INFN - Earnings call transcript Q4 2019

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Operator

Welcome to Infinera's Fourth Quarter and Fiscal 2019 Conference Call. All lines will be in a listen-only mode until the question-and-answer session. [Operator Instructions] Today's call is being recorded. If anyone has any objections, you may disconnect at this time.

I would now like to turn the call over to Lauren Sloane, Investor Relations for Infinera. begin. may you Lauren,

Lauren Sloane

of Welcome call. fourth earnings A available Relations slides operator. year and and XXXX are section Investor the conference copy on website. to you, quarter Infinera's fiscal investor our Thank of today's

will Additionally, replay available from recorded for be this website. being call is and the

expectations. products, forward-looking as slides obligation events and factors filed update cause management's impact expected opportunities, map, well our forward-looking status statements about and from arise as call plans the Infinera's integration may subject fiscal our regarding technology reminded current today. Please uncertainties no Today's statements XX-Q revise plans of constitute of all These including include made manufacturing or risks after sales, of investor or this reflect not circumstances filed the X-K date earnings as today, quarter that in Infinera first but our our statements various and the as risk results with synergies to projections of including undertakes as that that will road and to our the materially release and well differ as results any as most and our recently business, market growth, could are outlook. be in to may call. result efficiencies, limited and Actual furnished differ our included materially the a are XXXX operations, of that product about future and performance statements estimates statements to, financial strategy, statements statements coronavirus current to

fiscal provided our we financial is financial these the non-GAAP directly which of investor measures reconciliation our and measures. Pursuant section year GAAP Today's conference call of XXXX certain earnings includes Investor and to website. Relations a of slides in release quarter on comparable each Regulation available most fourth to the G, measures financial have non-GAAP

our to over the turn Chief I'll now Fallon. Executive Tom call Officer,

Tom Fallon

opportunity and conference afternoon end thank some this us past you to from QX brief today XXXX greater fourth performance, we then launch perspective and joining QX on provide I'll and will results our earnings cover for XXXX. see year with into call. our Nancy read fiscal the for a us detail with joining our outlook fiscal year our highlights of as Good Q&A. for start and we in additional David share quarter financial and year review

creating app was leader XXXX a in of market. in accomplishment significant scale a new optical networking year the

marked four is areas. by in achievements key Our progress

improvements with quarter. the demands range quarter-over-quarter. ending our significant in guidance Non-GAAP $XXX year This growth million was XX% our XX% revenue as represents performance year-over-year made financial the results. and exceeding of strong remain robust revenue customer we the First, solid for QX quarter in

operating gross in our non-GAAP exiting QX, achieved non-GAAP In non-GAAP and at XXXX quarter. improved margins XX% of goal to X.X% margin operating a positive came for the we profitability with as

healthy shipments backlog. fourth our non-GAAP both the year, a enter XXXX quarter $X.XX revenue With we and the for exceeding year, orders new For the with billion. was

end-to-end exceeded an as year we of app integration integration laying we Second, or efficiencies a one in portfolio. leading QX and move scale completed improved met for with the company Coriant forward foundation goals, as operational our

growth. view Third, we scale these the X us portfolio bring believe our in as positions us to continued products and market new portfolio customers of of Tier for validation enabled ten services our value well win now important to and the wins We XXXX.

we believe entirely lifting foundation markets XXXX technology. category create and us With complete, with and we heaviest our laying to increased in are ground. Lastly, solid business pluggable differentiated XXX-gig an cutting new to us positioning optical costs we emerging our entering fifth generation the investment technology lead with the behind the market while in XR XXXX of integration on DSP

efficiency first, key to primary during infrastructure markets three into crisp XXXX improvement; With focus expanded second, growth business are focus and improving are and technology of insertion continued our fully benefits executed place, in and new driving we technology; operating benefit sharpening on next-generation as on now base products transitioning we this model customer our the from actions third, the our through of revenue objectives; that position. synergy realizing

well review her systems our leading customer Leveraging our performance elevate and to and operational enterprise-wide during deliver and capability, these manufacturing integrated achieve to are planning experience remarks. plans improved performance. product prepared objectives Nancy new our portfolio will positioned rationalized we a to financial

business, to this driving are and solutions parallel major in are trends in well In aligned continued the end-user innovative These needs trends. deliver architectures the support demand. we operational with that by the to improvements bandwidth economically industry plan network driven growth required in to new XXXX

Our and traditional product fiber of today largest network transmission, opportunities for our are insertion road map customers is edge for deep, compute aligned optical initiating. high-capacity an transitions to disruptive XG, deliver creating array the solutions

that in efficient in restricting build networks; to scalable both efficient solutions IP our and of our flexible more heritage customers that disaggregated address optical and that increasing increasingly areas poised our network trends: are enables to that enable we the practical their economics environment. requirements; the optical three bring capacity value lock-in customer leadership differentiated to Specifically, operate driving the leverages to leadership vendor that and bit mandated ability implementation and by unique networks and integration disaggregated and an highly vertical and move solutions per performance to significant open and achieve most carrier-class to and of build in the customers inhibits dollar to automation bandwidth our network deliver main innovation, disruption ever easily higher leverage

specific As I touch we contributed for to XXXX. successes enter business and on that that these Infinera, momentum transitions the underlying customer technology our opportunity highlight topics I will create have as

for significant a tremendous capable DSP generation advantage. With also while customers, margin through in share generation creating important transition year Infinera will This fifth advantage mark manufacturing XXX-gig see for milestone technology. an technology grow the optics market we our cost and our opportunity vertical with fifth high-performance to expanding to performance

historically now integration reduce see High-capacity multibillion-dollar an the competitors to number is is limiting of used capability that market. optical viable market. optical significantly transport cost high-performance we a in the enabling Vertical

few our our As a view. opportunity, observations we drive consider

First, systems our available. not we before deliver see fifth-generation broadly to optical optical we until XXXX. commercial XXX-gig components, late commercial DSP do components components the designing or being manufacturing are year and gigabaud market expect this XX optical to available and widely for By own

Further, creates a XXX-gig to integrated in supply for for sources that we manufacturers scarcity of This are opportunity vertically early prioritizing ZR. XXX-gig those see and a opens market. and commercial DSP tremendous universally technology

like year Finally, subcarriers during create optical with capabilities this become leading at high XXX-gig half We to achieving second incremental in years on speeds mandatory XXXX. vertical experience our product the of of key revenues developed remain track deliver ramp integration to previously as and we performance. will to expect Nyquist value

and for added fast-growing with the over In continue opportunity addition disaggregated the to excited evolution engine insertion the trials, modular success our XXXX ICEX at bookings important of ongoing year-over-year. represents are grew to capable open We to upon be OFC advantages Groove customer than and optical and customers we to another performance for in our architectures, in us. platform. demonstrations showcasing March. more XXX-gig XX Groove we The In new XXX% Groove build market, compact

optical providers and XXX-gig contributor of by be At bookings addition will a This including product the to engine. globally the expansions to strong be continues service and OFC, ICEX is our our broadly being outlook. adopted we to cloud series introducing key Groove

With approach simultaneous the optical engine structure the representing of unique for cost that deliver vertical will a cost and positioning a us platforms, of the significantly margin. for purpose-built leads of expansion wins our share majority industry anticipate market we XXX-gig,

IP a a easy other factor approach given as edge. to edge. with the bandwidth now at be extended emerging reuse traditional the is viable form are future. in at The DCO for Many customers view ICEX requirements, economics not mandatory then increased disaggregation the platforms disruptive that in transition will across the

the router. this of deployment additional in are XXXX, our Germany, process announced nationwide disaggregated out rolling we Telefónica In Telefónica DRX we solution, a now And at in properties. with three

cloud committed our in routing completed over two trials customers. additional Additionally, field-proven for software remained pipeline with from CNOS and DRX plans, carrier-class, XX the deployment XXXX, And strong.

and combination a have in multi-layer for optimized with XG solution XTM edge Transcend, we and packet powerful Further, the series applications. DAA

for comes Lastly, is opportunities creating the increased us, customers growing dynamic our contend, bandwidth demands. with operational new that with the as and complexity traffic of importance automation and network growth cost,

automation, the meaningful full portfolio, suite implement and of migration are Our approach of customers. With Transcend traction Verizon Transcend automation provide is our practical in to a app-based customers. virtualization is last value example with automation to year, with applications, our software to gaining win our one easy services capabilities,

and software XXXX, to Layer applications in restoration migration customers, we We service automated zero with intend provisioning. as automation real-time successes, Transcend to XXXX. added We from these upon network nine in planning progress ranging and deployment build

beyond to excited, unique is which market innovation for track we potential creating we XR Looking optics. an market entirely the XXXX, year. A on And continue of introduced new the on end last at be to category.

solutions. of industry's designed point-to-point, to transmission first is coherent point, optics the technology, inherent optical break XR traditional to limitations multi-point subcarrier optical

XR networking can pluggable XR in with functionality, to function, plus optical customers the technology applications, and create, at ZR While point-to-point used true be only ZR can replace level.

our network transformation. growing highlight progress, optics' OFC, And with with XR live of approach announcements be interest, leaders at demonstration disruptive industry the we'll recent showcasing Our technology. this to a in

our pipeline objective XXXX, customer with for base. growing innovation third revenue to Our key is, expanded key achieving our

driving through differentiated expansion enterprise innovations. and and Building customers, on traction successes and Tier disruptive recent our significant with growth, for with of revenue X-ICP see end-to-end we portfolio business opportunity continued our

to are mitigate companies situation. my disruptions. daily our with and are technology basis, commentary, working actively supply with like potential Before global other developing chains, developments to contingency monitoring plans, are coronavirus concluding address we Like the suppliers a would closely on I

by we exposure our include some of While either risk Infinera supply supply customer have does limited material for directly, perspective, indirectly chain our partners. from some sourced through a or very

evolve. is in coronavirus the on our duration projected magnitude to of situation our assess continues and too impact to it early customers. service the to to And ability due fully the unknown The China outbreak,

guidance. the the strong But some in results quarter. half execution impact in had of are we business we we preliminary will the in are And this integration our view, first seeing summary, with in XXXX. this do In expect Nancy pleased following provide her momentum, a year.

pipeline key XXXX, wins With opportunity grow the our markets and in we backlog, X-scale transition, share, and market gain an see healthy to bookings, XXXX. XX and line Tier growing in innovation targeting top

experience With achieving business our the expertise model to of deliver the competitors high-capacity optics, begin for having foundation progress, place we expectations. is to growing toward believe us and in the significant scarcity differentiated, making

in confidence like I partners, and for Infinera. and to our I for would to dedication thank to extend like continued customers', our continued their employees, success. thanks their and my especially would commitment shareholders our support to

will that, over turn the With I call Nancy. to

Nancy Erba

everyone. covering framework performance Thanks, to results. commentary I are discuss for financial by on full and QX toward additional as and our measure by followed the afternoon, our for XXXX our our progress And QX year Tom, we move our guidance begin good operational this strategy target And will model. XXXX. then, using, improvements, we year, business

posted with have to our range we with XX% guidance $XXX sequentially million, Investor revenue details, our reference, slides million. assist your non-GAAP to $XXX Relations million QX website, to of my to $XXX increased financial exceeding commentary. For

by growth base. of adoption an driven customer our increasingly expanded broader Revenue portfolio across was the

ICPs XX customer to top Xs, outcomes We with of company This benefit of our seeing is our acquisition will on healthy are product one list portfolio representing coupled cable expanded diverse that the of time. over Tier a key the mix the mix and continue customers operators.

customer customer quarter X XX% Tier XX%. the above in one consistently had that a been We has

leading came also We business a XXXX under had in cloud we XX%. won in just whose provider that

variable by Our guidance, in skewed was benefiting of XX.X% prior customers system of XX% the strength and that our North coming to to XX.X% revenue transition quarter be from to from toward our ICP geographic region. more Non-GAAP manufacturing with midpoint XX% up XX% at driven from mix a America margin model. continued gross the our from of

somewhat was deploying revenue relies customers by growth our platform, merchant third-party Groove growth versus our currently Margin vertically on subsystems. from optics, integrated countered significant in which

in our Another factor was quarter system. the in continued the line growth

create the growth initially the pressure, footprint fill future. lays these foundation for margin new While margin in higher the

In expenses. OpEx non-GAAP $XXX midpoint was million $XXX million range. the of our operating to to now guidance million at $XXX Moving QX,

appropriate pipeline. maintain improving to innovation continue as key platforms driving on We technology focus operational we efficiencies, investments our in

we products recognized model the later $X.XX. or the working and year. QX, that this non-GAAP EPS prepared operating operating of our non-GAAP new time, profit, At we same In $X.X margin to are bring overall to to expense of one non-GAAP launch scale million is with in operating X.X%

QX non-GAAP complex are EPS to year operating have just in profit We achieved and one and following pleased significant acquisition. a both

December billion $XX.X XX, operating $X.XX and a was loss. revenue margin Non-GAAP reported year of for We gross $X.XX XXXX XX.X%. ended the million with loss of non-GAAP non-GAAP non-GAAP of EPS

reminder, the of scale due although believe to added. to a Coriant the significant we As of acquisition, have is a full XXXX meaningful, demonstrate the don't comparison does XXXX closing we timing the year it

for Turning Total We management, sheet. quarter, and we draw improvement facility million. finished ended we additional we million pleased QX to up added $XXX ABL this We no at net capacity anticipate support $XXX bringing million exiting the growth balance during with revenue continue will financial are on results. and the $XX utilize And very ABL. to efforts. $XXX ABL the to In total, the cash with to particularly investments the operational million, the that QX. low-cost quarter total liquidity quarter our our from to

Now to categories. will on improvements. these before some three I in initiatives key we on discussing undertaking moving in as focus we view XXXX, guidance, to operational first continue are share efforts I

supply First, optimization. chain

improvements are experience, enhanced our improve providing logistics XXXX. conversion customer the levels as expenses. to operating is focused base on in demand we planning, prepare create our leading of and cycle XXXX the growth in into These half a be and an expected will This project second while important cash a service for processes. delivery, and fulfillment and driving We around processes to

working improvements. capital Second,

free the we averaged turns. imperative generate as One of improve X.X is We to an important creates improvement optimization outputs flow to metric inventory fiscal improved this turns. the It in supply process most resulting incremental and XXXX turns the grow. of opportunity in is as QX significant chain X.X with it cash exited

one QX XXXX, in cash. if As million a reference we point $XX turn in of would of generated we had additional have

on accelerate decrease capabilities process both to in would Additionally, forecasting improve we and to focused A million improvement order improvements process, cash are of QX five-day have in cash during our work XXXX, cash driven DSO to $XX and upon our improvement. DSO automation and DPO.

and commercial integration margin. expansion. Third, heavy margin third-party our a pressure vertical puts Today gross on components on reliance

We are enhance process cost executing our two-step profile. a to

a XXX-gig with developed tight leverages work customers our to the begin we optics design. our In offering, commercial year, first XXX-gig DSP half our internally migrating of technology the will to which largest own integration of

As expansion as we enable per our cost bit for reduce we customers, well. the margins of our own

occur comes broadly We be biggest own will the XXX-gig DSP with market are deliver our expect needle portfolio. developed vertically we will products PIC. across to And technology able to -- integrated more and mover our as internally our

beyond. to our model through during operational the returned to Achieving us with and enable and to heavily XXXX a efficiencies more our us XXXX position additional integrated scale year, launch improve business metrics of successfully business the in vertically XXX-gig should weighted solution ICEX

our for discuss the now guidance I'll quarter. first

quarter the takes both well seasonality impact consideration potential coronavirus. the QX this as for of that guidance the occurs as typical Our into

As companies chains, monitoring we Tom technology are with mentioned, situation. and actively many assessing other global supply the like

Given QX we these revenue from the to which a non-GAAP factors projected $XXX anticipate $XX in million, range two million coronavirus. of million contemplates $XXX the impact currently

our increases gross XX% ICPs margin risk XXX-gig range the resulting non-GAAP of potential continued by lower to and adoption the on projected of expect XX% coronavirus-related to volume, based in We mitigation. product be cost Groove from

are this. to key are increase expenses in Two Operating expected factors QX. impacting

collaborations II-VI our which The our R&D than interest. progressing innovation program NPI with as on recently Lumentum. strong had XR announced from as faster pipeline, increases our technology, is and evidenced XR execute optics by anticipated, investments including First, we customer

due beginning expense for stemming be from currently second at expenses $XXX employee-related typical standard expect resets and We year, the taxes. increases to The is bonus of payroll QX the of $XXX million between and to million. operating non-GAAP

and XXX to a expect or to margin range basis operating $X.XX minus $X.XX. loss be of points, of in we Finally, a a plus negative X%, the non-GAAP EPS non-GAAP

are efforts cash our capital earlier intended working to XXXX. Our operating discussed in improve flow

do one-time have taken costs operational Although, certain of from in will end that we in carry cash forward actions marked XXXX. integration, have XXXX we the

in include one-time systems of outflows advances our contract certain These $XX of of to repayment the more operations made and partner, half in integration and are the manufacturing to restructuring cash Munich, related payments. weighted year. cash XXXX, transition the as onetime These our retention we first R&D manufacturing disbursements approximately total and million to heavily

cash see generate expect in operations our one-time year-over-year. operations payments, we these to cash cash in expect Excluding XXXX. these improvement we onetime flow Even outflows, meaningful to from from with

few now items minutes with growth, the and have years. target alignment like thoughts integration how core including value we achievement in trends market model target foundational a our is of the today, its pipeline share discussed the on our coming would company. to the fundamental model, company's will upon to fueling key enable is the we that in business and take innovation of at I This built my of vertical the belief

As three or coronavirus we worsening market see we of of a situation. visual approximately past, impact in years our in the extraordinary website. X%, the excluding posted we material done have have any the growing the a mid-single shared XXXX, digits, supplemental to the our next In information in

given segments of our the We fastest grow the positioning revenue expect the to year portfolio this market. in of market above our growing

the XXX positioned win leverage further to lay we merchant to As in which we in the Tier continue XXXX footprint, foundational at group optics gig. scale and X new is important, platform

the margin to half slightly first of the in expect be We muted. gross year

see efficiencies, operational in we the our of we year in positive drive expect half half XXX-gig to the from to year. XXX-gig second back the margin on to the further impacts start transition the and As gross of

to to year, points XXXX. we greater basis expect full XXX XXX generate margins For gross than currently in the

Overall, the offset operating trend year. through year. expenses second being down efficiencies the in We operating non-GAAP year for fund to new our will by with the increased improvements profitability of during technologies half somewhat to spend R&D returning operational anticipate the

XXX-gig ramp year, a will this year the XXXX vertical in of and be integration beyond with offering. Looking product of pivotal our expansion

the continue XXX and ahead basis the we operational moving we manage our our and margins expect continue innovation driving year. gross market to points, while of key another While toward non-GAAP profitability XXX grow to for leverage to investments improve goal of

are XXXX to our As we the of margins faster and and business advantage double-digit move into and we model integrated growing our gross than continue to market of profit. ICEX, expect full vertically positioned operating mid-XX% take in achieve the target

addition XR In of time introduced in market the the we same optics. expect to frame, have implementation our to

XXXX for scale market the XX market in we non-GAAP the occurring grew efficiencies, the an that and base begin optical we well for X also increased company at unwavering this differentiated profitability. global hit is on important that the operating represented our an app as Infinera with Tier product positioned as an investment expanded acquisition customer returned that our wins, us focus an optical year undertook operational driving will positioned leader, portfolio inflections to to major later in With products year. a

the In us scalable work as helping us Infinera we for team summary, year and model laying business the foundation a strong will value. building shareholder that thanks highly sustainable while maximize toward a serve to my to entire close well

since with innovation the for I'm I've and and excited we is joining path dedication that to with we that what bringing contributor the are our are targets. future incredibly be market, drive this working team a The about done on the great in will to combined experienced talent confidence me efficiencies commitment gives remains to Infinera. work to in holds critical achieving While operational the cutting-edge be my long-term August

call to to like the turn now questions. I'd over

Operator

the now time session. question-and-answer And it’s for

from go The today of Alex Please Henderson first Needham comes ahead. & question Company.

Alex Henderson

Thank much. you very

there. you So over guys busy have been

to clarity with was whether nearest performance So the power met bit extent targets, advantages us the I could hoping implementation you time on versus degree I outcome characteristics give hits there? what some think it had efficiency your competitor? now evaluate which to other you've expectations, your your a the degree to more To spectral XXX-gig your DSP. little granular it on and which the happy you're gives you

Tom Fallon

Alex Yeah. this is Tom.

up have great Obviously And got conversation both completing, our the of and one business the new great we integration customers, happening level to really from transition We XXX-gig. a the lot of creating been that. the winning things asked of DSP, from is a busy. this you growing a keys portfolio bunch technologies. of about I'm So work going of kind

We into DSP. with are really the so system. the We're now on the working implication really DCO and comfortable

I all done consider what you would our is expectations. know matching we're the and through never think but So until DSP I risk you're certainly

optical theirs it planning and confident fifth-generation until own But at DSP will are a people that's and We pretty our be market with the performance, architecturally our seeing around leading we have those we that both solution the in we're internal expectations obviously, that on approach have nice showing that results internal published speculation. publish we're really XXX-gig other OFC. to going

we'll be hopefully our in booth. you and hopefully OFC occur will able to So show

Alex Henderson

tier XXX-gig products even launched the these I before are given follow-up. But in it into buying the lot seeing down you you've you side performance that coin obvious If a demand your but conclusion map future the of pike, those extra visibility, before could here you're the what push, given weighs and that technology is and of DRX, on some extent products of extra hits customers given Great. before got launched? other the to road extra Thanks. are half revenues. XR, it that -- getting, the is coming giving that are One even

Tom Fallon

Yeah.

higher the architectural dollar technologies. the Clearly, I in think and wants bit of a One, number we lower world carriers to and with the we some having the move discussions very the largest around world couple very, lot things. a of to a call optics. what per are deep performance of

subsea. have us of near plans two both technology, significant also the it I that think data that rollout but people one that the allowing center long-haul in And as to rollout for discussions do term. what us world and would is this viewing consider And the I year. is that's around will

-- because met we world couple a in must I the the go the to of the a old new the people years leadership economics of from to mobile world not of time mandatory. are life-threatening. saying making that And a CNOS into is commented are up of world in are call approach, on new perspective approach our in perfect the our DRX unique that carrier-class disaggregated largest having taking be to architectures quality saying, It's I'm and the a regard this software customers and are us for the field proven capability, market.

It cable is see to the but also I of desperate, world. think that very the are think they I in as right happen that And the an held architectures necessity time. incredibly for break articulate also industry don't -- has in the the paradigm that carrier long saying, a time in the guys, for it's been

to meetings, meetings between rearchitect up. forward. hurry few on and perspective actually the a skepticism encouraging this never say XX% from us customer insisting as and not anything viewing XX% long with is but revenue, as as They They in an this stronger within follow-up I seen. this than networks and and strong seen start I've technology I've of their ever as a to degree opportunity that having, a -- they this this technology costs they are have that been that they're XR, a somewhere of responsivity deeply business, XXXX In can are fundamentally moving to

leader, positions opening doors to as but That portfolio our sell us for technology incredible both us today. a it's

next about coming you of the have market incredibly -- as we So because Alex, have can't of as richness been, talked portfolio incredibly And I years. have I long should much. am to the I the IP over follow-up excited too I'm a couple

Alex Henderson

you. very response. I Thank much the appreciate

Tom Fallon

Yeah.

Operator

Please The today Sachs. Hall of from Rod comes next go ahead. question Goldman

Ashwin Kesireddy

some thank I the XXXX. my and in Ashwin the just ship made clarification you revenue and shipping that half second you'd wondering will probably Hey, that This to and you'll clarify XXX-gig revenue last first potentially you comment is question. if Tom. made product And was I in of believe make half. half on be wanted availability taking in for you on Rod. the you get that comment the some the announcement in quarter I mentioned second in launching customer behalf

you Just time wondering there you expecting clarify could days what for lines were the ago? XX versus if us

Tom Fallon

Yeah.

year. our clear will this So revenue expectations, for to we begin shipping be

I think said time. last we what that's

be for revenue year. spike in of to overreaction We starting the but this was this gigantic We My will year. shipping this next real of a it multiple encourage year, script commentary year. growth revenue meant customers not anticipate XXX-gig

-- at late OFC, the year will We revenue and the will with ramp that of go the year. anticipation see year in the you'll part with product, beginning we middle the trialing start next revenue of the

Ashwin Kesireddy

think a unrelated, time impact? related time but stretched Or Thank $XX product Actually a-- you. giving lead If purely as I supply of million. lead some you an on coronavirus we that of Should kind impact about could just follow-up. on the sort are -- chain

David Heard

why that's supply give not as topline chain -- is said, That's number. you specific that we're Yes. Tom able which to limited

Ashwin Kesireddy

Great. Thank you.

Operator

MKM Please comes go Partners. The Genovese of Michael ahead. next today question from

Michael Genovese

Thanks a lot.

is would I think up have following I $XX question. more expected. The than higher impact that -- last on million Just than

can you more So, talk are bit of be What granularity just going products? a little supply constrained? where you type to

David Heard

Yes.

we don't yes, -- while any So, thanks have Mike.

China, secondary have supply tertiary of of CMs looking partners who have of in supply think at some our China. as well on the don't impacts we our any dependencies industry as its major I While is

out merchant of that Wuhan some optics area. coming that our So, are we have ancillary of

outside calls have situation. it's add of very supply are They're source to and as of a million up $XXX subset dual means the CMs we've number. in been what have it's kind of But $XX certain our might monitoring $XXX not said, a as that our chain are on factories our of weekly coming the I million million with if discrete have to you carefully of Wuhan and million that out out like a area and ensure finger portion $XX large mitigation China obviously, to our products. got We're that we that the number

Michael Genovese

guess want slide I second percentage of you've verticals you great. generally question about verticals pretty ask at Okay, XX% I Tier the strong. X here. is to the my got

XX% XX% the strength of in besides Tier customer the -- So, what that X customer? you regions are in seeing one outside that

And guidance your that else type or which margin quarter provider you somewhere for about vertical is gross are products, Internet then talk and lower secondly well? content vertical when is is seeing an margin there these you of that's primarily that, as comment -- with next XXXG

David Heard

because proud interrelated the both long enough of these we're footprint a and margin benefit that the win them, Last year which been long-term we obviously initial announced a Tier with Tier that So, company. industry Mike. the impact and you've but to know short-term Xs; let's XX Xs winning kind out you in has they're for as of take putting were

And so mentioned, particular. we portfolio that some did mobile also in what as Tier positioned. but And U.S., new our wins including with you the of in internationally the here across Tom X Board, our we our saw see platform, that's EMEA, in wins them some strong across saw the mobile really platform

purpose-built about in from optics compact XX integrated from those impact fully earnings make integration vertical QX look having And impact. vertical XXX-gig a significant talked QX, of calls at we've has merchant When the ultimately optics we as platforms a points XXX-gig margin margin impact. in we we're goes partial to modular this XXX-gig optic XXX-gig of more and margin prior to the optic, integration to look when of transition at we on XXX-gig in complete which

And we footprint fill we're to we're that that with both the seeing XXX-gig those seeded because in question we're the Tier that ultimately now. Does your the what primarily that XXX-gig to sector speak. in with Xs out we're is well footprint today well. as that that as as sector us answer allows phasing Mike? as wait to bring just up can't platform -- happy winning ICP we've So, win We in CSP Groove

Michael Genovese

it. David. you, Thank Yes. Appreciate

Operator

comes The of JPMorgan. go ahead. next Chatterjee question from Please Samik

Samik Chatterjee

Hi, taking question. thanks the for

terms thoughts revenues. to get wanted I around rate business firstly, in exit for Just run your the of the

of were year which roughly like But billion of you the when here. end the at I strong related pro a delays were you Coriant, had remember forma announced on obviously roughly you award billion $X.X to close first from You've seeing to moderately the $X.X or revenue wins. acquisition

is you sense think where been out me of those you the pro pushed forma of have that in if at can just business revenues? And now of have exiting that wins might give time? terms So, award you most a recovered

Tom Fallon

said and two because that creating $X.X Yes. the combined occurred rate. we on you of That really history, my part part, lull told. run billion I mistake it We together I'll company, and story through a was forecast the did occur. companies, walk a because acquired them that put we was we we unfortunately the didn't candidly,

keep. products we it in QX feel did saw products We concerning. We we were going -- was bookings certainly and to QX what lull, not talk evaluated as that portfolios what together, would to and going invest while they were customers, to put a what we're we

bookings talked talk QX QX QX, very I QX being We about about book strong. very were and bookings bookings strong very -- being strong.

significant as a because largest into the of is we about, David as year, One constrained enter now, and backlog really right coronavirus. talked our of challenges

times people are lead like. longer Our than

and a while number a greater to go and having run not very the out, healthy backlog. David frankly, $X.X new customers did number occurred number billion only but a where lull than demand So with did down as take see the portfolios, pretty of with $XXX we that rate comfortable we of we and million are across from away, a year verticals. a won, markets of XX pointed of we We we're perspective. at it as growing exited quite revenue, We're

and a the that's the bookings of entered backlog outlook record comfortable. with year with So into we we enter pretty year

I So than the that the think we're to $X.X misstep $X.X the of billion. closer billion, $X.X rather rate billion run positioning probably

David Heard

impeded, As you And kind our view growing of looking the above X%. you is, grow market Nancy gave at that. to

guidance, If the still roughly even the of think you muted impact QX, about with our up in contemplated that. being year's million, from non-GAAP significantly coronavirus, is last revenue $XXX

backlog but, in front. So do, to good work again,

Samik Chatterjee

one Sure. with when laid the big in that up road you out XXXX, terms benefit seems from here follow-up to the the on, coming that in just through. And plan of to you XXXX ramp in related earlier, margin if I significant was more had terms versus laid the be of improvement key volume can targets difference there map a out margin

So if of old -- the you plan plan. the new in be improvement terms in seems walk -- through us XXXX year to can seems just kind XXXX this balanced be more to of versus the margin

what So there? changed really has

David Heard

Yes.

I think things. two

bit of on the footprint. operational we're is impacting as we've margin of we're top merchant got of intimated, I that a front XXX-gig that winning us these Xs the efficiencies of half negatively on driving. integration side our more muting that, impact that think first year, is the half, laying of Tier the the more On our Nancy the For

into of get we've efficiencies as system of the the the the we'll getting taking portfolio And back you XXX-gig see the half synergies IT the exit operational well the the of year. the vertical of impacts across ramp year, up implemented. integration, that the As complete we as as

Tom Fallon

laid crisply been, And about we we is later going than we to I I XXX-gig I That quarters offset. think two year certification that, technology both from say a out. pretty also one think a anticipated ago. to the a -- plan had think about two-quarter would we're is be perspective, delta perspective adopted has customer do but do probably executing

Operator

question comes The next Jefferies. from Notter of George

George Notter

you the Or But for Thanks type quarter? maybe a questions. very XX-K exiting I do have guess, that? the a for much. backlog questions, have we should number more Hi, guys. few housekeeping I wait guys

Nancy Erba

excited but you're exiting think, for with. we about going are very wait that the backlog XX-K the I we're to to for that, have

George Notter

-- then And Great. Okay.

Nancy Erba

should out in That next be the week.

George Notter

the of a I I And in see flow the then, Super. quarter there's lot Okay. statement historically cash press been a moving in number. also, parts this didn't cash know release.

And so, I kind few sequentials. of ask questions of understand you sort maybe, the can a just to

I had still guys liquidity out also have factoring of of is drawn, And then, takes trying Just in that the You you any Fabrinet told down sort ABL, relationship? or know Was there puts I any draw understand to cash. on this any and draw that? you that in Thanks. it's And quarter? quarter. assume, the the then million $XX zero? cash didn't the us

Nancy Erba

that drawn additional, and exited that our made vertical as ABL. have advances we $XX of will we repaying CM. the this although Sure. comments Yes model payments We million to as there the be transition year – – I did with the know were on quarter some the were any alluded same you advanced to my did not we not amount any that the in part to we make have us are certain that with do

So there's that came cash in some repaid that be out QX XXXX. that will through in

George Notter

it. Got

did in then was also just question and do cash, just down And other there – you Okay. Or is see a September? Thanks the in bottom another think the the then what cash? factoring step lot. we

Nancy Erba

there with in will those cash those we're So be they making. down did added remained where have on factoring one-time when we we certain were expect likely Those factoring be year, do one-time mentioned cash that have customers outflows flow have have but purchased that. generating as we to for QX cash not outflows any additional but will relationships. we excluding QX, cash to operations. Coriant, from the

Tom Fallon

we and made And some that decisions George. were year last those execution

George Notter

lot Okay. guys. Super. Thanks a

Operator

Marchetti next comes of The from Stifel. question John

John Marchetti

go wanted for transition back moment. and to a Thanks the I to very XXX-gig much. XXX, XXX

think there year, just a out to start sort XXXX? your similar that couple risk XXX, a a go XXX-gig, then think a maybe than thought. got into in of look we we XXX? through the later in took that of As do better little how as we comments that on Being of a you've think? to those given about some of XXXX pushed Tom to the qualifications on slips think fashion XXX originally you quarters as handle about you originally the as those in you of XXX, total do XXX-gig going you control by types some than sort bit qualifications of is longer being And Or

Tom Fallon

DSP DSP. is Well, comfortable that the delay. that deployed our feature slips this in were and XXX-gig as I That some based originally to upon we're point At is feature caused that were control not set more the sets of the intended our the the think very expectation. in of full some

able and that Second starting to market. transition. to we're I customers known in types is specifically of of customers, the with see on all, there two a the XXX-gig, be so work we'll

bit when $X cycles. certification fairly long gear per substantive, anxious is particularly deploy XXX-gig with to And them reduction of the Some that buy bit today have them today. are helps because per they $X some it enough that

And the candidly, in by us else. anybody today XXX-gig is or market not

have processes that of certification that So no aware there's I'm started.

going are So deploying customers to of will some They start volume. XXX. range in certify that

in revenue we'll XXX-gig QX. in some QX And recognize sold revenue selling today. are increasing We XXX-gig also on in We recognized we QX.

want who are really they the want certifying people XXX-gig. today. it as is to that the another for waiting that XXX-gig see back as large they of view have and XXX-gig. savings move effort bit They technology set don't do The to and customers substantive to of go they through to committed the amount the we see We couple half in a have certifying of dollar to per want

We then the of dollars be because going mix number So to reasonable probably that year and to with XXX-gig too believe I substantive. a do there's XXX-gig those can today are next save customers. going they a see

John Marchetti

Got it. a just follow-up as And then there. maybe

expect As go Thanks. the a a the on that kind of you throughout full is half into where strong in of do is year relatively growth XXX maybe away an with XXX situation look that the the out year? top? XXX and you XXX through of gives XXXX, year be driver there we do layered first Or can real as to expectation

Tom Fallon

long For and inserts current as ramps did technology When transitions to years. quickly. while XXX-gig, XXX-gig I to year think continues continuing introduced allows bit ramp? as will bandwidth new The ramp technology how long delta per ramp? delta introduced long XXX will bandwidth it next For think have to These whoever both year next how we did you that XXX-gig And very grow, grow as hard believe is XXX-gig nontrivial. both healthy years. the The the also year. has dollar XXX-gig a is I well. nontrivial. in performance will do very ramp I Yes. is XXX-gig market. When by

John Marchetti

Thank you.

Operator

Difficulty]. next Marshall The Meta from comes [Technical question of

Meta Marshall

for you XX% the achieving revenue about real Maybe question think quantum Nancy to first of me. how Maybe think operating margin... towards

Tom Fallon

Meta. nothing noise getting but here We sorry. I'm Yes. were

Operator

The next Suva comes of go Jim ahead. question from Citi. Please

Jim Suva

you with been greatly comments in set for has is that you'll so Any the get XXXX quite people commentary, especially which help I your had coronavirus environment? us you Thank the optimistic believe appreciated. macro very encouraging. and market overly far details in stage mentioned so the to much don't prepared uncertain just outgrow the

that to and As ballpark $X.XXX was I XX% billion. see realistic? up us sales around for you hey little I is bit I of the levels around anything of is wondering Is a of, just that kind kind consensus like at consensus about year-over-year but and consensus. or also XX% about corona market, want give I is because to that -- reality wonder comfort outgrowing remember look definitely

us If of you any guidepost? type can give you. Thank

Nancy Erba

And to again market at material excludes per growing Sure. to seeing Yes. about right coronavirus expecting We're be any the we're year. impact any now or now. right what X% that change

the So to be single growth to in mid high expect digits. would our I

commensurate now. pretty out there what's with I right think that is

is what would bit say a I little different. But again, maybe

would we've year of down. expect really million half a I at revenue and relative a to as of mentioned, both impact the the growth the from there. million David to looked incorporate perspective. QX see with $XXX guide of coronavirus shift kind to back seasonally $XXX our million in As $XX us margin QX's

Jim Suva

with We exactly That’s so it. That’s Thank much. in guidance. traditional great. appreciate you color

Nancy Erba

You’re welcome.

Operator

The Savageaux Markets. Northland next question comes Capital from of Tim

Tim Savageaux

QX margins. to which afternoon -- question the following and I for question And to revenue gross on something second on downs operating I first profitability target up ups through you've good hung on here. the Hey think on want congrats hitting is and

is ex and the growth virus which year-over-year. of to up to context are impact that both a XX% really want -- in reported year, little just expectations a bit I for a that apples-to-apples different but it got way so the really that one you But guiding you've quarter frame you're of

-- and guess the market details throughout know pushing plus the to assuming that backlog on the us what's year-over-year that backlog last X.Xx slowdown, come back? And there? up I and seeing year? market relative give is quarter where versus the expect relative And you growth don't puts you while you're to takes this XX% I growth maybe we X, holding don't that do out and and up, have something that Or maybe what's

Nancy Erba

remind in Yes. just a certainly I'll to you seasonally QX. of or high start albeit a those we down clear QX mean we typical can are reminder QX. and will David start We've as QX. then I Tom answer. pattern is had that through I seasonal challenges seen seeing in

So we're with very happy growth the that we're seeing.

product comes think customers. the offering of growth new it broad the I seeing adoption And from the in we're

So of I ahead an certainly growth the with pleased first mid we're half to uncertainty high the in single that. digit market year of there is right in the think where environment now,

efficiencies our through this going well execute really to year flowing the and improve operational bottom to on start more. line certainly drive to We're to that see in as

David Heard

Yes.

customers talking additional I are very, these very I in is last countries. as more that comments our couple a would winning you Tier lot there color we're multi recall add large we're I the of if the we've deploying projects about from over quarters, been of think winning

the And take reason from go a those backlog you've to is revenue, seen can couple grow. another of bookings into quarters which

we're of bookings year, contemplating a number. looked to plan like So as fiscal revenue into the that's we've in complete across the that feel conversion and prudent projects we the the

as make feel the number where we our the pipeline innovation we're cautious the impact providing of As to scarcity to we due see. call, want right begin macroeconomic so at the we Tom year the is. Certainly staying the what good sure started look as prudent market and and we

Tom Fallon

that around that not will no concern piece of vastly leverages have reticent I were we they of one last to the a of to of portfolio. portfolio going able I the growing be companies Combined opportunities the add now there. best customers some caused company market that But this. longer and good number think, carryover with end-to-end and both with had technology. Infinera, a very color the to as Coriant is Coriant of be the stand-alone in viewed to

and customer bringing and we're value our or we're disrupting where winning customers investments that are occurring believe that or in new are automation. we the I base their edge optical IP see it's whether

in market. top-line think growing It's some I optical a announcements, that I So not when a general. right healthy the Quite is we're frankly competitors performance optical our in healthy market look in space. unique of at there now significant

ourselves optics differentiate to architectures rising new that industry position think with to us tide, as disruptive to also but this a I market. the not XR our leader to positions true only a bringing XXX-gig enjoy in network opportunity

Tim Savageaux

market growth my but margins. because I the on couple here squeeze you don't of the of is even there kind in of know and I the QX outsized look cloud ramp have to the response, to side mentioned although in around you impact the lost last least segue in I part grown if of as margins quarters and rates. ex I'll that over on at And kind assume it that an follow-up try on

mentioned, of But that where kind just mid-XXs at level is of those intend where you've started factors get the year look three which you to you we XXs set contract QX last kind if manufacturing I to think to we if transition. from low

sense front of of the gap? a of the integration kind each You of there in that vertical full contributions extent vertical know mid-teens and benefits of give to then us you? in what -- still maybe there bridging are The three potential

Nancy Erba

Sure.

you these the to to it's XXXX I slide XXX-gig a on the in trying that We but really path you when we've the you in into refer in margin target have years as of show to in the of going we to each year where that to is of back the I'm transition to happening front two website, what terms feed about put seeing were the of So see that And the model. next know starts there model. getting leverage at out the the is of talked path model. that's and actually to we business visual half some to XXX-gig

putting are stakes, we do but integration expect table growth pound see operationally will is to the not a right? just over, going scale years. company a of to the next two be and to to going we're time, drive we same done. we're We Yes, the that in kind upon internally continuing the are operational our to with At efficiencies what

So points year XXX combination basis XXX a the of this basis to points efforts. those really is

transitions move XXXX where and depending vertical Tom transitions, right? I customer upon we're and the they when said say adding and as As into and take the time, you these the transition XXX-gig going integration the I in So implementation. their take to as mean, is are time to

we and reaching function then in year the step that see So mid-XXs in finally XXXX. another

Tim Savageaux

Okay. Thanks.

Tom Fallon

Tom. Thanks,

Operator

concludes to any like remarks. closing back session. to I would question-and-answer over conference for Tom This the turn the Fallon

Tom Fallon

you thank an update forward I create updating give time your our great today to would and we a will progress XXX-gig OFC to to look day. on a Otherwise, show. like I where a on where Have you you at lot can and hopefully have for venue we XR our we technologies.

Operator

The conference presentation. you concluded. Thank has for attending today's now

now disconnect. You may

Infinera (INFN) 25 Feb 202019 Q4 Earnings call transcript