Infn Q4 2014

Subject: Infinera Corporation (INFN)
Author: Buynholdisdead
Date: 1/22/2014
Sector: Technology
Industry: Communication Equipment


Infinera Communications (INFN) 4Q(1/22/2015) at 5:00 PM ET) Closing Price $14.40 the next day the stock went up $2.59 to close at $16.99
I would like to thank Seekingalpha.com for the transcripts

Price: $16.99
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SP500 2051.82
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Wheat $530
Lean Hogs $70.65
Feeder Cattle $201.83
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Lumber CME $311.50

All commodities have come down from last quarter except for Gold and Silver which is up marginally. With Oil having the biggest drop of course.

Today the Price is $16.99: The P/E ratio is 154.45

**March 31st, 1q:2012 earnings highlights:
**Revenues were $104.7 million up 13% from $92.9 million
**TTM Revenues were $416.7 million down 8% from $451.5 million
**1Q Earnings per share were ($.19) down from ($.16) a share
**TTM Earnings per share were ($.79) down from ($.24) a share
**Diluted share count were 108,666,000 up 5% from 103,426,000
**Cash Flow for the quarter was negative $19.4 million down 40.1% from negative $11.5 million
**TTM cash flow was negative $49.2 million down from $.8 million
**Cash $203.9 million
**Debt $0
**TTM Gross Profit were $163.2 million
**TTM Gross Profit Margin 39%
**Inventory for the quarter was 101,612,000 up 14% from 88,996,000(Tracking quarter to quarter)
**Trading range between $7.15 to $8.32
** P/E range NA
** P/S range 1.86 to 2.17
**Gross Profit to asset ratio = 32%

**June 30, 2q:2012 earnings highlights:
**Revenues were $93.5 million down 3% from $96 million
**TTM Revenues were $414.2 million down 8% from $436 million
**2Q Earnings per share were ($.27) down from ($.24) a share
**TTM Earnings per share were ($.83) down from ($.37) a share
**Diluted share count were 110,403,000 up 5% from 105,165,000
**Cash Flow for the quarter was negative $28.9 million down 325% from negative $6.8 million
**TTM cash flow was negative $71.3 million down 484% from negative $12.2 million
**Cash $268.6 million
**Debt $0
**TTM Gross Profit were $232 million down 5% from $243.5 million
**TTM Gross Profit Margin 56%
**Inventory for the quarter was 115,117,000 up 13% from 101,612,000 (Tracking quarter to quarter)
**Trading range between $5.78 to $7.40
** P/E range NA
** P/S range 1.54 to 1.97
**Gross Profit to asset ratio = 45%

**September 29th, 3q:2012 earnings highlights:
**Revenues were $112.2 million up 8% from $104 million
**TTM Revenues were $422.4 million down 7% from $454.4 million
**3Q Earnings per share were ($.17) up 19% from ($.21) a share
**TTM Earnings per share were ($.79) down from ($.62) a share
**Diluted share count were 111,579,000 up 5% from 106,264,000
**Cash Flow for the quarter was negative $31.7 million down from negative $1.8 million
**TTM cash flow was negative $101.2 million down 200% from negative $33.7 million
**Cash $168.9 million
**Debt $0
** 3Q Gross Profit were 41.5 million up 2% from 40.6 million
**TTM Gross Profit were $232.9 million up 31% from 178.1 million
**TTM Gross Profit Margin 55%
**Inventory for the quarter was 118,463,000 up 3% from 115,117,000 (Tracking quarter to quarter)
**Trading range between $4.57 to $6.18
** P/E range NA
** P/S range 1.21 to 1.63
**Gross Profit to asset ratio = 59%

**December 29th, 4Q:2012 earnings highlights:
**Revenues were $128.1 million up 14% from $112 million
**TTM Revenues were $438.4 million up 8% from $404.9 million
**4Q Earnings per share were ($.14) up 22% from ($.18) a share
**TTM Earnings per share were ($.76) up from ($.78) a share
**Diluted share count were 112,311,000 up 5% from 106,893,000
**Cash Flow for the quarter was $5.1 million up 124% from negative $21.2 million
**TTM cash flow was negative $75 million down from negative $41.3 million
**Cash $180.8 million
**Debt $0
** 4Q Gross Profit were 43.3 million down 3% from 44.7 million
**TTM Gross Profit were $157.6 million down 5% from 165.5 million
**TTM Gross Profit Margin 36%
**Inventory for the quarter was 127,809,000 up 8% from 118,463,000 (Tracking quarter to quarter)
**Trading range between $4.40 to $6.15
** P/E range NA
** P/S range 1.13 to 1.58
**Gross Profit to asset ratio = 27%

**March 30th, 1Q:2013 earnings highlights:
**Revenues were $124.6 million up 19% from $105 million
**TTM Revenues were $458.4 million up 10% from $417 million
**1Q Earnings per share were ($.13) up 32% from ($.19) a share
**TTM Earnings per share were ($.70) up from ($.79) a share
**Diluted share count were 114,308,000 up 5% from 108,666,000
**Cash Flow for the quarter was negative $26.2 million down from negative $19.4 million
**TTM cash flow was negative $81.7 million down from negative $49.3 million
**Cash $161.1 million
**Debt $0
**1Q Gross Profit were 42.7 million up 6% from 40.4 million
**TTM Gross Profit were $159.8 million down 5% from 163.2 million
**TTM Gross Profit Margin 35%
**Inventory for the quarter was 130,991,000 up 2% from 127,809,000 (Tracking quarter to quarter)
**Trading range between $5.66 to $7.75
** P/E range NA
** P/S range 1.41 to 1.93
**Gross Profit to asset ratio = 31%

**July 24th, 2Q:2013 earnings highlights:
**Revenues were $138.4 million up 48% from $93.5 million
**TTM Revenues were $503.3 million up 21% from $414.2 million
**2Q Earnings per share were ($.09) up 66.7% from ($.27) a share
**TTM Earnings per share were ($.53) up from ($.85) a share
**Diluted share count were 116,911,000 up 6% from 110,403,000
**Cash Flow for the quarter was $13.4 million up 146% from negative $28.9 million
**TTM cash flow was negative $39.4 million up 45% from negative $71.3 million
**Cash $301.6 million (Excluding the proceeds of the debt offering, cash was 184.4 million, up from $164.9 million in Q1. Debt offering was for $145 million)
**Debt $0
**2Q Gross Profit were 51.7 million up 37% from 32.4 million YOY and 21% from previous quarter.
**TTM Gross Profit were $179.2 million up 13% from 158.1 million
**2Q Gross Profit Margin 37%
**TTM Gross Profit Margin 36%
**Inventory for the quarter was 121,317,000 down 7% from 130,991,000 (Tracking quarter to quarter)
**Trading range between $6.06 to $12.16
** P/E range NA
** P/S range 1.41 to 2.83
**Gross Profit to asset ratio = 33%

**October 23, 3Q:2013 earnings highlights:
**Revenues were $142 million up 27% from $112 million
**TTM Revenues were $533 million up 26% from $422 million
**3Q Earnings per share were $.03 up from ($.17) a share
**TTM Earnings per share were ($.33) up from ($.81) a share
**Diluted share count were 124,679,000 up 12% from 111,579,000
**Cash Flow for the quarter was $8.6 million up from negative $31.7 million
**TTM cash flow was negative $.9 million from negative $101.2 million
**Cash $289,450 (Excluding the proceeds of the debt offering, cash was 144.5 million, down from $184.4 million in Q2. Debt offering was for $145 million)
**Debt $0
**3Q Gross Profit were $68.4 million up 65% from $41.5 million YOY and 32% from previous quarter.
**TTM Gross Profit were $206.1 million up 30% from 159 million
**3Q Gross Profit Margin 48%
**TTM Gross Profit Margin 39%
**Inventory for the quarter was 123,505,000 up 2% from 121,317,000 (Tracking quarter to quarter)
**Trading range between $9.24 to $11.91
** P/E range NA
** P/S range 2.16 to 2.78
**Gross Profit to asset ratio = 21%
YOY Inventory turnover ratio = 2.3
**Inventory Holding Period = 22.6 weeks

**January 29th, 4Q:2013 earnings highlights:
**4Q Revenues were $139,092 up 8% from $128,064 million
**TTM Revenues were $544 million up 24% from $533.1 million
**4Q Earnings per share were $(.08) up from ($.14) a share
**TTM Earnings per share were ($.27) up from ($.77) a share
**Diluted share count were 119,743 up 7% from 112,311
**Cash Flow for the quarter was $9.8 million up from $5.1 million
**TTM cash flow was $14 million from negative $75 million.
**Cash $296,990 up from $289,450
**Debt $0
**4Q Gross Profit were $55.9 million up 29% from $43.2 million
**TTM Gross Profit were $218.6 million up 39% from 157.6 million
**4Q Gross Profit Margin 40%
**TTM Gross Profit Margin 40%
**Inventory for the quarter was 123.7 million down 3% from 127.8 million (Tracking quarter to quarter)
**Trading range between $6.96 to $10.89
** P/E range NA
** P/S range 1.53 to 2.40
**Gross Profit to asset ratio = 31%
**YOY Inventory turnover ratio = 2.26
**Inventory Holding Period =23 weeks

**April 23rd, 1Q:2014 earnings highlights:
**1Q Revenues were $142.8 million up 15% from $124.6 million
**TTM Revenues were $562.2 million up 23% from $457.6 million
**1Q Earnings per share were $(.04) up from ($.13) a share
**TTM Earnings per share were ($.18) up from ($.63) a share
**Diluted share count were 121,352,000 up 6% from 114,308,000
**Cash Flow for the quarter was ($21) million up from ($26.2) million
**TTM cash flow was $19.2 million from negative $82 million.
**Cash $312 million up from $297 million
**Debt $0
**1Q Gross Profit were $58.4 million up 35% from $43 million
**TTM Gross Profit were $234.3 million up 46% from 160.2 million
**1Q Gross Profit Margin 41%
**TTM Gross Profit Margin 42%
**Inventory for the quarter was 126.5 million up 2% from 123.7 million (Tracking quarter to quarter)
**Trading range between $7.89 to $9.91
** P/E range NA
** P/S range 1.70 to 2.14
**Gross Profit to asset ratio = 34%

**July 23rd, 2Q:2014 earnings highlights:
**2Q Revenues were $165.4 million up 20% from $138.4 million
**TTM Revenues were $589 million up 21% from $485 million
**1Q Earnings per share were $.04 up from ($.09) a share
**TTM Earnings per share were ($.05) up from ($.53) a share
**Diluted share count were 126,758,000 up 8% from 116,911,000
**Cash Flow for the quarter was $5.8 million down from $13.4 million
**TTM cash flow was $3.4 million up from ($39.4) million.
**Cash $314 million up from $297 million
**Debt $0
**2Q Gross Profit were $70.3 million up 36% from $51.7 million
**TTM Gross Profit were $234.3 million up 31% from 179.4 million
**2Q Gross Profit Margin 43%
**TTM Gross Profit Margin 40%
**Inventory for the quarter was 130.9 million up 4% from 126.5 million (Tracking quarter to quarter)
**Trading range between $8.05 to $9.68
** P/E range NA
** P/S range 1.73 to 2.08
**Gross Profit to asset ratio = 40%
**Stock based compensation = 4% year to date

**10/22/2014, 3Q:2014 earnings highlights:
**3Q Revenues were $173.6 million up 22% from $142.0 million
**TTM Revenues were $620.9 million up 20% from $517 million
**3Q Gross Profit were $75.3 million up 10% from $68.4 million
**TTM Gross Profit were $260 million up 26% from 206.2 million
**3Q Gross Profit Margin 43%
**TTM Gross Profit Margin 42%
**3Q Earnings per share were $.04 up from $.03 a share
**TTM Earnings per share were ($.04) up from ($.33) a share
**Diluted share count were 128,964,000 up 8% from 124,679,000
**Cash Flow for the quarter was $2.9 million up from ($4.2) million
**TTM cash flow was ($2.5) million up from ($11.9) million.
**Cash $317.6 million up from $297 million
**Debt $0
**Inventory for the quarter was 130.8 million down from 130.9 million (Tracking quarter to quarter)
**Trading range between $8.70 to $13.96
** P/E range NA
** P/S range 1.81 to 2.90
**Gross Profit to asset ratio = 34%
**Stock based compensation = 5% year to date

**01/22/2015, 4Q:2014 earnings highlights:
**4Q Revenues were $186.3 million up 34% from $139.1 million
**TTM Revenues were $668.1 million up 23% from $544.1 million
**4Q Gross Profit were $84.3 million up 51% from $56 million
**TTM Gross Profit were $288.3 million up 32% from 218.6 million
**4Q Gross Profit Margin 45%
**TTM Gross Profit Margin 43%
**4Q Earnings per share were $.06 up from ($.08) a share
**TTM Earnings per share were .11 up from ($.27) a share
**Diluted share count were 133,072,000 up 11% from 119,743,000
**Cash Flow for the quarter was ($5.2) million down from $18.3 million
**TTM cash flow was $12.8 million down from $14.1 million.
**Cash $326.1 million up from $317.6 million
**Debt $0
**Inventory for the quarter was 146.5 million up from 130.8 million (Tracking quarter to quarter)
**Trading range between $12.17 to $15.74
** P/E range 110.64 to 143.09
** P/S range 2.42 to 3.14
**Gross Profit to asset ratio = 35%
**Stock based compensation = 4% year to date

This quarter Revenue, Net Income, and EPS were all up. They are growing their gross profit margins now. Last year they were setting at 40% and now they are setting at 45%. This is huge growth in just a year and shows that they must be selling alot of blades, which are higher margin items. The one weak point, that is constantly brought up, is their share compensation. This was even called out on the conference call. I find this troubling because the CEO knows that this is a problem but allows it to continue. On the conference call he did say, that with the share price going up, that it put more options in the money. I am happy to say though at 4% it is lower than last quarter’s YoY of 5%. This was a great quarter though as can be seen by their growing revenue by 34% and they are now profitable for the year. For everyone that has held this company it is a milestone.

The Balance sheet improved with 26 million dollars of more cash and no debt. This is great to see that they are keeping the debt down. Thomas Fallon (CEO) claims that Infinera has the best balance sheet of any of his peers.

The Cash Flow went down this quarter. When looking at the cash flow statement, what stands out is the Accounts Receivables and the Inventory. Both of these are way up YOY. So they have sold more equipment but have yet to collect on this, the CEO stated that this was a timing problem and was not an aging problem. He said it was nothing to worry about. Also with their inventory being way up even from last quarter they must be assuming that they will be making more meaningful sales. With their AR setting at 54 million dollars I do want to see them bring that down. A year ago it was down around 6 million but their earnings were also negative. With the spike in inventory we have seen this quarter I would think that Sales next quarter will be way up also. In fact in the conference call Brad Feller, the CFO, stated that the backlog is north of 100 million dollars. That is half of the revenue of this quarter ready to be deployed. That must be why they are ramping up the inventory.

Conclusion: This company is really growing now. According to Del Orro, Infinera is growing twice as fast as the market. Del Orro expects the market to grow by 11% and Infinera is growing by 23%. Infinera completed the year with 59 DTN-X customers and 19 of these were new customers. Infonetics took a survey of customers and found that Infinera was the Top Optical Vendor worldwide. Awhile back I said that Infinera was a one trick pony and I was worried if they would make it. Now, after two decisive quarters, and their move into the metro and cloud market, all I can say is that I see strong growth ahead.
They have firmly planted themselves in the long-haul, and sub-sea markets and I think they will only grow in the metro aggregation and metro cloud. I think this company will be number one in the Metro side within 2 years and possibly as early as the end of this year. Right now their market cap is at 2.3 billion and they believe there is at least 3 billion in the 100 gig metro market. Ovum released a press release that Infinera was the fastest growing transport supplier for Internet Content Providers (ICP). They believe that this is a sector that is important going forward. I think they are correct. While Verizon has many sectors that they are in the old telephone companies and cable companies are just not as important as they once were. Losing a Verizon or AT&T doesn’t make me happy but it isn’t as catastrophic as it was even 20 years ago. The important markets now are the cloud based, data center, type business’s. They are growing fast with more and more data being moved. Infinera just started in December with their cloud xpress and they already have 8 customers. They expect to grow their addressable market 2 to 3 times over the next few years.
On the conference call they said they see their growth going for several years. I will not be selling any of my shares. I am going to hold all of them until at least 2017. Then I will see where the market is and decide what to do. This is a cyclical industry but we are in one of the great growth periods right now. You do not want to be in these companies on the way down but you also do not want to sell to soon on the way up. With them getting into metro cloud and the metro area now we should see really good growth but that’s not to say that some quarters might not be lumpy.

Andy

Estimates
1Q 2015 .10
2Q 2015 .12
Current Year .52
Next year .70

2 Likes

…and MDP sold it, if I am right?

Great write up!

Anurag

1 Like

Thanks Anurag,
I am no longer in MDP but if they did sell it they were not looking at what is going on now. They should have told me to sell in 2009 and buy in 2014. To sell it now is a big mistake in my opinion. They should have at least 20% growth YOY going forward and it might be a little better than that. With INFN getting into the Data Centers and Metro now they have really expanded their market share.

Andy

They sold it last year - I think - at sub $10. Today MDP lags SPY by 8-8% after 7 years. MDP team is splintered too with Charly and Meir over the Funds and only Ron left with probably some new folks. Rich Griefner is now in IV. What a mess…!

Anurag

Hi Anurag,

There is a new team at MDP led by Matt Argesinger (TMFMattyA).

The team includes:

Paul Chi (TMFBabo) from II and SN
Simon Erickson (TMFInnovator) from RB
Jason Moser (TMFJMo)
Bryan White (TMFCaccamise)

With regard to the former team Ron G is now emeritus at MDP, still leads MDP Deep Value and is developing education content for the Fool. Micah Robinson is still at Stock Advisor and Mike Olsen is heading up Champion Funds Pro in the UK.

Jason

1 Like

I left when Charly and Meir announce they were going. I can understand people want to move up and make more money, and I am thinking that is what they did, but I think its important for the premium services to keep some continuity. Now that I know that Rich has left I feel even better about my decision. I am going to stick with just RB an SA.

Andy

With regard to the former team Ron G is now emeritus at MDP, still leads MDP Deep Value and is developing education content for the Fool. Micah Robinson is still at Stock Advisor and Mike Olsen is heading up Champion Funds Pro in the UK.

So Ron is gone too? You know MF says you shouldn’t invest in Funds with new managers. That is just ridiculous. It looks like Anurag is correct its a mess.

Andy

1 Like

Andy

TMF has tried to sort the mess. They did it elsewhere too. Tom Jacobs was recently let go in SpOpsand the service revamped. I am glad TMF has taken the steps to restore the charter. I hope they succeed.

Anurag

3 Likes