SUNNYVALE, Calif., July 31, 2007 (PRIME NEWSWIRE) -- Infinera Corporation. (Nasdaq:INFN), a leading provider of digital optical communications systems, today released financial results for the second quarter ended June 30, 2007.
In a separate press release today, the company also announced that Cox Communications has selected Infinera to build its national transport network.
GAAP Results:
* Revenues for the second quarter of 2007 were $58.4 million
compared to $49.2 million in the first quarter of 2007.
* Gross margins were 28% in the second quarter of 2007 compared to
24% in the first quarter of 2007.
* Including non-cash stock-based compensation and warrant
revaluation expenses, the net loss was $26.1 million, or $1.10 per
share, for the second quarter of 2007 compared to a net loss of
$19.8 million, or $2.62 per share, in the first quarter of 2007.
Non-GAAP Invoiced Shipment Results:
* Invoiced shipments for the second quarter of 2007 were
$69.0 million compared to $66.7 million in the first quarter of
2007.
* Gross margins were 37% in the second quarter of 2007 compared to
35% in the first quarter of 2007.
* Excluding non-cash stock-based compensation and warrant
revaluation expenses, the net income was $2.7 million, or
$0.04 per diluted share, for the second quarter of 2007 compared
to a net loss of $5.4 million, or $0.71 per diluted share, in the
first quarter of 2007.
Comments from Management:
"We are pleased with Infinera's second quarter performance -- our first quarter as a public company -- as it reflects our continued success in establishing ourselves as a leading systems company in the optical networking industry," said Jagdeep Singh, chief executive officer of Infinera. "As service providers build out their networks to accommodate growing internet traffic, they continue to embrace Infinera's highly-differentiated and highly-flexible Digital Optical Network architecture as a compelling solution for long-haul and metro optical networks."
Singh also noted that Infinera added five new customers in the second quarter, bringing its total customer roster to 31, and that the company introduced the new Infinera 40G Tributary Adapter Module, which the company believes is the industry's most flexible and economical means of deploying 40G services in the optical network.
Conference Call Information:
Infinera will host a conference call for analysts and investors to discuss its second quarter results 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 websiteat www.infinera.com. Following the webcast, an archived version will be available on the website for 30 days. To hear the replay, parties in the United States and Canada should call 866-457-5509. International parties can access the replay at 203-369-1283.
About Infinera
Infinera provides Digital Optical Networking systems (the DTN System) to telecommunications carriers, cable operators and other service providers worldwide. Infinera's large-scale photonic integrated circuit (PIC) incorporates 100 Gigabits per second of transmit and receive capacity and the functionality of more than 60 discrete optical components into a pair of indium phosphide chips. Infinera's DTN system and PIC technology are designed to provide optical networks that provide operating simplicity, enhanced revenue generation, faster time-to-service and capital cost savings. For more information, please visit www.infinera.com.
Forward-Looking Statements
This press release contains forward-looking statements, including statements relating to Infinera's ability to change the economics of optical communications networks and design products that are flexible and economical for its customers. 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 our ability to react to trends and challenges in our business and the markets in which we operate; our ability to anticipate market needs or 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 compete in our industry; fluctuations indemand, sales cycles and prices for our products and services; shortages or price fluctuations in our supply chain; our ability to protect our intellectual property rights; general political, economic and market conditions and events; and other risks and uncertainties described more fully in our documents filed with or furnished to the Securities and Exchange Commission. More information about these and other risks that may impact Infinera's business are set forth in our final Prospectus which was filed with the SEC on June 6, 2007, as well as subsequent reports filed with the SEC. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.
Non-GAAP and other Financial Measures
In addition to disclosing financial measures prepared in accordance with United States Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain non-GAAP financial measures reported on an invoiced shipment basis. For a description of these non-GAAP financial measures, including the reasons why management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled "GAAP to Non-GAAP Invoiced Shipment Reconciliation" as well as the accompanying notes on the use of non-GAAP invoiced shipment information. We anticipate disclosing forward-looking non-GAAP and other financial information in our conference call to discuss our second quarter results, including an estimate of non-GAAP invoiced shipment earnings for the third quarter of 2007 that includes the impact of invoiced shipments in the period and excludes non-cash stock-based compensation expenses related to our equity awards and the right to purchase common stock under our Employee Stock Purchase Plan.
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 Six Months Ended
June 30, June 30,
------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
Revenue:
Ratable product and related
support and services $ 54,411 $ 4,054 $100,358 $ 6,707
Product 4,005 -- 7,250 --
-------- -------- -------- --------
Total revenue 58,416 4,054 107,608 6,707
Cost of revenue(a):
Cost of ratable product and
related support and
services 37,529 4,488 72,372 9,973
Lower of cost or market
adjustment 2,219 3,657 3,286 7,982
Cost of product 2,488 -- 3,851 --
-------- -------- -------- --------
Total cost of revenue 42,236 8,145 79,509 17,955
Gross profit (loss) 16,180 (4,091) 28,099 (11,248)
Operating expenses(a):
Sales and marketing 6,401 4,162 14,037 6,863
Research and development 14,079 7,272 30,137 13,718
General and administrative 5,358 2,286 10,915 3,664
Amortization of intangible
assets 37 -- 74 --
-------- -------- -------- --------
Total operating expenses 25,875 13,720 55,163 24,245
-------- -------- -------- --------
Loss from operations (9,695) (17,811) (27,064) (35,493)
Other income (expense), net:
Interest income 729 569 914 795
Interest expense (1,119) (1,399) (2,182) (2,389)
Other gain (loss), net(b) (15,978) 460 (17,515) 728
-------- -------- -------- --------
Total income (expense), net (16,368) (370) (18,783) (866)
Loss before provision of
income taxes (26,063) (18,181) (45,847) (36,359)
Provision for income taxes 33 15 62 30
-------- -------- -------- --------
Net loss $(26,096) $(18,196) $(45,909) $(36,389)
======== ======== ======== ========
Net loss per common share,
basic and diluted $ (1.10) $ (3.23) $ (2.94) $ (6.84)
======== ======== ======== ========
Shares used in computing
basic and diluted net loss
per common share 23,678 5,630 15,620 5,320
======== ======== ======== ========
-----------------------
(a) The following table summarizes the effects of stock-based
compensation related to employees, non-recourse notes and
non-employees for the three and six months ended June 30, 2007
and 2006:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
Cost of revenue $ 94 $ 2 $ 111 $ 4
Research and development 1,014 30 1,323 58
Sales and marketing 346 16 433 28
General and administration 685 21 903 40
-------- -------- -------- --------
2,139 69 2,770 130
Cost of revenue -
amortization from balance
sheet* 27 -- 40 --
-------- -------- -------- --------
Total stock-based
compensation expense $ 2,166 $ 69 $ 2,810 $ 130
======== ======== ======== ========
* Stock-based compensation expense deferred to inventory and
deferred inventory costs in prior periods and recognized in the
current period.
(b) The following table summarizes the remeasurement of our
freestanding preferred stock warrants under FAS 150:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
Other gain (loss) $ 17,261 $ (442) $ 19,761 $ (581)
Infinera Corporation
GAAP to Non-GAAP Invoiced Shipment Reconciliation
(In thousands, except for share amounts)
(Unaudited)
Three Months Ended June 30, 2007
-------------------------------------------------------
Non-GAAP
Invoiced
Shipments
Excluding
Non-GAAP Stock Comp Stock Comp
Deferral Invoiced /Warrant /Warrant
GAAP Adjustments Shipments Valuation Valuation
-------- -------- -------- -------- --------
Revenue $ 58,416 $ 10,535 (a) $ 68,951 $ -- $ 68,951
Cost of
revenue 42,236 1,248 (b) 43,484 (169) (c) 43,315
-------- -------- -------- -------- --------
Gross profit 16,180 9,287 25,467 169 25,636
Gross margin 28% 37%
Operating
expenses 25,875 -- 25,875 (2,045) (c) 23,830
-------- -------- -------- -------- --------
Income (Loss)
from
operations (9,695) 9,287 (408) 2,214 1,806
Other income
(expense),
net (16,368) -- (16,368) 17,261 (d) 893
-------- -------- -------- -------- --------
Income (Loss)
before
provision
for income
taxes (26,063) 9,287 (16,776) 19,475 2,699
Provision for
income taxes 33 -- 33 -- 33
-------- -------- -------- -------- --------
Net income
(loss) $(26,096) $ 9,287 $(16,809) $ 19,475 $ 2,666
======== ======== ======== ======== ========
Net income
(loss) per
common share:
Basic $ (1.10) $ 0.11
======== ========
Diluted $ (1.10) $ 0.04
======== ========
Shares used in
computing net
income (loss)
per common
share:
Basic 23,678 23,678
======== ========
Diluted 23,678 59,284
======== ========
Three Months Ended March 31, 2007
-------------------------------------------------------
Non-GAAP
Invoiced
Shipments
Excluding
Non-GAAP Stock Comp Stock Comp
Deferral Invoiced /Warrant /Warrant
GAAP Adjustments Shipments Valuation Valuation
-------- -------- -------- -------- --------
Revenue $ 49,192 $ 17,467 (a) $ 66,659 $ -- $ 66,659
Cost of
revenue 37,273 6,205 (b) 43,478 (57) (c) 43,421
-------- -------- -------- -------- --------
Gross profit 11,919 11,262 23,181 57 23,238
Gross margin 24% 35%
Operating
expenses 29,288 -- 29,288 (614) (c) 28,674
-------- -------- -------- -------- --------
Income (Loss)
from
operations (17,369) 11,262 (6,107) 671 (5,436)
Other income
(expense), net (2,415) -- (2,415) 2,500 (d) 85
-------- -------- -------- -------- --------
Income (Loss)
before
provision for
income taxes (19,784) 11,262 (8,522) 3,171 (5,351)
Provision for
income taxes 29 -- 29 -- 29
-------- -------- -------- -------- --------
Net income
(loss) $(19,813) $ 11,262 $ (8,551) $ 3,171 $ (5,380)
======== ======== ======== ======== ========
Net income
(loss) per
common share:
Basic $ (2.62) $ (0.71)
======== ========
Diluted $ (2.62) $ (0.71)
======== ========
Shares used in
computing
net income
(loss) per
common share:
Basic 7,560 7,560
======== ========
Diluted 7,560 7,560
======== ========
Infinera Corporation
GAAP to Non-GAAP Invoiced Shipment Reconciliation
(In thousands)
Use of Non-GAAP Invoiced Shipments Information:
To supplement our condensed consolidated financial statements presented on a U.S. GAAP basis, Infinera uses non-GAAP Invoiced Shipment measures of operating results, net income and net income per share, which are adjusted to exclude stock-based compensation expense and warrant valuation expense and include changes in deferred revenue and deferred cost of inventory. We believe these adjustments are appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our current period GAAP results are made with the intent of providing both management and investors a more complete understanding of Infinera's underlying operating results and trends and our marketplace performance. The non-GAAP Invoiced Shipments results are an indication of our baseline performance that 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 or basic and diluted net income per share prepared in accordance with U.S. GAAP. Non-GAAP Invoiced Shipments financial measures are not based on a comprehensive set of accounting rules or principles and are subject to limitations.
(a) Included amount represents the change in the deferred revenue
balance for the period as reported on the company's balance
sheet. We believe investors want to see the income statement
with the change in deferral balance included in order to
understand the gross margin profile of the underlying invoiced
shipments.
(b) Included amount represents the change in the deferred cost of
inventory balance for the period as reported on the company's
balance sheet. We believe investors want to see the income
statement with the change in the deferral balance included in
order to understand the gross margin profile of the underlying
invoiced shipments.
(c) Excluded amount represents stock-based compensation expense.
Stock-based compensation is a non-cash expense accounted for in
accordance with the fair value recognition provisions of
Statement of Financial Accounting Standards No. 123(R). While a
large component of our expense, we believe investors want to
evaluate our financial results both including and excluding the
effects of stock-based compensation expense in order to compare
our financial performance with that of other companies and
between time periods.
(d) Excluded amount represents the adjustment to revalue our
convertible preferred warrants to fair value as required by FAS
150. Subsequent to our IPO, we are no longer required to revalue
these warrants and, therefore, we believe investors want to
evaluate our financial results both including and excluding the
effect of this revaluation expense in order to compare our
financial performance with that of other companies and between
periods.
Infinera Corporation
Condensed Consolidated Balance Sheets
(In thousands)
June 30, December 31,
2007 2006
--------- ---------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 197,419 $ 28,884
Short-term investments 696 688
Accounts receivable 27,584 42,148
Inventory 58,511 58,269
Deferred inventory costs 70,299 62,936
Prepaid expenses and other current 3,074 3,115
--------- ---------
Total current assets 357,583 196,040
Property, plant and equipment, net 30,746 26,665
Intangible assets 1,673 1,806
Deferred inventory costs, non-current 4,407 4,317
Other non-current assets 444 1,638
--------- ---------
Total assets $ 394,853 $ 230,466
========= =========
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 28,963 $ 41,767
Accrued expenses 8,853 16,574
Accrued compensation and related benefits 9,080 7,628
Accrued warranty 4,324 1,339
Deferred revenue 129,605 101,080
Preferred stock warrant liability -- 5,409
Current portion of debt 4,500 20,025
--------- ---------
Total current liabilities 185,325 193,822
Long-term portion of debt -- 8,357
Accrued warranty, non-current 5,712 1,378
Deferred revenue, non-current 9,350 9,873
Long-term exercised unvested options 1,298 996
Other long-term liabilities 3,021 1,811
Convertible preferred stock -- 320,550
Stockholders' equity
(deficit):
Common stock 85 9
Additional paid-in capital 550,188 7,911
Accumulated other comprehensive loss (129) (153)
Accumulated deficit (359,997) (314,088)
--------- ---------
Total stockholders' equity (deficit) 190,147 (306,321)
--------- ---------
Total liabilities, convertible preferred
stock and stockholders' equity (deficit) $ 394,853 $ 230,466
========= =========
Infinera Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited) Six Months Ended
June 30,
----------------------
2007 2006
--------- ---------
Cash Flows from Operating Activities:
Net loss $ (45,909) $ (36,389)
Adjustments to reconcile net loss to net
cash used in operating
activities:
Depreciation and amortization 4,423 3,480
Amortization of debt discount 282 128
Asset impairment charges 393 --
Stock-based compensation expense 2,810 130
Revaluation of warrant liablities 19,761 91
Gain on disposal of fixed assets (20) --
Gain on sale of assets held for sale (2,001) --
Unrealized loss on investments (25) --
Changes in assets and liabilities:
Accounts receivable 14,732 (7,052)
Inventory 1,661 (13,653)
Prepaid expenses and other current assets 39 (206)
Deferred inventory costs (7,493) (18,351)
Other non-current assets 599 (337)
Accounts payable (12,761) 3,334
Accrued liabilities and other expenses (5,603) 7,491
Deferred revenue 28,002 26,777
Accrued warranty 7,318 645
--------- ---------
Net cash provided by (used in) operating
activities 6,208 (33,912)
Cash Flows from Investing Activities:
Purchase of short-term investments -- 4
Proceeds from sale of short-term
investments -- 1,098
Proceeds from disposition of acquired
assets -- 1,450
Proceeds from disposal of fixed assets 30 --
Proceeds from sale of assets held for sale 2,507 --
Purchase of property and equipment (8,723) (4,937)
Net cash used in investing activities
(6,186) (2,385)
Cash Flows from Financing Activities:
Principal payments on loan obligation (30,901) (11,012)
Proceeds from loans 7,119 13,652
Proceeds from initial public offering,
net of issuance costs 190,245 --
Proceeds from issuance of common stock 2,050 2,591
Proceeds from issuance of convertible
preferred stock, net of issuance costs -- 52,640
Proceeds from non-recourse notes -- 18
Repurchase of common stock (50) --
--------- ---------
Net cash provided by financing activities 168,463 57,889
Effect of exchange rate changes 49 (62)
--------- ---------
Net change in cash and cash equivalents 168,534 21,530
Cash and cash equivalents at beginning of
period 28,884 36,013
--------- ---------
Cash and cash equivalents at end of period $ 197,418 $ 57,543
========= =========
Supplemental disclosures of cash flow
information:
Cash paid for interest $ 2,203 $ 1,369
Cash paid for income taxes $ 81 $ 21
Infinera Corporation
Supplemental Financial Information
---------------------------------------------------------------------
Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07
---------------------------------------------------------------------
Invoiced Shipments $13.8 $19.7 $42.0 $70.5 $66.7 $69.0
Gross Margin % -43% 16% 21% 25% 35% 37%
---------------------------------------------------------------------
Invoiced Shipment
Composition:
Domestic % 76% 89% 78% 72% 89% 84%
International % 24% 11% 22% 28% 11% 16%
Largest Customer% 64% 58% 55% 47% 57% 48%
---------------------------------------------------------------------
Cash Related Information:
Cash from Operations ($21.6) ($12.3) ($18.8) ($15.0) $6.9 ($0.8)
Capital Expenditures $2.1 $2.9 $6.2 $4.1 $5.2 $3.6
Depreciation &
Amortization $1.6 $1.7 $1.9 $1.8 $2.1 $2.0
DSO's 54 48 49 54 27 36
---------------------------------------------------------------------
Inventory Metrics:
Raw Materials $4.0 $5.1 $7.8 $6.7 $7.4 $8.8
Work in Process $16.7 $21.2 $30.9 $38.1 $31.6 $36.0
Finished Goods $5.7 $12.0 $11.8 $13.5 $18.4 $13.7
---------------------------------------------------------------------
Total Inventory $26.5 $38.3 $50.5 $58.3 $57.3 $58.5
Inventory Turns 3.0 1.7 2.6 3.6 3.0 3.0
---------------------------------------------------------------------
Worldwide Headcount 363 470 576 605 617 646
---------------------------------------------------------------------