Infinera(US:INFN)2022-02-23 20:15Revenue Performance - Total revenue increased to $1,425.2 million in 2021, a 5% increase from $1,355.6 million in 2020, driven by growth in the ICP vertical and service provider customers in EMEA and the United States [271]. - Total revenue for 2021 was $1,425,205, an increase of $69,609 or 5% compared to 2020 [278]. - Product revenue increased by $53.8 million, or 5%, in 2021, driven by growth from ICP customers and service providers in EMEA and the United States [279]. - Services revenue rose by $15.8 million, or 5%, in 2021, primarily due to increased professional services revenue from network installations [281]. - Domestic revenue increased by $33.4 million, or 5%, in 2021, primarily due to strong growth from ICP and other service provider customers [284]. - International revenue also grew by $36.2 million, or 5%, in 2021, with notable increases in EMEA and Other Americas [285]. - Direct revenue increased by $59.7 million, or 6%, in 2021, while indirect revenue rose by $10 million, or 3% [286]. Gross Margin and Operating Expenses - Gross margin improved to 35% in 2021 from 31% in 2020, primarily due to pricing discipline, cost reduction initiatives, and increased revenue from vertically-integrated products [273]. - Gross margin improved to 35% in 2021 from 31% in 2020, benefiting from a better product mix and reduced integration-related expenses [289]. - Operating expenses rose to $585.5 million in 2021, a 4% increase from $564.0 million in 2020, mainly due to higher employee-related costs and investments in new technologies [274]. - Total operating expenses for 2021 were $585.5 million, representing 41% of total revenue, an increase of $21.5 million or 4% from 2020 [296]. Cash Flow and Financial Position - Net cash provided by operating activities was $28.1 million for 2021, a significant improvement from net cash used of $112.3 million in 2020 [322]. - Cash balance at the end of 2021 was $190.6 million, down from $298.0 million at the end of 2020 [321]. - As of December 25, 2021, the company had cash and restricted cash totaling $202.5 million, down from $315.4 million as of December 26, 2020, with unrestricted cash held for working capital purposes [381]. - The company is continuously evaluating alternatives for efficiently funding capital expenditures and ongoing operations [333]. Debt and Financing - The company entered into a Credit Agreement providing for a senior secured asset-based revolving credit facility of up to $150 million, maturing on March 5, 2024 [340]. - As of December 25, 2021, long-term debt included $140.3 million outstanding for the 2027 Notes, with annual payments of $5.0 million due from 2022 through 2026 [336]. - The company issued 2024 Notes and 2027 Notes with fixed annual interest rates of 2.125% and 2.50%, respectively, with fair values of $472.1 million and $293.4 million as of December 25, 2021 [382]. - The fair value of the Notes is subject to interest rate risk, credit risk, and other factors, but does not impact the company's financial position or cash flows due to the fixed nature of the debt obligation [382]. Strategic Initiatives and Future Outlook - The company anticipates benefiting from a diversified customer base and sees opportunities to grow revenue by driving adoption of new and existing solutions in 2022 [272]. - The acquisition of Coriant in 2018 enhanced the company's ability to serve a global customer base and expand its product offerings [257]. - The company plans to continue improving its fixed cost structure and expand vertical integration capabilities across its product portfolio in 2022 [273]. Challenges and Risks - The impact of the COVID-19 pandemic has caused disruptions in supply chain and manufacturing operations, affecting revenue and operational results [266]. - Management believes that domestic net deferred tax assets are not realizable in the foreseeable future, leading to a full valuation allowance [372]. - The company is exposed to foreign currency exchange rate fluctuations, particularly with the euro, affecting operating income due to international operations [378]. - Foreign currency exchange forward contracts are utilized to mitigate some currency exchange rate impacts, but not all transactions are covered [379]. Changes in Expenses - Research and development expenses increased by $34.3 million, or 13%, in 2021 compared to 2020, primarily due to higher employee-related costs and investments in future technologies [297]. - Sales and marketing expenses rose by $9.2 million, or 7%, in 2021 from 2020, driven by higher employee-related costs and commissions [300]. - General and administrative expenses increased by $3.2 million, or 3%, in 2021 compared to 2020, mainly due to higher employee-related costs and litigation settlements [302].