-- GAAP revenues for the second quarter of 2008 were $161.1 million compared to $138.3 million in the first quarter of 2008 and $58.4 million in the second quarter of 2007. -- GAAP gross margins were 50% in the second quarter of 2008 compared to 45% in the first quarter of 2008 and 28% in the second quarter of 2007. -- Including non-cash stock-based compensation and warrant valuation expenses, GAAP net income was $42.9 million, or $0.44 per diluted share, in the second quarter of 2008 compared to $27.6 million, or $0.29 per share, in the first quarter of 2008 and a GAAP net loss of $26.1 million, or $1.10 per share, in the second quarter of 2007.Adjusted GAAP / Invoiced Shipment Results:
-- Adjusted GAAP revenue for the second quarter of 2008 was $90.8 million compared to $95.5 million of invoiced shipments in the first quarter of 2008 and $69.0 million of invoiced shipments in the second quarter of 2007. -- Gross margins on an adjusted GAAP basis, excluding non-cash stock-based compensation, were 47% in the second quarter of 2008 compared to 45% in the first quarter of 2008 and 37% in the second quarter of 2007. -- Excluding non-cash stock-based compensation and warrant valuation expenses, the net income on an adjusted GAAP basis was $10.7 million, or $0.11 per diluted share, for the second quarter of 2008 compared to net income on an invoiced shipments basis of $12.6 million, or $0.13 per diluted share, in the first quarter of 2008 and $2.7 million, or $0.04 per share, in the second quarter of 2007. Footnote: For an explanation of our use of Adjusted GAAP and Invoiced Shipments measures and a full reconciliation of these measures to our GAAP results, please see the section of the accompanying tables titled "GAAP to Non-GAAP Invoiced Shipment and Adjusted GAAP Reconciliation"Management Commentary "Our second quarter results reflect strong shipments of both our chassis and tributary adapter modules," said Jagdeep Singh, president and chief executive officer of Infinera. "We grew revenues from international customers to 22 percent and added two new customers in the quarter to bring our total roster to 44. We generated operating profits and cash from operations while maintaining our investments to expand our technology lead as the world's leading optical network based on photonic integration. "We are committed to growing our business within markets where we have established a beach-head and to continue expanding our customer base in both existing and new markets. We have identified our highest growth opportunities -- international markets, global tier 1 carriers, new adjacent markets including metro access and ultra long haul, and under-penetrated North American markets. We are implementing strategic initiatives to expand share in each of these market segments." Singh noted several second quarter performance highlights:
-- Deutsche Telekom selected Infinera for its long haul DWDM Pan European network, representing a major Tier one incumbent win for Infinera. -- Three customers -- Level 3, Cox Communications and Global Crossing -- were each 10 percent or greater of revenue, versus four such customers in Q1. -- Infinera announced several important technology advances, including: -- The new next-generation Infinera ILS2 line system with up to 160 DWDM channels in the C-band and future scalability of 8 Terabits/second of total capacity. -- Two new passive photonic integrated circuits (PICs) that integrate passive devices such as multiplexers, interleavers, variable optical attenuators and waveguides, and play key roles in routing and filtering DWDM wavelengths in the ILS2 system. -- A 100 Gigabit Ethernet (100 GbE) demonstration, in collaboration with XO Communications, Avago Technologies and Ixia, that sent 100 GbE traffic over a long-haul network and demonstrated progress towards making 100 GbE products and services a commercial reality in the future.Conference Call Information: Infinera will host a conference call for analysts and investors to discuss its second quarter results today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). A live webcast of the conference call will also be accessible from the "Investor Relations" section of the company's website at www.infinera.com. Following the webcast, an archived version will be available on the website for 30 days. To hear the replay, parties in the United States and Canada should call 1-866-503-3213. International parties can access the replay at +1-203-369-1862. About Infinera Infinera provides Digital Optical Networking systems to telecommunications carriers worldwide. Infinera's systems are unique in their use of a breakthrough semiconductor technology: the Photonic Integrated Circuit (PIC). Infinera's systems and PIC technology are designed to provide optical networks with simpler and more flexible engineering and operations, faster time-to-service, and the ability to rapidly deliver differentiated services without reengineering their optical infrastructure. For more information, please visit www.infinera.com. Forward-Looking Statements - This press release contains forward-looking statements, including statements relating to Infinera's ability to change the economics of optical communications networks and design products that are flexible and economical for our customers, our belief that we will be able to expand our technology lead as the world's leading optical network based on photonic integration, our belief we will be able to grow our business within existing markets and to continue expanding our customer base in both existing and new markets, future benefits and scalability of our products, including the future scalability of 8 Terabits/second of total capacity for our ILS2 system, and our belief that our recent demonstration shows progress towards making 100 GbE products and services a commercial reality in the future. These forward-looking statements involve risks and uncertainties, as well as assumptions that if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include our ability to react to trends and challenges in our business and the markets in which we operate; our ability to anticipate market needs and develop new or enhanced products to meet those needs; the adoption rate of our products; our ability to establish and maintain successful relationships with our customers; our ability to reduce customer concentration; our ability to compete in our industry; fluctuations in demand, sales cycles and prices for our products and services; shortages or price fluctuations in our supply chain; our ability to protect our intellectual property rights; general political, economic and market conditions and events; and other risks and uncertainties described more fully in our documents filed with or furnished to the Securities and Exchange Commission (SEC). More information about these and other risks that may impact Infinera's business are set forth in our annual report on Form 10-K, which was filed with the SEC on February 19, 2008, as well as subsequent reports filed with the SEC. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements. Non-GAAP and other Financial Measures In addition to disclosing financial measures prepared in accordance with United States Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain certain non-GAAP and other financial measures that reflect invoiced shipments, adjusted GAAP revenue and exclude non-GAAP non-cash stock-based compensation and warrant valuation expenses. For a description of these non-GAAP financial measures, including the reasons why management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled "GAAP to Non-GAAP Invoiced Shipment and Adjusted GAAP Reconciliation" as well as the accompanying notes on the use of certain non-GAAP measures. We anticipate disclosing forward-looking non-GAAP and other financial information in our conference call to discuss our second quarter of 2008 results, including an estimate of adjusted GAAP earnings for the third quarter of 2008 that excludes revenues and costs previously recognized on an invoiced shipments basis and non-GAAP non-cash stock-based compensation expenses related to our equity awards and the right to purchase common stock under our Employee Stock Purchase Plan in the period. A copy of this press release can be found on the investor relations page of Infinera's website at www.infinera.com. Infinera Corporation and the Infinera logo are trademarks or registered trademarks of Infinera Corporation. All other trademarks used or mentioned herein belong to their respective owners.
Infinera Corporation GAAP Condensed Consolidated Statements of Operations (In thousands, except share data) (Unaudited) Three Months Ended Six Months Ended --------------------- -------------------- June 28, June 30, June 28, June 30, 2008 2007 2008 2007 ---------- --------- --------- --------- Revenue: Ratable product and related support and services $ 69,581 $ 54,411 $ 141,967 $ 100,358 Product 86,505 4,005 150,633 7,250 Services 5,023 - 6,762 - ---------- --------- --------- --------- Total revenue 161,109 58,416 299,362 107,608 Cost of revenue (1): Cost of ratable product and related support and services 32,169 39,748 68,000 75,658 Cost of product 47,124 2,488 86,789 3,851 Cost of services 2,032 - 3,222 - ---------- --------- --------- --------- Total cost of revenue 81,325 42,236 158,011 79,509 Gross profit 79,784 16,180 141,351 28,099 Operating expenses (1): Sales and marketing 10,860 6,401 21,106 14,037 Research and development 17,787 14,079 36,080 30,137 General and administrative 8,502 5,358 16,919 10,915 Amortization of intangible assets 37 37 74 74 ---------- --------- --------- --------- Total operating expenses 37,186 25,875 74,179 55,163 Income (loss) from operations 42,598 (9,695) 67,172 (27,064) Other income (expense), net: Interest income 2,258 729 5,561 914 Interest expense 0 (1,119) (3) (2,182) Other gain (loss), net (2): 296 (15,978) 1,176 (17,515) ---------- --------- --------- --------- Total other income (expense), net 2,554 (16,368) 6,734 (18,783) Income (loss) before provision for income taxes 45,152 (26,063) 73,906 (45,847) Provision for income taxes 2,267 33 3,427 62 ---------- --------- --------- --------- Net income (loss) $ 42,885 $ (26,096) $ 70,479 $ (45,909) ========== ========= ========= ========= Net income (loss) per common share Basic $ 0.47 $ (1.10) $ 0.77 $ (2.94) ========== ========= ========= ========= Diluted $ 0.44 $ (1.10) $ 0.73 $ (2.94) ========== ========= ========= ========= Weighted average shares used in computing net income (loss) per common share Basic 92,124 23,678 91,687 15,620 ========== ========= ========= ========= Diluted 97,284 23,678 96,988 15,620 ========== ========= ========= ========= (1) The following table summarizes the effects of stock-based compensation related to employees, non-recourse notes and non-employees for the three months ended June 28, 2008 and June 30, 2007: Three Months Ended Six Months Ended --------------------- -------------------- June 28, June 30, June 28, June 30, 2008 2007 2008 2007 ---------- --------- --------- --------- Cost of revenue $ 271 $ 94 $ 479 $ 111 Research and development 1,629 1,014 2,852 1,323 Sales and marketing 1,164 346 2,014 433 General and administration 2,072 685 3,574 903 ---------- --------- --------- --------- 5,136 2,139 8,919 2,770 Cost of revenue - amortization from balance sheet* 1,219 27 2,369 40 ---------- --------- --------- --------- Total stock-based compensation expense $ 6,355 $ 2,166 $ 11,288 $ 2,810 ========== ========= ========= ========= * Stock-based compensation expense deferred to inventory and to deferred inventory costs in prior periods and recognized in the current period. (2) The following table summarizes the remeasurement of our freestanding preferred stock warrants under FAS 150: Three Months Ended Six Months Ended --------------------- -------------------- June 28, June 30, June 28, June 30, 2008 2007 2008 2007 ---------- --------- --------- --------- Other gain (loss) $ - $ (17,261) $ - $ (19,761) Infinera Corporation GAAP to Non-GAAP Invoiced Shipment and Adjusted GAAP Reconciliation (In thousands, except per share data) (Unaudited) Three Months Ended June 28, 2008 ------------------------------------------------------ Adjusted Adjusted GAAP Adjusted GAAP Excluding Deferral GAAP Stock Stock GAAP Adjustments Results Comp Comp -------- -------- -------- -------- -------- Revenue Product and ratable revenue $156,086 $(70,349)(a) $ 85,737 $ - $ 85,737 Services revenue 5,023 - 5,023 - 5,023 -------- -------- -------- -------- -------- Total revenue 161,109 (70,349) 90,760 - 90,760 Cost of revenue 81,325 (32,090)(c) 49,235 (1,176)(e) 48,059 -------- -------- -------- -------- -------- Gross profit 79,784 (38,259) 41,525 1,176 42,701 Gross margin 50% 47% Operating expenses 37,186 - 37,186 (4,865)(e) 32,321 -------- -------- -------- -------- -------- Income (loss) from operations 42,598 (38,259) 4,339 6,041 10,380 Other income (expense), net 2,554 - 2,554 - 2,554 -------- -------- -------- -------- -------- Income (loss) before provision for income taxes 45,152 (38,259) 6,893 6,041 12,934 Provision for income taxes 2,267 - 2,267 - 2,267 -------- -------- -------- -------- -------- Net income (loss) $ 42,885 $(38,259) $ 4,626 $ 6,041 $ 10,667 ======== ======== ======== ======== ======== Net income (loss) per common share: Basic $ 0.47 $ 0.12 ======== ======== Diluted $ 0.44 $ 0.11 ======== ======== Weighted average shares used in computing net income (loss) per common share: Basic 92,124 92,124 ======== ======== Diluted 97,284 97,284 ======== ======== Three Months Ended March 29, 2008 ------------------------------------------------------ Non-GAAP Invoiced Shipments Non-GAAP Excluding Deferral Invoiced Stock Stock GAAP Adjustments Shipments Comp Comp -------- -------- -------- -------- -------- Revenue Product and ratable revenue $136,514 $(42,747)(b) $ 93,767 $ - $ 93,767 Services revenue 1,739 1,739 - 1,739 -------- -------- -------- -------- -------- Total revenue 138,253 (42,747) 95,506 - 95,506 Cost of revenue 76,686 (23,022)(d) 53,664 (1,141)(e) 52,523 -------- -------- -------- -------- -------- Gross profit 61,567 (19,725) 41,842 1,141 42,983 Gross margin 45% 45% Operating expenses 36,993 - 36,993 (3,575)(e) 33,418 -------- -------- -------- -------- -------- Income (loss) from operations 24,574 (19,725) 4,849 4,716 9,565 Other income (expense), net 4,180 - 4,180 - 4,180 -------- -------- -------- -------- -------- Income (loss) before provision for income taxes 28,754 (19,725) 9,029 4,716 13,745 Provision for income taxes 1,160 - 1,160 - 1,160 -------- -------- -------- -------- -------- Net income (loss) $ 27,594 $(19,725) $ 7,869 $ 4,716 $ 12,585 ======== ======== ======== ======== ======== Net income (loss) per common share: Basic $ 0.30 $ 0.14 ======== ======== Diluted $ 0.29 $ 0.13 ======== ======== Weighted average shares used in computing net income (loss) per common share: Basic 91,250 91,250 ======== ======== Diluted 96,692 96,692 -------- -------- Infinera Corporation GAAP to Non-GAAP Invoiced Shipment and Adjusted GAAP Reconciliation (In thousands, except per share data) (Unaudited) Three Months Ended June 30, 2007 ------------------------------------------------------ Non-GAAP Invoiced Shipments Excluding Stock Stock Comp/ Comp/ Deferral Invoiced Warrant Warrant GAAP Adjustments Shipments Valuation Valuation -------- -------- -------- -------- -------- Revenue $ 58,416 $ 10,535 (b) $ 68,951 $ - $ 68,951 Cost of revenue 42,236 1,248 (d) 43,484 (169)(e) 43,315 -------- -------- -------- -------- -------- Gross profit 16,180 9,287 25,467 169 25,636 Gross margin 28% 37% Operating expenses 25,875 - 25,875 (2,045)(e) 23,830 -------- -------- -------- -------- -------- Income (Loss) from operations (9,695) 9,287 (408) 2,214 1,806 Other income (expense), net (16,368) - (16,368) 17,261 (f) 893 -------- -------- -------- -------- -------- Income (Loss) before provision for income taxes (26,063) 9,287 (16,776) 19,475 2,699 Provision for income taxes 33 - 33 - 33 -------- -------- -------- -------- -------- Net income (loss) $(26,096) $ 9,287 $(16,809) $ 19,475 $ 2,666 ======== ======== ======== ======== ======== Net income (loss) per common share: Basic $ (1.10) $ 0.11 ======== ======== Diluted $ (1.10) $ 0.04 ======== ======== Shares used in computing net income (loss) per common share: Basic 23,678 23,678 ======== ======== Diluted 23,678 59,284 ======== ========Use of Non-GAAP Invoiced Shipments / Adjusted GAAP Information: Prior to the second quarter of 2008, in order to supplement our condensed consolidated financial statements presented on a GAAP basis, Infinera used invoiced shipment measures of operating results and net income. Invoiced shipment measures reflected GAAP results adjusted for changes in our deferred revenue and deferred cost of inventory balances from the prior period. We further presented non-GAAP measures of operating results, net income and net income per share, which included invoiced shipments and excluded non-GAAP stock-based compensation expense and warrant valuation expense. These adjustments to our GAAP results were made to provide both management and investors with an understanding of Infinera's underlying operating results and trends as they would have been reflected had we established vendor specific objective evidence ("VSOE") of fair value for our service offerings and not been required to recognize revenue ratably. Effective April 2008, we had established VSOE of fair value for most of our service offerings. Therefore beginning in the second quarter of 2008, we have used adjusted GAAP measures of operating results and net income. Adjusted GAAP results reflect our GAAP results reduced for amounts released from deferred revenue and deferred cost of inventory balances recorded prior to the second quarter of 2008 and previously reported in our invoiced shipment results. Deferred services and deferred ratable and product revenue and cost amounts recorded after March 29, 2008 have not been adjusted and are recognized on a GAAP basis in arriving at the adjusted GAAP results. We have continued to present non-GAAP measures of operating results, net income and net income per share, which include adjusted GAAP results and exclude non-GAAP stock-based compensation expense. We believe these adjustments are appropriate to enhance an overall understanding of our underlying financial performance and also our prospects for the future and are considered by management for the purpose of making operational decisions. In addition, these results are the primary indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income or basic and diluted net income per share prepared in accordance with GAAP. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and are subject to limitations.
Infinera Corporation GAAP to Non-GAAP Invoiced Shipment and Adjusted GAAP Reconciliation (In thousands) Use of Non-GAAP Financial Measures (Continued): (a) Adjustment amount represents the release of ratable and product deferred revenue amounts related to periods prior to March 29, 2008 as these amounts have been previously reported as invoiced shipments. No adjustment has been made for changes in services deferred revenue as these amounts relate to future service deliverables and are appropriately deferred. Deferred ratable and product amounts recorded after March 29, 2008 have not been adjusted as these amounts are recognized on a GAAP basis in arriving at the adjusted GAAP results. The deferred revenue adjustments recorded above are reconciled to the deferred revenue balance on our balance sheet in the table below: Three Months Ended June 28, 2008 ----------------------------------- --------- Pre Mar 29, Post Mar 2008 29, 2008 Ratable and Ratable and Product Product Deferred Revenue Revenue Revenue Services Total ----------- ----------- --------- --------- (In thousands) Beginning balance $ 131,689 $ - $ 3,805 $ 135,494 Additions to deferred revenue - 4,979 3,651 $ 8,630 Amortization to revenue (70,349) (1,866) (2,000) $ (74,215) ----------- ----------- --------- --------- Ending balance $ 61,340 $ 3,113 $ 5,456 $ 69,909 =========== =========== ========= ========= ----------- ----------- --------- --------- Change in deferred revenue balance $ (70,349) $ 3,113 $ 1,651 $ (65,585) =========== =========== ========= ========= (b) Adjustment amount represents the change in the ratable and product deferred revenue balance for the period as reported on our balance sheet. No adjustment has been made for changes in services deferred revenue as these amounts relate to future service deliverables and are appropriately deferred on an invoiced shipment basis. We believe investors want to see the statement of operations data with the change in the ratable and product deferred revenue balances included in order to understand the gross margin profile of the underlying invoiced shipments. The deferred revenue adjustments recorded above are reconciled to the deferred revenue balance on our balance sheet in the table below: Three Months Three Months Ended March 29, Ended June 2008 30, 2007 ------------------------------- ------------ Ratable and Product Services Deferred Revenue Revenue Revenue Total Total --------- --------- --------- ------------ (In thousands) Beginning balance $ 174,437 $ - $ 174,437 $ 128,420 Additions to deferred revenue 29,639 4,561 34,200 64,946 Amortization to revenue (72,386) (756) (73,142) (54,411) --------- --------- --------- ------------ Ending balance $ 131,690 $ 3,805 $ 135,495 $ 138,955 ========= ========= ========= ============ --------- --------- --------- ------------ Change in deferred revenue balance $ (42,747) $ 3,805 $ (38,942) $ 10,535 --------- --------- --------- ------------ (c) Adjustment amount represents the release of ratable and product deferred cost amounts related to periods prior to March 29, 2008 as these amounts have been previously included as invoiced shipments. Deferred ratable and product amounts recorded after March 29, 2008 have not been adjusted as these amounts are recognized on a GAAP basis in arriving at the adjusted GAAP results. The deferred revenue adjustments recorded above are reconciled to the deferred revenue balance on our balance sheet in the table below: Three Months Ended June 28, 2008 ------------------------------------- Pre Mar 29, Post Mar 29, 2008 Ratable 2008 Ratable and Product and Product Deferred Inventory Cost Cost Cost Total ------------ ------------ --------- (In thousands) Beginning balance $ 58,600 $ - $ 58,600 Additions to deferred cost of revenue - 459 459 Amortized to cost of revenue (32,090) (9) (32,099) ------------ ------------ --------- Ending balance $ 26,510 $ 450 $ 26,960 ============ ============ ========= ------------ ------------ --------- Change in deferred inventory cost balance $ (32,090) $ 450 $ (31,640) ------------ ------------ --------- (d) Adjustment amount represents the change in the deferred cost of inventory balance for the period as reported on our balance sheet. We believe investors want to see the statement of operations data with the change in the deferral balance included in order to understand the gross margin profile of the underlying invoiced shipments and in order to compare our financial performance with that of other companies and between periods. The deferred cost of inventory adjustments recorded above are reconciled to the deferred cost of inventory balance on our balance sheet in the table below: Three Months Ended -------------------- Mar. 29 June 30 Deferred Inventory Cost 2008 2007 --------- --------- (In thousands) Beginning balance $ 81,622 $ 73,458 Additions to deferred cost of revenue 11,162 32,800 Amortized to cost of revenue (34,184) (31,552) --------- --------- Ending balance $ 58,600 $ 74,706 ========= ========= --------- --------- Change in deferred inventory cost balance $ (23,022) $ 1,248 --------- --------- (e) Excluded amount represents stock-based compensation expense on a non-GAAP basis. Stock-based compensation is a non-cash expense accounted for in accordance with the fair value recognition provisions of Statement of Financial Accounting Standards No. 123(R). While a large component of our expense, we believe investors want to evaluate our financial results both including and excluding the effects of stock-based compensation expense in order to compare our financial performance with that of other companies and between time periods. The stock-based compensation expense excluded from cost of revenue is a non-GAAP financial measure and is reconciled to the corresponding GAAP amount in the table below: Three Months Ended ------------------------- June March June 28, 29, 30, 2008 2008 2007 ------- ------- ------- GAAP stock-based compensation in cost of revenue $ 271 $ 208 $ 94 GAAP stock-based compensation in cost of revenue - amortization from balance sheet 1,219 1,150 26 Stock-based compensation not deferred to deferred inventory cost 0 215 71 Stock-based compensation previously recognized on invoiced shipment basis (314) (432) (22) ------- ------- ------- Non-GAAP stock-based compensation in cost of revenue $ 1,176 $ 1,141 $ 169 ------- ------- ------- (f) Excluded amount represents the adjustment to revalue our convertible preferred warrants to fair value as required by FAS 150. Subsequent to our IPO, we are no longer required to revalue these warrants and, therefore, we believe investors want to evaluate our financial results both including and excluding the effect of this revaluation expense in order to compare our financial performance with that of other companies and between periods. Infinera Corporation Condensed Consolidated Balance Sheets (In thousands) June 28, December 29, 2008 2007 ----------- ----------- ASSETS (Unaudited) (Audited) Current assets: Cash and cash equivalents $ 135,963 $ 91,209 Short-term investments 74,203 181,168 Short-term restricted cash 873 743 Accounts receivable 56,804 39,216 Other receivables 487 1,127 Inventory 57,643 58,579 Deferred inventory costs 24,114 78,362 Prepaid expenses and other current assets 5,704 3,941 ----------- ----------- Total current assets 355,791 454,345 Property, plant and equipment, net 40,651 36,973 Intangible assets 1,408 1,541 Deferred inventory costs, non-current 2,846 3,260 Long-term investments 105,132 30,116 Long-term restricted cash 2,046 2,594 Other non-current assets 665 359 ----------- ----------- Total assets $ 508,539 $ 529,188 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 24,154 $ 17,504 Accrued expenses 9,829 9,497 Accrued compensation and related benefits 11,431 17,749 Accrued warranty 5,529 4,974 Deferred revenue 63,028 167,031 ----------- ----------- Total current liabilities 113,971 216,755 Accrued warranty, non-current 5,031 5,018 Deferred revenue, non-current 6,881 7,406 Long-term exercised unvested options 453 825 Other long-term liabilities 3,537 4,610 Commitments and contingencies Stockholders' equity: Preferred stock, $0.001 par value Authorized shares - 25,000 and no shares issued and outstanding - - Common stock, $0.001 par value Authorized shares - 500,000 as of June 28, 2008 and December 29, 2007 Issued and outstanding shares - 93,077 as of June 28, 2008 and 91,580 as of December 29, 2007 93 92 Additional paid-in capital 682,695 663,870 Accumulated other comprehensive income (loss) (5,135) 78 Accumulated deficit (298,987) (369,466) ----------- ----------- Total stockholders' equity 378,666 294,574 ----------- ----------- Total liabilities and stockholders' equity $ 508,539 $ 529,188 =========== =========== The accompanying notes are an integral part of these financial statements. Infinera Corporation Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Six Months Ended -------------------- June 28, June 30, 2008 2007 --------- --------- Cash Flows from Operating Activities: Net income (loss) $ 70,479 $ (45,909) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 5,469 4,423 Amortization of debt discount 282 Accretion of investment discount (725) - Asset impairment charges 393 Stock-based compensation expense 11,288 2,810 Excess tax benefit from stock option transactions (559) - Tax benefit from stock option transactions 623 - Revaluation of warrant liablities 19,761 Gain on disposal of assets (770) (2,021) Other gain (15) (25) Changes in assets and liabilities: Accounts receivable (16,949) 14,732 Inventory 479 1,661 Prepaid expenses and other current assets (1,782) 39 Deferred inventory costs 54,143 (7,493) Other non-current assets (314) 599 Accounts payable 4,901 (12,761) Accrued liabilities and other expenses (6,902) (5,603) Deferred revenue (104,528) 28,002 Accrued warranty 568 7,318 --------- --------- Net cash provided by operating activities 15,406 6,208 Cash Flows from Investing Activities: Purchase of available-for-sale investments (123,624) - Proceeds from sale of investments 69,543 - Proceeds from maturities of investments and restricted cash 82,304 - Proceeds from disposal of assets 771 2,537 Purchase of property and equipment (7,283) (8,723) --------- --------- Net cash (used in) investing activities 21,711 (6,186) Cash Flows from Financing Activities: Principal payments on loan obligation (30,901) Proceeds from loans 7,119 Proceeds from initial public offering, net of issuance costs 190,245 Proceeds from issuance of common stock 7,164 2,050 Excess tax benefit from stock option transactions 559 - Repurchase of common stock (30) (50) --------- --------- Net cash provided by financing activities 7,693 168,463 --------- --------- Effect of exchange rate changes (56) 49 Net change in cash and cash equivalents 44,754 168,534 Cash and cash equivalents at beginning of period 91,209 28,884 --------- --------- Cash and cash equivalents at end of period $ 135,963 $ 197,418 ========= ========= Supplemental disclosures of cash flow information: Cash paid for interest $ 3 $ 2,203 Cash paid for income taxes $ 593 $ 81 The accompanying notes are an integral part of these financial statements. Infinera Corporation Supplemental Financial Information Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 ------- ------- ------- ------- ------- ------- Invoiced Shipments/ Adjusted GAAP $ 66.7 $ 69.0 $ 80.4 $ 93.4 $ 95.5 $ 90.8 Gross Margin % 35% 37% 43% 47% 45% 47% ------- ------- ------- ------- ------- ------- Invoiced Shipment Composition: Domestic % 89% 84% 81% 81% 82% 78% International % 11% 16% 19% 19% 18% 22% Largest Customer % 57% 48% 28% 18% 31% 21% ------- ------- ------- ------- ------- ------- Cash Related Information: Cash from Operations $ 6.9 ($ 0.8)($ 2.0) $ 18.9 $ 9.8 $ 5.6 Capital Expenditures $ 5.2 $ 3.6 $ 3.0 $ 8.5 $ 2.5 $ 4.8 Depreciation & Amortization $ 2.1 $ 2.0 $ 2.7 $ 2.7 $ 2.6 $ 2.9 DSO's 27 36 47 39 42 57 ------- ------- ------- ------- ------- ------- Inventory Metrics: Raw Materials $ 7.4 $ 8.8 $ 7.5 $ 10.5 $ 7.9 $ 9.2 Work in Process $ 31.6 $ 36.0 $ 34.8 $ 35.1 $ 40.6 $ 34.6 Finished Goods $ 18.4 $ 13.7 $ 14.8 $ 13.0 $ 10.7 $ 13.8 ------- ------- ------- ------- ------- ------- Total Inventory $ 57.3 $ 58.5 $ 57.1 $ 58.6 $ 59.2 $ 57.6 Inventory Turns 3.0 3.0 3.2 3.4 3.5 3.3 ------- ------- ------- ------- ------- ------- Worldwide Headcount 617 646 668 711 799 853 ------- ------- ------- ------- ------- -------
Contact Information: Contacts: Press: Jeff Ferry jferry@infinera.com Infinera Corporation 408-572-5213 Investors/Analysts: Bob Blair bblair@infinera.com Infinera Corporation 408-716-4879