UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K/A

(Amendment Number 1)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission file number: 001-33486

Infinera Corporation

(Exact name of registrant as specified in its charter)

Delaware	77-0560433
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

6373 San Ignacio Avenue

San Jose, CA 95119

(Address of principal executive offices, including zip code)

(408) 572-5200

(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(g) of the Act: None

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

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☒    No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		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. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The aggregate market value of the registrant’s common stock, $0.001 par value per share, held by non-affiliates of the registrant on June 25, 2022, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $835,203,452 (based on the closing sales price of the registrant’s common stock on that date). Shares of the registrant’s common stock held by each officer and director and each person who owns more than 10% or more of the outstanding common stock of the registrant have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of February 21, 2023, 222,660,820 shares of the registrant’s common stock, $0.001 par value per share, were issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement relating to its 2023 Annual Meeting of Stockholders (the “2023 Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2023 Proxy Statement was filed with the U.S. Securities and Exchange Commission on March 31, 2023 (File No. 001-33486).

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A (this Amendment) amends the Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the Original Form 10-K), filed by Infinera Corporation (Infinera, the Company, we, us or our) with the Securities and Exchange Commission (the SEC) on February 27, 2023. Unless otherwise indicated or unless the context requires otherwise, all references herein to this Annual Report on Form 10-K, this Form 10-K, this Annual Report and similar names refer to the Original Form 10-K, as amended by this Amendment.

Subsequent to the filing of the Original Form 10-K and our Quarterly Reports on Form 10-Q for the periods ended April 1, 2023 and July 1, 2023, Ernst & Young LLP (EY), our independent registered public accounting firm, informed us that the Public Company Accounting Oversight Board had commenced an inspection of EY’s audit of our consolidated financial statements for the fiscal year ended December 31, 2022. Subsequently, EY raised questions regarding our stand-alone sales price (“SSP”) methodology as it relates to revenue allocation between product revenue, which is recognized upon delivery, and certain components of services revenue, which is recognized over a period of time. In addition, EY raised questions regarding the sufficiency of documentation retained by us related to the revenue portion of our quote to cash cycle (revenue cycle) and our inventory cycle. As a result of these queries, we reexamined our SSP methodology and engaged in an evaluation of our review procedures related to our revenue cycle and our inventory cycle. Subsequently, we concluded that, as of December 31, 2022, there were material weaknesses in our internal control over financial reporting related to our revenue cycle, inventory cycle, and with respect to these, our internal resources, expertise and policies required to maintain an effective control environment. As a result, our internal control over financial reporting was not effective, as of December 31, 2022, and continues to be ineffective, and these material weaknesses are not remediated as of the date of the filing of this Amendment. Furthermore, we have determined that because of these material weaknesses, the Company’s disclosure controls and procedures were not effective at a reasonable assurance level as of December 31, 2022.

These material weaknesses did not result in any material misstatement of our consolidated financial statements for the year ended December 31, 2022 included in our Original Form 10-K, and accordingly, we have concluded that the consolidated financial statements and other financial information included in our Original Form 10-K present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented.

Part II Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" - "Critical Accounting Policies and Estimates" and Item 8 “Financial Statements and Supplementary Information” - Note 2 “Significant Accounting Policies" have been amended to incorporate changes that have been made to our SSP methodology.

In addition, this Amendment is being filed to (i) amend Part II, Item 9A—Controls and Procedures to address management’s re-evaluation of disclosure controls and procedures and reflect the identification of material weaknesses in internal control over financial reporting, (ii) amend EY’s opinion on our internal control over financial reporting, and (iii) amend EY’s opinion on the consolidated financial statements included in Part II, Item 8—Financial Statements and Supplementary Data of the Original Form 10-K solely to include a reference to EY’s updated report on internal control over financial reporting.

Part IV, Item 15—Exhibits and Financial Statement Schedules also has been amended to include currently dated certifications from our Chief Executive Officer and Chief Financial Officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The certifications are attached to this Amendment as Exhibits 31.1, 31.2, 32.1 and 32.2. We are also filing an updated Consent of Independent Registered Public Accounting Firm, attached as Exhibit 23.1.

This Amendment is limited in scope to the portions of this Amendment set forth above, and does not modify, amend, or update in any way any other items or disclosures contained in the Original Form 10-K, including the consolidated financial statements set forth in the Original Form 10-K or XBRL data filed in Exhibit 101.

Except as noted above, this Amendment has not been updated for other events or information subsequent to the date of the filing of the Original Form 10-K, and should be read in conjunction with the Original Form 10-K and our other filings with the SEC.

INFINERA CORPORATION

ANNUAL REPORT ON FORM 10-K

For the Fiscal Year Ended December 31, 2022

Table of Contents

		Page
	Part II
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Item 8.	Financial Statements and Supplementary Data	18
	CONSOLIDATED BALANCE SHEETS	24
	CONSOLIDATED STATEMENTS OF OPERATIONS	25
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)	26
	CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY	27
	CONSOLIDATED STATEMENTS OF CASH FLOWS	28
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	30
Item 9A.	Controls and Procedures	73
	Part IV
Item 15.	Exhibits, Financial Statement Schedules	76
	Signatures	80

PART II

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Annual Report on Form 10-K contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements include, but are not limited to, our expectations regarding revenue, gross margin, operating expenses, cash flows and other financial items; the severity, magnitude, duration and effects of supply chain challenges and logistics issues; the extent to which the COVID-19 pandemic or other public health concerns and related impacts will materially and adversely affect our business operations, financial performance, results of operations, financial position, stock price and personnel; achievement of strategic objectives; any statements regarding our plans, strategies and objectives; the impact of new customer network footprint on our gross margin; our anticipated diversified customer base; our opportunities to grow revenue by driving adoption of new and existing solutions; expansion of our vertical integration capabilities across more of our product portfolio utilizing our ICE6 optical engine and related impacts on gross margin; cost management with investments in technology innovation; our go-to-market efforts globally to expand our customer reach and drive additional market share gains in the long term; future investments in our direct sales force; the portion of our future revenue attributable to direct sales; the effects of seasonal patterns in our business; the variable length of our sales cycle; factors that may affect our operating results; investments in research and development to support our strategy of expanding our vertically integrated product portfolio, including bringing new products to market quickly; anticipated customer acceptance of our solutions; statements concerning new products or services, including new product features; our beliefs about who we may compete with and how we are differentiated from those competitors; statements regarding our production capacity and facilities requirements; statements related to capital expenditures; statements related to working capital and liquidity; our ability to realize deferred tax assets; statements related to future economic conditions, performance, market growth, competitor, supplier or customer consolidation, or our sales cycle; our ability to identify, attract and retain highly skilled personnel; statements regarding our corporate culture; our ability to protect our technology and intellectual property, the frequency of claims related to our intellectual property and the value of our intellectual property; statements regarding restructuring of our business, acquisitions, or other strategic transactions; statements related to our convertible senior notes and credit facility; statements related to the impact of tax regulations; statements related to the proliferation and impact of environmental regulation; statements related to the effects of litigation on our financial position, results of operations or cash flows; statements related to factors beyond our control, such as natural disasters, acts of war or terrorism, epidemics and pandemics; statements related to new accounting standards; statements as to industry trends and other matters that do not relate strictly to historical facts; and statements of assumptions underlying any of the foregoing. These statements are often identified using words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” "should," "will," or "would," and similar expressions or variations. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in Part I, Item 1A of this Annual Report on Form 10-K. You should review these risk factors for a more complete understanding of the risks associated with an investment in our securities. Such forward-looking statements speak only as of the date of this report. We disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.

Overview

We are a semiconductor manufacturer and global supplier of networking solutions comprised of networking equipment, optical semiconductors, software and services. Our portfolio of solutions includes optical transport platforms, converged packet-optical transport platforms, compact modular platforms, optical line systems, coherent optical engines and subsystems, a suite of networking and automation software offerings, and support and professional services. Leveraging our U.S.-based compound semiconductor fab and in-house

packaging capabilities, we design, develop, and manufacture industry-leading indium phosphide-based PICs for use in our vertically integrated, high-capacity optical communications products.

Our customers include operators of fixed and mobile networks, including telecommunications service providers, ICPs, cable providers, wholesale carriers, research and educational institutions, large enterprises, utilities and government entities. Our networking solutions enable our customers to deliver high-bandwidth business and consumer communications services. Our comprehensive portfolio of networking solutions also enables our customers to scale their transport networks as end-user services and applications continue to drive growth in demand for network bandwidth. These end-user services and applications include, but are not limited to, high-speed internet access, business ethernet services, 4G/5G mobile broadband, cloud-based services, high-definition video streaming services, virtual and augmented reality, IoT, business Ethernet services and DCI.

As an optical semiconductor manufacturer, we specialize in the manufacturing of optical compound semiconductors using InP. This technology is used in telecommunications networks to transmit massive amounts of data and power, critical communications services like 5G, enhanced broadband, and high-capacity data center connectivity. We have made significant investments in our unique research, development, fabrication, and packaging facilities, including our optical compound semiconductor fab in Silicon Valley. We optimize the manufacturing process by using InP to build our PICs, which enables the integration of hundreds of optical functions onto a onto a single, monolithic optical semiconductor chip. The unique capabilities of our optical semiconductor fab, which has provided our customers with a critical and secure source of U.S.-produced optical semiconductors and strengthened the supply chain, have enabled us to consistently pioneer critical technology advancements. For example, our latest generation of technology has made it possible to transmit information at a rate of 800 Gb/s using a single laser.

We support U.S. government efforts to advance and increase the domestic manufacturing base for semiconductors as a matter of economic and national security. Compound semiconductors – including those based in InP – are an important part of the domestic semiconductor industry and will enable the next-generation of leading-edge technologies. Domestic manufacturing is critical in order to reduce our reliance on foreign sources of compound semiconductor materials and components, which is essential to economic growth and to the security of our domestic communications infrastructure.

The large-scale integration of our PICs and advanced DSPs enables us to develop and manufacture high-performance optical engines that are used in our coherent optical networking system and subsystem solutions. These solutions include features that customers care about the most, including reduced cost per bit, lower footprint and power consumption, and improved performance, reliability and security. Coherent optical solutions are becoming increasingly important across the network as our customers transition to 800 Gb/s per wavelength transmission speeds and beyond in the core, 400 Gb/s in the metro, and 100 Gb/s in the access market segment. We believe our vertical integration strategy provides a competitive advantage by enabling leading optical performance at higher optical speeds with increased spectral efficiency, greater control over our supply chain, and a lower cost structure.

We have grown our solutions portfolio through internal development as well as acquisitions, including the acquisition of Coriant, a privately held global supplier of open network solutions for the largest global network operators. These developments positioned us to be one of the leading providers of vertically integrated optical networking solutions in the world with the ability to serve a global customer base with accelerated delivery of the innovative solutions our customers demand. In 2021, we announced an expansion of our portfolio with the introduction of a suite of coherent optical pluggables designed to seamlessly address the rapidly growing market for point-to-point solutions as well as create a new category of point-to-multipoint solutions that can enable a dramatically more cost-efficient network architecture. Based on our vertically integrated optical semiconductor technology and supporting a range of high-speed transport rates that include 800 Gb/s, 400 Gb/s and 100 Gb/s, this suite of coherent optical pluggables builds on our history of delivering innovative, highly differentiated, and vertically integrated coherent optical engines.

Our products are designed to be managed by a suite of software solutions that enable simplified network management and automated operations. We also provide software-enabled programmability that offers differentiated capabilities such as Instant Bandwidth. Combined with our differentiated hardware solutions, Instant Bandwidth enables our customers to purchase and activate bandwidth as needed through our unique software licensing feature set. This, in turn, allows our customers to accomplish two key objectives: (1) limit their

initial network startup costs and investments; and (2) instantly activate new bandwidth as their customers’ and their own network needs evolve.

We sell our products to end-user customers and third-party network equipment manufacturers via a direct sales force and through indirect channel partners.

We believe our systems and subsystems portfolios benefit our customers by providing a unique combination of highly scalable capacity and features that address access to core transport network applications and ultimately simplify and automate network operations. Our high-performance optical transport solutions leverage the industry shift to open optical network architectures and enable our customers to efficiently and cost-effectively meet bandwidth demand, which continues to grow 30% or more year-over-year.

Impact of COVID-19 Pandemic

We continue to monitor the COVID-19 pandemic and actively assess potential implications to our business, supply chain, customer fulfillment sites, support operations and customer demand. We are also continuing to take appropriate measures to protect the health and safety of our employees and to create and maintain a safe working environment. While the effects of the COVID-19 pandemic have been decreasing, if the COVID-19 pandemic or its adverse effects become more severe or prevalent in the future or are prolonged in the locations where we, our customers, suppliers or contract manufacturers conduct business, or we experience more pronounced disruptions in our operations, or in economic activity and demand generally, our business and results of operations in future periods could be materially adversely affected.

Financial and Business Highlights

    Total revenue was $1,573.2 million in 2022 as compared to $1,425.2 million in 2021, representing a 10% increase. The year-over-year increase in revenue was driven by the ramp of new products, particularly ICE6, and revenue growth in our ICP vertical in the United States and our other service provider vertical in the United States and APAC. This growth was partially offset by lower revenue from certain Tier 1 customers and each of our other service provider and ICP verticals in EMEA and in our cable vertical in the United States. In 2023, we anticipate benefiting from a diversified customer base and see several prospective opportunities to grow revenue by driving adoption of new and existing solutions. Our results will depend on overall market conditions and, as is typical, quarter-over-quarter revenue could be volatile, affected by, among other factors, customer buying patterns, supply chain disruptions and the timing of customer network deployments.

Gross margin decreased to 34% in 2022 from 35% in 2021. The year-over-year decrease in gross margin was primarily driven by higher costs related to component price increases, higher logistics and freight costs, and supply constrained manufacturing volumes, partially offset by quality initiatives and ongoing cost improvements. In this period, our margins benefited from improved product mix including increased revenue from vertically integrated products. In 2023, we intend to continue to expand our vertical integration capabilities across more of our product portfolio utilizing our ICE6 optical engine and expect to benefit from the partial relief of elevated supply chain costs, both of which should help drive continued gross margin improvement over time.

Operating expenses increased to $595.9 million in 2022 from $585.5 million in 2021, representing a 2% increase. This increase was primarily attributable to higher employee-related costs, costs related to bringing our new technologies to market and investments in future technologies. These increases were partially offset by lower restructuring costs and amortization of our acquired intangibles. In 2023, we intend to continue to balance prudent cost management with investments in technology innovation and our go-to-market efforts globally to expand our customer reach and drive additional market share gains in the long term.

One customer accounted for approximately 11% of our revenue in 2022. No customer accounted for over 10% of our revenue in 2021.

We primarily sell our products through our direct sales force, with the remainder sold indirectly through channel partners. We derived 76% and 77% of our revenue from direct sales to customers in 2022 and 2021, respectively. In the future, we expect to continue generating a majority of our revenue from direct sales.

We are headquartered in San Jose, California, with employees located throughout North America, LATAM, EMEA and APAC.

Results of Operations

A discussion regarding our financial condition and results of operations for the fiscal year ended December 31, 2022 compared to 2021 is presented below. A discussion regarding our financial condition and results of operations for our fiscal year ended December 25, 2021 compared to our fiscal year ended December 26, 2020 can be found under Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 25, 2021, filed with the SEC on February 23, 2022.

The following tables set forth, for the periods presented, certain consolidated statements of operations information (in thousands, except percentages):

	Years Ended
	December 31, 2022		% of total revenue		December 25, 2021		% of total revenue		Change		% Change
Revenue:
Product	$	1,268,624	81	%	$	1,099,376	77	%	$	169,248	15	%
Services	304,618		19	%	325,829		23	%	(21,211)		(7)	%
Total revenue	$	1,573,242	100	%	$	1,425,205	100	%	$	148,037	10	%
Cost of revenue:
Product	$	852,476	54	%	$	732,071	51	%	$	120,405	16	%
Services	161,630		10	%	174,008		12	%	(12,378)		(7)	%
Amortization of intangible assets	23,138		1	%	19,621		1	%	3,517		18	%
Restructuring and other related costs	222		—	%	1,531		—	%	(1,309)		(85)	%
Total cost of revenue	$	1,037,466	66	%	$	927,231	65	%	$	110,235	12	%
Gross profit	$	535,776	34	%	$	497,974	35	%	$	37,802	8	%

	Years Ended
	December 25, 2021		% of total revenue		December 26, 2020		% of total revenue		Change		% Change
Revenue:
Product	$	1,099,376	77	%	$	1,045,551	77	%	$	53,825	5	%
Services	325,829		23	%	310,045		23	%	15,784		5	%
Total revenue	$	1,425,205	100	%	$	1,355,596	100	%	$	69,609	5	%
Cost of revenue:
Product	$	732,071	51	%	$	751,465	55	%	$	(19,394)	(3)	%
Services	174,008		12	%	160,118		12	%	13,890		9	%
Amortization of intangible assets	19,621		1	%	29,247		2	%	(9,626)		(33)	%
Acquisition and integration costs	—		—	%	1,828		—	%	(1,828)		(100)	%
Restructuring and other related costs	1,531		—	%	4,146		—	%	(2,615)		(63)	%
Total cost of revenue	$	927,231	65	%	$	946,804	69	%	$	(19,573)	(2)	%
Gross profit	$	497,974	35	%	$	408,792	31	%	$	89,182	22	%

Revenue

2022 Compared to 2021. Product revenue increased by $169.2 million, or 15%, in 2022 from 2021. This increase was driven by the ramp of new products, particularly ICE6, and growth in each of our ICP and other

service provider verticals. This increase was partially offset by lower revenue from certain Tier 1 customers and continued supply constraints.

Services revenue decreased by $21.2 million, or 7%, in 2022 from 2021. This decrease was attributable to a decline in professional services revenue. This decline was primarily related to network installation delays, which were driven by customer readiness and supply constraints.

In line with typical seasonality in our industry, we expect our total revenue will be lower in the first quarter of 2023 as compared to the fourth quarter of 2022.

Revenue by geographic region is based on the shipping address of the customer. The following tables summarize our revenue by geography and sales channel for the periods presented (in thousands, except percentages): 

	Years Ended
	December 31, 2022		% of total revenue		December 25, 2021		% of total revenue		Change		% Change
Total revenue by geography
Domestic	$	870,282	55	%	$	663,808	47	%	$	206,474	31	%
International	702,960		45	%	761,397		53	%	(58,437)		(8)	%
	$	1,573,242	100	%	$	1,425,205	100	%	$	148,037	10	%
Total revenue by sales channel
Direct	$	1,191,584	76	%	$	1,099,632	77	%	$	91,952	8	%
Indirect	381,658		24	%	325,573		23	%	56,085		17	%
	$	1,573,242	100	%	$	1,425,205	100	%	$	148,037	10	%

	Years Ended
	December 25, 2021		% of total revenue		December 26, 2020		% of total revenue		Change		% Change
Total revenue by geography
Domestic	$	663,808	47	%	$	630,422	47	%	$	33,386	5	%
International	761,397		53	%	725,174		53	%	36,223		5	%
	$	1,425,205	100	%	$	1,355,596	100	%	$	69,609	5	%
Total revenue by sales channel
Direct	$	1,099,632	77	%	$	1,039,976	77	%	$	59,656	6	%
Indirect	325,573		23	%	315,620		23	%	9,953		3	%
	$	1,425,205	100	%	$	1,355,596	100	%	$	69,609	5	%

2022 Compared to 2021. Domestic revenue increased by $206.5 million, or 31%, in 2022 compared to 2021, driven primarily by increased revenue from each of our ICP and other service provider verticals, which was partially offset by decreased revenue from certain Tier 1 customers and our cable vertical.

International revenue decreased by $58.4 million, or 8%, in 2022 compared to 2021. In this period, EMEA revenue decreased in each of our other service provider and cable verticals and from certain Tier 1 customers, including from our suspension of operations in Russia. Our Other Americas revenue also decreased in our other service provider vertical during this period. This decline was partially offset by increased revenue in APAC in our other service provider vertical.

Direct revenue increased by $92.0 million, or 8%, in 2022 compared to 2021, driven primarily by increased revenue from each of our ICP and other service provider verticals which was partially offset by decreased revenue from certain Tier 1 customers.

Indirect revenue increased $56.1 million, or 17%, driven primarily by increased revenue from customers in each of our ICP and other service provider verticals who purchased through our indirect sales channel.

Cost of Revenue and Gross Margin

2022 Compared to 2021. Gross profit increased by $37.8 million, with gross margin decreasing to 34% in 2022 from 35% in 2021. The gross margin decrease was primarily driven by higher costs related to component price increases, higher logistics and freight costs, and supply constrained manufacturing volumes, partially offset by ongoing cost improvement and quality initiatives. In this period, our margins benefited from improved product mix including increased revenue from vertically integrated products as well as reductions in restructuring costs. In 2023, we intend to continue to expand our vertical integration capabilities across more of our product portfolio utilizing our ICE6 optical engine and expect to benefit from the partial relief of elevated supply chain costs, both of which should help drive continued gross margin improvement over time.

In any given quarter, gross margins can fluctuate based on a number of factors, including the mix of line system footprint versus capacity utilization, product mix, customer mix and overall volume.

Amortization of Intangible Assets

2022 Compared to 2021. Amortization of intangible assets increased by $3.5 million, or 18%, in 2022 from 2021. The increase was due to the shortened life of certain developed technologies resulting from us having exited certain product lines in the fourth quarter of 2021.

Restructuring and Other Related Costs

2022 Compared to 2021. Restructuring and other related costs decreased $1.3 million, or 85%, in 2022 from 2021 reflecting the substantial completion of our 2021 Restructuring Plan as well as the completion of our 2020 Restructuring Plan in 2022. See Note 9, “Restructuring and Other Related Costs” to the Notes to Consolidated Financial Statements for more information on our restructuring plans.

Operating Expenses

The following tables summarize our operating expenses for the periods presented (in thousands, except percentages):

	Years Ended
	December 31, 2022		% of total revenue		December 25, 2021		% of total revenue		Change		% Change
Research and development	$	306,188	19	%	$	299,894	21	%	$	6,294	2	%
Sales and marketing	146,445		9	%	138,829		10	%	7,616		5	%
General and administrative	118,602		8	%	115,415		8	%	3,187		3	%
Amortization of intangible assets	14,576		1	%	17,455		1	%	(2,879)		(16)	%
Acquisition and integration costs	—		—	%	614		—	%	(614)		(100)	%
Restructuring and other related costs	10,122		1	%	13,246		1	%	(3,124)		(24)	%
Total operating expenses	$	595,933	38	%	$	585,453	41	%	$	10,480	2	%

	Years Ended
	December 25, 2021		% of total revenue		December 26, 2020		% of total revenue		Change		% Change
Research and development	$	299,894	21	%	$	265,634	20	%	$	34,260	13	%
Sales and marketing	138,829		10	%	129,604		10	%	9,225		7	%
General and administrative	115,415		8	%	112,240		8	%	3,175		3	%
Amortization of intangible assets	17,455		1	%	18,581		1	%	(1,126)		(6)	%
Acquisition and integration costs	614		—	%	13,346		1	%	(12,732)		(95)	%
Restructuring and other related costs	13,246		1	%	24,586		2	%	(11,340)		(46)	%
Total operating expenses	$	585,453	41	%	$	563,991	42	%	$	21,462	4	%

The following table summarizes the stock-based compensation expense included in our operating expenses for the periods presented (in thousands):

	Years Ended
	December 31, 2022		December 25, 2021		December 26, 2020
Research and development	$	23,553	$	18,554	$	16,863
Sales and marketing	13,311		12,345		10,907
General and administration	14,666		12,985		13,906
Total	$	51,530	$	43,884	$	41,676

Research and Development Expenses

2022 Compared to 2021. Research and development expenses increased by $6.3 million, or 2%, in 2022 from 2021. The increase was primarily attributable to higher employee-related expenses, material costs, and equipment costs related to bringing our new technologies to market and investments in future technologies. These costs were offset by lower facility costs due to site optimization and lower depreciation related to legacy technologies. In 2023, we expect to make additional targeted innovation investments in research and

development to support our strategy of expanding our vertically integrated product portfolio, including bringing new products to market quickly.

Sales and Marketing Expenses

2022 Compared to 2021. Sales and marketing expenses increased by $7.6 million, or 5%, in 2022 from 2021. This increase was driven by higher employee-related expenses including higher commissions and other costs, increased travel as COVID-related restrictions eased, and higher marketing costs related to the resumption of in-person trade shows partially offset by lower facility costs and spending on trial equipment. In 2023, we plan to increase investments in our go-to-market efforts globally to expand our customer reach and drive additional market share gains in the long term.

General and Administrative Expenses

2022 Compared to 2021. General and administrative expenses increased by $3.2 million, or 3%, in 2022 from 2021. The increase was attributable to higher employee-related expenses, outside professional fees, and indirect tax expenses partially offset by lower litigation settlement costs.

Amortization of Intangible Assets

2022 Compared to 2021. Amortization of intangible assets decreased by $2.9 million in 2022 from 2021. The decreases were largely due to lower amortization of the value of customer relationships and backlog intangibles. Customer relationships and backlog intangibles are amortized over the expected customer lives.

Acquisition and Integration Costs

2022 Compared to 2021. Acquisition and integration costs decreased by $0.6 million in 2022 from 2021 primarily due to the completion of our integration efforts related to the Acquisition in the first quarter of 2021.

Restructuring and Other Related Costs

2022 Compared to 2021. Restructuring and other related costs decreased by $3.1 million in 2022 compared to 2021. The decrease was primarily due to lower severance and other related expenses and asset impairment charges, partially offset by lease-related impairment charges incurred for various sites. See Note 9, “Restructuring and Other Related Costs” to the Notes to Consolidated Financial Statements for more information on our restructuring plans.

Other Income (Expense), Net

	Years Ended
	December 31, 2022		December 25, 2021		December 26, 2020
	(In thousands)
Interest income	$	893	$	455	$	118
Interest expense	(26,015)		(49,099)		(46,728)
Gain on extinguishment of debt	15,521		—		—
Other gain (loss), net	14,247		(22,667)		1,121
Total other income (expense), net	$	4,646	$	(71,311)	$	(45,489)

2022 Compared to 2021. Interest income was immaterial.

Interest expense decreased by $23.1 million in 2022 compared to 2021, primarily due to the adoption of ASU 2020-06, which resulted in the elimination of the debt discounts for our convertible senior notes that were amortized to interest expense over their contractual terms prior to its adoption, offset by the write off of unamortized deferred debt issuance costs related to the asset-based revolving credit facility under the Prior Credit Agreement. See Note 12, “Debt” to the Notes to Condensed Consolidated Financial Statements for more information.

Gain on extinguishment of debt was $15.5 million in 2022 due to the partial repurchase of our 2024 Notes at a price that was below their par value. The gain includes and was reduced by the write-off of related deferred issuance costs of $3.5 million.

The change in other gain (loss), net, 2022 compared to 2021, was $36.9 million primarily due to an increase in unrealized foreign exchange gains driven by foreign currency exchange rate changes.

Provision for Income Taxes

We recognized an income tax expense of $20.5 million on a loss before income taxes of $55.5 million, $12.0 million on a loss before income taxes of $158.8 million, and $6.0 million on a loss before income taxes of $200.7 million in 2022, 2021 and 2020, respectively. The resulting effective tax rates were (37.1)%, (7.5)% and (3.0)% for 2022, 2021 and 2020, respectively. The 2022 and 2021 effective tax rates differ from the expected statutory rate of 21% based on our ability to benefit from our U.S. loss carryforwards, offset by state income taxes, non-deductible stock-based compensation expenses and foreign taxes provided on foreign subsidiary earnings. The increase in 2022 income tax provision compared to 2021 is mainly driven by an increase in income taxes and withholding taxes in certain non-U.S. jurisdictions where our local subsidiaries do not have carryforward losses to offset income.

During 2022, we implemented a realignment of our internal supply chain and customer facing entities. The new structure aligned and consolidated our intellectual property and the associated commercial risk and reward among the customer-facing entities in their internal supply chain and improved operational efficiency. The impact of this internal realignment is reflected in our tax provision for the year ended December 31, 2022.

Because of our U.S. operating loss in 2022, significant loss carryforward position, and corresponding valuation allowance in all years, other than separate filing state taxes, a few combined states and minimum taxes, we have not been subject to federal or state tax on our U.S. income because of the availability of loss carryforwards. If these losses and other tax attributes become fully utilized, our taxes will increase significantly to a more normalized, expected rate on U.S. earnings. The release of transfer pricing reserves in the future may have a beneficial impact to tax expense, but the timing of the impact depends on factors such as expiration of the statute of limitations or settlements with tax authorities. No significant releases are expected in the near future based on information available at this time.

Liquidity and Capital Resources

	Years Ended
	December 31, 2022		December 25, 2021		December 26, 2020
	(In thousands)
Net cash flow provided by (used in):
Operating activities	$	(37,560)	$	28,128	$	(112,300)
Investing activities	$	(46,053)	$	(41,379)	$	(39,009)
Financing activities	$	82,346	$	(101,544)	$	334,162

	Years Ended
	December 31, 2022		December 25, 2021
	(In thousands)
Cash and cash equivalents	$	178,657	$	190,611
Restricted cash	10,546		11,910
	$	189,203	$	202,521

Our restricted cash balance amounts are primarily pledged as collateral for certain standby letters of credit related to customer performance guarantees, value added tax licenses and property leases.

Operating Activities

Net cash used by operating activities was $37.6 million for 2022, as compared to net cash provided by operating activities of $28.1 million for 2021 and net cash used by operating activities of $112.3 million for 2020.

Net loss for 2022 was $76.0 million, which included non-cash charges of $152.1 million such as depreciation, stock-based compensation, amortization of intangibles assets, operating lease expense, restructuring charges and related costs, and amortization of debt issuance costs, compared to a net loss of $170.8 million in 2021, which included non-cash charges of $193.8 million. Net cash used in working capital was $113.7 million in 2022. Accounts receivable increased by $69.0 million due to higher billings to customers and timing of collections. Inventory levels increased by $89.5 million due to our efforts to purchase more inventory to manage lead time challenges resulting from the industry-wide supply chain environment. Prepaid and other assets increased by $34.0 million primarily due to increase in contract manufacturer deposits and increase in customer contract assets. Accounts payable increased by $88.3 million primarily due timing of payments to suppliers. Accrued liabilities and other expenses decreased by $24.4 million primarily due to timing of payments of other compensation related expenses and decreased restructuring and tax liabilities. Deferred revenue increased by $15.1 million due to higher maintenance renewals during the period attributable to expanding our installed base. Maintenance contracts are typically contracted on an annual or multi-year basis.

Net loss for 2021 was $170.8 million, which included non-cash charges of $193.8 million such as depreciation, stock-based compensation, amortization of intangibles assets, operating lease expense, restructuring charges and related costs, and amortization of debt discount and debt issuance costs, compared to a net loss of $206.7 million in 2020, which included non-cash charges of $206.2 million. Net cash provided by working capital was $5.1 million in 2021. Accounts receivable increased by $45.8 million due to higher billings to customers and timing of collections. Inventory levels increased by $28.0 million due to longer lead time on supply which required more inventory on hand and higher service inventory to meet customer service level agreements. Prepaid and other assets decreased by $0.4 million primarily due to timing of value-added tax and income tax payments and increase in customer contract assets. Accounts payable increased by $32.3 million primarily due timing of payments to suppliers. Accrued liabilities and other expenses increased by $39.3 million primarily due to accrual of 2021 corporate bonus, restructuring liabilities, tax liabilities, purchases of shares of our common stock under our 2007 Employee Stock Purchase Plan (the “ESPP”) in 2021 and no accrual for 2020 corporate bonus. Deferred revenue increased by $7.8 million due to higher maintenance renewals during the period attributable to expanding our installed base. Maintenance contracts are typically contracted on an annual or multi-year basis.

Investing Activities

Net cash used in investing activities was for the purchase of property and equipment and amounted to $46.1 million and $41.4 million for 2022 and 2021, respectively.

Financing Activities

Net cash provided by financing activities was $82.3 million for 2022. Financing activities in 2022 primarily included net proceeds of $92.9 million from issuance of the 2028 Notes and partial repurchase of the 2024 Notes, and $15.2 million from the issuance of shares of our common stock under the ESPP. These proceeds were offset by $7.7 million term license purchases, $12.5 million payment of debt issuance costs incurred in connection with the issuance of the 2028 Notes and entering into the asset-based revolving credit facility under the Loan Agreement, $1.3 million payments on finance lease obligations, and tax withholdings in the amount of $3.7 million paid on behalf of certain employees for net share settlements of restricted stock units (“RSUs”).

Net cash used in financing activities was $101.5 million for 2021. Financing activities in 2021 included repayments of $77.0 million under the Credit Facility and $24.6 million under the financing assistance arrangement, and payments of $1.6 million for finance lease obligations and $7.3 million for term license purchases. The period also included net proceeds of $16.5 million from the issuance of shares under our ESPP and the exercise of stock options. These proceeds were offset by tax withholdings of $7.2 million paid on behalf of certain employees for net share settlements of RSUs.

Liquidity

We believe that our current cash, along with the Credit Facility (as defined below) will be sufficient to meet our anticipated cash needs for working capital and capital expenditures, and the interest payments on the convertible senior notes and the Credit Facility for at least 12 months. If the impact to our business and financial position of the supply chain challenges and disruptions in the global economy and financial markets is more

extensive or prolonged than expected and our existing sources of cash are insufficient to satisfy our liquidity requirements, we may require additional capital from equity or debt financings to fund our operations, to respond to competitive pressures or strategic opportunities, or otherwise. In addition, we are continuously evaluating alternatives for efficiently funding our capital expenditures and ongoing operations. We may, from time to time engage in a variety of financing transactions for such purposes. We may not be able to secure timely additional financing, or restructure existing debt, on favorable terms or at all. The terms of any additional financings or restructurings may place limits on our financial and operating flexibility. If we raise additional funds through further issuances of equity or equity-linked securities, our existing stockholders could suffer dilution in their percentage ownership of us, and any new securities we issue could have rights, preferences and privileges senior to those of holders of our common stock.

On August 8, 2022, we issued the 2028 Notes, which will mature on August 1, 2028, unless earlier repurchased, redeemed or converted. Interest is payable semi-annually in arrears on February 1 and August 1 of each year, which commenced on February 1, 2023. In the event that all of the 2028 Notes are converted, we would be required to repay the principal amount in cash and the conversion premium in any combination of cash and shares of its common stock at our election.

On March 9, 2020, we issued the 2027 Notes, which will mature on March 1, 2027, unless earlier repurchased, redeemed or converted. Interest is payable semi-annually in arrears on March 1 and September 1 of each year, which commenced on September 1, 2020. For the conversion obligation, we intend to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election.

On September 11, 2018, we issued the 2024 Notes, which will mature on September 1, 2024, unless earlier repurchased, redeemed or converted. Interest is payable semi-annually in arrears on March 1 and September 1 of each year, which commenced on March 1, 2019. For the conversion obligation, we intend to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election.

For more information regarding the convertible senior notes, see Note 12, “Debt” to the Notes to Consolidated Financial Statements. Refer to the contractual obligations section below for future payment obligations.

On June 24, 2022, we entered into a Loan, Guaranty and Security Agreement (the "Loan Agreement") with the lenders party thereto, and Bank of America, N.A., as agent. The Loan Agreement provides for a senior secured asset-based revolving credit facility of up to $200 million (the "Credit Facility"), which we may draw upon from time to time. We may increase the total commitments under the revolving credit facility by up to an additional $100 million, subject to certain conditions. In addition, the Loan Agreement provides for a $50 million letter of credit subfacility and a $20 million swingline loan facility.

As of December 31, 2022, we had no drawings on the Credit Facility and we had availability of $161.6 million under the Credit Facility. For more information regarding the Credit Facility, see Note 12, “Debt” to the Notes to Consolidated Financial Statements.

As of December 31, 2022, we had $189.2 million of cash, cash equivalents and restricted cash including $65.9 million of cash held by our foreign subsidiaries. Our policy with respect to undistributed foreign subsidiaries' earnings is to consider those earnings to be indefinitely reinvested. As a result of the enactment in the United States of the Tax Cuts and Jobs Act of 2017, if and when funds are actually distributed in the form of dividends or otherwise, we expect minimal tax consequences, including foreign withholding taxes, which would be applicable in some jurisdictions.

We had standby letters of credit and bank guarantees as of the years ended December 31, 2022 and December 25, 2021. See Note 14, “Guarantees” to the Notes to Consolidated Financial Statements for further information.

Contractual Obligations

The following is a summary of our contractual obligations as of December 31, 2022 and December 25, 2021 (in thousands):

	December 31, 2022		December 25, 2021		Change		% Change
Operating leases(1)	$	71,903	$	90,887	$	(18,984)	(21)	%
Finance lease obligations	966		2,337		(1,371)		(59)	%
Purchase obligations(2)	744,777		591,540		153,237		26	%
2028 Notes, including interest(3)	457,572		—		457,572		100	%
2027 Notes, including interest(3)	222,500		227,500		(5,000)		(2)	%
2024 Notes, including interest(3)	107,015		428,159		(321,144)		(75)	%
Mortgage payable, including interest	7,611		8,392		(781)		(9)	%
Total contractual obligations(4)	$	1,612,344	$	1,348,815	$	263,529	20	%

(1)We lease facilities under non-cancelable operating lease agreements. These leases have varying terms that range from one to 11 years, and contain leasehold improvement incentives, rent holidays and escalation clauses. In addition, some of these leases have renewal options for up to six years. We also have contractual commitments to remove leasehold improvements and return certain properties to a specified condition when the leases terminate. See Note 13, "Commitments and Contingencies" to the Notes to Consolidated Financial Statements for more information.

(2)We have service agreements with certain production suppliers under which we are committed to purchase certain parts. The increase in purchase obligations compared with the end of fiscal 2021 was primarily due to increased lead-time commitments required to secure supply and pricing for certain product components as well as investments to support the release of new products.

(3)For additional information regarding our asset-based revolving credit facility and 2028, 2027 and 2024 Notes, see Note 12, “Debt” to the Notes to Consolidated Financial Statements.

(4)Certain commitments and contingencies are not included in the table because we cannot reliably estimate the timing and amount of future payments, if any. For example, tax liabilities of $9.6 million related to uncertain tax positions and expected future payments to our pension and post-employment plans are excluded from the contractual obligation table because they do not represent contractual cash outflows as they are dependent on various factors. See Note 18, "Employee Benefit and Pension Plans" to the Notes to Consolidated Financial Statements for more information relating to our pension and post-retirement benefit plans.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP. These accounting principles require us to make certain estimates, assumptions and judgments that can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the periods presented. See Note 2, “Significant Accounting Policies” to the Notes to Consolidated Financial Statements, which is included in Part II, Item 8 of this Annual Report on Form 10-K. Financial Statements and Supplementary Data, which describes our significant accounting policies and methods used in preparation of our consolidated financial statements. Management believes that the estimates, assumptions and judgments upon which they rely are reasonable based upon information available to them at the time that these estimates and judgments are made. To the extent there are material differences between these estimates and actual results, our consolidated financial statements will be affected.

We believe our critical accounting policies and estimates are those related to revenue recognition, accounting for income taxes, and inventory valuation. Management considers these policies critical because they are both important to the portrayal of our financial condition and results of operations, and they require management to make judgments and estimates about inherently uncertain matters.

Revenue Recognition

We recognize revenue when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

We determine revenue recognition by applying the following five-step approach:

•identification of the contract, or contracts, with a customer;

•identification of the performance obligations in the contract;

•determination of the transaction price;

•allocation of the transaction price to the performance obligations in the contract; and

•recognition of revenue when, or as, we satisfy a performance obligation.

Many of our product sales are sold in combination with installation and deployment services along with initial hardware and software support. Our product sales are also sold at times with spares management, on-site hardware replacement services, network operations management, software subscription services, extended hardware warranty and training. Initial software and hardware support services are generally delivered over a one-year period in connection with the initial purchase. Software warranty provides customers with maintenance releases during the warranty support period and hardware warranty provides replacement or repair of equipment that fails to perform in line with specifications. Software subscription services include software warranty and additionally provides customers with rights to receive unspecified software product upgrades released during the support period.

Spares management and on-site hardware replacement services include the replacement of defective units at customer sites in accordance with specified service level agreements. Network operations management includes the day-to-day operation of a customer's network. These services are generally delivered on an annual basis. We evaluate each promised good and service in a contract to determine whether it represents a distinct performance obligation or should be accounted for as a combined performance obligation.

Services revenue includes software subscription services, installation and deployment services, spares management, on-site hardware replacement services, network operations management, extended hardware warranty and training. Revenue from software subscription services, spares management, on-site hardware replacement services, network operations management and extended hardware warranty contracts is deferred and is recognized ratably over the contractual support period, which is generally one year, as services are provided over the course of the entire period. Revenue related to training and installation and deployment services is recognized upon completion of the services.

Contracts and customer purchase orders are generally used to determine the existence of an arrangement. In addition, shipping documents and customer acceptances, when applicable, are used to verify delivery and transfer of title. We typically satisfy our performance obligations upon shipment or delivery of product depending on the contractual terms. Payment terms to customers generally range from net 30 to 120 days from invoice, which are considered to be standard payment terms. We assess our ability to collect from our customers based primarily on the creditworthiness and past payment history of the customer.

Customer product returns are generally approved on a case by case basis. Specific reserve provisions are made based upon a specific review of all the approved product returns where the customer has yet to return the products to generate the related sales return credit at the end of a period. Estimated sales returns are recorded as a reduction to revenue.

For sales to resellers, the same revenue recognition criteria apply. It is our practice to identify an end-user prior to shipment to a reseller. We do not offer rights of return or price protection to our resellers.

We report revenue net of any required taxes collected from customers and remitted to government authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority.

Customer Purchase Commitments

We sell software licenses that provide customers the ability to purchase incremental bandwidth capacity on an already-deployed piece of hardware. Instant Bandwidth-enabled systems generally include a specific initial capacity and incremental capacity can be added by the purchase of Instant Bandwidth licenses. Instant Bandwidth licenses are considered distinct performance obligations because customers can provision additional transmission capacity on demand without the deployment of any incremental equipment.

Some contracts commit the customer to purchase incremental Instant Bandwidth licenses within a specified time frame from the initial shipment of the Instant Bandwidth-enabled hardware. The time frame varies by customer and generally ranges between 12 to 24 months. If the customer does not purchase the additional capacity within the time frame as stated in the contract, we have the right to deliver and invoice such Instant Bandwidth licenses to the customer. Future committed licenses are considered to be additional performance obligations when a minimum purchase obligation is present, as evidenced by enforceable rights and obligations. As such, we are required to estimate the variable consideration for future Instant Bandwidth licenses as part of determining the contract transaction price.

Contract Termination Rights

The contract term is determined on the basis of the period over which the parties to the contract have present enforceable rights and obligations. Certain customer contracts include a termination for convenience clause that allows the customer to terminate services without penalty, upon advance notification. For such contracts, the service duration is limited to the non-cancelable portion of the contract.

Variable Consideration

The consideration associated with customer contracts is generally fixed. Variable consideration includes discounts, rebates, refunds, credits, incentives, penalties, or other similar items. The amount of consideration that can vary is not a substantial portion of total consideration.

Variable consideration estimates are re-assessed at each reporting period until a final outcome is determined. The changes to the original transaction price due to a change in estimated variable consideration will be applied on a retrospective basis, with the adjustment recorded in the period in which the change occurs.

Stand-alone Selling Price

The transaction price for a contract is allocated among the performance obligations on a relative stand-alone selling price (SSP) basis. The SSP is the price at which an entity would sell a promised product or service separately to a customer.

While certain services we sell have readily observable SSPs, the majority of our products and services are generally not sold on a standalone basis and therefore SSPs for such products and services are not directly observable. If there is no observable SSP, it is estimated using judgment and considering all reasonably available information, including but not limited to, gross margin objectives, pricing practices in customer contracts with multiple goods and services, internal costs, historical profitability data, competitor pricing strategies, as well as other observable inputs. The determination of SSPs for performance obligation is assessed on a periodic basis and estimates are revised to reflect any significant changes to underlying assumptions, as needed.

Transaction Price Allocated to the Remaining Performance Obligation

Our remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied or partially satisfied, as of period end, consisting of deferred revenue and backlog. Our backlog represents purchase orders received from customers for future product shipments and services that are unsatisfied or partially satisfied as of period end. Our backlog is subject to future events that could cause the amount or timing of the related revenue to change, and, in certain cases, may be canceled without penalty. Orders in backlog may be fulfilled several quarters following receipt or may relate to multi-year support service obligations.

Accounting for Income Taxes

As part of the process of preparing our consolidated financial statements, we are required to estimate our taxes in each of the jurisdictions in which we operate. We estimate actual current tax expense together with assessing temporary differences resulting from different treatment of items, such as accruals and allowances not currently deductible for tax purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. In general, deferred tax assets represent future tax benefits to be received when certain expenses previously recognized in our consolidated statements of operations become deductible expenses under applicable income tax laws or loss, or credit carryforwards are utilized. Accordingly, realization of our deferred tax assets is dependent on future taxable income within the respective jurisdictions against which these deductions, losses and credits can be utilized within the applicable future periods.

We must assess the likelihood that some portion or all of our deferred tax assets will be recovered from future taxable income within the respective jurisdictions. To the extent the Company believes that recovery does not meet the “more-likely-than-not” standard, it must establish a valuation allowance. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management judgment is required in determining its provision for income taxes, its deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. In evaluating the need for a full or partial valuation allowance, all positive and negative evidence must be considered, including the Company's forecast of taxable income over the applicable carryforward periods, its current financial performance, its market environment, and other factors. Based on the available objective evidence, at December 31, 2022, management believes it is not more likely than not that the domestic net deferred tax assets will be realizable in the foreseeable future. Accordingly, the domestic net deferred tax assets are subject to a full valuation allowance. To the extent that the Company determines that deferred tax assets are realizable on a more likely than not basis, and an adjustment is needed, that adjustment will be recorded in the period that the determination is made.

Inventory Valuation

Inventories consist of raw materials, work-in-process and finished goods and are stated at standard cost adjusted to approximate the lower of actual cost or net realizable value. Costs are recognized utilizing the first-in, first-out method. Net realizable value is based upon an estimated selling price reduced by the estimated cost of disposal. The determination of market value involves numerous judgments including estimated average selling prices based upon recent sales volumes, industry trends, existing customer orders, current contract price, future demand and pricing and technological obsolescence of our products.

Inventory that is obsolete or in excess of our forecasted demand or is anticipated to be sold at a loss is written down to its estimated net realizable value based on historical usage and expected demand. In valuing our inventory costs and deferred inventory costs, we considered whether the net realizable value of inventory delivered or expected to be delivered at less than cost, primarily comprised of common equipment, had declined. We concluded that, in the instances where the net realizable value of inventory delivered or expected to be delivered was less than cost, it was appropriate to value the inventory costs and deferred inventory costs at cost or net realizable value, whichever is lower, thereby recognizing the cost of the reduction in net realizable value of inventory in the period in which the reduction occurred or can be reasonably estimated. We have, therefore, recognized inventory write-downs as necessary in each period in order to reflect inventory at the lower of actual cost or net realizable value.

We consider whether we should accrue losses on firm purchase commitments related to inventory items. Given that the net realizable value of common equipment is below contractual purchase price, we have also recorded losses on these firm purchase commitments in the period in which the commitment is made. When the inventory parts related to these firm purchase commitments are received, that inventory is recorded at the purchase price less the accrual for the loss on the purchase commitment.

Recent Accounting Pronouncements

See Note 2, “Significant Accounting Policies” to the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements including the respective expected dates of adoptions and effects on us.

ITEM 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm (PCAOB ID: 42)	19
Consolidated Balance Sheets	24
Consolidated Statements of Operations	25
Consolidated Statements of Comprehensive Income (Loss)	26
Consolidated Statements of Stockholders’ Equity	27
Consolidated Statements of Cash Flows	28
Notes to Consolidated Financial Statements	30
Note 1: Organization and Basis of Presentation	30
Note 2: Significant Accounting Policies	30
Note 3: Leases	39
Note 4: Revenue Recognition	41
Note 5: Fair Value Measurements	43
Note 6: Derivative Instruments	44
Note 7: Goodwill and Intangibles	45
Note 8: Balance Sheet Details	47
Note 9: Restructuring and Other Related Costs	48
Note 10: Accumulated Comprehensive Income (Loss)	50
Note 11: Basic and Diluted Net Loss Per Common Share	50
Note 12: Debt	52
Note 13: Commitments and Contingencies	58
Note 14: Guarantees	60
Note 15: Stockholders' Equity	61
Note 16: Income Taxes	65
Note 17: Segment Information	68
Note 18: Employee Benefit and Pension Plans	69

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Infinera Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Infinera Corporation (the Company) as of December 31, 2022 and December 25, 2021, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and December 25, 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 27, 2023, except for the effect of the material weaknesses described in the third paragraph of that report, as to which the date is February 29, 2024, expressed an adverse opinion thereon.

Adoption of ASU No. 2020-06

As discussed in Note 2 to the consolidated financial statements, the Company changed its method for accounting for convertible debt in the year ended December 31, 2022 due to the adoption of Accounting Standards Update ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Inventory Valuation

Description of the Matter

As discussed in Note 2 of the consolidated financial statements, the Company assesses the valuation of inventories, including raw materials, work-in-process, and finished goods, in each reporting period. Obsolete inventory or inventory in excess of

management’s forecasted demand is written down to its estimated net realizable value if less than cost.

Auditing management’s estimates for excess and obsolete inventory involved subjective auditor judgement because the estimates rely on a number of factors that are affected by market and economic conditions outside the Company’s control. In particular, the excess and obsolete inventory calculations are sensitive to significant assumptions, including forecasted demand for the Company’s products. Additionally, auditing management’s judgments and estimates was complex as there were material weaknesses in internal controls over the information and judgements used in the estimation of reserves for excess and obsolete inventory.

How We Addressed the

Matter in Our Audit

After consideration of the material weaknesses, our audit procedures included, among others, evaluating the significant assumptions, including forecasted demand, and the accuracy and completeness of the underlying data management used to value excess and obsolete inventory by preparing a comparable analysis based on historical and subsequent period consumption and sales and compared the results to management’s forecasted demand. We obtained corroborative information about management’s estimated lifecycle of the Company’s products to support the quantities on hand. We also tested the completeness and accuracy of underlying data used in management’s analysis, including historical and subsequent period consumption and sales. For certain assumptions or inputs, we performed sensitivity analyses to test the reasonableness of management’s judgements.

Revenue Recognition – Estimation of Stand-alone Selling Prices

Description of the Matter

As described in Note 2 to the consolidated financial statements, the Company’s contracts with customers generally contain promises to transfer products and services which are not sold separately. The Company allocates the transaction price for a contract among the performance obligations on a relative stand-alone selling price (SSP) basis.

Auditing management’s estimates of SSP of its various performance obligations was challenging and complex due to a lack of stand-alone sales transactions that provide observable evidence. Because of this lack of stand-alone sales transactions, the Company must apply judgment and consider all reasonably available information, including but not limited to gross margin objectives, pricing practices in customer contracts with multiple goods and services, internal costs, historical profitability data and other observable inputs when estimating SSP. Additionally, auditing management’s estimates of SSP was complex as there were material weaknesses in internal controls over the information and judgments used in the estimation of such prices.

How We Addressed the

Matter in Our Audit

After consideration of the material weaknesses, our audit procedures included, among others, evaluating the appropriateness of the Company’s estimates based on the Company’s gross margin objectives and pricing practices in customer contracts. We tested the completeness and accuracy of the data used in the SSP methodology, including cost data used in determining historical profitability and pricing practices. We evaluated the Company’s identification and consideration of available information, and the use of such information in estimating SSP. We tested the accuracy of the Company’s calculations of SSP. We also tested, for a sample of transactions, the Company’s allocation of the transaction price among performance obligations based on relative SSP.

/s/    Ernst & Young LLP

We have served as the Company’s auditor since 2001.

San Jose, California

February 27, 2023, except for the effect of the material weaknesses described in the second paragraph of the Opinion on the Consolidated Financial Statements and the Critical Audit Matters described above, as to which the date is February 29, 2024.

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Infinera Corporation

Opinion on Internal Control over Financial Reporting

We have audited Infinera Corporation’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, because of the effect of the material weaknesses described below on the achievement of the objectives of the control criteria, Infinera Corporation (the Company) has not maintained effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

In our report dated February 27, 2023, we expressed an unqualified opinion that the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria. Management has subsequently identified deficiencies in controls related to the revenue and inventory processes and has further concluded that such deficiencies represented material weaknesses as of December 31, 2022. As a result, management has revised its assessment, as presented in the accompanying Management’s Report on Internal Control over Financial Reporting; to conclude that the Company’s internal control over financial reporting was not effective as of December 31, 2022. Accordingly, our present opinion on the effectiveness of internal control over financial reporting as of December 31, 2022, as expressed herein, is different from that expressed in our previous report.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management's assessment. Management has identified material weaknesses in controls related to the Company’s revenue cycle, inventory cycle, and with respect to these, their internal resources, expertise and policies required to maintain an effective control environment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's consolidated balance sheets as of December 31, 2022 and December 25, 2021, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the December 31, 2022 consolidated financial statements, and this report does not affect our report dated February 27, 2023, except for the effect of the material weaknesses described above and the Critical Audit Matters described in our Opinion on the Consolidated Financial Statements, as to which the date is February 29, 2024, which expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in

accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/    Ernst & Young LLP

San Jose, California

February 27, 2023, except for the effects of the material weaknesses described in the third paragraph above, as to which the date is February 29, 2024.

INFINERA CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except par values)

	December 31, 2022		December 25, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	178,657	$	190,611
Short-term restricted cash	7,274		2,840
Accounts receivable, net	419,735		358,954
Inventory	374,855		291,367
Prepaid expenses and other current assets	152,451		147,989
Total current assets	1,132,972		991,761
Property, plant and equipment, net	172,929		160,218
Operating lease right-of-use assets	34,543		45,338
Intangible assets, net	47,787		86,574
Goodwill	232,663		255,788
Long-term restricted cash	3,272		9,070
Other long-term assets	44,972		38,475
Total assets	$	1,669,138	$	1,587,224
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	304,880	$	216,404
Accrued expenses and other current liabilities	141,450		147,029
Accrued compensation and related benefits	78,849		88,021
Short-term debt, net	510		533
Accrued warranty	19,747		23,204
Deferred revenue	158,501		137,297
Total current liabilities	703,937		612,488
Long-term debt, net	667,719		476,789
Long-term accrued warranty	16,874		21,106
Long-term deferred revenue	23,178		31,612
Long-term deferred tax liability	2,348		2,364
Long-term operating lease liabilities	45,862		54,326
Other long-term liabilities	29,573		64,768
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 in 2022 and 500,000 in 2021 Issued and outstanding shares—220,408 in 2022 and 211,381 in 2021	220		211
Additional paid-in capital	1,901,491		2,026,098
Accumulated other comprehensive loss	(22,471)		(4,496)
Accumulated deficit	(1,699,593)		(1,698,042)
Total stockholders' equity	179,647		323,771
Total liabilities and stockholders’ equity	$	1,669,138	$	1,587,224

The accompanying notes are an integral part of these consolidated financial statements.

INFINERA CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

 

	Years Ended
	December 31, 2022		December 25, 2021		December 26, 2020
Revenue:
Product	$	1,268,624	$	1,099,376	$	1,045,551
Services	304,618		325,829		310,045
Total revenue	1,573,242		1,425,205		1,355,596
Cost of revenue:
Cost of product	852,476		732,071		751,465
Cost of services	161,630		174,008		160,118
Amortization of intangible assets	23,138		19,621		29,247
Acquisition and integration costs	—		—		1,828
Restructuring and other related costs	222		1,531		4,146
Total cost of revenue	1,037,466		927,231		946,804
Gross profit	535,776		497,974		408,792
Operating expenses:
Research and development	306,188		299,894		265,634
Sales and marketing	146,445		138,829		129,604
General and administrative	118,602		115,415		112,240
Amortization of intangible assets	14,576		17,455		18,581
Acquisition and integration costs	—		614		13,346
Restructuring and other related costs	10,122		13,246		24,586
Total operating expenses	595,933		585,453		563,991
Loss from operations	(60,157)		(87,479)		(155,199)
Other income (expense), net:
Interest income	893		455		118
Interest expense	(26,015)		(49,099)		(46,728)
Gain on extinguishment of debt	15,521		—		—
Other income (expense), net	14,247		(22,667)		1,121
Total other income (expense), net	4,646		(71,311)		(45,489)
Loss before income taxes	(55,511)		(158,790)		(200,688)
Provision for income taxes	20,532		11,988		6,035
Net loss	(76,043)		(170,778)		(206,723)
Net loss per common share:
Basic	$	(0.35)	$	(0.82)	$	(1.10)
Diluted	$	(0.35)	$	(0.82)	$	(1.10)
Weighted average shares used in computing net loss per common share:
Basic	216,376		207,377		188,216
Diluted	216,376		207,377		188,216

The accompanying notes are an integral part of these consolidated financial statements.

INFINERA CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

			Years Ended
	December 31, 2022		December 25, 2021		December 26, 2020
Net loss	$	(76,043)	$	(170,778)	$	(206,723)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment and other	(40,839)		(8,561)		29,040
Actuarial gain (loss) on pension liabilities	22,538		12,580		(8,183)
Amortization of net actuarial loss	326		3,383		1,884
Net change in accumulated other comprehensive income (loss)	(17,975)		7,402		22,741
Comprehensive loss	$	(94,018)	$	(163,376)	$	(183,982)

The accompanying notes are an integral part of these consolidated financial statements.

INFINERA CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Years Ended December 31, 2022, December 25, 2021 and December 26, 2020

(In thousands)

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at December 28, 2019	181,134	$	181	$	1,740,884	$	(34,639)	$	(1,319,891)	$	386,535
Shares of common stock sold in at-the market equity offering, net of issuance costs	12,000	12		92,852		—		—		92,864
Stock options exercised	474	—		3,995		—		—		3,995
Retirement of common shares purchased upon exercise of options	(254)	—		(2,255)		—		—		(2,255)
ESPP shares issued	3,001	3		15,343		—		—		15,346
Shares withheld for tax obligations	(330)	—		(2,013)		—		—		(2,013)
Restricted stock units released	5,372	5		—		—		—		5
Stock-based compensation	—	—		48,642		—		—		48,642
Conversion option related to convertible senior notes, net of allocated costs	—	—		67,797		—		—		67,797
Cumulative-effect adjustment from adoption of Topic 326	—	—		—		—		(650)		(650)
Other comprehensive income	—	—		—		22,741		—		22,741
Net loss	—	—		—		—		(206,723)		(206,723)
Balance at December 26, 2020	201,397	$	201	$	1,965,245	$	(11,898)	$	(1,527,264)	$	426,284
Stock options exercised	46	—		332		—		—		332
ESPP shares issued	2,272	2		16,164		—		—		16,166
Shares withheld for tax obligations	(808)	—		(7,178)		—		—		(7,178)
Restricted stock units released	8,474	8		—		—		—		8
Stock-based compensation	—	—		51,535		—		—		51,535
Other comprehensive income	—	—		—		7,402		—		7,402
Net loss	—	—		—		—		(170,778)		(170,778)
Balance at December 25, 2021	211,381	$	211	$	2,026,098	$	(4,496)	$	(1,698,042)	$	323,771
Cumulative-effect adjustment from adoption of ASU 2020-06	—	—		(196,493)				74,492		$	(122,001)
ESPP shares issued	2,552	2		15,189		—		—		$	15,191
Restricted stock units released	7,025	7		—		—		—		7
Shares withheld for tax obligations	(550)	—		(3,714)		—		—		(3,714)
Stock-based compensation and other	—	—		60,411		—		—		60,411
Other comprehensive loss	—	—		—		(17,975)		—		(17,975)
Net loss	—	—		—		—		(76,043)		(76,043)
Balance at December 31, 2022	220,408	$	220	$	1,901,491	$	(22,471)	$	(1,699,593)	$	179,647

The accompanying notes are an integral part of these consolidated financial statements.

INFINERA CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

			Years Ended
	December 31, 2022		December 25, 2021		December 26, 2020
Cash Flows from Operating Activities:
Net loss	$	(76,043)	$	(170,778)	$	(206,723)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	83,830		83,583		100,140
Non-cash restructuring charges and other related costs	6,066		6,805		5,471
Amortization of debt discount and issuance costs	6,109		32,455		28,115
Operating lease expense	9,421		14,993		18,556
Stock-based compensation expense	61,015		51,812		49,461
Gain on extinguishment of debt	(15,521)		—		—
Other, net	1,218		4,147		4,438
Changes in assets and liabilities:
Accounts receivable	(69,024)		(45,783)		32,150
Inventory	(89,527)		(28,022)		71,424
Prepaid expenses and other current assets	(34,046)		(424)		(36,127)
Accounts payable	88,256		32,304		(93,411)
Accrued expenses and other current liabilities	(24,443)		39,283		(107,704)
Deferred revenue	15,129		7,753		21,910
Net cash (used in) provided by operating activities	(37,560)		28,128		(112,300)
Cash Flows from Investing Activities:
Purchase of property and equipment	(46,053)		(41,379)		(39,009)
Net cash used in investing activities	(46,053)		(41,379)		(39,009)
Cash Flows from Financing Activities:
Proceeds from issuance of 2028 Notes	373,750		—		—
Proceeds from issuance of common stock from at-the-market equity offering, net of issuance costs of $3,380	—		—		92,916
Proceeds from issuance of 2027 Notes	—		—		194,500
Proceeds from asset-based revolving credit facility	80,000		—		55,000
Repayment of 2024 Notes	(280,842)		—		—
Repayment of third-party manufacturing funding	—		(24,610)		(5,346)
Repayment of asset-based revolving credit facility	(80,000)		(77,000)		(8,000)
Repayment of mortgage payable	(533)		(350)		(233)
Payment of debt issuance cost	(12,451)		—		(2,455)
Principal payments on financing lease obligations	(1,314)		(1,631)		(1,587)
Payment of term license obligation	(7,739)		(7,272)		(5,692)
Proceeds from issuance of common stock	15,189		16,497		17,072
Tax withholding paid on behalf of employees for net share settlement	(3,714)		(7,178)		(2,013)
Net cash provided by (used in) financing activities	82,346		(101,544)		334,162
Effect of exchange rate changes on cash	(12,051)		1,933		(267)
Net change in cash, cash equivalents, and restricted cash	(13,318)		(112,862)		182,586
Cash, cash equivalents, and restricted cash at beginning of period	202,521		315,383		132,797
Cash, cash equivalents, and restricted cash at end of period(1)	$	189,203	$	202,521	$	315,383
Supplemental disclosures of cash flow information:
Cash paid for income taxes, net	$	15,126	$	18,703	$	5,039
Cash paid for interest	$	14,787	$	18,261	$	15,638

Supplemental schedule of non-cash investing and financing activities:
Transfer of inventory to fixed assets	$	9,332	$	2,279	$	1,083
Property and equipment included in accounts payable and accrued liabilities	$	7,435	$	9,011	$	—
Unpaid term licenses (included in accounts payable, accrued liabilities and other long term liabilities)	$	9,178	$	9,339	$	12,478

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

	December 31, 2022		December 25, 2021		December 26, 2020
	(In thousands)
Cash and cash equivalents	$	178,657	$	190,611	$	298,014
Short-term restricted cash	7,274		2,840		3,293
Long-term restricted cash	3,272		9,070		14,076
Total cash, cash equivalents and restricted cash	$	189,203	$	202,521	$	315,383

The accompanying notes are an integral part of these consolidated financial statements.

INFINERA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Organization and Basis of Presentation

Infinera Corporation (“Infinera” or the “Company”), headquartered in San Jose, California, was founded in December 2000 and incorporated in the State of Delaware. Infinera is a global supplier of networking solutions comprised of networking equipment, optical semiconductors, software and services. Infinera’s portfolio of solutions includes optical transport platforms, converged packet-optical transport platforms, optical line systems, disaggregated router platforms, and a suite of networking and automation software offerings, and support and professional services. Infinera leverages its U.S.-based compound semiconductor fab and in-house packaging capabilities to design, develop, and manufacture industry-leading indium phosphide-based photonic integrated circuits for use in its high-capacity optical communications products.

The Company operates and reports financial results on a fiscal year of 52 or 53 weeks ending on the last Saturday of December in each year. Accordingly, fiscal year 2022 was a 53-week year that ended on December 31, 2022. Fiscal years 2021 and 2020 were 52-week years that ended on December 25, 2021 and December 26, 2020, respectively. The next 53-week year will end on December 30, 2028.

The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). The consolidated financial statements include all adjustments necessary for a fair presentation of the Company's annual results. All adjustments are of a normal recurring nature.

The consolidated financial statements include the accounts for the Company and its subsidiaries and affiliates in the Company which the Company has a controlling financial interest or is the primary beneficiary. All inter-company balances and transactions have been eliminated. The Company reclassified certain amounts reported in previous periods to conform to the current presentation.

2.    Significant Accounting Policies    

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates, assumptions and judgments that can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting periods. Estimates, assumptions and judgements made by management include inventory valuation, revenue recognition, accounting for income taxes, stock-based compensation, employee benefit and pension plans, manufacturing partner and supplier liabilities, allowances for sales returns, allowances for credit losses, useful life of intangibles and property, plant and equipment, impairment loss related to lease abandonment, accrued warranty, operating and finance lease liabilities, restructuring and other related costs and loss contingencies. The Company bases its assumptions on historical experience and also on assumptions that it believes are reasonable. Actual results could differ materially from those estimates. These estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in the Company's consolidated financial statements.

Revenue Recognition

The Company recognizes revenue when control of the promised goods or services is transferred to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

The Company determines revenue recognition by applying the following five-step approach:

•identification of the contract, or contracts, with a customer;

•identification of the performance obligations in the contract;

•determination of the transaction price;

•allocation of the transaction price to the performance obligations in the contract; and

•recognition of revenue when, or as, the Company satisfies a performance obligation.

INFINERA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Most of the Company's product sales are sold in combination with installation and deployment services along with initial hardware and software support. The Company's product sales are also sold at times with spares management, on-site hardware replacement services, network operations management, software subscription services, extended hardware warranty and training. Initial software and hardware support services are generally delivered over a one-year period in connection with the initial purchase. Software warranty provides customers with maintenance releases during the warranty support period and hardware warranty provides replacement or repair of equipment that fails to perform in line with specifications. Software subscription services include software warranty and additionally provides customers with rights to receive unspecified software product upgrades released during the support period.

Spares management and on-site hardware replacement services include the replacement of defective units at customer sites in accordance with specified service level agreements. Network operations management includes the day-to-day operation of a customer's network. These services are generally delivered on an annual basis. The Company evaluates each promised good and service in a contract to determine whether it represents a distinct performance obligation or should be accounted for as a combined performance obligation.

Services revenue includes software subscription services, installation and deployment services, spares management, on-site hardware replacement services, network operations management, extended hardware warranty and training. Revenue from software subscription services, spares management, on-site hardware replacement services, network operations management and extended hardware warranty contracts is recognized ratably over the contractual support period, which is generally one year, as services are provided over the course of the entire period. Revenue related to training and installation and deployment services is recognized upon completion of the services.

Contracts and customer purchase orders are generally used to determine the existence of an arrangement. In addition, shipping documents and customer acceptances, when applicable, are used to verify delivery and transfer of title. The Company typically satisfies its performance obligations upon shipment or delivery of product depending on the contractual terms. Payment terms to customers generally range from net 30 to 120 days from invoice, which are considered to be standard payment terms. The Company assesses its ability to collect from its customers based primarily on the creditworthiness and past payment history of the customer.

For sales to resellers, the same revenue recognition criteria apply. It is the Company’s practice to identify an end-user prior to shipment to a reseller. The Company does not offer rights of return or price protection to its resellers.

The Company reports revenue net of any required taxes collected from customers and remitted to government authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority.

Customer Purchase Commitments

The Company sells software licenses that provide customers the ability to purchase incremental bandwidth capacity on an already-deployed piece of hardware. Infinera Instant Bandwidth-enabled systems generally include a specific initial capacity and incremental capacity can be added by the purchase of Instant Bandwidth licenses. Instant Bandwidth licenses are considered distinct performance obligations because customers can provision additional transmission capacity on demand without the deployment of any incremental equipment.

Some contracts commit the customer to purchase incremental Instant Bandwidth licenses within a specified time frame from the initial shipment of the Instant Bandwidth-enabled hardware. The time frame varies by customer and generally ranges between 12 to 24 months. If the customer does not purchase the additional capacity within the time frame as stated in the contract, the Company has the right to deliver and invoice such Instant Bandwidth licenses to the customer. Future committed licenses are considered to be additional performance obligations when a minimum purchase obligation is present, as evidenced by enforceable rights and obligations. As such, the Company is required to estimate the variable consideration for future Instant Bandwidth licenses as part of determining the contract transaction price.

Contract Termination Rights

The contract term is determined on the basis of the period over which the parties to the contract have present enforceable rights and obligations. Certain customer contracts include a termination for convenience clause that allows the customer to terminate services without penalty, upon advance notification. For such contracts, the service duration is limited to the non-cancelable portion of the contract.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Variable Consideration

The consideration associated with customer contracts is generally fixed. Variable consideration includes discounts, rebates, refunds, credits, incentives, penalties, or other similar items. The amount of consideration that can vary is not a substantial portion of total consideration.

Variable consideration estimates are re-assessed at each reporting period until a final outcome is determined. The changes to the original transaction price due to a change in estimated variable consideration will be applied on a retrospective basis, with the adjustment recorded in the period in which the change occurs.

Stand-alone Selling Price

The Company allocates the transaction price for a contract among the performance obligations on a relative stand-alone selling price (SSP) basis. The SSP is the price at which an entity would sell a promised product or service separately to a customer.

While certain services sold by the Company have readily observable SSPs, the majority of the Company's products and services are generally not sold on a standalone basis and therefore SSPs for such products and services are not directly observable. If there is no observable SSP, it is estimated using judgment and considering all reasonably available information, including but not limited to, gross margin objectives, pricing practices in customer contracts with multiple goods and services, internal costs, historical profitability data, competitor pricing strategies, as well as other observable inputs. The determination of SSPs for performance obligations is assessed on a periodic basis and estimates are revised to reflect any significant changes to underlying assumptions, as needed.

Shipping and Handling

The Company treats shipping and handling activities as costs to fulfill the Company's promise to transfer products. Shipping and handling fees billed to customers are recorded as a reduction to cost of product.

Capitalization of Costs to Obtain a Contract

The Company has assessed the treatment of costs to obtain or fulfill a contract with a customer. Sales commissions have historically been expensed as incurred. Under Topic 606, the Company capitalizes sales commissions related to multi-year service contracts, which are paid for upfront, and amortizes the asset over the period of benefit, which is the service period. Sales commissions paid on service contract renewals, are commensurate with the sales commissions paid on the initial contracts.

Transaction Price Allocated to the Remaining Performance Obligation

The Company’s remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied or partially satisfied as of period end, consisting of deferred revenue and backlog, pursuant to contracts that are not subject to cancellation without penalty at the end of the reporting period.

Stock-Based Compensation

Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period (generally the vesting period) under the straight-line amortization method. The Company accounts for forfeitures as they occur.

 The Company estimates the fair value of the rights to acquire stock under its 2007 Employee Stock Purchase Plan (the “ESPP”) using the Black-Scholes option pricing formula. The ESPP provides for consecutive six-month offering periods and the Company's historical volatility data in the valuation of shares that are purchased under the ESPP.

The Company accounts for the fair value of restricted stock units (“RSUs”) using the closing market price of the Company’s common stock on the date of grant. For new-hire grants, RSUs typically vest ratably on an annual basis over four years. For annual refresh grants, RSUs typically vest ratably over 18 months to three years.

Performance Stock Units ("PSUs") granted to the Company's executive officers and senior management during 2019, 2020, 2021 and 2022 are based on performance criteria related to specific financial targets over the span of a two or three-year performance period. These PSUs may become eligible for vesting to begin before the end of the applicable performance period, if the applicable financial target is met. The number of shares to be

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

issued upon vesting of these PSUs is capped at the target number of PSUs granted. The Company assesses the achievement status of these PSUs on a quarterly basis and records the related stock-based compensation expenses based on the estimated achievement payout.

In addition, the Company granted other PSUs to certain employees that only vest upon the achievement of specific operational performance criteria. The Company assesses the achievement status of these PSUs on a quarterly basis and records the related stock-based compensation expenses based on the estimated achievement payout.

Employee Benefit and Pension Plans

The Company operates a number of post-employment plans in Germany, as well as smaller post-employment plans in other countries, including both defined contribution and defined benefit plans. Benefit cost and obligations pertaining to these plans are based on assumptions for the discount rate, expected return on plan assets, mortality rates, expected salary increases, health care cost trend rates and attrition rates. The discount rate assumption is based on current investment yields of high-quality fixed-income securities with maturities similar to the expected benefits payment period. Mortality rates help predict the expected life of plan participants. The expected increase in the compensation levels assumption reflects the Company's actual experience and future expectations. The expected long-term return on plan assets is determined based on asset allocations, historical portfolio results, historical asset correlations and management’s expected returns for each asset class. The Company evaluates its expected return assumptions annually including reviewing current capital market assumptions to assess the reasonableness of the expected long-term return on plan assets. The Company updates the expected long-term return on assets when the Company observes a sufficient level of evidence that would suggest the long-term expected return has changed.

Research and Development

All costs to develop the Company’s hardware products are expensed as incurred. Software development costs are capitalized beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. Generally, the Company’s software products are released soon after technological feasibility has been established. As a result, costs subsequent to achieving technological feasibility have not been significant and all software development costs have been expensed as incurred.

Advertising

All advertising costs are expensed as incurred. Advertising expenses in 2022, 2021 and 2020 were $1.5 million, $1.6 million, and $1.3 million, respectively.

Accounting for Income Taxes

As part of the process of preparing its consolidated financial statements, the Company is required to estimate its taxes in each of the jurisdictions in which it operates. The Company estimates actual current tax expense together with assessing temporary differences resulting from different treatment of items, such as accruals and allowances not currently deductible for tax purposes. These differences result in deferred tax assets and liabilities, which are included in consolidated balance sheets. In general, deferred tax assets represent future tax benefits to be received when certain expenses previously recognized in consolidated statements of operations become deductible expenses under applicable income tax laws or loss, or credit carryforwards are utilized. Accordingly, realization of deferred tax assets is dependent on future taxable income within the respective jurisdictions against which these deductions, losses and credits can be utilized within the applicable future periods.

The Company must assess the likelihood that some portion or all of its deferred tax assets will be recovered from future taxable income within the respective jurisdictions, and to the extent the Company believes that recovery does not meet the “more-likely-than-not” standard, it must establish a valuation allowance. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management judgment is required in determining its provision for income taxes, its deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. In evaluating the need for a full or partial valuation allowance, all positive and negative evidence must be considered, including the Company's forecast of taxable income over the applicable carryforward periods, its current financial performance, its market environment, and other factors. Based on the available objective evidence, at December 31, 2022, management believes it is not more likely

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

than not that the domestic net deferred tax assets will be realizable in the foreseeable future. Accordingly, the domestic net deferred tax assets are subject to a full valuation allowance. To the extent that the Company determines that deferred tax assets are realizable on a more likely than not basis, and an adjustment is needed, that adjustment will be recorded in the period that the determination is made.

During 2022, the Company executed an internal realignment of its supply chain and customer-facing entities. Among other things, the new structure aligned and consolidated the exploitation of its intellectual property and the allocation of the associated commercial risk and reward with the customer-facing entities that manage its supply chain. The impact of this internal realignment is reflected in the Company’s tax provision for the year ended December 31, 2022.

Foreign Currency Translation and Transactions

The Company considers the functional currencies of its foreign subsidiaries to be the local currency. Assets and liabilities recorded in foreign currencies are translated at the exchange rate as of the balance sheet date, revenue, costs and expenses are translated at average exchange rates in effect during the period. Equity transactions are translated using historical exchange rates. The effects of foreign currency translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss) in the accompanying consolidated balance sheets and consolidated statements of comprehensive income (loss).

For all non-functional currency account balances, the re-measurement of such balances to the functional currency will result in either a foreign exchange transaction gain or loss, which is recorded to other income (loss), net, in the Company's consolidated statement of operations, in the same period that the re-measurement occurred. Aggregate foreign exchange transactions recorded was gain of $12.8 million in 2022 and losses of $17.2 million and $0.2 million, in 2021 and 2020, respectively.

The Company enters into foreign currency exchange forward contracts to reduce the impact of foreign exchange fluctuations on earnings from certain non-functional currency account balances denominated primarily in euros and British pounds.

Cash and Cash Equivalents

Cash consists primarily of cash in bank deposit accounts which, at times, a portion may exceed federally insured limits. The Company has not experienced any losses in such accounts.

The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents.

Fair Value Measurement

Pursuant to the accounting guidance for fair value measurements and its subsequent updates, fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

Valuation techniques used by the Company are based upon observable and unobservable inputs. Observable or market inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions about market participant assumptions based on the best information available. Observable inputs are the preferred source of values. These two types of inputs create the following fair value hierarchy:

Level 1	–	Quoted prices in active markets for identical assets or liabilities.
Level 2	–	Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3	–	Prices or valuations that require management inputs that are both significant to the fair value measurement and unobservable.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company measures its cash equivalents, foreign currency exchange forward contracts and debt securities at fair value and classifies them in accordance with the fair value hierarchy on a recurring basis.

Foreign Currency Exchange Forward Contracts

As discussed in Note 6, “Derivative Instruments" to the Notes to Consolidated Financial Statements, the Company historically held non-speculative foreign exchange forward contracts to hedge certain foreign currency exchange exposures. The Company estimates the fair values of derivatives based on quoted market prices or pricing models using current market rates. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, credit risk, foreign exchange rates, and forward and spot prices for currencies.

Facilities-related Charges

The Company estimates the fair value of its facilities-related charges associated with its restructuring plans, based on estimated future discounted cash flows and unobservable inputs, which includes the amount and timing of estimated sublease rental receipts that the Company can reasonably obtain over the remaining lease term and the discount rate.

Accounts Receivable and Allowances for Credit Losses

Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company maintains an allowance for estimated credit losses resulting from the inability of its customers to make required payments and reviewed the allowance quarterly. The Company determines expected credit losses by performing credit evaluations of its customers' financial condition, establishing both a general reserve and specific reserve for customers in adverse financial condition and adjusting for its expectations of changes in conditions that may impact the collectability of outstanding receivables. The Company considers a customer's receivable balance past due when the amount is due beyond the credit terms extended, The Company considers factors such as historical experience, credit quality, age of the accounts receivable balances, and geographic or country-specific risks. Amounts are written off when receivables are determined to be uncollectible.

Allowances for Sales Returns

Customer product returns are approved on a case by case basis. Specific reserve provisions are made based upon a specific review of all the approved product returns where the customer has yet to return the products to generate the related sales return credit at the end of a period. Estimated sales returns are provided for as a reduction to revenue. At December 31, 2022, December 25, 2021 and December 26, 2020, revenue was reduced for estimated sales returns by $3.6 million, $0.8 million, and $2.4 million, respectively.

Concentration of Risk

Financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash, foreign exchange contracts and accounts receivable.

The risk with respect to foreign exchange contracts is mitigated by entering into these contracts with a large high-quality financial institution and the Company monitors the creditworthiness of the counterparty consistently.

The risk with respect to accounts receivable is mitigated by ongoing credit evaluations that the Company performs on its customers. As the Company continues to expand its sales internationally, it may experience increased levels of customer credit risk associated with those regions. Collateral is generally not required for accounts receivable but may be used in the future to mitigate credit risk associated with customers located in certain geographical regions.

One customer accounted for over 10% of the Company's accounts receivable balance, net on the consolidated balance sheets as of December 31, 2022. No customer accounted for over 10% of the Company's accounts receivable balance, net on the consolidated balance sheets as of December 25, 2021.

One customer accounted for approximately 11% of the Company's revenue in 2022 and 2020. No customer accounted for 10% or more of the Company's revenue in 2021.

The Company depends on sole source or limited source suppliers for several key components and raw materials. The Company generally purchases these sole source or limited source components and raw materials through standard purchase orders and does not have long-term contracts with many of these limited-source

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

suppliers. While the Company seeks to maintain sufficient reserve stock of such components and raw materials, the Company’s business and results of operations could be adversely affected if any of its sole source or limited source suppliers suffer from capacity constraints, lower than expected yields, deployment delays, work stoppages or any other reduction or disruption in output.

 Derivative Instruments

The Company is exposed to foreign currency exchange rate fluctuations in the normal course of its business. As part of its risk management strategy, the Company uses derivative instruments, specifically forward contracts, to reduce the impact of foreign exchange fluctuations on earnings. The forward contracts are with high-quality institutions and the Company monitors the creditworthiness of the counterparties consistently. The Company’s objective is to offset gains and losses resulting from these exposures with gains and losses on the derivative contracts used to hedge them, thereby reducing volatility of earnings or protecting fair values of assets. The Company does not use derivative contracts for trading or speculative purposes.

The Company enters into foreign currency exchange forward contracts to manage its exposure to fluctuations in foreign exchange rates that arise primarily from euro and British pounds. Gains and losses on these contracts are intended to offset the impact of foreign exchange rate changes on the underlying account balances, and therefore, do not subject the Company to material balance sheet risk.

The Company has entered into factoring agreements, to sell certain receivables to unrelated third-party financial institutions. These transactions are accounted for in accordance with ASC 860, Transfers and Servicing (“ASC 860”). ASC 860 and result in a reduction in accounts receivable because the agreements transfer effective control over and risk related to the receivables to the buyers. The Company's factoring agreements do not allow for recourse in the event of uncollectability, and the Company does not retain any interest in the underlying accounts receivable once sold.

Inventory Valuation

Inventories consist of raw materials, work-in-process and finished goods and are stated at standard cost adjusted to approximate the lower of actual cost or net realizable value. Costs are recognized utilizing the first-in, first-out method. Net realizable value is based upon an estimated selling price reduced by the estimated cost of disposal. The determination of market value involves numerous judgments including estimated average selling prices based upon recent sales volumes, industry trends, existing customer orders, current contract price, future demand and pricing and technological obsolescence of the Company’s products.

Inventory that is obsolete or in excess of the Company’s forecasted demand or is anticipated to be sold at a loss is written down to its estimated net realizable value based on historical usage and expected demand. In valuing its inventory costs and deferred inventory costs, the Company considered whether the net realizable value of inventory delivered or expected to be delivered at less than cost, primarily comprised of common equipment, had declined. The Company concluded that, in the instances where the net realizable value of inventory delivered or expected to be delivered was less than cost, it was appropriate to value the inventory costs and deferred inventory costs at cost or net realizable value, whichever is lower, thereby recognizing the cost of the reduction in net realizable value of inventory in the period in which the reduction occurred or can be reasonably estimated. The Company has, therefore, recognized inventory write-downs as necessary in each period in order to reflect inventory at the lower of actual cost or net realizable value.

The Company considers whether it should accrue losses on firm purchase commitments related to inventory items. Given that the net realizable value of common equipment is below contractual purchase price, the Company has also recorded losses on these firm purchase commitments in the period in which the commitment is made. When the inventory parts related to these firm purchase commitments are received, that inventory is recorded at the purchase price less the accrual for the loss on the purchase commitment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Property, Plant and Equipment

Property, plant and equipment are stated at cost. This includes enterprise-level business software that the Company customizes to meet its specific operational needs and certain software licenses. Depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset. An assumption of lease renewal where a renewal option exists is used only when the renewal has been determined to be reasonably certain. Repair and maintenance costs are expensed as incurred. The estimated useful life for each asset category is as follows:

	Estimated Useful Lives
Building	20 years
Laboratory and manufacturing equipment	1.5 to 10 years
Furniture and fixtures	3 to 5 years
Computer hardware	3 to 5 years
Computer software	3 years
Leasehold and building improvements	1 to 11 years

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable or that the useful life is shorter than originally estimated. If impairment indicators are present and the projected future undiscounted cash flows are less than the carrying value of the assets, the carrying values are reduced to the estimated fair value. If assets are determined to be recoverable, but the useful lives are shorter than originally estimated, the carrying value of the assets is depreciated over the newly determined remaining useful lives.

Accrued Warranty

In the Company's contracts with its customers, the Company warrants that its products will operate substantially in conformity with product specifications. Hardware warranties provide the purchaser with protection in the event that the product does not perform to product specifications. During the warranty period, the purchaser’s sole and exclusive remedy in the event of such defect or failure to perform is limited to the correction of the defect or failure by repair, refurbishment or replacement, at the Company’s sole option and expense. The Company's hardware warranty periods generally range from one to five years from date of acceptance for hardware and the Company's software warranty is 90 days. Upon delivery of the Company's products, the Company provides for the estimated cost to repair or replace products that may be returned under warranty. The hardware warranty accrual is based on actual historical returns and cost of repair experience and the application of those historical rates to the Company's in-warranty installed base. The provision for warranty claims fluctuates depending upon the installed base of products and the failure rates and costs of repair associated with these products under warranty. Furthermore, the Company's costs of repair vary based on repair volume and its ability to repair, rather than replace, defective units. In the event that actual product failure rates and costs to repair differ from the Company's estimates, revisions to the warranty provision are required. In addition, from time to time, specific hardware warranty accruals may be made if unforeseen technical problems arise with specific products. The Company regularly assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

Amortization of Intangible Assets

Intangible assets with finite lives are carried at cost, less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets. In-process research and development represent the fair value of incomplete research and development projects that have not reached technological feasibility as of the date of acquisition. Initially, these assets are not subject to amortization, but once projects have been completed, these assets are transferred to developed technology, which are subject to amortization, while assets related to projects that have been abandoned are impaired and expensed to research and development.

Impairment of Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price of an acquired business over the fair value of the identifiable assets acquired and liabilities assumed. The Company tests for impairment of goodwill on an annual

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basis in the fourth quarter and at any other time when events occur or circumstances indicate that the carrying amount of goodwill may not be recoverable. The Company has the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. If the Company determines that as a result of the qualitative assessment that it is more likely than not (i.e., greater than 50% likelihood) that the fair value of a reporting unit is less than its carrying amount, then the quantitative test is required or it can directly perform the quantitative analysis. The Company recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized does not exceed the total amount of goodwill allocated to that reporting unit.

The Company evaluates events and changes in circumstances that could indicate carrying amounts of purchased intangible assets may not be recoverable. When such events or changes in circumstances occur, the Company assesses the recoverability of these assets by determining whether or not the carrying amount will be recovered through undiscounted expected future cash flows. If the total of the future undiscounted cash flows is less than the carrying amount of an asset, the Company records an impairment loss for the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Leases

The Company has operating leases primarily for real estate (facilities) and automobiles. The Company has finance leases primarily for computer hardware, laboratory and manufacturing equipment and leasehold and building improvements.

The Company leases facilities under non-cancelable operating lease agreements. These leases have varying terms that range from one to 11 years and contain leasehold improvement incentives, rent holidays and escalation clauses. In addition, some of these leases have renewal options for up to six years.

The Company determines if an arrangement contains a lease at inception. Operating leases are included in operating lease right of use ("ROU") assets, accrued expenses and other current liabilities and operating lease liabilities on the Company's consolidated balance sheets. Finance leases are included in property, plant and equipment, net, accrued expenses and other current liabilities and other long-term liabilities on the Company's consolidated balance sheets.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. Operating lease ROU assets also include any lease payments made and exclude lease incentives and initial direct costs incurred. Variable lease payments are expensed as incurred and are not included within the ROU asset and lease liability calculation. Variable lease payments primarily include reimbursements of costs incurred by lessors for common area maintenance and utilities. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company rents or subleases certain real estate under agreements that are classified as operating leases.

Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company does not account for lease components (e.g., fixed payments including rent) separately from the non-lease components (e.g., common-area maintenance costs).

Upon abandoning or committing to a plan to abandon a leased property in the short term before the lease term expires, the Company assesses the fair value of its remaining obligation under the lease and records an impairment of the ROU asset, if needed. The impairment loss is calculated as the present value of the amount by which the remaining lease obligation, adjusted for the effects of any one-time costs to sublease, exceeds the estimated sublease rentals that could be reasonably obtained. The estimated sublease rentals consider Company's ability and intent to sublease the space. The significant assumptions used in the Company's discounted cash flow model include the amount and timing of estimated sublease rental receipts and the discount rate which involve a number of risks and uncertainties, some of which are beyond control, including future real estate market conditions and the Company's ability to successfully enter into subleases or termination agreements with terms as favorable as those assumed when arriving at its estimates. The Company monitors these estimates and assumptions on at least a quarterly basis for changes in circumstances and any corresponding adjustments to the accrual are recorded in its statement of operations in the period when such changes are known.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The loss recorded or to be recorded may change significantly as a result of the re-measurement of the liability, if the timing or amount of estimated cash flows change.

Restructuring and Other Related Costs

The Company records costs associated with exit activities related to restructuring plans in accordance with ASC 420, Exit or Disposal Cost Obligations, or ASC 712, Compensation — Nonretirement Postemployment Benefits. Liabilities for costs associated with an exit or disposal activity are recognized in the period in which the liability is incurred. The timing of the associated cash payments is dependent upon the type of exit cost and extends over an approximately four-year period. The Company records restructuring cost liabilities in “accrued expenses and other current liabilities” and "other long-term liabilities" in the consolidated balance sheet.

Restructuring costs include employee and contract termination costs, facility consolidation and closure costs, lease related impairment charges, equipment write-downs and inventory write-downs. One-time termination benefits are recognized as a liability at estimated fair value when the approved plan of termination has been communicated to employees, unless employees must provide future service, in which case the benefits are recognized ratably over the future service period. Ongoing termination benefits arrangements are recognized as a liability at estimated fair value when the amount of such benefits becomes estimable and payment is probable.

Restructuring charges require significant estimates and assumptions, including estimates made for employee separation costs and other contract termination charges. Management estimates involve a number of risks and uncertainties, some of which are beyond control, including the Company's ability to successfully enter into termination agreements with employees and others with terms as favorable as those assumed when arriving at its estimates. The Company monitors these estimates and assumptions on at least a quarterly basis for changes in circumstances and any corresponding adjustments to the accrual are recorded in its statement of operations in the period when such changes are known.

Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ("ASU 2020-06"). ASU 2020-06 simplifies the accounting for convertible instruments by removing certain separation models in ASC 470-20, Debt—Debt with Conversion and Other Options, for convertible instruments. On December 26, 2021, the Company adopted ASU 2020-06 using the modified retrospective method. Applying the transition guidance, the Company was required to apply the guidance to all impacted financial instruments that were outstanding as of December 26, 2021 with the cumulative effect recognized as an adjustment to the opening balance of accumulated deficit.

The adoption of ASU 2020-06 required the Company to record a $196.5 million reduction of additional paid in capital, on December 26, 2021, due to the recombination of the equity conversion component of convertible debt remaining outstanding, which was initially separated and recorded in equity. The $122.0 million increase in debt represented the removal of the remaining debt discounts recorded for this previous separation. The Company recognized a $74.5 million cumulative effect decrease of initially applying ASU 2020-06 as an adjustment to the December 26, 2021 opening balance of accumulated deficit. Interest expense recognized in future periods will be reduced as a result of accounting for the convertible senior notes as a liability instrument. Since the Company had a net loss in 2022, the convertible senior notes were determined to be anti-dilutive and therefore had no impact to basic or diluted net loss per share in 2022 as a result of adopting ASU 2020-06. The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.

3.    Leases

The Company has operating leases for real estate (facilities) and automobiles. For the fiscal years ended December 31, 2022, December 25, 2021 and December 26, 2020, operating lease expense was $21.1 million, $25.7 million and $34.0 million, respectively. Included in operating lease expense were rent expense and impairment charges due to restructuring resulting in abandonment of certain lease facilities, amounting to $8.1 million, $6.5 million and $9.9 million for the fiscal years ended December 31, 2022, December 25, 2021 and December 26, 2020, respectively. Variable lease cost, short-term lease cost and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

sublease income were immaterial during the fiscal years ended December 31, 2022, December 25, 2021 and December 26, 2020, respectively.

The following table presents current and long-term portion of operating lease liabilities as classified in the consolidated balance sheets (in thousands):

	December 31, 2022		December 25, 2021
Accrued expenses and other current liabilities	$	10,948	$	16,542
Long-term operating lease liabilities	45,862		54,326
Total operating lease liability	$	56,810	$	70,868

The Company also has finance leases. The lease term for these arrangements range from three to five years with option to purchase at the end of the term.

As of December 31, 2022 and December 25, 2021, finance leases included in property, plant, and equipment, net in the consolidated balance sheets were $1.9 million and $3.5 million, respectively. Finance lease expense includes amortization of the right-of-use assets and interest expense. Total finance lease expense during the fiscal years ended December 31, 2022 and December 25, 2021 was not material.

The following table presents maturity of lease liabilities under the Company's non-cancelable leases as of December 31, 2022 (in thousands):

	Operating Lease		Finance Lease
Total lease payments	$	71,903	$	966
Less: interest(1)	15,093		37
Present value of lease liabilities	$	56,810	$	929

(1)    Calculated using the interest rate for each lease.

The following table presents supplemental information for the Company's non-cancelable leases for the fiscal year ended December 31, 2022 (in thousands, except for weighted average and percentage data):

	Operating Lease			Finance Lease
Weighted average remaining lease term	5.42 years			1.00 year
Weighted average discount rate	9.25		%	7.02		%
Cash paid for amounts included in the measurement of lease liabilities	$	23,398		$	1,310
Leased assets obtained in exchange for new lease liabilities	$	5,748		$	—

40

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4.    Revenue Recognition

Disaggregation of Revenue

The following table presents the Company's revenue disaggregated by revenue source (in thousands):

	Years Ended
	December 31, 2022		December 25, 2021		December 26, 2020
Product	$	1,268,624	$	1,099,376	$	1,045,551
Services	304,618		325,829		310,045
Total revenue	$	1,573,242	$	1,425,205	$	1,355,596

The Company sells its products directly to customers who are predominantly service providers and to channel partners that sell on its behalf. The following tables present the Company's revenue disaggregated by geography, based on the shipping address of the customer and by sales channel (in thousands):

	Years Ended
	December 31, 2022		December 25, 2021		December 26, 2020
United States	$	870,282	$	663,808	$	630,422
Other Americas	101,600		107,963		99,158
Europe, Middle East and Africa	405,328		477,787		424,411
Asia Pacific	196,032		175,647		201,605
Total revenue	$	1,573,242	$	1,425,205	$	1,355,596

	Years Ended
	December 31, 2022		December 25, 2021		December 26, 2020
Direct	$	1,191,584	$	1,099,632	$	1,039,976
Indirect	381,658		325,573		315,620
Total revenue	$	1,573,242	$	1,425,205	$	1,355,596

Contract Balances

The following table provides information about receivables, contract assets and contract liabilities from contracts with customers (in thousands):

Assets (Liabilities)	December 31, 2022		December 25, 2021
Accounts receivable, net	$	419,735	$	358,954
Contract assets	$	60,172	$	49,052
Deferred revenue	$	(181,679)	$	(168,909)

Revenue recognized for the fiscal year ended December 31, 2022 and December 25, 2021 that was included in the deferred revenue balance at the beginning of the reporting period was $106.8 million and $88.1 million, respectively. Changes in the contract asset and liability balances during the fiscal year ended December 31, 2022 and December 25, 2021 were not materially impacted by other factors.

Transaction Price Allocated to the Remaining Performance Obligation

The Company’s remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied or partially satisfied, consisting of deferred revenue and backlog. The Company’s backlog represents purchase orders received from customers for future product shipments and

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services. The Company’s backlog is subject to future events that could cause the amount or timing of the related revenue to change, and, in certain cases, may be canceled without penalty. Orders in backlog may be fulfilled several quarters following receipt or may relate to multi-year support service obligations.

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially satisfied) pursuant to contracts that are not subject to cancellation without penalty at the end of the reporting period (in thousands):

	2023		2024		2025		2026		2027		Thereafter		Total
Revenue expected to be recognized in the future as of December 31, 2022	$	827,410	$	106,100	$	29,108	$	9,043	$	5,227	$	6,066	$	982,954

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5.    Fair Value Measurements

The following table presents the Company’s fair value hierarchy for its assets (liabilities) measured at fair value on a recurring basis (in thousands): 

	As of December 31, 2022						As of December 25, 2021
	Fair Value Measured Using						Fair Value Measured Using
	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets (Liabilities)
Foreign currency exchange forward contracts	$	—	$	—	$	—	$	—	$	(221)	$	(221)

Disclosure of Fair Values

Financial instruments that are not re-measured at fair value include accounts receivable, accounts payable, accrued liabilities, and debt. The carrying values of these financial instruments other than the Company's 2024 Notes, 2027 Notes and 2028 Notes (collectively referred to as "convertible senior notes" below) approximate their fair values. The fair value of each series of convertible senior notes was determined based on the quoted bid price of the applicable series of convertible senior notes in an over-the-counter market on December 30, 2022 (the last trading day of the fiscal quarter).

The following table presents the estimated fair values of the convertible senior notes (in thousands): 

	As of December 31, 2022						As of December 25, 2021
	Fair Value Measured Using						Fair Value Measured Using
	Level 1		Level 2		Total		Level 1		Level 2		Total
Convertible senior notes	$	—	$	785,364	$	785,364	$	—	$	765,412	$	765,412

Cash equivalents are measured and reported at fair value on a recurring basis. The following table presents the fair value of these financial assets and their levels within the fair value hierarchy (in thousands):

	As of December 31, 2022						As of December 25, 2021
	Fair Value Measured Using						Fair Value Measured Using
	Level 1		Level 2		Total		Level 1		Level 2		Total
Money market funds	$	95,000	$	—	$	95,000	$	—	$	—	$	—

During 2022 and 2021, there were no transfers of assets or liabilities between Level 1 and Level 2 of the fair value hierarchy. As of December 31, 2022 and December 25, 2021, none of the Company’s existing securities were classified as Level 3 securities.

The Company measures goodwill and intangible assets at fair value on a nonrecurring basis when there are identifiable events or changes in circumstances that may have a significant adverse impact on the fair value of these assets. The Company performed an analysis of impairment indicators of these assets and noted no adverse impact to their fair values as of December 31, 2022.    

Facilities-related Charges

The Company classifies certain facilities-related charges within Level 3 of the fair value hierarchy and applies fair value accounting on a nonrecurring basis when impairment indicators exist or upon the existence of observable fair values. The fair values are classified as Level 3 measurements due to the significance of unobservable inputs. These analyses require management to make assumptions and estimates regarding industry and economic factors, future operating results and discount rates.

In connection with its Restructuring Plans (as defined in Note 9, “Restructuring and Other Related Costs” to the Notes to Consolidated Financial Statements), the Company incurred facilities related charges of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$8.1 million and $6.5 million for the years ended December 31, 2022 and December 25, 2021, respectively. These charges primarily consisted of impairment charges incurred for operating lease right-of-use assets and were calculated at fair value based on estimated future sublease rental receipts that the Company could reasonably obtain over the remaining lease term at the discount rate. Facilities-related charges are classified as Level 3 measurement due to the significance of these unobservable inputs.

Cash and Cash Equivalents

As of December 31, 2022, the Company had $189.2 million of cash, cash equivalents and restricted cash, including $65.9 million held by its foreign subsidiaries. As of December 25, 2021, the Company had $202.5 million of cash, cash equivalents and restricted cash including $77.6 million held by its foreign subsidiaries. The Company's cash held by its foreign subsidiaries is used for operating and investing activities in those locations, and the Company does not currently have the need or the intent to repatriate those funds to the United States.

6.    Derivative Instruments

Foreign Currency Exchange Forward Contracts

The Company transacts business in various foreign currencies and has international sales, cost of sales, and expenses denominated in foreign currencies, and carries foreign-currency-denominated account balances, subjecting the Company to foreign currency risk. The Company’s primary foreign currency risk management objective is to protect the U.S. dollar value of future cash flows and minimize the volatility of reported earnings. The Company utilizes foreign currency forward contracts, primarily short term in nature.

Historically, the Company enters into foreign currency exchange forward contracts to manage its exposure to fluctuation in foreign exchange rates that arise from its euro and British pound denominated account balances. Gains and losses on these contracts are intended to offset the impact of foreign exchange rate fluctuations on the underlying foreign currency denominated account balances, do not subject the Company to material balance sheet risk.

The Company had no outstanding foreign currency exchange forward contracts as of December 31, 2022. As of December 25, 2021, the Company had $29.5 million outstanding foreign currency exchange forward contract and posted collateral of $0.9 million to cover associated potential credit risk exposure. This collateral amount was classified as other long-term restricted cash on the accompanying consolidated balance sheets.

The before-tax effect of foreign currency exchange forward contracts was a gain of $0.6 million, $0.9 million and $0.3 million for 2022, 2021 and 2020, respectively, included in other income (expense), net, in the consolidated statements of operations. In each of these periods, the impact of the gross gains and losses were offset by foreign exchange rate fluctuations on the underlying foreign currency denominated amounts.

The Company does not designate foreign currency exchange forward contracts as hedges for accounting purposes and accordingly, changes in the fair value are recorded in the accompanying consolidated statements of operations. These contracts were with one high-quality institution and the Company consistently monitors the creditworthiness of the counterparties.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The fair value of derivative instruments not designated as hedging instruments in the Company’s consolidated balance sheets was as follows (in thousands):

	As of December 31, 2022				As of December 25, 2021
	Gross Notional(1)		Accrued expenses and other current liabilities		Gross Notional(1)		Accrued expenses and other current liabilities
Foreign currency exchange forward contracts
Related to euro denominated receivables	$	—	$	—	$	21,981	$	(139)
Related to British pound denominated receivables	—		—		7,566		(82)
Total	$	—	$	—	$	29,547	$	(221)

(1)Represents the face amounts of forward contracts that were outstanding as of the period noted.

Accounts Receivable Factoring

The Company sells certain designated trade account receivables based on factoring arrangements with well-established factoring companies. Pursuant to the terms of the arrangements, the Company accounts for these transactions in accordance with ASC 860. The Company's factor purchases trade accounts receivables on a non-recourse basis and without any further obligations. Trade accounts receivables balances sold are removed from the consolidated balance sheets and cash received are reflected as cash provided by operating activities in the consolidated statements of cash flow. The difference between the fair value of the Company's trade receivables and the proceeds received is recorded as interest expense in the Company's consolidated statements of operations. For the years ended December 31, 2022, December 25, 2021 and December 26, 2020, the Company's recognized factoring related interest expense was approximately $0.9 million, $0.4 million and $0.4 million, respectively. The gross amount of trade accounts receivables sold totaled approximately $101.0 million and $121.3 million for the fiscal years ended December 31, 2022 and December 25, 2021 respectively.

7.    Goodwill and Intangible Assets

Goodwill

Goodwill is recorded when the purchase price of an acquisition exceeds the fair value of the net tangible and identified intangible assets acquired.

The following table presents details of the Company’s goodwill for the fiscal year ended December 31, 2022 (in thousands):

Balance as of December 25, 2021	$	255,788
Foreign currency translation adjustments	(23,125)
Balance as of December 31, 2022	$	232,663

The gross carrying amount of goodwill may change due to the effects of foreign currency fluctuations as a portion of these assets are denominated in foreign currency. To date, the Company has zero accumulated impairment loss on goodwill.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Intangible Assets

The following tables present details of the Company’s intangible assets as of December 31, 2022 and December 25, 2021 (in thousands):

	December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Remaining Useful Life (In Years)
Intangible assets with finite lives:
Customer relationships and backlog	151,461		(114,294)		37,167		3.5
Developed technology	170,467		(159,847)		10,620		0.7
Total intangible assets	$	321,928	$	(274,141)	$	47,787

	December 25, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Remaining Useful Life (In Years)
Intangible assets with finite lives:
Customer relationships and backlog	157,495		(104,701)		52,794		4.2
Developed technology	182,844		(149,064)		33,780		1.5
Total intangible assets	$	340,339	$	(253,765)	$	86,574

The gross carrying amount of intangible assets and the related amortization expense of intangible assets may change due to the effects of foreign currency fluctuations as a portion of these assets are denominated in foreign currency. Amortization expense was $37.7 million, $37.1 million and $47.8 million for the years ended December 31, 2022, December 25, 2021 and December 26, 2020, respectively.

The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of December 31, 2022 (in thousands):

	Total		2023		2024		2025		2026		2027		Thereafter
Total future amortization expense	$	47,787	$	22,968	$	9,025	$	9,025	$	6,769	$	—	$	—

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8.    Balance Sheet Details

Restricted Cash

The Company’s restricted cash balance is held in deposit accounts at various banks globally. These amounts primarily collateralize the Company’s issuances of standby letters of credit and bank guarantees.

Allowance for Credit Losses

The following table provides a rollforward of the allowance for credit losses for accounts receivable for the fiscal year ended December 31, 2022 (in thousands):

Balance as of December 25, 2021	$	1,304
Additions(1)	1,397
Write offs(2)	(1,279)
Balance as of December 31, 2022	$	1,422

(1)The new additions during the fiscal year ended December 31, 2022 are primarily due to specific reserves.

(2)The write offs during the fiscal year ended December 31, 2022 are primarily amounts fully reserved previously.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table provides details of selected balance sheet items (in thousands):

	December 31, 2022		December 25, 2021
Inventory
Raw materials	$	48,688	$	39,379
Work in process	66,591		53,924
Finished goods	259,576		198,064
Total	$	374,855	$	291,367
Property, plant and equipment, net
Computer hardware	$	46,454	$	45,824
Computer software(1)	62,102		56,820
Laboratory and manufacturing equipment	297,261		287,875
Land and building	12,369		12,369
Furniture and fixtures	2,828		2,164
Leasehold and building improvements	50,360		51,471
Construction in progress	42,418		18,807
Subtotal	$	513,792	$	475,330
Less accumulated depreciation and amortization(2)	(340,863)		(315,112)
Total	$	172,929	$	160,218
Accrued expenses and other current liabilities
Loss contingency related to non-cancelable purchase commitments	$	28,796	$	19,405
Taxes payable	42,757		43,308
Restructuring accrual	941		8,610
Short-term operating and finance lease liability	11,701		17,792
Other accrued expenses and other current liabilities	57,255		57,914
Total accrued expenses and other current liabilities	$	141,450	$	147,029

(1)Included in computer software at December 31, 2022 and December 25, 2021 were $29.3 million and $25.9 million, respectively, related to enterprise resource planning (“ERP”) systems that the Company implemented in prior years. The unamortized ERP costs at December 31, 2022 and December 25, 2021 were $9.0 million and $8.9 million, respectively. Also included in computer software at December 31, 2022 and December 25, 2021 was $24.2 million and $20.9 million, respectively, related to term licenses. The unamortized term license costs at December 31, 2022 and December 25, 2021 was $9.1 million and $9.2 million, respectively.

(2)Depreciation expense was $46.1 million, $47.1 million and $52.3 million (which includes depreciation of capitalized ERP costs of $3.5 million, $2.8 million and $2.6 million) for 2022, 2021 and 2020, respectively. Also included in depreciation expense for 2022 and 2021 was $7.6 million and $6.7 million, respectively, related to term licenses.

9.    Restructuring and Other Related Costs

In 2020, the Company implemented a restructuring initiative (the "2020 Restructuring Plan") that was primarily intended to reduce costs and consolidate its operations. The identified cost reduction initiatives under the 2020 Restructuring Plan were substantially completed, with the majority of associated payments made in 2020 and the remaining amounts substantially paid during 2021.

In 2021, the Company announced a plan to restructure certain international research & development operations (the "2021 Restructuring Plan"). The Company estimates it will incur total costs related to the restructuring ranging from $15.0 million to $17.0 million, of which $6.1 million and $8.5 million was recorded in

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the fiscal years ended December 31, 2022 and December 25, 2021, respectively. The 2021 Restructuring Plan is substantially completed with the associated payments made in 2022. Additional restructuring activities may occur in the future in connection with the Company’s ongoing transformation initiatives.

The following table presents restructuring and other related costs included in cost of revenue and operating expenses in the accompanying consolidated statements of operations under the 2021 Restructuring Plan, 2020 Restructuring Plan, and Coriant's previous restructuring and reorganization plans (in thousands):

	Years Ended
	December 31, 2022				December 25, 2021				December 26, 2020
	Cost of Revenue		Operating Expenses		Cost of Revenue		Operating Expenses		Cost of Revenue		Operating Expenses
Severance and related expenses	$	203	$	1,834	$	335	$	4,615	$	4,042	$	14,054
Lease related impairment charges	—		8,059		—		6,534		88		9,932
Asset impairment	—		35		—		1,552		14		387
Others	19		194		1,196		545		2		213
Total	$	222	$	10,122	$	1,531	$	13,246	$	4,146	$	24,586

Restructuring liabilities are reported within accrued expenses and other long-term liabilities in the accompanying consolidated balance sheets (in thousands):

	Severance and related expenses		Lease related impairment charges		Asset impairment		Others		Total
Balance as of December 26, 2020	$	10,241	$	—	$	—	$	230	$	10,471
Charges	4,951		6,534		1,552		1,740		14,777
Cash payments	(7,091)		(2,089)		—		(381)		(9,561)
Non-cash Settlements and Other	(565)		(4,445)		(1,552)		(243)		(6,805)
Balance as of December 25, 2021	$	7,536	$	—	$	—	$	1,346	$	8,882
Charges	2,033		8,059		35		204		10,331
Cash payments	(8,503)		(2,267)		—		(1,436)		(12,206)
Non-cash Settlements and Other	(274)		(5,792)		(35)		35		(6,066)
Balance as of December 31, 2022	$	792	$	—	$	—	$	149	$	941

As of December 31, 2022, the Company's restructuring liability was primarily comprised of $0.7 million related to the 2021 Restructuring Plan and $0.2 million is related to assumed restructuring liabilities associated with Coriant's previous restructuring and reorganization plans, which was substantially completed in previous years. The liability related to the 2021 Restructuring Plan is expected to be paid by the end of 2023.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

10.    Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) includes certain changes in equity that are excluded from net income (loss). The following table sets forth the changes by component for the periods presented (in thousands):

	Foreign Currency Translation		Actuarial Gain (Loss) on Pension		Accumulated Tax Effect		Total
Balance at December 28, 2019	$	(28,308)	$	(5,367)	$	(964)	$	(34,639)
Other comprehensive income (loss) before reclassifications	29,040		(8,183)		—		20,857
Amounts reclassified from accumulated other comprehensive income	—		1,884		—		1,884
Net current-period other comprehensive income (loss)	29,040		(6,299)		—		22,741
Balance at December 26, 2020	$	732	$	(11,666)	$	(964)	$	(11,898)
Other comprehensive income (loss) before reclassifications	(8,561)		12,580		—		4,019
Amounts reclassified from accumulated other comprehensive income	—		3,383		—		3,383
Net current-period other comprehensive income (loss)	(8,561)		15,963		—		7,402
Balance at December 25, 2021	$	(7,829)	$	4,297	$	(964)	$	(4,496)
Other comprehensive income (loss) before reclassifications	(41,803)		22,538		—		(19,265)
Amounts reclassified from accumulated other comprehensive loss	—		326		964		1,290
Net current-period other comprehensive income (loss)	(41,803)		22,864		964		(17,975)
Balance at December 31, 2022	$	(49,632)	$	27,161	$	—	$	(22,471)

11.    Basic and Diluted Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed using net loss and the weighted average number of common shares outstanding plus potentially dilutive common shares outstanding during the period. Potentially dilutive common shares include the assumed exercise of outstanding in-the-money stock options, assumed release of outstanding RSUs and PSUs, and assumed issuance of common stock under the ESPP using the treasury stock method. Potentially dilutive common shares also include the shares of common stock issuable upon conversion of the convertible senior notes using the if-converted method, as further discussed in Note 12, “Debt” to the Notes to Consolidated Financial Statements. The Company includes the common shares underlying PSUs in the calculation of diluted net income per common share only when they become contingently issuable.

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The following table sets forth the computation of net loss per common share (in thousands, except per share amounts): 

	Years Ended
	December 31, 2022		December 25, 2021		December 26, 2020
Net loss	$	(76,043)	$	(170,778)	$	(206,723)
Weighted average common shares outstanding - basic and diluted	216,376		207,377		188,216
Net loss per common share - basic and diluted	$	(0.35)	$	(0.82)	$	(1.10)

The Company incurred net losses during 2022, 2021 and 2020, and as a result, potential common shares from stock options, RSUs, PSUs and the assumed release of outstanding shares under the ESPP were not included in the diluted shares used to calculate net loss per share, as their inclusion would have been anti-dilutive. Additionally, due to the net loss position during these periods, the Company excluded the potential shares issuable upon conversion of the 2028 Notes, the 2027 Notes and the 2024 Notes in the calculation of diluted earnings per share, as their inclusion would have been anti-dilutive.

The following table sets forth the potentially dilutive shares excluded from the computation of the diluted net loss per share because their effect was anti-dilutive (in thousands):

	As of
	December 31, 2022	December 25, 2021	December 26, 2020
Convertible senior notes(1)	55,800	4,448	8
Stock options outstanding	—	—	451
Restricted stock units	14,836	12,860	13,947
Performance stock units	2,685	2,751	3,668
Employee stock purchase plan shares	360	1,157	1,713
Total	73,681	21,216	19,787

(1)     The convertible senior notes were calculated under the if-converted method for 2022 due to the adoption of ASU 2020-06 and under the treasury stock method for 2021 and 2020.

Prior to the adoption of ASU 2020-06, the Company used the treasury stock method for calculating any potential dilutive effect of the conversion spread of its convertible senior notes. The conversion spread had a dilutive impact for the 2027 Notes during the fiscal year ended December 25, 2021 since the average market price of the Company’s common stock during the periods exceeded the initial conversion price of $7.66 per share. However, the potential shares of common stock issuable upon the conversion of the convertible senior notes were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive.

After the adoption of ASU 2020-06, the Company used the if-converted method for calculating any potential dilutive effect of the convertible senior notes for fiscal year ended December 31, 2022. The Company calculates diluted earnings per share assuming that all of the convertible senior notes permitted to be share settled were converted solely into shares of common stock at the beginning of the reporting period. The potential impact upon the conversion of the convertible senior notes was excluded from the calculation of diluted net loss per share for the fiscal year ended December 31, 2022 because the effect would have been anti-dilutive.

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12.    Debt

The following is a summary of our debt as of December 31, 2022 (in millions):

	Net Carrying Value				Unpaid Principal Balance		Contractual Maturity Date
	Current		Long-Term
2024 Notes	$	—	$	101.7	$	102.7	September 2024
2027 Notes	—		195.9		200.0		March 2027
2028 Notes	—		363.3		373.8		August 2028
Asset-based Revolving Credit Facility	—		—		—		June 2027
Mortgage	0.5		6.8		7.3		March 2024
Total Debt	$	0.5	$	667.7	$	683.8

The following is a summary of our debt as of December 25, 2021 (in millions):

	Net Carrying Value				Unpaid Principal Balance		Contractual Maturity Date
	Current		Long-Term
2024 Notes	$	—	$	329.2	$	402.5	September 2024
2027 Notes	—		140.3		200.0		March 2027
Asset-based Revolving Credit Facility	—		—		—		March 2024
Mortgage	0.5		7.3		7.8		March 2024
Total Debt	$	0.5	$	476.8	$	610.3

Convertible Senior Notes

In September 2018, the Company issued $402.5 million aggregate principal amount of 2.125% Convertible Senior Notes due 2024 (the "2024 Notes"). In March 2020, the Company issued $200.0 million aggregate principal amount of 2.5% Convertible Senior Notes due 2027 (the “2027 Notes"). In August 2022, the Company issued $373.8 million aggregate principal amount of 3.75% Convertible Senior Notes due 2028 (the "2028 Notes," and, together with the 2024 Notes and 2027 Notes, the “convertible senior notes”). The 2024 Notes bear interest at a fixed rate of 2.125% per year, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2019. The 2027 Notes bear interest at a fixed rate of 2.5% per year, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2020. The 2028 Notes bear interest at a fixed rate of 3.75% per year, payable semi-annually in arrears on February 1 and August 1 of each year, beginning on February 1, 2023. Each series of the convertible senior notes is governed by an indenture between the Company, as the issuer, and U.S. Bank National Association, as Trustee (individually, each an “Indenture,” and together, the “Indentures”). The convertible senior notes of each series are unsecured and rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the convertible senior notes; equal in right of payment to any of the Company's existing and future liabilities that are not so subordinated, effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s current or future subsidiaries. The applicable Indenture governing each series of the convertible senior notes does not contain any financial covenants or any restrictions on the payment of dividends, the incurrence of senior debt or other indebtedness, or the issuance or repurchase of the Company's other securities by the Company.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The net proceeds to the Company from the issuance of 2024 Notes were approximately $391.4 million, of which approximately $48.9 million was used to pay the cost of the capped call transactions with certain financial institutions (“Capped Calls”). The Company also used a portion of the remaining net proceeds to fund the cash portion of the purchase price of the Acquisition, including fees and expenses relating thereto, and used the remaining net proceeds for general corporate purposes.

The Capped Calls have an initial strike price of $9.87 per share, subject to certain adjustments, which corresponds to the initial conversion price of the 2024 Notes. The Capped Calls have initial cap prices of $15.19 per share, subject to certain adjustments. The Capped Calls cover, subject to anti-dilution adjustments, 40.8 million shares of common stock. The Capped Calls transactions are expected generally to reduce or offset potential dilution to the Company's common stock upon any conversion of the 2024 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 2024 Notes, as the case may be, with such reduction and/or offset subject to a cap. The Capped Calls expire on various dates between July 5, 2024 and August 29, 2024. The Capped Calls were recorded as a reduction of the Company’s stockholders’ equity in the accompanying consolidated balance sheets.

The net proceeds to the Company from the issuance of 2027 Notes were approximately $193.3 million after deducting initial purchasers' fee and other debt issuance costs. The Company used the remaining net proceeds for general corporate purposes, including working capital to fund growth and potential strategic projects.

The net proceeds to the Company from the issuance of 2028 Notes were approximately $362.4 million after deducting the initial purchasers' fee and other debt issuance costs. The Company used approximately $283.6 million, which included accrued and unpaid interest, of the net proceeds from this issuance to repurchase approximately $299.8 million in aggregate principal amount of its 2024 Notes concurrently with the issuance. This transaction involved a contemporaneous exchange of cash between the Company and holders of the 2024 Notes participating in the issuance of the 2028 Notes. Accordingly, the transaction was evaluated for modification or extinguishment accounting in accordance with ASC 470-50, Debt – Modifications and Extinguishments on a creditor-by creditor basis depending on whether the exchange was determined to have substantially different terms. The repurchase of the 2024 Notes and issuance of the 2028 Notes were deemed to have substantially different terms based on the present value of the cash flows or significant difference between the value of the conversion option immediately prior to and after the exchange. Therefore, the repurchase of the 2024 Notes was accounted for as a debt extinguishment. The Company recorded a $15.5 million gain on extinguishment of debt on its consolidated statements of operations during the fiscal year ended December 31, 2022, which includes the write-off of related deferred issuance costs of $3.5 million. After giving effect to the repurchase, the total remaining principal amount outstanding under the 2024 Notes as of December 31, 2022 was $102.7 million.

The Company intends to use the remaining net proceeds from the issuance of 2028 Notes for general corporate purposes, including working capital and to fund growth and potential strategic projects.

The 2024 Notes, the 2027 Notes and the 2028 Notes mature on September 1, 2024, March 1, 2027 and August 1, 2028, respectively. The Company did not have the right to redeem the 2024 Notes prior to September 5, 2021, and may not redeem the 2027 Notes prior to March 5, 2024 or the 2028 Notes prior to August 5, 2025. The Company may redeem for cash all or any portion of the 2024 Notes at its option, on or after September 5, 2021, the 2027 Notes, at its option, on or after March 5, 2024, and the 2028 Notes, at its option, on or after August 5, 2025, if the last reported sale price of its common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the convertible senior notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. No sinking fund is provided for the convertible senior notes.

Conversion Rate and Initial Conversion Price for each series of convertible senior notes are presented in the following table:

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	Conversion Rate per $1,000 Principal	Initial Conversion Price
2024 Notes	101.2812	$	9.87
2027 Notes	130.5995	$	7.66
2028 Notes	147.1183	$	6.80

Throughout the term of the convertible senior notes, the conversion rate may be adjusted upon the occurrence of certain events, including for any cash dividends. Holders of the convertible senior notes will not receive any cash payment representing accrued and unpaid interest upon conversion. Accrued but unpaid interest will be deemed to be paid in full upon conversion rather than canceled, extinguished or forfeited. Prior to the close of business on the business day immediately preceding June 1, 2024 for the 2024 Notes, December 1, 2026 for the 2027 Notes and May 1, 2028 for the 2028 Notes (the convertible dates), holders may convert their convertible senior notes under the following circumstances:

•during any fiscal quarter commencing after the fiscal quarters ended on December 29, 2018 for the 2024 Notes, June 27, 2020 for the 2027 Notes and September 24, 2022 for the 2028 Notes (and only during such fiscal quarter) if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

•during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the convertible senior notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;

•if the Company calls any or all of the convertible senior notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date;

•upon the occurrence of specified corporate events described under the Indentures, such as a consolidation, merger or binding share exchange;

•or at any time on or after respective convertible dates, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their convertible senior notes at any time, regardless of the foregoing circumstances.

Upon the receipt of conversion requests, the settlement of the convertible senior notes will be paid pursuant to the terms of the respective governing Indentures. In the event that any of the 2024 Notes and 2027 Notes are converted, the Company would be required to repay the principal amount and any conversion premium in any combination of cash and shares of its common stock at the Company’s option. In the event that any of the 2028 Notes are converted, the Company would be required to repay the principal amount in cash and the conversion premium in any combination of cash and shares of its common stock at the Company’s option.

If the Company undergoes a fundamental change as defined in the Indentures, holders may require the Company to repurchase for cash all or any portion of their convertible senior notes at a repurchase price equal to 100% of the principal amount of the convertible senior notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, upon the occurrence of a “make-whole fundamental change” (as defined in each of the Indentures), the Company may, in certain circumstances, be required to increase the conversion rate by a number of additional shares for a holder that elects to convert its convertible senior notes in connection with such make-whole fundamental change.

There have been no changes to the initial conversion price of the convertible senior notes since issuance. None of the conditions allowing holders of the convertible senior notes to convert early were met. The convertible senior notes were therefore not convertible during 2022.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Interest Expense

The following table presents the interest expense related to the contractual interest coupon, the amortization of debt issuance costs, and the amortization of debt discounts on our convertible senior notes (in thousands):

	Year Ended
	December 31, 2022		December 25, 2021		December 26, 2020
Contractual interest expense	$	16,589	$	13,553	$	12,577
Amortization of debt issuance costs	3,404		1,892		1,634
Amortization of debt discount	—		29,411		25,349
Total interest expense	$	19,993	$	44,856	$	39,560

Adoption of ASU 2020-06

Prior to the adoption of ASU 2020-06 on December 26, 2021 and in accounting for the issuance of the convertible senior notes, the convertible senior notes were separated into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated conversion feature. The carrying amounts of the equity component representing the conversion option related to the 2024 Notes and 2027 Notes were $128.7 million and $67.8 million, respectively. This was determined by deducting the fair value of the liability component from its par value. The equity component was recorded in additional paid-in-capital and was not re-measured as long as it continued to meet the conditions for equity classification. The excess of the principal amount of the liability component over its carrying amount (the “debt discount”) was amortized to interest expense over the respective contractual term of the convertible senior notes at an effective interest rate of 9.92%.

Prior to the adoption of ASU 2020-06 on December 26, 2021 and in accounting for the debt issuance costs of $12.9 million and $6.7 million related to the 2024 Notes and 2027 Notes, respectively, the Company allocated the total amount incurred to the liability and equity components of the convertible senior notes based on their relative values. Issuance costs attributable to the liability component were $8.7 million and $4.3 million, related to the 2024 Notes and 2027 Notes, respectively, and were amortized to interest expense using the effective interest method over the contractual term of the convertible senior notes. Issuance costs attributable to the equity component were netted with the equity component in additional paid-in-capital.

On December 26, 2021, the Company adopted ASU 2020-06 based on a modified retrospective transition method. Under such transition, prior-period information has not been retrospectively adjusted.

In accounting for the convertible senior notes after adoption of ASU 2020-06, the convertible senior notes are accounted for as a single liability. The issuance cost related to the 2024 Notes, the 2027 Notes and the 2028 Notes are being amortized to interest expense over the respective contractual term, at effective interest rates of 2.7%, 3.0% and 4.3%, respectively. Unamortized debt issuance costs will be amortized over the remaining life of the 2024 Notes, the 2027 Notes and the 2028 Notes which is approximately 20 months, 50 months, and 67 months, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The net carrying amount of the convertible senior notes as of December 31, 2022 (post-ASU 2020-06 adoption) and as of December 25, 2021 (pre-ASU 2020-06 adoption) was as follows (in thousands):

	2024 Notes				2027 Notes				2028 Notes
	December 31, 2022		December 25, 2021		December 31, 2022		December 25, 2021		December 31, 2022
Principal	$	102,652	$	402,500	$	200,000	$	200,000	$	373,750
Unamortized debt discount	—		(68,755)		—		(56,270)		—
Unamortized issuance costs	(926)		(4,488)		(4,121)		(3,472)		(10,401)
Net carrying amount	$	101,726	$	329,257	$	195,879	$	140,258	$	363,349

Asset-based revolving credit facility

On June 24, 2022, the Company entered into a Loan, Guaranty and Security Agreement (the “Loan Agreement”) with the lenders party thereto, and Bank of America, N.A., as agent. The Loan Agreement provides for a senior secured asset-based revolving credit facility of up to $200 million (the "Credit Facility"), which the Company may draw upon from time to time. The Company may increase the total commitments under the revolving credit facility by up to an additional $100 million, subject to certain conditions. In addition, the Loan Agreement provides for a $50 million letter of credit subfacility and a $20 million swingline loan facility.

The proceeds of the loans under the Loan Agreement may be used to pay the fees, costs, and expenses incurred in connection with the Loan Agreement, repay existing debt and for working capital and general corporate purposes, including to fund growth. The Credit Facility has a stated maturity date of June 24, 2027. Availability under the Credit Facility will be based upon periodic borrowing base certifications valuing certain inventory and accounts receivable, as reduced by certain reserves. The Credit Facility is secured by a first-priority security interest (subject to certain exceptions) in inventory, certain related assets, specified deposit accounts, and certain other accounts.

Outstanding borrowings accrue interest at floating rates plus an applicable margin of 1.25% to 1.75% for Term Secured Overnight Financing Rate ("SOFR") rate loans and 0.25% to 0.75% for base rate loans. The unused line fee rate payable on the unused portion of the Credit Facility is equal to 0.25% per annum based on utilization of the Credit Facility.

The Loan Agreement contains customary affirmative covenants, such as financial statement reporting requirements and delivery of borrowing base certificates. The Loan Agreement also contains customary covenants that limit the ability of the Company to, among other things, incur debt, create liens and encumbrances, engage in certain fundamental changes, dispose of assets, prepay certain indebtedness, make restricted payments, make investments, and engage in transactions with affiliates. The Loan Agreement also contains a financial covenant that requires the Company to maintain a minimum fixed charge coverage ratio. As of December 31, 2022, the Company was in compliance with all covenants under the Loan Agreement.

In connection with the Credit Facility, the Company incurred lender and other third-party costs of approximately $1.2 million, which are recorded as a deferred asset and will be amortized to interest expense using a straight-line method over the term of the Credit Facility.

As of December 31, 2022, the Company had availability of $161.6 million under the Credit Facility. As of December 31, 2022, the Loan Agreement included a $50.0 million letter of credit subfacility and $15.4 million letters of credit issued and outstanding.

On August 1, 2019, the Company entered into a Credit Agreement with Wells Fargo Bank, N.A., (the "2019 Credit Agreement"), which was subsequently amended on December 23, 2019 (the "Amended Credit Agreement", and together with the 2019 Credit Agreement, the "Prior Credit Agreement"). The Prior Credit Agreement provided for a senior secured asset-based revolving credit facility of up to $150 million, which the Company could draw upon from time to time. The credit facility was secured by first-priority security interest

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(subject to certain exceptions) in inventory, certain related assets, specified deposit accounts, and certain other accounts in certain domestic subsidiaries. The Prior Credit Agreement also provided for a $50 million letter of credit sub-facility and a $10 million swing loan sub-facility.

Outstanding borrowings under the Prior Credit Agreement accrued interest at floating rates plus and applicable margin from 2.00% to 2.50% for LIBOR rate loans and 1.00% to 1.50% for base rate loans, depending on the utilization of the credit facility. The commitment fee payable on the unused portion of the credit facility ranged from 0.375% to 0.625% per annum, also based on the utilization of the credit facility. The letter of credit accrued fee at a per annum rate equal to the applicable LIBOR rate margin times by the average amount of the letter of credit usage during the immediately preceding quarter, in addition to the fronting fees, commissions and other fees.

Effective January 1, 2022, with the cessation of LIBOR, the Prior Credit Agreement provided for an alternative benchmark rate for LIBOR-based loans, which included SOFR or other prevailing market rate as determined by the agent plus a spread based on prevailing market convention for the applicable interest period plus a margin ranging from 2.00% to 2.50%.

The Prior Credit Agreement contained customary affirmative covenants, such as financial statement reporting requirements and delivery of borrowing base certificates. It also contained customary covenants that limited the ability of the Company and its subsidiaries to, among other things, incur debt, create liens and encumbrances, engage in certain fundamental changes, dispose of assets, prepay certain indebtedness, make restricted payments, make investments, and engage in transactions with affiliates. In addition the Prior Credit Agreement also contained a financial covenant that required the Company to maintain a minimum amount of liquidity and customary events of default.

In connection with the Prior Credit Agreement, the Company incurred lender and other third-party costs of approximately $4.9 million in 2019, which were recorded as a deferred asset and are amortized to interest expense using a straight-line method over the term of the Prior Credit Agreement. As of December 25, 2021, the Prior Credit Agreement included a $50 million letter of credit facility and $11.5 million had been issued and outstanding.

In June 2022, the Company terminated the Prior Credit Agreement and repaid the entire outstanding principal balance of $40.0 million, in addition to accrued interest and other fees of $0.5 million. The Company also recorded $2.0 million in interest expense to write off the unamortized deferred debt issuance costs related to the Prior Credit Agreement.

Mortgage Payable

In March 2019, the Company mortgaged a property it owns. The Company received proceeds of $8.7 million in connection with the loan. The loan carries a fixed interest rate of 5.25% and is repayable in 59 equal monthly installments of principal and interest with the remaining unpaid principal balance plus accrued unpaid interest due five years from the date of the loan.

On September 24, 2021, the loan was amended to reduce the interest rate from 5.25% to 3.80% for the remaining 31 equal monthly installments of approximately $0.1 million, with the remaining principal payment at maturity date.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

13.    Commitments and Contingencies

The following table sets forth commitments and contingencies related to our various obligations (in thousands):

			Payments Due by Period
	Total		2023		2024		2025		2026		2027		Thereafter
Operating leases(1)(2)	$	71,903	$	15,603	$	14,366	$	13,202	$	10,232	$	7,930	$	10,570
Financing lease obligations(3)	966		789		177		—		—		—		—
Purchase obligations (4)	744,777		695,641		41,904		7,232		—		—		—
2028 Notes, including interest(5)	457,572		13,743		14,016		14,016		14,016		14,016		387,765
2027 Notes, including interest(5)	222,500		5,000		5,000		5,000		5,000		202,500		—
2024 Notes, including interest(5)	107,015		2,182		104,833		—		—		—		—
Mortgage Payable, including interest(5)	7,611		781		6,830		—		—		—		—
Total contractual obligations	$	1,612,344	$	733,739	$	187,126	$	39,450	$	29,248	$	224,446	$	398,335

(1)     The Company leases facilities under non-cancelable operating lease agreements. These leases have varying terms that range from one to 11 years. The above payment schedule includes interest. See Note 3, "Leases" to the Notes to Consolidated Financial Statements for more information.

(2)    The Company has contractual commitments to remove leasehold improvements and return certain properties to a specified condition when the leases terminate. At the inception of a lease with such conditions, the Company records an asset retirement obligation liability and a corresponding capital asset in an amount equal to the estimated fair value of the obligation. Asset retirement obligations were $4.9 million and $5.1 million as of December 31, 2022 and December 25, 2021, respectively. Of the $4.9 million as of December 31, 2022, $4.6 million is classified as other long-term liabilities on the accompanying consolidated balance sheets. The remainder is included in accrued expenses and other current liabilities.

(3)     The Company has finance leases for computer hardware and leasehold improvements. The above payment schedule includes interest. See Note 3, "Leases" to the Notes to Consolidated Financial Statements for more information.

(4)     The Company has agreements with its major production suppliers, where the Company is committed to purchase certain parts. As of December 31, 2022, December 25, 2021 and December 26, 2020, these non-cancelable purchase commitments were $744.8 million, $591.5 million and $291.4 million, respectively.

(5)     See Note 12, "Debt" to the Notes to Consolidated Financial Statements for more information.

Legal Matters

NextGen Innovations, LLC

On August 9, 2022, NextGen Innovations, LLC ("NextGen") filed a complaint against us in the United States District Court for the Eastern District of Texas. The complaint asserts that through certain products we infringe on U.S. Patent Nos. 9,887,795, 10,263,723, and 10,771,181. The complaint alleges that NextGen is entitled to unspecified damages, costs, fees, expenses, interest, and injunctive relief. We are currently unable to predict the outcome of this litigation and therefore cannot reasonably estimate the possible loss or range of loss, if any, arising from this matter.

In addition to the matter described above, we are subject to various legal proceedings, claims and litigation arising in the ordinary course of business. While the outcome of these matters is currently not determinable, we do not expect that the ultimate costs to resolve these matters will have a material effect on our consolidated financial position, results of operations or cash flows.

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Loss Contingencies

The Company is subject to the possibility of various losses arising in the ordinary course of business. These may relate to disputes, litigation and other legal actions. In the preparation of its quarterly and annual financial statements, the Company considers the likelihood of loss or the incurrence of a liability, including whether it is probable, reasonably possible or remote that a liability has been incurred, as well as the Company’s ability to reasonably estimate the amount of loss, in determining loss contingencies. In accordance with U.S. GAAP, an estimated loss contingency is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The Company regularly evaluates current information to determine whether any accruals should be adjusted and whether new accruals are required. As of each of December 31, 2022 and December 25, 2021, the Company has accrued the estimated liabilities associated with certain loss contingencies.

Indemnification Obligations

From time to time, the Company enters into certain types of contracts that contingently require it to indemnify parties against third-party claims. The terms of such indemnification obligations vary. These contracts may relate to: (i) certain real estate leases under which the Company may be required to indemnify property owners for environmental and other liabilities, and other claims arising from the Company’s use of the applicable premises; and (ii) certain agreements with the Company’s officers, directors and certain key employees, under which the Company may be required to indemnify such persons for liabilities.

In addition, the Company has agreed to indemnify certain customers for claims made against the Company’s products, where such claims allege infringement of third-party intellectual property rights, including, but not limited to, patents, registered trademarks, and/or copyrights. Under the aforementioned intellectual property indemnification clauses, the Company may be obligated to defend the customer and pay for the damages awarded against the customer under an infringement claim as well as the customer’s attorneys’ fees and costs. These indemnification obligations generally do not expire after termination or expiration of the agreement containing the indemnification obligation. In certain cases, there are limits on and exceptions to the Company’s potential liability for indemnification. The Company cannot estimate the amount of potential future payments, if any, that it might be required to make as a result of these agreements. The maximum potential amount of any future payments that the Company could be required to make under these indemnification obligations could be significant.

As permitted under Delaware law and the Company’s charter and bylaws, the Company has agreements whereby it indemnifies certain of its officers and each of its directors. The term of the indemnification period is for the officer’s or director’s lifetime for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements could be significant; however, the Company has a director and officer insurance policy that may reduce its exposure and enable it to recover all or a portion of any future amounts paid. As a result of its insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

14.    Guarantees

Product Warranties

Activity related to product warranty was as follows (in thousands): 

	December 31, 2022		December 25, 2021
Beginning balance	$	44,310	$	40,708
Charges to operations	27,176		23,061
Utilization	(22,420)		(25,745)
Change in estimate(1)	(12,445)		6,286
Balance at the end of the period	$	36,621	$	44,310

(1)The Company records product warranty liabilities based on the latest quality and cost information available as of the date the revenue is recorded. The changes in estimate shown here are due to changes in overall actual failure rates, the mix of new versus used units related to replacement of failed units, and changes in the estimated cost of repair and product recalls. As the Company's products mature over time, failure rates and repair costs associated with such products generally decline leading to favorable changes in warranty reserves.

Letters of Credit and Bank Guarantees

The Company had $24.7 million and $22.5 million of standby letters of credit, bank guarantees and surety bonds outstanding as of December 31, 2022 and December 25, 2021, respectively. Details are sets in below table (in thousands).

	December 31, 2022		December 25, 2021
Customer performance guarantees	$	20,903	$	16,307
Value added tax license	1,434		287
Property leases	2,398		4,684
Pension plans	—		1,004
Credit cards	—		150
Other liabilities	—		68
Total	$	24,735	$	22,500

Of the $20.9 million related to customer performance guarantees, approximately $4.0 million was used to secure surety bonds in the aggregate of $7.5 million as of December 31, 2022. Of the $16.3 million to customer performance guarantees, approximately $4.0 million was used to secure surety bonds in the aggregate of $5.5 million as of December 25, 2021.

As of December 31, 2022, of the aforementioned standby letters of credit and bank guarantees outstanding, $9.2 million was backed by cash collateral.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

15.    Stockholders’ Equity

2016 Equity Incentive Plan, 2019 Inducement Equity Incentive Plan and Employee Stock Purchase Plan

In February 2007, the Company's board of directors adopted the ESPP and the Company's stockholders approved the ESPP in May 2007. The ESPP was last amended by the stockholders in May 2019 to increase the shares authorized under the ESPP to a total of approximately 31.6 million shares of common stock. The ESPP has a 20-year term. Eligible employees may purchase the Company’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning or the end of six-month offering periods. An employee’s payroll deductions under the ESPP are limited to a maximum of 15% of the employee’s compensation and an employee may not purchase more than 3,000 shares per purchase period.

In February 2016, the Company's board of directors adopted the 2016 Plan and the Company's stockholders approved the 2016 Plan in May 2016. In May 2017, May 2018, May 2019, May 2020 and May 2021 and May 2022, the Company's stockholders approved amendments to the 2016 Plan to increase the number of shares authorized for issuance under the 2016 Plan by 6.4 million shares, 1.5 million shares, 7.3 million shares, 8.1 million shares, 4.4 million shares and 8.5 million shares, respectively. As of December 31, 2022, the Company reserved a total of 43.7 million shares of common stock for the award of stock options, RSUs and PSUs to employees, non-employees, consultants and members of the Company's board of directors pursuant to the 2016 Plan, plus any shares subject to awards granted under the 2007 Plan that, after the effective date of the 2016 Plan, expire, are forfeited or otherwise terminate without having been exercised in full to the extent such awards were exercisable, and shares issued pursuant to awards granted under the 2007 Plan that, after the effective date of the 2016 Plan, are forfeited to or repurchased by the Company due to failure to vest. The 2016 Plan has a maximum term of 10 years from the date of adoption, or it can be earlier terminated by the Company's board of directors. The 2007 Plan was cancelled and there are no outstanding grants under the 2007 Plan.

Shares Reserved for Future Issuances

Common stock reserved for future issuance was as follows (in thousands):

	December 31, 2022
Outstanding stock awards	15,148
Reserved for future award grants	9,078
Reserved for future ESPP	4,613
Total common stock reserved for stock options and awards	28,839

Stock-based Compensation Plans

The Company has stock-based compensation plans pursuant to which the Company has granted stock options, RSUs and PSUs. The Company also has an ESPP for all eligible employees. The following tables summarize the Company’s equity award activity and related information (in thousands, except per share data):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Number of Restricted Stock Units	Weighted-Average Grant Date Fair Value Per Share		Aggregate Intrinsic Value
Outstanding at December 28, 2019	11,600	$	6.20	$	90,254
RSUs granted	7,064	$	5.95
RSUs released	(5,087)	$	6.36	$	30,421
RSUs canceled	(1,109)	$	6.29
Outstanding at December 26, 2020	12,468	$	5.99	$	136,781
RSUs granted	7,377	$	8.68
RSUs released	(7,509)	$	5.96	$	66,317
RSUs canceled	(729)	$	6.92
Outstanding at December 25, 2021	11,607	$	7.66	$	110,849
RSUs granted	8,897	$	8.26
RSUs released	(6,690)	$	7.52	$	46,104
RSUs canceled	(1,226)	$	7.89
Outstanding at December 31, 2022	12,588	$	8.13	$	84,847

	Number of Performance Stock Units	Weighted-Average Grant Date Fair Value Per Share		Aggregate Intrinsic Value
Outstanding at December 28, 2019	2,505	$	6.48	$	19,485
PSUs granted	1,628	$	5.89
PSUs released	(285)	$	9.02	$	1,702
PSUs canceled	(382)	$	6.93
Outstanding at December 26, 2020	3,466	$	5.36	$	38,022
PSUs granted	659	$	8.61
PSUs released	(964)	$	5.21	$	8,278
PSUs canceled	(1,047)	$	4.91
Outstanding at December 25, 2021	2,114	$	6.66	$	20,184
PSUs granted	899	$	8.38
PSUs released	(335)	$	5.40	$	2,592
PSUs canceled	(119)	$	7.19
Outstanding at December 31, 2022	2,559	$	7.40	$	17,251
Expected to vest as of December 31, 2022	1,701			$	11,464

The aggregate intrinsic value of unreleased RSUs and unreleased PSUs is calculated using the closing price of the Company's common stock of $6.74 at December 30, 2022. The aggregate intrinsic value of RSUs and PSUs released is calculated using the fair market value of the common stock at the date of release.

 The following table presents total stock-based compensation cost for instruments granted but not yet recognized, net of forfeitures, of the Company’s equity compensation plans as of December 31, 2022. These costs are expected to be amortized on a straight-line basis over the following weighted-average periods (in thousands, except for weighted-average period): 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Unrecognized Compensation Expense, Net		Weighted- Average Period (in years)
RSUs	$	75,755	2.00
PSUs	$	8,069	1.90

 Employee Stock Purchase Plan

The fair value of the ESPP shares was estimated at the date of grant using the following assumptions:

	Years Ended
	December 31, 2022	December 25, 2021	December 26, 2020
Volatility	39% - 63%	38% - 50%	42% - 97%
Risk-free interest rate	0.67% - 3.12%	0.05% - 0.06%	0.12% - 1.56%
Expected life	0.5 years	0.5 years	0.5 years
Estimated fair value	$1.91 - $2.21	$2.22 - $3.11	$2.17 - $3.42

The expected dividend yield is zero for the Company as it does not expect to pay dividends in the future.

The Company’s ESPP activity for the following periods was as follows (in thousands):

	Years Ended
	December 31, 2022		December 25, 2021		December 26, 2020
Stock-based compensation expense	$	5,551	$	5,879	$	6,607
Employee contributions	$	15,189	$	16,167	$	15,346
Shares purchased	2,552		2,272		3,001

Restricted Stock Units

Pursuant to the 2016 Plan, the Company has granted RSUs to employees and non-employee members of the Company's board of directors. All RSUs awarded are subject to each individual's continued service to the Company through each applicable vesting date. The Company accounted for the fair value of the RSUs using the closing market price of the Company’s common stock on the date of grant. Amortization of stock-based compensation expense related to RSUs in 2022, 2021 and 2020 was approximately $54.1 million, $42.3 million and $36.1 million, respectively.

Performance Stock Units

Pursuant to the 2016 Plan, the Company has granted PSUs to certain of the Company’s executive officers, senior management and certain employees. All PSUs awarded are subject to each individual's continued service to the Company through each applicable vesting date and if the performance metrics are not met within the time limits specified in the award agreements, the PSUs will be canceled.

PSUs granted to the Company's executive officers and senior management under the 2016 Plan during 2020, 2021 and 2022 are based on performance criteria related to a specific financial target over the span of a three-year performance period. These PSUs may become eligible for vesting to begin before the end of the three-year performance period, if the applicable financial target is met. The number of shares to be issued upon vesting of these PSUs are capped at the target number of PSUs granted. Certain other employees were awarded PSUs that will only vest upon the achievement of specific financial and operational performance criteria.

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The following table summarizes by grant year, the Company’s PSU activity for the fiscal year ended December 31, 2022 (in thousands):

	Total Number of Performance Stock Units	2019	2020	2021	2022
Outstanding at December 25, 2021	2,114	185	1,270	659	—
PSUs granted	899	—	—	—	899
PSUs released	(335)	(185)	(150)	—	—
PSUs canceled	(119)	—	(62)	(57)	—
Outstanding at December 31, 2022	2,559	—	1,058	602	899

Amortization of stock-based compensation expense related to PSUs in 2022, 2021 and 2020 was approximately $1.6 million, $3.3 million and $6.0 million, respectively.

Stock-based Compensation Expense

The following tables summarize the effects of stock-based compensation on the Company’s consolidated balance sheets and statements of operations for the periods presented (in thousands):

	Years Ended
	December 31, 2022		December 25, 2021		December 26, 2020
Stock-based compensation effects in inventory	$	3,979	$	3,707	$	3,979
Income tax benefit associated with stock-based compensation	$	8,588	$	9,345	$	8,637
Stock-based compensation effects in net loss before income taxes
Cost of revenue	$	9,485	$	7,928	$	7,785
Research and development	23,553		18,554		16,863
Sales and marketing	13,311		12,345		10,907
General and administrative	14,666		12,985		13,906
Total stock-based compensation expense	$	61,015	$	51,812	$	49,461

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16.    Income Taxes

The following is a geographic breakdown of the provision for income taxes (in thousands):

	Years Ended
	December 31, 2022		December 25, 2021		December 26, 2020
Current:
Federal	$	945	$	991	$	494
State	1,537		137		917
Foreign	20,616		12,431		9,606
Total current	$	23,098	$	13,559	$	11,017
Deferred:
Federal	$	—	$	—	$	—
State	—		—		—
Foreign	(2,566)		(1,571)		(4,982)
Total deferred	$	(2,566)	$	(1,571)	$	(4,982)
Total provision for income taxes	$	20,532	$	11,988	$	6,035

Loss before provision for income taxes from international operations was $20.2 million, $20.7 million and $37.3 million for the years ended December 31, 2022, December 25, 2021 and December 26, 2020, respectively.

The provisions for income taxes differ from the amount computed by applying the statutory federal income tax rates as follows: 

	Years Ended
	December 31, 2022		December 25, 2021		December 26, 2020
Expected tax at federal statutory rate	21.0	%	21.0	%	21.0	%
State taxes, net of federal benefit	(2.2)	%	(1.2)	%	(0.4)	%
Research credits	8.9	%	1.7	%	1.2	%
Stock-based compensation	(10.2)	%	1.1	%	(1.2)	%
Change in valuation allowance	(25.9)	%	(20.9)	%	(16.9)	%
Foreign rate differential	(7.3)	%	(6.9)	%	(6.3)	%
Nondeductible expenses	(15.4)	%	—	%	—	%
Other	(6.0)	%	(2.3)	%	(0.4)	%
Effective tax rate	(37.1)	%	(7.5)	%	(3.0)	%

For 2022, the Company's income tax expense was $20.5 million with effective tax rate of (37.1)%. The difference between the effective income tax rate and the U.S federal statutory rate of 21% to income before income taxes is primarily the result of R&D credits, stock-based compensation, foreign income taxed at different rates and valuation allowances. The Company recognized an income tax expense of $12.0 million and $6.0 million in 2021 and 2020, respectively. The resulting effective tax rates were (7.5)% and (3.0)% for 2021 and 2020, respectively. The 2021 and 2020 effective tax rates differ from the expected statutory rate of 21%, based on the Company's ability to benefit from its U.S. loss carryforwards, offset by state income taxes, non-deductible stock-based compensation expenses and foreign taxes provided on foreign subsidiary earnings.

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During 2022, the Company implemented a realignment of its internal supply chain and customer facing entities. The new structure aligned and consolidated the Company's intellectual property and the associated commercial risk and reward among the customer-facing entities in their internal supply chain and improved operational efficiency. The impact of this internal realignment is reflected in the Company’s tax provision for the year ended December 31, 2022.

Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis using enacted tax rates in effect for the year in which the differences are expected to reverse. Significant deferred tax assets and liabilities consist of the following (in thousands):

	Years Ended
	December 31, 2022		December 25, 2021
Deferred tax assets:
Net operating losses	$	293,179	$	336,711
Research and foreign tax credits	140,828		132,829
Nondeductible accruals	57,480		76,898
R&D expense capitalization	49,135		—
Inventory valuation	14,329		22,651
Leasing Liabilities	16,890		19,407
Stock-based compensation	5,138		4,902
Total deferred tax assets	$	576,979	$	593,398
Valuation allowance	(548,257)		(521,620)
Net deferred tax assets	$	28,722	$	71,778
Deferred tax liabilities:
Property, plant and equipment	$	(11,912)	$	(10,792)
Right of use asset	(10,482)		(12,216)
Acquired intangible assets	(4,293)		(19,273)
Convertible senior notes	—		(29,897)
Total deferred tax liabilities	$	(26,687)	$	(72,178)
Net deferred tax assets (liabilities)	$	2,035	$	(400)

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company must consider all positive and negative evidence, including the Company's forecasts of taxable income over the applicable carryforward periods, its current financial performance, its market environment, and other factors in evaluating the need for a full or partial valuation allowance against its net U.S. deferred tax assets. Based on the available objective evidence, management believes it is not more likely than not that the domestic net deferred tax assets will be realizable in the foreseeable future. Accordingly, the Company has provided a full valuation allowance against its domestic deferred tax assets, net of deferred tax liabilities, as of December 31, 2022 and December 25, 2021.

The Company intends to continue maintaining a full valuation allowance on its deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. However, considering the Company's current assessment of the probability of maintaining profitability, there is a reasonable possibility that, within the next year or two, sufficient positive evidence may become available to reach a conclusion that a portion of the valuation allowance will no longer be needed. As such, the Company may release a portion of its valuation allowance against its deferred tax assets within the next 12-24 months. This release, if

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any, would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period such release is recorded.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the right to deduct research and development expenditures for tax purposes in the period the expenses were incurred and instead requires all U.S. and foreign research and development expenditures to be amortized over five and fifteen tax years, respectively. Due to this required capitalization of research and development expenditures, the Company has recorded U.S. current income tax expense of $1.3 million for the year ended December 31, 2022. The U.S. current income tax provision is primarily for state taxes we anticipate paying as a result of statutory limitations on our ability to offset expected taxable income with net operating loss and research and development credit carry forwards. The increase in Federal taxable income due to R&D expense capitalization is offset by net operating carryover balance. It is expected that R&D expense capitalization will continue to generate Federal and State taxable income in future years and continue to utilize net operating loss and other available tax credits.

As of December 31, 2022, the Company had net operating loss carryforwards of approximately $507.0 million for federal income tax purposes which will begin to expire in 2032 if unused. The Company had net operating loss carryforwards of approximately $512.0 million for state income tax purposes which will begin to expire in the year 2023 if unused. The Company also had foreign net operating loss carryforwards of approximately $605.5 million, some of which will begin expiring in the year 2023 if unused.

As of December 31, 2022, the Company also had R&D credit carryforwards of approximately $49.3 million for federal income tax and $55.1 million for state income tax purposes. The federal R&D tax credit will begin to expire in 2023 if unused. State R&D tax credits will carry forward indefinitely.

As of December 31, 2022, the Company also had Foreign Tax credit carryforwards of approximately $38.9 million for federal income tax. The foreign tax credit will begin to expire in 2023 if unused.

Infinera Canada Inc., an indirect wholly owned subsidiary, has Scientific Research and Experimental Development Expenditures (“SRED”) credits available of $4.0 million to offset future Canadian income taxes payable as of December 31, 2022. Infinera Portugal subsidiary has a SIFIDE Credit of $4.3 million to offset future income tax payable in Portugal as of December 31, 2022. Canadian SRED credits will begin to expire in the year 2032 if not fully utilized. The Portugal SIFIDE credits will begin to expire in the year 2023.

At December 31, 2022, the Company had federal capital loss carryforwards of $19.6 million. If not utilized, the federal capital loss will expire in 2023.

The federal and state net operating loss carryforwards may be subject to significant limitations under Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended (the "Code") and similar provisions under state law. The Tax Reform Act of 1986 contains provisions that limit the federal net operating loss carryforwards that may be used in any given year in the event of special occurrences, including significant ownership changes. The Company has completed a Section 382 review and has determined that none of its operating losses will expire solely due to Section 382 limitation(s).

The aggregate changes in the balance of gross unrecognized tax benefits were as follows (in thousands): 

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	December 31, 2022		December 25, 2021		December 26, 2020
Beginning balance	$	54,250	$	57,931	$	44,092
Tax position related to current year
Additions	1,536		1,198		3,213
Tax positions related to prior years
Additions	7,220		7,633		11,494
Reductions	(4,832)		(9,569)		(625)
Lapses of statute of limitations	(325)		(2,943)		(243)
Ending balance	$	57,849	$	54,250	$	57,931

As of December 31, 2022, the cumulative unrecognized tax benefit was $57.8 million, of which $49.5 million was netted against deferred tax assets, which would have otherwise been subjected with a full valuation allowance. Of the total unrecognized tax benefit as of December 31, 2022, approximately $8.3 million, if recognized, would impact the Company’s effective tax rate. The amount of unrecognized tax benefit could be reduced upon expiration of the applicable statute of limitation. The potential reduction in unrecognized tax benefits during the next 12 months is not expected to be material.

As of December 31, 2022, December 25, 2021 and December 26, 2020, the Company had $1.3 million, $2.1 million and $2.9 million, respectively, of accrued interest or penalties related to unrecognized tax benefits, of which $0.8 million was included in the Company’s provision for income taxes in each of the years ended December 31, 2022, December 25, 2021 and December 26, 2020, respectively. The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the Company’s provision for income taxes.

The Company is potentially subject to examination by the Internal Revenue Service and the relevant state income taxing authorities under the statute of limitations for years 2003 and forward.

Included in the balance of income tax liabilities, accrued interest and penalties at December 31, 2022 is an immaterial amount related to tax positions for which it is reasonably possible that the statute of limitations will expire in various jurisdictions within the next twelve months.

Post U.S. Tax Reform, the Company and its subsidiaries do not have significant unremitted foreign earnings and the associated withholding and other taxes are not material for the fiscal year ended December 31, 2022.

17.    Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the Company’s Chief Executive Officer (“CEO”). The Company’s CEO reviews financial information presented on a consolidated basis, accompanied by information about revenue by geographic region for purposes of allocating resources and evaluating financial performance. The Company has one business activity as a provider of optical transport networking equipment, software and services. Accordingly, the Company is considered to be in a single reporting segment and operating unit structure.

Revenue by geographic region is based on the shipping address of the customer. For more information regarding revenue disaggregated by geography, see Note 4, “Revenue Recognition” to the Notes to Consolidated Financial Statements.

Additionally, the following table sets forth our property, plant and equipment, net by geographic region (in thousands):

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	December 31, 2022		December 25, 2021
United States	$	156,065	$	141,977
Other Americas	2,908		2,687
Europe, Middle East and Africa	10,285		12,245
Asia Pacific and Japan	3,671		3,309
Total property, plant and equipment, net	$	172,929	$	160,218

18.    Employee Benefit and Pension Plans

Defined Contribution Plans

The Company has established a savings plan under Section 401(k) of the Code (the “401(k) Plan”). As allowed under Section 401(k) of the Code, the 401(k) Plan provides tax-deferred salary contributions for eligible U.S. employees. Employee contributions are limited to a maximum annual amount as set periodically by the Code. The Company made voluntary cash contributions and matched a portion of employee contributions of $3.0 million, $2.8 million and $2.4 million for 2022, 2021, and 2020, respectively. Expenses related to the 401(k) Plan were insignificant for each of the years 2022, 2021, and 2020.

The Company has an ITP pension plan covering its Swedish employees. Commitments for old-age and survivors' pension for salaried employees in Sweden are vested through an insurance policy. Expenses related to the ITP pension plan were $2.5 million for 2022, $2.8 million for 2021 and $2.7 million for 2020.

The Company also provides defined contribution plans in certain foreign countries where required by local statute or at the Company's discretion. For the years ended December 31, 2022, December 25, 2021 and December 26, 2020, the Company had $4.9 million, $6.2 million, and $3.5 million related to post-retirement costs, respectively.

Pension Plans

Pension and Post-Retirement Benefit Plans

The Company has a number of post-employment plans in Germany, as well as a number of smaller post-employment plans in other countries, including both defined contribution and defined benefit plans. The defined benefit plans expose the Company to actuarial risks such as, investment risk, interest rate risk, life expectancy risk and salary risk. The characteristics of the defined benefit plans and the risks associated with them vary depending on legal, fiscal, and economic requirements.

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Obligations and Funded Status

The following table sets forth the changes in benefits obligations and the fair value of plan assets of the Company's benefit plans (in thousands):

	December 31, 2022		December 25, 2021
Benefit obligation at beginning of year	$	115,771	$	129,936
Service cost	300		351
Interest cost	1,249		1,265
Benefits paid	(3,382)		(3,413)
Actuarial gain	(30,779)		(3,050)
Employee contributions	54		190
Foreign currency exchange rate changes	(7,041)		(9,508)
Benefit obligation at end of year(1)	$	76,172	$	115,771
Fair value of plan assets at beginning of year	$	81,615	$	77,561
Actual (loss) return on plan assets	(5,305)		12,425
Payments	(5,316)		(3,206)
Employee contributions	153		289
Foreign currency exchange rate changes	(4,692)		(5,454)
Fair value of plan assets at end of year	$	66,455	$	81,615
Net liability recognized	$	9,717	$	34,156

(1)    The Company's accumulated benefit obligation was $76.1 million and $115.1 million at December 31, 2022 and December 25, 2021, respectively.

The net liability is included in the line item other long-term liabilities in the Company's consolidated balance sheets.

The following table presents net amounts of non-current assets and current and non-current liabilities for the Company's pension and other post-retirement benefit plans recognized on its consolidated balance sheet (in thousands):

	December 31, 2022		December 25, 2021
Other non-current assets	$	66,455	$	81,615
Other long-term liabilities	(76,172)		(115,771)
Net liability recognized	$	(9,717)	$	(34,156)

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Components of Net Periodic Benefit Cost

Net periodic benefit cost for the Company's pension and other post-retirement benefit plans consisted of the following (in thousands):

	Years ended
	December 31, 2022		December 25, 2021		December 26, 2020
Service cost	$	300	$	351	$	896
Interest cost	1,249		1,265		1,773
Expected return on plan assets	(2,936)		(2,895)		(2,644)
Amortization of net actuarial loss	326		3,383		1,884
Total net periodic (benefit) cost	$	(1,061)	$	2,104	$	1,909

Actuarial gains and losses are amortized using a corridor approach. The gain/loss corridor is equal to 10% of the greater of the pension benefit obligation and the market-related value of assets. Gains and losses in excess of the corridor are generally amortized over the average future working lifetime of the pension plan participants. The service cost component is included in operating expenses in the Company's consolidated statements of operations. All other components are included in Other income (expense), net in the Company's consolidated statements of operations.

The following table sets forth the changes in accumulated other comprehensive income (loss) for the Company's benefit plans (pre-tax) (in thousands):

	December 31, 2022		December 25, 2021
Beginning balance	$	4,297	$	(11,666)
Net actuarial gain arising in current year	22,538		12,580
Amortization of net actuarial loss(1)	326		3,383
Ending balance	$	27,161	$	4,297

(1)    The actuarial gain for the fiscal years ended December 31, 2022 and December 25, 2021 is primarily due to the change in the discount rate. Amounts recorded in accumulated other comprehensive income (loss) expected to be amortized as a part of net periodic pension cost during 2023 is $3.7 million (pre-tax).

Assumptions

Certain actuarial assumptions used in computing the benefit obligations for the major plans are as follows:

	December 31, 2022		December 25, 2021
Discount rate	4.17	%	1.20	%
Salary growth rate	2.50	%	2.25	%
Pension growth rate	2.25	%	2.00	%
Expected long-term rate of return on plan assets	3.93	%	3.93	%

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Investment Policy

The financial position of the Company’s funded status is the difference between the fair value of plan assets and projected benefit obligations. Volatility in funded status occurs when asset values change differently from liability values and can result in fluctuations in costs in financial reporting. The Company’s investment policies and strategies are designed to increase the rate of assets to plan liabilities at an appropriate level of funded status volatility. Asset allocation decisions are recommended by the trustees for the specific plan and agreed to by the Company's management. Investment objectives are designed to generate returns that will enable the plan to meet its future obligations. The Company's management reviews the investment strategy and performance semi-annually and discuss alternatives to manage volatility.    

Basis for Expected Long-Term Rate of Return on Plan Assets

The expected long-term rate of return on plan assets reflects the expected returns for each major asset class in which the plan invests and the weight of each asset class in the target mix. Expected asset returns reflect the current yield on government bonds, risk premiums for each asset class and expected real returns which considers each country’s specific inflation outlook. The expected return is set using a low to medium risk profile and to meet the market expectations over a longer period of time to meet the obligations in the future.

Fair Value of Plan Assets

The following tables present the fair value of plan assets for pension and other benefit plans by major asset category (in thousands):

	As of December 31, 2022						December 25, 2021
	Fair Value Measured Using						Fair Value Measured Using
	Level 1		Level 2		Total		Level 1		Level 2		Total
Cash	$	1,160	$	—	$	1,160	$	738	$	—	$	738
Equity fund	—		41,492		41,492		—		55,400		55,400
Insurance contracts	—		23,803		23,803		—		25,388		25,388
Pension fund	—		—		—		—		89		89
Total plan assets at fair value	$	1,160	$	65,295	$	66,455	$	738	$	80,877	$	81,615

Valuation Techniques

The following describes the valuation techniques used to measure the fair value of the assets shown in the table above. Equity funds are invested in traded securities and are recorded at market value as of the balance sheet date. Insurance contracts are recorded at cash surrender value of the policies. Mixed fund and pension fund are valued at the amounts as provided by the insurance companies who manage the funds and represent fair market value at the date of the balance sheet.

Transfers Between Levels

Any transfers between levels in the fair value hierarchy are recognized as of the end of the reporting period. No material transfers between levels occurred during the fiscal year ended December 31, 2022.

Future Contributions

In 2023, the Company does not expect to make additional contributions to the plan.

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Cash Flows

Estimated future benefit payments under the Company's pension plans as of December 31, 2022 are as follows (in thousands):

2023	$	5,385
2024	4,071
2025	4,698
2026	4,020
2027	3,908
2027 to 2031	20,752

ITEM 9A.    CONTROLS AND PROCEDURES

Attached as exhibits to this Form 10-K are certifications of our principal executive officer and principal financial officer, which are required in accordance with Rule 13a-14 of the Exchange Act. This “Controls and Procedures” section includes information concerning the internal controls and controls evaluation referred to in the certifications.

Evaluation of Disclosure Controls and Procedures

Prior to the filing of the Original Form 10-K, an evaluation was performed by our management, with the participation of our principal executive officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d -15(e) under the Exchange Act). Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. At the time that we filed our Original Form 10-K, our principal executive officer and principal financial officer concluded that, as of December 31, 2022, our disclosure controls and procedures were effective at the reasonable assurance level.

Subsequent to the filing of the Original Form 10-K, our management team, with the participation of our principal executive officer and our principal financial officer, re-evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2022. Based on such re-evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of December 31, 2022, due to the material weaknesses in our internal control over financial reporting described in "Management’s Report on Internal Control Over Financial Reporting" below.

Notwithstanding the identified material weaknesses, our principal executive officer and principal financial officer concluded that our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of the Original Form 10-K fairly present, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in conformity with U.S. GAAP.

Management’s Report on Internal Control Over Financial Reporting

Our management, with the participation of our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.

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Prior to the filing of the Original Form 10-K, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. Management based its assessment on the framework established in the 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“2013 COSO framework”). Our management’s assessment included evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment. This assessment is supported by testing and monitoring performed by our internal audit and finance personnel utilizing the 2013 COSO framework. At the time of the filing of the Original Form 10-K, based on the results of such evaluation, our management team concluded that our internal control over financial reporting was effective as of December 31, 2022.

Subsequent to the filing of the Original Form 10-K, our management team re-evaluated the effectiveness of our internal control over financial reporting using the 2013 COSO framework. Based on such re-evaluation, management identified control deficiencies with our revenue cycle, inventory cycle, and with respect to these, our internal resources, expertise and policies required to maintain an effective control environment, that, individually or in the aggregate, constitute material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis.

Within the revenue cycle, controls over the annual establishment of the stand-alone selling prices (“SSPs”) for our performance obligations were not designed to include an adequate review and evaluation of whether the methodology used to develop and establish SSPs, including related financial statement disclosures, was in conformity with ASC 606, Revenue from Contracts with Customers.

Within the inventory cycle, controls over judgements used in the estimation of reserves for excess and obsolete inventory were not designed and operating effectively to support such judgements. In addition, controls over the application of our policy for capitalizing variances from standard costs as part of the cost of inventory, did not operate effectively.

Additionally, as related to both our revenue and inventory cycles, certain key controls were not sufficiently designed to assess the completeness and accuracy of Information Produced by the Entity (IPE).

The material weaknesses identified above indicate that we had insufficient personnel with an appropriate level of technical accounting knowledge, experience, and training in the application of GAAP commensurate with the complexity of our business and our financial accounting and reporting requirements. In turn, this impacted our ability to adequately design, implement and monitor financial reporting controls related to our revenue cycle and inventory cycle that identify and mitigate risks of material misstatements in our financial statements.

Notwithstanding the identified material weaknesses, our principal executive officer and principal financial officer concluded that our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of the Original Form 10-K fairly present, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in conformity with U.S. GAAP.

Remediation Plan for the Material Weaknesses

Our management, under the oversight of the Audit Committee of our Board of Directors, has evaluated the material weaknesses described above and designed a remediation plan to enhance our internal control environment. To remediate the material weaknesses, we plan to:

a.revise the methodology used to determine our SSPs, including the design and implementation of effective controls that provide adequate review and evaluation of such methodology, and related financial statement disclosures;

b.review and revise the design and implementation of key controls related to inventory, including the estimation of reserves for excess and obsolete inventory and the application of our policy for capitalizing variances from standard costs;

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INFINERA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

c.design and implement effective controls over IPE to ensure adequate levels of evidence and documentation to support controls procedures, augmented by training of our control preparers and reviewers related to the assessment of completeness and accuracy; and

d.review and enhance our personnel with the appropriate level of technical accounting knowledge, experience, and training in the application of GAAP commensurate with the complexity of our business and our financial accounting and reporting requirements, particularly in areas related to our revenue and inventory cycles.

We are committed to maintaining a strong internal control environment and implementing measures designed to help ensure that control deficiencies contributing to our material weaknesses are remediated as soon as possible. We believe our efforts listed above will enable us to successfully remediate our material weaknesses, however, we cannot provide assurance as to when our remediation measures will be complete. We will consider the material weaknesses remediated after the applicable controls operate for a sufficient period of time and management has concluded, through testing, that such controls are operating effectively. We will monitor the effectiveness of our remediation plan and refine our remediation plan as appropriate.

The effectiveness of our internal control over financial reporting as of the December 31, 2022, has been audited by Ernst & Young, LLP, an independent registered public accounting firm, as stated in their revised report, which is included elsewhere herein.

Changes in Internal Control over Financial Reporting

Except for the identified material weaknesses noted above, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the fiscal year ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements and projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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PART IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES

    (a)(1) Consolidated Financial Statements

    This Annual Report on Form 10-K contains the following financial statements which appear under Part II, Item 8 of this Form 10-K on the pages noted below: 

	Page
Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm	19
Consolidated Balance Sheets	24
Consolidated Statements of Operations	25
Consolidated Statement of Comprehensive Income (Loss)	26
Consolidated Statements of Stockholders’ Equity	27
Consolidated Statements of Cash Flows	28
Notes to Consolidated Financial Statements	30

    (a)(2) Financial Statement Schedule

Schedule II: Valuation and Qualifying Accounts

	Years Ended
	December 31, 2022		December 25, 2021		December 26, 2020
	(In thousands)
Deferred tax asset, valuation allowance
Beginning balance	$	521,620	$	531,923	$	484,834
Additions	41,782		14,395		53,761
Reductions	(15,145)		(24,698)		(6,672)
Ending balance	$	548,257	$	521,620	$	531,923
Allowance for credit losses
Beginning balance	$	1,304	$	2,912	$	4,005
Additions	1,397		822		2,422
Write-offs	(1,279)		(2,430)		(3,515)
Ending balance	$	1,422	$	1,304	$	2,912

    Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the consolidated financial statements or notes thereto.

    (a)(3) Exhibits.

    See Index to Exhibits. The Exhibits listed in the accompanying Index to Exhibits are filed or incorporated by reference as part of this Annual Report on Form 10-K.

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INDEX TO EXHIBITS

Exhibit No.	Description
2.1	Unit Purchase Agreement by and among Infinera Corporation, Coriant Investor LLC and Oaktree Optical Holdings, L.P., dated July 23, 2018, incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K/A (No. 001-33486), filed with the SEC on July 27, 2018.
3.1	Amended and Restated Certificate of Incorporation, incorporated herein by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on June 12, 2007.
3.2	Amended and Restated Bylaws, incorporated herein by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on December 9, 2022.
4.1	Form of Common Stock Certificate, incorporated herein by reference to Exhibit 4.1 of the Registrant’s Form S-1/A (No. 333-140876), filed with the SEC on April 27, 2007.
4.2	Base Indenture, dated as of September 11, 2018, by and between Infinera Corporation and U.S. Bank National Association, incorporated herein by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on September 12, 2018.
4.3	First Supplemental Indenture, dated as of September 11, 2018, by and between Infinera Corporation and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National Association), incorporated herein by reference to Exhibit 4.2 of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on September 12, 2018.
4.4	Form of 2.125% Convertible Senior Notes due 2024 (included in Exhibit 4.3 incorporated by reference hereto).
4.5	Indenture, dated March 9, 2020, by and between Infinera Corporation and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National Association), incorporated herein by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on March 9, 2020.
4.6	Form of 2.50% Convertible Senior Notes due 2027 (included in Exhibit 4.5 incorporated by reference hereto).
4.7	Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, incorporated herein by reference to Exhibit 4.5 of the Registrant's Annual Report on Form 10-K (No. 001-33486) filed with the SEC on March 4, 2020.
4.8	Form of Indenture, incorporated herein by reference to Exhibit 4.2 of the Registrant's Form S-3 Registration Statement (No. 333-244741) filed with the SEC on August 12, 2020.
4.9	Indenture, dated August 8, 2022, by and between Infinera Corporation and U.S. Bank Trust Company, National Association, incorporated herein by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K (No. 00133486) filed with the SEC on August 8, 2022.
4.10	Form of 3.75% Convertible Senior Notes due 2028 (included in Exhibit 4.9 incorporated by reference hereto).
10.1*	Form of Indemnification Agreement between Registrant and each of its directors and executive officers, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Form S-1 (No. 333-140876), filed with the SEC on February 26, 2007.
10.2*	2007 Equity Incentive Plan, incorporated herein by reference to Exhibit 10.3 of the Registrant’s Annual Report on Form 10-K (No. 001-33486), filed with the SEC on February 18, 2015.
10.3*	Infinera Corporation Amended and Restated 2007 Employee Stock Purchase Plan, incorporated herein by reference to Exhibit 10.3 of the Registrant's Annual Report on Form 10-K (No. 001-33486) filed with the SEC on March 4, 2020.
10.4*	Form of 2007 Employee Stock Purchase Plan Global Subscription Agreement, incorporated herein by reference to Exhibit 10.4 of the Registrant's Annual Report on Form 10-K (No. 001-33486) filed with the SEC on March 4, 2020.
10.5*	Bonus Plan, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on 8-K (No. 001-33486), filed with the SEC on February 14, 2011.
10.6*	Form of Section 16 Officer Notice of Grant of Restricted Stock Units under the 2007 Equity Incentive Plan, incorporated herein by reference to Exhibit 10.7 of the Registrant’s Annual Report on Form 10-K (No. 001-33486), filed with the SEC on February 18, 2015.

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Exhibit No.	Description
10.7*	Form of Notice of Grant of Stock Option under the 2007 Equity Incentive Plan, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q (No. 001-33486), filed with the SEC on May 5, 2010.
10.8*	Form of Chief Executive Officer Amended and Restated Change of Control Severance Agreement, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on February 22, 2018.
10.9*	Form of Section 16 Officer Amended and Restated Change of Control Severance Agreement, incorporated herein by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on February 22, 2018.
10.10*	Executive Clawback Policy, incorporated herein by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on January 17, 2013.
10.11*	Executive Severance Policy, incorporated herein by reference to Exhibit 10.19 of the Registrant’s Annual Report on Form 10-K (No. 001-33486), filed with the SEC on February 18, 2015.
10.12*	Infinera Corporation Amended and Restated 2016 Equity Incentive Plan, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on May 19, 2022.
10.13*^	Form of Notice of Grant of Restricted Stock Units under the Amended and Restated 2016 Equity Incentive Plan, filed with the SEC on February 27, 2023.
10.14*	Form of Notice of Grant of Restricted Stock Units for Directors under the Amended and Restated 2016 Equity Incentive Plan, incorporated herein by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on May 17, 2016.
10.15*	Form of Notice of Grant of Performance Shares under the Amended and Restated 2016 Equity Incentive Plan, incorporated herein by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q (No. 001-33486), filed with the SEC on May 9, 2019.
10.16	Underwriting Agreement, dated as of September 6, 2018, by and between Infinera Corporation and Morgan Stanley & Co. LLC, as manager of the underwriter named therein, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on September 12, 2018.
10.17	Form of Capped Call Confirmation, incorporated herein by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on September 12, 2018.
10.18	First Amendment to Unit Purchase Agreement, dated as of March 4, 2019, by and among Infinera Corporation, Coriant Investor LLC and Oaktree Optical Holdings, L.P., incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on March 4, 2019.
10.19*	Offer Letter between Infinera Corporation and David L. Teichmann dated March 18, 2019, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q (No. 001-33486), filed with the SEC on August 8, 2019.
10.20*	Offer Letter between Infinera Corporation and Nancy Erba dated July 8, 2019, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q (No. 001-33486), filed with the SEC on November 12, 2019.
10.21*	Infinera Corporation 2019 Inducement Equity Incentive Plan, incorporated herein by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-8 (No. 333-233150), filed with the SEC on August 8, 2019.
10.22*	Form of Notice of Grant of Restricted Stock Units (Inducement Plan), incorporated herein by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-8 (No. 333-233150), filed with the SEC on August 8, 2019.
10.23*	Form of Notice of Grant of Performance Shares (Inducement Plan), incorporated herein by reference to Exhibit 4.3 of the Registrant’s Registration Statement on Form S-8 (No. 333-233150), filed with the SEC on August 8, 2019.
10.24*	Offer Letter between Infinera Corporation and Nicholas Walden dated January 3, 2020, incorporated herein by reference to Exhibit 10.27 of the Registrant's Annual Report in Form 10-K (No. 001-33486) filed with the SEC on March 4, 2020.

78

Exhibit No.	Description
10.25	Purchase Agreement, dated March 4, 2020, by and between Infinera Corporation and Goldman Sachs & Co. LLC, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on March 9, 2020.
10.26	Letter agreement, dated as of April 13, 2020, among Infinera Corporation, Oaktree Optical Holdings, L.P. and certain other parties, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on April 14, 2020.
10.27	Loan, Guaranty and Security Agreement, dated as of June 24, 2022, by and among Infinera Corporation, the other obligors party thereto, the lenders party thereto, and Bank of America, N.A. as agent, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on June 27, 2022.
10.28	First Amendment to Loan, Guaranty and Security Agreement, dated as of August 2, 2022, among Infinera Corporation, the other obligors party thereto, the lenders party thereto, and Bank of America, N.A., as Administrative Agent, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (No. 001-33486) filed with the SEC on August 3, 2022.
10.29	Purchase Agreement, dated August 3, 2022, by and between Infinera Corporation and Jefferies LLC, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (No. 001-33486) filed with the SEC on August 8, 2022.
21.1^	Subsidiaries.
23.1	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
24.1^	Power of Attorney.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS^	XBRL Instance Document
101.SCH^	XBRL Taxonomy Extension Schema Document
101.CAL^	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF^	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB^	XBRL Taxonomy Extension Label Linkbase Document
101.PRE^	XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

*    Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.

**    This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

^    Previously filed with our Original Form 10-K, originally filed with the SEC on February 27, 2023, which is being amended hereby.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: February 29, 2024

Infinera Corporation
By:	/s/  NANCY ERBA
	Nancy Erba Chief Financial Officer Principal Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

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Name and Signature	Title	Date
*	Chief Executive Officer, Principal Executive Officer and Director	February 29, 2024
David W. Heard
/s/ Nancy Erba	Chief Financial Officer, Principal Financial Officer	February 29, 2024
Nancy Erba
*	Chief Accounting Officer and Principal Accounting Officer	February 29, 2024
Michael Fernicola
*	Chairman of the Board	February 29, 2024
George Riedel
*	Director	February 29, 2024
Christine Bucklin
*	Director	February 29, 2024
Greg P. Dougherty
*	Director	February 29, 2024
Sharon Holt
*	Director	February 29, 2024
Roop Lakkaraju
*	Director	February 29, 2024
Paul J. Milbury
*	Director	February 29, 2024
Amy Rice
*	Co-founder, Chief Innovation Officer and Director	February 29, 2024
David F. Welch, Ph.D.

*By: /s/ Nancy Erba

Nancy Erba

As Attorney-in-Fact

81