UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

					

FORM 8-K

					
 	 	 	 	 	
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 9, 2018

	

INFINERA CORPORATION
(Exact name of registrant as specified in its charter)

					

	

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

					
 	140 Caspian Court	 	 	 	
 	Sunnyvale, CA	 	94089	 	
 	(Address of principal executive offices)	 	(Zip Code)	 	
(408) 572-5200
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)

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

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

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

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

		
¨	Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

	
		
Item 2.02	Results of Operations and Financial Condition.	
On May 9, 2018, Infinera Corporation (the “Company”) issued a press release announcing financial results for its first quarter ended March 31, 2018. The Company also posted on the Investor Relations section of its website (www.infinera.com) a CFO Commentary with respect to its first quarter ended March 31, 2018. Copies of the press release and CFO Commentary are furnished as Exhibits 99.1 and 99.2, respectively, to this Current Report on Form 8-K. Information on the Company’s website is not, and will not be deemed, a part of this report or incorporated into any other filings the Company makes with the Securities and Exchange Commission.
In accordance with General Instruction B.2 of Form 8-K, the information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 and Exhibit 99.2, are being furnished under Item 2.02 and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of the general incorporation language of such filing, except as shall be expressly set forth by specific reference in such a filing.
The press release and CFO Commentary furnished herewith as Exhibit 99.1 and Exhibit 99.2, respectively, refer to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in each exhibit.

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

	
			
Exhibit No.	  	Description	
 	 	
99.1	  	Press release dated May 9, 2018.	
99.2	 	CFO Commentary dated May 9, 2018.	

	

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

	

 	 	 	 	INFINERA CORPORATION	
 	 	 	
Date: May 9, 2018	 	By:	 	/s/ BRAD D. FELLER	
 	 	 	 	Brad D. Feller
Chief Financial Officer	

Exhibit 99.1

Infinera Corporation Reports First Quarter 2018 Financial Results

Sunnyvale, Calif., May 9, 2018 - Infinera Corporation, provider of Intelligent Transport Networks, today released financial results for its first quarter ended March 31, 2018.

GAAP revenue for the quarter was $202.7 million compared to $195.8 million in the fourth quarter of 2017 and $175.5 million in the first quarter of 2017.

GAAP gross margin for the quarter was 40.5% compared to 24.1% in the fourth quarter of 2017 and 36.5% in the first quarter of 2017. GAAP operating margin for the quarter was (12.2)% compared to (36.0)% in the fourth quarter of 2017 and (21.6)% in the first quarter of 2017.

GAAP net loss for the quarter was $(26.3) million , or $(0.17) per share, compared to a net loss of $(74.0) million, or $(0.50) per share, in the fourth quarter of 2017, and net loss of $(40.5) million, or $(0.28) per share, in the first quarter of 2017.

Non-GAAP gross margin for the quarter was 43.7% compared to 37.5% in the fourth quarter of 2017 and 40.3% in the first quarter of 2017. Non-GAAP operating margin for the quarter was (3.4)% compared to (9.3)% in the fourth quarter of 2017 and (11.4)% in the first quarter of 2017.

Non-GAAP net loss for the quarter was $(7.2) million , or $ (0.05) per share, compared to a net loss of $(18.6) million, or $(0.12) per share, in the fourth quarter of 2017, and net loss of $(21.7) million, or $(0.15) per share, in the first quarter of 2017.

A further explanation of the use of non-GAAP financial information and a reconciliation of the non-GAAP financial measures to the GAAP equivalents can be found at the end of this release.
    
“Our financial performance in Q1 reflects continued strong growth from our next-generation products that offset typical seasonal weakness,” said Tom Fallon, Infinera’s Chief Executive Officer. “In 2018, we remain focused on winning new customers that will diversify our revenue base, drive multi-year growth and leverage our unique vertically-integrated operating model. We also remain committed to returning to profitability during the second half of 2018.”

Second Quarter 2018 Financial Outlook
Infinera's outlook for the quarter ending June 30, 2018 is as follows:
		
•	Revenue is expected to be in the range of $203 million to $213 million.	
		
•	GAAP gross margin is expected to be 38% +/- 200 bps. Non-GAAP gross margin is expected to be 42% +/- 200 bps.	
		
•	GAAP operating expenses are expected to be $106 million +/- $2 million. Non-GAAP operating expenses are expected to be $93 million +/- $2 million.	
		
•	GAAP operating margin is expected to be approximately (13)%. Non-GAAP operating margin is expected to be approximately (3)%.	
		
•	GAAP EPS is expected to be $(0.18)+/- $0.02. Non-GAAP EPS is expected to be $(0.05) +/- $0.02.	
Infinera's Financial Outlook does not include the potential impact of any business combinations, asset acquisitions, strategic investments and other significant transactions that may be completed after May 9, 2018. Actual results may differ materially from Infinera's Financial Outlook as a result of, among other things, the factors described under “Forward-Looking Statements” below.

First Quarter 2018 Financial Commentary Available Online
A CFO Commentary reviewing Infinera's first quarter of 2018 financial results will be furnished to the SEC on Form 8-K and published on Infinera's Investor Relations website at investors.infinera.com. Analysts and investors are encouraged to review this commentary prior to participating in the conference call webcast.

Conference Call Information
Infinera will host a conference call for analysts and investors to discuss its first quarter 2018 results and its outlook for the second quarter of 2018 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 & Webcasts section of Infinera’s website at investors.infinera.com. Replay of the audio webcast will be available at investors.infinera.com approximately two hours after the end of the live call.

	
			
Contacts:	  	 	
Media:
Anna Vue	  	Investors:
Jeff Hustis	
Tel. +1 (916) 595-8157	 	Tel. +1 (408) 213-7150	
avue@infinera.com	  	jhustis@infinera.com	

About Infinera
Infinera provides Intelligent Transport Networks, enabling carriers, cloud operators, governments and enterprises to scale network bandwidth, accelerate service innovation and automate optical network operations. Infinera’s end-to-end packet-optical portfolio is designed for long-haul, subsea, data center interconnect and metro applications. To learn more about Infinera visit www.infinera.com, follow us on Twitter @Infinera and read our latest blog posts at www.infinera.com/blog.
Forward-Looking Statements
This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties. Such forward-looking statements include, without limitation, Infinera’s ability to win new customers that will diversify its revenue base, drive multi-year growth and leverage its unique vertically-integrated operating model; Infinera’s commitment to return to profitability on a non-GAAP basis during the second half of 2018; and Infinera's expectations regarding its outlook for the second quarter of 2018. Forward-looking statements can also be identified by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” and "would” or similar words. These statements are based on information available to Infinera as of the date hereof and actual results could differ materially from those stated or implied due to risks and uncertainties. The risks and uncertainties that could cause Infinera’s results to differ materially from those expressed or implied by such forward-looking statements include, delays in the development and introduction of new products or updates to existing products and market acceptance of these products; 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; the effects of increased customer consolidation; Infinera’s ability to respond to rapid technological changes; aggressive business tactics by Infinera’s competitors; Infinera's reliance on single and limited source suppliers; Infinera's ability to adequately respond to demand as a result of the restructuring plan; Infinera’s ability to protect Infinera’s intellectual property; claims by others that Infinera infringes their intellectual property; the effect of global macroeconomic conditions 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 year ended on December 30, 2017 as filed with the SEC on February 28, 2018, as well as subsequent reports filed with or furnished to the SEC from time to time. These reports are available on Infinera’s website at www.infinera.com and the SEC’s website at www.sec.gov. Infinera assumes no obligation to, and does not currently intend to, update any such forward-looking statements.

Use of Non-GAAP Financial Information
In addition to disclosing financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain certain non-GAAP measures that exclude restructuring and other costs (credits), impairment of cost-method investment, non-cash stock-based compensation expenses, amortization of debt discount on Infinera’s convertible senior notes, amortization and impairment of acquired intangible assets, acquisition-related costs, and certain purchase accounting adjustments related to Infinera's acquisition of Transmode AB, which closed during the third quarter of 2015, along with related 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 also included forward-looking non-GAAP information in this press release, including an estimate of certain non-GAAP financial measures for the second quarter of 2018 that exclude non-cash stock-based compensation expenses, amortization of acquired intangible assets and related tax effects, and amortization of debt discount on Infinera’s convertible senior notes. Please see the section titled, “GAAP to Non-GAAP Reconciliations 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 net loss, basic and diluted net loss per share, gross margin or operating margin prepared in accordance with GAAP. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and are subject to limitations.

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

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

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

									
 	 	Three Months Ended	
 	 	March 31, 2018	 	April 1, 2017	
Revenue:	 	 	 	 	
Product	 	$	171,629		 	$	147,053		
Services	 	31,052		 	28,469		
Total revenue	 	202,681		 	175,522		
Cost of revenue:	 	 	 	 	
Cost of product	 	107,665		 	99,332		
Cost of services	 	12,831		 	12,134		
Restructuring and other related costs	 	17		 	—		
Total cost of revenue	 	120,513		 	111,466		
Gross profit	 	82,168		 	64,056		
Operating expenses:	 	 	 	 	
Research and development	 	58,681		 	55,083		
Sales and marketing	 	30,492		 	29,441		
General and administrative	 	17,836		 	17,359		
Restructuring and other related credits	 	(163	)	 	—		
Total operating expenses	 	106,846		 	101,883		
Loss from operations	 	(24,678	)	 	(37,827	)	
Other income (expense), net:	 	 	 	 	
Interest income	 	897		 	751		
Interest expense	 	(3,683	)	 	(3,403	)	
Other gain (loss), net:	 	506		 	(130	)	
Total other income (expense), net	 	(2,280	)	 	(2,782	)	
Loss before income taxes	 	(26,958	)	 	(40,609	)	
Benefit from income taxes	 	(678	)	 	(158	)	
Net loss	 	(26,280	)	 	(40,451	)	
 	 			 			
Net loss per common share - basic and diluted:	 	$	(0.17	)	 	$	(0.28	)	
Weighted average shares used in computing net loss	 	 	 	 	
per common share - basic and diluted:	 	150,333		 	145,786		

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

																					
 	Three Months Ended	
 	March 31, 2018	 	 	 	December 30, 2017	 	 	 	April 1, 2017	 	 	
Reconciliation of Gross Profit:	 	 	 	 	 	 	 	 	 	 	 	
U.S. GAAP as reported	$	82,168		 	40.5	 %	 	$	47,286		 	24.1	 %	 	$	64,056		 	36.5	 %	
Stock-based compensation (1)	994		 	 	 	1,846		 	 	 	1,831		 	 	
Amortization of acquired intangible assets (2)	5,341		 	 	 	5,169		 	 	 	4,880		 	 	
Acquisition-related costs (3)	—		 	 	 	—		 	 	 	40		 	 	
Restructuring and other costs (4)	17		 	 	 	19,141		 	 	 	$	—		 	 	
Non-GAAP as adjusted	$	88,520		 	43.7	 %	 	$	73,442		 	37.5	 %	 	$	70,807		 	40.3	 %	
 	 	 	 	 	 	 	 	 	 	 	 	
Reconciliation of Operating Expenses:	 	 	 	 	 	 	 	 	 	 	 	
U.S. GAAP as reported	$	106,846		 	 	 	$	117,793		 	 	 	$	101,883		 	 	
Stock-based compensation (1)	9,989		 	 	 	8,450		 	 	 	9,046		 	 	
Amortization of acquired intangible assets (2)	1,607		 	 	 	1,555		 	 	 	1,468		 	 	
Acquisition-related costs (3)	—		 	 	 	—		 	 	 	306		 	 	
Restructuring and other costs (credits) (4)	(163	)	 	 	 	16,106		 	 	 	—		 	 	
Intangible asset impairment (5)	—		 	 	 	—		 	 	 	252		 	 	
Non-GAAP as adjusted	$	95,413		 	 	 	$	91,682		 	 	 	$	90,811		 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Reconciliation of Loss from Operations:	 	 	 	 	 	 	 	 	 	 	 	
U.S. GAAP as reported	$	(24,678	)	 	(12.2	)%	 	$	(70,507	)	 	(36.0	)%	 	$	(37,827	)	 	(21.6	)%	
Stock-based compensation (1)	10,983		 	 	 	10,296		 	 	 	10,877		 	 	
Amortization of acquired intangible assets (2)	6,948		 	 	 	6,724		 	 	 	6,348		 	 	
Acquisition-related costs (3)	—		 	 	 	—		 	 	 	346		 	 	
Restructuring and other costs (credits) (4)	(146	)	 	 	 	35,247		 	 	 	—		 	 	
Intangible asset impairment (5)	—		 	 	 	—		 	 	 	252		 	 	
Non-GAAP as adjusted	$	(6,893	)	 	(3.4	)%	 	$	(18,240	)	 	(9.3	)%	 	$	(20,004	)	 	(11.4	)%	
 	 	 	 	 	 	 	 	 	 	 	 	
Reconciliation of Net Loss:	 	 	 	 	 	 	 	 	 	 	 	
U.S. GAAP as reported	$	(26,280	)	 	 	 	$	(73,985	)	 	 	 	$	(40,451	)	 	 	
Stock-based compensation (1)	10,983		 	 	 	10,296		 	 	 	10,877		 	 	
Amortization of acquired intangible assets (2)	6,948		 	 	 	6,724		 	 	 	6,348		 	 	
Acquisition-related costs (3)	—		 	 	 	—		 	 	 	261		 	 	
Restructuring and other costs (credits) (4)	(146	)	 	 	 	35,247		 	 	 	—		 	 	
Intangible asset impairment (5)	—		 	 	 	—		 	 	 	252		 	 	
Amortization of debt discount (6)	2,779		 	 	 	2,710		 	 	 	2,514		 	 	
Impairment of cost-method investment (7)	—		 	 	 	1,890		 	 	 	—		 	 	
Income tax effects (8)	(1,529	)	 	 	 	(1,479	)	 	 	 	(1,474	)	 	 	
Non-GAAP as adjusted	$	(7,245	)	 	 	 	$	(18,597	)	 	 	 	$	(21,673	)	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Net Loss per Common Share - Basic and Diluted:	 	 	 	 	 	 	 	 	 	 	 	
U.S. GAAP as reported	$	(0.17	)	 	 	 	$	(0.50	)	 	 	 	$	(0.28	)	 	 	
Non-GAAP as adjusted	$	(0.05	)	 	 	 	$	(0.12	)	 	 	 	$	(0.15	)	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Weighted Average Shares Used in Computing Net Loss per Common Share - Basic and Diluted:	150,333		 	 	 	149,412		 	 	 	145,786		 	 	
____________________________

(1)  	Stock-based compensation expense is calculated in accordance with the fair value recognition provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation – Stock Compensation effective January 1, 2006. The following table summarizes the effects of stock-based compensation related to employees and non-employees (in thousands):	

	
													
 	 	Three Months Ended	
 	 	March 31, 2018	 	December 30, 2017	 	April 1, 2017	
Cost of revenue	 	$	(122	)	 	$	728		 	$	724		
Research and development	 	4,324		 	3,841		 	3,780		
Sales and marketing	 	2,898		 	2,264		 	2,726		
General and administration	 	2,767		 	2,345		 	2,540		
 	 	9,867		 	9,178		 	9,770		
Cost of revenue - amortization from balance sheet*	 	1,116		 	1,118		 	1,107		
Total stock-based compensation expense	 	$	10,983		 	$	10,296		 	$	10,877		
  _____________________________
		
*	Stock-based compensation expense deferred to inventory and deferred inventory costs in prior periods and recognized in the current period.	
		
(2)  	Amortization of acquisition-related intangible assets consists of amortization of developed technology, trade names, and customer relationships acquired in connection with the Transmode acquisition. U.S. GAAP accounting requires that acquired intangible assets are recorded at fair value and amortized over their useful lives. As this amortization is non-cash, Infinera has excluded it from its non-GAAP operating expenses, gross margin 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.	
		
(3)  	Acquisition-related costs associated with the Transmode acquisition include legal, financial, employee retention costs and other professional fees incurred in connection with the transaction, including squeeze-out proceedings. These amounts have been adjusted in arriving at Infinera's non-GAAP results because management believes that these expenses are non-recurring, not indicative of ongoing operating performance and their exclusion provides a better indication of Infinera's underlying business performance.	
		
(4)  	Restructuring and other costs (credits) are related to Infinera's plan to restructure its worldwide operations, which was implemented during the fourth quarter of 2017. 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.	
		
(5)  	Intangible asset impairment is associated with previously acquired intangibles, which Infinera has determined that the carrying value will not be recoverable. 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 these expenses are not indicative of ongoing operating performance.	
		
(6)  	Under GAAP, certain convertible debt instruments that may be settled in cash on conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate. Accordingly, for GAAP purposes, Infinera is required to amortize as debt discount an amount equal to the fair value of the conversion option that was recorded in equity as interest expense on its $150 million in aggregate principal amount of 1.75% convertible debt issuance in May 2013 over the term of the notes. 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.	
		
(7)  	The impairment of cost-method investment has been excluded in arriving at Infinera's non-GAAP results because it is non-recurring, and management believes that this non-cash expense is not indicative of ongoing operating performance.	
		
(8)  	The difference between the GAAP and non-GAAP tax is due to the net tax effects of the purchase accounting adjustments, acquisition-related costs and amortization of acquired intangible assets.	

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

									
 	 	March 31, 2018	 	December 30, 2017	
ASSETS	 	 	 	 	
Current assets:	 	 	 	 	
Cash and cash equivalents	 	$	151,436		 	$	116,345		
Short-term investments	 	112,886		 	147,596		
Accounts receivable, net of allowance for doubtful accounts of $916 in 2018 and $892 in 2017	 	161,541		 	126,152		
Inventory	 	215,888		 	214,704		
Prepaid expenses and other current assets	 	44,362		 	43,140		
Total current assets	 	686,113		 	647,937		
Property, plant and equipment, net	 	135,196		 	135,942		
Intangible assets	 	83,958		 	92,188		
Goodwill	 	192,562		 	195,615		
Long-term investments	 	18,383		 	31,019		
Cost-method investment	 	5,110		 	5,110		
Other non-current assets	 	11,335		 	9,859		
Total assets	 	$	1,132,657		 	$	1,117,670		
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	 	
Current liabilities:	 	 	 	 	
Accounts payable	 	$	77,776		 	$	58,124		
Accrued expenses	 	51,955		 	39,782		
Accrued compensation and related benefits	 	46,911		 	45,751		
Short-term debt	 	147,946		 	144,928		
Accrued warranty	 	14,022		 	13,670		
Deferred revenue	 	58,460		 	72,421		
Total current liabilities	 	397,070		 	374,676		
Accrued warranty, non-current	 	16,826		 	17,239		
Deferred revenue, non-current	 	13,181		 	22,502		
Deferred tax liability	 	19,398		 	21,609		
Other long-term liabilities	 	14,973		 	16,279		
Commitments and contingencies	 	 	 	 	
Stockholders’ equity:	 	 	 	 	
Preferred stock, $0.001 par value	 	 	 	 	
Authorized shares - 25,000 and no shares issued and outstanding	 	—		 	—		
Common stock, $0.001 par value	 	 	 	 	
Authorized shares - 500,000 as of March 31, 2018 and December 30, 2017	 	 	 	 	
Issued and outstanding shares - 151,163 as of March 31, 2018 and 149,471 as of December 30, 2017	 	151		 	149		
Additional paid-in capital	 	1,438,700		 	1,417,043		
Accumulated other comprehensive income	 	1,313		 	6,254		
Accumulated deficit	 	(768,955	)	 	(758,081	)	
Total stockholders’ equity	 	671,209		 	665,365		
Total liabilities and stockholders’ equity	 	$	1,132,657		 	$	1,117,670		

Infinera Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

									
 	 	Three Months Ended	
 	 	March 31, 2018	 	April 1, 2017	
Cash Flows from Operating Activities:	 	 	 	 	
Net loss	 	$	(26,280	)	 	$	(40,451	)	
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:	 	 	 	 	
Depreciation and amortization	 	16,976		 	15,951		
Non-cash restructuring and other related credits	 	(81	)	 	—		
Amortization of debt discount and issuance costs	 	3,018		 	2,730		
Impairment of intangible assets	 	—		 	252		
Stock-based compensation expense	 	10,983		 	10,877		
Other loss (gain)	 	84		 	60		
Changes in assets and liabilities:	 	 	 	 	
Accounts receivable	 	(30,928	)	 	26,366		
Inventory	 	(2,329	)	 	(326	)	
Prepaid expenses and other assets	 	(3,950	)	 	(5,767	)	
Accounts payable	 	19,286		 	(3,180	)	
Accrued liabilities and other expenses	 	(6,181	)	 	(16,425	)	
Deferred revenue	 	5,293		 	12,943		
Net cash provided by (used in) operating activities	 	(14,109	)	 	3,030		
Cash Flows from Investing Activities:	 	 	 	 	
Purchase of available-for-sale investments	 	(2,986	)	 	(84,422	)	
Proceeds from maturities of investments	 	50,168		 	46,679		
Purchase of property and equipment	 	(8,019	)	 	(14,743	)	
Net cash provided by (used in) investing activities	 	39,163		 	(52,486	)	
Cash Flows from Financing Activities:	 	 	 	 	
Acquisition of noncontrolling interest	 	—		 	(471	)	
Proceeds from issuance of common stock	 	10,644		 	9,808		
Minimum tax withholding paid on behalf of employees for net share settlement	 	(97	)	 	(151	)	
Net cash provided by financing activities	 	10,547		 	9,186		
Effect of exchange rate changes on cash and restricted cash	 	(58	)	 	1,337		
Net change in cash, cash equivalents and restricted cash	 	35,543		 	(38,933	)	
Cash, cash equivalents and restricted cash at beginning of period	 	121,486		 	177,580		
Cash, cash equivalents and restricted cash at end of period (1)	 	$	157,029		 	$	138,647		
Supplemental disclosures of cash flow information:	 	 	 	 	
Cash paid for income taxes, net of refunds	 	$	1,537		 	$	1,553		
Cash paid for interest	 	$	9		 	$	3		
Supplemental schedule of non-cash investing activities:	 	 	 	 	
Transfer of inventory to fixed assets	 	$	893		 	$	138		

		

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

								
 	March 31, 2018	 	April 1, 2017	
 	 	 	 	
 	(In thousands)	
Cash and cash equivalents	$	151,436		 	$	125,658		
Short-term restricted cash	84		 	7,908		
Long-term restricted cash	5,509		 	5,081		
Total cash, cash equivalents and restricted cash	$	157,029		 	$	138,647		

Infinera Corporation
Supplemental Financial Information
(Unaudited)

	
																																	
 	 	Q2'16	 	Q3'16	 	Q4'16	 	Q1'17	 	Q2'17	 	Q3'17	 	Q4'17	 	Q1'18	
GAAP Revenue ($ Mil)	 		$258.8		 		$185.5		 		$181.0		 		$175.5		 		$176.8		 		$192.6		 		$195.8		 		$202.7		
GAAP Gross Margin %	 	47.8	%	 	45.6	%	 	38.1	%	 	36.5	%	 	36.7	%	 	35.2	%	 	24.1	%	 	40.5	%	
Non-GAAP Gross Margin % (1)	 	50.4	%	 	49.2	%	 	41.8	%	 	40.3	%	 	40.7	%	 	39.1	%	 	37.5	%	 	43.7	%	
Revenue Composition:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Domestic %	 	64	%	 	56	%	 	53	%	 	57	%	 	63	%	 	59	%	 	53	%	 	64	%	
International %	 	36	%	 	44	%	 	47	%	 	43	%	 	37	%	 	41	%	 	47	%	 	36	%	
Customers >10% of Revenue	 	2		 	2		 	2		 	1		 	3		 	2		 	1		 	2		
Cash Related Information:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash from Operations ($ Mil)	 		$28.2		 		$5.2		 		($5.0	)	 		$3.0		 		($3.0	)	 		($20.9	)	 		($1.0	)	 		($14.1	)	
Capital Expenditures ($ Mil)	 		$12.5		 		$9.6		 		$10.4		 		$14.7		 		$24.5		 		$11.0		 		$7.8		 		$8.0		
Depreciation & Amortization ($ Mil)	 		$15.2		 		$15.9		 		$15.7		 		$16.0		 		$16.6		 		$16.8		 		$16.6		 		$17.0		
DSOs	 	68		 	75		 	81		 	64		 	64		 	65		 	59		 	73		
Inventory Metrics:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Raw Materials ($ Mil)	 		$39.1		 		$37.2		 		$33.2		 		$34.8		 		$36.7		 		$35.8		 		$27.4		 		$30.3		
Work in Process ($ Mil)	 		$61.0		 		$65.5		 		$74.5		 		$81.1		 		$91.6		 		$84.3		 		$59.6		 		$66.5		
Finished Goods ($ Mil)	 		$102.2		 		$128.8		 		$125.3		 		$118.0		 		$117.7		 		$122.7		 		$127.7		 		$119.1		
Total Inventory ($ Mil)	 		$202.3		 		$231.5		 		$233.0		 		$233.9		 		$246.0		 		$242.8		 		$214.7		 		$215.9		
Inventory Turns (2)	 	2.5		 	1.6		 	1.8		 	1.8		 	1.7		 	1.9		 	2.3		 	2.1		
Worldwide Headcount	 	2,218		 	2,262		 	2,240		 	2,245		 	2,272		 	2,296		 	2,145		 	2,084		
Weighted Average Shares Outstanding (in thousands):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	142,396		 	143,850		 	144,770		 	145,786		 	147,538		 	148,777		 	149,412		 	150,333		
Diluted	 	145,891		 	144,993		 	145,497		 	147,017		 	148,662		 	149,714		 	150,098		 	151,633		

	

		
(1)  	Non-GAAP adjustments include restructuring and other costs, non-cash stock-based compensation expense, certain purchase accounting adjustments related to Infinera's acquisition of Transmode and amortization of acquired intangible assets. For a description of this non-GAAP financial measure, please see the section titled, “GAAP to Non-GAAP Reconciliations” of this press release for a reconciliation to the most directly comparable GAAP financial measures.	

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

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

The following amounts represent the midpoint of the expected range:

					
 	 	Q2'18	
 	 	Outlook	
Reconciliation of Gross Margin:	 	 	
U.S. GAAP	 	38	 %	
Stock-based compensation	 	1	 %	
Amortization of acquired intangible assets	 	3	 %	
Non-GAAP	 	42	 %	
 	 	 	
Reconciliation of Operating Expenses:	 	 	
U.S. GAAP	 	$	106		
Stock-based compensation	 	(11	)	
Amortization of acquired intangible assets	 	(2	)	
Non-GAAP	 	$	93		
 	 	 	
Reconciliation of Operating Margin:	 	 	
U.S. GAAP	 	(13	)%	
Stock-based compensation	 	6	 %	
Amortization of acquired intangible assets	 	4	 %	
Non-GAAP	 	(3	)%	
 	 	 	
Reconciliation of Net Loss per Common Share:	 	 	
U.S. GAAP	 	$	(0.18	)	
Stock-based compensation	 	0.08		
Amortization of acquired intangible assets	 	0.05		
Amortization of debt discount	 	0.01		
Income tax effects	 	(0.01	)	
Non-GAAP	 	$	(0.05	)	

Exhibit 99.2

CFO Commentary - First Quarter 2018 Preliminary Financial Results

The following metrics and commentary are provided by management and should be reviewed in conjunction with our first quarter 2018 preliminary financial results press release, available on the Investor Relations section of our website at http://investors.infinera.com.
First Quarter 2018 Preliminary Financial Results
GAAP

																					
(In millions, except per share amounts and percentages)	 	Q1'18	 	Q4'17	 	Q1'17	 	Q/Q Change	 	Y/Y Change	
Revenue	 	$	202.7		 	$	195.8		 	$	175.5		 	4	%	 	15	%	
Product	 	171.6		 	160.5		 	147.0		 	7	 %	 	17	%	
Service	 	31.1		 	35.3		 	28.5		 	(12	)%	 	9	%	
Gross margin %	 	40.5	 %	 	24.1	 %	 	36.5	 %	 	16.4pts		 	4.0pts		
Research and development	 	58.7		 	55.2		 	55.1		 	6	 %	 	7	%	
Sales and marketing	 	30.5		 	29.4		 	29.4		 	4	 %	 	4	%	
General and administrative	 	17.8		 	17.1		 	17.4		 	4	 %	 	2	%	
Restructuring and other costs (credits)	 	(0.2	)	 	16.1		 	—		 	(101	)%	 	100	%	
Total operating expenses	 	$	106.8		 	$	117.8		 	$	101.9		 	(9	%)	 	5	%	
Operating margin %	 	(12.2	)%	 	(36.0	)%	 	(21.6	)%	 	23.8pts		 	9.4pts		
Net loss	 	$	(26.3	)	 	$	(74.0	)	 	$	(40.5	)	 	64	 %	 	35	%	
EPS	 	$	(0.17	)	 	$	(0.50	)	 	$	(0.28	)	 	$	0.33		 	$	0.11		

Non-GAAP

																					
(In millions, except per share amounts and percentages)	 	Q1'18	 	Q4'17	 	Q1'17	 	Q/Q Change	 	Y/Y Change	
Revenue	 	$	202.7		 	$	195.8		 	$	175.5		 	4	%	 	15	%	
Product	 	171.6		 	160.5		 	147.0		 	7	 %	 	17	%	
Service	 	31.1		 	35.3		 	28.5		 	(12	)%	 	9	%	
Gross margin %	 	43.7	 %	 	37.5	 %	 	40.3	 %	 	6.2pts		 	3.4pts		
Research and development	 	54.3		 	51.4		 	51.0		 	6	 %	 	6	%	
Sales and marketing	 	26.0		 	25.6		 	25.0		 	2	 %	 	4	%	
General and administrative	 	15.1		 	14.7		 	14.8		 	3	 %	 	2	%	
Total operating expenses	 	$	95.4		 	$	91.7			$	90.8		 	4	%	 	5	%	
Operating margin %	 	(3.4	)%	 	(9.3	)%	 	(11.4	)%	 	5.9pts		 	8.0pts		
Net loss	 	$	(7.2	)	 	$	(18.6	)	 	$	(21.7	)	 	61	 %	 	67	%	
EPS	 	$	(0.05	)	 	$	(0.12	)	 	$	(0.15	)	 	$	0.07		 	$	0.10		

This CFO Commentary contains non-GAAP financial measures. The reconciliation of the GAAP to non-GAAP financial measures can be found at the end of this document.
Q1’18 Overview
In the first quarter of 2018, we continued our recent trend of sequential revenue improvement in a quarter that is typically seasonally down in the industry. We delivered revenue at the high end of our guidance, and gross margin and EPS above our guidance ranges, stemming primarily from continued growth in ICE4 product sales.

Revenue:
In the first quarter of 2018, we continued to see strong growth from our ICE4 products, driven largely by significant growth in our cable vertical and by ongoing strength from Internet Content Providers (“ICPs”). Growth of ICE4 products was the key reason our first quarter revenue of $202.7 million exceeded the midpoint of our guidance range of $195 million to $205 million. In the first quarter, ICE4 products comprised nearly 30% of product revenue versus nearly 20% of product revenue in the fourth quarter of 2017. In particular, cable customers ramped up purchases of our XT-3300, while ICPs continued to purchase Cloud Xpress 2 (“CX2”) and ramped up spending on the XT-3300.

In the first quarter, services revenue of $31.1 million was down 12% sequentially due to lower deployment revenue, as is typical in the first quarter of the year, along with the negative impacts from our adoption of the new revenue recognition standard (“ASC 606”). We continued to see expansion of our installed base of customers, which should help us to steadily grow our on-going maintenance service revenue over time.

The impact of our adoption of ASC 606 in the first quarter of 2018 resulted in overall revenue being approximately $3 million lower than it would have been under the previous revenue recognition standard. We estimate the impact of this accounting transition will be $1 million to $2 million per quarter for the remainder of 2018.

Our top five customers consisted of a cable operator, a domestic Tier-1, two ICPs and a wholesale and enterprise carrier. Our two greater than 10% of revenue customers in the first quarter of 2018 were a cable operator and a domestic Tier-1.

Geographies
North America (64% of total revenue):
		
•	Our strong growth in North America (25% sequential, 29% year-over-year) in the first quarter of 2018 was largely driven by growth in our cable vertical, which grew more than 100% both sequentially and year-over-year largely due to significant spending from one key customer. We expect this customer to continue its significant network buildout in the second quarter of 2018. As expected in the quarter, revenue from our Tier-1, Tier-2 and wholesale verticals (collectively, referred to in this document as “Service Providers”), was moderately lower due to typical softness in early year spending. Spend from our largest Tier-1 customer continued to be subdued, as a result of its merger activity. We continue to believe that our new products position us well for growth in North America.	
International (36% of total revenue):
		
•	EMEA (29% of total revenue): We were pleased with our first quarter results in EMEA, with year-over-year growth of 3% driven by growth from our new ICE4 and XTM II products. In the quarter, we benefitted from one of our largest ICP customers continuing to invest in data center expansion in the region. As is typical, we also experienced seasonally lower spend from our Service Provider customers in the region. Looking ahead, we believe our new products will drive opportunities to win new customers and new deals with existing customers in EMEA.	
		
•	APAC (5% of total revenue): Coming off of a very strong fourth quarter of 2017, revenue in the first quarter of 2018 in APAC was lower primarily due to typical first quarter seasonality and ordering patterns from our largest customer in the region. We continue to see APAC as a potential growth region going forward, with encouraging signals that our new products will enable new multi-year opportunities, particularly in subsea and long-haul.	
		
•	Other Americas (LATAM) (3% of total revenue): In the first quarter, our LATAM business continued to be weak. In particular, spending from one of our key customers in the region continued to be hindered by challenging political conditions. In 2018, we continue to believe that our new products will enable new opportunities in this region.	
Customer Verticals
		
•	Cable was our highest growth vertical in the first quarter of 2018, with greater than 100% growth both sequentially and year-over-year. Growth was driven primarily by our largest customer in the quarter, which continued to invest in a substantial network build. We expect revenue from our largest European metro	

customers, which were subdued in the first quarter, to improve in the second quarter. In line with historical precedent, we expect revenue from our cable vertical will be heavily weighted towards the first half of the year.
		
•	Service Providers were weaker in the first quarter of 2018, as is typical in the first quarter due to industry seasonality. Despite it being a down quarter, we are very encouraged by the interest in our new ICE4 and XTM II products. We believe these products will be compelling to our Service Provider customers and should drive incremental revenue as the year goes on.	
		
•	ICP results were solid in the first quarter of 2018, although down slightly sequentially. Our ICE4-based CX2 and XT-3300 products continue to be key drivers in this vertical as ICPs have been amongst the first adopters of our ICE4 products.	
                       
Gross Margin (GAAP 40.5%; Non-GAAP 43.7%)

•	Our gross margin on a GAAP basis improved significantly on a sequential basis as we incurred a significant amount of restructuring-related expenses in the fourth quarter of 2017, which were significantly smaller in the first quarter of 2018. In addition, our GAAP gross margin improved due to a strong product mix towards our new products and decreasing impact from both the high costs related to early production runs of our ICE4 units and the negative impacts of commercial deals to transition certain customers to our new products.	
		
•	Our gross margin on a non-GAAP basis was stronger than expected, with results coming in higher than our guidance range of 38% to 42%. The improvement in gross margin was due primarily to lower margin footprint deals being delayed until the second quarter of 2018 and the benefits of the continued mix shift to our new products. As a reminder, footprint deals, and more broadly deals to win new customers, typically carry lower margins initially but enable opportunities for higher margin capacity fill and revenue expansion in the future. Given the delay in certain footprint deals, this will have a negative impact on projected margins in the second quarter of 2018.	

Operating Expenses (GAAP $106.8 million; Non-GAAP $95.4 million)

•	Our GAAP operating expenses declined on a sequential basis as we incurred significant restructuring expenses in the fourth quarter of 2017 while restructuring charges in the first quarter of 2018 were substantially lower. We also started to realize benefits from our modified cost structure.	
		
•	Our non-GAAP operating expenses came in largely as expected relative to our guidance range of $93 million to $97 million. In the quarter, we continued to make investments to bring our new products to market. We also continued to execute on the restructuring plan that was announced in the fourth quarter of 2017 and expect operating expenses to steadily decline over the course of 2018.	

Operating Margin (GAAP (12.2)%; Non-GAAP (3.4)%)

•	Our operating margin on a GAAP basis improved significantly on a sequential basis due to higher revenue and gross margin along with lower operating expenses.	
		
•	Our operating margin on a non-GAAP basis was significantly better than our guidance of (8%). This favorable outcome was a result of the combination of better than expected revenue, largely driven by sales of our new products and improved gross margin. We expect to continue to make progress towards achieving positive operating margin during the second half of 2018.	
Earnings per Share (GAAP $(0.17); Non-GAAP $(0.05))

•	EPS on a GAAP basis improved significantly due to higher revenue and gross margin along with lower operating expenses.	
		
•	EPS on a non-GAAP basis was better than our midpoint guidance of ($0.11) primarily due to higher revenue and gross margin.	

Balance Sheet and Cash Flow

													
(In millions)	 	Q1'18	 	Q4'17	 	Q1'17	
Cash, investments & restricted cash, net of debt principal of $150 million	 	$	138.3		 	$	150.1		 	$	208.7		
Accounts receivable	 	$	161.5		 	$	126.2		 	$	124.3		
Inventory	 	$	215.9		 	$	214.7		 	$	233.9		
Cash from operations	 	$	(14.1	)	 	$	(1.0	)	 	$	3.0		
Capital expenditures	 	$	8.0		 	$	7.8		 	$	14.7		

•	Cash, investments and restricted cash, net of debt principal of $150 million, declined $11.8 million from the prior quarter. This decrease was driven by our operating loss, an unfavorable change in net working capital primarily due to an increase in accounts receivable, and capital expenditures. This decline was partially offset by $10 . 6 million in proceeds from our Employee Stock Purchase Plan.	
		
•	Net accounts receivable was up $35 . 3 million from the prior quarter primarily driven by our revenue being back-end loaded, which is typical in the first quarter as customers take time to finalize their budgets early in the year.	
		
•	Net inventory grew $1 . 2 million from the prior quarter as we continue to balance building our inventory of new products to meet anticipated customer demand, with rationalizing our inventory levels of previous generation products.	
		
•	Cash from operations in the first quarter of 2018 was negative $14.1 million, as net loss and negative working capital changes consumed cash. The back-end loaded quarter drove accounts receivable higher, while accounts payable was a source of cash.	
		
•	Capital Expenditures were $8.0 million as we continued to actively manage spending to conserve cash.	

Forward-Looking Statements
This CFO Commentary and related conference call contain certain forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties. Such forward-looking statements include, without limitation, our expectations concerning our overall business strategy, market conditions and growth opportunities; expectations regarding revenue, gross margin, operating expenses and operating margin; expectations regarding opportunities in APAC, EMEA and LATAM; views on our customer verticals; expectations regarding new products; views on our product and customer mix; and overall future prospects. 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 us 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 our results to differ materially from those expressed or implied by such forward-looking statements include, delays in the development and introduction of new products or updates to existing products and market acceptance of these products; 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 our key customers; the effect that changes in product pricing or mix, and/or increases in component costs could have on our gross margin; the effects of increased customer consolidation; our ability to respond to rapid technological changes; aggressive business tactics by our competitors; our reliance on single and limited source suppliers; our ability to adequately respond to demand as a result of the restructuring plan; our ability to protect our intellectual property; claims by others that we infringe their intellectual property; the effect of global macroeconomic conditions on our business; war, terrorism, public health issues, natural disasters and other circumstances that could disrupt the supply, delivery or demand of our products; and other risks and uncertainties detailed in our SEC filings from time to time. More information on potential factors that may impact our business are set forth in our Annual Report on Form 10-K for the year ended on December 30, 2017 as filed with the SEC on February 28, 2018, as well as subsequent reports filed with or furnished to the SEC from time to time. These reports are available on our website at www.infinera.com and the SEC’s website at www.sec.gov. We assume no obligation to, and do not currently intend to, update any such forward-looking statements.

Use of Non-GAAP Financial Information
This CFO Commentary contains references to the following non-GAAP financial measures: gross margin, operating expenses, operating margin, net loss and EPS. To supplement our financial results presented on a GAAP basis, we use the non-GAAP measures indicated above, which exclude restructuring and other costs (credits), impairment of cost-method investment, non-cash stock-based compensation expenses, amortization of debt discount on our convertible senior notes, amortization and impairment of acquired intangible assets, acquisition-related costs, and certain purchase accounting adjustments related to our acquisition of Transmode AB, which closed during the third quarter of 2015, along with related tax effects. We believe these adjustments are appropriate to enhance an overall understanding of our underlying financial performance and also our 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 net loss, basic and diluted net loss per share, gross margin or 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. 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 Corporation
GAAP to Non-GAAP Reconciliations
(In thousands, except percentages and per share data)
(Unaudited)  

																					
 	Three Months Ended	
 	March 31, 2018	 	 	 	December 30, 2017	 	 	 	April 1, 2017	 	 	
Reconciliation of Gross Profit:	 	 	 	 	 	 	 	 	 	 	 	
U.S. GAAP as reported	$	82,168		 	40.5	 %	 	$	47,286		 	24.1	 %	 	$	64,056		 	36.5	 %	
Stock-based compensation (1)	994		 	 	 	1,846		 	 	 	1,831		 	 	
Amortization of acquired intangible assets (2)	5,341		 	 	 	5,169		 	 	 	4,880		 	 	
Acquisition-related costs (3)	—		 	 	 	—		 	 	 	40		 	 	
Restructuring and other costs (4)	17		 	 	 	19,141		 	 	 	$	—		 	 	
Non-GAAP as adjusted	$	88,520		 	43.7	 %	 	$	73,442		 	37.5	 %	 	$	70,807		 	40.3	 %	
 	 	 	 	 	 	 	 	 	 	 	 	
Reconciliation of Operating Expenses:	 	 	 	 	 	 	 	 	 	 	 	
U.S. GAAP as reported	$	106,846		 	 	 	$	117,793		 	 	 	$	101,883		 	 	
Stock-based compensation (1)	9,989		 	 	 	8,450		 	 	 	9,046		 	 	
Amortization of acquired intangible assets (2)	1,607		 	 	 	1,555		 	 	 	1,468		 	 	
Acquisition-related costs (3)	—		 	 	 	—		 	 	 	306		 	 	
Restructuring and other costs (credits) (4)	(163	)	 	 	 	16,106		 	 	 	—		 	 	
Intangible asset impairment (5)	—		 	 	 	—		 	 	 	252		 	 	
Non-GAAP as adjusted	$	95,413		 	 	 	$	91,682		 	 	 	$	90,811		 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Reconciliation of Loss from Operations:	 	 	 	 	 	 	 	 	 	 	 	
U.S. GAAP as reported	$	(24,678	)	 	(12.2	)%	 	$	(70,507	)	 	(36.0	)%	 	$	(37,827	)	 	(21.6	)%	
Stock-based compensation (1)	10,983		 	 	 	10,296		 	 	 	10,877		 	 	
Amortization of acquired intangible assets (2)	6,948		 	 	 	6,724		 	 	 	6,348		 	 	
Acquisition-related costs (3)	—		 	 	 	—		 	 	 	346		 	 	
Restructuring and other costs (credits) (4)	(146	)	 	 	 	35,247		 	 	 	—		 	 	
Intangible asset impairment (5)	—		 	 	 	—		 	 	 	252		 	 	
Non-GAAP as adjusted	$	(6,893	)	 	(3.4	)%	 	$	(18,240	)	 	(9.3	)%	 	$	(20,004	)	 	(11.4	)%	
 	 	 	 	 	 	 	 	 	 	 	 	
Reconciliation of Net Loss:	 	 	 	 	 	 	 	 	 	 	 	
U.S. GAAP as reported	$	(26,280	)	 	 	 	$	(73,985	)	 	 	 	$	(40,451	)	 	 	
Stock-based compensation (1)	10,983		 	 	 	10,296		 	 	 	10,877		 	 	
Amortization of acquired intangible assets (2)	6,948		 	 	 	6,724		 	 	 	6,348		 	 	
Acquisition-related costs (3)	—		 	 	 	—		 	 	 	261		 	 	
Restructuring and other costs (credits) (4)	(146	)	 	 	 	35,247		 	 	 	—		 	 	
Intangible asset impairment (5)	—		 	 	 	—		 	 	 	252		 	 	
Amortization of debt discount (6)	2,779		 	 	 	2,710		 	 	 	2,514		 	 	
Impairment of cost-method investment (7)	—		 	 	 	1,890		 	 	 	—		 	 	
Income tax effects (8)	(1,529	)	 	 	 	(1,479	)	 	 	 	(1,474	)	 	 	
Non-GAAP as adjusted	$	(7,245	)	 	 	 	$	(18,597	)	 	 	 	$	(21,673	)	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Net Loss per Common Share - Basic and Diluted:	 	 	 	 	 	 	 	 	 	 	 	
U.S. GAAP as reported	$	(0.17	)	 	 	 	$	(0.50	)	 	 	 	$	(0.28	)	 	 	
Non-GAAP as adjusted	$	(0.05	)	 	 	 	$	(0.12	)	 	 	 	$	(0.15	)	 	 	
Weighted Average Shares Used in Computing Net Loss per Common Share - Basic and Diluted:	 	 	 	 	 	 	 	 	 	 	 	
Weighted Average Shares Used in Computing Net Loss per Common Share - Basic and Diluted:	150,333		 	 	 	149,412		 	 	 	145,786		 	 	
_____________________________

(1)  	Stock-based compensation expense is calculated in accordance with the fair value recognition provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation – Stock Compensation effective January 1, 2006. The following table summarizes the effects of stock-based compensation related to employees and non-employees (in thousands):	

	
													
 	 	Three Months Ended	
 	 	March 31, 2018	 	December 30, 2017	 	April 1, 2017	
Cost of revenue	 	$	(122	)	 	$	728		 	$	724		
Research and development	 	4,324		 	3,841		 	3,780		
Sales and marketing	 	2,898		 	2,264		 	2,726		
General and administration	 	2,767		 	2,345		 	2,540		
 	 	9,867		 	9,178		 	9,770		
Cost of revenue - amortization from balance sheet*	 	1,116		 	1,118		 	1,107		
Total stock-based compensation expense	 	$	10,983		 	$	10,296		 	$	10,877		
  _____________________________
		
*	Stock-based compensation expense deferred to inventory and deferred inventory costs in prior periods and recognized in the current period.	
		
(2)  	Amortization of acquisition-related intangible assets consists of amortization of developed technology, trade names, and customer relationships acquired in connection with the Transmode acquisition. U.S. GAAP accounting requires that acquired intangible assets are recorded at fair value and amortized over their useful lives. As this amortization is non-cash, Infinera has excluded it from its non-GAAP operating expenses, gross margin 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.	
		
(3)  	Acquisition-related costs associated with the Transmode acquisition include legal, financial, employee retention costs and other professional fees incurred in connection with the transaction, including squeeze-out proceedings. These amounts have been adjusted in arriving at Infinera's non-GAAP results because management believes that these expenses are non-recurring, not indicative of ongoing operating performance and their exclusion provides a better indication of Infinera's underlying business performance.	
		
(4)  	Restructuring and other costs are related to Infinera's plan to restructure its worldwide operations, which was implemented during the fourth quarter of 2017. 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.	
		
(5)  	Intangible asset impairment is associated with previously acquired intangibles, which Infinera has determined that the carrying value will not be recoverable. 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 these expenses are not indicative of ongoing operating performance.	
		
(6)  	Under GAAP, certain convertible debt instruments that may be settled in cash on conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate. Accordingly, for GAAP purposes, Infinera is required to amortize as debt discount an amount equal to the fair value of the conversion option that was recorded in equity as interest expense on its $150 million in aggregate principal amount of 1.75% convertible debt issuance in May 2013 over the term of the notes. 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.	
		
(7)  	The impairment of cost-method investment has been excluded in arriving at Infinera's non-GAAP results because it is non-recurring, and management believes that this non-cash expense is not indicative of ongoing operating performance.	
		
(8)  	The difference between the GAAP and non-GAAP tax is due to the net tax effects of the purchase accounting adjustments, acquisition-related costs and amortization of acquired intangible assets.