Yahoo Finance Infinera Corp (INFN) Q1 2024 Earnings Call Transcript Highlights: Navigating Challenges with ...
Revenue: $307 million, down 22% year-over-year, 4% below outlook range.
Gross Margin: 36.6%, decreased 220 basis points year-over-year.
Net Income: Operating loss of $25.9 million, diluted EPS loss of $0.17.
Free Cash Flow: $16 million, continuing positive trend from previous quarter.
Cash and Cash Equivalents: Ended quarter with $192 million, no amounts drawn against $200 million+ ABL.
Bookings: Strong, up year-over-year; strategic deal momentum with over $1 billion in potential value.
Outlook for Q2 2024: Revenue expected to be $330 million $20 million, gross margin 39.5% 150 basis points, operating loss 3.5% 300 basis points, EPS loss of $0.09 $0.04.
Release Date: May 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Infinera Corp (NASDAQ:INFN) reported strong bookings and unprecedented strategic deal momentum, potentially representing over $1 billion in cumulative multiyear value across strategic accounts.
The company maintained healthy cash flow generation with free cash flow of $16 million in the quarter, continuing a positive trend from the previous quarter.
Infinera Corp (NASDAQ:INFN) ended Q1 with $192 million in cash and cash equivalents, with no amounts drawn against its $200 million plus ABL, indicating strong liquidity.
The company announced significant strategic wins, including a new GXI seven based subsea deal with a major hyperscaler potentially worth $100 million to $200 million over three years.
Infinera Corp (NASDAQ:INFN) launched new IC intra-data center solutions that could significantly reduce power per bit by as much as 75% for AI-centric applications, enhancing its competitive edge in the market.
Negative Points
Q1 revenue of $307 million came in 4% below the outlook range and declined 22% on a year-over-year basis.
The revenue shortfall in Q1 was attributed to a slower release of book-ship orders and the push-out of shipments, indicating potential operational inefficiencies or market challenges.
Gross margin in Q1 decreased by 220 basis points year-over-year, primarily due to the higher contribution of lower margin line systems to product mix.
Operating loss in Q1 was $25.9 million with an operating margin of negative 8.4%, impacted by lower revenue and product mix.
Infinera Corp (NASDAQ:INFN) faces a challenging near-term operating environment as customers continue to work down excess inventory and delay some projects, which could impact financial performance in the upcoming quarters.
Q & A Highlights
Q: Can you provide more details on the order trends related to gas carriers, telco service providers, and cloud customers in the quarter? A: (David Heard - CEO, Infinera Corp) Yes, the overall booking profile was about what we expected in terms of dollar value and was indeed above one. However, there was about $25 million mostly from ICPs that pushed out into the back half of the year, as well as some project implementations at CSPs that also pushed into the back half of the year. We expect this trend to continue into Q2 but anticipate a reversal in the back half of the year based on the design wins and orders we're pulling in.
Q: Can you discuss the gross margin expansion from Q1 to Q2 and the expectations for the end of the year? A: (Nancy Erba - CFO, Infinera Corp) In Q1, gross margin was impacted by the number of wind systems deployed, which had almost a 200 basis point impact. For the end of the year, if revenues are down 1% to 5%, we expect margins to be flat to slightly up compared to fiscal year '23. It will take some time to get back to the mid-40s, which is still our target business model.
Q: What are the key drivers for the expected similar second half of the year as previously anticipated, despite the softness seen this quarter? A: (David Heard - CEO, Infinera Corp) The second half is expected to be very similar to our prior expectations. This includes projects being pushed out from the first half to the second half, and the slow release of book ship and the order of $25 million mentioned in the last quarter's call. These factors contribute to the expected improvement in the second half.
Q: Can you provide more details on customer concentration and expectations for 2024? A: (Nancy Erba - CFO, Infinera Corp) In Q1, there was not a 10% customer. There were a couple that were close to that mark. We continue to see a lot of strength from ICPs in our top 10 customers.
Q: Could you summarize the total potential value of the design wins discussed, anticipated to start in '25 through '28? A: (David Heard - CEO, Infinera Corp) The design wins for systems and pluggables are quite significant. For example, a hyperscaler domain win is worth $100 million to $200 million over three years, and a GX open line system win is worth $200 million to $300 million over the same period. Additionally, a sizable 800 gig ZR and ZR plus win with a major hyperscaler could generate between $300 million to $700 million in revenues over three years.
Q: Are the recent design wins incremental to existing business, and are they contracted with specified dollar values or unit volumes? A: (David Heard - CEO, Infinera Corp) Most of the wins, such as the I7 subsea win and the hyperscaler OLS win, are incremental. These are based on forecasts provided by the customers as part of the RFP or contract negotiations, which outline potential volumes and associated dollar values.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
