GAAP revenue for the quarter was $142.8 million compared to $139.1 million in the fourth quarter of 2013 and $124.6 million in the first quarter of 2013.
GAAP gross margins for the quarter were 40.9% compared to 40.2% in the fourth quarter of 2013 and 34.2% in the first quarter of 2013.
GAAP net loss for the quarter was $(4.4) million, or $(0.04) per share, compared to net loss of $(10.2) million, or $(0.08) per share, in the fourth quarter of 2013, and a net loss of $(15.3) million, or $(0.13) per share, in the first quarter of 2013.
Non-GAAP gross margins for the quarter were 41.8% compared to 41.4% in the fourth quarter of 2013 and 35.9% in the first quarter of 2013.
Non-GAAP net income for the quarter was $4.2 million, or $0.03 per share, compared to net loss of $(0.2) million, or break even on an earnings per share basis in the fourth quarter of 2013, and net loss of $(7.3) million, or $(0.06) per share, in the first quarter of 2013.
These non-GAAP measures exclude non-cash stock-based compensation expenses and the amortization of debt discount on Infinera's 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:
"Our first quarter performance was exceptionally strong in what is typically a soft quarter for our industry. We are benefitting from the continued investment cycle in 100G and network convergence. The favorable economics of our PIC-based architectures and the operational benefits of super-channels positions us as the industry recognized leader in the optical market," said Tom Fallon, Chief Executive Officer. "I remain optimistic about our short-, intermediate- and long-term opportunity. Our focus this year remains on winning footprint, gaining market share, and servicing customers. We believe the continued growth of our business in long-haul, combined with product investments in adjacent markets, is the best way for us to provide long-term shareholder value."
Conference Call Information:
Infinera will host a conference call for analysts and investors to discuss its first quarter of 2014 results and its outlook for the second quarter of 2014 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 Infinera'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 Following the webcast, an archived version will be available on the website for 90 days.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 1-888-566-0689. International parties can access the replay at 1-402-998-0823.
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 Infinera's opportunity in the short-, intermediate- and long-term; Infinera's ability to win footprint and gain market share; and Infinera's belief that continued growth of its business in long haul, combined with product investments, is the best way for Infinera to provide long-term shareholder value. 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 Infinera's results to differ materially from those expressed or implied by such forward-looking statements include aggressive business tactics by Infinera's competitors, Infinera's reliance on single-source suppliers, Infinera's ability to protect Infinera's intellectual property, claims by others that Infinera infringes their intellectual property, and Infinera's ability to respond to rapid technological changes, and other risks that may impact Infinera's business are set forth in its annual report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 21, 2014, as well as subsequent reports filed with or furnished to the SEC. These reports are available on Infinera's website at www.infinera.com and the SEC's website at www.sec.gov. Infinera assumes no obligation to, and does not currently intend to, update any such forward-looking statements.
Use of Non-GAAP Financial Information
In addition to disclosing financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain certain non-GAAP measures that exclude non-cash stock-based compensation expenses and amortization of debt discount on Infinera's convertible senior notes. Infinera believes these adjustments are appropriate to enhance an overall understanding of its underlying financial performance and also its prospects for the future and are considered by management for the purpose of making operational decisions. In addition, these results are the primary indicators management uses as a basis for its planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income (loss), basic and diluted net income (loss) per share, 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." Infinera anticipates disclosing forward-looking non-GAAP information in its conference call to discuss its first quarter results, including an estimate of non-GAAP earnings for the second quarter of 2014 that excludes non-cash stock-based compensation expenses and amortization of debt discount on Infinera's convertible senior notes.
A copy of this press release can be found on the Investor Relations' page of Infinera's website at www.infinera.com.
Infinera and the Infinera logo are trademarks or registered trademarks of Infinera Corporation. All other trademarks used or mentioned herein belong to their respective owners.
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Infinera Corporation
GAAP Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended
-----------------------------------
March 29, March 30,
2014 2013
----------------- -----------------
Revenue:
Product $ 124,242 $ 108,343
Services 18,573 16,282
----------------- -----------------
Total revenue 142,815 124,625
Cost of revenue (1):
Cost of product 78,438 75,447
Cost of services 5,971 6,476
----------------- -----------------
Total cost of revenue 84,409 81,923
Gross profit 58,406 42,702
Operating expenses (1):
Research and development 29,346 29,726
Sales and marketing 17,862 18,046
General and administrative 12,254 9,872
----------------- -----------------
Total operating expenses 59,462 57,644
Loss from operations (1,056) (14,942)
Other income (expense), net:
Interest income 336 197
Interest expense (2,677) -
Other gain (loss), net: (729) (203)
----------------- -----------------
Total other income (expense), net (3,070) (6)
Loss before income taxes (4,126) (14,948)
Provision for income taxes 248 331
----------------- -----------------
Net loss $ (4,374)$ (15,279)
================= =================
Net loss per common share, basic and
diluted $ (0.04)$ (0.13)
================= =================
Weighted average shares used in
computing basicand diluted net loss per
common share 121,352 114,308
================= =================
----------------------------------------
(1) The following table summarizes the effects of stock-based
compensation related to employees and non-employees for the three
months ended March 29, 2014 and March 30, 2013:
Three Months Ended
-----------------------------------
March 29, March 30,
2014 2013
----------------- -----------------
Cost of revenue $ 452 $ 486
Research and development 2,138 3,119
Sales and marketing 1,720 1,999
General and administration 1,530 769
----------------- -----------------
5,840 6,373
Cost of revenue - amortization from
balance sheet* 832 1,602
----------------- -----------------
Total stock-based compensation
expense $ 6,672 $ 7,975
================= =================
* Stock-based compensation expense deferred to inventory and deferred
inventory costs in prior periods and recognized in the current period.
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Infinera Corporation
GAAP to Non-GAAP Reconciliations
(In thousands, except percentages and per share data)
(Unaudited)
Three Months Ended
-----------------------------------------
March 29, December 28, March 30,
2014 2013 2013
------------ ------------ ------------
Reconciliation of Gross Profit:
U.S. GAAP as reported $ 58,406 $ 55,912 $ 42,702
Stock-based compensation(1) 1,284 1,695 2,088
------------ ------------ ------------
Non-GAAP as adjusted $ 59,690 $ 57,607 $ 44,790
============ ============ ============
Reconciliation of Gross Margin:
U.S. GAAP as reported 40.9% 40.2% 34.2%
Stock-based compensation(1) 0.9% 1.2% 1.7%
------------ ------------ ------------
Non-GAAP as adjusted 41.8% 41.4% 35.9%
============ ============ ============
Reconciliation of Income (Loss)
from Operations:
U.S. GAAP as reported $ (1,056) $ (7,081) $ (14,942)
Stock-based compensation(1) 6,672 8,174 7,975
------------ ------------ ------------
Non-GAAP as adjusted $ 5,616 $ 1,093 $ (6,967)
============ ============ ============
Reconciliation of Net Income
(Loss):
U.S. GAAP as reported $ (4,374) $ (10,178) $ (15,279)
Stock-based compensation(1) 6,672 8,174 7,975
Amortization of debt discount(2) 1,860 1,814 -
------------ ------------ ------------
Non-GAAP as adjusted $ 4,158 $ (190) $ (7,304)
============ ============ ============
Net Income (Loss) per Common Share
- Basic:
U.S. GAAP as reported $ (0.04) $ (0.08) $ (0.13)
============ ============ ============
Non-GAAP as adjusted $ 0.03 $ - $ (0.06)
============ ============ ============
Net Income (Loss) per Common Share
- Diluted:
U.S. GAAP as reported $ (0.04) $ (0.08) $ (0.13)
============ ============ ============
Non-GAAP as adjusted(3) $ 0.03 $ - $ (0.06)
============ ============ ============
Weighted average shares used in
computing net income (loss) per
common share - U.S. GAAP:
Basic 121,352 119,743 114,308
============ ============ ============
Diluted 121,352 119,743 114,308
============ ============ ============
Weighted average shares used in
computing net income (loss) per
common share - Non-GAAP:
Basic 121,352 119,743 114,308
============ ============ ============
Diluted(3) 125,435 125,134 117,602
============ ============ ============
------------------------------
(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 (in thousands):
Three Months Ended
--------------------------------------
March 29, December 28, March 30,
2014 2013 2013
------------ ------------ ------------
Cost of revenue $ 452 $ 489 $ 486
Research and development 2,138 2,725 3,119
Sales and marketing 1,720 1,965 1,999
General and administration 1,530 1,789 769
------------ ------------ ------------
5,840 6,968 6,373
Cost of revenue - amortization
from balance sheet* 832 1,206 1,602
------------ ------------ ------------
Total stock-based compensation
expense $ 6,672 $ 8,174 $ 7,975
============ ============ ============
---------------------------------
* 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, Infinera is 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
its $150 million 1.75% convertible debt issuance in May 2013 over the
term of the notes. These amounts have been adjusted in arriving at
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.
(3) Diluted shares used to calculate net loss per share on a non-GAAP basis
provided for informational purposes only.
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Infinera Corporation
Condensed Consolidated Balance Sheets
(In thousands, except par values)
(Unaudited)
March 29, December 28,
2014 2013
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 85,249 $ 124,330
Short-term investments 226,705 172,660
Accounts receivable, net of allowance for
doubtful accounts
of $41 in 2014 and $43 in 2013 107,405 100,643
Inventory 126,465 123,685
Prepaid expenses and other current assets 20,537 17,752
------------- -------------
Total current assets 566,361 539,070
Property, plant and equipment, net 78,801 79,668
Long-term investments 32,756 64,419
Cost-method investment 9,000 9,000
Long-term restricted cash 4,392 3,904
Other non-current assets 5,776 4,865
------------- -------------
Total assets $ 697,086 $ 700,926
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 37,843 $ 39,843
Accrued expenses 20,244 22,431
Accrued compensation and related benefits 21,377 33,899
Accrued warranty 14,351 12,374
Deferred revenue 31,496 32,402
------------- -------------
Total current liabilities 125,311 140,949
Long-term debt, net 111,024 109,164
Accrued warranty, non-current 12,034 10,534
Deferred revenue, non-current 4,886 4,888
Other long-term liabilities 17,563 17,581
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 March 29,
2014 and December 28, 2013
Issued and outstanding shares - 122,485 as
of March 29, 2014 and 119,887
as of December 28, 2013 123 120
Additional paid-in capital 1,038,216 1,025,661
Accumulated other comprehensive loss (3,212) (3,486)
Accumulated deficit (608,859) (604,485)
------------- -------------
Total stockholders' equity 426,268 417,810
------------- -------------
Total liabilities and stockholders' equity $ 697,086 $ 700,926
============= =============
Infinera Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
----------------------------
March 29, March 30,
2014 2013
------------- -------------
Cash Flows from Operating Activities:
Net loss $ (4,374) $ (15,279)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 6,314 6,334
(Recovery of) provision for other
receivables - (88)
Amotization of debt discount and issuance
costs 2,020 -
Amortization of premium on investments 828 314
Stock-based compensation expense 6,672 7,975
Other gain (20) (243)
Changes in assets and liabilities:
Accounts receivable (6,762) (5,094)
Inventory (3,354) (5,041)
Prepaid expenses and other assets (3,797) (361)
Accounts payable (2,080) (8,045)
Accrued liabilities and other expenses (13,448) (6,301)
Deferred revenue (909) 4,340
Accrued warranty 3,477 190
------------- -------------
Net cash used in operating activities (15,433) (21,299)
Cash Flows from Investing Activities:
Purchase of available-for-sale investments (80,223) (20,023)
Proceeds from sale of available-for-sale
investments - 2,850
Proceeds from maturities and calls of
investments 57,063 33,835
Purchase of property and equipment (5,608) (4,936)
Change in restricted cash (479) 44
------------- -------------
Net cash provided by (used in) investing
activities (29,247) 11,770
Cash Flows from Financing Activities:
Proceeds from issuance of common stock 7,054 5,560
Minimum tax withholding paid on behalf of
employees for net share settlement (1,619) (1,493)
------------- -------------
Net cash provided by financing activities 5,435 4,067
Effect of exchange rate changes on cash 164 (206)
Net change in cash and cash equivalents (39,081) (5,668)
Cash and cash equivalents at beginning of
period 124,330 104,666
------------- -------------
Cash and cash equivalents at end of period $ 85,249 $ 98,998
============= =============
Supplemental disclosures of cash flow
information:
Cash paid for income taxes, net of refunds $ 303 $ 210
Supplemental schedule of non-cash financing
activities:
Transfer of inventory to fixed assets $ 603 $ 1,522
Infinera Corporation
Supplemental Financial Information
(Unaudited)
----------------------------------------------------------------------------
Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14
----------------------------------------------------------------------------
Revenue ($ Mil) $93.5 $112.2 $128.1 $124.6 $138.4 $142.0 $139.1 $142.8
Gross Margin % (1) 36.6% 39.1% 35.9% 35.9% 38.9% 49.2% 41.4% 41.8%
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Invoiced Shipment
Composition:
Domestic % 70% 70% 63% 63% 64% 73% 54% 78%
International % 30% 30% 37% 37% 36% 27% 46% 22%
Largest Customer % 15% 13% 13% 14% < 10% 17% 11% 21%
----------------------------------------------------------------------------
Cash Related
Information:
Cash from (used in)
Operations ($ Mil) $(22.7)$(29.3) $8.3$(21.3) $17.9 $12.8 $25.8$(15.4)
Capital Expenditures
($ Mil) $6.1 $2.5 $3.2 $4.9 $4.5 $4.2 $7.5 $5.6
Depreciation &
Amortization ($
Mil) $5.7 $6.1 $6.4 $6.3 $6.3 $5.9 $6.0 $6.3
DSO's 55 74 76 82 64 56 66 68
----------------------------------------------------------------------------
Inventory Metrics:
Raw Materials ($
Mil) $14.8 $12.4 $13.0 $12.2 $9.8 $12.1 $14.3 $13.2
Work in Process ($
Mil) $49.4 $59.8 $57.3 $53.1 $41.0 $45.7 $49.2 $47.8
Finished Goods ($
Mil) $50.9 $46.3 $57.5 $65.7 $70.5 $65.7 $60.2 $65.5
----------------------------------------------------------------------------
Total Inventory ($
Mil) $115.1 $118.5 $127.8 $131.0 $121.3 $123.5 $123.7 $126.5
Inventory Turns (2) 2.1 2.3 2.6 2.4 2.8 2.3 2.6 2.6
----------------------------------------------------------------------------
Worldwide Headcount 1,228 1,235 1,242 1,219 1,238 1,296 1,318 1,346
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Amounts reflect non-GAAP results. Non-GAAP adjustments include non-cash
stock-based compensation expense.
(2) Infinera calculates non-GAAP inventory turns as annualized non-GAAP
cost of revenue before adjustments for non-cash stock-based
compensation expense divided by the average inventory for the quarter.
Contacts: Media and analysts: Anna Vue Tel. +1 (916) 595-8157 avue@infinera.com Investors: Leigh Salvo Tel. +1 (408) 543-8139 lsalvo@infinera.com