SAN JOSE, Calif., Aug. 03, 2021 (GLOBE NEWSWIRE) -- Infinera Corporation (NASDAQ:INFN) today released financial results for its second quarter ended June 26, 2021.

GAAP revenue for the quarter was $338.2 million compared to $330.9 million in the first quarter of 2021 and $331.6 million in the second quarter of 2020.

GAAP gross margin for the quarter was 35.6% compared to 35.4% in the first quarter of 2021 and 29.4% in the second quarter of 2020. GAAP operating margin for the quarter was (6.9)% compared to (7.0)% in the first quarter of 2021 and (13.5)% in the second quarter of 2020.

GAAP net loss for the quarter was $(35.6) million, or $(0.17) per share, compared to $(48.3) million, or $(0.24) per share, in the first quarter of 2021, and $(61.6) million, or $(0.33) per share, in the second quarter of 2020.

Non-GAAP revenue for the quarter was $339.2 million compared to $331.9 million in the first quarter of 2021 and $332.6 million in the second quarter of 2020.

Non-GAAP gross margin for the quarter was 37.7% compared to 37.6% in the first quarter of 2021 and 33.8% in the second quarter of 2020. Non-GAAP operating margin for the quarter was 0.8% compared to 0.4% in the first quarter of 2021 and (1.8)% in the second quarter of 2020.

Non-GAAP net loss for the quarter was $(6.0) million, or $(0.03) per share, compared to net loss of $(5.5) million, or $(0.03) per share, in the first quarter of 2021, and a net loss of $(15.6) million, or $(0.08) per share, in the second quarter of 2020.

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, "Q2 was another quarter of strong demand, with double digit year-over-year growth in product bookings, a book-to-bill ratio above one and record backlog at quarter end. Revenue was within our outlook range, despite significant industry-wide supply chain challenges, while gross margin and operating margin exceeded the high end of our outlook ranges. For the first half of FY'21, we delivered double digit year-over-year bookings growth and expanded each of gross margin and operating margin by over 600 basis points.

Our innovative new products continued to gain momentum in Q2 with additional customer wins and expanded network footprint. Backed by a highly focused strategy to gain share and grow our business, these results reinforce our confidence in and commitment to achieving the target business model we outlined during our recent Investor Day."

Financial Outlook

Infinera's outlook for the third quarter ending September 25, 2021 is as follows:

GAAP revenue is expected to be $354 million +/- $15 million. Non-GAAP revenue is expected to be $355 million +/- $15 million.
GAAP gross margin is expected to be 33.0% +/- 150 bps. Non-GAAP gross margin is expected to be 35.5% +/- 150 bps.
GAAP operating expenses are expected to be $148 million +/- $2.5 million. Non-GAAP operating expenses are expected to be $128 million +/- $2 million.
GAAP operating margin is expected to be (9.5)% +/- 200 bps. Non-GAAP operating margin is expected to be (1.0%) +/- 200 bps.

Second Quarter 2021 Investor Slides Available Online

Investor slides reviewing Infinera's second quarter of 2021 financial results will be furnished to the 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 prior to the second quarter of 2021 earnings conference call. Analysts and investors are encouraged to review these slides prior to participating in the conference call webcast.

Conference Call Information

Infinera will host a conference call for analysts and investors to discuss its results for the second quarter of 2021 and its outlook for the third quarter of 2021 today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). Interested parties may join the conference call by dialing 1-866-373-6878 (toll free) or 1-412-317-5101 (international). A live webcast of the conference call will also be accessible from the Events section of Infinera's website at investors.infinera.com. Replay of the audio webcast will be available at investors.infinera.com approximately two hours after the end of the live call.

Contacts:

Media:

Anna Vue

Tel. +1 (916) 595-8157

avue@infinera.com

Investors:

Amitabh Passi, Head of Investor Relations

Tel. +1 (669) 295-1489

apassi@infinera.com

About Infinera

Infinera is a global supplier of innovative networking solutions that enable carriers, cloud operators, governments, and enterprises to scale network bandwidth, accelerate service innovation, and automate network operations. The Infinera end-to-end packet-optical portfolio delivers 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 Twitter @Infinera, and read Infinera's latest blog posts at www.infinera.com/blog.

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. Such forward-looking statements in this press release include, without limitation, Infinera's strategy to gain share and grow its business, Infinera's commitment to achieving its target business model, and Infinera's financial outlook for the third quarter of 2021. These forward-looking statements are based on estimates and information available to Infinera as of the date hereof and are not guarantees of 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 delays in the development, introduction or acceptance of new products or updates to existing products; Infinera's reliance on single and limited source suppliers and other supply chain risks; the effect of the COVID-19 pandemic on Infinera's business, results of operations, financial condition, stock price and personnel; fluctuations in demand, sales cycles and prices for products and services, including discounts given in response to competitive pricing pressures, as well as the timing of purchases by Infinera's key customers; our ability to identify, attract and retain qualified personnel; aggressive business tactics by Infinera's competitors; the effects of customer and supplier consolidation; Infinera's ability to respond to rapid technological changes; 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; risks and compliance obligations relating to our international operations as well as actions by the U.S. or foreign governments; the impacts of foreign currency fluctuations; Infinera's ability to service its debt obligations and pursue its strategic plan; Infinera's ability to protect its intellectual property; claims by others that Infinera infringes their intellectual property; war, terrorism, public health issues, natural disasters and other circumstances that could disrupt the supply, delivery or demand of Infinera's products; and other risks and uncertainties detailed in Infinera's SEC filings from time to time. 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 on December 26, 2020 as filed with the SEC on March 3, 2021, and its Quarterly Report on Form 10-Q for the quarter ended March 27, 2021 as filed with the SEC on May 4, 2021, as well as subsequent reports filed with or furnished to the SEC from time to time. These reports 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 acquisition-related deferred revenue adjustment, stock-based compensation expenses, amortization of acquired intangible assets, acquisition and integration costs, restructuring and related costs, COVID-19 related costs, amortization of debt discount on Infinera's convertible senior notes, litigation charges, foreign exchange (gains) losses, net, and income tax effects. 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 has included forward-looking non-GAAP information in this press release, including an estimate of certain non-GAAP financial measures for the third quarter of 2021 that exclude acquisition-related deferred revenue adjustment, stock-based compensation expense, amortization of acquired intangible assets, and restructuring and related costs. Please see the section titled "GAAP to Non-GAAP Reconciliation of Financial Outlook" below on specific adjustments.

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, these results 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 revenue, gross margin, operating expenses, operating margin, and net income (loss) 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.

A copy of this press release can be found on the Investor Relations page of Infinera's website at investors.infinera.com.

Infinera and the Infinera logo are trademarks or registered trademarks of Infinera Corporation.

Infinera Corporation

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 26, 2021			June 27, 2020			June 26, 2021			June 27, 2020
Revenue:
Product	$	257,441		$	261,227		$	511,602		$	516,419
Services	80,786			70,360			157,532			145,441
Total revenue	338,227			331,587			669,134			661,860
Cost of revenue:
Cost of product	172,053			186,519			337,538			388,311
Cost of services	41,446			36,599			84,706			77,294
Amortization of intangible assets	4,614			8,721			9,230			17,349
Acquisition and integration costs	—			750			—			1,785
Restructuring and related	(269		)	1,591			245			2,748
Total cost of revenue	217,844			234,180			431,719			487,487
Gross profit	120,383			97,407			237,415			174,373
Operating expenses:
Research and development	73,934			67,090			147,463			135,270
Sales and marketing	33,782			31,816			66,554			68,505
General and administrative	32,197			30,101			58,703			59,721
Amortization of intangible assets	4,392			4,585			8,797			9,140
Acquisition and integration costs	—			3,344			614			12,566
Restructuring and related	(674		)	5,097			1,645			10,677
Total operating expenses	143,631			142,033			283,776			295,879
Loss from operations	(23,248		)	(44,626		)	(46,361		)	(121,506		)
Other income (expense), net:
Interest income	27			54			67			78
Interest expense	(12,017		)	(12,436		)	(23,860		)	(21,230		)
Other gain (loss), net	2,719			(1,992		)	(9,676		)	(14,674		)
Total other income (expense), net	(9,271		)	(14,374		)	(33,469		)	(35,826		)
Loss before income taxes	(32,519		)	(59,000		)	(79,830		)	(157,332		)
Provision for income taxes	3,075			2,635			4,086			3,571
Net loss	$	(35,594	)	$	(61,635	)	$	(83,916	)	$	(160,903	)
Net loss per common share:
Basic	$	(0.17	)	$	(0.33	)	$	(0.41	)	$	(0.88	)
Diluted	$	(0.17	)	$	(0.33	)	$	(0.41	)	$	(0.88	)
Weighted average shares used in computing net loss per common share:
Basic	206,780			185,596			204,709			183,810
Diluted	206,780			185,596			204,709			183,810

Infinera Corporation

GAAP to Non-GAAP Reconciliations

(In thousands, except percentages and per share data)

(Unaudited)

	Three Months Ended															Six Months Ended
	June 26, 2021					March 27, 2021					June 27, 2020					June 26, 2021					June 27, 2020
Reconciliation of Revenue:
G AAP as reported	$	338,227				$	330,907				$	331,587				$	669,134				$	661,860
Acquisition-related deferred revenue adjustment⁽¹⁾	978					978					1,050					1,956					2,160
Non-GAAP as adjusted	$	339,205				$	331,885				$	332,637				$	671,090				$	664,020

Reconciliation of Gross Profit:
GAAP as reported	$	120,383		35.6	%	$	117,032		35.4	%	$	97,407		29.4	%	$	237,415		35.5	%	$	174,373		26.3	%
Acquisition-related deferred revenue adjustment⁽¹⁾	978					978					1,050					1,956					2,160
Stock-based compensation expense⁽²⁾	2,130					1,796					2,063					3,926					4,165
Amortization of acquired intangible assets⁽³⁾	4,614					4,616					8,721					9,230					17,349
Acquisition and integration costs⁽⁴⁾	—					—					750					—					1,785
Restructuring and related costs⁽⁵⁾	(269		)			514					1,591					245					2,748
COVID-19 related costs⁽⁶⁾	—					—					761					—					3,641
Non-GAAP as adjusted	$	127,836		37.7	%	$	124,936		37.6	%	$	112,343		33.8	%	$	252,772		37.7	%	$	206,221		31.1	%

Reconciliation of Operating Expenses:
GAAP as reported	$	143,631				$	140,145				$	142,033				283,776					$	295,879
Stock-based compensation expense⁽²⁾	11,809					9,178					10,713					20,987					20,314
Amortization of acquired intangible assets⁽³⁾	4,392					4,405					4,585					8,797					9,140
Acquisition and integration costs⁽⁴⁾	—					614					3,344					614					12,566
Restructuring and related costs⁽⁵⁾	(674		)			2,319					5,097					1,645					10,677
Litigation charges ⁽⁸⁾	2,885					—					—					2,885					—
Non-GAAP as adjusted	$	125,219				$	123,629				$	118,294				$	248,848				$	243,182

Reconciliation of Income/(Loss) from Operations:
GAAP as reported	$	(23,248	)	(6.9	)%	$	(23,113	)	(7.0	)%	$	(44,626	)	(13.5	)%	$	(46,361	)	(6.9	)%	$	(121,506	)	(18.4	)%
Acquisition-related deferred revenue adjustment⁽¹⁾	978					978					1,050					1,956					2,160
Stock-based compensation expense⁽²⁾	13,939					10,974					12,776					24,913					24,479
Amortization of acquired intangible assets⁽³⁾	9,006					9,021					13,306					18,027					26,489
Acquisition and integration costs⁽⁴⁾	—					614					4,094					614					14,351
Restructuring and related costs⁽⁵⁾	(943		)			2,833					6,688					1,890					13,425
COVID-19 related costs⁽⁶⁾	—					—					761					—					3,641
Litigation charges ⁽⁸⁾	2,885					—					—					2,885					—
Non-GAAP as adjusted	$	2,617		0.8	%	$	1,307		0.4	%	$	(5,951	)	(1.8	)%	$	3,924		0.6	%	$	(36,961	)	(5.6	)%

	Three Months Ended									Six Months Ended
	June 26, 2021			March 27, 2021			June 27, 2020			June 26, 2021			June 27, 2020
Reconciliation of Net Income/(Loss):
GAAP as reported	$	(35,594	)	$	(48,322	)	$	(61,635	)	$	(83,916	)	(160,903		)
Acquisition-related deferred revenue adjustment ⁽¹⁾	978			978			1,050			1,956			2,160
Stock-based compensation expense⁽²⁾	13,939			10,974			12,776			24,913			24,479
Amortization of acquired intangible assets⁽³⁾	9,006			9,021			13,306			18,027			26,489
Acquisition and integration costs⁽⁴⁾	—			614			4,094			614			14,351
Restructuring and related costs⁽⁵⁾	(943		)	2,833			6,688			1,890			13,425
COVID-19 related costs⁽⁶⁾	—			—			761			—			3,641
Amortization of debt discount on Infinera's convertible senior notes⁽⁷⁾	7,259			7,083			6,577			14,342			11,698
Litigation charges ⁽⁸⁾	2,885			—			—			2,885			—
Foreign exchange (gains) losses, net⁽⁹⁾	(3,382		)	11,706			1,603			8,324			14,509
Income tax effects⁽¹⁰⁾	(152		)	(353		)	(836		)	(505		)	(2,006		)
Non-GAAP as adjusted	$	(6,004	)	$	(5,466	)	$	(15,616	)	$	(11,470	)	$	(52,157	)

Net Income/(Loss) per Common Share - Basic and Diluted:
GAAP as reported	$	(0.17	)	$	(0.24	)	$	(0.33	)	$	(0.41	)	$	(0.88	)
Non-GAAP as adjusted	$	(0.03	)	$	(0.03	)	$	(0.08	)	$	(0.06	)	$	(0.28	)

Weighted Average Shares Used in Computing Net Income/(Loss) per Common Share:
Basic	206,780			202,638			185,596			204,709			183,810
Diluted ⁽¹¹⁾	206,780			202,638			185,596			204,709			183,810

(1) Business combination accounting principles require Infinera to write down to fair value its maintenance support contracts assumed in Infinera's acquisition of Coriant, which closed during the fourth quarter of 2018. The revenue for these support contracts is deferred and typically recognized over a period of time after the Coriant acquisition, so Infinera's GAAP revenue for a period of time after the acquisition will not reflect the full amount of revenue that would have been reported if the acquired deferred revenue was not written down to fair value. The non-GAAP adjustment eliminates the effect of the deferred revenue write-down. Management believes these adjustments to revenue from support contracts assumed in the Coriant acquisition are useful to investors as an additional means to reflect revenue trends in Infinera's business.

(2) 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						Six Months Ended
	June 26, 2021		March 27, 2021		June 27, 2020		June 26, 2021		June 27, 2020
Cost of revenue	$	2,130	$	1,796	$	2,063	$	3,926	$	4,165
Total cost of revenue	2,130		1,796		2,063		3,926		4,165
Research and development	5,071		4,297		4,379		9,368		8,153
Sales and marketing	2,811		3,199		2,786		6,010		5,430
General and administration	3,927		1,682		3,548		5,609		6,731
Total operating expenses	11,809		9,178		10,713		20,987		20,314
Total stock-based compensation expense	$	13,939	$	10,974	$	12,776	$	24,913	$	24,479

(3) Amortization of acquired intangible assets consists of developed technology, trade names, customer relationships and backlog acquired in connection with the Coriant acquisition. Amortization of acquired intangible assets also consists of amortization of developed technology, trade names and customer relationships acquired in connection with Infinera's acquisition of Transmode AB, which closed in 2015. 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.

(4) Acquisition and integration costs consist of legal, financial, IT, manufacturing-related costs, employee-related costs and professional fees incurred in connection with the Coriant acquisition. These amounts have been adjusted in arriving at Infinera's non-GAAP results because management believes that these expenses are non-recurring, not indicative of ongoing operating performance and their exclusion provides a better indication of Infinera's underlying business performance.

(5) Restructuring and related costs are primarily associated with the reduction of operating costs, the closure of Infinera's Berlin, Germany site, the reduction of headcount at Infinera's Munich, Germany site and other sites, and Coriant's historical restructuring plan associated with its early retirement plan. 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.

(6) COVID-19 related costs consist of higher replacement costs associated with certain warranty parts customers were unable to return for repair due to logistics issues and mobility issues related to COVID-19 public health mandates and restrictions. In addition, Infinera needed to source certain key components from an alternate supplier at substantially higher cost in order to fulfill delivery commitments in the normal course of business. Management has excluded these expenses from non-GAAP financial measures because they were caused by atypical circumstances during the COVID-19 pandemic, as their exclusion provides a better indication of Infinera's underlying business performance.

(7) 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 debt discount an amount equal to the fair value of the conversion option that was recorded in equity as interest expense on the $402.5 million in aggregate principal amount of its 2.125% convertible debt issuance in September 2018 due September 2024 and $200 million in aggregate principal amount of 2.50% convertible debt issued in March 9, 2020 due March 2027. Interest expense has been excluded from Infinera's non-GAAP results because management believes that this non-cash expense is not indicative of ongoing operating performance and its exclusion provides a better indication of Infinera's underlying business performance.

(8) Litigation charges are associated with the settlement of litigation matters. Management has excluded the impact of this charge in arriving at Infinera's non-GAAP results because it is non-recurring, and management believes that this expense is not indicative of ongoing operating performance.

(9) Foreign exchange gains and losses 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. Exclusion of foreign exchange gains and losses from non-GAAP results commenced in the first quarter of 2021 and prior periods have been adjusted for comparability.

(10) The difference between the GAAP and non-GAAP tax provision is due to the net tax effects of the purchase accounting adjustments, acquisition-related costs and amortization of acquired intangible assets. Management believes the exclusion of these tax effects provides a better indication of Infinera's underlying business performance.

(11) The non-GAAP diluted shares include the potentially dilutive securities from Infinera's stock-based benefit plans and convertible senior notes excluded from the computation of dilutive net loss per share attributable to common stockholders on a GAAP basis because the effect would have been anti-dilutive. 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.

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, net 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 the Company'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									Six Months Ended
	June 26, 2021			March 27, 2021			June 27, 2020			June 26, 2021			June 27, 2020
Net cash provided by (used in) operating activities	$	21,304		$	18,630		$	(36,572	)	$	39,934		$	(128,089	)
Purchase of property and equipment, net	(14,068		)	(11,721		)	(10,538		)	(25,789		)	(19,002		)
Free cash flow	$	7,236		$	6,909		$	(47,110	)	$	14,145		$	(147,091	)

Infinera Corporation

Condensed Consolidated Balance Sheets

(In thousands, except par values)

(Unaudited)

	June 26, 2021			December 26, 2020
ASSETS
Current assets:
Cash	$	219,735		$	298,014
Short-term restricted cash	2,840			3,293
Accounts receivable, net of allowance for doubtful accounts of $2,730 in 2021 and $2,912 in 2020	281,022			319,428
Inventory	274,030			269,307
Prepaid expenses and other current assets	136,607			171,831
Total current assets	914,234			1,061,873
Property, plant and equipment, net	158,326			153,133
Operating lease right-of-use assets	62,154			68,851
Intangible assets	106,455			124,882
Goodwill	268,699			273,426
Long-term restricted cash	10,655			14,076
Other long-term assets	40,004			36,256
Total assets	$	1,560,527		$	1,732,497
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	172,959		$	175,762
Accrued expenses and other current liabilities	131,574			150,550
Accrued compensation and related benefits	69,519			52,976
Short-term debt, net	424			101,983
Accrued warranty	20,322			19,369
Deferred revenue	119,913			133,246
Total current liabilities	514,711			633,886
Long-term debt, net	461,080			445,996
Long-term accrued warranty	21,348			21,339
Long-term deferred revenue	28,410			29,810
Long-term deferred tax liability	3,237			4,164
Long-term operating lease liabilities	67,985			76,126
Other long-term liabilities	87,163			94,892
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 26, 2021
and December 26, 2020
Issued and outstanding shares – 208,468 as of June 26, 2021 and
201,397 as of December 26, 2020	208			201
Additional paid-in capital	1,996,091			1,965,245
Accumulated other comprehensive loss	(8,526		)	(11,898		)
Accumulated deficit	(1,611,180		)	(1,527,264		)
Total stockholders' equity	376,593			426,284
Total liabilities and stockholders' equity	$	1,560,527		$	1,732,497

Infinera Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Six Months Ended
	June 26, 2021			June 27, 2020
Cash Flows from Operating Activities:
Net loss	$	(83,916	)	$	(160,903	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	39,308			51,369
Non-cash restructuring charges and related costs	824			2,818
Amortization of debt discount and issuance costs	15,834			13,016
Operating lease expense	8,526			9,873
Stock-based compensation expense	24,913			24,479
Other, net	3,090			3,001
Changes in assets and liabilities:
Accounts receivable	36,293			53,989
Inventory	(6,120		)	50,164
Prepaid expenses and other assets	21,332			(26,961		)
Accounts payable	(2,085		)	(77,358		)
Accrued liabilities and other expenses	(3,754		)	(59,939		)
Deferred revenue	(14,311		)	(11,637		)
Net cash provided by (used in) operating activities	39,934			(128,089		)
Cash Flows from Investing Activities:
Purchase of property and equipment, net	(25,789		)	(19,002		)
Net cash used in investing activities	(25,789		)	(19,002		)
Cash Flows from Financing Activities:
Proceeds from issuance of 2027 Notes	—			194,500
Proceeds from revolving Credit Facility	—			55,000
Repayment of revolving Credit Facility	(77,000		)	(8,000		)
Repayment of third party manufacturing funding	(24,610		)	(3,960		)
Payment of debt issuance cost	—			(2,073		)
Repayment of mortgage payable	(130		)	(166		)
Payment of term license obligation	(3,930		)	—
Principal payments on financing lease obligations	(819		)	(922		)
Proceeds from issuance of common stock	9,344			7,399
Minimum tax withholding paid on behalf of employees for net share settlement	(3,398		)	(1,319		)
Net cash (used in) provided by financing activities	(100,543		)	240,459
Effect of exchange rate changes on cash and restricted cash	4,245			(1,968		)
Net change in cash and restricted cash	(82,153		)	91,400
Cash and restricted cash at beginning of period	315,383			132,797
Cash and restricted cash at end of period⁽¹⁾	$	233,230		$	224,197

Infinera Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Six Months Ended
	June 26, 2021		June 27, 2020
Supplemental disclosures of cash flow information:
Cash paid for income taxes, net	$	13,162	$	(773	)
Cash paid for interest	$	9,862	$	7,320
Supplemental schedule of non-cash investing and financing activities:
Unpaid debt issuance cost	$	—	$	382
Property and equipment included in accounts payable and accrued liabilities	$	—	$	4,864
Transfer of inventory to fixed assets	$	1,735	$	118
Unpaid term licenses (included in accounts payable, accrued liabilities and other long-term liabilities)	$	9,807	$	—

⁽¹⁾ Reconciliation of cash and restricted cash to the condensed consolidated balance sheets:

	June 26, 2021		June 27, 2020

Cash	$	219,735	$	202,782
Short-term restricted cash	2,840		4,307
Long-term restricted cash	10,655		17,108
Total cash and restricted cash	$	233,230	$	224,197

Infinera Corporation

Supplemental Financial Information

(Unaudited)

	Q3'19			Q4'19			Q1'20			Q2'20			Q3'20			Q4'20			Q1'21			Q2'21
GAAP Revenue ($ Mil)	$	325.3		$	384.6		$	330.3		$	331.6		$	340.2		$	353.5		$	330.9		$	338.2
GAAP Gross Margin %		26.7	%		29.0	%		23.3	%		29.4	%		31.8	%		35.7	%		35.4	%		35.6	%
Non-GAAP Gross Margin %⁽¹⁾		33.1	%		35.2	%		28.3	%		33.8	%		35.2	%		37.6	%		37.6	%		37.7	%
GAAP Revenue Composition:
Domestic %		51	%		52	%		52	%		50	%		49	%		36	%		48	%		52	%
International %		49	%		48	%		48	%		50	%		51	%		64	%		52	%		48	%
Customers >10% of Revenue		1			1			1			1			1			—			1			—
Cash Related Information:
Cash from Operations ($ Mil)	($	37.2	)	($	10.2	)	($	91.5	)	($	36.6	)	($	36.4	)	$	52.2		$	18.6		$	21.3
Capital Expenditures ($ Mil)	$	12.5		$	2.7		$	8.5		$	10.5		$	8.1		$	11.9		$	11.7		$	14.1
Depreciation & Amortization ($ Mil)	$	29.0		$	28.6		$	25.4		$	25.9		$	22.9		$	25.9		$	20.5		$	18.8
DSOs		80			83			75			79			78			82			76			76
Inventory Metrics:
Raw Materials ($ Mil)	$	47.2		$	47.4		$	50.0		$	43.4		$	39.3		$	34.7		$	31.8		$	33.3
Work in Process ($ Mil)	$	52.2		$	48.8		$	52.0		$	50.9		$	51.6		$	55.8		$	55.5		$	55.1
Finished Goods ($ Mil)	$	225.4		$	244.1		$	217.7		$	193.9		$	185.0		$	178.8		$	175.5		$	185.9
Total Inventory ($ Mil)	$	324.8		$	340.3		$	319.7		$	288.2		$	275.9		$	269.3		$	262.8		$	274.3
Inventory Turns⁽²⁾		2.7			2.9			3.0			3.1			3.2			3.3			3.1			3.1
Worldwide Headcount		3,557			3,261			3,302			3,209			3,074			3,050			3,041			3,108
Weighted Average Shares Outstanding (in thousands):
Basic		179,988			180,864			182,024			185,596			189,589			195,655			202,638			206,780
Diluted		182,073			186,349			189,246			190,127			195,868			203,259			217,970			219,459

(1) Non-GAAP adjustments include acquisition-related deferred revenue and inventory adjustments, stock-based compensation expenses, amortization of acquired intangible assets, acquisition and integration costs, restructuring and related costs, and COVID-19 related costs. 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.

(2) Infinera calculates non-GAAP inventory turns as annualized non-GAAP cost of revenue before adjustments for restructuring and related costs, non-cash stock-based compensation expense, and certain purchase accounting adjustments, divided by the average inventory for the quarter.

Infinera Corporation

GAAP to Non-GAAP Reconciliation of Financial Outlook

(In millions, except percentages)

(Unaudited)

The following amounts represent the midpoint of the expected range:

	Q3'21
	Outlook
Reconciliation of Revenue:
GAAP	$	354.0
Acquisition-related deferred revenue adjustment	1.0
Non-GAAP	$	355.0

Reconciliation of Gross Margin:
GAAP	33.0		%
Acquisition-related deferred revenue adjustment	0.3		%
Stock-based compensation expense	0.6		%
Amortization of acquired intangible assets	1.3		%
Restructuring and related costs	0.3		%
Non-GAAP	35.5		%

Reconciliation of Operating Expenses:
GAAP	$	148.0
Stock-based compensation expense	(11.4		)
Amortization of acquired intangible assets	(4.2		)
Restructuring and related costs	(4.4		)
Non-GAAP	$	128.0

Reconciliation of Operating Margin:
GAAP	(9.5		)%
Acquisition-related deferred revenue adjustment	0.3		%
Stock-based compensation expense	3.8		%
Amortization of acquired intangible assets	2.5		%
Restructuring and related costs	1.9		%
Non-GAAP	(1.0		)%

Infinera Corporation Reports Second Quarter 2021 Financial Results