INFN - Earnings call transcript Q1 2021

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Operator

Good day, and welcome to the Infinera Corp First Quarter 221 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the call over to Amitabh Passi, Head of Investor Relations. ahead. go Please

Amitabh Passi

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

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

David Heard

basis. the basis board. second Thanks, margin then gross thanks execution Amitabh. of I end both with to above our and the the and of non-GAAP XXX performance our outlook margin of Good Revenue joining marked on across high quarter. solid financial the Each points with midpoint first a just outlook, the details outlook. the begin results us to quarter the of cover turn non-GAAP over in for Nancy was strong operating ahead of our for brief came over call of year-on-year will a and quarter afternoon, review today. performance and QX another with

continued revenue and customer double and metro, service service up strong strength across XXX sequential regions. we chain as new including lead industry COVID million customers our bookings verticals record a with with optical up the year-on-year on on expand customer challenging bookings Most line We provider percentage shortages we a over traffic QX. including digit basis and generally GX against platforms. added experienced growth favorable the international expectations. flow Overall gig had other open cash same semiconductor with X and recovered product revenue basis for by $XXX optic our which builds, base. navigated expansions, for several year-on-year was year dynamics from segments broad environment robust, product million in a On customer our compact extended to up we at routes by in a From core. were During a United line revenue XG was new spending expected as were enormous modular modular generated operating quarter and optical customer year-on-year segment Within of the year-on-year open performed traffic subsidies weak network double-digit for perspective, subsea and ago. supply quarter growth in the was their rollout record and our our range handle the growth. in the gig near of wide service open the a with our from portfolio, in for service a tier our bookings the $XX platforms systems metro This in almost following the top at line providers out and to XXX as and continued bookings times. plan ICPs of basis in compact line States and providers driven XXX% providers system gig impacted built revenue We XXX came wins grew based growth

reflects demand the that of is interfaces to and future CSP Our drive X anticipated gig which XXX To footprint XXX a line we availability systems our The precursor service solid portfolio. Metro increasing. is positive announced recent our for effect bookings we especially Metro today to network products continues expansion, opportunity insertion bookings margin momentum, Metro revenue. believe gigs high ongoing in to

of additional quarter now and XXX gig secured in customer On we commercially customers. wins. pace shipping orders wins the front accelerated The the ICEX and purchase is design to

ramp and the terrestrial across half second as deployments remain more for XXXX. subsea of customer Our on list both meaningful service tier and global includes providers track wins of one we in revenue ICP a

healthy sharing our We to longer-term additional built meet have we We traction on XXX on and Investor focused a ramping across a remain solid forward customers, gig demands by are to growth look details strong at our production and backlog broad the expectations strength seeing. platforms. in with I'm Overall, based encouraged Day demand to very our open start a few and for market geographies, weeks. XXXX optical

our challenge are a companies only remain indicators base demand not broad and many While across spectrum peers constraints customer of very across us, supply encouraging the for of but industries. a

to of industry closely with work inventory shortages and extended these are partners address challenges, to lead times. component continue wide We and to positioning supply our the effects the chain mitigate

and will to slightly year to market the exceed year-on-year continue and XTM gig on complementing GE the XXX scarcity time value and And solutions, optical the continue growth believe dynamics technology. ICEX is of full ahead insertion of our I GX we as in our solution. XXXX, our GE our optical growth gig that optical the growing be XXX opportunities us am vertical X% enhance XXX deployment X% Huawei, the the of ramp XXXG be For of and to portfolio our of market revenue ahead of differentiated as in the integrated with that gig systems is expect the a and we confident We to performance capability. interfaces supplier series, the to I us. opportunities of rate we offerings. market the Metro there with provide a market competitive XXX grow see metro project recognition XXX long-term our great this of in rollout numerous high and the

integration leading the products currently our where a Our challenging in is sharing gain In expand market next focused to focus engines, and market, margins recognize on and look strategic to in us core that May should portfolio accelerating at high I thank to the forward of family investor period. and Infinera the roadmap open difficult in like several recognizing We on defining enable competence category particular, performance I details to generation with share, Infinera optical optical upcoming our for we our vertical and In priorities additional remain leveraging towards strategic the and geographies pluggable priorities, shift resilience, to of our strategic XR want facing pandemic addressable effects support, the members long-term very targets. drive regarding evolution optics, in are their closing, who global unwavering remain the acute and team operate. XX. dedication financial day wish our differentiating India,

turn In call the shareholders our continued quarter addition, Nancy second now to to customers, of outlook. I over partners our would I the like to provide details support. will additional for and quarter and thank their

Nancy Erba

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

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

end [ph] revenue In midpoint basis was XX%. of at XX% the certain outperformed Gross $XX of more of margin nearly million from our to doubled estimate reflected of structure, our that our we We was of XXX United the QX, outlook the the XXXX. the projects. weak of above first On and our higher the QX that in improvements product a XX.X% from sequentially, dropped assessment, in revenue COVID. million. from we above revenue our our chain while supply there from was expanded we impact call margin risk, and XX% margin. down potential and in experienced basis, QX, recovered last international region points, we the gross outlook of by quarter as intercepted in in share a $XXX $XXX than $XXX in high came which was the our million service quarter, meaningful approximately spending of year-on-year metrics impact Our and benefited million X/XX was in cost was States revenue seasonality timing customer

not of chain year-on-year. margin quarter semiconductor was which road. and project professional with experience basis logistics our operating the for rollout services be a $X.X is anticipated quarter in primarily year-on-year expectations. quarter. with great higher to outlook believe were primarily performance, margin operating and gross tied X.X% $X.XX new line QX per and it in was supply will that our foreign The generally from margin, products exchange these margin margin provide $XXX.X wins per the points from of of billion better design a operating than to costs are excluding and decreased indicator we representative predictable. improvement supply are in resulting improvement stronger industry impact as gross are a wide profit end $X.XX loss 'XX leading The of also expenses continue year-on-year. result, components as down constraints of EPS of the share with higher wins. a is profitability revenue loss the million in is even or the almost high Operating XXXX unrealized of QX non-GAAP an operating Services impact Ultimately, unable outcome, ongoing or indicative higher amount the gain Beginning in the the we We to and of not of we shortages share

sheet million ended capital the cash. and items, and cash to balance on we restricted with in quarter Moving $XXX the

drawn cash 'XX with we free million and of $XXX positive operations the amounts no the ending after $XX quarter Our $XX position balance of It in get principal [ph]. flow that million QX from facility. end on cash repaid the to of at the of drawn million credit that also million CapEx from cash ADL be resulted ended noted flow should benefited $X

use QX component new can try product the we a mitigation to position from of amount inventory second shortages in in to grow for our [ph]. expect the of continue impact of We extent the and we introductions, in modest operations as half cash

second of ending growth the double-digit encouraged the at evidenced by strong profile demand QX we Looking backlog. booking quarter XXXX our by in as are year-on-year and

approximately be pressures, reflected revenue are however midpoint. XXX systems four associated remains earlier metro million come anticipating of in that for will strong, call, that [indiscernible] QX, in XXX with million Taking minus the $XX range this has it outlook, expected recognized QX gig quarter. are risk to the noted important initially. $XX into with or the exacerbating compliance in XX% a points as with margins in reminder, lower and revenue we of to laid these gross supply challenges And anticipate the be line forecasted the reiterate with mindful in groundwork QX. We in as Even demand be the that this for to gig customer basis of the to revenue plus to XXX customer rights and to our our at industry theme product. QX in David XXX margins including in the We of account varies $XX year-on-year million introduce gig demand to XX% over risk, the range have our $XXX million. is

planning we invest and to primarily new million are $XXX a We driven be for increase an expenses million by QX R&D $XXX as with between sequential and in development. operating program in innovation continued change

opportunities our metro dynamics platforms. in investments transition and the for in the significantly now's from the of a advantage to optical Given R&D market and market These enhance highly to open it's position, accelerate believe us take and the just lean engine front our intended in we improved ago, position financial areas, in differentiated in past of flexible and optical industry. including rollout to competitive and year investments the speeds in are to higher and of

minus to approximately line, million, other driven are operating interest billion. taxes a net basis expect income be expect QX margins to operating plus negative Below points. of charges expense X% we estimated primarily the We and or XXX $X be at income by $X

For market growth grow to to the earnings XXXX balanced X% with be shortages. over to semiconductor on call, environment last and demand our consistent our statements market, full full slightly for we our we above the strong revenue the expect as systems X% with year

to expect our our by main backlog conversion primarily us sales We portfolio. of half and driven revenue be product second for continued of the

fiscal committed the our are I driving continue on growth virtual compared We the shareholders drive for exciting for XXX XX. close to footprint time share are I as expansion opportunities and they our non-GAAP at cash partners points look of yet tremendous challenging and advantage our market to come seeing we in planning support. you way team, effort to the our to continued customers Investor fiscal by of to same margin operations thanking to margin and XXX to will gain take Furthermore, Day XXXX. basis additional from positive for expansion in XXXX. for still like time flow forward their the and Infinera all May operating

Now we'll for questions. the line open

Operator

will question capital. go Michael Park with [Operator ahead. Instructions] Genovese first our And Please come West from today

Michael Genovese

the question. very for Hi, thanks Thanks much.

and talking preparing you're haul So preparing the about XXXG long Metro the for XXXG.

in And quarter not So down. product different some just the then matter I'm building quarter, orders, a But the in orders? networks more that actually are about taking that taking of sounded right they first half Or the Is they there they're year? not besides in the trends different ordering just I it you second or sure saw back because the and what can preparing other make things now verticals the everything sense? any wondering and order strong? placing talk you will I'm ramp anything? got of is

David Heard

out get and both revenue to products. first a décor systems had we revenue. the and for shipped that QX, strong expand purchase And orders demand some we in to shipped build Line to sub-sea metro. that the So footprint typically products for some [ph] in able weren't order in for received products we be

very So shortages as infrastructure component as our to is our comments, longer long strong, and demand our both really in industry. metro, comments lead well products And around something more haul. are the the is and access semiconductors times for that's tempered given industry our wide, the which for the

Michael Genovese

ups. follow quantitative of couple a just couple a So

quarter we be number back quarter. million higher to expect by? have of of, then could you trial number numbers supply I revenue of that new getting a the maybe So a a can said first numbers, customer Is there And been in us out chip? for you second think secondly, XX a customers number or give standards their number chain held any number million XX

Nancy Erba

Yes.

Analyst for our detail, So is of then for to the XX that XXX ability stay a million constrained ask another factored to to revenue on least up and XXth ship supply thought the to QX thought I million have to ICEX we with into tuned going in discussion pretty QX you million fulsome We I'm $XX for in Day. of May. the QX. revenue, yes, terms $XX what we regarding to midpoints million plan at And on

about So to got get need to demand, customers. built. we've you think as backlog get it that out we've We the and the supply can the in got

Michael Genovese

Thanks a lot.

Operator

And from will our ahead. Marchetti go Please come Stifel. next John question with

John Marchetti

much, just very answering following Nancy, comment Thanks your there up on last Mike's question.

that, those these being million not For the out that those talking are and that are are right? as XX strong It's XQ, you're about shortages quarter? in in you your million in backlog, million QX the someplace, those referenced XX XX those in in backlog or order the ether in numbers the in

Nancy Erba

correct. let Yes, me

So actually over million wasn't, million it to in million annually and started saw XX built that moved of QX, was carried terms $XX was is in some of we for had what some we the it of QX, to through continued quarter, impact, $XX build. of some

if we our $XXX top our so risk look we've we terms midpoint on of see million to that at $XX as And in in another $XX million the million outlook. QX, for of built

David Heard

And that weeks going orders because, know, that quarters. but be you're there, apart in backlog from XX quarter don't turnaround those think able the when takes add to or fulfilled XX, weeks to size time are John not in the to be you lead XX first to in just somebody eight we fulfill two to will

John Marchetti

right. Understood actually that getting was backlog, in

Okay.

David Heard

Yes.

John Marchetti

those weaker. North just what the strengths tier little And a were you ICT. some in one the I in sequential bit about if a then, in provider wondering the where service sort service bit of America. was of in could market provider in talk happened the And mentioned recovery category, anywhere little other you

were you saw cable, strength could saw those line of some roughly what through in, markets Just thinking? you You that came just in given said with maybe us? in talk the they what for you you're in we

David Heard

I Yes, it's we've lovely. always mean, said, sector, very as ICT

to right. And revenue so it bookings really is a story,

bookings was top QX, top ICP, of an bookings you one know, our one the ICP. within So customers the of not in quarter. our did fall billings customers with In QX, an

year on see continue of terms into as a strength in rate good in a to recovery go back as patterns spend as saw in heavier the Asia, we bookings, feel within terms helps That overall again, order to weaker So and of billings forward customer well, ICP you? tends basis. the of it going terms of the about the in half the segment lumping. We again, but

John Marchetti

It lastly, side, that? jump. They're more just did. cable specific came that was both broad in I'm based said, Maybe one that like I or the there in big something sequentially was deployment year-on-year through

David Heard

a know, two that to in think of it I couple Yes, call customers, you strong. projects three came

John Marchetti

you the Thank call. appreciate

Operator

will from with go MKM come ahead. next Our question Please Fahad Partners. Najam

Fahad Najam

I impact moving the call some heard I want you, me in bit [indiscernible] late But I yourself. to, an remind you much can caught about shortages? Thank comments [indiscernible]. over a but component million, from corner the $X.X how of saw just you repeat backlog

Nancy Erba

for to saw challenge. supply million million $XX we're $XX $XX what to And that terms from $XX indicated revenue an to to the million is that anticipating we between I in million. of QX, Sure, impact be for QX

Fahad Najam

out [ph] those [ph] probably about lead you thinking that? is to are Given they how your give XX with visibility times XQ, not on you, orders are the sharing quantify into future are you likely so more filled kind how of and their can order us likely now trends be the to in are a sense that around weeks,

Nancy Erba

is I dynamic this so industry an this certainly a, Yes, our is wide right mean, now. customers not

transparent. being are people So

of in transparent Our terms customers are their being needs.

back still building there we're the to the risk the piece, it. from as in still we the But the side the slightly for tremendous said seeing. my don't market we about strength that expecting that we have very demand quickly of year. ahead we And and the as I comments, good of half as to are the of on from is a rest supply standpoint grow of visibility supply piece shipping feel into the can fulfill are But We backlog.

Fahad Najam

purchase may, on generational ramp hyperscale believe order, last you is, Got far, type if XXX customer got your are you XXX the cycles are I gig can is I you've What wins got quantifiable have us XXX that with they've to one you what if kind seeing competitors, data? your XXX seeing kind compared it. obviously any of have question, [indiscernible]. suspect what I so ICEX, of of a you And of gig? And to the share you new design gig terms in gig? mentioned ramp versus it previous with

David Heard

It's good question.

appears news as the will of be generations. for the gig, faster quite long We I think based the XXX the on good it think I a cycle to than ramp think geometry be network, previous is that well.

and XX, we long the lifecycle where technology what gig XXX experienced how have going be will across from you business magnitude lens or time map the over winds see model. We just across in try product purchase what have applications. weeks and the here to win and will terrestrial see really it be our and service just of couple ICP the have of of both that commercial of come segments that design to that subsea purchase will provider and on give size and both said orders begun does we of orders Those a more a May Nancy shipments where as

Fahad Najam

you. Thank

Operator

JP next go will Chatterjee come ahead. our Morgan. with from Samik question Please And to

Samik Chatterjee

Hey, thanks Great. for guys, question. the

want start Just constraints. with supply off to the

to What your follow like the long-haul have the are the share systems? you more? constraints Where systems well. I most this more of is the And from up if are seeing? constrained? a impacting then so second, systems as do shortage I ask modular compact go line And to on But we are what we insight on components can again, any like the

David Heard

from which bit fan will be what but portfolio. Yes, I a that the mean, standpoint, but to the just little track, a tend because only we've pretty aging are be can newer our this procurement planned a products, of legacy on is microprocessors, first prioritized. an just then semiconductors, broad, tell you standpoint, that A the more I and profound what products, more not isn't product fan some for, with from

I So it's on partners, the and your this well broad legacy swath well in of lead we the them. accelerated as more we've December, will working on more and customers you, behalf supply QX, going with half, partnerships in bit again, vertical and it reach a those supply control saw as we're across see we're with we chain a impact in activity started more a a profound tend bit contract longer we've the more tell and I provided manufacturers, more and industry, QX, it back is integration to again, as think with got numbers why again, good continues our to times, as important. little our can I strategically we little out. think chain our to best partnering as you say partner Again, And bit have

So what call. the half, the back we're of process in literally the doing that's

Samik Chatterjee

share to on share slightly in market, just gain was the this commentary this late. particularly had wins in that gains, share your relative back than year the So which on where market customer from primarily to you're Where seeing gross jumped year you missed systems for share both expecting term XQ year? when be comments relationship deploy where can because I and you also and the segment is QX [ph]. that But coming maybe share, I margins and XQ full I to you where this question softer going to the guiding mentioned are you Second market helpful? a outperform full be will bit and biggest short you're in drivers if both the as

David Heard

Yes, good question.

long-haul across terrestrial we're networks. certainly, both So and coming

line has That's Europe, less and geographies, again, open the marketplace an across America. in subsea going XXX well platforms, it again in to in gig haul and existing both in gig. us happening to XXX you're long opportunity So with insert insertion see long Asia There's just opportunity our Metro players given as as, with ability systems, core haul as North with quicker. platforms

Samik Chatterjee

Okay. Thank you.

Operator

next our Please will with Alex And from Needham. come go question Henderson ahead.

Alex Henderson

Great, you. thank

nature bit the I Clearly, talk of of hoping So, well are was could received. half year, the into that in orders the half XXX would on the a that's XXX is that that orders so gig little you've the to you products the the product gig the shipping about back backlog? predominantly existing backlog you products include marketplace in the Or today? not available for you back related have the

David Heard

include as Yes, no, well the products, - set. backlog gig our existing so does product XXX as

into that So of as now, the ramping issue know, our strong, so have. - we've you we're biggest to a that's Demand said good the for a we couple we've accumulated backlog and and here extremely get if cash to into cycle date, is and quarters expect it's piece, the back converted the to deployed win as and to then half we of be we continue book flow and revenue the year. production

Alex Henderson

they only process. last a call. other in shipped were fair in that company on product only accurate in your pre-ramp an context, gig Is that XXX limited that that assume is that quantities shipping I statement stated the their statement? competitors that - their you have Within not the

David Heard

commercial that to deployment and few it's we more that ship - convert the good very quarters then expect going shipped now in that have, Albeit, for revenue feel again qualification, to cycle. a into again, would performance the we and the Yes. we're ahead. half. product shipping quantities We they long we're for of We about a back very, be

to continue we about be the So rollouts. excited

Alex Henderson

Thank what is in is of install with business systems? respect systems? you. last - same percentage your book one base order talk the what And question of to line coming you is lines. to your Can install portion about open what in line along And base open currently the extent your

David Heard

bit record, systems; line on say We'll periods. color, But from they've when Yes, for good - prior quarters got system at to the the have I we that here record say, Day your we've profoundly to line booking for when bookings, the last all up Alex. Analyst more good look XXth. our little been try a three questions, of

bit little good quantification trying but percentage percentage meaningful more it's what a got is it's of to pickup total the a on you So give that. on

Alex Henderson

Thank you very much. Great.

David Heard

Thanks, Alex.

Operator

question with come And will go ahead. George Please our from Notter Jefferies. next

George Notter

the to margin revenue products Hi, Could you integrated? thanks is piece can that vertically guys Obviously, prospectively? mix here lot. the the guys, a comes get of what you expansion the and a story us from are for sense where of give

Nancy Erba

up this also but you up the quarter QX, of increase cost by could was from helps step primarily an The integration in where Yes. margin, see level there. in reductions, driven vertical slightly were we percent the in

as of at we're that as term percent say said, below where our keeping improving I we to quarter. XX. gross it is end quarter is not the XXXX that want number As margin but exiting, to we've now target long the we and it model, growth certainly is, mid-XXs. And would be by will our right objective in be

George Notter

it. Got

Okay. as of now, right just improvement step about of of couple and gig, are on those there I vertically I points then, margin. here basis the products margins here think Is basis conversation, the that in how groove. XXX XXXX integrated. think you - math point for talking a big up And to we're I you think the you those and step was still narrative products? I organic said XXXX gig to functions guess were I as that ICEX think XXX improvement went more about another up And I'm the because away you gross part versions there going the from, you think was then of back example, - but from

Nancy Erba

but owning going importance 'XX still vertically that your margin talk as the through our close. when 'XX Analysts the as being integrated. timeframe, to out not for And can and and we much in about And the lay roadmap pretty into 'XX it's structure think just you expands. out a and and really Day, we're beyond 'XX, chain walk of supply of and how I

George Notter

Got it.

Okay.

So, I'll structure but I it changed. the assume I this the started guess way. of labor ask just on It hasn't your ICEX viewpoint margin [ph],

Nancy Erba

Correct.

George Notter

Thanks. Awesome. it. I appreciate Okay.

Sorry, Nancy?

Nancy Erba

a as about had as see you vertically Oh, level. basis that's improvement a okay. should be at ICEX XXXX no, we product, What said points to product able integrated

David Heard

average weighted then Above a have George, merchant product, but do to you the math.

annualized integration provided also to And vertical improvement the the year product, at Analyst guys you year, showing percentage impacts of we basis how we'll compare VI total last as with of like our XXX show That's XXX an year. with on out QX to basis. we'll full the a started lift of given on portfolio to expected - So XXX year Day we the major albeit that subsea a from points last this reasonable weaker basis deployment. the

George Notter

Thank guys, it. much. Got very you,

David Heard

George. Thanks,

Operator

ahead. will James. from Please And with our Raymond question go next Leopold Simon come

Simon Leopold

out playing very as of see good that I to you Great, a year, this bit happening thank hearing how ask you you you you about you what backlash the fourth then, at Thank your quarter about it? asking two quarter the beginning. you. this see taking Huawei so this And opportunity? a has terms being I'm European What keep had for year. looking near-term as a I'm terms long-term opportunity kind see of how the of questions. beginning the But we wanted do been in in Huawei opportunity; last at of little question over business good this long-term? And do parts. backlash

David Heard

questions, Simon. Good

So if in revenue a are uplift. the Huawei see a kind on opportunity? prior, two into or I opportunities; the handful get won of revenue are longer best, small won wouldn't secretly yet. But them quite dynamic period. are QX see Look, you're winning Huawei we think asking, those you would three of that a we really we so as term said, At being we've we few do fact but we're this as hiding being bid, XXXX the

look for competitors, long opportunity ability not is not when the restructure, up seeing circumstances, being just to links network but with that network. point to mainly allowed subsea is and insertion. there of architecture, Again, different Metro, are pick a an subsea, again, the metros, it a they're and being the play and at and other field Huawei haul competitive We lot you in of many than go to many on the point long-haul a or re share

steam our integration line of a that of our you'll day. in XXXX, penetration. investment So and we big our and into vertical then that'll part XXXX it's think our to XXXX, pick see curve we we begin as feel up get in And top analyst

our profile As you XR technology, get and margin going improve pluggable will to that other forward.

Simon Leopold

your opportunity? opportunity? how you could sort backlash We've you do global billion seize And [ph] numbers this China billion have sort sort to heard $X to can own [ph], if - of Europe, review CAM opportunity. Huawei of sizing of this of on ranging you in $X of sort sorry, a look be are How you

David Heard

see, by eaten this to opportunity think that's not netted be Look, as all potentially $X.X when going it's is supplier. one billion Yes. you and a all I

we've it know get of I go So our kind sales path $X.X the billion teams you - out Thanks. of Huawei and as opportunity. to yourself think of told

Operator

will from question ahead. Hall go And Sachs. with our next Goldman Rod Please come

Unidentified Analyst

[ph] feel Bala with my follow-up that product, for currently on Could Rod. taking this it? I gig Hi, or Reddy a for feature on further in if you XXX can. feel more modify questions. have Do is a is I maybe Starting and we're complete terms you set? or you less shipping. Thanks you need whether the about talk of improve maybe to product functionality like

David Heard

why than which competition. our are Well, all into as product complete for set applications continuing Day, rolling feature is to enhance that and of contractually product Analyst functionality to the our we the products for little bit see at bound of you'll a always but them look the you'll see performance later will We and like lots of gains some performance original our a Yes, sets. tend additional products, and build see first to feature to feature its the continue you shipments. is out

our of record. as strategy integration; kind can scale but to on current planner that Some that's given and size, focus vertical our argue

Unidentified Analyst

the Okay. any should could for you product the Analyst comparison trend CNR between want provide details and just we wait And ICE performance check. I to or maybe on Day? the

David Heard

- terms rollout, ramp? and performance-wise the going everybody's be in on through what's as I that are both will XXth. we slope-wise then, on question we as to best the And size market May So, go compare think again, the we'll the of how I in of can opportunity? think terms of shaping

Operator

ahead. Jim go And will question Citigroup come Please with our next Research. from Investment Suva

Jim Suva

much. very you Thank

just As at CFO geopolitical wonder wars, Inventory stocking? this first been then maybe we've CEO, inventory, challenges. COVID on more and keep I'm you also think I as and chip through is and business together, there keep to look sit do challenges, prudent it work you and order? you're now more been chips everything just thinking I'm shock them case more structurally, the hold it just that of down and road? wondering, just procure to wondering it like and sense after makes strategically, other; unfortunately, tougher, mankind all the if maybe but happens one seems chips in inventory it's something

David Heard

don't that. off in in challenges that a just our having we're world, inventory trying a this year, that country, we're to what plan a begin does as of can we chain quarter as our we a supply as the supply observation. safer these hands, And is last approved Yes, it's remind position I began we is happen that what don't way the in hand chain to we Certainly, manufacturers as you can to be. own a to consumption period ourselves your our company; people now able it that's on watch; of do. your you with the suppliers. orders, kind This what Again, to more and And into I of better great at when we're Luckily, both that year-over-year over situations as period. cash the that's such. unexpectedly, combat just put do doubt and But December, our got job. good contract call and so our And trying more to partners past disagree, face you part tends yes, out to terms and provisioning. position, look you in of

what on we're I East waiting coming one. the so understand, up Coast from I next think locusts the for are

Jim Suva

you Thank to details weeks. few so forward and the the look Investor in for a Day much

David Heard

Jim. Thanks, Yes.

Operator

from Kvaal Research. Wolfe next our with And question Jeff will Please come ahead. go

Jeff Kvaal

the very expect to are has I that on the to wondering pay a and with to the get question is timing of bit extent, what harder gains? therefore, to shift thanks components seven margins. quickly much. might could I'm you'd if you Yes, - little goals? similarly one those to But affecting any, is those more or of changing? one the internal But kind you get, guess, the because just could a how bit And it when get is help is of later. be like constraints be us semi it My little to because And margin

Nancy Erba

we my of point have on that QX of some certain And is costs, time, of did was our based comments saw you driving that by was reductions in also what we're we exactly we focused XXX level margin the in look the But it lead because basis to the year, year-over-year; long out you're that of improvement right, this coming it terms been ahead Jeff. cost of in offset, mentioned as referencing, why a XXX in for definitely the output. Yes, maintaining uncertainty. have good part that I but increase really times for as component and reason

we lower starting; QX know, and of the with given are the to deployment in where bit the about on guide But XXX terms we good to I've margin for hit revenue You a for margin QX. XXX we little year. and full able cycle be feel to and the basis QX intend recognition points

Jeff Kvaal

of might trying to were where reasonably could you're little the you a a Then thank portables very markets. thinking that. session opportunity. investment prioritizing what understand with secondly, excited what I'm your And about? hoping the in with few about pluggable you're be ago, weeks in you for about you of you share sensibly avoid you your us terms portables are helpful a I thoughtful dollars bit being

David Heard

has people investing Yes, many over because through a part go this bulk been in analyst We've we plus of strategy our day been. category, we'll essentially know on what now not do. it's year May at XX, because that investment essence the for what of a

hard, these XXX to market have markets, big gig gig of we I one, those metro XXXX, the are the offering gig nascent talked are get pluggable market now the to you very, we out be XXX in the and gig. what put call that but meat are and XXX know, and You large of that in Most a product line. and going XXX merchant XXX just a with XXXX, about and gig for XXX be gig metro that right certainly very are like today gig as XXXX, into going we XXX

piece, our now, high own So by that certainly XXXX, architecture, capacity again, the XXX some them investor data the there on investment on rolling in next getting go we vertical quite more in but market both integration of meet we our changes own already content of opportunity AR. then probables that gig have up a to generation is And be the having able integration the has multipoint next with XX:XX game point the deeper vertical market We've gig with a edge solution we'll XR and a that. about. open in started to in to within our hitting been intersecting with alleviate what product focus next is a really our good in horizon, feel generation those for XXX the the our gen important, our and some and bit through market

Jeff Kvaal

to it. forward look Great,

David Heard

Thanks.

Operator

next Mehta question with Stanley. go ahead. Marshall come our And Please Morgan will from

Unidentified Analyst

Karen the is Stanley. Thank for you this question. from Hi, Morgan

a higher to could So, when sort I at been level. is XR conversations think material be you they customers on this XR, be with optics, for stay. But most optics know of more How of contributions. saved guess annual will the have and I

David Heard

the Yes, Xg so and cloud architecture we the very, is elasticity very mobile it kind compute a really customer edge new good and to of requires drive on edge. driving kind the of of the agility to engagement network edge behalf, to and

And it it, to its similar a, base The this fact others been say in impact we're an XXth that of providing think good. to our terms that I model. positively technology allowing has let's to So, May open the build to business making the endorsed. has reaction discussion. the it's very on meaning architecture, okay, If customer been ZR, to

Unidentified Analyst

so makes Thank you much. That sense.

Operator

with will from [Operator Riley. ahead. come next B. question Instructions] go Dave King Our Please

Dave King

Thank afternoon. Good you.

booked I you on what late. a maybe got strong. missed call disclose I bill? bit was you there But little have that. Did saying I Sorry, heard to may pretty were or perhaps orders

David Heard

just strong. said EBITDA; we pretty

continue to again as QX, we then think build and exited I QX. into So we backlog we can

Nancy Erba

digit… a For double

Dave King

so flavor then or a should $XXX And we our of for optics regarding million quarter quarters, for second usually second kind gave about think Nancy half? for

Nancy Erba

for the Yes, range the of what out for we use for half I should think QX now. was second probably put is

this are we've investment in in We there technology our key the dollars looking a focusing year. areas lean and to through that little bit highlighting been

So in that year. for the of appropriate rest $XXX I million to $XXX is million range, think the

Dave King

my on your of question increasing? And quarter. it. regarding Are gross last in prices margin June you baking of is a sort Got outlook XX% like chip for

Nancy Erba

in great know, revenue start and would starting those they improves they're walk all and in that as been, Yes, terms lower included line there then market margins that demand but QX, be of the in cost to through we've system initially, for, tend increases, the deployment to to also have seeing sell. you the of impact

So, it's combination of both. a

Dave King

XX:XX chip we're quarter current they agree this will view? be as their that is challenging far concerned? with Your peers in that you availability most Do quarter as believe

David Heard

we put again, see I that given I we larger degree of of No, the in math the times. this just on we think, out risk think and accelerating based quarter, think lead just

Dave King

all you. right. Thank Okay,

Operator

from Needham. come will Henderson Alex question next our And ahead. with Please go

Nancy Erba

for one. Came another back

Operator

dropped out queue. He has from the

with come Craig will ahead. question Allen from go Capital next So Group. Please our [ph] Christian

Unidentified Analyst

product is Is quick to in guys, can't on want make understand who question lost QX? be you shift a component that there I that quarter that order you to constraint sure other that the I competitor quarter, this is have that even potentially last sitting believe volume fair? ship be ship. and that you some just just what one and isn't life to that might able come going the might can't in product Hey, long volume I that on

Nancy Erba

is I fair. think it

But have strong very know focused any of right now some customers. think our may customers certainly from information shifts. means you in to which to is backlog what we don't And right we But Right? be now, the know. have There bookings, our don't XX:XX for I that that know, supplying overtime so we really getting demand. pios watch we're placing on and we we're hand. are going that. They the

Unidentified Analyst

No Great. Thanks. questions. other

Operator

conclude closing over David back like I'd turn And to any for session. our head this question-and-answer will conference remarks. the to

David Heard

from Certainly, about I we're in We're mindful optical appreciate a questions. environment Challenge know, and quarters. the these the performance the external World perspective, open all of a perspective. family relentless very very continue out these appreciate excited consecutive our are supply from chain we're in team humbled our to about in support the the a just you opportunity perspective in last but recent and of not chain and macroeconomic the by with continued much prayers will supply ongoing be our with India, I And and unprecedented you. again, thoughts customers our the partners, members our are really to and the shareholder support. Infinera team really from win times. also

well. safe So, thank you all. Please be and be

Operator

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

your You time. disconnect now may a great at this have day. lines And

Infinera (INFN) 5 May 212021 Q1 Earnings call transcript