228)
Accumulated deficit (604,485) (572,366)
------------- -------------
Total stockholders' equity 417,810 356,136
------------- -------------
Total liabilities and stockholders' equity $ 700,926 $ 528,170
============= =============
Infinera Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Twelve Months Ended
----------------------------
December 28, December 29,
2013 2012
------------- -------------
Cash Flows from Operating Activities:
Net loss $ (32,119) $ (85,330)
Adjustments to reconcile net loss to net
cashused in operating activities:
Depreciation and amortization 24,562 23,661
(Recovery of) provision for other
receivables (88) -
Provision for doubtful accounts 55 94
Amotization of debt discount and issuance
costs 4,522 -
Amortization of premium on investments 1,539 2,068
Stock-based compensation expense 31,976 41,819
Non-cash tax benefit - (7)
Other gain (243) (475)
Changes in assets and liabilities:
Accounts receivable 6,341 (26,517)
Other receivables 1,435 (1,894)
Inventory (3,036) (40,623)
Prepaid expenses and other assets (4,992) 2,293
Deferred inventory costs 395 5,741
Accounts payable (20,202) 15,410
Accrued liabilities and other expenses 11,272 6,915
Deferred revenue 7,337 3,763
Accrued warranty 6,426 3,616
------------- -------------
Net cash provided by (used in) operating
activities 35,180 (49,466)
Cash Flows from Investing Activities:
Purchase of available-for-sale investments (288,140) (54,150)
Proceeds from sale of available-for-sale
investments 2,850 11,584
Proceeds from maturities and calls of
investments 125,624 117,605
Proceeds from disposal of assets 3 1
Purchase of property and equipment (21,068) (25,395)
Reimbursement of manufacturing capacity
advance - 50
Change in restricted cash (69) (827)
------------- -------------
Net cash provided by (used in) investing
activities (180,800) 48,868
Cash Flows from Financing Activities:
Proceeds from issuance of debt, net 144,469 -
Proceeds from issuance of common stock 23,185 11,580
Repurchase of common stock (1,544) (882)
------------- -------------
Net cash provided by financing activities 166,110 10,698
Effect of exchange rate changes on cash (826) 108
Net change in cash and cash equivalents 19,664 10,208
Cash and cash equivalents at beginning of
period 104,666 94,458
------------- -------------
Cash and cash equivalents at end of period $ 124,330 $ 104,666
============= =============
Supplemental disclosures of cash flow
information:
Cash paid for income taxes $ 2,135 $ 923
Cash paid for interest $ 1,320 $ -
Supplemental schedule of non-cash financing
activities:
Non-cash settlement for manufacturing
capacity advance $ - $ 275
Transfer of inventory to fixed assets $ 5,458 $ 3,222
---------------------------------------------------------------------
Infinera Corporation
Supplemental
Financial
Information
(Unaudited)
----------------------------------------------------------------------------
Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13
----------------------------------------------------------------------------
Revenue ($ Mil) $104.7 $93.5 $112.2 $128.1 $124.6 $138.4 $142.0 $139.1
Gross Margin % (1) 40% 37% 39% 36% 36% 39% 49% 41%
----------------------------------------------------------------------------
Invoiced Shipment
Composition:
Domestic % 71% 70% 70% 63% 63% 64% 73% 54%
International % 29% 30% 30% 37% 37% 36% 27% 46%
Largest Customer % 13% 15% 13% 13% 14% < 10% 17% 11%
----------------------------------------------------------------------------
Cash Related
Information:
Cash from (used in)
Operations ($ Mil) ($5.8)($22.7)($29.3) $8.3 ($21.3) $17.9 $12.8 $25.8
Capital Expenditures
($ Mil) $13.6 $6.1 $2.5 $3.2 $4.9 $4.5 $4.2 $7.5
Depreciation &
Amortization ($
Mil) $5.5 $5.7 $6.1 $6.4 $6.3 $6.3 $5.9 $6.0
DSO's 57 55 74 76 82 64 56 66
----------------------------------------------------------------------------
Inventory Metrics:
Raw Materials ($
Mil) $15.3 $14.8 $12.4 $13.0 $12.2 $9.8 $12.1 $14.3
Work in Process ($
Mil) $41.6 $49.4 $59.8 $57.3 $53.1 $41.0 $45.7 $49.2
Finished Goods ($
Mil) $44.7 $50.9 $46.3 $57.5 $65.7 $70.5 $65.7 $60.2
----------------------------------------------------------------------------
Total Inventory ($
Mil) $101.6 $115.1 $118.5 $127.8 $131.0 $121.3 $123.5 $123.7
Inventory Turns (1) 2.5 2.1 2.3 2.6 2.4 2.8 2.3 2.6
----------------------------------------------------------------------------
Worldwide Headcount 1,210 1,228 1,235 1,242 1,219 1,238 1,296 1,318
----------------------------------------------------------------------------
--------------------
(1) Amounts reflect non-GAAP results. Non-GAAP adjustments include non-cash
stock-based compensation expense.
Contacts: Media: Anna Vue avue@infinera.com Infinera Corporation 916-595-8157 Investors/Analysts: Jenifer Kirtland/Bob Jones jkirtland@infinera.com / bjones@infinera.com Infinera Corporation 408-543-8139/408-543-8140