Infinera Corporation Reports Fourth Quarter and Fiscal Year 2013 Financial Results

SUNNYVALE, CA -- (Marketwired) -- Jan 29, 2014 -- Infinera Corporation (NASDAQ: INFN), provider of Intelligent Transport Networks™, today released financial results for the fourth quarter and fiscal year ended December 28, 2013.

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:
 

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