Infinera Investor Presentation March 2020
Infinera Investor Presentation
March 2020
2© 2020 Infinera. All rights reserved. Company Confidential.
© 2020 Infinera. All rights reserved. Company Confidential.
Safe HarborThis presentation contains forward-looking statements, including those related to Infinera’s expectations regarding its convertible debt offering; business model, market opportunities and customers; it expectations regarding its products and market position; its financial outlook; and its growth capability related to its working capital and liquidity. All statements other than statements of historical fact could be deemed forward-looking, including, but not limited to, statements made about future market and financial performance; statements regarding future products or technology as well as the timing to market of any such products or technology; any statements about historical results that may suggest trends for our business; and any statements of assumptions underlying any of the items mentioned.
These statements are based on estimates and information available to us at the time of this presentation and are not guarantees of future performance. These statements are based on information available to Infinera as of the date hereof and actual results could differ materially from those stated or implied due to risks and uncertainties. The risks and uncertainties that could cause Infinera’s results to differ materially from those expressed or implied by such forward-looking statements include, Infinera’s future capital needs and its ability to generate the cash flow or otherwise secure the capital necessary to make anticipated capital expenditures; Infinera's ability to service its debt obligations and pursue its strategic plan; delays in the development and introduction of new products or updates to existing products; market acceptance of Infinera’s end-to-end portfolio; Infinera's reliance on single and limited source suppliers; the effects of the coronavirus on the supply chain and our ability meet customer demand; Infinera’s ability to successfully integrate its enterprise resource planning system and other management systems; the diversion of management time on issues related to the integration and the implementation of its enterprise resource planning system; fluctuations in demand, sales cycles and prices for products and services, including discounts given in response to competitive pricing pressures, as well as the timing of purchases by Infinera's key customers; the effect that changes in product pricing or mix, and/or increases in component costs could have on Infinera’s gross margin; Infinera’s ability to respond to rapid technological changes; aggressive business tactics by Infinera’s competitors; the effects of customer consolidation; Infinera’s ability to protect Infinera’s intellectual property; claims by others that Infinera infringes their intellectual property; the effect of global macroeconomic conditions, including tariffs, on Infinera's business; war, terrorism,
public health issues, natural disasters and other circumstances that could disrupt the supply, delivery or demand of Infinera's products; and other risks and uncertainties detailed in Infinera’s SEC filings from time to time. More information on potential factors that may impact Infinera’s business are set forth in its Annual Report on Form 10-K for the fiscal year ended December 28, 2019 as filed with the SEC on March 4, 2020, as well as subsequent reports filed with or furnished to the SEC from time to time. These reports are available on Infinera’s website at www.infinera.com and the SEC’s website at www.sec.gov. Infinera assumes no obligation to, and does not currently intend to, update any such forward-looking statements set forth in this presentation.
This presentation shall not constitute an offer to sell or a solicitation of an offer to purchase any securities and shall not constitute an offer, solicitation or sale in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful. The Convertible Senior Notes due 2027 (the “Notes”) and securities issuable upon conversion of the Notes, if any, will not be registered under the Securities Act of 1933, as amended (the “Act”), or any state securities laws, and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Act and applicable state laws. Any purchaser of the Notes will be deemed to have made certain representations and acknowledgments, including, without limitation, that the purchaser is a “qualified institutional buyer” as defined in Rule 144A.
3© 2020 Infinera. All rights reserved. Company Confidential.
Our Mission
Infinite Network
Everywhere, Always, Instantly
Our Vision
Our Mission
and Vision
© 2020 Infinera. All rights reserved. Company Confidential.
4© 2020 Infinera. All rights reserved. Company Confidential.
OUR SOLUTIONS
Revolutionize telecommunications
networks with innovative advanced
connectivity solutions
What We Do
© 2020 Infinera. All rights reserved. Company Confidential.
5© 2020 Infinera. All rights reserved. Company Confidential.
© 2020 Infinera. All rights reserved. Company Confidential.
Employees
3,000+Patents
1,900Countries with
Operations
45+In Revenue
$1B+
Headquarters
Sunnyvale, California(NASDAQ: INFN)
Infinera
at-a-Glance
6© 2020 Infinera. All rights reserved. Company Confidential.
© 2020 Infinera. All rights reserved. Company Confidential.
Tom FallonCEO
Nancy ErbaChief Financial
Officer
David HeardChief Operating
Officer
Nick WaldenSenior Vice President
Sales
David TeichmannChief Legal
Officer
Rob ShoreSenior Vice
President Marketing
Parthi KandappanChief Technology Officer
Glenn LaxdalSVP Disaggregated, Edge,
and Access
Alex DerechoSenior VP Global Services
Uwe FischerSenior VP
System Solutions
Dave WelchChief Innovation
Officer
Greg GrecoSenior VP Global
R&D
Management Team
© 2020 Infinera. All rights reserved. Company Confidential.
7© 2020 Infinera. All rights reserved. Company Confidential.
© 2020 Infinera. All rights reserved. Company Confidential.
Customers
1,000+of the Top 10
Service Providers
9of the Top 6 Internet
Content Providers
5
Our Customers
Internet Content Providers
Fixed and MobileService Providers
EnterpriseVerticals
Submarine Operators
Integration
8© 2020 Infinera. All rights reserved. Company Confidential.
© 2020 Infinera. All rights reserved. Company Confidential.
52%30%
10%7%
BY REGION
North America EMEA APAC Other America
39%
15%8%
38%
BY VERTICAL
Tier 1 ICP Cable Other Service Provider
Totals may not foot to 100% due to rounding
Geographies & Customer Verticals
Diversification Across
9© 2020 Infinera. All rights reserved. Company Confidential.
© 2020 Infinera. All rights reserved. Company Confidential.
NEW SOLUTIONS
5G
COMPLETELY NEW NETWORK ARCHITECTURES
Fiber Deep Business
Bandwidth10-100X
Coherent End-Points5-10x
INCREASED AUTOMATION
Dynamic Traffic Patterns
Edge Compute
On-Demand Services
OPEN DISAGGREGATION
ELIMINATE VENDOR LOCK-IN
INCREASE INNOVATION SPEED
INCREASE SOLUTION FLEXIBILITY
Optical IPNFV
Networking
Trends
10© 2020 Infinera. All rights reserved. Company Confidential.
© 2020 Infinera. All rights reserved. Company Confidential.
HIGH END OPTICAL
PACKET OPTICALEDGE
MID-LOW END OPTICAL
SDN
$17.4B TOTAL MARKET BY 2023GROWING AT 7.4% CAGR
$ 5.1B Market
10.5% CAGR
$ 5.1B Market
3.2% CAGR
$5.6B Market4.3% CAGR
$ 1.5B Market37.9% CAGR
* Sources: Ovum, CignalAI, Dell’Oro, Infinera
Market Growth
11© 2020 Infinera. All rights reserved. Company Confidential.
© 2020 Infinera. All rights reserved. Company Confidential.
INFINITE CAPACITY ENGINE (ICE)
Industry Leading High-Performance Optical Engines
XR OPTICS
Revolutionary Point-to-Multipoint Coherent Optical Solution
COMPLETE INNOVATION AND PRODUCTION OF ADVANCED OPTICAL ENGINES
INFINERA’S
OPTICAL INNOVATION CENTER
AISC/DSP DESIGN
PIC DESIGN
PACKAGINGDESIGN
HOLISTIC CO-DESIGN
ANALOG ELECTRONICS DESIGN
RFINTERCONNECTS
PIC MANUFACTURING
PACKAGING MANUFACTURING
Deep Vertical
Integration
12© 2020 Infinera. All rights reserved. Company Confidential.
TOTAL ACTIONABLE MARKET
$18B6%
AUTOMATION
OPEN DISAGGREGATED
OPTICAL INNOVATION
INVESTMENT FOCUS
Market Size
Key Growth Areas
NETWORKPLUGGABLES $1B+ NEW
DISAGGREGATEDROUTERS $1.4B NEW
COMPACTMODULAR $3.4B 32%
400G+TRANSMISSION $2.4B 29%
SDNSOFTWARE $1.8B 46%
KEY GROWTH AREAS
© 2020 Infinera. All rights reserved. Company Confidential.
13© 2020 Infinera. All rights reserved. Company Confidential.
© 2020 Infinera. All rights reserved. Company Confidential.
OPTICAL EVOLUTION
OPEN DISAGGREGATED SOLUTIONS
PRACTICAL AUTOMATION
Accelerate Automaton with an Easy to Implement Practical Approach
Aware ADAPT vASON ML PCE Planner Custom 3rd Party
Orchestrator Controller NMS
NFV/MANO 3rd Party
SOFTWARE PLATFORM
TRANSCEND SOFTWARE SUITE
Lower Cost Per Bit with Vertically Integrated Leading Optical Technology
XR OPTICS
Disaggregated Router
NOS Apps
ROADMMuxponder
Transponder Edge OLS
Compact Modular
Sled based Architecture
DRXGROOVE
Drive Down Network Costs Open Modular Networking Solutions
ICE
200G
600G
800G
Leading Performance Disruption
Investment Strategy
© 2020 Infinera. All rights reserved. Company Confidential.
14© 2020 Infinera. All rights reserved. Company Confidential.
Practical Automation
The Infinite Edge
DRX/CNOS
Transcend Software Suite
XTM 7100
Groove (GX)
Groove (GX) 7300Flex ILS
Delivering End-to-End, Multi-Layer, Multi-Vendor Applications
Application Optimized, Open, Disaggregated
The Infinite CoreSuperior Performance (ICE), Superior Scalability
CX
mTera XTC
XT
SWITCHING SWITCHING
TRANSPORT
Groove (GX)
OPEN LINE SYSTEMS
TRANSPORT
SDN
COMPREHENSIVE SOLUTION SET FROM EDGE TO CORE, FROM L0 TO L3 WITH ADVANCED AUTOMATION
Our Solutions3 Year Corporate Strategy
15© 2020 Infinera. All rights reserved. Company Confidential.
Revenue and margin expansion
accelerated in second half of year
STRONG FY19 PERFORMANCEFY19Q4’19
Non-GAAP
Gross Margin % 35.2% 33.6%
Non-GAAP
Operating Margin % 2.3% (6.3%)
Non-GAAP
Revenue $386M $1.3B
Completed successful integration and
achieved 2x of synergy targets
Achieved YoY Backlog Growth
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
2019
TRADITION OF INNOVATION & REVENUE GROWTH*2018
2019 Financial Highlights
* Non-GAAP financial measures, see appendix for reconciliation to most directly comparable GAAP financial measures
© 2020 Infinera. All rights reserved. Company Confidential.
16© 2020 Infinera. All rights reserved. Company Confidential.
© 2020 Infinera. All rights reserved. Company Confidential.
Achieved ~$200M in cost synergies – 2x target
Manufacturing transition complete
Heritage of innovation
Strong Q4’2019 Performance – 18% revenue growth Q/Q and Non-GAAP profitability
Customers: Strong order and pipeline growth in 2019 with 10 Tier 1 scale + several ICP wins
Integration of Coriant complete
One of two announced non-Chinese players with 800G and only player with 600G and 800G roadmap
Product portfolio positioned for increased network edge spending
New pluggable strategy designed to leapfrog the industry
Positioning for Growth
© 2020 Infinera. All rights reserved. Company Confidential.
17© 2020 Infinera. All rights reserved. Company Confidential.
Growing market with significant opportunity
Track record of winning and growing
A Great Opportunity
for Employees, Investors
and Partners
Continually challenging conventional thinking to bring to life innovation that matters
making the impossible probable
© 2020 Infinera. All rights reserved. Company Confidential.
Thank You
19© 2020 Infinera. All rights reserved. Company Confidential.
GAAP to Non-GAAP Reconciliation
Infinera Corporation
GAAP to Non-GAAP Reconciliation
(in millions, except percentages and per share data)
(Unaudited)
(in millions, except percentages and per share data) Q4'19 FY'19
Actual Actuals
Reconciliation of Revenue:
U.S. GAAP as reported 384.6$ 1,298.9$
Acquis i tion-related deferred revenue adjustment 1.9$ 9.6$
Other customer related charges -$ 8.1$
Non-GAAP as adjusted 386.5$ 1,316.6$
Reconciliation of Gross Profit:
U.S. GAAP 111.4 29.0% 325.9 25.1%
Acquis i tion-related deferred revenue adjustment 1.9$ 9.6$
Other customer related charges -$ 8.1$
Stock-based compensation 1.8$ 6.4$
Amortization of acquired intangible assets 8.4$ 32.6$
Acquis i tion and integration costs 7.2$ 28.4$
Acquis i tion-related inventory adjustment -$ 1.8$
Restructuring and related 5.4$ 29.9$
Non-GAAP 136.1$ 35.2% 442.8$ 33.6%
Reconciliation of Net Income/(Loss) from Operations
U.S. GAAP (60.9)$ -15.8% (350.2)$ -27.0%
Acquis i tion-related deferred revenue adjustment 1.9$ 9.6$
Other customer related charges -$ 8.1$
Stock-based compensation 11.1$ 42.8$
Amortization of acquired intangible assets 15.1$ 59.9$
Acquis i tion and integration costs 18.2$ 70.7$
Acquis i tion-related inventory adjustment -$ 1.8$
Restructuring and related 23.4$ 70.8$
Li tigation charges -$ 4.1$
Non-GAAP 8.8$ 2.3% (82.5)$ -6.3%