Infinera 8K Reports Second Quarter 2012 Financial Results | INFN 24 Jul 12

Exhibit 99.1


Contacts:

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

Infinera Corporation Reports Second Quarter 2012 Financial Results

Sunnyvale, CA, July 24, 2012 – Infinera Corporation (NASDAQ: INFN), a leading provider of digital optical communications systems, today released financial results for the second quarter ended June 30, 2012.

GAAP revenues for the second quarter of 2012 were $93.5 million compared to $104.7 million in the first quarter of 2012 and $96.0 million in the second quarter of 2011.

GAAP gross margin for the second quarter of 2012 was 35% compared to 39% in the first quarter of 2012 and 39% in the second quarter of 2011. GAAP net loss for the 2012 second quarter was $(29.5) million, or $(0.27) per share, compared to net loss of $(20.6) million, or $(0.19) per share, in the first quarter of 2012 and net loss of $(24.2) million, or $(0.23) per share, in the second quarter of 2011.

Non-GAAP gross margin for the second quarter of 2012 was 37% compared to 40% in the first quarter of 2012 and 41% in the second quarter of 2011, excluding non-cash stock-based compensation expenses. Non-GAAP net loss for the second quarter of 2012 was $(18.6) million, or $(0.16) per share, compared to net loss of $(11.2) million, or $(0.10) per share, in the first quarter of 2012 and net loss of $(11.7) million, or $(0.11) per share, in the second quarter of 2011.

Management Commentary

“We executed well on our commitment to deliver the DTN-X to the market in the second quarter, completing critical customer trials and shipping the platform to customers for deployment as promised,” said Tom Fallon, president and chief executive officer. “Reception to the DTN-X, featuring 500 Gb/s long haul super-channels along with WDM and integrated OTN switching, has been very positive and broad-based.

“To date, we have received purchase commitments for the DTN-X from ten customers, including three customers new to Infinera. These customers represent a cross section of our markets, including cable, subsea, internet content, research & education, and Tier 1 providers. Adoption of the DTN-X demonstrates customers’ recognition of the unique differentiation of our leading next-generation platform which provides unparalleled scale, efficiency, simplicity and reliability at a reduced total cost of ownership. We remain on track to recognize revenues from DTN-X sales beginning in the third quarter. While we are growing more cautious regarding the macro-economic environment and the outlook for capex spending in the second half of 2012, we are pleased with the market acceptance of the DTN-X.”

Conference Call Information:

Infinera will host a conference call for analysts and investors to discuss its second quarter results and its outlook for the third quarter today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). A live webcast of the conference call will 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 1-800-570-8795. International parties can access the replay at 1-402-220-2264.

About Infinera

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

Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding our expectations for customer interest in and adoption of our DTN-X product, and expectations for the timing of revenue recognition related to our DTN-X product. These forward-looking statements involve risks and uncertainties, as well as assumptions that if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include unexpected delays in the development, production or availability of the DTN-X product, decisions by customers to delay orders of the product, changes in the marketplace that would affect customer demand for the product, as well as our general ability to react to trends and challenges in our business and the markets in which we operate; our ability to anticipate market needs and develop new or enhanced products to meet those needs; the adoption rate of our products; our ability to establish and maintain successful relationships with our customers; our ability to reduce customer concentration; our ability to compete in our industry; fluctuations in demand, sales cycles and prices for our products and services; our ability to operate profitably; aggressive business tactics by our competitors; our reliance on single-source suppliers; shortages or price fluctuations in our supply chain; our ability to protect our intellectual property rights; and general, political, economic and market conditions and events. Further information about these risks and uncertainties, and other risks and uncertainties that affect our business, are contained in the risk factors section and other sections of our annual report on Form 10-K filed with the Securities Exchange Commission on March 6, 2012, as well as subsequent reports filed with or furnished to the SEC. These reports are available on our website at www.infinera.com and the SEC’s website at www.sec.gov. We assume no obligation to, and do not currently intend to, update any such forward-looking statements.

Use of Non-GAAP Financial Information

In addition to disclosing financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain certain non-GAAP measures that exclude non-cash stock-based compensation expenses and non-recurring restructuring and other related costs. 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 second quarter results, including an estimate of non-GAAP earnings for the third quarter of 2012 that excludes non-cash stock-based compensation expenses.

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

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

Infinera Corporation

GAAP Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)


	Three Months Ended						Six Months Ended
	June 30, 2012			June 25, 2011			June 30, 2012			June 25, 2011
Revenue:
Product	$	77,843		$	84,361		$	170,234		$	166,889
Ratable product and related support and services		523			814			1,054			1,736
Services		15,092			10,781			26,871			20,221

Total revenue		93,458			95,956			198,159			188,846
Cost of revenue⁽¹⁾:
Cost of product		56,017			54,540			115,341			101,158
Cost of ratable product and related support and services		166			294			357			679
Cost of services		4,901			3,708			9,660			6,851

Total cost of revenue		61,084			58,542			125,358			108,688
Gross profit		32,374			37,414			72,801			80,158
Operating expenses⁽¹⁾:
Research and development		31,676			32,899			62,661			64,208
Sales and marketing		17,777			14,957			36,019			28,892
General and administrative		12,320			13,635			23,404			27,144

Total operating expenses		61,773			61,491			122,084			120,244
Loss from operations		(29,399	)		(24,077	)		(49,283	)		(40,086	)
Other income (expense), net:
Interest income		228			225			503			537
Other gain (loss), net		149			20			(275	)		(391	)

Total other income (expense), net		377			245			228			146
Loss before income taxes		(29,022	)		(23,832	)		(49,055	)		(39,940	)
Provision for income taxes		527			362			1,106			648

Net loss	$	(29,549	)	$	(24,194	)	$	(50,161	)	$	(40,588	)

Net loss per common share, basic and diluted	$	(0.27	)	$	(0.23	)	$	(0.46	)	$	(0.39	)

Weighted average shares used in computing basic and diluted net loss per common share		110,403			105,165			109,534			104,272

⁽¹⁾	The following table summarizes the effects of stock-based compensation related to employees and non-employees for the three and six months ended June 30, 2012 and June 25, 2011:


	Three Months Ended				Six Months Ended
	June 30, 2012		June 25, 2011		June 30, 2012		June 25, 2011
Cost of revenue	$	686	$	760	$	1,292	$	1,491
Research and development		3,695		3,504		7,015		7,330
Sales and marketing		2,744		2,225		4,963		4,285
General and administration		2,705		4,828		4,928		9,611

		9,830		11,317		18,198		22,717
Cost of revenue—amortization from balance sheet*		1,100		1,165		2,169		2,130

Total stock-based compensation expense	$	10,930	$	12,482	$	20,367	$	24,847

*	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									Six Months Ended
	June 30, 2012			March 31, 2012			June 25, 2011			June 30, 2012			June 25, 2011
Reconciliation of Gross Profit:
U.S. GAAP as reported	$	32,374		$	40,427		$	37,414		$	72,801		$	80,158
Stock-based compensation⁽¹⁾		1,786			1,675			1,925			3,461			3,621

Non-GAAP as adjusted	$	34,160		$	42,102		$	39,339		$	76,262		$	83,779

Reconciliation of Gross Margin:
U.S. GAAP as reported		35	%		39	%		39	%		37	%		42	%
Stock-based compensation⁽¹⁾		2	%		1	%		2	%		2	%		2	%

Non-GAAP as adjusted		37	%		40	%		41	%		39	%		44	%

Reconciliation of Loss from Operations:
U.S. GAAP as reported	$	(29,399	)	$	(19,884	)	$	(24,077	)	$	(49,283	)	$	(40,086	)
Stock-based compensation⁽¹⁾		10,930			9,437			12,482			20,367			24,847

Non-GAAP as adjusted	$	(18,469	)	$	(10,447	)	$	(11,595	)	$	(28,916	)	$	(15,239	)

Reconciliation of Net Loss:
U.S. GAAP as reported	$	(29,549	)	$	(20,612	)	$	(24,194	)	$	(50,161	)	$	(40,588	)
Stock-based compensation⁽¹⁾		10,930			9,437			12,482			20,367			24,847

Non-GAAP as adjusted	$	(18,619	)	$	(11,175	)	$	(11,712	)	$	(29,794	)	$	(15,741	)

Net Loss per Common Share—Basic:
U.S. GAAP as reported	$	(0.27	)	$	(0.19	)	$	(0.23	)	$	(0.46	)	$	(0.39	)

Non-GAAP as adjusted	$	(0.17	)	$	(0.10	)	$	(0.11	)	$	(0.27	)	$	(0.15	)

Net Loss per Common Share—Diluted:
U.S. GAAP as reported	$	(0.27	)	$	(0.19	)	$	(0.23	)	$	(0.46	)	$	(0.39	)

Non-GAAP as adjusted⁽²⁾	$	(0.16	)	$	(0.10	)	$	(0.11	)	$	(0.26	)	$	(0.15	)

Weighted average sharesused in computing net lossper common share—U.S. GAAP:
Basic		110,403			108,666			105,165			109,534			104,272

Diluted		110,403			108,666			105,165			109,534			104,272

Weighted average sharesused in computing net lossper common share—Non-GAAP:
Basic		110,403			108,666			105,165			109,534			104,272

Diluted⁽²⁾		112,931			112,007			108,330			112,469			108,076

⁽¹⁾

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


	Three Months Ended						Six Months Ended
	June 31, 2012		March 31, 2012		June 25, 2011		June 30, 2012		June 25, 2011
Cost of revenue	$	686	$	606	$	760	$	1,292	$	1,491
Research and development		3,695		3,320		3,504		7,015		7,330
Sales and marketing		2,744		2,219		2,225		4,963		4,285
General and administration		2,705		2,223		4,828		4,928		9,611

		9,830		8,368		11,317		18,198		22,717
Cost of revenue—amortization from balance sheet*		1,100		1,069		1,165		2,169		2,130

Total stock-based compensation expense	$	10,930	$	9,437	$	12,482	$	20,367	$	24,847

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

⁽²⁾	Diluted shares used to calculate net loss per share on a non-GAAP basis provided for informational purposes only.

Infinera Corporation

Condensed Consolidated Balance Sheets

(In thousands, except par values)

(Unaudited)


	June 30, 2012			December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	84,988		$	94,458
Short-term investments		105,046			101,296
Accounts receivable		56,200			80,616
Other receivables		1,492			1,346
Inventory		115,117			88,996
Deferred inventory costs		2,853			5,987
Prepaid expenses and other current assets		10,217			10,532

Total current assets		375,913			383,231
Property, plant and equipment, net		82,396			76,753
Deferred inventory costs, non-current		173			1,020
Long-term investments		17,057			54,315
Cost-method investment		9,000			9,000
Long-term restricted cash		3,263			3,047
Deferred tax asset		822			822
Other non-current assets		2,137			3,516

Total assets	$	490,761		$	531,704

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	37,679		$	48,838
Accrued expenses		17,666			22,421
Accrued compensation and related benefits		19,391			18,966
Accrued warranty		5,929			5,692
Deferred revenue		18,507			22,781
Deferred tax liability		767			767

Total current liabilities		99,939			119,465
Accrued warranty, non-current		7,773			7,173
Deferred revenue, non-current		2,732			3,410
Other long-term liabilities		15,004			13,853
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value
Authorized shares—25,000 and no shares issued and outstanding		—			—
Common stock, $0.001 par value
Authorized shares—500,000 as of June 30, 2012 and December 31, 2011
Issued and outstanding shares—110,836 as of June 30, 2012 and 106,976 as of December 31, 2011		111			107
Additional paid-in capital		904,963			876,927
Accumulated other comprehensive loss		(2,564	)		(2,195	)
Accumulated deficit		(537,197	)		(487,036	)

Total stockholders’ equity		365,313			387,803

Total liabilities and stockholders’ equity	$	490,761		$	531,704

Infinera Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Six Months Ended
	June 30, 2012			June 25, 2011
Cash Flows from Operating Activities:
Net loss	$	(50,161	)	$	(40,588	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		11,224			8,434
Amortization of premium on investments		1,098			2,218
Stock-based compensation expense		20,367			24,847
Non-cash tax benefit		—			(121	)
Other gain		(501	)		(293	)
Changes in assets and liabilities:
Accounts receivable		24,416			2,247
Other receivables		(477	)		3,830
Inventory		(24,770	)		13,269
Prepaid expenses and other assets		1,533			(536	)
Deferred inventory costs		3,910			(604	)
Accounts payable		(8,753	)		(7,772	)
Accrued liabilities and other expenses		(2,272	)		(4,500	)
Deferred revenue		(4,952	)		(693	)
Accrued warranty		837			(727	)

Net cash used in operating activities		(28,501	)		(989	)
Cash Flows from Investing Activities:
Purchase of available-for-sale investments		(42,853	)		(153,034	)
Proceeds from sale of available-for-sale investments		5,194			3,035
Proceeds from maturities and calls of investments		70,464			150,511
Proceeds from disposal of assets		—			262
Purchase of property and equipment		(19,770	)		(17,322	)
Advance to secure manufacturing capacity		—			(1,500	)
Reimbursement of manufacturing capacity advance		50			225
Change in restricted cash		(230	)		1,573

Net cash provided by (used in) investing activities		12,855			(16,250	)
Cash Flows from Financing Activities:
Proceeds from issuance of common stock		7,093			5,712
Repurchase of common stock		(839	)		(1,200	)
Payments for purchase of assets under financing arrangement		—			(174	)

Net cash provided by financing activities		6,254			4,338
Effect of exchange rate changes on cash		(78	)		178
Net change in cash and cash equivalents		(9,470	)		(12,723	)
Cash and cash equivalents at beginning of period		94,458			113,649

Cash and cash equivalents at end of period	$	84,988		$	100,926

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	595		$	565
Supplemental schedule of non-cash financing activities:
Non-cash settlement for manufacturing capacity advance	$	275		$	—

Infinera Corporation

Supplemental Financial Information

(Unaudited)


	Q3’10			Q4’10			Q1’11			Q2’11			Q3’11			Q4’11			Q1’12			Q2’12
Revenue ($ Mil)	$	130.1		$	117.1		$	92.9		$	96.0		$	104.0		$	112.0		$	104.7		$	93.5
Gross Margin %⁽¹⁾		51	%		51	%		48	%		41	%		41	%		42	%		40	%		37	%
Invoiced Shipment Composition:
Domestic %		73	%		70	%		74	%		72	%		65	%		70	%		71	%		70	%
International %		27	%		30	%		26	%		28	%		35	%		30	%		29	%		30	%
Largest Customer %		19	%		10	%		14	%		10	%		<10	%		14	%		13	%		15	%
Cash Related Information:
Cash from Operations ($ Mil)	$	10.0		$	7.0		$	(0.9	)	$	(0.1	)	$	4.1		$	(5.1	)	$	(5.8	)	$	(22.7	)
Capital Expenditures ($ Mil)	$	5.9		$	5.0		$	10.6		$	6.7		$	5.9		$	16.1		$	13.6		$	6.1
Depreciation & Amortization ($ Mil)	$	3.9		$	4.0		$	4.2		$	4.2		$	4.9		$	4.5		$	5.5		$	5.7
DSO’s		45			59			60			70			60			65			57			55
Inventory Metrics:
Raw Materials ($ Mil)	$	11.0		$	23.1		$	20.1		$	7.3		$	7.0		$	12.1		$	15.3		$	14.8
Work in Process ($ Mil)	$	36.5		$	14.8		$	17.2		$	27.7		$	26.9		$	37.0		$	41.6		$	49.4
Finished Goods ($ Mil)	$	41.2		$	44.0		$	41.0		$	34.4		$	36.4		$	39.9		$	44.7		$	50.9
Total Inventory ($ Mil)	$	88.7		$	81.9		$	78.3		$	69.4		$	70.3		$	89.0		$	101.6		$	115.1
Inventory Turns⁽¹⁾		2.9			2.8			2.5			3.3			3.5			2.9			2.5			2.1
Worldwide Headcount		1,040			1,072			1,118			1,136			1,151			1,181			1,210			1,228

⁽¹⁾	Amounts reflect non-GAAP results. Non-GAAP adjustments include restructuring and other related costs and non-cash stock-based compensation expense.

Infinera (INFN) 8-KInfinera Corporation Reports Second Quarter 2012 Financial Results