Infinera Corp - FORM 8-K - EX-99.1

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8-K - FORM 8-K - Infinera Corp	d477358d8k.htm

Exhibit 99.1


Contacts:

Media: Anna Vue		Investors/Analysts: Jenifer Kirtland/Bob Jones
avue@infinera.com		jkirtland@infinera.com/bjones@infinera.com
Infinera Corporation		Infinera Corporation
916-595-8157		408-543-8139/408-543-8140

Infinera Corporation Reports Fourth Quarter and Fiscal Year 2012 Financial Results

Sunnyvale, CA, February 5, 2013 – Infinera Corporation (NASDAQ: INFN), a leading provider of digital optical networks, today released financial results for the fourth quarter and fiscal year ended December 29, 2012.

GAAP revenues for the quarter were $128.1 million compared to $112.2 million in the third quarter of 2012 and $112.0 million in the fourth quarter of 2011.

GAAP gross margins for the quarter were 34% compared to 37% in the third quarter of 2012 and 40% in the fourth quarter of 2011. GAAP net loss for the quarter was $(16.1) million, or $(0.14) per share, compared to net loss of $(19.1) million, or $(0.17) per share, in the third quarter of 2012 and a net loss of $(19.4) million, or $(0.18) per share, in the fourth quarter of 2011.

Non-GAAP gross margins for the quarter were 36% compared to 39% in the third quarter of 2012 and 42% in the fourth quarter of 2011. Non-GAAP net loss for the quarter was $(6.0) million, or $(0.05) per diluted share, compared to net loss of $(7.8) million, or $(0.07) per diluted share in the third quarter of 2012 and net loss of $(6.7) million, or $(0.06) per diluted share, in the fourth quarter of 2011. These Non-GAAP measures exclude non-cash stock-based compensation expenses and restructuring and other related costs.

GAAP revenues for the year were $438.4 million compared to $404.9 million in 2011.

GAAP gross margins for the year were 36% compared to 41% in 2011. GAAP net loss for the year was $(85.3) million, or $(0.77) per share compared to $(81.7) million, or $(0.78) per share in 2011.

Non-GAAP gross margins for the year were 38% compared to 43% in 2011. Non-GAAP net loss for the year was $(43.5) million or $(0.38) per diluted share in 2012, compared to net loss of $(31.7) million or $(0.29) per diluted share in 2011. These Non-GAAP measures exclude non-cash stock-based compensation expenses and restructuring and other related costs.

Management Commentary

“Our fourth quarter results reflected solid execution of our growth strategy and represented a strong finish to a productive year for Infinera,” said Tom Fallon, president and chief executive officer. “Our DTN-X continues to gain traction and to date, we have purchase commitments from 22 customers, including seven new to Infinera. These customers represent a broad cross section of our market segments. Revenue from the DTN-X platform continues to ramp.”

“During the fourth quarter, we were pleased to announce our first domestic Tier 1 backbone deployment with CenturyLink. We have also successfully completed the OSMINE certification process, another key milestone in demonstrating our US Tier 1 readiness. Our ability to fully service global Tier 1 customers essentially doubles our addressable market. We also added four new DTN customers during the quarter for a total of 111 customers worldwide,” continued Mr. Fallon.

“We are optimistic about the outlook for 2013. Interest in our unique 100G converged DWDM/OTN switching solution remains strong, resulting in significant trial activity, which has helped us build a strong pipeline into 2013. A strong focus on winning footprint and gaining market share, balanced with prudent financial management remain our priorities for 2013,” Mr. Fallon concluded.

Conference Call Information:

Infinera will host a conference call for analysts and investors to discuss its fourth quarter and fiscal year 2012 results and first quarter outlook 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 1-888-566-0401. International parties can access the replay at 1-203-369-3040.

About Infinera

Infinera provides Digital Optical Networking systems to telecommunications carriers worldwide. Infinera’s systems are unique in their use of a breakthrough semiconductor technology: the photonic integrated circuit (PIC). Infinera’s systems and PIC technology are designed to provide customers with simpler and more flexible engineering and operations, faster time-to-service, and the ability to rapidly deliver differentiated services without reengineering their optical infrastructure. For more information, please visit www.infinera.com.

Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding our expectations for customer interest in, adoption of, and revenue and purchase commitments related to our DTN-X product, our ability to fully service Tier 1 customers and the addressable market related to Tier 1 customers, and customer interest in our 100G converged DWDM/OTN switching solution, and our building of a strong pipeline for 2013. These forward-looking statements involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include unexpected delays in the development, production or availability of our products; decisions by customers to delay orders of the product; changes in the marketplace that would affect customer demand for the product, as well as our general ability to react to trends and challenges in our business and the markets in which we operate; our ability to anticipate market needs and develop new or enhanced products to meet those needs; the adoption rate of our products; our ability to establish and maintain successful relationships with our customers; our ability to reduce customer concentration; our ability to compete in our industry; fluctuations in demand, sales cycles and prices for our products and services; our ability to operate profitably; aggressive business tactics by our competitors; our reliance on single-source suppliers; shortages or price fluctuations in our supply chain; our ability to protect our intellectual property rights; and general, political, economic and market conditions and events. Further information about these risks and uncertainties, and other risks and uncertainties that affect our business, are contained in the risk factors section and other sections of our annual report on Form 10-K filed with the Securities Exchange Commission on March 6, 2012, 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. We assume no obligation to, and do 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. 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 2013 that excludes non-cash stock-based compensation expenses.

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 per share data)

(Unaudited)


	Three Months Ended						Twelve Months Ended
	December 29,			December 31,			December 29,			December 31,
	2012			2011			2012			2011
Revenue:
Product	$	109,051		$	93,025		$	378,138		$	349,468
Ratable product and related support and services		393			593			1,897			3,176
Services		18,620			18,391			58,402			52,233

Total revenue		128,064			112,009			438,437			404,877
Cost of revenue⁽¹⁾:
Cost of product		77,023			61,103			258,874			219,710
Cost of ratable product and related support and services		104			250			563			1,096
Cost of services		7,669			5,972			21,431			18,580

Total cost of revenue		84,796			67,325			280,868			239,386
Gross profit		43,268			44,684			157,569			165,491
Operating expenses⁽¹⁾:
Research and development		26,660			31,218			117,233			127,120
Sales and marketing		20,558			18,336			75,862			64,773
General and administrative		11,563			14,119			47,475			54,375
Restructuring and other costs (credit)		—			(129	)		—			(129	)

Total operating expenses		58,781			63,544			240,570			246,139
Loss from operations		(15,513	)		(18,860	)		(83,001	)		(80,648	)
Other income (expense), net:
Interest income		233			272			911			1,014
Other gain (loss), net		(158	)		(216	)		(1,050	)		(419	)

Total other income (expense), net		75			56			(139	)		595
Loss before income taxes		(15,438	)		(18,804	)		(83,140	)		(80,053	)
Provision for income taxes		650			546			2,190			1,691

Net loss	$	(16,088	)	$	(19,350	)	$	(85,330	)	$	(81,744	)

Net loss per common share, basic and diluted	$	(0.14	)	$	(0.18	)	$	(0.77	)	$	(0.78	)

Weighted average shares used in computing basic and diluted net loss per common share		112,311			106,893			110,739			105,432

⁽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 29, 2012 and December 31, 2011:


	Three Months Ended				Twelve Months Ended
	December 29,		December 31,		December 29,		December 31,
	2012		2011		2012		2011
Cost of revenue	$	735	$	710	$	2,710	$	2,923
Research and development		2,852		3,915		13,306		14,990
Sales and marketing		2,802		2,317		10,450		8,818
General and administration		1,797		4,481		9,529		18,502

		8,186		11,423		35,995		45,233
Cost of revenue—amortization from balance sheet*		1,949		1,307		5,824		4,924

Total stock-based compensation expense	$	10,135	$	12,730	$	41,819	$	50,157

*	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									Twelve Months Ended
	December 29,			September 29,			December 31,			December 29,			December 31,
	2012			2012			2011			2012			2011
Reconciliation of Gross Profit:
U.S. GAAP as reported	$	43,268		$	41,500		$	44,684		$	157,569		$	165,491
Stock-based compensation⁽¹⁾		2,684			2,389			2,017			8,534			7,847

Non-GAAP as adjusted	$	45,952		$	43,889		$	46,701		$	166,103		$	173,338

Reconciliation of Gross Margin:
U.S. GAAP as reported		34	%		37	%		40	%		36	%		41	%
Stock-based compensation⁽¹⁾		2	%		2	%		2	%		2	%		2	%

Non-GAAP as adjusted		36	%		39	%		42	%		38	%		43	%

Reconciliation of Loss from Operations:
U.S. GAAP as reported	$	(15,513	)	$	(18,205	)	$	(18,860	)	$	(83,001	)	$	(80,648	)
Restructuring and other related costs (credit)⁽²⁾		—			—			(129	)		—			(129	)
Stock-based compensation⁽¹⁾		10,135			11,317			12,730			41,819			50,157

Non-GAAP as adjusted	$	(5,378	)	$	(6,888	)	$	(6,259	)	$	(41,182	)	$	(30,620	)

Reconciliation of Net Loss:
U.S. GAAP as reported	$	(16,088	)	$	(19,081	)	$	(19,350	)	$	(85,330	)	$	(81,744	)
Restructuring and other related costs (credit)⁽²⁾		—			—			(129	)		—			(129	)
Stock-based compensation⁽¹⁾		10,135			11,317			12,730			41,819			50,157

Non-GAAP as adjusted	$	(5,953	)	$	(7,764	)	$	(6,749	)	$	(43,511	)	$	(31,716	)

Reconciliation of Net Loss per Common Share—Basic:
U.S. GAAP as reported	$	(0.14	)	$	(0.17	)	$	(0.18	)	$	(0.77	)	$	(0.78	)

Non-GAAP as adjusted	$	(0.05	)	$	(0.07	)	$	(0.06	)	$	(0.39	)	$	(0.30	)

Reconciliation of Net Loss per Common Share—Diluted:
U.S. GAAP as reported	$	(0.14	)	$	(0.17	)	$	(0.18	)	$	(0.77	)	$	(0.78	)

Non-GAAP as adjusted⁽³⁾	$	(0.05	)	$	(0.07	)	$	(0.06	)	$	(0.38	)	$	(0.29	)

Weighted average shares used in computing net loss per common share—U.S. GAAP:
Basic		112,311			111,579			106,893			110,739			105,432

Diluted		112,311			111,579			106,893			110,739			105,432

Weighted average shares used in computing net loss per common share—Non-GAAP:
Basic		112,311			111,579			106,893			110,739			105,432

Diluted⁽³⁾		114,115			113,443			110,018			113,124			108,770

⁽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						Twelve Months Ended
	December 29,		September 29,		December 31,		December 29,		December 31,
	2012		2012		2011		2012		2011
Cost of revenue	$	735	$	683	$	710	$	2,710	$	2,923
Research and development		2,852		3,439		3,915		13,306		14,990
Sales and marketing		2,802		2,685		2,317		10,450		8,818
General and administration		1,797		2,804		4,481		9,529		18,502

		8,186		9,611		11,423		35,995		45,233
Cost of revenue—amortization from balance sheet*		1,949		1,706		1,307		5,824		4,924

Total stock-based compensation expense	$	10,135	$	11,317	$	12,730	$	41,819	$	50,157

*	Stock-based compensation expense deferred to inventory and deferred inventory costs in prior periods and recognized in the current period.

⁽²⁾

Adjustment amount represents equipment and facility-related creidts associated with restructuring recorded in relation to the closure of our Maryland FAB announced on July 21, 2009. These amounts have been adjusted in arriving at our non-GAAP results as they are non-recurring in nature and the adjusted numbers provide 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 29,			December 31,
	2012			2011
ASSETS
Current assets:
Cash and cash equivalents	$	104,666		$	94,458
Short-term investments		76,146			101,296
Accounts receivable, net of allowance for doubtful accounts of $94 in 2012 and $0 in 2011		107,039			80,616
Other receivables		2,909			1,346
Inventory		127,809			88,996
Deferred inventory costs		1,029			5,987
Prepaid expenses and other current assets		9,899			10,532

Total current assets		429,497			383,231
Property, plant and equipment, net		80,343			76,753
Deferred inventory costs, non-current		100			1,020
Long-term investments		2,874			54,315
Cost-method investment		9,000			9,000
Long-term restricted cash		3,868			3,047
Deferred tax asset		805			822
Other non-current assets		1,683			3,516

Total assets	$	528,170		$	531,704

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	61,428		$	48,838
Accrued expenses		25,483			22,421
Accrued compensation and related benefits		22,325			18,966
Accrued warranty		7,262			5,692
Deferred revenue		26,744			22,781
Deferred tax liability		805			767

Total current liabilities		144,047			119,465
Accrued warranty, non-current		9,220			7,173
Deferred revenue, non-current		3,210			3,410
Other long-term liabilities		15,557			13,853
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 29, 2012 and December 31, 2011 Issued and outstanding shares – 112,461 as of December 29, 2012 and 106,976 as of December 31, 2011		112			107
Additional paid-in capital		930,618			876,927
Accumulated other comprehensive loss		(2,228	)		(2,195	)
Accumulated deficit		(572,366	)		(487,036	)

Total stockholders’ equity		356,136			387,803

Total liabilities and stockholders’ equity	$	528,170		$	531,704

Infinera Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Twelve Months Ended
	December 29,			December 31,
	2012			2011
Cash Flows from Operating Activities:
Net loss	$	(85,330	)	$	(81,744	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		23,661			17,859
Provision for doubtful accounts		94			—
Provision for other receivables		—			563
Non-cash restructuring and other costs (credit)		—			(129	)
Amortization of premium on investments		2,068			4,215
Stock-based compensation expense		41,819			50,157
Non-cash tax benefit		(7	)		(95	)
Other gain		(475	)		(335	)
Changes in assets and liabilities:
Accounts receivable		(26,517	)		(4,686	)
Other receivables		(1,894	)		3,440
Inventories, net		(40,623	)		(6,007	)
Prepaid expenses and other assets		2,293			12,695
Deferred inventory costs		5,741			1,999
Accounts payable		15,410			9,342
Accrued liabilities and other expenses		6,915			(10,282	)
Deferred revenue		3,763			(401	)
Accrued warranty		3,616			1,444

Net cash used in operating activities		(49,466	)		(1,965	)
Cash Flows from Investing Activities:
Purchase of available-for-sale investments		(54,150	)		(273,334	)
Purchase of cost-method investment		—			(4,500	)
Proceeds from sale of available-for-sale investments		11,584			4,072
Proceeds from maturities and calls of investments		117,605			287,781
Proceeds from disposal of assets		1			262
Purchase of property and equipment		(25,395	)		(39,382	)
Advance to secure manufacturing capacity		—			(1,500	)
Reimbursement of manufacturing capacity advance		50			450
Change in restricted cash		(827	)		983

Net cash provided by (used in) investing activities		48,868			(25,168	)
Cash Flows from Financing Activities:
Proceeds from issuance of common stock		11,580			10,023
Repurchase of common stock		(882	)		(1,248	)
Payments for purchase of assets under financing arrangement		—			(262	)

Net cash provided by financing activities		10,698			8,513
Effect of exchange rate changes on cash		108			(571	)
Net change in cash and cash equivalents		10,208			(19,191	)
Cash and cash equivalents at beginning of period		94,458			113,649

Cash and cash equivalents at end of period	$	104,666		$	94,458

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	923		$	1,487
Supplemental schedule of non-cash investing and financing activities:
Transfer of inventory to fixed assets	$	3,222		$	—
Non-cash settlement for manufacturing capacity advance	$	275		$	—

Infinera Corporation

Supplemental Financial Information

(Unaudited)


	Q1’11			Q2’11			Q3’11			Q4’11			Q1’12			Q2’12			Q3’12			Q4’12
Revenue ($ Mil)	$	92.9		$	96.0		$	104.0		$	112.0		$	104.7		$	93.5		$	112.2		$	128.1
Gross Margin % ⁽¹⁾		48	%		41	%		41	%		42	%		40	%		37	%		39	%		36	%

Invoiced Shipment Composition:
Domestic %		74	%		72	%		65	%		70	%		71	%		70	%		70	%		63	%
International %		26	%		28	%		35	%		30	%		29	%		30	%		30	%		37	%
Largest Customer %		14	%		10	%		<10	%		14	%		13	%		15	%		13	%		13	%

Cash Related Information:
Cash from (used in) Operations ($ Mil)	$	(0.9	)	$	(0.1	)	$	4.1		$	(5.1	)	$	(5.8	)	$	(22.7	)	$	(29.3	)	$	8.3
Capital Expenditures ($ Mil)	$	10.6		$	6.7		$	5.9		$	16.1		$	13.6		$	6.1		$	2.5		$	3.2
Depreciation & Amortization ($ Mil)	$	4.2		$	4.2		$	4.9		$	4.5		$	5.5		$	5.7		$	6.1		$	6.4
DSO’s		60			70			60			65			57			55			74			76

Inventory Metrics:
Raw Materials ($ Mil)	$	20.1		$	7.3		$	7.0		$	12.1		$	15.3		$	14.8		$	12.4		$	13.0
Work in Process ($ Mil)	$	17.2		$	27.7		$	26.9		$	37.0		$	41.6		$	49.4		$	59.8		$	57.3
Finished Goods ($ Mil)	$	41.0		$	34.4		$	36.4		$	39.9		$	44.7		$	50.9		$	46.3		$	57.5

Total Inventory ($ Mil)	$	78.3		$	69.4		$	70.3		$	89.0		$	101.6		$	115.1		$	118.5		$	127.8
Inventory Turns ⁽¹⁾		2.5			3.3			3.5			2.9			2.5			2.1			2.3			2.6

Worldwide Headcount		1,118			1,136			1,151			1,181			1,210			1,228			1,235			1,242

⁽¹⁾	Amounts reflect non-GAAP results. Non-GAAP adjustments include non-cash stock-based compensation expense.

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