INFN - Earnings call transcript Q3 2020

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Operator

Greetings, and welcome to the Infinera Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, November 5, 2020. I would now like to turn the conference over to Amitabh Passi, Head of IR. Please go ahead.

Amitabh Passi

Thank you, operator, and good afternoon. Quarter Conference Third Infinera's to Fiscal Call. XXXX Welcome and to Head have name Investor is Infinera excited Passi, Amitabh the My joined I'm recently Relations. of as of I with to look all forward working you. section investor of copy available Investor today's and of A slides website. the earnings on are the Relations

financial from our result growth, sales, no and ended not call and recorded for regarding map, plans, forward-looking estimates our operations, opportunities, forward-looking to and including, SEC today, quarter all release manufacturing reflect but replay that factors, to, well this may may Today's statements XX-Q or the differ statements and circumstances after of that update for as reminded XXXX, furnished or statements various Form the the X-K road outlook call Infinera made on of annual business technology product December as our as our are current that future of Form market any of investor Relations section XXXX, be available filed call and operations, products, provided call. year and June and of strategy, XXXX, as third slides today. constitute most on to the impact March measures from and statements fiscal X, quarter earnings including Forms Officer, with each SEC as Additionally, to arise that Today's as as website. well results performance, our XXXX. are to X, events including investor reconciliation in revise financial forth our uncertainties on will expectations. will fiscal limited XX, of be date regarding differ about statements of is is risks Chief our this report for financial results quarterly being These year the and financial measures ended the on with call obligation business our available GAAP our include non-GAAP undertakes a projections statements those with including results materially August we've financial our turn fourth the the COVID-XX XX, on release plans as our Infinera's quarter XX-K statements subject Fallon. slides, G, I'll set filed conference the Tom filed these management's a Actual report on cause for materially of earnings XXXX, could year Pursuant Please directly in which our now to comparable includes website. Regulation over to non-GAAP the Executive to XXXX certain of measures. the Investor risk

Tom Fallon

function profitability review with brief outlook for in of key the strong with we customers mile call achieved and transmission. dollar bit margin -- market growing facing, and are the improvements margin growth, realize near-term the quarters to will to our innovation cost typically we per non-GAAP joining and be industry. We in and will both continue bandwidth quarter the a for The per resulting macroeconomic thank QX operating we and longer-term a us. reduction. delivered expansion gross discussing industry I'll our broader David Most operational our I improvements mile I uncertainties notably, and for step Dollar afternoon, operating be during begin to has period non-GAAP slower enabler continue a about Nancy the of to Good the QX. per over that the and evidenced QX, our the year-over-year. the company. margin revenue, to very been have made the and unbounded past the several opportunities remains specific the turn expense opportunities helping over the cover by optimistic quarter are of and ahead. for Despite before see you then sequentially seasonal

has advancing powering the high-speed role During solutions innovation the confident a in company, services that my and around the Today, identifying leadership are pipeline positioned to and robust, technologies played and Infinera core connectivity world. future. well thought network pivotal the cost-effective remains Infinera's are I tenure in am at our services innovative enable

solutions beyond, we vendors become generations cost near from innovations and years, adoption of industry are optical term, in increasingly from innovation, performance are delivering earlier of networks the we and that transport optical ICP network in it solutions and viable are will contrast open models require addressing XXX X transitioning observing suppliers to the solutions. clear and only vendor. of vendor of to and has that accelerate of insertion best-in-class Concurrently, X deep to integration. that and architectures any that capable numerous commercially disaggregated ease We the Over as gig a believe greater significant scale lock-in gig come improvements TSP stark break vertical XXX

raise our be customers, ICEX-enabled Infinera place. often we bar deployed and the Importantly, and on open are in optical with solutions GX pioneered capability this our XT can already products, for is poised Groove to platform. with our the optical infrastructure that significantly CX

concerns can of to vertical confident networks open for deep by communications is aggregation all networks, how After other further providers, in and solutions fundamental are networks, trends. transponder. to am infrastructure point-to-point landscape. savings evolve competitive service mandate inevitable laying be market industry Huawei the my are networks year, pluggables. shifts growing that are we over the of out, CEO based accelerate be architectures will pluggables, Infinera's led fully CapEx our transition to OpEx believe that starting last than and the and The operators engagements subcarrier built. that security architectures This of is with by the numerous will that on to On it foundation from the of I position for point-to-multipoint shift redefining the our evolution coherent the and intelligent confident I a announced to integration, global succeed Heard are these XX% David Furthermore, like point-to-multipoint healthy from greater be transitioning earnings track. catalyst I role that alter are that Looking we will opportunity and providers with CEO. likely optical for meaningfully out networks XR These tomorrow. today will network by realize call, a access as potential enabled best me provider will end

turn with and appreciate passion. inspired outlook earnings to call partners I stockholders share the and for of like call. to our So I commitment, would the this customers, all our on employees over me the their support final courage deeply QX. David additional will daily details QX over be thank Infinera I will years. who my to supply and the now have

David Heard

forward. everyone. an for he Thanks, I and years. the the active to a service Tom about continue upcoming will the to continuing moving many great Infinera, Tom. value, to opportunity years to I'm afternoon, partner want company of board thank publicly Good member X service I as lead provide know last excited for counsel over to be and and for his me

Tom our the outlook healthy, are highlighted, is The long-term this for opportune company for growth and priorities clear. As time is strategic Infinera. an

will share We optical continue gains to invest margin drive expansion. that market in and systems high-performance

March industry and differentiate planning XXXX. execution. details network customer our I through to of will the We to solid look Day, is sharing revenue leading I delivered market early and diligent quarterly open strategy non-GAAP quarter-over-quarter revenue X% QX we're innovation, on above at growth X% gross hold non-GAAP our high perspective forward year-over-year. in We seasonally to operational provide our end to results optical Analyst and margin now intimacy We like excellence, in range additional would on further continue and of outlook with what at our achieved revenue non-GAAP typically the and down grew margins performance. quarter non-GAAP a guidance operating range. which

generated and profit across a forecasted gained operational a For million share operating be the million. grew quarter, X that the Overall, solid $XX metrics. $X first Most host of revenue we of importantly, our execution in market non-GAAP year-over-year XXXX, of year-over-year, we X% improvement X% of in up representing is XXXX. to months was in non-GAAP

make costs, and managing open additional perspective, margin even the on the details expanding investments notable and the reducing in and quarter. demand will while vertical well We maintaining in inventory, continue most on out dynamics quarter pretty integration expected. growing progress we as financial optical provide to solutions. a played From Nancy

and and ITPs to networks and to growth exposure among some as challenged North along recently India our significant operators primarily like across more shielded peers. customers, and traffic markets slightly experienced basis, diversification, revenue by cable revenue with was us provider year-over-year Japan, to support project continued in On up down our service base a invest American timing headwinds priority. of from our our customer customer due to Our limited

on our solutions. Moving the key to performance platforms and of technology

Our metro had another quarter. solutions good

For platform prior the our to dynamics. benefiting critical also XTM due GX, XG quarter. builds platform, from in well from of our double-digit traffic the performed a to new open optical X and months compared was Similarly, patterns Groove strategy, to up year, XXXX, revenue modular the first work-from-home our in shift compact

ICP Groove QX. the traction share GX which XXX-gig continued customers, first solution. revenue XX% for the For in adoption in category. CSP This Notable GX highlights X to of lion's industry, substantial CapEx platform saw future momentum of months year. ongoing prior continued saw represent consistent in with spend the came signals were strong compact Groove among modular from the We the in XXXX, the bookings this a compared customers of platforms our of non we growth for QX this

doubling new quarter-over-quarter to the shipments our quarter, we added XX, and During total customer our bringing count port customers, again. X

Our on track. XXX-gig remains ICEX platform

a introduction our XXX-gig resources of products our delivery We focused are QX. first new pipeline strong and around product on and executing customer in have go-to-market

expect more impact As last to ICEX few positive the meaningful in XXXX. half of said from to second for we financials the begin quarters, we our a have

to our a believe Longer share edge we see extending via replacing XXX-gig proposition the with that opportunity. shift way and market savings that customers. optics will hand open a all This designed primary additional long is intelligence a palm is new to the to term, the cycle network pluggable open suppliers be what of into Huawei. your it believe optical technologies. will fits to X the We transition XR of with deliver, a is value meaningful for continue our delivers opportunity the Network networking, market gains a we to this and technology compelling for addressable significant

the of this XXXX. early exciting cycle, development market and additional in we'll at Day opportunity our are share in Analyst details We March on

to ahead Looking QX.

QX. Despite down While taken growth expect we for year and to sequential analysts continue recently the for of revenue calling systems optical year-over-year be for in we their a analysts macroeconomic have uncertain, approximately XXXX, plan climate XXXX, full in outlook markets X%. the for improvement to market flat remains our

quarter to we coming quarters, provide believe closing, operating through earnings continued grow expansion opportunity innovation, cash transition operational our on strong intend to quarter and shareholder optical unprecedented cautious delivering plan another to macroeconomic have expand new with flow. industry lead in the a growth the to and profit we remain outlook. non-GAAP call focus Nancy the importantly, More a will I our and deliver QX of details environment drive the improvements and margins the value. In gross of now improved solutions and market an open about to turn on to by margin execution. we we era customer additional over while We share,

Nancy Erba

Today, non-GAAP everyone. our and for by afternoon, then QX results. outlook our covering results reflect I our begin My QX. Good will comments provide

the at our product challenging product which despite America. million, to delivered your a website demonstrated contributed up be include to logistics XXX-gig margin North our XX% environment from most saw top showing results, what One growth operating to came decline a by range, same our in my ongoing XX% as is million basis. quarter-over-quarter we revenue in increase margin cost to $XXX positive was and end $XXX we guidance up stemming our our the offering. across For non-GAAP supply and am cost to our a of the continues and comparative the period will XX.X%, business revenue our with drive non-GAAP and progress, processes impact is as customer Investor importantly EPS. sales cost to our through have synergies to a margin, QX reductions to we of benefiting was our Relations efficiency strong continue integration EMEA. with previous management and operating discussed details commentary. Contributing our year-over-year our the we to And financial in revenue, offset of financial in improvements, our all over assist of high initiatives gross was we calls redesign as reduction. Non-GAAP and of The overall ongoing $XXX priorities that XX.X% near this have fulfillment operating QX reference, outlook internationally, efforts range margin revenue. X% improved we improvements with The pleased chain look end These efforts APAC, XX.X% growth from the as of quarter COVID-XX. a year that improve I from and well of posted focused automation. undertaken highlight over slides and of million, have gross on with are investment ago.

$XXX million, outlook the range. low expenses Our QX to our non-GAAP $XXX below million end operating million of were $XXX

While of items costs basis, in recognized R&D second the being Approximately expenses meaningful QX, line reduction, expected especially now with our lower-than-expected previous in year-over-year million originally will $X committed remain the operating in a quarter. maintaining technology outlook. operating QX $X during in the investments above total certain drove continuing GX driving to with expenses half effort appropriate operating on our of cost-saving operating specifically We which ago be range. non-GAAP or ICEX, was operating million resulted $XX million we innovation to our and the margin, operating on key recognized QX, guidance million. $X level. XR positive a In our Compared profit year Groove while programs optics, the of to X% expense quarter, to in profit pipeline, focus improved by our our timing

QX Our non-GAAP a profit of was $X.XX. in EPS

equivalents, Moving with and cash $XXX ended quarter $XXX $X million from on million and QX. flow million to balance We in sheet cash the cash exiting items. down

$XX capital while we million target strategic our $XX million to year. reduction achieved Accounts on variable leveraging with for contract flat the in of to we model, a million focus working payables continued inventory a and manufacturers. this $XX the Our now having reduced reduction quarter, were receivable continue more inventory move

of costs during flow, onetime through million $XX previously a quarter the we We ATM Importantly, on offering. total, integration with million our discussed early. we have taken million million ABL exited care operating quarter, $XX flat cash cash quarter $XX our utilized drawn in the million QX. in the existing raised $XX All with $XXX and

Regarding our structure. capital

Our through remains this flow primary area of of and ample achievement maintaining opportunities customer the unique on focus liquidity to cash sustained generation operational profitability, in time. execute while optionality

half. X% we QX, QX, growth sequential the would $XXX in with that million. at we the As midpoint the range. second approximately represent as the first QX range revenue the at non-GAAP when of look revenue our XXXX $XXX our shared is expected to In expect in exceed of quarter-over-quarter half in business growth, we million would This outlook of

improve to to of the with to risks any improvement slightly wider would XX% COVID-XX. this balance be guidance gross modest the meant XX%. of The midpoint, this in to range represent margin in gross us non-GAAP with front macroeconomic may quarter, continue that is occur expect and At range margin. sequential in opportunity We the

with of step As will remains mid-XX% tied calls, function to vertical expand margins our we XXXX to sound our our in to we come prior have shared targeted increasing range believe our and plan gross improvements level on integration.

improvements margin product in will near-term achieved projected mix. growth through Our gross be the cost and

the of XXXX. next of revenue the improvement ramp come to half function step with ICEX in expect second We the

million, shifted and QX million from million of to which current $XXX into is includes to $X that QX between be for expectation expenses Our QX. $XXX $X operating million expenses

non-GAAP XXX X%, million the and line expense million. expect or to $X $X of operating margin will -- at interest Below points. line, plus operating We a the basis income in minus below are $X estimated taxes operating QX, million approximately be

and operations our working our complemented capital. gross efforts Finally, as improve in cash from modest to to QX, we revenue expansion are margin generate continued expect by

hold. starting work take results optimization operating to to demonstrate the we capital QX have and expansion Our improve are working that margin done efficiency,

position the We the period Our as prepared ourselves what a must be potential succeed macroeconomic in impacts purposeful COVID-XX pandemic. ongoing for approach is unique time. of of to is global we

architectures largest opportunities. Our new is optical creating open the industry competitive one market in moving shareholders evolving insertion is restricted certain environment increasingly and markets. to of being The as is for participating

we technology-leading undertaken financial the We demonstrated the finally, taking are effect confident poised operational margin as innovation deliver integrated our pipeline. to that our investments in couple and our improvements results. changes in ones the have for these years long-term Tina, team of continue vertically shareholder over last I And I'd expanding amazing right remain ICEX times. the success driven to like questions. the through now I'd closing, creation. Infinera for and the In company for effort us value thank the position in challenging like are to open to their call are

Operator

first [Operator question the comes Needham. Henderson with Alex line Instructions] Our of from

Alex Henderson

ICEX bit press availability So fourth think first release, you've the expected in platform. talked And a shipments you the I about the GA of said little quarter. I the in think you

or sounds extent clearly, opinion, like activity have in the testing of it's And you some for have mean, the orders. the the next product? what about important years. my the been element what I it talk little pipeline Can of So that most you bit people is? to matter, current a outlook, several

to there. what's love some have on we'd on more granularity going So

David Heard

for Alex. along with important No. you're other right, and our It's super to part rollouts, important the growth Thanks, our -- technology super future.

you GX it get ICEX So and right. platform, of did in terms the

to for on customers. shipment this quarter continue We to track remain

a in We market demand lots pipeline have large for a there too to customers, XXX-gig. continue of out of

next into typical think materially the that consistent we orders. We for the will come have We start half that back next the kind of any remain of deployment that, have year. cycle. given first And purchase of year, revenue in do in half received just we

pretty the as ICPs that ramp the as CSPs well well So demand with as board is technology. the in pipeline go to across we

Alex Henderson

that So wins direction give or of extended it limited any as to to I Or about sense other that this the a are on problem just have us think the demand some road be able you contract for use you going of announcements going? simply how out triangulate or time, of along process, signs is an initially? we to you're is period production of sold production can

David Heard

Yes.

So we're milestones, as Day to reasonable wins, XXXX, the And new the other our Analyst out we'll well color to it's that on reasonable. technology. phase of about for Certainly, we of our Completely design in product POs. able forward. for the ask you the NPI as in milestones come as be kind give of introduction you March moving

Operator

question from Goldman comes Our with Hall of next Sachs. Rod the line

RK Raghunathan Kamesh

This been great behalf RK with Tom, you, Rod. wishes. of It's is working on best

Tom Fallon

you. Thank

RK Raghunathan Kamesh

To start about visibility. with, I to wanted ask

but of you bit be have Some made to shielded. seem your guys comments, cautious peers a more more

a So you're could the geography? environment seeing comment And demand on you by follow-up. I have

David Heard

times. Maybe first adjusted of COVID of macroeconomic Yes. expectations. remind could impact, additional half quicker these of -- that to can talked profitability I during back kind action company when And those year, times, at we about the the our you we drive we its took kind and when we to We ensure I that we half operational adjusted yours believe in time. that

we sector expected. we And have in maybe that half we Xs, QX have more the their kind their that freezes cut Tier was certainly, the certain see the year, about So half the back half what of the of within in CapEx the bit There intensity spending that like exposure what year as ICP others year, when the India, in about given at demand and in been the the is for expected. we and had in markets through front demand of we've a of do. went than QX more down entered concentration industry, they back the

have time, XX% in softener more a from have aspiring little noted bit We Nancy a we demand this be to a had customer Did you to it us that X customer. a certainly follow-on? profile. only for But quarter, are of customer a the As at concentration. proves was

RK Raghunathan Kamesh

even Great. I was cash do. X up And could it On A I quick And one onetime number you you integration going to Or flow just a -- past if is quick was are us for looking that for for? the sustainable? what QX? that? it drove it Nancy, fiscal cost be for is services, give is and on revenue what x What whether may. significantly ones sequentially. cash flow, positive

Nancy Erba

onetime pleased we been were that the On we have growth. product side, marketplace. perform good get we're in to had the million in cash occurred of services of well in the to and by -- we driven the again customer breadth traction QX. us. and It on that breadth $X sorry, customers the approximately see And So continuing for see flow, that business items has

care my in in we QX, flow cash are moving forward from and $XX behind mentioned items. I in operations. have put that that onetime us As million of taken generating be comments, We've to pleased

sustained Our to driven profitability. objective but by going it's be be that, forward would continue to going

Operator

Our of next Stifel. comes the John question from with Marchetti line

John Marchetti

sort you as of really a of half the the we're are new mix the of into that, half think maybe curious to looking characterize which favorable Given relative just where of and and saw older going story forward about the if going the then do here, speed but you year we in time, as saw margins, and can now ICEX was to first QX XXX to delays margin down the that the you this year? like we weighing products more or lower of that demand, not out is some things next -- over how just move we first part be where of mix more big

David Heard

Yes.

I of deployment the a back were has out of laying line growth to year. the proven the half first second a thesis half there the the subsea our for for the the And grow. in come large we the for talked to to blade or systems there. we're razors very really razor and QX had careful that that be All compare out the about, as think us you have transponders. --

of And our the portments So I to as growth, the normal. go scale, ahead think doubling ship -- ICE we is on XXX-gig. mix on you saw

I The is invested our last shape, the portion that operational the of small in average margin the investment accretion. work It's supply get of benefit. we to adding pay couple and, to paid beginning mildly we've and weighted as in be Nancy still years over think cash said, that able to our a is revenue. done retired chain to our of

we key So periods. believe its margin half in see of and that that, go to the in terms the will first second in and together talked begin scale answer that versus as function half about with into the the get step you the accretion with the us begin in results, prepared for, XXX-gig your Nancy strength range would revenues basically half XX-point her XXXX. is And next second as next Did in that year as of prior ICEX, to we question?

John Marchetti

comments of Huawei. I little the remarks, when some talked And does. around seeing the In that bit It a some that you're quarter, you happening. he benefits think there. about Tom's actually opening still mentioned Last about more of had

a to or that want Huawei, qualified, term? back of go out newer much we as in either have bit the through vendors longer like don't things is existing maybe little some Just that qualified you're reverting with they're look versus and some curious that to traction either how of to relationships already but products

David Heard

It's an excellent question.

to about opportunities. years that last decisions. X place We beginning out. time were think seeing just outs to long put make fact to that swap see countries quarter, were X we as were talked for were We I in as the seeing be particular continue frames we

dynamic. same that see to continue We

that us it We where on seeing faster, into be able more our to be bid are able makes line systems, new market as system. can in in said insert to and his put and Huawei to that along to optical a I environment Tom prepared remarks, space. more economical line transponder now It open allows this to which RFQs RFPs line, open where

for it able be see cycle it we X And in to for so It a good multiyear network. XXX-gig, The to sizable. able through. And should be that the there's is go we'll will is competitors news compete business. be that that only

I it's year pace, fact that think and opportunities on that, again, of its we we in would bidding and in flow. that cash its see increasing terms the based on now as exit income on we're statement the impact next

Operator

question next with comes from James. of Raymond the line Leopold Simon Our

Mauricio Roldan

you us process. This in an mentioned you for XXX-gig give Mauricio that quarter, there to with Simon. you to please with in qualification platform? think customer. wasn't was the last is major Can But traction the guys update segment a ship I ICP a your started

So if we the can start update the in get XXX-gig And you of XXX-gig about an should we lifespan on think that. then volume? shipping how once

David Heard

this double quarter, question. last good mentioned we it's also we add a shipments we -- customers, No, port up Yes. quarter. Again, new did doubled And our did and we our total them ship X bringing our to XX.

discussed X beginning beginning that still ago albeit is grow, ICP It's momentum. on it So to a is quarters gain to lower we That qualified. base. X not

modes continue qualification times, to XXX-gig expect these can in the We know, you do get in cycle. As extended.

XXX-gig and albeit sell be. today. the maintain length that XXX-gig to of a couple at cycle not amplitude solutions continue expect of we years, the and will XXX-gig We XXX-gig to the

We're customers our us optical network So that in using finding multi And are it solutions. allow a in their be the drive platforms, to lowest advantage for given market. real insertion. our per the bit to for cost

Nancy Erba

currently thing is products one buying that are us. ICP. say second for customer other a to on add They the I'll

them. with business doing we're So

Mauricio Roldan

right? course, your They Yes. I'm XXX-gig, in is correct? of are, If

David Heard

Correct.

Operator

comes question of the Suva with next Jim from Our line Citi Group.

Jim Suva

vertical wins it's go about as to portfolio or should we vertical. think nature it how design into Can like a on us is it we be chapter and going maybe be you or more forward we give I of know strategically? should of think switch percent status of an one? or talk milestones in strategy it's how whether very important the long-term gradual, and us know and I it's not of shift? Can Or part going, efforts your whether your about light off. you about RFPs, your it a that or kind

David Heard

and and When number the Yes. No, does coming of And question. we're do integrated the increase and to package in XXX-gig the integrated was with company X. is that and to when the founded an what XXX-gig have the that. its XXX-gig marketplace I Meaning of we're circuit very photonically technology. the the it's own will on been suppliers that that who now and company XXX-gig, for of us attractors DSP about vertical which have excited we company was at to was We it X, able its we -- vertically and founded the had able was from company integration. to technology were excellent number that's at that on, one products the see built own went

capacity on integration to opportunity margin to of reductions allow and to the network be leverage cost metro Plus, to the which edge for into And optics pluggables managed down to will been for integrated. we've as result we've strategies on take we've have company the some Things their Coriant buying also are been which can vertical more VR, a that using, We high acquisition, us use. optics us things, vertically always That do of merchant but able markets. and you like we the a the continue from that network. third-party our of side others, used see leading expansion, players in an those Acacia as from bit non a is like of be commodity and On ZR those results. see drive network

that by you're look coverage so under Jim. to vertical Today, is it as absolutely right, And the total XX%. of our products at We integration.

we portfolio ultimately, our there increase going step covered. function When we'd gross see in that, our XX% goal margins do is forward. of a Our plus to is like

the we've recently, scarcity from very let's for Marvell think recent Acacia very, say, of by have and the the to you've as DSPs purchase multiple seen or intent the of demand seen purchase Inphi. I and demand, terms optics, a purchase a, in high

to think very, good we And business be. it's for It's so a our the for model, good customers. good place very

Operator

of from the comes question Meta Stanley. next with Our Morgan line Marshall

Meta Marshall

this reduction in management maybe kind some actions the check I you all COVID? second. announced to You of salaries cost And on Or taken Have in just then addressed on immediate may rolled guys temporary those that back were kind that at this of update have but last have any in point? wanted just of with QX. the quarter,

a Europe seen receive any expecting second just with or product? kind any or you've customers lockdown, heads of you're to changes on as ability changes just into customers to ship Just ability with

Nancy Erba

Sure.

management reductions took the effect. So in still that salaries are in we

come go full as we intend we next and bonuses back to into see to would As salary those year, their well.

accrue next fully pay did for bonuses we those year, So year. to but plan not this

line you're other, sustained And the expense operating at today The deltas reductions are look margin the that larger and taken, as is though, cost we've in that cost will much on the in terms seeing on driver line. as as we those a well that continue reductions through. of the

from seen it COVID, the in that the I've terms to in is this increased reason sure in logistics I we've still and for recent say, of part of a in just impact make As of it cost freight prepared wider substantial relates that, range we bit guidance of would we're not challenges given shutdowns little revenue should Europe. quarter timing happen. deliveries. a are experiencing to terms But

Operator

from line Jefferies. comes question next Our of Notter with George the

George Notter

guess which as and gross to And driver right I'm great. sales that I'm big I September opposed looking improvement. now? somehow, card I you're would seeing performance Quite And line is good be that It June. amplifiers, a degree. would the to environment is guess that the you that of assuming back good sense? in if I margin also curious quite that to quarter. And does some the mean, margin. here work-from-home that helping a assume of the could I about mix quantify chassis lower make higher be was

Tom Fallon

Yes. did line actually QX I based on and margin in in than that also not when her say script. notice more -- We favorable George, we we systems up set last recognize line the you'll Nancy mix sorry, cards in mix, from I'm did year. higher QX historically, sold

the getting reductions cost of impacting are company. the the strategy. outsourcing with actually Nancy part and of have David ERP. manufacturing So over our X overall It's effected last cost alignment that been by structure That's year the

both we structure up, that board less cost and anything, is So company's implying the deployment. more oriented. roughly we If down, mix footprint of I margin we gross footprint are think had, still than across for are sold the margins winning the future product

George Notter

Got it.

market, ZR And think what's that with not guys And that I then use talked of cost competitors great. mentioned number you is That's the you remembering just point Okay. And remember follow-up, seem of Can a talk I to guys just the given now? being potential -- reductions. one you pluggables pluggables as Plus -- as you pursuing and ZR can that at there. I will through am ZR changed guys correctly? kind about you

David Heard

Yes.

correctly. entirely it remembering You're

we a today be to now reduction, Plus plus same like Acacia able with as for put XTM factor to our competitors. someone an CSPX to platform, will when have in the we option we it ZR say use a from put to into cost just So be to buy form able that XXX-gig more

that. So George, entirely will leverage we

Plus our We ZR own are we occur. that, because build that not DSP for believe planning would commoditization to

see do we for the trend to intelligence adding edge. So pluggable towards a network

so DSPs investments a And optics. XR our we've in put category around called

are ZR leverage So ZR to and we going Plus. absolutely

good However, own our that's don't think we a return. building there. investor DSP not We are

Operator

the Our next of Ryan with question Securities. comes Koontz from Rosenblatt line

Ryan Koontz

to wondering escalating guys. as to opportunity provide you And fiber lot we've that. America product be timing out to see Middle getting the XXX XXX. the most maybe the of the mix, optical could a seeing mix was are little relates XXX, Obviously, us terms the and about seems you XXX a where with I help in the broadband revenue, that assume as it you rural at wondered XXX, anything then and secondarily, you're could tailwind for mix. priority, ranking I a -- volume, if speeds talked among still most revenue strong I coherent if different of pretty those of still connectivity

David Heard

anything yet. we're X Tier No, broadband wouldn't build not No, from say it's the material seeing -- I excellent.

company on we the aggregation said across work-at-home platform and the and seeing, are our in as board platforms access the prepared metro comments, we well. doing are Although XTM and there portion new of quite the environment our across the from demand metro network,

so go. we as that's And for great us

a it going industry of lower our still beginning to from of this bit on a everyone, We we impact huge a back the And will these of bit crawl up a we us. the as we be at are will we Tom and Predominance on that customer half getting remind POs average distance. per do its be we're a wins, market getting to again, some Again, see the XXX-gig XXX-gig that services, a and of some do and XXX-gig, the revenue in in and that selling of is impact these And into not the XXX-gig the you'll basis, in point across X. But bandwidth mentioned, does cycles see be network must it continues long as our get and next the shorter, continue are pipeline, cost XXX-gig, to bit I from portion very, believe our XXX-gig, continue. from our XXX-gig time. quarter-over-quarter, for board. demand, over go. financials. XXX-gig cycles year, do cycle. again, on higher the of Obviously, As design start bit buy We longer. our are to very from is of to very a believe profound it's weighted is roll long cycle company to year mentioned, more hungry for

Operator

[Operator the of next Samik from JPMorgan. question Chatterjee comes with line Our Instructions]

Samik Chatterjee

I in and should of back questions. I the with usually, you of to pipeline sense wanted market that's have. in have strong to wanted launch come I to share with just to that going product a see are just you successful going when we ICEX be just product. It start mean, gains. that with like duopoly a a kind of, that one, couple

I share at share ICPs, customer verticals, should be be should with gains should I So service providers to how be -- the strongest product? your track from verticals how that gains think other X, we like to look which about expecting we and and that when market coming Tier

David Heard

tend than technologies technology. Typically, first line very allow great. rolling out compact other platforms, system Huawei technologies, technology. the of Yes, out networks in competitor those to in prior generations is these roll Xs They modular similar any Tier to faster insert to it much or to open us and onto for ICPs. example, our used onto in networks historically configurations And which are be

looking that the in transponder The of of material optical the cost OpenRAN. in of on the seeing our bit, lot for largest same You're lot the an is drive a of the the per best a world same bill to hype network. and OpenRAN portion It's in industry.

first, U.S., funnel And it And Xs We so see Asia, the it Europe, the the Tier then you'll into globe. current you'll global. ICPs. across both -- in see quite is insert centered our it's

as players well there. as as that category ICP our As across are of well out subsea the it's CSP product

Samik Chatterjee

or what XR a in the seeing portion can Got industry growth And the of I mentioned open any optical there? this is quarter the today was kind optics? or -- clarification, what you already, I just kind of customer it. you are wins follow-up. solutions. revenue maybe on mean, move -- just your of the solutions, optical And move you discussed if towards And open

David Heard

Yes.

me of yes, So things. clarify let a couple

why category, March. architectures convinced that will optical, open is our to modular today, which we one just in tell lot And technologies break of sold as CSPs pretty you a that's ICPs, a went platforms that similarities detail mentioned more of kind open prepared we quarter compact not in is elements again, nice because for tipping of they're a in adopting and the Tom that I point you What in XX% comments. of his that row. the that these the disaggregated says second not this will think great but so again, be for technologies give I time company XXXX, routing, a you And So today do optical which to are view forward. we're is we're access March as you'll give what and I our that a good going see of open think -- to of We our to and going definition with mobile is. out

that that an online be the modular XX% systems take second for And there's at historically. in that than of the piece went our much line is systems. to of moving of that to us The sold, we able compact faster forward, competitors over pace platforms open markets says share those opportunity to a

Samik Chatterjee

it. Got

the wins XR any sorry, And optics? on

David Heard

in as And addressable prepared opportunity investment the point-to-multipoint optics. innings get going we our will accretive optics, how we'll forward into company the industry market we the and my in again, of Day. of a we category a Analyst sorry. for yes, that March do And I believe evolving mentioned is Oh, that category in which see XR healthy into more of early remarks, be we're in the believe

Operator

with question next line from comes the of Needham. Alex Henderson Our

Alex Henderson

into I position in sneaking for partner. I'm you the that might in a reach have hoping trials about on competitive those second power or or Any that the done any other performance one. from characteristics given field some metrics clarity was or with more customers insight between talk differential that deltas? the little Great. could of other around and your duopoly bit we you've you a

David Heard

real-life situations a different comfortable era today it still to Tier able in highlight We The it year. competitor performance. because the against And to It's technology execute have And and our about the get performance concentrate data. trialing of Alex, way and meaning we flow income X for us the technology situations and to ramp trialed the as and our be deployed as in with No, with cash and reaches is market. indicated that for of of that us to major our the question, B, at us. it that expect the a where people is the it the right look technology, really different be own, public that second and isn't on ICP we thing X of statement half where to we've and Alex. into we competitor very carriers their we of good facts we for and building on quite now X argument it's and the think kind are Yes. A are trial it's being

Alex Henderson

low volumes going follow-up latter be could I ramp? have slow assume very I initially And that point. on If Do initial production margins. a to are expect to you fairly would

scale, there very about to little So is availability, pressure Can then stabilize amounts the ramp terms little and cost those and of initial of the bit that as timing element? improve? small you bit margins of once volumes a obviously, dynamics a get and in you a you talk -- margin initially in

David Heard

Yes.

huge So particular, volumes right, you out come certainly, at any in first of NPI, the don't but in you in optical floodgates, in go drop NPI, quarter the then out.

have bit We That's very good go the curve go expect we that. CSPs, takes against do to ramp through do cycle. longer. With news. testing demand quicker large So -- service. it little go they And with a ICPs, to a to that execute be we're going a of a bit

of to the of of past terms in of half half has year, is kind the how more of material. regards its In terms play margin where and circuit do for the photonically to comment. with the as And we first of in with DSP that expect so what integrated interacts you're seeing CSP the the more side on periods ICP where the the been your in profound the as back year entitlement of it It's world. we mostly things. And of not the out in in bill

as you'll We comments real you impact back given the better improvement in dilutive expect impact. move look, certainly, scaling function we that don't time, in to an we'll which the over Nancy margin, the But the but out the does a accretion XXXX. is there as is start of see periods. to step why to move early However, half even scale it that, year, see her be in start has

Alex Henderson

last... If I could

David Heard

Did that it? help answer

Alex Henderson

that had could we associated seasonal, fit sequentially the for the that was I any that, looking obviously first quarter, that quarter than transition? better from in. elements about Q-to-Q last to one what year seasonal But exactly be fourth subsea I reason the other to large is worse Relative It's or there XQ for. thinking would patterns, any the than should be build. normal If seasonal one with a you last

Nancy Erba

not little Well, But as likely we'll a looking with fact QX. commentary that be somewhat we announce more to and I to disagree would is providing think QX it's going our be the we early 'XX. at be seasonal,

Operator

Kvaal next from Our the Wolfe Research. comes line of question Jeff with

Jeff Kvaal

of customers shift about new that not come I but to inability have wins. in existing half the to to shift space been second the has think up to slowdown one themes an the optical

I the for on what extent second that a about first, trajectory And should we so persist, should something to about pandemic Or as thinking is half the either the are this revenues? that all of headwind guess, weighing worry XXX-gig? you

David Heard

a in -- second year think we out in impact I We our for to half more the promised. did first took what part, QX, and thought the again, half So out of kind QX early the most we, lay action, the and we growth, muted over second and would half, we as play be half. second seen we that with still

look we -- As of that we our half I we're baked new second this into introduction, at technology think year.

technology. we'll longer in I you everybody impact milestones to this through with product give where to at March, see period out any think we see COVID. Right that takes of come look, able go as time we time the be introduction now, to in new appropriate

I line you'll subsea so platforms even compact XX-country in -- far, think a systems, this did for with environment. deployment a it However, and new modular deployments we and recall, open was

lines making our job. We this And the I happen. have some on think a real is out doing industry employees nice heroes our of front

to going. competitors the place customers, protocols things Our keep right are putting in our

as world. for -- tough in next mind could wave we're is bit into early we So the any It QX a of see mindful, that. certainly we a as in outlook a and second year for that next impacts guidance very time. will get we certainly And Nancy for It's keep give of it's said, an our being that we around bit as year.

Jeff Kvaal

you particular now? how fast-growing secondly, your a obviously, in is where good into to got of share small that. form different years market a think, do visibility reports market, color you you And there's on all? indeed. you -- was opportunity would factor pioneer scale? then that obviously, but that ago. that's How frankly, for mind with I And for lies can a the you opportunities in much Indeed, you web We've adding whatever number markets. And the are then think Infinera share where in

David Heard

good modular, Yes. When which of share we look that It's is is I we've the ICP great. at market believe growing been question. an a compact space space, Again, in that we area pioneered.

got of So especially ICP. we that of rollout us do opportunity agile XXX-gig believe, front XXX-gig a with an and Groove, with the the we've and great GX in platform

X periods mentioned probably that CSP that's last of X I So nothing number the continue we're that which spend. the share pioneered of the quarters, being top part more of segment. customers architecture of again, Groove and ICPs, more lion's more predictable And also GX a And as perspective. company prior is is sales important that adopted, the from lumpiness exciting tend adopted investor seen to mentioned, And CapEx that that terms same that their now ICPs bit for I demand. by us the XX% CSPs, more bit And doesn't have of a #X predictable. in be monetize from the in I that. us there's can't now. we're space, our say being an a that to -- ahead as the think on been in to The of behalf you've Those we is

Jeff Kvaal

company made [Indiscernible]. guys [Indiscernible]

David Heard

What's that?

Jeff Kvaal

saying, we're I new ask metro an is, I'm little mixed since Or other associated there a that? -- But for But -- bit experience guess just question to price vendors is existing cannibalization you? those there's that is sorry, have wins to of other the solution, therefore, without it. placing like, and I that, want are

David Heard

going be have forward. customer for GX us efficient Groove No. perspective the It cap But from as margin we those on well. as said, to a depends, might might It new We're and obviously. platform. be platforms margin it or be lots a tend we more growth of capital-efficient scenario wins

commodity that you, integrated. about really a so it stack margin vertically leveraging or tells it's being either better to is optics where get all And

Operator

Our of with next Fahad question MKM. line the from comes Najam

Fahad Najam

my addressed more but want workloads And be expect X spending ICP all to I I kind apologize steep given bit earlier, and into dive is a the right, the deeper to consecutive ICP pandemic you've enterprise declines. One your If math moving the to actually this quarters revenue trends. of if of little it's would card.

introduced bit help softness So understand in what's you the have before can product. latest guys a us Is space. little your happening you this just XXX-gig about ICP

really So the new of gets what's accepted? business Just us product pause driving ICP there's before kind help the here. understand a

David Heard

Yes. the ICPs. quarter and tends be of it down this of to ingestion we bit lumpy, Well, were softly terms the a in

haven't We strength And we of periods a had trend couple of that a reasonable exit as we're ICP category. down. of the year in seeing

yesterday. it And lumping. and want they When now, it it, be just they they they so tend to want want

on our profile from current ICP see So segment. ICPs. demand huge we the our guidance, the no, a reasonable downward and we don't again, forward And demand quarter the for see looking contemplated trend in in

Fahad Najam

one having mean, your upgrade the back of Oracle, And an I tend is Zoom Microsoft, going been push that which ICP crazy. be if another itself. fortune is on that growing traffic ICP ICPs through crazy, may a as I they explanation look customer lumpy. If Zoom going at is have of large cycle customer. customers, to large I has which

still would TiGRIS. is solution, your So white there why one then Amazon is Project And impacted. revenue that it box about its negatively wonder talk developing is own

to I white Amazon there? you can But maybe insights think share maybe maybe a shift you is maybe so something to the of meaningful players or any going shift share want begin like, Amazon, solution, on, there trend you in with. box a, nonetheless, And else with

Nancy Erba

up So quarter-on-quarter. ICPs quarter just with I guess, from I start our -- this I'll actually, was mean, revenue

supplemental the by you'll split customer see material, the in So vertical.

of... I'm confused so X seeing where quarters the bit And little you're a

Fahad Najam

[Indiscernible] Year-over-year. year-over-year growth.

David Heard

of different experienced and as provision it that at huge that way servers. it everybody be you Well, in and if and look. the are the next is ingest, they've since bandwidth to tends more let's the market market slug bought they just It bandwidth they buy that's Maybe they that look onboard The bled to down Teams be then and ICP buy. optical. over lots for globs pertains base, of these It's they bigger draw we deployment. bought think Year-over-year. capacity, inventory the invented compact our been the competitive happens happens, lumpy say, as CSPs. Yes, platforms the way for into Zoom buy lumpiness, in modular when always has and space in to I growing. way now the additional the and for the But

Amitabh Passi

Okay.

we're I think of time think I [Indiscernible]. out

Tom Fallon

guys, the David Bye-bye. I to much for Fallon. Nancy, looks safe. Yes. look Thank chatting the -- forward over very and years. Tom and you, next appreciate time And quarter. today. support your Stay with you David

David Heard

Bye-bye. you. Thank

Operator

that the That please call thank does you today. for lines. We for you disconnect conclude conference ask participation your your and

Infinera (INFN) 6 Nov 202020 Q3 Earnings call transcript