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 share amounts)
(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 September December December December
29, 2012 29, 2012 31, 2011 29, 2012 31, 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
CommonShare -
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 September December December December
29, 29, 31, 29, 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 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.
Contacts: Media: Anna Vue Email Contact Infinera Corporation 916-595-8157 Investors/Analysts: Jenifer Kirtland/Bob Jones Email Contact / Email Contact Infinera Corporation 408-543-8139/408-543-8140