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Infinera Corporation Reports Third Quarter 2024 Financial Results
Source: Nasdaq GlobeNewswire / 05 Nov 2024 15:03:30 America/Chicago
SAN JOSE, Calif., Nov. 05, 2024 (GLOBE NEWSWIRE) -- Infinera Corporation (NASDAQ: INFN) today released financial results for its third quarter ended September 28, 2024.
GAAP revenue for the quarter was $354.4 million compared to $342.7 million in the second quarter of 2024 and $392.4 million in the third quarter of 2023.
GAAP gross margin for the quarter was 39.8% compared to 39.6% in the second quarter of 2024 and 40.3% in the third quarter of 2023. GAAP operating margin for the quarter was (3.1)% compared to (8.7)% in the second quarter of 2024 and 2.0% in the third quarter of 2023.
GAAP net loss for the quarter was $(14.3) million, or $(0.06) per diluted share, compared to net loss of $(48.3) million, or $(0.21) per diluted share, in the second quarter of 2024, and net loss of $(9.4) million, or $(0.04) per diluted share, in the third quarter of 2023.
Non-GAAP gross margin for the quarter was 40.4% compared to 40.3% in the second quarter of 2024 and 41.9% in the third quarter of 2023. Non-GAAP operating margin for the quarter was 3.5% compared to (1.3)% in the second quarter of 2024 and 7.7% in the third quarter of 2023.
Non-GAAP net income for the quarter was $0.3 million, or $0.00 per diluted share, compared to non-GAAP net loss of $(14.0) million, or $(0.06) per diluted share, in the second quarter of 2024, and non-GAAP net income of $19.9 million, or $0.08 per diluted share, in the third quarter of 2023.
During the three-months ended September 28, 2024, the Company generated positive cash flow from operations of $44.5 million and ended the quarter with cash, cash equivalents and restricted cash of $115.6 million.
A further explanation of the use of non-GAAP financial information and a reconciliation of each of the non-GAAP financial measures to the most directly comparable GAAP financial measure can be found at the end of this press release.
Infinera CEO, David Heard said “Our team delivered another quarter with continued sequential improvements in our financial metrics and critical service provider and webscaler design wins across our ICE-X coherent pluggables, next-generation line systems, software, and ICE7 solutions. In addition, in October we signed a non-binding preliminary memorandum of terms with the U.S. Department of Commerce for an award under the CHIPS and Science Act that, together with other federal and state incentives, could result in more than $200 million in funds for Infinera.”
“Looking ahead, our customers remain excited about our pending acquisition by Nokia as they look forward to the combined company accelerating the pace of innovation in the industry. We are making good progress on the steps required to close the transaction, including receiving stockholder approval and attaining U.S. antitrust and CFIUS approval. There are still other regulatory approvals pending, but we believe we remain on track to close the deal in the first half of 2025,” continued Mr. Heard.
Pending Merger with Nokia
On June 27, 2024, Infinera, Nokia Corporation, a company incorporated under the laws of the Republic of Finland (“Nokia”) (NYSE: NOK) and Neptune of America Corporation, a Delaware corporation and wholly owned subsidiary of Nokia (“Merger Sub”) entered into an Agreement and Plan of Merger (as it may be amended, modified or waived from time to time, the “Merger Agreement”) that provides for Merger Sub to merge with and into Infinera (the “Merger”), with Infinera surviving the Merger as a wholly owned subsidiary of Nokia. The transaction is expected to close in the first half of 2025.
In light of the proposed transaction with Nokia, and as is customary during the pendency of an acquisition, Infinera will not be providing financial guidance during the pendency of the acquisition.
Third Quarter 2024 Investor Slides to be Made Available Online
Investor slides reviewing Infinera's third quarter of 2024 financial results will be furnished to the U.S. Securities and Exchange Commission ("SEC") on a Current Report on Form 8-K and published on Infinera's Investor Relations website at investors.infinera.com.
Contacts:
Media:
Anna Vue
Tel. +1 (916) 595-8157
avue@infinera.comInvestors:
Amitabh Passi, Head of Investor Relations
Tel. +1 (669) 295-1489
apassi@infinera.comAbout Infinera
Infinera is a global supplier of innovative open optical networking solutions and advanced optical semiconductors that enable carriers, cloud operators, governments, and enterprises to scale network bandwidth, accelerate service innovation, and automate network operations. Infinera solutions deliver industry-leading economics and performance in long-haul, submarine, data center interconnect, and metro transport applications. To learn more about Infinera, visit www.infinera.com, follow us on X and LinkedIn, and subscribe for updates.
Infinera and the Infinera logo are registered trademarks of Infinera Corporation.
Forward-Looking Statements
This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements generally relate to future events or Infinera's future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or the negative of these words or similar terms or expressions that concern Infinera's expectations, strategy, priorities, plans or intentions. Forward-looking statements in this press release include, but are not limited to, statements regarding the amount Infinera could receive in government funding; and statements related to the Merger, including the timing of completion of the Merger and the future performance and benefits of the combined business.
These forward-looking statements are based on estimates and information available to Infinera as of the date hereof and are not guarantees of actual or future performance; actual results could differ materially from those stated or implied due to risks and uncertainties. The risks and uncertainties that could cause Infinera’s results to differ materially from those expressed or implied by such forward-looking statements include statements related to the Merger, including whether the Merger may not be completed or completion may be delayed, and if the Merger Agreement is terminated, there may be a required payment of a significant termination fee by either party; the receipt of necessary approvals to complete the Merger; the possibility that due to the Merger, and uncertainty regarding the Merger, Infinera’s customers, suppliers or strategic partners may delay or defer entering into contracts or making other decisions concerning Infinera; the significance and timing of costs related to the Merger; the impact on us of litigation or other stockholder action related to the Merger; the effects on us and our stockholders if the Merger is not completed; demand growth for additional network capacity and the level and timing of customer capital spending and excess inventory held by customers beyond normalized levels; delays in the development, introduction or acceptance of new products or in releasing enhancements to existing products; aggressive business tactics by Infinera’s competitors and new entrants and Infinera's ability to compete in a highly competitive market; supply chain and logistics issues and their impact on our business, and Infinera's dependency on sole source, limited source or high-cost suppliers; dependence on a small number of key customers; product performance problems; the complexity of Infinera's manufacturing process; Infinera's ability to identify, attract, upskill and retain qualified personnel; challenges with our contract manufacturers and other third-party partners; the effects of customer and supplier consolidation; dependence on third-party service partners; Infinera’s ability to respond to rapid technological changes; failure to accurately forecast Infinera's manufacturing requirements or customer demand; failure to secure the funding contemplated by grants Infinera may receive from governments, agencies or research organizations, or failure to comply with the terms of those grants; Infinera’s future capital needs and its ability to generate the cash flow or otherwise secure the capital necessary to meet such capital needs; the effect of global and regional economic conditions on Infinera’s business, including effects on purchasing decisions by customers; the adverse impact inflation and higher interest rates may have on Infinera by increasing costs beyond what it can recover through price increases; restrictions to our operations resulting from loan or other credit agreements; the impacts of any restructuring plans or other strategic efforts on our business; Infinera’s international sales and operations; the impacts of foreign currency fluctuations; the effective tax rate of Infinera, which may increase or fluctuate; potential dilution from the issuance of additional shares of common stock in connection with the conversion of Infinera's convertible senior notes; Infinera’s ability to protect its intellectual property; claims by others that Infinera infringes on their intellectual property rights; security incidents, such as data breaches or cyber-attacks; Infinera's ability to comply with various rules and regulations, including with respect to export control and trade compliance, environmental, social, governance, privacy and data protection matters; events that are outside of Infinera's control, such as natural disasters, acts of war or terrorism, or other catastrophic events that could harm Infinera's operations; Infinera’s ability to remediate its recently disclosed material weaknesses in internal control over financial reporting in a timely and effective manner, and other risks and uncertainties detailed in Infinera’s SEC filings from time to time; and statements of assumptions underlying any of the foregoing. More information on potential factors that may impact Infinera’s business are set forth in Infinera’s periodic reports filed with the SEC, including its Annual Report on Form 10-K for the year ended December 30, 2023, filed with the SEC on May 17, 2024, and its Quarterly Report on Form 10-Q for the quarter ended June 29, 2024, as filed with the SEC on August 2, 2024, as well as subsequent reports filed with or furnished to the SEC from time to time. These SEC filings are available on Infinera’s website at www.infinera.com and the SEC’s website at www.sec.gov. Infinera assumes no obligation to, and does not currently intend to, update any such forward-looking statements.
Use of Non-GAAP Financial Information
In addition to disclosing financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), this press release and the accompanying tables contain certain non-GAAP financial measures that exclude in certain cases stock-based compensation expense, amortization of acquired intangible assets, restructuring and other related costs, warehouse fire recovery, merger-related charges, foreign exchange (gains) losses, net, and income tax effects. Infinera believes these adjustments are appropriate to enhance an overall understanding of its underlying financial performance and also its prospects for the future and are considered by management for the purpose of making operational decisions. In addition, the non-GAAP financial measures presented in this press release are the primary indicators management uses as a basis for its 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 gross margin, operating expenses, operating margin, net income (loss) and net income (loss) per common 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.
For a description of these non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial measures, please see the table titled “GAAP to Non-GAAP Reconciliations” and related footnotes.
Infinera Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)Three months ended Nine months ended September
28, 2024September
30, 2023September
28, 2024September
30, 2023Revenue: Product $ 276,214 $ 316,613 $ 778,008 $ 931,057 Services 78,184 75,756 226,051 229,615 Total revenue 354,398 392,369 1,004,059 1,160,672 Cost of revenue: Cost of product 170,693 190,312 494,248 577,152 Cost of services 42,515 40,209 121,910 124,889 Amortization of intangible assets — 3,528 — 10,621 Restructuring and other related costs (24 ) — 652 — Total cost of revenue 213,184 234,049 616,810 712,662 Gross profit 141,214 158,320 387,249 448,010 Operating expenses: Research and development 73,283 76,846 225,223 237,234 Sales and marketing 35,715 41,075 118,357 124,406 General and administrative 34,160 29,368 101,114 89,762 Amortization of intangible assets 2,257 2,976 6,769 10,088 Merger-related charges 6,954 — 15,471 — Restructuring and other related costs (157 ) 400 4,105 2,621 Total operating expenses 152,212 150,665 471,039 464,111 Income (loss) from operations (10,998 ) 7,655 (83,790 ) (16,101 ) Other income (expense), net: Interest income 874 546 2,789 1,734 Interest expense (8,764 ) (7,608 ) (25,556 ) (21,795 ) Other gain (loss), net 8,485 (7,540 ) (8,910 ) 10,586 Total other income (expense), net 595 (14,602 ) (31,677 ) (9,475 ) Loss before income taxes (10,403 ) (6,947 ) (115,467 ) (25,576 ) Provision for income taxes 3,910 2,466 8,528 12,510 Net loss $ (14,313 ) $ (9,413 ) $ (123,995 ) $ (38,086 ) Net loss per common share: Basic $ (0.06 ) $ (0.04 ) $ (0.53 ) $ (0.17 ) Diluted $ (0.06 ) $ (0.04 ) $ (0.53 ) $ (0.17 ) Weighted average shares used in computing net loss per common share: Basic 235,832 228,077 233,905 225,465 Diluted 235,832 228,077 233,905 225,465 Infinera Corporation
GAAP to Non-GAAP Reconciliations
(In thousands, except percentages)
(Unaudited)Three months ended Nine months ended September
28, 2024June 29,
2024September
30, 2023September
28, 2024September
30, 2023Reconciliation of Gross Profit and Gross Margin: GAAP as reported $ 141,214 39.8 % $ 135,594 39.6 % $ 158,320 40.3 % $ 387,249 38.6 % $ 448,010 38.6 % Stock-based compensation expense(1) 2,084 0.6 % 1,777 0.5 % 2,515 0.7 % 5,754 0.5 % 7,672 0.7 % Amortization of acquired intangible assets(2) — — % — — % 3,528 0.9 % — — % 10,621 0.9 % Restructuring and other related costs(3) (24 ) (0.0) % 703 0.2 % — 652 0.1 % — — % Warehouse fire recovery(4) — — % — — % — — % — — % (1,985 ) (0.2) % Non-GAAP as adjusted $ 143,274 40.4 % $ 138,074 40.3 % $ 164,363 41.9 % $ 393,655 39.2 % $ 464,318 40.0 % Reconciliation of Operating Expenses: GAAP as reported $ 152,212 $ 165,403 $ 150,665 $ 471,039 $ 464,111 Stock-based compensation expense(1) 12,305 8,024 13,230 32,967 41,721 Amortization of acquired intangible assets(2) 2,257 2,256 2,976 6,769 10,088 Restructuring and other related costs(3) (157 ) 3,948 400 4,105 2,621 Merger-related charges(5) 6,954 8,517 — 15,471 — Non-GAAP as adjusted $ 130,853 $ 142,658 $ 134,059 $ 411,727 $ 409,681 Reconciliation of Income (Loss) from Operations and Operating Margin: GAAP as reported $ (10,998 ) (3.1) % $ (29,809 ) (8.7) % $ 7,655 2.0 % $ (83,790 ) (8.3) % $ (16,101 ) (1.4) % Stock-based compensation expense(1) 14,389 4.1 % 9,801 2.8 % 15,745 3.9 % 38,721 3.8 % 49,393 4.3 % Amortization of acquired intangible assets(2) 2,257 0.6 % 2,256 0.7 % 6,504 1.7 % 6,769 0.7 % 20,709 1.8 % Restructuring and other related costs(3) (181 ) (0.1) % 4,651 1.4 % 400 0.1 % 4,757 0.5 % 2,621 0.2 % Warehouse fire recovery(4) — — % — — % — — % — — % (1,985 ) (0.2) % Merger-related charges(5) 6,954 2.0 % 8,517 2.5 % — — % 15,471 1.5 % — — % Non-GAAP as adjusted $ 12,421 3.5 % $ (4,584 ) (1.3) % $ 30,304 7.7 % $ (18,072 ) (1.8) % $ 54,637 4.7 % Three months ended Nine months ended September
28, 2024June
29, 2024September
30, 2023September
28, 2024September
30, 2023Reconciliation of Net Income (Loss): GAAP as reported $ (14,313 ) $ (48,287 ) $ (9,413 ) $ (123,995 ) $ (38,086 ) Stock-based compensation expense(1) 14,389 9,801 15,745 38,721 49,393 Amortization of acquired intangible assets(2) 2,257 2,256 6,504 6,769 20,709 Restructuring and other related costs(3) (181 ) 4,651 400 4,757 2,621 Warehouse fire recovery(4) — — — — (1,985 ) Merger-related charges(5) 6,954 8,517 — 15,471 — Foreign exchange (gains) losses, net(6) (8,039 ) 11,690 7,527 10,099 (9,903 ) Income tax effects(7) (788 ) (2,604 ) (894 ) (3,775 ) 2,072 Non-GAAP as adjusted $ 279 $ (13,976 ) $ 19,869 $ (51,953 ) $ 24,821 Weighted Average Shares Used in Computing GAAP Net Income (Loss) per Common Share: Basic 235,832 234,349 228,077 233,905 225,465 Diluted(8) 235,832 234,349 228,077 233,905 225,465 Weighted Average Shares Used in Computing Non-GAAP Net Income (Loss) per Common Share: Basic 235,832 234,349 228,077 233,905 225,465 Diluted(9) 240,502 234,349 257,219 233,905 228,735 Reconciliation of Adjusted EBITDA (10): Non-GAAP net income (loss) $ 279 $ (13,976 ) $ 19,869 $ (51,953 ) $ 24,821 Add: Interest expense, net 7,890 7,370 7,062 22,767 20,061 Less: Other gain (loss), net 446 507 (13 ) 1,189 683 Add: Income tax effects 4,698 2,529 3,360 12,303 10,438 Add: Depreciation 13,501 13,285 13,498 39,975 38,694 Non-GAAP as adjusted $ 25,922 $ 8,701 $ 43,802 $ 21,903 $ 93,331 Net Income (Loss) per Common Share: GAAP Basic $ (0.06 ) $ (0.21 ) $ (0.04 ) $ (0.53 ) $ (0.17 ) Diluted(8) $ (0.06 ) $ (0.21 ) $ (0.04 ) $ (0.53 ) $ (0.17 ) Net Income (Loss) per Common Share: Non-GAAP Basic $ 0.00 $ (0.06 ) $ 0.09 $ (0.22 ) $ 0.11 Diluted(9) $ 0.00 $ (0.06 ) $ 0.08 $ (0.22 ) $ 0.11 (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 Nine months ended September 28,
2024June 29,
2024September 30,
2023September 28,
2024September 30,
2023Cost of revenue $ 2,084 $ 1,777 $ 2,515 $ 5,754 $ 7,672 Research and development 4,623 4,497 5,734 14,232 17,557 Sales and marketing 3,241 2,611 3,706 9,139 11,371 General and administration 4,441 916 3,790 9,596 12,793 Total operating expenses 12,305 8,024 13,230 32,967 41,721 Total stock-based compensation expense $ 14,389 $ 9,801 $ 15,745 $ 38,721 $ 49,393 (2) Amortization of acquired intangible assets consists of developed technology and customer relationships acquired in connection with the acquisitions of Coriant and Transmode AB. GAAP accounting requires that acquired intangible assets are recorded at fair value and amortized over their useful lives. As this amortization is non-cash, Infinera has excluded it from its non-GAAP gross profit, operating expenses and net income measures. Management believes the amortization of acquired intangible assets is not indicative of ongoing operating performance and its exclusion provides a better indication of Infinera's underlying business performance. (3) Restructuring and other related costs are primarily associated with the reduction of headcount and the reduction of operating costs. In addition, this includes accelerated amortization on operating lease right-of-use assets due to the cessation of use of certain facilities. Management has excluded the impact of these charges in arriving at Infinera's non-GAAP results as they are non-recurring in nature and its exclusion provides a better indication of Infinera's underlying business performance. (4) Warehouse fire losses were incurred due to inventory destroyed in a warehouse fire in the third quarter of fiscal year 2022. Recoveries are recorded when they are probable of receipt. Management has excluded the impact of this loss and subsequent recoveries in arriving at Infinera's non-GAAP results as it is non-recurring in nature and its exclusion provides a better indication of Infinera's underlying business performance. (5) Merger-related charges represent costs incurred directly in connection with the pending merger with Nokia. Management has excluded the impact of these charges in arriving at Infinera's non-GAAP results as they are non-recurring in nature and the exclusion of these charges provides a better indication of Infinera's underlying business performance. (6) Foreign exchange (gains) losses, net, have been excluded from Infinera's non-GAAP results because management believes that this expense is not indicative of ongoing operating performance and its exclusion provides a better indication of Infinera's underlying business performance. (7) The difference between the GAAP and non-GAAP tax provision is due to the net tax effects of above non-GAAP adjustments. Management believes the exclusion of these tax effects provides a better indication of Infinera's underlying business performance. (8) The GAAP diluted shares include potentially dilutive securities from Infinera's stock-based benefit plans and convertible senior notes. These potentially dilutive securities are added for the computation of diluted net income per share on a GAAP basis in periods when Infinera has net income on a GAAP basis, as its inclusion provides a better indication of Infinera's underlying business performance. For purposes of calculating GAAP diluted earnings per share, we used the following net loss and weighted average common shares outstanding (in thousands, except per share data):
Three months ended Nine months ended September
28, 2024June 29,
2024September
30, 2023September
28, 2024September
30, 2023GAAP net loss for basic earnings per share $ (14,313 ) $ (48,287 ) $ (9,413 ) $ (123,995 ) $ (38,086 ) Interest expense related to the convertible senior notes, net of tax — — — — — GAAP net loss for diluted earnings per share $ (14,313 ) $ (48,287 ) $ (9,413 ) $ (123,995 ) $ (38,086 ) Weighted average basic common shares outstanding 235,832 234,349 228,077 233,905 225,465 Dilutive effect of restricted and performance share units — — — — — Dilutive effect of 2024 convertible senior notes(a) — — — — — Dilutive effect of 2027 convertible senior notes(b) — — — — — Dilutive effect of 2028 convertible senior notes(c) — — — — — Weighted average dilutive common shares outstanding 235,832 234,349 228,077 233,905 225,465 GAAP net loss per common share: Basic $ (0.06 ) $ (0.21 ) $ (0.04 ) $ (0.53 ) $ (0.17 ) Diluted $ (0.06 ) $ (0.21 ) $ (0.04 ) $ (0.53 ) $ (0.17 ) (a) For the three-months ended September 28, 2024, June 29, 2024, and September 30, 2023, there were 1.4 million, 1.9 million and 1.9 million shares, respectively, excluded from the calculation of diluted net loss per share, due to their anti-dilutive effect. For the nine-months ended September 28, 2024, and September 30, 2023, there were 1.7 million, and 7.1 million shares, respectively, excluded from the calculation of diluted net loss per share, due to their anti-dilutive effect. (b) For each of the three-months ended September 28, 2024, June 29, 2024, and September 30, 2023, there were 26.1 million shares excluded from the calculation of diluted net loss per share, due to their anti-dilutive effect. For each of the nine-months ended September 28, 2024, and September 30, 2023, there were 26.1 million shares excluded from the calculation of diluted net loss per share, due to their anti-dilutive effect. (c) For each of the three-months ended September 28, 2024, June 29, 2024, and September 30, 2023, there were no shares excluded from the calculation of diluted net loss per share. For the nine-months ended September 28, 2024, there were no shares excluded from the calculation of diluted net loss per share. For the nine-months ended September 30, 2023, there were 1.2 million shares excluded from the calculation of diluted net loss per share, due to their anti-dilutive effect. (9) The non-GAAP diluted shares include the potentially dilutive securities from Infinera's stock-based benefit plans and convertible senior notes. These potentially dilutive securities are added for the computation of diluted net income per share on a non-GAAP basis in periods when Infinera has net income on a non-GAAP basis as its inclusion provides a better indication of Infinera's underlying business performance. Refer to the diluted earnings per share reconciliation presented below. For purposes of calculating non-GAAP diluted earnings per share, we used the following net income (loss) and weighted average common shares outstanding (in thousands, except per share data):
Three months ended Nine months ended September 28, 2024 June 29, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Non-GAAP net income (loss) for basic earnings per share $ 279 $ (13,976 ) $ 19,869 $ (51,953 ) $ 24,821 Interest expense related to the convertible senior notes, net of tax — — 1,359 — — Non-GAAP net income (loss) for diluted earnings per share $ 279 $ (13,976 ) $ 21,228 $ (51,953 ) $ 24,821 Weighted average basic common shares outstanding 235,832 234,349 228,077 233,905 225,465 Dilutive effect of restricted and performance share units 4,670 — 1,123 — 2,005 Dilutive effect of employee stock purchase plan — — — — 70 Dilutive effect of 2024 convertible senior notes(a) — — 1,899 — — Dilutive effect of 2027 convertible senior notes(b) — — 26,120 — — Dilutive effect of 2028 convertible senior notes(c) — — — — 1,195 Weighted average dilutive common shares outstanding 240,502 234,349 257,219 233,905 228,735 Non-GAAP net income (loss) per common share: Basic $ 0.00 $ (0.06 ) $ 0.09 $ (0.22 ) $ 0.11 Diluted $ 0.00 $ (0.06 ) $ 0.08 $ (0.22 ) $ 0.11 (a) For the three-months ended September 28, 2024, and June 29, 2024, there were 1.4 million, and 1.9 million shares, respectively, excluded from the calculation of diluted net income (loss) per share, due to their anti-dilutive effect. For the three-months ended September 30, 2023, there were no shares excluded from the calculation of diluted net income per share. For the nine-months ended September 28, 2024, and September 30, 2023, there were 1.7 million, and 7.1 million shares, respectively, excluded from the calculation of diluted net income (loss) per share, due to their anti-dilutive effect. (b) For each of the three-months ended September 28, 2024, and June 29, 2024, there were 26.1 million shares excluded from the calculation of diluted net income (loss) per share, due to their anti-dilutive effect. For the three-months ended September 30, 2023, there were no shares excluded from the calculation of diluted net income per share. For each of the nine-months ended September 28, 2024, and September 30, 2023, there were 26.1 million shares excluded from the calculation of diluted net income (loss) per share, due to their anti-dilutive effect. (c) For each of the three-months ended September 28, 2024, June 29, 2024, and September 30, 2023, there were no shares excluded from the calculation of diluted net income (loss) per share. For each of the nine-months ended September 28, 2024, and September 30, 2023, there were no shares excluded from the calculation of diluted net income (loss) per share. (10) Adjusted EBITDA is a non-GAAP supplemental measure of operating performance that does not represent and should not be considered an alternative to operating loss or cash flow from operations, as determined by GAAP. Infinera's adjusted EBITDA is calculated by excluding the above non-GAAP adjustments, interest expense, net, other gain (loss), net, income tax effects and depreciation expenses. Management believes that adjusted EBITDA is an important financial measure for use in evaluating Infinera's financial performance, as it measures the ability of our business operations to generate cash. Infinera Corporation
GAAP to Non-GAAP Reconciliations
(In thousands)
(Unaudited)Free Cash Flow
We define free cash flow as net cash provided by (used in) operating activities in the period minus the purchase of property and equipment made in the period.
Free cash flow is considered a non-GAAP financial measure under the SEC’s rules. Management believes that free cash flow is an important financial measure for use in evaluating Infinera's financial performance, as it measures our ability to generate additional cash from our business operations. Free cash flow should be considered in addition to, rather than as a substitute for, net loss as a measure of our performance or net cash provided by (used in) operating activities as a measure of our liquidity. Additionally, our definition of free cash flow is limited and does not represent residual cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt service and other obligations. Therefore, we believe it is important to view free cash flow as supplemental to our entire statement of cash flows.
Three months ended Nine months ended September
28, 2024June 29,
2024September
30, 2023September
28, 2024September
30, 2023Net cash provided by (used in) operating activities $ 44,563 $ (59,954 ) $ (29,793 ) $ 8,635 $ (30,142 ) Purchase of property and equipment (24,090 ) (14,582 ) (13,318 ) (46,748 ) (40,900 ) Free cash flow $ 20,473 $ (74,536 ) $ (43,111 ) $ (38,113 ) $ (71,042 ) Infinera Corporation
Condensed Consolidated Balance Sheets
(In thousands, except par values)
(Unaudited)September 28,
2024December 30,
2023ASSETS Current assets: Cash and cash equivalents $ 115,089 $ 172,505 Short-term restricted cash 42 517 Accounts receivable, net 288,265 381,981 Inventory 356,119 431,163 Prepaid expenses and other current assets 162,560 129,218 Total current assets 922,075 1,115,384 Property, plant and equipment, net 231,190 206,997 Operating lease right-of-use assets 39,359 39,973 Intangible assets, net 18,050 24,819 Goodwill 237,509 240,566 Long-term restricted cash 446 837 Other long-term assets 57,128 50,662 Total assets $ 1,505,757 $ 1,679,238 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 259,225 $ 299,005 Accrued expenses and other current liabilities 137,078 110,758 Accrued compensation and related benefits 48,683 85,203 Short-term debt, net 10,473 25,512 Accrued warranty 12,635 17,266 Deferred revenue 116,332 136,248 Total current liabilities 584,426 673,992 Long-term debt, net 667,205 658,756 Long-term accrued warranty 12,554 15,934 Long-term deferred revenue 21,626 21,332 Long-term deferred tax liability 1,770 1,805 Long-term operating lease liabilities 44,563 47,464 Other long-term liabilities 39,767 43,364 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 September 28, 2024 and December 30, 2023
Issued and outstanding shares - 236,296 as of September 28, 2024 and 230,994 as of December 30, 2023236 231 Additional paid-in capital 2,012,820 1,976,014 Accumulated other comprehensive loss (30,409 ) (34,848 ) Accumulated deficit (1,848,801 ) (1,724,806 ) Total stockholders' equity 133,846 216,591 Total liabilities and stockholders’ equity $ 1,505,757 $ 1,679,238 Infinera Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)Nine months ended September 28,
2024September 30,
2023Cash Flows from Operating Activities: Net loss $ (123,995 ) $ (38,086 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 46,744 59,403 Non-cash restructuring charges and other related costs 32 1,183 Amortization of debt issuance costs and discount 2,750 2,970 Operating lease expense 6,905 6,402 Stock-based compensation expense 38,721 49,393 Other, net 139 (683 ) Changes in assets and liabilities: Accounts receivable 92,364 89,248 Inventory 74,527 (82,983 ) Prepaid expenses and other current assets (48,141 ) 16,811 Accounts payable (57,127 ) (27,798 ) Accrued expenses and other current liabilities (5,386 ) (46,163 ) Deferred revenue (18,898 ) (59,839 ) Net cash provided by (used in) operating activities 8,635 (30,142 ) Cash Flows from Investing Activities: Purchase of property and equipment (46,748 ) (40,900 ) Net cash used in investing activities (46,748 ) (40,900 ) Cash Flows from Financing Activities: Proceeds from issuance of 2028 Notes, net of discount — 98,751 Repayment of 2024 Notes (18,747 ) (83,446 ) Payment of debt issuance cost — (2,108 ) Proceeds from asset-based revolving credit facility 50,000 — Repayment of asset-based revolving credit facility (40,000 ) — Repayment of mortgage payable (354 ) (381 ) Principal payments on finance lease obligations (469 ) (784 ) Payment of term license obligation (7,882 ) (7,720 ) Proceeds from issuance of common stock 5 14,931 Tax withholding paid on behalf of employees for net share settlement (1,860 ) (2,217 ) Net cash (used in) provided by financing activities (19,307 ) 17,026 Effect of exchange rate changes on cash (862 ) (8,551 ) Net change in cash, cash equivalents and restricted cash (58,282 ) (62,567 ) Cash, cash equivalents and restricted cash at beginning of period 173,859 189,203 Cash, cash equivalents and restricted cash at end of period(1) $ 115,577 $ 126,636 Infinera Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)Nine months ended September 28,
2024September 30,
2023Supplemental disclosures of cash flow information: Cash paid for income taxes, net $ 18,205 $ 9,955 Cash paid for interest $ 25,967 $ 21,579 Supplemental schedule of non-cash investing and financing activities: Property and equipment included in accounts payable and accrued liabilities $ 26,779 $ 18,529 Transfer of inventory to fixed assets $ — $ 1,207 Unpaid term licenses (included in accounts payable, accrued liabilities and other long-term liabilities) $ 16,380 $ 16,510 (1) Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets (in thousands):
September 28,
2024September 30,
2023Cash and cash equivalents $ 115,089 $ 123,927 Short-term restricted cash 42 1,725 Long-term restricted cash 446 984 Total cash, cash equivalents and restricted cash $ 115,577 $ 126,636 Infinera Corporation
Supplemental Financial Information
(Unaudited)Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 GAAP Revenue $(Mil) $ 485.9 $ 392.1 $ 376.2 $ 392.4 $ 453.5 $ 306.9 $ 342.7 $ 354.4 GAAP Gross Margin % 37.1 % 37.5 % 38.0 % 40.3 % 38.6 % 36.0 % 39.6 % 39.8 % Non-GAAP Gross Margin %(1) 38.7 % 38.8 % 39.3 % 41.9 % 39.6 % 36.6 % 40.3 % 40.4 % GAAP Revenue Composition: Domestic % 61 % 60 % 58 % 59 % 68 % 54 % 58 % 60 % International % 39 % 40 % 42 % 41 % 32 % 46 % 42 % 40 % Customers >10% of Revenue 1 — 1 1 1 — — 2 Cash Related Information: Cash from Operations $(Mil) $ (0.6 ) $ (1.8 ) $ 1.4 $ (29.7 ) $ 79.6 $ 24.0 $ (59.9 ) $ 44.5 Capital Expenditures $(Mil) $ 8.3 $ 16.8 $ 10.8 $ 13.3 $ 21.4 $ 8.1 $ 14.6 $ 24.0 Depreciation & Amortization $(Mil) $ 19.8 $ 19.6 $ 19.8 $ 20.0 $ 19.4 $ 15.4 $ 15.6 $ 15.7 DSOs(2) 79 78 79 76 77 79 76 74 Inventory Metrics: Raw Materials $(Mil) $ 48.7 $ 67.6 $ 85.4 $ 110.4 $ 133.6 $ 132.5 $ 119.4 $ 105.2 Work in Process $(Mil) $ 66.6 $ 71.8 $ 71.9 $ 69.9 $ 68.4 $ 68.6 $ 68.7 $ 67.6 Finished Goods $(Mil) $ 259.6 $ 273.6 $ 270.1 $ 276.6 $ 229.2 $ 219.6 $ 196.1 $ 183.3 Total Inventory $(Mil) $ 374.9 $ 413.0 $ 427.4 $ 456.9 $ 431.2 $ 420.7 $ 384.2 $ 356.1 Inventory Turns(3) 3.4 2.4 2.2 2.1 2.5 1.8 2.0 2.3 Worldwide Headcount 3,267 3,351 3,365 3,369 3,389 3,323 3,334 3,340 Weighted Average Shares Outstanding (in thousands): Basic 219,921 222,393 225,922 228,077 230,509 231,533 234,349 235,832 Diluted 258,030 265,921 262,712 257,219 259,210 260,980 265,591 267,999 (1) Non-GAAP adjustments include stock-based compensation expense, amortization of acquired intangible assets, restructuring and other related costs and warehouse fire recovery. For a description of this non-GAAP financial measure, please see the section titled, “GAAP to Non-GAAP Reconciliations” of this press release for a reconciliation to the most directly comparable GAAP financial measures. For reconciliations of prior periods that are not otherwise provided herein, see the prior period earnings releases available on our Investor Relations webpage. (2) Infinera calculates DSO based on 91 days. Fiscal year 2022 was 53 weeks and the fourth quarter of fiscal year 2022 was 98 days. When calculation is based on 98 days, DSO was 85 days for the fourth quarter of fiscal year 2022. (3) Infinera calculates non-GAAP inventory turns as annualized non-GAAP cost of revenue, which is calculated as GAAP cost of revenue less stock-based compensation expense, amortization of acquired intangible assets, restructuring and other related costs and warehouse fire recovery, as illustrated in the reconciliation of gross profit above, divided by the average inventory for the quarter. 
