8-K

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 5, 2020

INFINERA CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	001-33486	77-0560433
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

140 Caspian Court
Sunnyvale,	California	94089
(Address of principal executive offices, including Zip Code)

(408) 572-5200

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	INFN	The Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition.

On August 5, 2020, Infinera Corporation (the “Company”) issued a press release announcing financial results for its second quarter ended June 27, 2020. The Company also posted on the Investor Relations section of its website (www.infinera.com) investor slides for its second quarter ended June 27, 2020 and outlook for its third quarter ending September 26, 2020. A copy of the press release and investor slides are furnished as Exhibit 99.1 and Exhibit 99.2, respectively, to this Current Report on Form 8-K. Information on the Company’s website is not, and will not be deemed, a part of this report or incorporated into this or any other filings that the Company makes with the Securities and Exchange Commission.

In accordance with General Instruction B.2 of Form 8-K, the information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 and Exhibit 99.2, is being furnished under Item 2.02 and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of the general incorporation language of such filing, except as shall be expressly set forth by specific reference in such a filing.

The press release and investor slides furnished herewith as Exhibit 99.1 and Exhibit 99.2, refer to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is contained in the exhibit in which each such non-GAAP measure appears.

Item 9.01	Financial Statements and Exhibits.
(d)	Exhibits.

Exhibit No.	Description
99.1	Press release of Infinera Corporation dated August 5, 2020
99.2	Investor Slides dated August 5, 2020
104	Cover Page Interactive Data File (formatted as Inline XBRL)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		INFINERA CORPORATION
Date: August 5, 2020	By:	/s/ NANCY ERBA
		Nancy Erba Chief Financial Officer

EX-99.1

Exhibit 99.1

Infinera Corporation Reports Second Quarter 2020 Financial Results

Sunnyvale, Calif., August 5, 2020 - Infinera Corporation (NASDAQ: INFN) today released financial results for its second quarter ended June 27, 2020.

GAAP revenue for the quarter was $331.6 million compared to $330.3 million in the first quarter of 2020 and $296.3 million in the second quarter of 2019.

GAAP gross margin for the quarter was 29.4% compared to 23.3% in the first quarter of 2020 and 20.7% in the second quarter of 2019. GAAP operating margin for the quarter was (13.5)% compared to (23.3)% in the first quarter of 2020 and (36.6)% in the second quarter of 2019.

GAAP net loss for the quarter was $(61.6) million, or $(0.33) per share, compared to $(99.3) million, or $(0.55) per share, in the first quarter of 2020, and $(113.7) million, or $(0.64) per share, in the second quarter of 2019.

Non-GAAP revenue for the quarter was $332.6 million compared to $331.4 million in the first quarter of 2020 and $306.9 million in the second quarter of 2019.

Non-GAAP gross margin for the quarter was 33.8% compared to 28.3% in the first quarter of 2020 and 30.7% in the second quarter of 2019. Non-GAAP operating margin for the quarter was (1.8)% compared to (9.4)% in the first quarter of 2020 and (12.3)% in the second quarter of 2019.

Non-GAAP net loss for the quarter was $(17.2) million, or $(0.09) per share, compared to a net loss of $(49.4) million, or $(0.27) per share, in the first quarter of 2020, and net loss of $(42.0) million, or $(0.24) per share, in the second quarter of 2019.

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 release.

“I am pleased with our execution in the quarter from a financial, operational and technical perspective, making advances on all fronts. We are managing the operational impacts of COVID-19 and are continuing to take the necessary measures to reduce costs and improve working capital utilization as macroeconomic uncertainty in our industry continues,” said Tom Fallon, Infinera CEO. "Importantly, I am encouraged by the opportunity we believe will be created by our ICE6 solution as the industry readies for a new technology cycle driven by ever increasing demand for bandwidth.”

Financial Outlook

Infinera's outlook for the quarter ending September 26, 2020 is as follows:

• GAAP revenue is expected to be $334 million +/- $10 million. Non-GAAP revenue is expected to be $335 million +/- $10 million.

• GAAP gross margin is expected to be 30.5% +/- 150 bps. Non-GAAP gross margin is expected to be 34% +/- 150 bps.

• GAAP operating expenses are expected to be $137 million +/- $1.5 million. Non-GAAP operating expenses are expected to be $116.5 million +/- $1.5 million.

• GAAP operating margin is expected to be (11.0)% +/- 200 bps. Non-GAAP operating margin is expected to be (1.0)% +/- 200 bps.

Second Quarter 2020 Investor Slides Available Online

Investor slides reviewing Infinera's second quarter of 2020 financial results will be furnished to the SEC on a Current Report on Form 8-K and published on Infinera's Investor Relations website at investors.infinera.com prior to second quarter of 2020 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 2020 and its outlook for the third quarter of 2020 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: Michael Bowen, ICR, Inc. Tel. +1 (203) 682-8299 Michael.Bowen@icrinc.com
	Marc P. Griffin, ICR, Inc. Tel. +1 (646) 277-1290 Marc.Griffin@icrinc.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 based on current expectations, forecasts and assumptions that involve risks and uncertainties. Such forward-looking statements include, without limitation, Infinera’s ability to continue to execute on its financial, operational and technical plans; its expectations regarding its ICE6 solution, and its financial outlook for the third quarter of 2020.

Forward-looking statements can also be identified by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” and "would” or similar words. These statements are based on information available to Infinera as of the date hereof and 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, the effect of the COVID-19 pandemic on Infinera’s business, results of operations, financial condition, stock price and personnel; the effect of global and regional economic conditions on Infinera’s business, including effects on purchasing decisions by customers; Infinera’s future capital needs and its ability to generate the cash flow or otherwise secure the capital necessary to make anticipated capital expenditures; Infinera's ability to service its debt obligations and pursue its strategic plan; delays in the development and introduction of new products or updates to existing products; market acceptance of Infinera’s end-to-end portfolio; Infinera's reliance on single and limited source suppliers; 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; the effect that changes in product pricing or mix, and/or increases in component costs could have on Infinera’s gross margin; Infinera’s ability to respond to rapid technological changes; aggressive business tactics by Infinera’s competitors; the effects of customer consolidation; the impacts of foreign currency fluctuations; Infinera’s ability to protect Infinera’s 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 its Annual Report on Form 10-K for the year ended on December 28, 2019 as filed with the SEC on March 4, 2020, and its Quarterly Report on Form 10-Q for the quarter ended March 28, 2020 as filed with the SEC on May 15, 2020, 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 and inventory adjustments, other customer related charges, stock-based compensation expenses, amortization of acquired intangible assets, acquisition and integration costs, restructuring and related costs, , COVID-19 related costs, litigation charges, amortization of debt discount on Infinera’s convertible senior notes, gain on non-marketable equity investments, along with related 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 section titled, “GAAP to Non-GAAP Reconciliations.”

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 2020 that exclude acquisition-related deferred revenue adjustments, stock-based compensation expenses, amortization of acquired intangible assets, acquisition and integration costs related to Infinera's acquisition of Coriant, and restructuring and related expenses. 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 and operating margin, 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 www.infinera.com.

Infinera 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

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 27, 2020			June 29, 2019			June 27, 2020			June 29, 2019
Revenue:
Product	$	261,227		$	226,866		$	516,419		$	449,873
Services	70,360			69,384			145,441			139,084
Total revenue	331,587			296,250			661,860			588,957
Cost of revenue:
Cost of product	186,519			177,501			388,311			335,318
Cost of services	36,599			36,831			77,294			73,507
Amortization of intangible assets	8,721			8,098			17,349			16,350
Acquisition and integration costs	750			10,700			1,785			12,764
Restructuring and related	1,591			1,864			2,748			23,330
Total cost of revenue	234,180			234,994			487,487			461,269
Gross profit	97,407			61,256			174,373			127,688
Operating expenses:
Research and development	67,090			73,937			135,270			147,597
Sales and marketing	31,816			37,651			68,505			77,688
General and administrative	30,101			35,672			59,721			68,716
Amortization of intangible assets	4,585			6,745			9,140			13,802
Acquisition and integration costs	3,344			12,164			12,566			19,298
Restructuring and related	5,097			3,471			10,677			20,659
Total operating expenses	142,033			169,640			295,879			347,760
Loss from operations	(44,626		)	(108,384		)	(121,506		)	(220,072		)
Other income (expense), net:
Interest income	54			183			78			949
Interest expense	(12,436		)	(7,280		)	(21,230		)	(14,843		)
Other gain (loss), net	(1,992		)	3,210			(14,674		)	287
Total other income (expense), net	(14,374		)	(3,887		)	(35,826		)	(13,607		)
Loss before income taxes	(59,000		)	(112,271		)	(157,332		)	(233,679		)
Provision for income taxes	2,635			1,385			3,571			1,578
Net loss	$	(61,635	)	$	(113,656	)	$	(160,903	)	$	(235,257	)
Net loss per common share:
Basic	$	(0.33	)	$	(0.64	)	$	(0.88	)	$	(1.33	)
Diluted	$	(0.33	)	$	(0.64	)	$	(0.88	)	$	(1.33	)
Weighted average shares used in computing net loss per common share:
Basic	185,596			178,677			183,810			177,542
Diluted	185,596			178,677			183,810			177,542

Infinera Corporation

GAAP to Non-GAAP Reconciliations

(In thousands, except percentages and per share data)

(Unaudited)

	Three Months Ended															Six Months Ended
	June 27, 2020					March 28, 2020					June 29, 2019					June 27, 2020					June 29, 2019
Reconciliation of Revenue:
U.S. GAAP as reported	$	331,587				$	330,273				$	296,250				$	661,860				$	588,957
Acquisition-related deferred revenue adjustment(1)	1,050					1,110					2,530					2,160					5,435
Other customer related charges(2)	—					—					8,100					—					8,100
Non-GAAP as adjusted	$	332,637				$	331,383				$	306,880				$	664,020				$	602,492
Reconciliation of Gross Profit:
U.S. GAAP as reported	$	97,407		29.4	%	$	76,966		23.3	%	$	61,256		20.7	%	$	174,373		26.3	%	$	127,688		21.7	%
Acquisition-related deferred revenue adjustment(1)	1,050					1,110					2,530					2,160					5,435
Other customer related charges(2)	—					—					8,100					—					8,100
Stock-based compensation(3)	2,063					2,102					1,591					4,165					2,919
Amortization of acquired intangible assets(4)	8,721					8,628					8,098					17,349					16,350
Acquisition and integration costs(5)	750					1,035					10,700					1,785					12,764
Acquisition-related inventory adjustments(6)	—					—					—					—					1,778
Restructuring and related(7)	1,591					1,157					1,864					2,748					23,330
COVID-19 related costs(8)	761					2,880					—					3,641					—
Non-GAAP as adjusted	$	112,343		33.8	%	$	93,878		28.3	%	$	94,139		30.7	%	$	206,221		31.1	%	$	198,364		32.9	%
Reconciliation of Operating Expenses:
U.S. GAAP as reported	$	142,033				$	153,846				$	169,640				295,879					$	347,760
Stock-based compensation(3)	10,713					9,601					11,456					20,314					18,841
Amortization of acquired intangible assets(4)	4,585					4,555					6,745					9,140					13,802
Acquisition and integration costs(5)	3,344					9,222					12,164					12,566					19,298
Restructuring and related(7)	5,097					5,580					3,471					10,677					20,659
Litigation charges(9)	—					—					4,050					—					4,050
Non-GAAP as adjusted	$	118,294				$	124,888				$	131,754				$	243,182				$	271,110
Reconciliation of Loss from Operations:
U.S. GAAP as reported	$	(44,626	)	(13.5	)%	$	(76,880	)	(23.3	)%	$	(108,384	)	(36.6	)%	$	(121,506	)	(18.4	)%	$	(220,072	)	(37.4	)%
Acquisition-related deferred revenue adjustment(1)	1,050					1,110					2,530					2,160					5,435
Other customer related charges(2)	—					—					8,100					—					8,100
Stock-based compensation(3)	12,776					11,703					13,047					24,479					21,760
Amortization of acquired intangible assets(4)	13,306					13,183					14,843					26,489					30,152
Acquisition and integration costs(5)	4,094					10,257					22,864					14,351					32,062
Acquisition-related inventory adjustments(6)	—					—					—					—					1,778
Restructuring and related(7)	6,688					6,737					5,335					13,425					43,989
COVID-19 related costs(8)	761					2,880					—					3,641					—
Litigation charges(9)	—					—					4,050					—					4,050
Non-GAAP as adjusted	$	(5,951	)	(1.8	)%	$	(31,010	)	(9.4	)%	$	(37,615	)	(12.3	)%	$	(36,961	)	(5.6	)%	$	(72,746	)	(12.1	)%

	Three Months Ended									Six Months Ended
	June 27,  2020			March 28, 2020			June 29, 2019			June 27,  2020			June 29, 2019
Reconciliation of Net Loss:
U.S. GAAP as reported	$	(61,635	)	$	(99,268	)	$	(113,656	)	$	(160,903	)	(235,257		)
Acquisition-related deferred revenue adjustment(1)	1,050			1,110			2,530			2,160			5,435
Other customer related charges(2)	—			—			8,100			—			8,100
Stock-based compensation(3)	12,776			11,703			13,047			24,479			21,760
Amortization of acquired intangible assets(4)	13,306			13,183			14,843			26,489			30,152
Acquisition and integration costs(5)	4,094			10,257			22,864			14,351			32,062
Acquisition-related inventory adjustments(6)	—			—			—			—			1,778
Restructuring and related(7)	6,688			6,737			5,335			13,425			43,989
COVID-19 related costs(8)	761			2,880			—			3,641			—
Litigation charges(9)	—			—			4,050			—			4,050
Amortization of debt discount(10)	6,577			5,121			4,348			11,698			8,589
Gain/Loss on non-marketable equity investment(11)	—			—			(1,009		)	—			(1,009		)
Income tax effects(12)	(836		)	(1,170		)	(2,470		)	(2,006		)	(2,896		)
Non-GAAP as adjusted	$	(17,219	)	$	(49,447	)	$	(42,018	)	$	(66,666	)	$	(83,247	)
Net Loss per Common Share - Basic and Diluted:
U.S. GAAP as reported	$	(0.33	)	$	(0.55	)	$	(0.64	)	$	(0.88	)	$	(1.33	)
Non-GAAP as adjusted(13)	$	(0.09	)	$	(0.27	)	$	(0.24	)	$	(0.36	)	$	(0.47	)
Weighted Average Shares Used in Computing Net Loss per Common Share - Basic and Diluted:
Basic	185,596			182,024			178,677			183,810			177,542
Diluted	185,596			182,024			178,677			183,810			177,542

⁽¹⁾  Business combination accounting principles require Infinera to write down to fair value its maintenance support contracts assumed in the Coriant acquisition. 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 of Infinera's business.

⁽²⁾  Other customer related charges include one-time benefits and charges that are not directly related to Infinera’s ongoing or core business results. During the second quarter of 2019, Infinera agreed to reimburse a customer for certain expenses incurred by them in connection with a network service outage that occurred during the fourth quarter of fiscal 2018. 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 reimbursement is not indicative of ongoing operating performance.

⁽³⁾  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 27, 2020		March 28,  2020		June 29, 2019		June 27, 2020		June 29, 2019
Cost of revenue	$	779	$	624	$	663	$	1,403	$	1,201
Research and development	4,379		3,774		6,127		8,153		9,730
Sales and marketing	2,786		2,644		2,099		5,430		3,646
General and administration	3,548		3,183		3,230		6,731		5,465
	11,492		10,225		12,119		21,717		20,042
Cost of revenue - amortization from balance sheet*	1,284		1,478		928		2,762		1,718
Total stock-based compensation expense	$	12,776	$	11,703	$	13,047	$	24,479	$	21,760

* Stock-based compensation expense deferred to inventory and deferred inventory costs in prior periods recognized in the current period.

⁽⁴⁾   Amortization of acquired intangible assets consists of developed technology, trade names, customer relationships and backlog acquired in connection with the Coriant acquisition, which closed during the fourth quarter of 2018. Amortization of acquired intangible assets also consists of amortization of developed technology, trade names and customer relationships acquired in connection with the Transmode AB acquisition. U.S. 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.

⁽⁵⁾ Acquisition and integration costs consist of legal, financial, IT, manufacturing-related costs, employee-related costs and professional fees incurred in connection with Infinera's acquisition of Coriant. 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.

⁽⁶⁾  Business combination accounting principles require Infinera to measure acquired inventory at fair value. The fair value of inventory reflects the acquired company’s cost of manufacturing plus a portion of the expected profit margin. The non-GAAP adjustment to Infinera's cost of sales excludes the amortization of the acquisition-related step-up in carrying value for units sold in the quarter. Additionally, in connection with the Coriant acquisition, cost of sales excludes a one-time adjustment in inventory as a result of renegotiated supplier agreements that contained unusually higher than market pricing. Management believes these adjustments are useful to investors as an additional means to reflect ongoing cost of sales and gross margin trends of Infinera's business.

⁽⁷⁾  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 Coriant's historical restructuring plan associated with its early retirement plan. In addition, management included accelerated amortization on operating lease right-of-use assets due to the cease 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.

⁽⁸⁾ 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, we needed to source certain key components from an alternate suppler at substantially higher cost in order for Infinera to fulfill delivery commitments in the normal course of business. As of result of these atypical challenges caused by the circumstances surrounding the COVID-19 pandemic, management has excluded these expenses from non-GAAP financial measures, as their exclusion provides a better indication of Infinera's underlying business performance.

⁽⁹⁾ Litigation charges are associated with the preliminary settlement of a litigation matter agreed to during the quarter ended June 29, 2019. 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.

⁽¹⁰⁾  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 provides a better indication of Infinera's underlying business performance.

⁽¹¹⁾ Management has excluded the gain on the sale related to non-marketable equity investments in arriving at Infinera's non-GAAP results because it is non-recurring, and management believes that this income is not indicative of ongoing operating performance

⁽¹²⁾  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.

⁽¹³⁾ Non-GAAP EPS as adjusted did not exclude the impact of foreign currency. Had the impact of foreign currency been excluded for the three months ended June 27, 2020, March 28, 2020, June 29, 2019, non-GAAP EPS as adjusted would have been $(0.08), $(0.20) and $(0.25), respectively and for the six months ended June 27, 2020 and June 29, 2019, non-GAAP EPS as adjusted would have been $(0.28) and $(0.47), respectively.

Infinera Corporation

Condensed Consolidated Balance Sheets

(In thousands, except par values)

(Unaudited)

	June 27, 2020			December 28, 2019
ASSETS
Current assets:
Cash	$	202,782		$	109,201
Short-term restricted cash	4,307			4,339
Accounts receivable, net of allowance for doubtful accounts of $3,183 in 2020 and $4,005 in 2019	289,107			349,645
Inventory	288,159			340,429
Prepaid expenses and other current assets	168,052			139,217
Total current assets	952,407			942,831
Property, plant and equipment, net	145,110			150,793
Operating lease right-of-use assets	60,798			68,081
Intangible assets	143,762			170,346
Goodwill	251,050			249,848
Long-term restricted cash	17,108			19,257
Other non-current assets	25,623			27,182
Total assets	$	1,595,858		$	1,628,338
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	195,947		$	273,397
Accrued expenses and other current liabilities	172,100			193,168
Accrued compensation and related benefits	52,674			92,221
Short-term debt, net	27,726			31,673
Accrued warranty	17,674			21,107
Deferred revenue	95,932			103,753
Total current liabilities	562,053			715,319
Long-term debt, net	508,459			323,678
Long-term financing lease obligations	1,869			2,394
Accrued warranty, non-current	19,409			22,241
Deferred revenue, non-current	31,300			36,067
Deferred tax liability	5,564			8,700
Operating lease liabilities	63,819			64,210
Other long-term liabilities	73,531			69,194
Commitments and contingencies (Note 13)
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 27, 2020 and December 28, 2019 Issued and outstanding shares – 187,299 as of June 27, 2020 and 181,134 as of December 28, 2019	187			181
Additional paid-in capital	1,838,677			1,740,884
Accumulated other comprehensive loss	(27,566		)	(34,639		)
Accumulated deficit	(1,481,444		)	(1,319,891		)
Total stockholders' equity	329,854			386,535
Total liabilities and stockholders’ equity	$	1,595,858		$	1,628,338

Infinera Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Six Months Ended
	June 27, 2020			June 29, 2019
Cash Flows from Operating Activities:
Net loss	$	(160,903	)	$	(235,257	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	51,369			62,143
Non-cash restructuring charges and related costs	2,818			14,538
Amortization of debt discount and issuance costs	13,016			9,245
Operating lease expense	9,873			19,913
Stock-based compensation expense	24,479			21,760
Other, net	3,001			10
Changes in assets and liabilities:
Accounts receivable	53,989			55,216
Inventory	50,164			(30,640		)
Prepaid expenses and other assets	(26,961		)	(30,958		)
Accounts payable	(77,358		)	4,726
Accrued liabilities and other expenses	(59,939		)	1,604
Deferred revenue	(11,637		)	(12,267		)
Net cash used in operating activities	(128,089		)	(119,967		)
Cash Flows from Investing Activities:
Proceeds from sale of non-marketable equity investments	—			1,009
Proceeds from maturities of investments	—			25,085
Acquisition of business, net of cash acquired	—			(10,000		)
Purchase of property and equipment, net	(19,002		)	(15,784		)
Net cash (used in)/provided by investing activities	(19,002		)	310
Cash Flows from Financing Activities:
Proceeds from issuance of 2027 Notes	194,500			—
Proceeds from mortgage payable	—			8,584
Proceeds from revolving line of credit	55,000			—
Repayment of revolving line of credit	(8,000		)	—
Repayment of third party manufacturing funding	(3,960		)	—
Payment of debt issuance cost	(2,073		)	—
Repayment of mortgage payable	(166		)	(96		)
Principal payments on financing lease obligations	(922		)	—
Proceeds from issuance of common stock	7,399			7,740
Minimum tax withholding paid on behalf of employees for net share settlement	(1,319		)	(354		)
Net cash provided by financing activities	240,459			15,874
Effect of exchange rate changes on cash and restricted cash	(1,968		)	(33		)
Net change in cash, cash equivalents and restricted cash	91,400			(103,816		)
Cash, cash equivalents and restricted cash at beginning of period	132,797			242,337
Cash, cash equivalents and restricted cash at end of period(1)	$	224,197		$	138,521

Supplemental disclosures of cash flow information:
Cash paid for income taxes, net of refunds	$	(773	)	$	13,606
Cash paid for interest	$	7,320		$	4,687
Supplemental schedule of non-cash investing and financing activities:
Unpaid debt issuance cost	$	382		$	—
Third-party manufacturer funding for transfer expenses incurred	$	—		$	3,327
Transfer of inventory to fixed assets	$	118		$	2,195

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

	June 27, 2020		June 29, 2019
	(In thousands)
Cash and cash equivalents	$	202,782	$	109,034
Short-term restricted cash	4,307		2,742
Long-term restricted cash	17,108		26,745
Total cash, cash equivalents and restricted cash	$	224,197	$	138,521

Infinera Corporation

Supplemental Financial Information

(Unaudited)

	Q3'18			Q4'18			Q1'19			Q2'19			Q3'19			Q4'19			Q1'20			Q2'20
GAAP Revenue ($ Mil)		$200.4			$332.1			$292.7			$296.3			$325.3			$384.6			$330.3			$331.6
GAAP Gross Margin %	35.0		%	25.4		%	22.7		%	20.7		%	26.7		%	29.0		%	23.3		%	29.4		%
Non-GAAP Gross Margin %(1)	38.4		%	31.8		%	35.3		%	30.7		%	33.1		%	35.2		%	28.3		%	33.8		%
Revenue Composition:
Domestic %	49		%	39		%	45		%	45		%	51		%	52		%	52		%	50		%
International %	51		%	61		%	55		%	55		%	49		%	48		%	48		%	50		%
Customers >10% of Revenue	2			2			1			1			1			1			1			1
Cash Related Information:
Cash from Operations ($ Mil)		($20.4	)		($71.6	)		($56.2	)		($63.8	)		($37.2	)		($10.2	)		($91.5	)		($36.6	)
Capital Expenditures ($ Mil)		$5.5			$10.7			$6.6			$9.2			$12.5			$2.7			($8.5	)		($10.5	)
Depreciation & Amortization ($ Mil)		$17.1			$50.2			$31.0			$31.2			$29.0			$28.6			$25.4			$25.9
DSOs	70			87			83			80			80			83			75			79
Inventory Metrics:
Raw Materials ($ Mil)		$33.6			$74.5			$82.5			$70.4			$47.2			$47.4			$50.0			$43.4
Work in Process ($ Mil)		$56.4			$57.2			$63.0			$59.5			$52.2			$48.8			$52.0			$50.9
Finished Goods ($ Mil)		$121.9			$180.2			$187.0			$208.9			$225.4			$244.1			$217.7			$193.9
Total Inventory ($ Mil)		$211.9			$311.9			$332.5			$338.8			$324.8			$340.3			$319.7			$288.2
Inventory Turns(2)	2.3			2.9			2.3			2.5			2.7			2.9			3.0			3.1
Worldwide Headcount	2,079			3,876			3,708			3,632			3,557			3,261			3,302			3,209
Weighted Average Shares Outstanding (in thousands):
Basic	153,492			174,908			176,406			178,677			179,988			180,864			182,024			185,596
Diluted	154,228			175,629			176,602			179,343			182,073			186,349			189,246			190,127

⁽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 and per share data)

(Unaudited)

The following amounts represent the midpoint of the expected range:

	Q3'20
	Outlook
Reconciliation of Revenue:
U.S. GAAP	$	334
Acquisition-related deferred revenue adjustment	1
Non-GAAP	$	335
Reconciliation of Gross Margin:
U.S. GAAP	30.5		%
Acquisition-related deferred revenue adjustment	0.5		%
Stock-based compensation	0.5		%
Amortization of acquired intangible assets	2.0		%
Restructuring and related costs	0.5		%
Non-GAAP	34.0		%
Reconciliation of Operating Expenses:
U.S. GAAP	$	137.0
Stock-based compensation	(11.0		)
Amortization of acquired intangible assets	(4.0		)
Restructuring and related costs	(4.0		)
Acquisition and integration costs	(1.5		)
Non-GAAP	$	116.5
Reconciliation of Operating Margin:
U.S. GAAP	(11.0		)%
Acquisition-related deferred revenue adjustment	0.5		%
Stock-based compensation	4.0		%
Amortization of acquired intangible assets	3.0		%
Acquisition and integration costs	0.5		%
Restructuring and related costs	2.0		%
Non-GAAP	(1.0		)%

EX-99.2

Second Quarter 2020 Financial Results August 5, 2020

Safe Harbor Forward-Looking Statements This presentation contains forward-looking statements, including those related to Infinera’s expectations regarding its business model, market opportunities and customers; its expectations regarding the timing of its new products being available in the market; its ability to win new customers; its visibility into the performance of its business in future quarters based on the unpredictability of the macro-economic environment and the COVID-19 pandemic; and its financial outlook for the third quarter of 2020. All statements other than statements of historical fact could be deemed forward-looking, including, but not limited to, statements made about future market and financial performance; statements regarding future products or technology as well as the timing to market of any such products or technology; any statements about historical results that may suggest trends for our business; and any statements of assumptions underlying any of the items mentioned. These statements are based on estimates and information available to us at the time of this presentation and are not guarantees of future performance. These statements are based on information available to Infinera as of the date hereof and 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, the effect of the COVID-19 pandemic on Infinera’s business, results of operations, financial condition, stock price and personnel; the effect of global and regional economic conditions on Infinera’s business, including effects on purchasing decisions by customers; Infinera’s future capital needs and its ability to generate the cash flow or otherwise secure the capital necessary to make anticipated capital expenditures; Infinera's ability to service its debt obligations and pursue itsstrategic plan; delays in the development and introduction of new products or updates to existing products; market acceptance of Infinera’s end-to-end portfolio; Infinera's reliance on single and limited source suppliers; Infinera’s ability to successfully integrate its enterprise resource planning system and other management systems; the diversion of management time on issues related to the integration and the implementation of its enterprise resource planning system; 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;the effect that changes in product pricing or mix, and/or increases in component costs could have on Infinera’s gross margin; Infinera’s ability to respond to rapid technological changes; aggressive business tactics by Infinera’s competitors; the effects of customer consolidation; the impacts of foreign currency fluctuations; Infinera’s ability to protect Infinera’s 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 its Annual Report on Form 10-K for the year ended on December 28, 2019 as filed with the SEC on March 4, 2020, and its Quarterly Report on Form 10-Q for the quarter ended March 28, 2020 as filed with the SEC on May 15, 2020, as well as subsequent reports filed with or furnished to the SEC from time to time. These reports are available on Infinera’s website atwww.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 set forth in this presentation. 2 © 2020 Infinera. All rights reserved.

Q2’20 Key Highlights CONTINUED COMPANY GROWTH CUSTOMER & MARKET TRACTION IMPROVING OPERATIONAL EFFICIENCY Revenue Growth Advancing Key Solutions $31M inventory reduction in 8% - Q2’20 YoY Q2’20 and $51M in 1H’20 10% - 1H’20 vs. 1H’19 5 new 600G customers (16 total) (Including 1 major ICP) ICE6 (800G) - record-setting trials & 20% increase in Tier 1 revenue 10% OPEX reduction & on track for delivery this year and 2x increase in ICP revenue 1000+ basis point 1H'20 vs. 1H'19 operating margin Subsea wins & expansions improvement vs. Q2’19 Significant YoY growth in metro solutions Revenue, OPEX and operating margin references are non-GAAP. See reconciliation of GAAP to non-GAAP on last page of slide deck 3 © 2020 Infinera. All rights reserved.

Significant Market Opportunity in High End Optics GROWING High End Optical MARKET 25% CAGR to >$2B by 2024 Engines (600g+) Sources: Ovum, Cignal AI 800G th LONG LIFE Each Gen of Embedded 5 GEN 8+ Years Significant Revenue Optics Technology COHERENT CYCLE Source: Light Counting OPTICAL ENGINE rd th COMPETITION th From 8+ 3 & 4 SHRINKING 2 Vendors At 5 Gen Gen Vendors Current non-Chinese vendors DEMONSTRATED SUPERIOR PERFORMANCE PERFORMANCE VS. OTHER 5th GEN COHERENT SOLUTIONS COVERS ICE6 4x BETTER 2.5x BETTER 70% LEADERSHIP AT 800G AT 600G OF BACKBONE Based on Deployable performance NETWORK LINKS ICE6 65% 35% 25% NETWORK OVER OVER OVER Major North American SAVINGS Network Operator (Estimated) 400G 600G Other 800G (3rd Gen) (4th Gen) (5th Gen) 4 © 2020 Infinera. All rights reserved.

Q2’20 Comparison to Prior Periods KEY DRIVERS Q2’20 Q2’20 NON-GAAP Q2’19 Q1’20 Q2’20 vs. Q2’19 vs. Q1’20 (in $ Millions except EPS) REVENUE HIGHER REVENUE $306.9 $331.4 $332.6 $25.7 $1.2 year-over-year and sequentially Growth % 8.4% 0.4% GROSS MARGIN IMPROVEMENT driven by product mix and lower GROSS MARGIN % 30.7% 28.3% 33.8% 310 bps 550 bps cost structure OPEX $131.8 $124.9 $118.3 ($13.5) ($6.6) OPERATING EXPENSE DOWN Reduction % 10.2% 5.3% due to process improvements and increased automation OPERATING MARGIN % (12.3%) (9.4%) (1.8%) 1050 bps 760 bps INVENTORY REDUCTION EPS ($0.24) ($0.27) ($0.09) $0.15 $0.18 $51M in 1H’20 with annual target of $80M See reconciliation of GAAP to non-GAAP on last page of slide deck 5 © 2020 Infinera. All rights reserved.

Revenue by Region & Revenue by Vertical BY REGION Q1'19 Q2'19 Q3'19 Q4'19 FY'19 Q1'20 Q2'20 Americas 45% 45% 49% 52% 48% 52% 50% APAC 16% 15% 9% 10% 12% 16% 13% EMEA 34% 31% 35% 30% 32% 27% 29% Other Americas 5% 10% 6% 7% 7% 6% 8% Grand Total 100% 100% 100% 100% 100% 100% 100% BY CHANNEL Q1'19 Q2'19 Q3'19 Q4'19 FY'19 Q1'20 Q2'20 Direct 85% 81% 78% 75% 80% 74% 81% Reseller 15% 19% 22% 25% 20% 26% 19% Grand Total 100% 100% 100% 100% 100% 100% 100% VERTICAL Q1'19 Q2'19 Q3'19 Q4'19 FY'19 Q1'20 Q2'20 Tier 1 40% 42% 44% 39% 41% 47% 40% Other Service Provider 44% 44% 37% 41% 41% 33% 44% ICP 6% 9% 13% 13% 10% 16% 9% Cable 10% 6% 6% 8% 8% 4% 7% Grand Total 100% 100% 100% 100% 100% 100% 100% Based on GAAP revenue; Some may not add to 100% due to rounding 6 © 2020 Infinera. All rights reserved.

Q3’20 Non-GAAP Outlook TAKEAWAYS +2% vs Q3’19 OUR STRATEGY REVENUE $325 - $345 Million +1% vs Q2’20 REMAINS SOUND GROSS +90 pts vs Q3’19 CONTINUE TO DRIVE MARGIN % 32.5% - 35.5% +20 pts vs Q2’20 OPERATIONAL EFFICIENCIES -8% vs Q3’19 OPEX $115 - $118 Million -2% vs Q2’20 KEY DIFFERENTIATING TECHNOLOGIES ARE ON TRACK OPERATING +470 pts vs Q3’19 MARGIN % (1%) +/- 200 bps +80 pts vs Q2’20 WORKING CAPITAL IMPROVEMENT FROM REDUCED INVENTORY * Growth % uses midpoint of Q3’20 guidance compared to actuals of prior periods See reconciliation of GAAP to non-GAAP on last page of slide deck 717 © 2020 Infinera. All rights reserved.© 2020 Infinera. Company All rights Confidential. reserved.

GAAP to Non-GAAP Reconciliation NOTES: 1. Totals may not foot due to rounding 2. COVID included in ‘Restructuring and related’ in reconciliation of gross margin 3. Q3’20 Outlook represents the midpoints of the expected ranges 4. Non-GAAP metrics are reconciled to the most directly comparable GAAP financial metric 5. For a complete reconciliation of other period results, see prior quarterly earnings releases 8 © 2020 Infinera. All rights reserved.

Thank You

XML

Cover	Aug. 05, 2020
Cover [Abstract]
Document Type	8-K
Document Period End Date	Aug. 05, 2020
Entity Registrant Name	INFINERA CORPORATION
Entity Incorporation, State or Country Code	DE
Entity File Number	001-33486
Entity Tax Identification Number	77-0560433
Entity Address, Address Line One	140 Caspian Court
Entity Address, City or Town	Sunnyvale,
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94089
City Area Code	408
Local Phone Number	572-5200
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Entity Central Index Key	0001138639
Amendment Flag	false
Title of 12(b) Security	Common Stock, par value $0.001 per share
Trading Symbol	INFN
Security Exchange Name	NASDAQ