GlobeNewswire Inc | Aug 5, 2020 04:03PM EDT

August 05, 2020

SUNNYVALE, Calif., Aug. 05, 2020 (GLOBE NEWSWIRE) -- Infinera Corporation (NASDAQ: INFN) today released financial results for its second quarter ended June 27, 2020.

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

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

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

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

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

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

A further explanation of the use of non-GAAP financial information and a reconciliation of each of the non-GAAP financial measures to the most directly comparable GAAP financial measure can be found at the end of this release.

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

Financial Outlook

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

-- GAAP revenue is expected to be $334 million +/- $10 million. Non-GAAP revenue is expected to be $335 million +/- $10 million. -- GAAP gross margin is expected to be 30.5% +/- 150 bps. Non-GAAP gross margin is expected to be 34% +/- 150 bps. -- GAAP operating expenses are expected to be $137 million+/-$1.5 million. Non-GAAP operating expenses are expected to be $116.5 million+/-$1.5 million. -- GAAP operating margin is expected to be (11.0)% +/- 200 bps. Non-GAAP operating margin is expected to be (1.0)% +/- 200 bps.

Second Quarter 2020 Investor Slides Available Online

Investor slides reviewing Infinera's second quarter of 2020 financial results will be furnished to the SEC on a Current Report on Form 8-K and published on Infinera's Investor Relations website at investors.infinera.com prior to second quarter of 2020 earnings conference call. Analysts and investors are encouraged to review these slides prior to participating in the conference call webcast.

Conference Call Information

Infinera will host a conference call for analysts and investors to discuss its results for the second quarter of 2020 and its outlook for the third quarter of 2020 today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). Interested parties may join the conference call by dialing 1-866-373-6878 (toll free) or 1-412-317-5101 (international). A live webcast of the conference call will also be accessible from the Events section of Infineras website at investors.infinera.com. Replay of the audio webcast will be available at investors.infinera.com approximately two hours after the end of the live call.

Contacts:

Media:Anna VueTel. +1 (916) 595-8157avue@infinera.com

Investors:Michael Bowen, ICR, Inc.Tel. +1 (203) 682-8299Michael.Bowen@icrinc.com

Marc P. Griffin, ICR, Inc.Tel. +1 (646) 277-1290Marc.Griffin@icrinc.com

About Infinera

Infinera is a global supplier of innovative networking solutions that enable carriers, cloud operators, governments, and enterprises to scale network bandwidth, accelerate service innovation, and automate network operations. The Infinera end-to-end packet-optical portfolio delivers industry-leading economics and performance in long-haul, submarine, data center interconnect, and metro transport applications. To learn more about Infinera, visit www.infinera.com, follow us on Twitter @Infinera, and read Infinera's latest blog posts at www.infinera.com/blog.

Forward-Looking Statements

This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties. Such forward-looking statements include, without limitation, Infineras ability to continue to execute on its financial, operational and technical plans; its expectations regarding its ICE6 solution, and its financial outlook for the third quarter of 2020.

Forward-looking statements can also be identified by forward-looking words such as anticipate, believe, could, estimate, expect, intend, may, should, will, and "would or similar words. These statements are based on information available to Infinera as of the date hereof and actual results could differ materially from those stated or implied due to risks and uncertainties. The risks and uncertainties that could cause Infineras results to differ materially from those expressed or implied by such forward-looking statements include, the effect of the COVID-19 pandemic on Infineras business, results of operations, financial condition, stock price and personnel; the effect of global and regional economic conditions on Infineras business, including effects on purchasing decisions by customers; Infineras future capital needs and its ability to generate the cash flow or otherwise secure the capital necessary to make anticipated capital expenditures; Infinera's ability to service its debt obligations and pursue its strategic plan; delays in the development and introduction of new products or updates to existing products; market acceptance of Infineras end-to-end portfolio; Infinera's reliance on single and limited source suppliers; fluctuations in demand, sales cycles and prices for products and services, including discounts given in response to competitive pricing pressures, as well as the timing of purchases by Infinera's key customers; the effect that changes in product pricing or mix, and/or increases in component costs could have on Infineras gross margin; Infineras ability to respond to rapid technological changes; aggressive business tactics by Infineras competitors; the effects of customer consolidation; the impacts of foreign currency fluctuations; Infineras ability to protect Infineras intellectual property; claims by others that Infinera infringes their intellectual property; war, terrorism, public health issues, natural disasters and other circumstances that could disrupt the supply, delivery or demand of Infinera's products; and other risks and uncertainties detailed in Infineras SEC filings from time to time. More information on potential factors that may impact Infineras business are set forth in its Annual Report on Form 10-K for the year ended on December 28, 2019 as filed with the SEC on March 4, 2020, and its Quarterly Report on Form 10-Q for the quarter ended March 28, 2020 as filed with the SEC on May 15, 2020, as well as subsequent reports filed with or furnished to the SEC from time to time. These reports are available on Infineras website at www.infinera.com and the SECs website at www.sec.gov. Infinera assumes no obligation to, and does not currently intend to, update any such forward-looking statements.

Use of Non-GAAP Financial Information

In addition to disclosing financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain certain non-GAAP financial measures that exclude acquisition-related deferred revenue and inventory adjustments, other customer related charges, stock-based compensation expenses, amortization of acquired intangible assets, acquisition and integration costs, restructuring and related costs, COVID-19 related costs, litigation charges, amortization of debt discount on Infineras convertible senior notes, gain on non-marketable equity investments, along with related income tax effects. For a description of these non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial measures, please see the section titled, GAAP to Non-GAAP Reconciliations.

Infinera has included forward-looking non-GAAP information in this press release, including an estimate of certain non-GAAP financial measures for the third quarter of 2020 that exclude acquisition-related deferred revenue adjustments, stock-based compensation expenses, amortization of acquired intangible assets, acquisition and integration costs related to Infinera's acquisition of Coriant, and restructuring and related expenses. Please see the section titled, GAAP to Non-GAAP Reconciliation of Financial Outlook below on specific adjustments.

Infinera believes these adjustments are appropriate to enhance an overall understanding of its underlying financial performance and also its prospects for the future and are considered by management for the purpose of making operational decisions. In addition, these results are the primary indicators management uses as a basis for its planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for revenue, gross margin, operating expenses and operating margin, prepared in accordance with GAAP. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and are subject to limitations.

A copy of this press release can be found on the Investor Relations page of Infineras website at www.infinera.com.

Infinera and the Infinera logo are trademarks or registered trademarks of Infinera Corporation. All other trademarks used or mentioned herein belong to their respective owners.

Infinera CorporationCondensed Consolidated Statements of Operations(In thousands, except per share data)(Unaudited)

ThreeMonthsEnded SixMonthsEnded June 27, June 29, June 27, June 29, 2020 2019 2020 2019Revenue: Product $ 261,227 $ 226,866 $ 516,419 $ 449,873 Services 70,360 69,384 145,441 139,084 Total 331,587 296,250 661,860 588,957 revenueCost of revenue:Cost of product 186,519 177,501 388,311 335,318 Cost of 36,599 36,831 77,294 73,507 servicesAmortization ofintangible 8,721 8,098 17,349 16,350 assetsAcquisition andintegration 750 10,700 1,785 12,764 costsRestructuring 1,591 1,864 2,748 23,330 and related Total 234,180 234,994 487,487 461,269 cost of revenueGross profit 97,407 61,256 174,373 127,688 Operating expenses:Research and 67,090 73,937 135,270 147,597 developmentSales and 31,816 37,651 68,505 77,688 marketingGeneral and 30,101 35,672 59,721 68,716 administrativeAmortization ofintangible 4,585 6,745 9,140 13,802 assetsAcquisition andintegration 3,344 12,164 12,566 19,298 costsRestructuring 5,097 3,471 10,677 20,659 and related Totaloperating 142,033 169,640 295,879 347,760 expensesLoss from (44,626 ) (108,384 ) (121,506 ) (220,072 )operationsOther income (expense), net:Interest income 54 183 78 949 Interest (12,436 ) (7,280 ) (21,230 ) (14,843 )expenseOther gain (1,992 ) 3,210 (14,674 ) 287 (loss), net Totalother income (14,374 ) (3,887 ) (35,826 ) (13,607 )(expense), netLoss before (59,000 ) (112,271 ) (157,332 ) (233,679 )income taxesProvision for 2,635 1,385 3,571 1,578 income taxesNet loss $ (61,635 ) $ (113,656 ) $ (160,903 ) $ (235,257 )Net loss per common share:Basic $ (0.33 ) $ (0.64 ) $ (0.88 ) $ (1.33 )Diluted $ (0.33 ) $ (0.64 ) $ (0.88 ) $ (1.33 )Weightedaverage sharesused incomputing net lossper commonshare:Basic 185,596 178,677 183,810 177,542 Diluted 185,596 178,677 183,810 177,542

Infinera CorporationGAAP to Non-GAAP Reconciliations(In thousands, except percentages and per share data)(Unaudited)

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

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

Business combination accounting principles require Infinera to write down to fair value its maintenance support contracts assumed in the Coriant acquisition. The revenue for these support contracts is deferred and typically recognized over a period of time after the Coriant acquisition,(1) so Infinera's GAAP revenue for a period of time after the acquisition will not reflect the full amount of revenue that would have been reported if the acquired deferred revenue was not written down to fair value. The non-GAAP adjustment eliminates the effect of the deferred revenue write-down. Management believes these adjustments to revenue from support contracts assumed in the Coriant acquisition are useful to investors as an additional means to reflect revenue trends of Infinera's business. Other customer related charges include one-time benefits and charges that are not directly related to Infinera?s ongoing or core business results. During the second quarter of 2019, Infinera agreed to reimburse a customer(2) for certain expenses incurred by them in connection with a network service outage that occurred during the fourth quarter of fiscal 2018. Management has excluded the impact of this charge in arriving at Infinera's non-GAAP results because it is non-recurring, and management believes that this reimbursement is not indicative of ongoing operating performance. Stock-based compensation expense is calculated in accordance with the fair value recognition provisions of Financial Accounting Standards Board(3) Accounting Standards Codification Topic 718, Compensation ? Stock Compensation effective January1, 2006. The following table summarizes the effects of stock-based compensation related to employees and non-employees (in thousands):

Three Months Ended Six Months Ended June 27, March 28, June 29, June 27, June 29, 2020 2020 2019 2020 2019Cost of $ 779 $ 624 $ 663 $ 1,403 $ 1,201 revenueResearch and 4,379 3,774 6,127 8,153 9,730 developmentSales and 2,786 2,644 2,099 5,430 3,646 marketingGeneral and 3,548 3,183 3,230 6,731 5,465 administration 11,492 10,225 12,119 21,717 20,042 Cost ofrevenue -amortization 1,284 1,478 928 2,762 1,718 frombalance sheet*Totalstock-based $ 12,776 $ 11,703 $ 13,047 $ 24,479 $ 21,760 compensationexpense

* Stock-based compensation expense deferred to inventory and deferred inventory costs in prior periods recognized in the current period. Amortization of acquired intangible assets consists of developed technology, trade names, customer relationships and backlog acquired in connection with the Coriant acquisition, which closed during the fourth quarter of 2018. Amortization of acquired intangible assets also consists of amortization of developed technology, trade names and customer relationships acquired in connection with the Transmode AB acquisition.(4) U.S. GAAP accounting requires that acquired intangible assets are recorded at fair value and amortized over their useful lives. As this amortization is non-cash, Infinera has excluded it from its non-GAAP gross profit, operating expenses and net income measures. Management believes the amortization of acquired intangible assets is not indicative of ongoing operating performance and its exclusion provides a better indication of Infinera's underlying business performance. Acquisition and integration costs consist of legal, financial, IT, manufacturing-related costs, employee-related costs and professional fees incurred in connection with Infinera's acquisition of Coriant. These(5) amounts have been adjusted in arriving at Infinera's non-GAAP results because management believes that these expenses are non-recurring, not indicative of ongoing operating performance and their exclusion provides a better indication of Infinera's underlying business performance. Business combination accounting principles require Infinera to measure acquired inventory at fair value. The fair value of inventory reflects the acquired company?s cost of manufacturing plus a portion of the expected profit margin. The non-GAAP adjustment to Infinera's cost of sales^(6) excludes the amortization of the acquisition-related step-up in carrying value for units sold in the quarter. Additionally, in connection with the Coriant acquisition, cost of sales excludes a one-time adjustment in inventory as a result of renegotiated supplier agreements that contained unusually higher than market pricing. Management believes these adjustments are useful to investors as an additional means to reflect ongoing cost of sales and gross margin trends of Infinera's business. Restructuring and related costs are primarily associated with the reduction of operating costs, the closure of Infinera's Berlin, Germany site, the reduction of headcount at Infinera's Munich, Germany site and Coriant's historical restructuring plan associated with its early(7) retirement plan. In addition, management included accelerated amortization on operating lease right-of-use assets due to the cease use of certain facilities. Management has excluded the impact of these charges in arriving at Infinera's non-GAAP results as they are non-recurring in nature and its exclusion provides a better indication of Infinera's underlying business performance. COVID-19 related costs consist of higher replacement costs associated with certain warranty parts customers were unable to return for repair due to logistics issues and mobility issues related to COVID-19 public health mandates and restrictions. In addition, we needed to source certain key components from an alternate suppler at substantially higher cost in order(8) for Infinera to fulfill delivery commitments in the normal course of business. As of result of these atypical challenges caused by the circumstances surrounding the COVID-19 pandemic, management has excluded these expenses from non-GAAP financial measures, as their exclusion provides a better indication of Infinera's underlying business performance. Litigation charges are associated with the preliminary settlement of a litigation matter agreed to during the quarter ended June 29, 2019.^(9) Management has excluded the impact of this charge in arriving at Infinera's non- GAAP results because it is non-recurring, and management believes that this expense is not indicative of ongoing operating performance. Under GAAP, certain convertible debt instruments that may be settled in cash on conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate. Accordingly, for GAAP purposes, Infinera is required to amortize as debt discount an amount equal to the fair value of the(10) conversion option that was recorded in equity as interest expense on the $402.5 million in aggregate principal amount of its 2.125% convertible debt issuance in September 2018 due September 2024 and $200 million in aggregate principal amount of 2.50% convertible debt issued in March 9, 2020 due March 2027. Interest expense has been excluded from Infinera's non-GAAP results because management believes that this non-cash expense is not indicative of ongoing operating performance and provides a better indication of Infinera's underlying business performance. Management has excluded the gain on the sale related to non-marketable(11) equity investments in arriving at Infinera's non-GAAP results because it is non-recurring, and management believes that this income is not indicative of ongoing operating performance. (12) The difference between the GAAP and non-GAAP tax provision is due to the net tax effects of the purchase accounting adjustments, acquisition-related costs and amortization of acquired intangible assets. Non-GAAP EPS as adjusted did not exclude the impact of foreign currency. Had the impact of foreign currency been excluded for the three months(13) ended June 27, 2020, March 28, 2020, June 29, 2019, non-GAAP EPS as adjusted would have been $(0.08), $(0.20) and $(0.25), respectively and for the six months ended June 27, 2020 and June 29, 2019, non-GAAP EPS as adjusted would have been $(0.28) and $(0.47), respectively.

Infinera CorporationCondensed Consolidated Balance Sheets(In thousands, except par values)(Unaudited)

June 27, December 28, 2020 2019ASSETS Current assets: Cash $ 202,782 $ 109,201 Short-term restricted cash 4,307 4,339 Accounts receivable, net of allowance fordoubtful accounts of $3,183 in 2020 289,107 349,645 and $4,005 in 2019Inventory 288,159 340,429 Prepaid expenses and other current assets 168,052 139,217 Total current assets 952,407 942,831 Property, plant and equipment, net 145,110 150,793 Operating lease right-of-use assets 60,798 68,081 Intangible assets 143,762 170,346 Goodwill 251,050 249,848 Long-term restricted cash 17,108 19,257 Other non-current assets 25,623 27,182 Total assets $ 1,595,858 $ 1,628,338 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Accounts payable $ 195,947 $ 273,397 Accrued expenses and other current liabilities 172,100 193,168 Accrued compensation and related benefits 52,674 92,221 Short-term debt, net 27,726 31,673 Accrued warranty 17,674 21,107 Deferred revenue 95,932 103,753 Total current liabilities 562,053 715,319 Long-term debt, net 508,459 323,678 Long-term financing lease obligations 1,869 2,394 Accrued warranty, non-current 19,409 22,241 Deferred revenue, non-current 31,300 36,067 Deferred tax liability 5,564 8,700 Operating lease liabilities 63,819 64,210 Other long-term liabilities 73,531 69,194 Commitments and contingencies (Note 13) Stockholders? equity: Preferred stock, $0.001 par value Authorized shares ? 25,000 and no shares issued ? ? and outstandingCommon stock, $0.001 par valueAuthorized shares ? 500,000 as of June 27, 2020and December28, 2019 187 181 Issued and outstanding shares ? 187,299 as ofJune 27, 2020 and 181,134as of December28, 2019Additional paid-in capital 1,838,677 1,740,884 Accumulated other comprehensive loss (27,566 ) (34,639 )Accumulated deficit (1,481,444 ) (1,319,891 )Total stockholders' equity 329,854 386,535 Total liabilities and stockholders? $ 1,595,858 $ 1,628,338 equity

Infinera CorporationCondensed Consolidated Statements of Cash Flows(In thousands)(Unaudited)

Six Months Ended June 27, June 29, 2020 2019Cash Flows from Operating Activities: Net loss $ (160,903 ) $ (235,257 )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization 51,369 62,143 Non-cash restructuring charges and related costs 2,818 14,538 Amortization of debt discount and issuance costs 13,016 9,245 Operating lease expense 9,873 19,913 Stock-based compensation expense 24,479 21,760 Other, net 3,001 10 Changes in assets and liabilities: Accounts receivable 53,989 55,216 Inventory 50,164 (30,640 )Prepaid expenses and other assets (26,961 ) (30,958 )Accounts payable (77,358 ) 4,726 Accrued liabilities and other expenses (59,939 ) 1,604 Deferred revenue (11,637 ) (12,267 ) Net cash used in operating activities (128,089 ) (119,967 )Cash Flows from Investing Activities: Proceeds from sale of non-marketable equity ? 1,009 investmentsProceeds from maturities of investments ? 25,085 Acquisition of business, net of cash acquired ? (10,000 )Purchase of property and equipment, net (19,002 ) (15,784 ) Net cash (used in)/provided by investing (19,002 ) 310 activitiesCash Flows from Financing Activities: Proceeds from issuance of 2027 Notes 194,500 ? Proceeds from mortgage payable ? 8,584 Proceeds from revolving line of credit 55,000 ? Repayment of revolving line of credit (8,000 ) ? Repayment of third party manufacturing funding (3,960 ) ? Payment of debt issuance cost (2,073 ) ? Repayment of mortgage payable (166 ) (96 )Principal payments on financing lease obligations (922 ) ? Proceeds from issuance of common stock 7,399 7,740 Minimum tax withholding paid on behalf of employeesfor net share (1,319 ) (354 )settlement Net cash provided by financing activities 240,459 15,874 Effect of exchange rate changes on cash and (1,968 ) (33 )restricted cashNet change in cash, cash equivalents and restricted 91,400 (103,816 )cashCash, cash equivalents and restricted cash at 132,797 242,337 beginning of periodCash, cash equivalents and restricted cash at end of $ 224,197 $ 138,521 period^(1) Supplemental disclosures of cash flow information: Cash paid for income taxes, net of refunds $ (773 ) $ 13,606 Cash paid for interest $ 7,320 $ 4,687 Supplemental schedule of non-cash investing and financing activities:Unpaid debt issuance cost $ 382 $ ? Third-party manufacturer funding for transfer $ ? $ 3,327 expenses incurredTransfer of inventory to fixed assets $ 118 $ 2,195

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

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

Infinera CorporationSupplemental Financial Information(Unaudited)

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

Non-GAAP adjustments include acquisition-related deferred revenue and inventory adjustments, stock-based compensation expenses, amortization of acquired intangible assets, acquisition and integration costs,(1) restructuring and related costs, and COVID-19 related costs. For a description of this non-GAAP financial measure, please see the section titled, ?GAAP to Non-GAAP Reconciliations? of this press release for a reconciliation to the most directly comparable GAAP financial measures. Infinera calculates non-GAAP inventory turns as annualized non-GAAP cost of(2) revenue before adjustments for restructuring and related costs, non-cash stock-based compensation expense, and certain purchase accounting adjustments, divided by the average inventory for the quarter.

Infinera CorporationGAAP to Non-GAAP Reconciliation of Financial Outlook(In millions, except percentages and per share data)(Unaudited)

The following amounts represent the midpoint of the expected range:

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