Infinera(US:INFN)2022-07-29 00:34Financial Data and Key Metrics Changes - In Q2 2022, total revenue was $358 million, representing a year-over-year growth of 5.5% with product revenue increasing by 11% and services revenue declining by 11% due to supply chain delays [17][7] - Non-GAAP operating margin was at the upper end of the outlook range, while non-GAAP gross margin was near the midpoint of the range at 36.1%, impacted by approximately 350 basis points from elevated supply chain costs [17][14] - The company reported a loss of $0.05 per share for the quarter, with operating profit at $1.5 million, equating to an operating margin of 0.4% [17][18] Business Line Data and Key Metrics Changes - The systems business saw strong bookings, particularly with the new ICE6 customers, contributing to a record backlog that grew approximately 80% year-over-year [7][9] - Metro solutions and open line systems also performed well, with both bookings and revenue up in the double-digit percentage range year-over-year [10] - The subsystems business group introduced 400 gig XR pluggables, which are expected to impact financial performance starting in the first half of 2023 [11] Market Data and Key Metrics Changes - Revenue growth was observed across all regions year-over-year, with 51% of revenue derived from domestic customers [17] - The company reported a book-to-bill ratio above one, indicating strong demand and bookings growth in the double-digit percentage range year-over-year [16][7] Company Strategy and Development Direction - The company aims to ramp ICE6 to 20% to 25% of product revenue in 2022, leveraging vertical integration to enhance competitiveness and margin expansion [9][14] - The strategy includes mitigating supply chain costs through adjustments in commercial terms and cost-reducing initiatives [14][19] - The company is also expanding its line of pluggable products, targeting a new multi-billion dollar addressable market [11][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing supply chain challenges but expressed confidence in demand drivers and the potential for revenue growth in the second half of 2022 [8][15] - The company expects Q3 revenue to range from $360 million to $400 million, with product revenue growth projected at 8% to 12% year-over-year [20][21] - Management anticipates exiting 2022 with gross margins at or above 40% and a continued focus on driving revenue growth and margin expansion [22][23] Other Important Information - The company ended the quarter with $155 million in cash and restricted cash, with plans to improve cash collections in Q3 and Q4 [18][19] - The total supply chain impact on gross margins for 2022 is estimated to exceed 300 basis points, with expectations for easing in 2023 [14][45] Q&A Session Summary Question: What is the expected trend for the $1 billion backlog moving into 2023? - Management indicated that backlog continues to grow, supporting an 8% to 12% growth rate, with strong demand expected to persist [27] Question: What is the product backlog compared to total backlog? - The company clarified that the $1 billion figure refers to remaining performance obligations, with product backlog growing over 100% year-over-year [30] Question: What is the status of the 19-country subsea deployment project? - Management confirmed that the project was pushed to the back half of the year, with confidence in completion between Q3 and Q4 [32] Question: How is foreign exchange affecting the business? - Minimal impact from foreign exchange was reported, with expectations for no significant effect in the second half of the year [39][40] Question: What are the expectations for gross margin improvements? - Management expects gross margins to improve sequentially, with continued absorption of supply chain impacts [21][45] Question: Will there be any pricing increases? - Management stated that pricing actions are handled with customers, but did not disclose specific competitive pricing strategies [52]