- Earnings call transcript Q3 2022

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Infinera Corp.

Third Quarter 2022 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Investor may of your Head Passi, Relations, begin you conference. Amitabh

Amitabh Passi

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

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

David Heard

to turn afternoon, our performance. of to and for results Good Thanks of quarter Nancy us a the Amitabh. over begin cover our the thanks review details call the joining today. then I'll for with and financial

concise I'll today our in going the our that's estimates. everything overall to QX the and is message beat be Overall, on today. consensus non-GAAP financial try Given markets world with the results economy,

margin balance drive our year-over-year market strategy our as product operating growth, our we up consensus with to We're Our at On product against expectations. XX% in range Financially and non-GAAP basis of outlook revenue evidenced XXX QX, strengthened for range non-GAAP end a QX midpoint margins is points gains the revenue of the ICPs. the expanded growth our basis, cash points, the Furthermore, with the a and at near in most grew share outlook high represented quarter our an healthy delivered we basis quarter, revenue XX%, balance sequentially. line Americas gross we operating delivering by by grew sheet. the posted flow in for especially by in bookings revenue remained margin we quarter acceleration in from Demand that product and free which of total pace and XXX year-over-year generated continuing we last sheet. improved steady quarter the X%. and with and XX%

We of of on from week the strong quarter customers our fact, large third XXth few a four September top did based very fourth orders a start XX of the to into given the the quarter, quarter, our week last ICPs. In have slipped bookings resulting first were end in that QX.

margins full Our the XXXX. was environment the have the impacted ago, margins basis our approximately XXX by year up remained above tougher in backlog Supply costs, from supply the for points navigated a the healthy, normalized for quarter, XX% is which, our setting the our incrementally above and expectations expedite XX well adversely days over From freight into gross in been the the coming without challenges points and quarter. The would quarter impact but fourth including XXX margins for effectively perspective, than projections total our to basis quarter. team quarter gross us fees and relative elevated to levels, gross was

next first in the broad-based least some expect supply half supply of through While seeing we of we're conditions chain, for half XXXX. challenging easing back in overall before remain at to critical year relief the some

continued products, and provider ICPs ramp X we new with During Tier major win service customers. to the deals quarter,

our spanned the in quarter progress Our entire portfolio, confidence in our our reinforcing XxXxX strategy.

we business systems our two developments. within Specifically, key group, had

the significant quarter Asia XXXX, over in major of in X a line large operator as on the to wins provider in key a XX% the remains of secured ICP to Tier to prior ICEX track long-haul ramped operations several of revenue US, product we year total design cable expanded for Pacific. X service including revenue to with telecommunications with Tier First, ramp XX% in our at customers, product full we commitments. global network and XX% ICEX into with their and

Second, revenue GX on platforms basis. year-over-year our for the we another up metro for a range had product with the flagship percentage strong line XX quarter in double-digit

three Our internationally. provider domestically metro for there footprint service as accomplishments subsystems quarter. customers, provider notable group, continues Within we expand with both to diversify -- were and the service our

our ahead of is and our ZR+ First, gig pluggable XXX industry-leading expectations.

XXXX. as platforms, our are We integrate metro own which impact we to begin to exit starting into positively it should gross vertically margins

quarter, was with industry-leading large which gig a Tier results XXX American successful in X industry's first trial performance, a pluggable. power service provider During field reach, North all we ZR+ in software-defined the this accomplished in concluded and of the we demonstrated

based Second, We we're to pleased up service in for believe pluggables ready and and Membership the the us. form multi-point open gig coherent forum. with the XXX point a progress will of interested own there's on revolutionize the multi-source continues equipment to the to we're for and XR pipeline addressable new market of manufacturers developed sign specifications our expand growing multibillion-dollar providers development these up networks in a XR being open pluggables on making forum. Open the Open

and with In forum, including Telcom equipment as DriveNets, additional the UfiSpace Electric. American quarter, manufacturers, Furukawa Tower, fact, Italia joined network Mobile, members during along of the

progressing encouraged environment. pluggables while next-generation lead macroeconomic development Third industry category and I'm across of as we intend finally, our the uncertain and board, XXX-gig of business mindful our is an in being the execution to this well, well. by the

Our portfolio and product winning is and great share. deals in major market shape, we're gaining

and in capitalize globally. the strategic see investments on insertion We programs R&D sales are most marketing opportunities our prioritizing in the we to

We technology, production to our national invest made capability that have packaging is ourselves R&D funding US and the of supply In expand government, located may of potentially years chain government-sponsored business strengthening compound with government couple branches in in as while Infinera semiconductors accelerate of beneficiary of leadership to as based security resiliency in past interests. in addition, including core an been United optical new all manufacturer, any the an semiconductor capability to with and our CHIPS the use States. Department markets, Science intend critical US this into be unique the and Act. facilities intended over Commerce available us positioning and the and we

while the Looking ahead planning the towards get fourth remaining growth, into to supply challenges quarter, XX%. fighting acute we're chain margins revenue of of quarter for gross above-market another non-GAAP

operating We expect quarter business ICEX the fourth ramp from momentum continued leverage. the the of in additional and to metro benefit

elevated performance revenue an fourth integration. value year expect income the operating significant in the million This outlook environment product and of more than XXXX XXXX results. to especially supply full in further we chain year implies is for absorb over for XX% also $XX than vertical remarkable, growth of Our our cost quarter and expansion in the where financial greater demonstrates

our executing As you've our heard against commitments. strategy on today, and we're extremely focused meeting

XxXxX working. Our strategy is

Our and and are risks. chain the creating winning they for disruptions customers products are in us actually their our supply chain opportunities to supply look new mitigate market as

our in annual We are share model earnings towards driving per and relentlessly target business power. $X

be collaboration are macroeconomic drivers I several to demand of are impressed customers. factors our our there the with innovation, While Infinera products resilience the suppliers of of at partners and continue team, our our the degree and adverse healthy. and execution and engagement for services high underlying play, the of

portfolio to planning at deeper Diego, OFC of Nancy? are company's upcoming Show our our turn diving the forward As San fourth in March product for our I to Nancy we financial to Industry Investor Day XXXX, into call cover will quarter. now for the quarter details we outlook our and over the the strategy X, and at the that look California.

Nancy Erba

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

our year. we derived quarter from normal down Service details, over and along assist The service operating momentum in and GAAP deliver stable a quarter, sequentially, my our the to commentary. basis the at For from a growth as website, million, revenue customers, with providers strength of reconciliation in but was the of on to our customer performance on delayed QX. This Investor the revenue X% range revenue very continued in US. with we product ramp still in the due impact of earlier our the professional our of services of ICP XX% on than domestic level continue basis higher backlog business. was with in other Geographically, with we ICEX team executed revenue slides our the to build at deployments $XXX year-over-year outlook your have to to the well XX% posted the including year-over-year in metro revenue reference to revenue pleased Infinera continued financial a end due non-GAAP third was I'm to Relations product XX%. growth up margin of largely and with our upper

an and EPS equating a We margin one midpoint was our in in During of operating the the expectations of basis our XXX as per operating was year-over-year than to customer. XXX our XXX operating in third this outlook ICP points both the customer $X.XX quarter the and share. XXX basis of range quarter. was of Gross quarter. Operating absorbing the was near basis, XXX from points doubled profit an in to of than of greater at of million contributed outlook the roughly range quarter, are $XX ago. spending more resulting the outlook margin tightly we chain-related X.X%, $XXX.X up profit On quarter, margin Operating high dollars which we higher in delivered headwinds below XX% our XX.X% which while days revenue, to basis the The million, sequentially. was of than expenses points approximately manage range. supply our margin XX quarter end

in to cash, Moving restricted ended sheet the from quarter. up flow million with cash $XXX last items. cash on and balance We quarter and the

benefited resulted the sheet cash of of of balance of refinancing our operations from million, of cash million, balance part notes. portion flow flow further Our in we substantial XXXX a approximately reinforced as $X our which free cash from $XX and

our a drawn. off $XX paid zero million we with quarter, quarter the balance ABL outstanding facility, During ending on the the

XXXX, throughout and the As for absorbing in margins, quarters consistent X% to the of while model, expanded in ahead working short-term costs XXXX, XX%, chain we rate compared strengthening by to our X% same grew capital period ramped in a make by share. revenue well and growth continue company year, our three successfully business for supply continued higher first reminder, product an gain optical the conditions financial Through long-term facility operating ICEX in our market, revenue we position. commitments. utilize our to needs. and while the expected meaningful XXXX market of will with We netting the Despite progress we ABL target the strategically macroeconomic we tough toward

quarter. Turning to fourth the for outlook the

ICEX revenue expect of million, albeit supply challenges minus at representing with are the some least backlog. we same the by the factors range strong demand are of environment, half $XXX these into the to million, macroeconomic basis moderation. uncertain We QX time, the the the in plus a year-over-year and on At at expect of range. and XXXX, account, cognizant encouraged growth Taking to $XX ramp X% approximately first of we of the be persist through environment our or midpoint

QX revenue a for planning are We XX% year-over-year sequential in product and in services revenue. of greater improvement than growth

from XXX plus minus points range chain range margin projected elevated a on of vertical the impact improvement up in margin from and gross XXX driver ramp ICEX. the the absorb our to at the expect percentage tied XXX approximately assumption The that continue costs outlook our of of higher of midpoint We and to primary sequential of integration freight. gross mix points, in of materials to quarter-over-quarter components, supply basis ongoing the is we a will margin points XX%, basis basis is be or basis. Embedded

$X X%, net or interest range income operating points expected be The in are pay basis be both million Below at a assume points, and and $XXX outlook of annual million, million of XXX prioritize in is in for margin with range line to the and expense on QX as and We to investments basis. and to up continue the QX up sales consensus XXX million minus the plus to operating operating taxes. basis in midpoint commissions $X forecasting R&D. expenses year-over-year line, marketing resulting sequentially, we for the we $XXX

XXX anticipating approximately diluted share fully Finally, share million count count million basic a we shares for of of are a and XXX QX shares.

I close these XxXxX solid focus environment. years, of team am operational in earnings couple long-term to results, per and growth over our a We power. today, I last as have margins. confident while toward external tough As we share through model proud we products, I new accelerated how Infinera accomplishments as delivered on and our business navigating remain $X the team's strategy, has reiterate expanded drive in generating new won want of ramped customers, The the

our Finally, to the your over partners, I'd customers continued call extend shareholders I'd like cooperation. Session and support for questions. to thanks my Josh, and turn like Question-and-Answer to for

Operator

Instructions] line Catherine [Operator comes the first Partners. Your question with of MKM Trebnick from

Your line is open.

Catherine Trebnick

Thank taking on on guys. with actually time you question. for Thank and call my first you you the

it going explain Can it and much quarter-over-quarter. Europe Is down. So Europe looks in is of you question my there? Thanks. on you like down to talk why taking -- one place X% the issues is just yes, that's still some – pretty what's

David Heard

has not a down this QX travel in a the over to been pandemic, Europe, good Good as online. bit year. Yes, much have quarter seasonally typically, it's question, you a Catherine. of

forward. saw we the a with prospects and the it ordinary, US systemic, demand nothing Europe travel still good a concentration of had of the some see US revenue the out But nothing of ICPs in and strong in count I falls bucket. and plus going ICP that we global quite think way in we we here

Catherine Trebnick

a with only for is pinpoint strong Can competitive XXX thing the press you the always upon in. much And area Yes. you of are subsea gig that I upgrades some pretty to opportunity? against has wanted landscape where been of

David Heard

winning with out there -- we're aren't many, the there. of at XXX-gig we with lots technology routes. think I when Yes, technology, then And look

year-over-year, interconnecting but it's pipeline has going in tables the growth global of growing on also been of an not so and the data to bookings opportunity, only us centers in take revenue to So that going exciting business basis. -- be for lots these handling a new advantage

Catherine Trebnick

Thank you. right. All

Amitabh Passi

Thanks, Catherine.

Operator

Kang B. Your with of next Dave line from question Riley. the comes

open. is line Your

David Heard

Dave. Hey,

Dave Kang

you. is months? And three know than really how that thank disclose just RPO, how much say, you Hi, was less I afternoon. first Good shipments, question immediate don't for it? much of if My is

Nancy Erba

disclose was and detailed So do Q in RPO we schedule the that today. filed is the the

$XXX up But $XXX the quarter. of It QX, versus into bookings was million were year-over-year million I than first more first in QX. of RPOs week at literally last some million. week in can say that So $XX offset that down we just over pushed that the

Dave Kang

that like about quarter. is about fourth fair that It is were question actually, set orders $XXX it next million. my Is So, to that sounds assume $XX it's maybe million right? to to -- was

Nancy Erba

there. $XX you I'll to going amount, it than but million. it's not give I'm leave the more

David Heard

Yes, quarter folks the September that way our to third getting and on customers is challenge. came Yes. sometimes just a the October all in realize, not it's XX, days X -- fell closed and

in, orders came in So $XX million QX the all number. yes, well those over

Dave Kang

how immediate for first And much my question actually about is was RPO shipments? of that

Nancy Erba

For immediate shipments?

Dave Kang

expect -- of have quarter, how Yes, this can you like if much -- like should within you almost component. yes, plenty like you

Nancy Erba

of is -- go Yes, the XXXX million. remaining million, $XX the the in remaining to $XXX

Dave Kang

As -- we quarter think okay. first you. Thank about

Operator

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

line Your open. is

Alex Henderson

So have looking And answer came refreshed. half of I I’m first would of and down sequentially the basic been normal at than that to is give quarter by quite the bit in significantly, the how now backlog. we far term way at a point decline in going look about fully same relative backlog do had you and seasonality to that that different And past? the at upward out. quarter $XX out backlog, next have lesser a the into sales little know for of backlog the maybe this I have the If enough product guess that a there it than But we in first because million it’s drops you plays specifically is don't that think year? want guidance quarter, first an is to normally, the the RPO seasonality in question,

David Heard

but the That to last XX possible, it RPO everybody, limited It's to for we're months. call been and number, supply it's yet. not just remind number and going backlog has

So, Alex, QX. time, that typical the the given supply we're QX Too dynamic seasonal how environment this at to continuing early we'll fall-off point believe to ball, of from call to in is. kind have

with XX As up probably have that holding industry, really easier handful have X to CEOs gotten while still are parts, parts in some suppliers the things earlier, of broader familiar I myself, acute of mentioned that for very each and parts there's a like many kind been muttering. names

Alex Henderson

hand, going Is look it or at been the straight take Okay. million is it got $XX of a service? around normal to XXXX. related sounds XXXX fourth If I as you've the therefore, CY assuming in to to as that a of portion of and of backlog, large and think for September it that that, quarter have quarter like you that sales reasonable over there a in million had well product RPO and into XX% already hand $XXX

Nancy Erba

related ahead our going about backlog in guidance good portion do is XXXX and grow into XXXX our we point, although giving full us us of we're I for the this expected A that comfort. gives market to it say, service. XXXX feel backlog not of expect at that to would we and gives that

Alex Henderson

Thank right. you. I’ll floor. leave All the

David Heard

want backlog the make RPO. Yeah. get to because question for to those, your we clarify I Alex, and I sure, on just want

orders a of So million. again, ended that slipped X into the October $XX were of over that week, couple September which quarter excess there following were we in XX, before ended the

Nancy included. those just think, So bookings RPO that went number, I the without was through reported

would been well the So have – $XX would over million. over – million up have by $XX that number been $XXX million

Alex Henderson

Right.

have of – something excess coming you you around the is would RPO XX into the to that in had you one-week quarter, if that make So had that adjustment?

David Heard

Correct.

Nancy Erba

Correct.

Amitabh Passi

Thanks, Alex.

Operator

from comes the Mike line question Securities. next Genovese Rosenblatt with of Your

Your line is open.

Mike Genovese

want Great. and we're not XXXX next don't Nancy, think Thanks for guidance mean XX giving X I now, to guess, – I heard to that not I you talking year? very guess, I does right I I you're much. about said, anymore understand,

Nancy Erba

right and any to make It's update point. anything. we're on mean not it focused to executing this QX, No, doesn't going QX we're now, at XXXX just –

David Heard

updates Yeah. Mike. prior, we've No to what said

not make the we're through get want anything, quarter So stability ends we and backing where sure off this to up. market in the see we just

Mike Genovese

which I'm bookings looking says at the pace. presentation Okay. steady continued a at

prior there continue year-over-year. the double I digits year, did sort Is a think flat up or that that this think, quarters is were third – year-over-year? quarter, they of in steady I means

David Heard

Yes.

forecast So Mike. the the was ending I XXth the with that think is that week to for strong the of steady back The half Xst what the we're growth. that October had year of saw, timing of holding is seeing only change we we

back of book-to-bill. the growth we see look at half the as rate kind positive year So we still that of and

under Our one into back of book-to-bill, one. half clear, were if consistent what take just we And you to was over our the with that be just week the and as definitely was thoughts entered year.

Mike Genovese

Okay.

So a couple questions, don't if of mind. you more

from First good is on strength as other we for quarter sounds one? well, customer. really now had it it the one driven was the XX% of customers like ICP primarily by or all, you but ICPs,

David Heard

No, touch two last with some we're mentioned going engage the are as in where now call, ICP those at there of and time, ramping. pattern forward I positioned – to kind used isn’t a those we of or only one the

in of heard ICPs. different my comments those You with each where we're applications ramping

there was well. as So couple XX% one a ICP, quarter while of contributors the large there to very were

Mike Genovese

count you. gross than driver margin then you margins the And the shift unrelated, mean be Does Great. I me. to ICEX for a lot I'm that supply mean, that supply in-line mix in-line be to thought? a guide. ask of even will And I chain, that think little powerful you and XQ? going will people that still share is in said the Thank bad what's I it even we then – at – from managed two – what thought. once, to come worse with have than But call The of secondly, gross in still us the dropping more like XQ

David Heard

Yes.

drag. look, us margin of is was not So we cost we year. supply this was expected quarter. basis script, was product That our over of extra as a eclipse first $XX points chain for what the for piece to positive yes, performance, said on the revenue million going in the XX% ICEX question, XXX The

vertical that did of mitigate XXXX. So, to that supply and of will us integration our and with line same future. our help mix some that costs into in integration powerful pluggables move margin as in vertical the into chain that own the And and product and in metro continue pluggables we QX will help us

Nancy Erba

material on the in Yes. meaning of cash, you of are of which not walks fee, one unusual the that And instrument count the But bridge new count. go share out if that a to into it's on included shares website count. an because back pay instrument But through you the share it's I that's the so for XX there. intend would the have fully not are more share actually of actually We converts, quarter, the can you somewhat bridge in count, an the include fully they attributes calculation. those you diluted an is we but diluted in want, those later fee, detail in

Mike Genovese

Thanks.

Amitabh Passi

Thanks, Mike.

Operator

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

Your open. line is

Simon Leopold

for thanks the taking Hey, questions.

taking make extra some supply little want coming sure like ability it something so execution but and heard I perhaps something, your isn't just market you or imagination I from, doing running So David, feel bit that and to are because away to better relative chain you're I supply part this of part sounds in with having -- my you like a suggest others. is suggested chain issues, your grow share, from to competitors faster say

you elaborate talking could If about? were maybe what you on

David Heard

intimating No, -- a or fact. you wasn't I that is actually

That right. that translation. got was a good you So,

to We need have bring are or and times open transponders number where to given markets And open that number ability one. hands. ramp had seeing and an traffic a the alternative of we limits, vertical orders more where they're with in of planned wanted maybe our have puts to hitting people had line on systems lead chain extra those in supply two, a big share, they placed integration number and or for in take transponders, been waiting own

us have couple that in has else where can provided cases, And waiting or somebody might been many to weeks of weeks, a deliver compared quarters XX transponders in so or that XX for we year. a

Simon Leopold

that the sticky guess for it is, give at supply advantage? I some everybody, that that? chain follow-on reverse And you to uses or point Does when how is does some

David Heard

Well, then the I across way any corporations our boardrooms, boardroom. chain time any I about a gone discussion think initiatives talk in huge or been whether when experience it you of this, everybody's have that [indiscernible] is, like the customers, shock to it's Supply to has a and

at some provides for the more just but have And in customers who more their on And they opportunity been it of think not I where where looked spend concentrated, so us people have have including each just taker, concentration permanently. maybe category, optical. the share as temporarily, somebody is a

Simon Leopold

And just Thank you. then clarification. a quick

quarter you full in year achieved XX% a for to fourth still I of the the your the be XX% XX% to outlook ICEX us the the past, give to target and quarter, have for do this or the for in And full you XX%? year. believe, given target think you for is I it revision that revenue, XX%

David Heard

No, XX%, also why X we question the year XX% having this we're at March somebody Day, on That's Investor call, had on mentioned OFC. it's to guidance. and full then still our

we'll those give So all like metrics did. to you we try

nice did going ramp iX. what "Hey, saying, job think a we're here's this we I to year, of for

with going to what's happen Here's pluggables.

with margins. Here's what's happen going to operating

Here's supply what believe the chain we drag will be.

X San We in detail on will Diego. the give of kind March same

Simon Leopold

you. there. Thank be I'll Great.

David Heard

All right. look to We forward it.

Operator

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

Your line is open.

Meta Marshall

a the Great. Thanks. Maybe chain a just on minute. bearing for supply bit in

little products products -- where the formed a get unavailable bit a higher project-based kind your expected? And became trying that Just bit than what supply a did quarter, what second, were weaker. this that fees that little Just complicated to of in the business became a I different of happened script. then the take of you sense the macro were you there just there's of chain where versus what quarter? there, but lumpiness understand international mention context during kind more they're in broker up obviously Just expecting? about is

just wondering of kind so Thanks. it European any me. And if of the base? kind your with of had for an strength impact That’s customer dollar

David Heard

questions through. to go both No, excellent

I basis, demand. the to think on macro back

seen general, we far, We're significant. make so in Now I'll comment about anything providers haven't a spend. service maybe

ICPs their data grow continuing center. are think I to in

saw numbers think what I are. you Meta's CapEx

subsea cables center growth to has continue. data expect in the continue We to

partnering And when We long have see very been under get you're because sea, good planning base. we've client our as those cables projects with we to insight into those. are the that

gives us CapEx implementation be more prepared primarily the said, When a a on bit first look, So to the going very and of be XG. confidence continue of you radio focused in CapEx the prioritized. CSPs, from spend have of remarks to most they're think will largest little fiber fiber, tends XG to that heavy implementation. CSPs that them our on

of fees there. Obviously, you broker time costs actually a going seen of a From little be one trend company. the fees make we went we're fiber tell in grew And fiber, chain XX% supply you've the Supply so terms fees. in that announced two announced really conservative economy, perspective, with Warsaw investment but strong transportation and expedite is year-over-year. implementation revenue one too, they're to and up the if is chain a They spend means, to thesis the Corning seeing be bumpy I'll this on product is Arizona big that continued means intensity a which very this. factories,

is ICEX, good make our also large more So to under a was in The we lot integration. was do to order our vertical own portion available. of it our had news which that, a supply

control. bit little of our a own So

to XX those their continue we to still geometries up X and are back ease see parts again We to older expect are this of or vendors still to that the on analog next technologies. the X half capacities Those in XX biting ramping industry, in and fab year.

Nancy Erba

our expenses certainly there. natural both FX call say $X quarter-over-quarter terms in impact I Yeah. year-over-year, And we have the a on million-ish, revenue, on modest of would the hedge a on but quarter-over-quarter, and it,

$X So neutral net-net, almost was it million impact. to

not So not would anything -- that ensure change.

Meta Marshall

you. Thank Great.

David Heard

Thank you.

Operator

Capital. comes line of Loop question Najam next the Fahad with from Your

Your line is open.

Fahad Najam

my question. Is why to the you products? are why most thank -- revenue you to your ICEX, guys not the you wins share it they Hey, still are are if are the that for then XX% of in legacy ICEX still Clarification first, in you share, XX%. David, contribution taking taking more maintaining not are

David Heard

mean, terms basis if competition most down the I even you the follow you again, weighted I down probably significantly think of when terms revenue of at mean, that profit I I their this stuff a percentages. and is competition, year-over-year average math, in of do the on look in closer No. gross

So all competition and by revenue product up don't I the know I XX%, there. believe in in by is up X%, we're is

even yet. metro, major and So when gains. their gaining pluggables share the report and If on both ICEX, well think we're unleashed the way, the own market haven't DOs as the our I competitors that's, we in and by are others be down our we'll share. up, as And long-haul

Fahad Najam

it If step to spending, you taking you it. your even XXX-gig in and real I bring R&D sequentially face development. VR plan inflation, mentioned back leadership in Got a on I role if down question, a the that managed the to you of at worsening look take

How the of yet this inflationary going down environment. a to number your still ahead got of an to competition? spend R&D sustain managing you is of think are You've you're and R&D you, coming face that keep adverse ahead in

David Heard

what circuits or assembly like how which which big well largest the optical same We as or the own the of We're X.X portion our ICEX, TROSA, integrated the transmit we build is gig XxXXX Those do terabit can as integrated transponders gig, vertically systematically pluggable. is our is, that's receive Yeah. integrated. product develop circuit. XXX

development So in that allows to kind us our platform of be efficient development.

Now, some on other development of and positive a the relief others for some our system some but we we of do our side software because in have that, jurisdictions, FX not amount. tremendous of had

Again, those we're in customer. just Why? and we've our we've channel but continue much to we relationships the if to gain R&D And having about our invest going product a simplified with year, areas. well in as set, expand sales there more critical it's in to be taken have to the as being investments. it's able portfolio about the again, going go-to-market said share, product, you're Next will to not

Fahad Najam

BOFC, I role? does leadership outlook and these intensity the R&D of realize that ambitions XXXX sales all to the give projects spending to full think do and for you're but on year increase your and lead on at going at that question, your you likely sustaining new to is your marketing you as look

David Heard

Yeah.

by the on you're as well. it think increase. see there's inflation going to way, going I And too some overall,

well and ready to the we've you'll but to good we to operating specific and the faster in news intend down doing So faster the good in where than mentioned feel inflationary of that's the for what accretion been this and position the is market. that's that terms earlier both market do. just level impact, margin leverage, last nail see probably Nancy as we yeah, gross level, we not as growing being three bottom-line being years, we the news on intend numbers, news about than Good what good our invest, market. We're the grow

Fahad Najam

the answers. you. Appreciate Excellent. Thank

Operator

Your line Citigroup. the of comes from Suva next with Jim question

Your line is open.

Jim Suva

you. help actually understand, a are just different In or like Have they parts trying that worse chain. or better? things get supply you your than I'm Thank better talked final to just about is And comments, prepared is it gotten

David Heard

capacity. order The and sure to to supply lightning again, we expedite through just meet are of in Both. by as pay people the costs needed Yes, was And to beginning see building that line the same And points, fees next things are the in of robust now what that, geometries a that with so requirements components half it, in dynamic. out we economy. We the revenue in did for of We process more to work both. focused us demand other be quarters XXX place of of breakers a we effective expect than and don't big as see -- where general in environment like that call from chain some make acute components product year. that in the that We number we and went was there QX that the expected late get was up through lightens. to very and the number systems expansionary three older free back capacity for again overall demand consumer backlog growth. basis XX% more see up still

Jim Suva

expense this the basis follow-up as is a for good Fed Okay. have Nancy XX number Interest modeling this increased so by you rates my of current or upward on. interest continue course on Then that going is probably. points quarter we run rate forward, more expense

Nancy Erba

No.

In fact, the we're done really we XX did. got the glad of refinance we converts when

be but quarter, The should we keep at interest are. and drawn you the ABL, utilize they is rates, only today would flow would a needs, of working if that capital for and basis temporary as anything So those there have ABL. be that don't ebb end the on but the we of on as

Jim Suva

Great. Thanks clarifications. much for the so

David Heard

you. Thank

Operator

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

line is Your open.

George Notter

Hi. lot, mix the wanted I products. of to guys. Thanks about integrated ask a vertically

an greater of the But was than vertically do said have you overall XX%. for you the mix think products? I ICEX integrated number

Nancy Erba

to XX. Yes, it was close

George Notter

Great. Okay. then.. And

Nancy Erba

Yes.

George Notter

you quarter, XX-week it what's XX-week referencing the end. I -- kept to or the quarter about suggesting quarter? also a ask wanted was XX guys September Was Are you that? also in it I unique about

Nancy Erba

the timing. just It XX-week a was quarter. was It

a We this XX weeks quarter. going are into

So this in December quarter will XX.

George Notter

Got it.

appreciate Okay. Super. Thank it. you very much. I

Operator

with the comes of Chatterjee next Samik JPMorgan. Your line from question

Your line is open.

Angela Jin

just one Angela for Jin on Chatterjee. is This question. Hi. I have Samik

how you for order ahead just Could growth expect to XQ to revenue trend sort your verticals? thinking customer So maybe rank XXXX. you of, in

David Heard

a scale but tell QX. X one to nothing be provider to just mix number as to next complete tough do. kind Finance's A is not have lot Tier do the probably quarter. That get underway. for to going do strong of you'll normalized I'll for we've year, going us. of for service to beginning are recognition that see ordinary I ICPs that and But of with certifications that to continue to of continue guidance revenue has be we pretty very the in US QX, you, believe in out projects up when contemplated QX,

Angela Jin

Okay. Thank you.

Operator

next Your comes Instructions] of the with question Needham. line [Operator Alex from Henderson

open. is line Your

Alex Henderson

you. Thank Great.

the to to wanted increases math I up. I get absorbed worth back over I million normal. go comment the about chain but also that certainly understand $XX supply this year, are prices So of going that for cost

or of So, normalized the cause increases there to improves benefit. that are will chain anticipating we the as price would into when basis next costs points through margins, effective the four, some but out you falls five up XXX that to go quarters, three, that see offset and look the that supply you're gross

David Heard

job question. added prior mentioned in good supply is happens, our a next in it's think chain calls, plans, million in we've it our Yes, offset that of this we've $XX When excess to costs year. contemplated I for

$XX we said be million right. But go we remember, absolutely next it would -- $XX year. So, thought this from XX-ish to to you're year million Alex,

or price Some suppliers ahead to to are and up going there. here go

supply i.e., continue back. those adjustments get contemplate Our reduction arrangements, expect that have annual also we pricing do I we'll if our guidance in into to down. go like should We've initiatives things And we're Xth. that detail that the that with suppliers March made that to go chain drive to not our can call. going job cost we commercial when do begins We is to to go into and mitigate. in year all this that next marketplace of be the for able through on turn,

Alex Henderson

expenses. point to XQ in if would that of and three conceptually, basis and say, some and that year, were the in bottom gross take sales quarter third to of hypothetically, the to the So, that reinvest take a of you the we marketing line, quarters be fall next to margins majority out, fall see XXX or into hit other would out it of expected strategy R&D,

David Heard

what That's a that through said… good yes, we conceptually mean, Yes. question we'll right. I go it,

Alex Henderson

forecast your In

David Heard

R&D pluggables, okay. to we've vertically this what it's vertical this No, pluggables pretty view asset is that increasing Conceptually based because our US we no, pluggables said, we XXX-gig got we going XXX-gig and for integrated integration XXX-gig be powerful. are again,

never And had going well we've So and to marketing. you see a in will sales for as as and see need step go supply been invest has in confidence subsea there you're transponders diversity as well up open for and better long-haul continue us product the and dynamics do have never to been because the has never that, to there. line the honestly, as industry the shape chain

year-after-year is we'll and we contemplation continue while to have grow do that, we yes, to sales our that. And do continue while expand So margins it. R&D, to and we marketing

that talk XXXX, in come will will And so products more some of from And XXXX, come leverage, from that's I see about that to give of but I integrated. but then some any vertically won't going operating XXXX.

well our that As you're to operating continued of point margin products, But investment kick marketing say, as the pluggables than more I'd to as and well well we of R&D. and see become system there leverage. marketing though. have our continue in R&D own with sales the going do as of next platform more intensity metro sales as as

Alex Henderson

one clarification the earlier. just from on comment And R&D

out. fall caused While actually costs big and it's and I have lot down of prototype that guess from of down sequentially declines year-over-year, you that sort when a things they

you looks R&D to will that the in As that Is about for fourth up meaningful I R&D, look the way a in R&D increase which would good the like of spend chunk I it the at right And the here think in at go year. quarter, the is December bit sequentially. put a quarter? assume quite

David Heard

we said beginning is. and to generally were in samples certification. back the we go It -- It the half of get through year trends you as out splitting

get our So head got we an benefit gross increase that bit continue as increase it happens next It's albeit while not income next operating will expected. a the of on our but for into from of little QX. start year. we you a still FX, increase in nailed increase we a probably and margins to it everybody as year, Again,

Nancy Erba

step see the with with that QX well. commissions also bookings planned In you'll as QX, up also for

Alex Henderson

and the line, So am right? sales commissions marketing are in I

David Heard

Correct.

Nancy Erba

Correct. in talking were OpEx We about total.

Alex Henderson

understand I Okay.

David Heard

Thanks, Alex.

Operator

to of turn like call Heard, for David CEO, remarks. closing to back There the are further I'd no questions. Q&A End

David Heard

No, questions. I good, difficult appreciate there, it's know I a Really going it. a lot solid market on. out

our given beat relatively guidance trying and prior environment. chain we're And of which expectations is a growth midpoint product met we delivered things quarter concise. revenue expectations. had tremendous XX% keep that QX the Overall, So to supply the

with of strong three down first revenue heads our growing was in like get three to XX%. last drag, double at there you this execute a our we environment the product So revenue for expanded that. operating over growth, backdrop, while X% while with the We've total We that and the services total year quarters quarter, year-over-year to still quarters macro margins, tough that. saw ready and delivered do

the So that efficiency and bottom do we drive while to we're drive really line. to things trying that

So look, our strategy is working.

gone the CapEx lots very through do. We are and and power, team to laser through earnings we fiber focused of focused, demand great wars. no our through there's thank news share what We've that specialty. $X we're on But things is of recession the want gone build-outs, we've driving through. pandemics. really be pun that makes to going on a fiber mean Infinera their for We've go gone The that seems that's intended are dedication. -- well. per I for And we now I in

stepping there's where integration to an We that And architecture away, open Huawei got there. insert have matters to. vertical for us environment an we've

March on detailed it helmets in down, going And call look, our on, look to So pieces the not our strategy deeper into Investor answering and heads the execute. diving you're all questions Day see you're have heads in going down we to to and forward to X.

see and support. to you OFC families. appreciate of there Thanks. your Diego. at Take So care your yourselves we We hope San

Operator

call. conference today's concludes This

disconnect. may You now

Infinera (INFN) 3 Nov 222022 Q3 Earnings call transcript