INFN - Earnings call transcript Q4 2020

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Operator

Good afternoon, and welcome to the Infinera Corporation Fourth Quarter 2020 Earnings Conference Call. All participants will be in listen only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Amitabh Passi, Head of Investor Relations. Please go ahead.

Amitabh Passi

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

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

David Heard

the and and of for over and with Nancy expectations review XXXX to before quarter future our afternoon, generation of achievement we and full results joining our million technologies expanded efficiency of thanks year-on-year was another I quarter-over-quarter discussing have outlook we will us in growth. a XXXX. flow, well I of Revenue came notable believe the will details margin pretty a of expected. we the made we outlook. out quarter the cash key indicator board. profitability strengthen then the fourth Good progress operational a the the demand line Infinera. balance basis the a begin Amitabh. as today. performance non-GAAP range. brief above the margins, health which in solid the with call financial the will played the and our drove But and turn Thanks, year that for fourth in quarter quarter operating From perspective, gross sheet was our cover of while financial guidance with is to across margin On and quarter performance execution in investing drive strong with free A improving $XX

service demand service other ICP industry we strong softness ICP build While providers. American advancing our strong from orders across consistent from gig Groove and book other and open customers, won generally progress Tier We wins service Pacific global modular XXX we the for from typical in ratio among the from our not the had did optical with customers above EMEA initiatives offset customer have GX a provider We book and as and new flush experienced the ones base see including year-end XXX North in tier providers purchase X platform our was one. compact customer Asia and a nine CSP the with and demand ICP to Due diversified quarter. we and ended regions, major portfolio. made quarter a strong, our year Revenue budget gig design bookings secured customers helped expectations. this across the several was to in our

impact product, strong financial We We more half second a and timeline ICEX to quarter in meaningful services saw software from the continued our the keeping our the in efforts from annuity qualifying business. our XXXX. in and contributions of ramping of

scarce our maintenance our As in drove remain healthy integration, footprint capability on we software a and in investments vertical the focused industry. highly expanded differentiated renewals, added and value

as the heavy it's clear improvements we our the the for is lifting taking back results. to As evidenced drive look results years full in hold, operational year over to past two XXXX, that

including million ended in $XXX million growth by our optical million, $XX to basis nearly points achieved perspective, over XXX to X compact inventory a CapEx growth. a several and we Revenue year, restricted GX and by global operations From and $XX future $X.X by the up revenue XTM cash and by more number well and reflected ended accounts $XX margin slightly to working than that home $XXX the for challenging driven from XX% overall X% Reduced we XX% We XXXX. by as We platform cash. improved down grew revenue paying our Metro is and than the to a the we highlights market gig Groove XG grow expected ICP. For fuel our investing XXXX through non-GAAP the record R&D our in two expansion. million, market XX% year-on-year, We with for year position systems from X-haul. modular platform year had flow product over the XX Tier million industry profit non-GAAP the in full with close expanded a $XXX nearly market, the added by analysts. environment XXXX. in faster operating operating almost grew in customers year, year did notable equating We in this payable year compact cash in billion modular million and by new by mobile XXXX, XXX in rollouts, over

optimistic first we conference the XR extensive XXXX We who industry made recently optics set We During market units open added and trials as customer production. received now receive performance at prior that new wins, to large XR in to validated industry the innovative in study. year days optics with and our orders records quarter early innovative award up the Infinera feel additional confident Telecom We a traction end. differentiation. will the for ICEX CSP December. We this trial with customer in product significant new fourth purchase and industry Its in with our for BT, qualification but the for ECOC created year the opportunity are an in we demonstrated performance the savings on for XR our solution ramping ICEX delivered XTM most British with in focused ICP technology as future. we're customers. major optics progress continued XX a secured design

in XXXX. second As half we begin previously have to ICEX expect we ramped the it's of stated revenue

acceptance, progress As through the revenue and we customer recognition typical cycle. certification

the purchase well ICP additional other very To this of wins global design strong, wins orders X pipeline and recognized list Our building are and in our backlog design our strategic and and in purchase by We in and innovation service XXXX. the technology the team business quarter. we delivered by includes with a Tier financial improvements orders stronger year position is date, providers. model progress target operational encouraged goals. to ended Infinera I'm our achieve

we XXXX, will first proven to ahead with Looking half especially our the outlook, of the be year. in

unique X% COVID-XX optical market are to some are term, half systems semiconductor In extended full grow growth around being developing ongoing that not shortages and X% for great of year to the impact second expect weighted lead year-on-year, the times we the the near towards newly components. year. of with to the our given the industry, cautious we For

we growing and to XXXX see need are well market quarter positioned around the for shift The optical as integration their open of in is and the to increasing we us, be foundational dynamics sound accelerating we we term of time execute. a and spoke have technology the strategy supplier value year growth provide. recognition importance. are a last of longer for great bandwidth This of optical a differentiated Looking there is vertical a to a

for to RFP have geopolitical and us we market term days, dynamics impact displacements $X pursue. RFQ activity, these but financial early In from XXXX. a as we the grow see million up increasing ability to $XXX are annual opened Huawei meaningful constraining longer addition, more opportunity expect We in that begin to incremental a billion competitive would its

the and year, of see including as full ICEX, we For products, a to Metro overall our enhancements the stronger the to With grow half than GX slightly revenue portfolio. new market. faster expect second impact we

high prioritize value and including optical optical investments growing our continue performance open segments portfolio will the differentiated optical, We market, high pluggable. of in engines sub to fast

Lastly, cash expanding full on driving remain the focused and margins, profitability, operational for excellence, year. flow we will laser generating

our for months, give few business the long of our webcasts. into business key our greater ahead market opportunity drivers we will for growth the us a you via and out of the visibility lay path series as model Over elements next we term our strategy, towards the

of the opportunity events in be value proposition customer March these important beginning The first market understanding in will open with optical. extremely and

financial quarter additional events with and on details I culminate roadmap shareholder Nancy and a now will of quarter being where of to will in planned to investor to our QX, value. the the over later first We now day drive the provide share call our virtual for outlook. technology we will details turn additional series

Nancy Erba

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

our my with commentary. website assist For reconciliation your our to financial to posted with Relations to GAAP non-GAAP including we slides have details reference, Investor

$XXX QX second delivered X% free another United the XX-K during XXXX, that the quarter in the range. SEC our high undertaken States progress wide operating our highlights during we near business expect half revenue leverage our operational we half of both the non-GAAP the to cash meaningfully the U.S. We challenging sequentially outstanding industry close and were and macroeconomic and margin face model are next flow The achievements end with Form positive of was slightly We and non-GAAP range balance improvements. drove by XXXX. revenue midpoint EPS the strong margin, spending outlook revenue our our financial our with operating a operational in environment. In we guidance gross by the a filed flow softness and of in characterized the in our pandemic. have will to in cash XXX week. million, showing which with in guidance expanded demonstrated our improvements relatively the first exceeding a of of all and strengthened of line improved and came efforts generation, $XXX million Tier Significant of global million in were carrier quarter X margin year XX% which of profitability quarter above operating sheet as revenue market in our in from to drive achieved weak growth up both the be

growth quarter. and strong of EMEA the Pacific. strong execution at services, in positive challenges, gig guidance There Operating and XX.X% in partially X.X% which range. were supply chain Looking percent vertically the logistics late quarter operating products, including above margin, guidance growth to XX% these was performance, factors offsetting of modest in especially the products, the saw internationally; and ongoing million, above and $XX was our or integrated in margin several or of cost strengthened XX%. growth we profit reduction, better was that range on XXX to improvement Gross the margin strong led Asia

margin, operating improvements in accomplished with gross to program. million over $XXX of were year-on-year, million by productivity lower range. Operating expenses $XXX million key and margin our the $XXX while points innovation to in expanded Our our stronger sequentially to compared continuing invest and basis expenses quarter operating XXX outlook both lower

While in focus was EPS QX had approximately driven certain of and in American the to million operating million million. Latin quarter, Euro shifts well resulting margin QX cost the from helped strong various $X.XX $X in to we and operating an QX from continued The a foreign management forecasted R&D income below the by as primarily items our exchange $X line, as impact on $X.X and currencies. $X expense to of shifted costs benefits million related

$X.XX been foreign a the the non-GAAP adjusted would share. have in exchange Excluding impact, EPS quarter

cash and ended the from the operations efficiencies. free with and flow $XXX quarter profitability was million. in capital the cash free $XXX of that's million were working with A fiscal exited flow was improved our drawn in cash $XXX We cash million $XX sheet significant quarters The to we sequentially. $XXX we quarter the in primary year on of quarter flow $XX million Moving higher and million Cash drivers items, flow from utilized flow cash improvement restricted the first free three million cash $XX XXXX. balance and ABL. million on in

raised fiscal offerings for of million million and ATM During total a consider in $XX XXXX our QX we the through proceeds offering raised concluded. now net in year $XX

are we cash maintaining profitability to sustained liquidity drive structure, to while growth. generation building our flow on ample capital operational focused through Regarding access

XXX ended As XX.X% through we operating XXXX, and breakeven billion, to year-on-year. year of with year-on-year. of with year of full increasing We XXXX up financial Gross $X.XX reflect progressively made I the revenue the points close up on basis I'm nearly margin pleased margin the X.X% improvement in the business.

and by $XX reduce accounts our cash previously, we process we As continuing Furthermore, variety cash. while in cash QX largely restricted R&D inventory with generated our have completed $XXX year past to We receivable mentioned the of exited free in a payable us. in onetime We million prioritize integration automation reduced accounts from and cash and outflows technology flow and million. due initiatives, investments both strategic program. our behind

normal that $XX into revenue to $XXX million Looking chain the semiconductor seasonality ahead to shortages our the business, planning approximately $XXX with is first highlighted and range in we're quarter earlier. of outlook of of for revenue million COVID-XX risk in supply Incorporated lead and our XXXX, David wide times million. from the industry

we XXX we however, We challenging backdrop the have in to experiencing measures in XX% year margins the year note midpoint. chain quarter. over of going important minimize normal to dynamics, over to taking It forward. is demand against been of of current that preventative range are Despite gross supply at basis healthy this seasonality points expect risk the XX% to its be

$XXX complement between as strong and increase Metro and technologies DSP, optical highly we XTM. subsea the and engines us. and investments to spend haul on are in in to and differentiated expenses $XXX operating and QX ICEX long in Groove with be with pluggable GX expect million These sequentially valued for momentum We million

Additionally, up we and that were as last A normal increases we year. for will accruals salaries step bonus reduced QX restore see employee in employees certain seasonal expenses.

taxes of million operating interest margin X% year-on-year loss will XXX at line million. be to $X and operating are Below estimated points and of QX the We and over expense $X be expect between breakeven midpoint. income improvement a approximately at basis the

in in from prior costs. from the a the in million we're the million utilize to Finally, we the and year of million $XX market quarter, more than first integration quarter we in $XX expect same cash heavy when operations midst improvement $XX to utilize cash

advantage creates margins Our operating opportunities, we take a foundation growth solid improvement integrated. drive customer and more to expand market for us share of become as insertion vertically

growth generate growth, XXX slightly are market we to operating of for to operation. from of flow gross planning positive positive anticipated XXX cash margin basis margin points, For year the XXXX, revenue expansion full above and

revenue first first to be XXXX. with the as with of remain to flat slightly expected half, up the expectations tempered half compared Our on

revenue from We the products. coming revenue ramp second half new both of expect growth from and improvement our market

we XXXX. call gross up difficult for As the expand targeted calls, to prior exit their we shareholders continued to as I Infinera shared these support. effort would mid-XX% times partners for our our have by team, our and in now to and plan like the I'd our customers on Gary, we close open margin questions. tremendous range like for to thanking the

Operator

ahead. Samik with first Our go Please from JPMorgan. comes Chatterjee Instructions] [Operator question

Unidentified Analyst

Gilchrist for Hi, And you good Thanks the the with, question first XXXX? XXX have actually over your for solution. product guys. quarters question visibility your platform are How your in couple past my into we I those do or Samik. your momentum? about the to around lines, gig guess you? platform, been to momentum for sustainability seen And here. has is that bifurcate on seeing and momentum particularly could a driving of This [ph] you've around how just do guys Metro feel if your you is second, those confidence what heading modular

David Heard

wins customer and insertion Yes, it's opportunities.

sales I fulfill. and those in pipeline to backlog continue products to forward, is be grow, and think invest we to Metro to going see So able continuing we continue a the nice to

products in think perspective. from serve have we right investments to the place a to demand. put it's bandwidth And obviously, the environment healthy we've demand a So the right

Unidentified Analyst

as guess, in what XXXX? what I what priorities? there Like, of what are half hear, visibility, growth it. here, of you're of just necessarily X they visibility And you're your communicating investment are kind you customers market into in is and to the switch I'm this will half But returning your to from hearing it we dive or second provider Thanks. recovery know, just assuming customers [ph] look into then to could quarter, of guide Tier of getting terms part you curious American Got into there come second obviously you a their kind around the North can that terms service doesn't you to surprise kind just of investment. then from if gears reap I customers specifically? particularly

David Heard

good it's a question. Yes,

year-on-year have that this decline as impact base certainly certainly some gains the of predicting greatly really I customer competitors. from diversified our to the CapEx will we one think is analysts what that QX advantages of market a QX. are year was Again, the be in us in our it didn't did

dynamic we to that the the As continue in to cloud the I in people video get look close now XX% healthy moved download continue are starting of iPhones new new forward, that core upload traffic all to a look, are backbone continues upload infrastructures on only traffic not the hyperscale think it grow to starting data back application is content now their center network, mobile buy network but of to their the loads, to up. to to for

know up X. think And those you there's expansion, those of so to beginning the service I keep seen the a of they've public you've out budgets as large with with their that But coming that some large from at some of Tier pause bandwidth to that from people as I capital information always continue providers. believe look, got lay year the

Unidentified Analyst

you. Thank Thank you.

Operator

with Rod The Hall Please question from next ahead. Goldman Sachs. is go

Rod Hall

to or wonder could in? be come lifted? I for what into then there And a to, factored constrained little your guess, for potential for question. talk bit. revenue you've to you ‘XX constraint the that supply any secondly, And I supply you And the you ask is Thanks that I supply if have constraint. back guidance wanted factored guys

what in accelerate? the year guess drivers I half expect You expect the the of think What second the think will kind kind year? second half in of you of said you And of of the you digit. second growth it growth are do the half, Thanks. you'd mid-single do

Nancy Erba

do in then Sure. call to $XXX take our In part, it that $XX every I'll risk. $XXX hard have day the QX, really supply million chain. that. million we into Rod, All said, that second. to working for; can to risk working are actively to David that outlook and built to go first mitigate single I'll Teams we million the the of are

So built doing got we're we've it and outlook, our our to into best it. mitigate

Rod Hall

sure I make that. to got want just I

So QX? Or factoring what in? you're just the is million $XX was year full saying for you're that

Nancy Erba

QX. Just,

Rod Hall

Okay, was about and I asking year. full the

Nancy Erba

we giving So this guidance at full aren't year point.

constraints, the best these the our We to are midst see to going to mitigate QX the first we're of of right, to in end them in it going them be and we now, do working through started half. at

David Heard

continue we of both that the that'll gig, new customer being recognition in us the again, number be chain. terms Yes, first good back line see XX the and you modular To chain the first we Rod, kind the this technologies, of into are for at systems opportunities of new can the number just in trial, remainder allowing and you as look for certification contemplated with think growth that's more the what charging, forward. year. the compact the of really QX And at of the to a to rollout move on our to with your you on based our as big insertion a look of represents And at look the as see We view when open in year year. half [ph] global the anything second basis. question, half go of risk plans process. our go portfolio, when drivers Metro into systems typically, on in supply we be the year. into of revenue second half half gig half, thorough for loaded But day half work back a internal mitigate new product, XXX we'll supply in at pretty we of that the we'll front try technologies XXX investor and the our our to all driven

nature grow. bandwidth, uplink to both a bandwidth years. going continuing that to is of for again, be big the roll XG is and to downlink next out And driver the of couple continuing So

Rod Hall

lot, Thanks David. Okay. a

Operator

question John ahead. Please from is go next The Marchetti Stifel. with

John Marchetti

a wondering Thanks Tier in European little if X. could were saw Asian But weakness the Understand markets seizing and sequential in you bulk what bit along seeing if demand if a stronger have basis now and I XXXX. minute those the curious footprint up, you're maybe that strength of talking up stuff very was and about, on winds a delayed pent the of just the in some or some new markets. those you American something the sequentially some was through lines? of of much. release, And spend it's the result North that or

David Heard

given Yes, the we obviously, footprint some have front some us, and the wins, I in new environment half, competitive Asia. up demand for and opportunities, in better Asia, think pent a in both

again we And So more continued across Metro to continents. the along wins had nice Europe, diverse lines there, market some portfolio. on in the traffic

on weighted that drive be to as growth well in basis continued very we able a North to market, be, in positioned And so overall American the weakness that average obviously, market. And well. to the against

good You the in was quarter. thing us for know, a that

John Marchetti

then good quarters just quick of a on the And had couple it. side, I Got Nancy, can a ask we've services growth. question of if

that's forward as do been, obviously ketchup the as to Thank you with some of you. be expansion mentioned side? to mean, trend Because story there expect of go well. more we You part sort we done I margin Is on the of add revenue renewals. sort services here? that

Nancy Erba

quarter typically start, these when we we QX the Yes, question. Good renewals. is see

to QX expect do for So us, it and with was the continue will a expect revenue we base. grow services to see good and

out been The So customers. with has now, right challenging in very our the get and we're business. environment really pleased team work with a work the to doing

David Heard

value drive those the for embedded annuities appropriate the us. of and software As and to John? software Anything having the else, renewal growing opportunities base those create

John Marchetti

it. was was greedy. get follow that want to didn't up. I my That Nope,

David Heard

Okay. Thanks, John.

Operator

from Alex with Henderson question Please Needham go The next & is Company. ahead.

Alex Henderson

much. you Thank very

First, clarification. just a

full for book-to-bill You that above for fourth the the gave was book-to-bill quarter that one book-to-bill both? year or or the was

David Heard

don't we book-to-bill the quarter strong but for book-to-bill. given We had So provide quarterly a in was bookings that QX guidance year.

Alex Henderson

correct. continue strength expect a the to you was pressure of that therefore I singular Tier-X a we of to continue. timing in clear Europe a that point of we the change if that year, around APAC, move the function will ask that should something commentary spending For and a that US, really and as that are is some in or US graph geographies, the their because Similarly, down wanted What installations are pretty should of at anticipate particular simply those ongoing there is forward we patterns in was programs? the in had

David Heard

Thanks, it's a good question, Alex.

the to that we fruit, wins growth and about thing. two new are from really your quarters marketplace, from Now, providers US working that we're the to some continue those. line service Asia-Pacific and we've position in over expand in last We some US seeing international, last over XXX% won footprint. nice hard expect with a beginning the few your bear good we've well that of to the question, it's out been next timing. continuing those To our and We're talked quarters Tier-X. systems question Again, is the been which to year laying

been expect have So these continue. I Albeit, basis. slow would a to on see things that quarterly

Alex Henderson

status from XXX you question, Just Gig you're if seeing Huawei assume I of Huawei a follow-up the No been lot that's a could. in change far. and I customers your mention of significant winning in so or said of can replacement kind of anything footprint, some be new in momentum opportunity? what from either customers, might some us customers, of potential context there new Huawei sense or the and that give

David Heard

one be not we're this trying our think just get Yes, too skis in to pounding ahead cautious to Alex. Thanks, I hard. of

uptick out we revenue, deployed know, RFPRQ bidding just but time wins, this We deals, dynamic are into to getting be as are expect quarter you we and the there in get is get score we gear XXXX, by a we accelerating. seeing [ph] and a that the we are it tremendous design growth activity, as

the XXXX. see multi-year it appreciable heard we the exit probably in into first which XXXX you've others of from is industry, a to expect game as If uptick we

Alex Henderson

Great, I you. the answers. appreciate Thank

David Heard

Thanks, Alex.

Operator

is James. Simon The from ahead. with go next Leopold Raymond Please question

Simon Leopold

thanks Hey, the taking for questions.

wanted decline to guiding the margin bit. the because thing wondering I much sequential is supply very margin? a are mix and stable much. just follow-up. there QX between help gross can other sequential customer understand your your I'm First trying I've the a how to to if just unpack I'm bridge a forecast had the knocked maybe of decline gross down QX fourth little all that volumes you Maybe issues the got if build you guide in or quarter a in chain.

David Heard

QX, you'd normally quarter. know down you a that Well, seasonally

So there's impact on that. from margin

As expecting terms for in we're which mix things to continue the an we've service on, which at to focusing providing going our on which is customers. excellent the we to driving opportunities, product and impact is and and next and insertion same look is focus cost been quarter of drive have try to mix, that's the reductions, we're going

plan we the XXX points. forward, to look for year margin we gross basis As expand XXX to

to so. last year have saying full-year So or the similar expansion for that what we is been

to I bit system intend up terms we full to midpoint. margin I after But to our QX and continue are last expansion we're we say, see We but year margin to that QX not again our delivered points is of we achieve would know in ability year. year and XXX the and XXX of was talked let's call we there's line off more and confident last Yes, ability forget to points are deployment a confident expansion XXXX. in got that that see, XXX feeling terrible a our because basis in to mix about our compare, basis for the

XXXX. basis We points in XXX XXX that confident expect in and to are

Simon Leopold

for you thank that. Great,

in As timing issues opportunity. longer a gain is deeper dig wanted the Huawei I'm term follow-up, a I a in bit What I on I little to appreciate the trying that get. really to understanding relationships that competitiveness. was If a European of domiciled you've better consider asset, European have the the Transmode an your clearly Europe. Nokia-Siemens you fact also asset, we Networks, that roots

a you as ability versus closest So share Huawei some do market? that your your with take how to in that competitors of backdrop, that see

David Heard

feature right innovative continue sets in there, to get to we technologies I we're the Yes, I think invest think and uniquely as positioned.

up opportunity suppliers their at Huawei, an mentioned could some through stage. maybe of certainly other and the vulnerabilities are that going you As there there's this that own to step

well positioned So we're very it. go I to through think

this know, market company. focused over a get to for just want we've to as activity expectations. here and all of again, are our You very our don't go this We got terms resources treating ahead of in skis

Simon Leopold

you. Thank

Operator

is Marshall Meta with from please question go next ahead. Morgan Stanley, The

Meta Marshall

Great.

a of Just questions. quick couple

XXX Maybe bigger be moved year, ICP question, of less Groove ICP might of on terms customer assume from Cloud we that Groove need Express shorter out need to this gets XXX XXX can before gig major point? from there customers are that is Express drag still over as Groove the from upgrade to cycles there rolled general? be gone is platform second gig headwind to XXX gross in versus versus the In that to or to a away margin or at next Gig still Cloud still Gig

David Heard

replace one are a first lot because and into the to servers From it's easier coexistence like rip environment, questions. on that in have excellent just you quite frankly, centers. platform, the insert can data compact or Both modular

still So opportunity, we're when Express forget, the of as comes we're Platform gig platform, Cloud the that go. it and lot XXX selling we don't XP XXX gig, a to selling still

that cycles. the second marketplace. years one into cycle. a gig Those So four will not XXX cycle very drag product We question, product think get continue as through to a believe we cycle XXXX to on it We some that that as the that be tend the based a XXXX, have we absolutely in would can is out we're for of on have On not into is your still very long disappears. falling and this get I has that company. integrated, yes, vertically and product long begin to a to small drag six categories expect where off. really

Meta Marshall

of customer detrimental thought was margin, gross customer XXX headwind? gig, any XXX who definitive started specific from to a that transition, an their I progress which on particularly kind that's and there away there ICP had was being gig

David Heard

Yes.

did sales we with year. gig an to we go as that XXX our in was QX in experienced in predicted the in in that mentioned, earlier the QX margin we and ICP, As up increase contributory particular so

Meta Marshall

thanks. Great,

Operator

Jeff Kvaal Wolf with is question next The Research. Please go from ahead.

Jeff Kvaal

the landscape broaden bit. afternoon, I'm everyone. a competitive competition maybe question hoping Good to and

sounds from maybe other be ability Huawei. You Huawei? opportunities mentioned share It Thank would vulnerabilities other to some impeding rivals from That from some than though share you. take of are as your take there helpful. their very folks very,

David Heard

rationalization Huawei. Yes, at one their there. have is they've there's I the number player player many there large I own that cycles market in well. think their it invested technology going when vulnerability a acknowledged is a we in their prioritization cycle look gig at Nokia. are players weighted it, three number but through imagine it, on of The the portfolio resources, XG. look they which the Certainly, not as look very we overall When invested, publicly optical XXX Obviously, at we would very with they're market, when that is and it's

offense the little in gain the into technology our help? the play difference a for opportunity us? and the solid half really get our share in opportunity to on financial back we that with ground us really begin there's us that Did to foundational of Huawei But set bit the this future year as We for a that with mindful. position, and on and being what to for the year makes share operational a position year are we feet then is So we're position, XXXX. a think to and in now grow really and

Jeff Kvaal

I was would what that's hoping you Yes, go.

a if deal is the wondering change I'm My comments the on part DSP may closing. question that of you visibility So, in dynamics the being have got side, good just Cisco how Acacia follow-up similar on space? on further pretty Acacia thank competitive you. the we've now

David Heard

I asset importance think of Dave speeds systems higher waves. company, things as grow founded, me bandwidth and such at go the talked Tom is company and as about the bigger higher the and to have it It's because here since to was of one these a the continues that recruited valuable integration. vertical and and bigger

the So why of best are for happens, when people at a so just a systems in integration, I of scale doing significant portion open have we're essential time and companies that up market. R&D line our think can vertical the win. is investing we It it's transponder portion that to dollars to let which

that every always our build As performance product aim efficiency to go is on very forward going to the price competitor take a drive know, seriously. dollar you best We're basis. per bit spectrum

that competitor be market forward scales to the I the look positioned is vertically in they will as meeting a them complete and integrated transaction. as think Cisco-Acacia we now

So profitable that Acacia week for on. broke one pretty up for week that they

Jeff Kvaal

you yes, Yes, was not much. very Thank bad.

David Heard

Thank you, Jeff.

Operator

The next Jim from is go question Suva Citi. ahead. Please with

Jim Suva

something mindful merit year, know much. excluding I'm on expect really not a Thank mindful comparing mentioned for for bit but should You on last very of COVID, for that but Can that. grow should be or seasonal we to you seasonality increases that about there and talk to coming for that to market you you seasonality, or mentioned your because this you you you. year additional the revenues that, I seasonality that historical next it of? beyond and outgrow about year March quarters? costs the the wondering quarter, little Thank COVID? year was last any comments on Are versus be we

David Heard

Jim. question, Good

have what in and mentioned growth to first In driving last COVID particular, did in do I the the the to half impacts focused salary and the really us coming quarter the year, are profitability be we're taxes we in the effect. in we as XXXX, reduced of which in remarks, certain for first the employee the increased the half we did really slightly of on of take market normal year. and Then the employees with year prepared for you're year environment, bonus. for costs, second first ahead flat payroll As a take of explicitly, and half other reductions first right, quarter as we expecting were ahead of in

be So year market, But will year those well. back really ahead total slightly the as the really added in growing important. in of the

We we cash to and XXX from are XXX positive generating points. cash operations margin basis get driving to our expanding flow plan profitability,

Jim Suva

is ahead the Then my parts growing in of that different basis your a or of view than question kind we kind that get to define slightly XXX of last too XXX people or XXX slightly points differently, country the just slightly you of it? over at to how exaggerate of is is market, commentary if I'm help bracket what's more of view ourselves. don't general So us of XXX? possible least or curious

David Heard

I to single digit. would say X% X%, low

Jim Suva

market. it. above you much. so appreciate so Thank I Thank for That's much and your quantifications. you details greatly the

Operator

with The ahead. next George Jeffries. Notter question from go Please is

George Notter

guess I ask ICEX I much. to about very Thanks the year. guys. Hi, in wanted contribution

year could that you year, big at ICEX is growth expect a of there? line it would look XX? code zip your you Any Is kind be As in points contributor five around of you top the give to us revenue the great?

David Heard

get you on to in contributor ramp expecting up for for healthy that year large look We're the be nice backlog port to shipments, Yes, back expecting set the ramp we shipments. for a XXXX. revenue not the mention to a that start based We're double-digit continue be we'll to and we cycles. on in XXXX. orders the a the throughout that really we When them we're and plan Again, recognition based that. expecting not to at to exit year total port half

George Notter

expect Then, rev that that just QX, on you initial rec to it Is is QX? ICEX? clarify, when do is

David Heard

attention meaningful. said, the in to want we half. will the is We As second ramp you anything be think pay to

George Notter

Then and DTX development, might on under that around ICEX, market? still Is that that's when be it. to I think also was Got carrier there some a version customers. there's development of coming more oriented going

David Heard

to of the a ICEX coming got host we've whole market. developments Again,

received market well as the for that in to both And features coming as products orders the the ICP are Our over the the next, enhancements first CSP them. terms continue have know, to market GX large well products CSP ICP customers. performance both both from on coming the ICP, you to both for we'll first and as as and additional months, out as XX we've product for the purchase well honed CSP functionality. is already XX platform But as of

George Notter

lot. Thanks good. Very Okay, a all right.

Operator

Koontz Ryan Rosenblatt Securities. from go with is question next ahead. Please The

Ryan Koontz

question. for topic. Circling thanks back the ICP to Hi, the

mostly You Thanks. that from how And long know, ZR business you there? characterize would there. you the or pretty threat haul more DCI? good to Metro business? How quarter characterize would your it Is

David Heard

good couple threat folks years. a to ongoing a question. discussion ZR, in, of And comes from using everybody has it's for think this continues as The know, been no, ZR an I Yes, you be the billion-ish optic an about in for has market to I plus of by $XXX million market $XX ZR, in think ZR the the been out to opportunity. metro, million XXXX, and $XXX sized

areas do based with is in and haul the and And It where on haul or on are know, a performance. based see long efficiency see ultra you subsea. plus you Metro business ICP. those subsea will not You ZR reach we reach spectral DCI, both will in have long mix of good and not ZR

those now active platforms So, can it's products market. we XXX gets XXX will the as and not continue showing We're you're to by when our closer compact think nice we I ZR to for here that in that, overall continue very And it cost the use be those since use forecasts reduction it's ZR And to plus the to Metro a again, to when again, impact come opportunities. in have Again, modular XXXX. a huge well. as me available.

Ryan Koontz

is clarification above that Super the that Or that's And out? is helpful. guide in at guide the just intended supply impact chain risk? is that on a million pushed quick the $XX

David Heard

able million guide did get. excludes that been wouldn't the $XX that not we the conditions have So to Those exist.

Ryan Koontz

so Yes. much. Thanks Perfect.

Operator

is Savageaux with Markets. from next Please The question Capital Tim Northland ahead. go

Tim Savageaux

didn't largest saw obviously, you And the kind in don't not to if close. know I forward. Tier you guys in with that the you X thought were but surprise? able assume in where receivables of as have your there. have with of you just like I weakness you opportunities here, that the then could have parent proactively the of seems that And declines. dynamic you I'm for somewhat be It customer the that, could pretty I And mean, about thoughts but is come XX% in been the degree But, quarter? offset Europe looking historically and some issue, a given some and Maybe your call, statical. extend about in even any I'm ramble headed. sort hopefully last did address Hey, sanguine that. afternoon. And customers on good and QX, you not Try are the of significant pretty dynamics did interested to Asia? see question year,

David Heard

Thanks, Tim.

number our those flow. been customers XX% was certainly, one the large look, have customer an So customer for year. And

companies So, that like the have the likes AT&Ts, of slow. the Verizon's, been

was I think I And We we so. or saw the of XX% think down by experienced their in base. customer provider competition North that terms service diversified guide. have a CapEx American a lot year-on-year more just of the

I insertion in to And again, more are which with take their effect they're X our second of winning are the to that what do opportunities and grow. in expecting space able know, those We to really in Tier to believe, CapEx. We infrastructure Tier of we're consistent X, be is, in other grow companies think terms of which expected year, the scale is those seeing. half you time taking the

Nancy Erba

for the And Remember on piece. renewals the the that comment we have on in services DSO. QX, your

So bump to QX. up that tends in DSO

Tim Savageaux

down follow broad, if people. saw I customers it. up and they mean, that there different with shut we could Got impacted are a I And briefly. pretty I think lot of

other competition as relative supply we that the at Thanks. forward, half customer of lines does annual and program of that's that other or customers share more know, what along or you you head impact you some North So the know, factors mentioned. issues large kind guide, American of to timing, shifts extent your to your first although,

David Heard

based [indiscernible] lose No, there. than again, that, to appreciate I a on more game

back outlook strong skis. ahead heavier to in as and got, the spending factored the pretty So it's half. to front going lighter said, we've in Tier the X current of Nancy in we're our quarter, in, just again, get been our the not half start factors a from in a And

We have nice a pipeline.

of it's mindful given good. feeling we're of the execute. again, trying for very portfolio But to market the year us conditions. be And product is to time Our half the front

Tim Savageaux

Okay, thanks.

Operator

with Partners. MKM The is Fahad next Najam ahead. go from question Please

Fahad Najam

with of the one kind your my a my can you their gig design And want couple upgrade mentioned Xx if cycle. seeing XXXX what near on any think to [ph]. magnitude term XXX term missed on. I question in look us modems and question competitor, that previous to quantify longer policy have they've wins? this that -- ramp XXX many gig question. I if have focused I compare To almost continue a the with I I of share may they you you're gig If I wins a ramp shipped how then you've to of that XXX have or XX leading design at by math shipment have may, kind suggests ICEX, the of had? versus opportunity Can ramp customers,

David Heard

Good question.

I and to the demand think continuing pipeline us and first in grow. piece, front the and strong of is

So past it's surprisingly given generations strong of technology.

So that's good.

you, the on going start that it fact opinions of generations based than to orders results As it in longer QX and that course our with into I we QX. get a and be to we previous in we in in mentioned, wins closed to curve our our QX kind but front agree see several Those steeper be is purchase QX we'll of build design able as technology in we is us. investor into continued day, plotting

had You question. a second

Fahad Najam

Yes.

of sure factor outs quarter of your in push that that comment just have was I impacted. book-to-bill. that you revenue your any in component shortages your So I understand to about on booked comment this may make want book-to-bill doesn't kind

shortages? revenue being customers component see who book-to-bill of kind concerned over this For And any you ordering year? this the are is throughout kind any the [ph], about your of quarter impact application by shortages from by component driven

David Heard

think. Nancy, that Yes, color bookings revenue. that you bookings, we our question. ratio were But strong, No, in give than jump And good ended looked at it's in book-to-build year I here. mean, a bookings, with will the to QX we our that a I was more and

also QX. I impact-ish semiconductor think So COVID. just Nancy, but the we're to our And suggestion did supply of carrying And to start we that it's shortages, $X the not The quarter. about was this see backlog. million in on chain,

Nancy Erba

Yes.

David Heard

some even the impacted end again moving always to from said -- QX, And that heightened That or weeks, as $XX in XX impact weeks, have the year. the XX quoted it out, some are million the coming with been weeks. some lead given as associated XX or we that weeks families forward, at of more of bids go time we've XX

Now, this we saw early.

right supply position chain position our we in supply so the to we're there. that And react in Thank we're capital job you, to chain and respond nice because and a is working team began our doing were much a in. Nancy team, better

Operator

with Next go Please Tower from Roy question Water Research. John ahead. is

John Roy

you held things? of an are back vaccines Great. as about What's months you're the much by a I and back to bit. the wanted a much held like things to wanted back through, better being as how I pretty really feel And Do I next really go you much getting acceleration Or going know can? step lockdown? the take near we're end But that whatever, you COVID. talk curious if But you little fast you the and being to feel see could in how etcetera? here. by you're nine get as

David Heard

COVID quantify environment. environment. buckled down it's are the last in a new you heck equipment, is mean, everything the out. Everything team board harder I year, in we the QX to where in lot now in and think I Yes, technologies But as servicing at of hard look is if we we certainly results were a rolling harder across a accomplished that and COVID,

at new be would heard borders the there's thrown implemented Because regardless point we're put, annual Now, we're from thinking, across in to of a going solid market in entirely shortages, technologies again, the we to real not front I away. you've to, at think and across. now get customer year. ability supply spend that we that's with opportunity not execute just to implemented move a number in it think chain our were time, foundation; But that last of we're different we're if market any uptick condition that and COVID, defense I what build thinking there's this in went an whether we us. as trying spot is offense, And because mentioned, us, than job we're way,

John Roy

supplies, COVID any progress, would And hints appreciated. the things great. any kind of as maybe obviously to on things that's greatly the also and from Right, in your front future your as demand changing be

at know, that's we me. But you're So seeing. can what least for it

David Heard

giving kind seeing Yes. We're of of to mindful impact one kind on, last that by It's trying be in data the in it. give you what what we're a and and point. we'll saw do can to you question. we digest can you that QX, good incorporating color impact QX, so trying Operator, take you

Operator

ahead. that is Jon with Group. And from question Please Lopez go Vertical

Jon Lopez

It sec a there? Hey, contribution in in kind better. had question. one then was bit or was don't talk Nancy Can and renewal services know, strong. that thanks maybe that? a just perhaps Is QX a I you very product much. upper ended about all just seasonal any the drove I of, what deferred just clarification the pretty there looks

Nancy Erba

It's both.

demand about, in QX. in as good services increase the both and just the certainly products we're deferred services seeing know, as drive we've in you QX. as But, revenue So talked well

Jon Lopez

to tier sort Okay, can of quick environment. of business I what come that to great. of drove the the customer group build you customer? wasn't the And actually think exited wondering, the what specifically take for in sustainable for the was XXXX? I day portion side one-time guess you quite it the back can And a in and that a out, Tier of X one like talk from and I there just just about your Tier beyond? just I'm a year want in the is that If that for one business we 'XX looks that base strong. anything second. COVID-related bit kind in terrific mean, Was you a for double kind digits to year, quarter then, year X

David Heard

us a we the Sustainable lot these competition to I as opportunity mentioned, of basis, compare you in more of especially than risk. when and it have Tier X, front

Jon Lopez

Very good.

David Heard

infrastructure their risk. than opportunity all more builds of Build,

Operator

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

David Heard

appreciate Yes, thoughtful questions. no, I everybody's

makes and on and of our do our a our for thank really some us. community. our a year, customers what difference year and I a to overall braved customers, shareholders, the year the solid like was know, behalf suppliers, for pandemic Infinera. to things heroic You what XXXX a ITT partners especially employees global would who

to keep is and keep we world XXXX. face laser and [ph] You on world will know, this to in focus execution. our the I you, connected. coming keep excited our going that We're And the the opportunities across tell focus, for really

well. you thank So all be and

Operator

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

You may now disconnect.

Infinera (INFN) 24 Feb 212020 Q4 Earnings call transcript