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Infinera Corporation Reports Fourth Quarter And Fiscal Year 2014 Financial Results

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Infinera Corporation, provider of Intelligent Transport Networks, today released financial results for the fourth quarter and fiscal year ended December 27, 2014.

Revenue for the quarter was $186.3 million compared to $173.6 million in the third quarter of 2014 and $139.1 million in the fourth quarter of 2013.

GAAP gross margin for the quarter was 45.3% compared to 43.4% in the third quarter of 2014 and 40.2% in the fourth quarter of 2013. GAAP operating margin was 6.9% in the fourth quarter of 2014 compared to 4.3% in the third quarter of 2014 and an operating loss of 5.1% in the fourth quarter of 2013.

GAAP net income for the quarter was $8.4 million, or $0.06 per diluted share, compared to net income of $4.8 million, or $0.04 per diluted share, in the third quarter of 2014 and a net loss of $10.2 million, or $0.08 per share, in the fourth quarter of 2013.

Non-GAAP gross margin for the quarter was 46.1% compared to 44.2% in the third quarter of 2014 and 41.4% in the fourth quarter of 2013. Non-GAAP operating margin for the fourth quarter of 2014 was 11.0% compared to 8.6% in the third quarter of 2014 and 0.8% in the fourth quarter of 2013.

Non-GAAP net income for the quarter was $18.0 million, or $0.13 per diluted share, compared to net income of $14.2 million, or $0.11 per diluted share, in the third quarter of 2014 and a net loss of $0.2 million, or breakeven on an earnings per share basis, in the fourth quarter of 2013.

Revenue for the year was $668.1 million compared to $544.1 million in 2013.

GAAP gross margin for the year was 43.2% compared to 40.2% in 2013. GAAP operating margin for the year was 4.1% compared to an operating loss of 4.5% in 2013. GAAP net income for the year was $13.7 million or $0.11 per diluted share, compared to a net loss of $32.1 million or $0.27 per share in 2013.

Non-GAAP gross margin for the year was 44.0% compared to 41.6% in 2013. Non-GAAP operating margin for the year was 8.3% compared to 1.4% in 2013. Non-GAAP net income for the year was $49.8 million or $0.39 per diluted share, compared to net income of $4.0 million or $0.03 per diluted share in 2013.

The above non-GAAP measures exclude non-cash stock-based compensation expenses and the amortization of debt discount on Infinera’s convertible senior notes. A further explanation of the use of non-GAAP financial information and a reconciliation of the non-GAAP financial measures to the GAAP equivalents can be found at the end of this release.

“The fourth quarter capped off an exceptional year of winning footprint, taking care of customers and increasing profitability. Growing greater than 20% for a second consecutive year demonstrates the market’s acceptance of our differentiated products and the overall Infinera experience,” said Tom Fallon, Infinera’s Chief Executive Officer. “As we evolve from a single-threaded product company to an end-to-end optical solutions company, I believe Infinera is better positioned than ever to serve more customers and address more opportunities.”

Infinera Corporation       
GAAP Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited)

                         Three Months Ended          Twelve Months Ended
                     --------------------------  --------------------------
                     December 27,  December 28,  December 27,  December 28,
                         2014          2013          2014          2013
                     ------------  ------------  ------------  ------------
Revenue:
  Product            $    158,492  $    115,102  $    572,276  $    465,424
  Services                 27,814        23,990        95,803        78,698
                     ------------  ------------  ------------  ------------
    Total revenue         186,306       139,092       668,079       544,122

Cost of revenue:
  Cost of product          89,809        73,385       340,856       295,715
  Cost of services         12,154         9,795        38,919        29,768
                     ------------  ------------  ------------  ------------
    Total cost of
     revenue              101,963        83,180       379,775       325,483

Gross profit               84,343        55,912       288,304       218,639
Operating expenses:
  Research and
   development             37,349        30,859       133,484       124,794
  Sales and
   marketing               22,288        19,857        79,026        72,778
  General and
   administrative          11,840        12,277        48,452        45,253
                     ------------  ------------  ------------  ------------
    Total operating
     expenses              71,477        62,993       260,962       242,825

Income (loss) from
 operations                12,866        (7,081)       27,342       (24,186)

Other income
 (expense), net:
  Interest income             410           287         1,456           923
  Interest expense         (2,835)       (2,634)      (11,021)       (6,061)
  Other gain (loss),
   net                       (348)         (336)       (1,365)       (1,141)
                     ------------  ------------  ------------  ------------
    Total other
     income
     (expense), net        (2,773)       (2,683)      (10,930)       (6,279)

Income (loss) before
 income taxes              10,093        (9,764)       16,412       (30,465)
Provision for income
 taxes                      1,683           414         2,753         1,654
                     ------------  ------------  ------------  ------------
Net income (loss)    $      8,410  $    (10,178) $     13,659  $    (32,119)
                     ============  ============  ============  ============

Net income (loss)
 per common share:
  Basic              $       0.07  $      (0.08) $       0.11  $      (0.27)
                     ============  ============  ============  ============
  Diluted            $       0.06  $      (0.08) $       0.11  $      (0.27)
                     ============  ============  ============  ============
Weighted average
 shares used in
 computing net
 income (loss) per
 common share:
  Basic                   125,830       119,743       123,672       117,425
                     ============  ============  ============  ============
  Diluted                 133,072       119,743       128,565       117,425
                     ============  ============  ============  ============
 Infinera Corporation
GAAP to Non-GAAP Reconciliations
(In thousands, except percentages and per share data)
(Unaudited)
                           Three Months Ended          Twelve Months Ended
                    -------------------------------   --------------------
                     December  September   December    December   December
                       27,        27,        28,         27,        28,
                       2014       2014       2013        2014       2013
                    ---------  ---------  ---------   ---------  ---------
Reconciliation of
 Gross Profit:
U.S. GAAP as
 reported           $  84,343  $  75,302  $  55,912   $ 288,304  $ 218,639
Stock-based
 compensation(1)        1,472      1,491      1,695       5,607      7,496
                    ---------  ---------  ---------   ---------  ---------
Non-GAAP as
 adjusted           $  85,815  $  76,793  $  57,607   $ 293,911  $ 226,135
                    =========  =========  =========   =========  =========
Reconciliation of
 Gross Margin:
U.S. GAAP as
 reported                45.3%      43.4%      40.2%       43.2%      40.2%
Stock-based
 compensation(1)          0.8%       0.8%       1.2%        0.8%       1.4%
                    ---------  ---------  ---------   ---------  ---------
Non-GAAP as
 adjusted                46.1%      44.2%      41.4%       44.0%      41.6%
                    =========  =========  =========   =========  =========
Reconciliation of
 Income (Loss) from
 Operations:
U.S. GAAP as
 reported           $  12,866  $   7,480  $  (7,081)  $  27,342  $ (24,186)
Stock-based
 compensation(1)        7,547      7,371      8,174      28,394     31,976
                    ---------  ---------  ---------   ---------  ---------
Non-GAAP as
 adjusted           $  20,413  $  14,851  $   1,093   $  55,736  $   7,790
                    =========  =========  =========   =========  =========
Reconciliation of
 Operating Margin:
U.S. GAAP as
 reported                 6.9%       4.3%      (5.1)%       4.1%      (4.5)%
Stock-based
 compensation(1)          4.1%       4.3%       5.9%        4.2%       5.9%
                    ---------  ---------  ---------   ---------  ---------
Non-GAAP as
 adjusted                11.0%       8.6%       0.8%        8.3%       1.4%
                    =========  =========  =========   =========  =========
Reconciliation of
 Net Income (Loss):
U.S. GAAP as
 reported           $   8,410  $   4,843  $ (10,178)  $  13,659  $ (32,119)
Stock-based
 compensation(1)        7,547      7,371      8,174      28,394     31,976
Amortization of
 debt discount(2)       2,006      1,956      1,814       7,730      4,164
                    ---------  ---------  ---------   ---------  ---------
Non-GAAP as
 adjusted           $  17,963  $  14,170  $    (190)  $  49,783  $   4,021
                    =========  =========  =========   =========  =========
Net Income (Loss)
 per Common Share -
 Basic:
U.S. GAAP as
 reported           $    0.07  $    0.04  $   (0.08)  $    0.11  $   (0.27)
                    =========  =========  =========   =========  =========
Non-GAAP as
 adjusted           $    0.14  $    0.11  $       -   $    0.40  $    0.03
                    =========  =========  =========   =========  =========
Net Income (Loss)
 per Common Share -
 Diluted:
U.S. GAAP as
 reported           $    0.06  $    0.04  $   (0.08)  $    0.11  $   (0.27)
                    =========  =========  =========   =========  =========
Non-GAAP as
 adjusted(3)        $    0.13  $    0.11  $       -   $    0.39  $    0.03
                    =========  =========  =========   =========  =========
Weighted Average
 Shares Used in
 Computing Net
 Income (Loss) per
 Common Share -
 U.S. GAAP:
Basic                 125,830    124,378    119,743     123,672    117,425
                    =========  =========  =========   =========  =========
Diluted               133,072    128,964    119,743     128,565    117,425
                    =========  =========  =========   =========  =========
Weighted Average
 Shares Used in
 Computing Net
 Income (Loss) per
 Common Share -
 Non-GAAP:
Basic                 125,830    124,378    119,743     123,672    117,425
                    =========  =========  =========   =========  =========
Diluted(3)            133,072    128,964    125,134     128,565    122,167
                    =========  =========  =========   =========  =========
    ------------------------------------------------------------------------
(1) Stock-based compensation expense is calculated in accordance with the
    fair value recognition provisions of Financial Accounting Standards
    Board Accounting Standards Codification Topic 718, Compensation-Stock
    Compensation effective January 1, 2006. The following table summarizes
    the effects of stock-based compensation related to employees and non-
    employees (in thousands):

                                 Three Months Ended      Twelve Months Ended
                           ----------------------------- -------------------
                            December September  December  December  December
                              27,       27,       28,       27,       28,
                              2014      2014      2013      2014      2013
                           --------- --------- --------- --------- ---------
Cost of revenue            $     500 $     492 $     489 $   1,921 $   1,871
Research and development       2,439     2,270     2,725     8,927    10,900
Sales and marketing            1,960     1,982     1,965     7,477     7,624
General and administration     1,676     1,628     1,789     6,383     5,956
                           --------- --------- --------- --------- ---------
                               6,575     6,372     6,968    24,708    26,351
Cost of revenue -
 amortization from balance
 sheet*                          972       999     1,206     3,686     5,625
                           --------- --------- --------- --------- ---------
Total stock-based
 compensation expense      $   7,547 $   7,371 $   8,174 $  28,394 $  31,976
                           ========= ========= ========= ========= =========
    ------------------------------------------------------------------------
    * Stock-based compensation expense deferred to inventory and deferred
    inventory costs in prior periods and recognized in the current period.

(2) Under GAAP, certain convertible debt instruments that may be settled in
    cash on conversion are required to be separately accounted for as
    liability (debt) and equity (conversion option) components of the
    instrument in a manner that reflects the issuer's non-convertible debt
    borrowing rate. Accordingly, for GAAP purposes, Infinera is required to
    amortize as a debt discount an amount equal to the fair value of the
    conversion option that was recorded in equity as interest expense on its
    $150 million 1.75% convertible debt issuance in May 2013 over the term
    of the notes. These amounts have been adjusted in arriving at Infinera's
    non-GAAP results because management believes that this non-cash expense
    is not indicative of ongoing operating performance and provides a better
    indication of Infinera's underlying business performance.

(3) Diluted shares used to calculate net loss per share on a non-GAAP basis
    provided for informational purposes only.
Infinera Corporation
Condensed Consolidated Balance Sheets
(In thousands, except par values)
(Unaudited)
                                                 December 27,  December 28,
                                                     2014          2013
                                                 ------------  ------------
ASSETS
Current assets:
  Cash and cash equivalents                      $     86,495  $    124,330
  Short-term investments                              239,628       172,660
  Accounts receivable, net of allowance for
   doubtful accounts of $38 in 2014 and $43 in
   2013                                               154,596       100,643
  Inventory                                           146,500       123,685
  Prepaid expenses and other current assets            24,636        17,752
                                                 ------------  ------------
    Total current assets                              651,855       539,070

Property, plant and equipment, net                     81,566        79,668
Long-term investments                                  59,233        64,419
Cost-method investment                                 14,500         9,000
Long-term restricted cash                               5,460         3,904
Other non-current assets                                5,402         4,865
                                                 ------------  ------------
    Total assets                                 $    818,016  $    700,926
Wahengbam Rorrkychand

View all contributions by Wahengbam Rorrkychand

Website: http://www.blog.tonsetelecom.com

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