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CST: 11/12/2019 08:02:13   

Infinera Corporation Reports Third Quarter 2019 Financial Results

29 Days ago

SUNNYVALE, Calif., Nov. 12, 2019 (GLOBE NEWSWIRE) -- Infinera Corporation, provider of Intelligent Transport Networks, today released financial results for its third quarter ended September 28, 2019.

GAAP revenue for the quarter was $325.3 million compared to $296.3 million in the second quarter of 2019 and $200.4 million in the third quarter of 2018.

GAAP gross margin for the quarter was 26.7% compared to 20.7% in the second quarter of 2019 and 35.0% in the third quarter of 2018. GAAP operating margin for the quarter was (21.3)% compared to (36.6)% in the second quarter of 2019 and (12.6)% in the third quarter of 2018.

GAAP net loss for the quarter was $(84.8) million, or $(0.47) per share, compared to a net loss of $(113.7) million, or $(0.64) per share, in the second quarter of 2019, and net loss of $(32.6) million, or $(0.21) per share, in the third quarter of 2018.

Non-GAAP revenue for the quarter was $327.6 million compared to $306.9 million in the second quarter of 2019 and $200.4 million in the third quarter of 2018.

Non-GAAP gross margin for the quarter was 33.1% compared to 30.7% in the second quarter of 2019 and 38.4% in the third quarter of 2018. Non-GAAP operating margin for the quarter was (5.7)% compared to (12.3)% in the second quarter of 2019 and (2.6)% in the third quarter of 2018.

Non-GAAP net loss for the quarter was $(30.5) million, or $(0.17) per share, compared to a net loss of $(42.0) million, or $(0.24) per share, in the second quarter of 2019, and net loss of $(6.7) million, or $(0.04) per share, in the third quarter of 2018.

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.

“In the third quarter, we delivered solid results and achieved significant bookings growth while completing the most challenging tasks of the Coriant integration. Our focused execution and growing backlog keep us on track to deliver double our synergy savings commitments in fiscal 2019 and return to non-GAAP operating profitability and positive cash flow for the fourth quarter of 2019,” said Tom Fallon, Infinera CEO. “We have also enhanced our innovation pipeline with announced DRX wins, the successful launch of XR optics, and growing confidence in our plan to deliver 800G products to the market in 2020.”

Financial Outlook

Infinera's outlook for the quarter ending December 28, 2019 is as follows:

  • GAAP revenue is expected to be $363 million +/- $10 million. Non-GAAP revenue is expected to be $365 million +/- $10 million.
  • GAAP gross margin is expected to be 32% +/- 100 bps. Non-GAAP gross margin is expected to be 35% +/- 100 bps.
  • GAAP operating expenses are expected to be $151 million +/- $2 million. Non-GAAP operating expenses are expected to be $127 million +/- $2 million.
  • GAAP operating margin is expected to be approximately (10)%. Non-GAAP operating margin is expected to be between break even and 2%.
  • GAAP EPS is expected to be $(0.26) +/- $0.02. Non-GAAP EPS is expected to be $(0.03) +/- $0.02.

Third Quarter 2019 Investor Slides Available Online

Investor slides reviewing Infinera’s third quarter of 2019 financial results will be furnished to the SEC on Form 8-K and published on Infinera’s Investor Relations website at investors.infinera.com. Analyst and investors are encouraged to review these slides prior to participating in the conference call webcast.

Conference Call Information

Infinera will host a conference call for analysts and investors to discuss its results for the third quarter of 2019 and its outlook for the fourth quarter of 2019 today at 8:00 a.m. Eastern Time (5:00 a.m. Pacific Time). Interested parties may join the conference call by dialing 1-866-373-6878 (toll free) or 1-412-317-5101 (international). A live webcast of the conference call will also be accessible from the Events section of Infinera’s website at investors.infinera.com. Replay of the audio webcast will be available at investors.infinera.com approximately two hours after the end of the live call.

Contacts:

Media:
Anna Vue
Tel. +1 (916) 595-8157
avue@infinera.com

Investors:
Ted Moreau
Tel. +1 (408) 542-6205 
tmoreau@infinera.com

About Infinera

Infinera is a global supplier of innovative networking solutions that enable carriers, cloud operators, governments, and enterprises to scale network bandwidth, accelerate service innovation, and automate network operations. The Infinera end-to-end packet-optical portfolio delivers industry-leading economics and performance in long-haul, submarine, data center interconnect, and metro transport applications. To learn more about Infinera, visit www.infinera.com, follow us on Twitter @Infinera, and read our latest blog posts at www.infinera.com/blog.

Forward-Looking Statements

This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties. Such forward-looking statements include, without limitation, Infinera’s ability to deliver double its synergy savings commitments in fiscal 2019; its expectations of being on track to return to non-GAAP operating profitability and positive cash flow for the fourth quarter of 2019; its ability to deliver 800G products to the market in 2020; and its financial outlook for the fourth quarter of 2019.

Forward-looking statements can also be identified by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” and "would” or similar words. 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. The risks and uncertainties that could cause Infinera’s results to differ materially from those expressed or implied by such forward-looking statements include, the combined company's ability to successfully complete the integration of the businesses; Infinera's ability to realize synergies in a timely manner; Infinera’s future capital needs and its ability to generate the cash flow or otherwise secure the capital necessary to make anticipated capital expenditures; Infinera's ability to service its debt obligations and pursue its strategic plan; market acceptance of Infinera’s end-to-end portfolio; Infinera’s ability to successfully integrate its enterprise resource planning system and other management systems; the diversion of management time on issues related to the integration and the implementation of its enterprise resource planning system; delays in the development and introduction of new products or updates to existing products and market acceptance of these products; fluctuations in demand, sales cycles and prices for products and services, including discounts given in response to competitive pricing pressures, as well as the timing of purchases by Infinera's key customers; the effect that changes in product pricing or mix, and/or increases in component costs could have on Infinera’s gross margin; Infinera’s ability to respond to rapid technological changes; aggressive business tactics by Infinera’s competitors; Infinera's reliance on single and limited source suppliers; the effects of customer consolidation; Infinera’s ability to protect Infinera’s intellectual property; claims by others that Infinera infringes their intellectual property; the effect of global macroeconomic conditions, including tariffs, on Infinera's business; war, terrorism, public health issues, natural disasters and other circumstances that could disrupt the supply, delivery or demand of Infinera's products; and other risks and uncertainties detailed in Infinera’s SEC filings from time to time. More information on potential factors that may impact Infinera’s business are set forth in its Quarterly Report on Form 10-Q for the quarter ended on June 29, 2019 as filed with the SEC on August 8, 2019, as well as subsequent reports filed with or furnished to the SEC from time to time. These reports are available on Infinera’s website at www.infinera.com and the SEC’s website at www.sec.gov. Infinera assumes no obligation to, and does not currently intend to, update any such forward-looking statements.

Use of Non-GAAP Financial Information

In addition to disclosing financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain certain non-GAAP measures that exclude acquisition-related deferred revenue and inventory adjustments, other customer related charges, non-cash stock-based compensation expenses, amortization of acquired intangible assets, acquisition and integration costs, restructuring and related costs (credits), litigation charges, amortization of debt discount on Infinera’s convertible senior notes, impairment charge of non-marketable equity investments, gain on non-marketable equity investments, and certain purchase accounting adjustments related to Infinera's acquisitions, along with related tax effects. For a description of these non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial measures, please see the section titled, “GAAP to Non-GAAP Reconciliations.”

Infinera has included forward-looking non-GAAP information in this press release, including an estimate of certain non-GAAP financial measures for the fourth quarter of 2019 that exclude non-cash stock-based compensation expenses, acquisition-related deferred revenue adjustments, acquisition and integration costs related to Infinera's acquisition of Coriant, restructuring and related expenses, amortization of debt discount on Infinera’s convertible senior notes, amortization of acquired intangible assets and related tax effects. Please see the section titled, “GAAP to Non-GAAP Reconciliations of Financial Outlook” below on specific adjustments.

Infinera believes these adjustments are appropriate to enhance an overall understanding of its underlying financial performance and also its prospects for the future and are considered by management for the purpose of making operational decisions. In addition, these results are the primary indicators management uses as a basis for its planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for gross margin, operating margin, net loss, or basic and diluted net loss per share 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.

A copy of this press release can be found on the Investor Relations page of Infinera’s website at www.infinera.com.

Infinera and the Infinera logo are trademarks or registered trademarks of Infinera Corporation. All other trademarks used or mentioned herein belong to their respective owners.

 
Infinera Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited) 
         
    Three Months Ended   Nine Months Ended
    September 28,
 2019
  September 29,
 2018
  September 28,
 2019
  September 29,
 2018
Revenue:                
Product   $ 253,754     $ 167,030     $ 703,627     $ 513,947  
Services   71,587     33,383     210,671     97,374  
Total revenue   325,341     200,413     914,298     611,321  
Cost of revenue:                
Cost of product   186,205     117,152     521,523     335,674  
Cost of services   34,866     13,075     108,373     38,945  
Amortization of intangible assets   7,796         24,146      
Acquisition and integration costs   8,447         21,211      
Restructuring and related   1,198     7     24,528     50  
Total cost of revenue   238,512     130,234     699,781     374,669  
Gross profit   86,829     70,179     214,517     236,652  
Operating expenses:                
Research and development   71,748     50,658     219,345     165,497  
Sales and marketing   35,756     26,073     113,444     86,286  
General and administrative   27,621     18,415     96,337     54,616  
Amortization of intangible assets   6,861         20,663      
Acquisition and integration costs   11,962         31,260      
Restructuring and related   2,168     191     22,827     1,708  
Total operating expenses   156,116     95,337     503,876     308,107  
Loss from operations   (69,287 )   (25,158 )   (289,359 )   (71,455 )
Other income (expense), net:                
Interest income   131     292     1,080     1,818  
Interest expense   (7,868 )   (2,160 )   (22,711 )   (8,344 )
Other gain (loss), net:   (6,195 )   (5,449 )   (5,908 )   (3,514 )
Total other income (expense), net   (13,932 )   (7,317 )   (27,539 )   (10,040 )
Loss before income taxes   (83,219 )   (32,475 )   (316,898 )   (81,495 )
Provision for (benefit from) income taxes   1,548     135     3,126     (667 )
Net loss   (84,767 )   (32,610 )   (320,024 )   (80,828 )
                 
Net loss per common share - basic and diluted:   $ (0.47 )   $ (0.21 )   $ (1.79 )   $ (0.53 )
                 
Weighted average shares used in computing net loss per common share - basic and diluted:   179,988     153,492     178,357     152,028  
 


 
Infinera Corporation
GAAP to Non-GAAP Reconciliations
(In thousands, except percentages and per share data)(Unaudited) 
       
  Three Months Ended   Nine Months Ended
  September 28, 2019       June 29, 2019       September 29, 2018       September 28, 2019       September 29, 2018    
Reconciliation of Revenue:                                      
U.S. GAAP as reported $ 325,341         $ 296,250         $ 200,413         $ 914,298         $ 611,321      
Acquisition-related deferred revenue adjustment(1) 2,305         2,530                 7,740              
Other customer related charges(2)         8,100                 8,100              
Non-GAAP as adjusted $ 327,646         $ 306,880         $ 200,413         $ 930,138         $ 611,321      
                                       
Reconciliation of Gross Profit:                                      
U.S. GAAP as reported $ 86,829     26.7 %   $ 61,256     20.7 %   $ 70,179     35.0 %   $ 214,517     23.5 %   $ 236,652     38.7 %
Acquisition-related deferred revenue adjustment(1) 2,305         2,530                 7,740              
Other customer related charges(2)         8,100                 8,100              
Stock-based compensation(3) 1,778         1,591         1,968         4,697         5,001      
Amortization of acquired intangible assets(4) 7,796         8,098         4,876         24,146         15,160      
Acquisition and integration costs(5) 8,447         10,700                 21,211              
Acquisition-related inventory adjustments(6)                         1,778              
Restructuring and related(7) 1,198         1,864         7         24,528         50      
Non-GAAP as adjusted $ 108,353     33.1 %   $ 94,139     30.7 %   $ 77,030     38.4 %   $ 306,717     33.0 %   $ 256,863     42.0 %
                                       
Reconciliation of Operating Expenses:                                      
U.S. GAAP as reported $ 156,116         $ 169,640         $ 95,337         $ 503,876         $ 308,107      
Stock-based compensation(3) 8,168         11,456         9,399         27,009         29,393      
Amortization of acquired intangible assets(4) 6,861         6,745         1,467         20,663         4,561      
Acquisition and integration costs(5) 11,962         12,164         2,067         31,260         2,067      
Restructuring and related(7) 2,168         3,471         191         22,827         1,708      
Litigation charges(8) 50         4,050                 4,100              
Non-GAAP as adjusted $ 126,907         $ 131,754         $ 82,213         $ 398,017         $ 270,378      
                                       
Reconciliation of Loss from Operations:                                      
U.S. GAAP as reported $ (69,287 )   (21.3 )%   $ (108,384 )   (36.6 )%   $ (25,158 )   (12.6 )%   $ (289,359 )   (31.6 )%   $ (71,455 )   (11.7 )%
Acquisition-related deferred revenue adjustment(1) 2,305         2,530                 7,740              
Other customer related charges(2)         8,100                 8,100              
Stock-based compensation(3) 9,946         13,047         11,367         31,706         34,394      
Amortization of acquired intangible assets(4) 14,657         14,843         6,343         44,809         19,721      
Acquisition and integration costs(5) 20,409         22,864         2,067         52,471         2,067      
Acquisition-related inventory adjustments(6)                         1,778              
Restructuring and related(7) 3,366         5,335         198         47,355         1,758      
Litigation charges(8) 50         4,050                 4,100              
Non-GAAP as adjusted $ (18,554 )   (5.7 )%   $ (37,615 )   (12.3 )%   $ (5,183 )   (2.6 )%   $ (91,300 )   (9.8 )%   $ (13,515 )   (2.2 )%
 


     
  Three Months Ended Nine Months Ended
  September 28, 2019   June 29, 2019   September 29, 2018   September 28, 2019   September 29, 2018
Reconciliation of Net Loss:                  
U.S. GAAP as reported $ (84,767 )   $ (113,656 )   $ (32,610 )   $ (320,024 )   (80,828 )
Acquisition-related deferred revenue adjustment(1) 2,305     2,530         7,740      
Other customer related charges(2)     8,100         8,100      
Stock-based compensation(3) 9,946     13,047     11,367     31,706     34,394  
Amortization of acquired intangible assets(4) 14,657     14,843     6,343     44,809     19,721  
Acquisition and integration costs(5) 20,409     22,864     4,567     52,471     4,567  
Acquisition-related inventory adjustments(6)             1,778      
Restructuring and related(7) 3,366     5,335     198     47,355     1,758  
Litigation charges(8) 50     4,050         4,100      
Amortization of debt discount(9) 4,456     4,348     1,578     13,045     6,249  
Impairment of non-marketable equity investment(9)         4,260         4,260  
Gain/Loss on non-marketable equity investment(10)     (1,009 )   (1,050 )   (1,009 )   (1,050 )
Income tax effects(11) (873 )   (2,470 )   (1,395 )   (3,769 )   (4,339 )
Non-GAAP as adjusted $ (30,451 )   $ (42,018 )   $ (6,742 )   $ (113,698 )   $ (15,268 )
                   
Net Loss per Common Share - Basic and Diluted:                  
U.S. GAAP as reported $ (0.47 )   $ (0.64 )   $ (0.21 )   $ (1.79 )   $ (0.53 )
Non-GAAP as adjusted $ (0.17 )   $ (0.24 )   $ (0.04 )   $ (0.64 )   $ (0.10 )
                   
Weighted Average Shares Used in Computing Net Loss per Common Share - Basic and Diluted: 179,988     178,677     153,492     178,357     152,028  

____________________________

(1) Business combination accounting principles require Infinera to write down to fair value its maintenance support contracts assumed in the Coriant acquisition. The revenue for these support contracts is deferred and typically recognized over a one year period, so Infinera's GAAP revenue for the one year period after the acquisition will not reflect the full amount of revenue that would have been reported if the acquired deferred revenue was not written down to fair value. The non-GAAP adjustment eliminates the effect of the deferred revenue write-down. Management believes these adjustments to revenue from these support contracts are useful to investors as an additional means to reflect revenue trends of Infinera's business.

(2) Other customer related charges include one-time benefits and charges that are not directly related to Infinera’s ongoing or core business results. During the three months ended June 29, 2019, Infinera agreed to reimburse a customer for certain expenses incurred by them in connection with a network service outage that occurred during the fourth quarter of fiscal 2018. Management has excluded the impact of this charge in arriving at Infinera's non-GAAP results because it is non-recurring, and management believes that this reimbursement is not indicative of ongoing operating performance.

(3) Stock-based compensation expense is calculated in accordance with the fair value recognition provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation – Stock Compensation, effective January 1, 2006. The following table summarizes the effects of stock-based compensation related to employees and non-employees (in thousands):

         
    Three Months Ended   Nine Months Ended
    September 28, 2019   June 29,
 2019
  September 29, 2018   September 28, 2019   September 29, 2018
Cost of revenue   $ 662     $ 663     $ 590     $ 1,863     $ 1,092  
Research and development   4,153     6,127     4,077     13,883     12,593  
Sales and marketing   2,189     2,099     2,744     5,835     8,688  
General and administration   1,826     3,230     2,578     7,291     8,112  
    8,830     12,119     9,989     28,872     30,485  
Cost of revenue - amortization from balance sheet*   1,116     928     1,378     2,834     3,909  
Total stock-based compensation expense   $ 9,946     $ 13,047     $ 11,367     $ 31,706     $ 34,394  

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

(4) Amortization of acquired intangible assets consists of developed technology, trade names, customer relationships and backlog acquired in connection with the Coriant acquisition, which closed during the fourth quarter of 2018. Amortization of acquired intangible assets also consists of amortization of developed technology, trade names and customer relationships acquired in connection with the Transmode AB acquisition. U.S. GAAP accounting requires that acquired intangible assets are recorded at fair value and amortized over their useful lives. As this amortization is non-cash, Infinera has excluded it from its non-GAAP gross profit, operating expenses and net income measures. Management believes the amortization of acquired intangible assets is not indicative of ongoing operating performance and its exclusion provides a better indication of Infinera's underlying business performance.         

(5) Acquisition and integration costs consist of legal, financial, IT, manufacturing-related costs, employee-related costs and professional fees incurred in connection with Infinera's acquisition of Coriant. These amounts have been adjusted in arriving at Infinera's non-GAAP results because management believes that these expenses are non-recurring, not indicative of ongoing operating performance and their exclusion provides a better indication of Infinera's underlying business performance.

(6) Business combination accounting principles require Infinera to measure acquired inventory at fair value. The fair value of inventory reflects the acquired company’s cost of manufacturing plus a portion of the expected profit margin. The non-GAAP adjustment to Infinera's cost of sales excludes the amortization of the acquisition-related step-up in carrying value for units sold in the quarter. Additionally, in connection with the Coriant acquisition, cost of sales excludes a one-time adjustment in inventory as a result of renegotiated supplier agreements that contained unusually higher than market pricing. Management believes these adjustments are useful to investors as an additional means to reflect ongoing cost of sales and gross margin trends of Infinera's business.

(7) Restructuring and related costs are associated with Infinera's two restructuring initiatives implemented during the fourth quarter of 2018 and during the fourth quarter of 2017, the planned closure of the Company's Berlin, Germany manufacturing facility and Coriant's historical restructuring plan associated with its early retirement plan. In addition, management included accelerated amortization on operating lease right-of-use assets due to the cease use of certain facilities. Management has excluded the impact of these charges in arriving at Infinera's non-GAAP results as they are non-recurring in nature and its exclusion provides a better indication of Infinera's underlying business performance.

(8) Litigation charges are associated with the settlement of a litigation matter during the three months ended June 29, 2019. Management has excluded the impact of this charge in arriving at Infinera's non-GAAP results because it is non-recurring, and management believes that this expense is not indicative of ongoing operating performance.

(9) Under GAAP, certain convertible debt instruments that may be settled in cash on conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate. Accordingly, for GAAP purposes, Infinera is required to amortize as debt discount an amount equal to the fair value of the conversion option that was recorded in equity as interest expense on the $402.5 million in aggregate principal amount of its 2.125% convertible debt issuance in September 2018 due September 2024 and the $150 million in aggregate principal amount of its 1.75% convertible debt issuance in May 2013 due June 2018, over the term of the respective notes. Interest expense has been excluded from Infinera's non-GAAP results because management believes that this non-cash expense is not indicative of ongoing operating performance and provides a better indication of Infinera's underlying business performance.

(10) Management has excluded the gain on the sale related to non-marketable equity investments in arriving at Infinera's non-GAAP results because it is non-recurring, and management believes that this income is not indicative of ongoing operating performance

(11) The difference between the GAAP and non-GAAP tax provision is due to the net tax effects of the purchase accounting adjustments, acquisition-related costs and amortization of acquired intangible assets.

 
Infinera Corporation
Condensed Consolidated Balance Sheets
(In thousands, except par values)
(Unaudited)
 
  September 28,
 2019
  December 29,
 2018
ASSETS      
Current assets:      
Cash and cash equivalents $ 94,804     $ 202,954  
Short-term investments     26,511  
Short-term restricted cash     13,229  
Accounts receivable, net of allowance for doubtful accounts of $2,867 in 2019 and $3,680 in 2018 284,448     317,115  
Inventory 324,845     311,888  
Prepaid expenses and other current assets 118,502     85,400  
Total current assets 822,599     957,097  
Property, plant and equipment, net 156,570     342,820  
Operating lease right-of-use assets 69,233      
Intangible assets 184,183     233,119  
Goodwill 234,485     227,231  
Long-term restricted cash 25,826     26,154  
Other non-current assets 13,375     14,849  
Total assets $ 1,506,271     $ 1,801,270  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 206,641     $ 191,187  
Accrued expenses and other current liabilities 160,747     131,891  
Accrued compensation and related benefits 88,693     71,152  
Short-term debt, net 6,939      
Accrued warranty 22,437     20,103  
Deferred revenue 72,870     88,534  
Total current liabilities 558,327     502,867  
Long-term debt, net 318,916     266,929  
Long-term financing lease obligation 1,259     193,538  
Accrued warranty, non-current 21,900     20,918  
Deferred revenue, non-current 32,750     31,768  
Deferred tax liability 9,146     13,347  
Operating lease liabilities 65,142      
Other long-term liabilities 72,132     68,082  
Commitments and contingencies (Note 19)      
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 September 28, 2019 and December 29, 2018
     
Issued and outstanding shares – 180,595 as of September 28, 2019 and 175,452 as of December 29, 2018 181     175  
Additional paid-in capital 1,729,875     1,685,916  
Accumulated other comprehensive loss (50,060 )   (25,300 )
Accumulated deficit (1,253,297 )   (956,970 )
Total stockholders' equity 426,699     703,821  
Total liabilities and stockholders’ equity $ 1,506,271     $ 1,801,270  
 


 
Infinera Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
   
  Nine Months Ended
  September 28,
 2019
  September 29,
 2018
Cash Flows from Operating Activities:      
Net loss $ (320,024 )   $ (80,828 )
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and amortization 91,181     50,339  
Non-cash restructuring charges and related (credits) 22,236     (81 )
Amortization of debt discount and issuance costs 14,107     6,752  
Impairment on non-marketable equity investment     4,260  
Operating lease amortization, net of accretion 31,263      
Stock-based compensation expense 31,565     34,394  
Other loss 579     (836 )
Changes in assets and liabilities:      
Accounts receivable 27,521     (27,728 )
Inventory (23,339 )   (926 )
Prepaid expenses and other assets (53,470 )   294  
Accounts payable 16,487     26,254  
Accrued liabilities and other expenses 12,807     (30,754 )
Deferred revenue (8,073 )   (8,669 )
Net cash used in operating activities (157,160 )   (27,529 )
Cash Flows from Investing Activities:      
Purchase of available-for-sale investments     (2,986 )
Proceeds from sales of available-for-sale investments     53,039  
Proceeds from sale of non-marketable equity investments 1,009     1,050  
Proceeds from maturities of investments 26,584     98,112  
Acquisition of business, net of cash acquired (10,000 )    
Proceeds from sale of assets 778      
Purchase of property and equipment (28,331 )   (27,027 )
Net cash provided by (used in) investing activities (9,960 )   122,188  
Cash Flows from Financing Activities:      
Proceeds from issuance of debt, net 37,334     391,431  
Payment of debt issuance cost (124 )    
Purchase of capped call transactions     (48,880 )
Repayment of debt (197 )   (150,000 )
Proceeds from issuance of common stock 12,053     17,693  
Minimum tax withholding paid on behalf of employees for net share settlement (393 )   (1,093 )
Net cash provided by (used in) financing activities 48,673     209,151  
Effect of exchange rate changes on cash and restricted cash (3,260 )   (3,054 )
Net change in cash, cash equivalents and restricted cash (121,707 )   300,756  
Cash, cash equivalents and restricted cash at beginning of period 242,337     121,486  
Cash, cash equivalents and restricted cash at end of period(1) $ 120,630     $ 422,242  
Supplemental disclosures of cash flow information:      
Cash paid for income taxes, net of refunds $ 15,924     $ 3,320  
Cash paid for interest $ 13,369     $ 1,332  
Supplemental schedule of non-cash investing and financing activities:      
Third-party manufacturer funding for transfer expenses incurred $ 6,541     $  
Unpaid debt issuance cost $ 1,931     $  
Transfer of inventory to fixed assets $ 2,440     $ 1,165  

(1) Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets:

  September 28,
 2019
  September 29,
 2018
       
  (In thousands)
Cash and cash equivalents $ 94,804     $ 416,406  
Short-term restricted cash     402  
Long-term restricted cash 25,826     5,434  
Total cash, cash equivalents and restricted cash $ 120,630     $ 422,242  
 


 
Infinera Corporation
Supplemental Financial Information
(Unaudited)
 
    Q4'17   Q1'18   Q2'18   Q3'18   Q4'18   Q1'19   Q2'19   Q3'19
GAAP Revenue ($ Mil)   $ 195.8     $ 202.7     $ 208.2     $ 200.4     $ 332.1     $ 292.7     $ 296.3     $ 325.3  
GAAP Gross Margin %     24.1 %     40.5 %     40.5 %     35.0 %     25.4 %     22.7 %     20.7 %     26.7 %
Non-GAAP Gross Margin %(1)     37.5 %     43.7 %     43.9 %     38.4 %     31.8 %     35.3 %     30.7 %     33.1 %
Revenue Composition:                                
Domestic %     53 %     64 %     58 %     49 %     39 %     45 %     45 %     51 %
International %     47 %     36 %     42 %     51 %     61 %     55 %     55 %     49 %
Customers >10% of Revenue     1       2       2       2       2       1       1       1  
Cash Related Information:                                
Cash from Operations ($ Mil)   ($ 1.0 )   ($ 14.1 )   $ 7.0     ($ 20.4 )   ($ 71.6 )   ($ 56.2 )   ($ 63.8 )   ($ 37.2 )
Capital Expenditures ($ Mil)   $ 7.8     $ 8.0     $ 13.5     $ 5.5     $ 10.7     $ 6.6     $ 9.2     $ 12.5  
Depreciation & Amortization ($ Mil)   $ 16.6     $ 17.0     $ 16.3     $ 17.1     $ 50.2     $ 31.0     $ 31.2     $ 29.0  
DSOs     59       73       65       70       87       83       80       80  
Inventory Metrics:                                
Raw Materials ($ Mil)   $ 27.4     $ 30.3     $ 30.5     $ 33.6     $ 74.5     $ 82.5     $ 70.4     $ 47.2  
Work in Process ($ Mil)   $ 59.6     $ 66.5     $ 61.6     $ 56.4     $ 57.2     $ 63.0     $ 59.5     $ 52.2  
Finished Goods ($ Mil)   $ 127.7     $ 119.1     $ 127.2     $ 121.9     $ 180.2     $ 187.0     $ 208.9     $ 225.4  
Total Inventory ($ Mil)   $ 214.7     $ 215.9     $ 219.3     $ 211.9     $ 311.9     $ 332.5     $ 338.8     $ 324.8  
Inventory Turns(2)     2.3       2.1       2.1       2.3       2.9       2.3       2.5       2.7  
Worldwide Headcount     2,145       2,084       2,070       2,079       3,876       3,708       3,632       3,557  
Weighted Average Shares Outstanding (in thousands):                                
Basic     149,412       150,333       152,259       153,492       174,908       176,406       178,677       179,988  
Diluted(3)     150,098       151,633       154,777       154,228       175,629       176,602       179,343       182,073  

(1) Non-GAAP adjustments include restructuring and related costs (credit), non-cash stock-based compensation expense, certain purchase accounting adjustments related to Infinera's acquisitions, amortization of acquired intangible assets, other customer related charges and certain other one-time charges. For a description of this non-GAAP financial measure, please see the section titled, “GAAP to Non-GAAP Reconciliations” of this press release for a reconciliation to the most directly comparable GAAP financial measures.

(2) Infinera calculates non-GAAP inventory turns as annualized non-GAAP cost of revenue before adjustments for restructuring and related costs, non-cash stock-based compensation expense, and certain purchase accounting adjustments, divided by the average inventory for the quarter.

(3) Diluted shares presented for information only.

 
Infinera Corporation
GAAP to Non-GAAP Reconciliation of Financial Outlook
(In millions, except percentages and per share data)
(Unaudited)
 
The following amounts represent the midpoint of the expected range:
   
  Q4'19
  Outlook
Reconciliation of Revenue:  
U.S. GAAP $ 363
Acquisition-related deferred revenue adjustment 2
Non-GAAP $ 365
   
Reconciliation of Gross Margin:  
U.S. GAAP 32%
Acquisition-related deferred revenue adjustment 1%
Amortization of acquired intangible assets 2%
Non-GAAP 35%
   
Reconciliation of Operating Expenses:  
U.S. GAAP $ 151
Stock-based compensation (9)
Amortization of acquired intangible assets (7)
Acquisition and integration costs (7)
Restructuring and related (1)
Non-GAAP $ 127
   
Reconciliation of Operating Margin:  
U.S. GAAP (10)%
Acquisition-related deferred revenue adjustment 1%
Stock-based compensation 2%
Amortization of acquired intangible assets 5%
Acquisition and integration costs 2%
Restructuring and related 1%
Non-GAAP 1%
   
Reconciliation of Net Loss per Common Share:  
U.S. GAAP $ (0.26)
Acquisition-related deferred revenue adjustment 0.01
Stock-based compensation 0.06
Amortization of acquired intangible assets 0.08
Acquisition and integration costs 0.04
Restructuring and related 0.02
Amortization of debt discount 0.02
Non-GAAP $ (0.03)

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