Infinera(US:INFN)2020-05-13 02:20Financial Data and Key Metrics Changes - Non-GAAP revenue for Q1 2020 was $331 million, which was above the guidance range of $315 million to $335 million and represented a 12% year-over-year increase [33][46] - Non-GAAP gross margin was 28.3%, which was below the expected range of 31% to 34% [35][46] - The company reported a non-GAAP operating loss of 9.4% for Q1 [40] Business Line Data and Key Metrics Changes - The company experienced a significant impact on gross margin due to a large-scale subsea consortium deal that was recognized a quarter earlier than anticipated, resulting in a 300 basis point decrement to Q1 margin [35][73] - The deployment of the 200-gig Groove solution, driven by a major North American ICP, contributed to a 200 basis point impact on gross margin due to a skewed product mix towards lower-margin merchant optics [36][74] - Record bookings were achieved for the XTM metro platform and substantial year-over-year growth was noted for the Groove product line [17] Market Data and Key Metrics Changes - Geographic revenue mix was skewed towards North America, with 52% of revenue coming from that region [34] - Bookings in Asia were weak in Q1 due to early COVID-19 impacts, but recovery is expected in Q2 [16] - Demand from Tier 1 and Tier 2 operators in North America and EMEA remained strong, while cable demand was weaker than expected in Q1 [16] Company Strategy and Development Direction - The company is focused on delivering differentiated solutions for high-performance optical transport markets, particularly with the upcoming ICE6 800-gig product [30][23] - Investment in disruptive technologies like XR optics is ongoing, which aims to redefine network architectures and drive down costs significantly [24][25] - The company is taking proactive measures to reduce operating expenses and improve gross margin in response to macroeconomic uncertainties [28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about medium and long-term opportunities despite near-term challenges posed by COVID-19 [30] - The company anticipates ongoing access restrictions at customer sites, which could delay network deployments in Q2 [27] - For Q2, the company expects non-GAAP revenue to be in the range of $310 million to $330 million, with gross margin projected between 31% and 35% [47] Other Important Information - The company ended Q1 with $284 million in cash, up from $133 million at the end of Q4 [43] - A significant focus on cash generation and working capital efficiency has led to a reduction in days sales outstanding (DSO) from 83 days to 75 days [43][44] - The company plans to reduce inventory by an additional $60 million over the balance of the year [51] Q&A Session Summary Question: Impact of COVID-19 on revenue and orders - Management noted a total disruption of about $30 million due to supply constraints and customer shutdowns impacting revenue recognition [56] Question: Reception of the 800-gig product - Trials for the 800-gig product have been delayed due to COVID-19, but online demonstrations have been well received [59] Question: Bookings from ISPs and cable customers - Bookings were slightly under expectations due to access issues rather than a change in demand plans [62] Question: Demand outlook from hyperscale providers and carriers - Management indicated that demand is mixed, with some customers pulling in capital plans while others remain cautious [68][72] Question: Subsea revenue pull forward and margin impacts - The subsea deal had a 300 basis point impact on margin, with expectations for higher margins in the second half of the year as additional orders come in [73] Question: Progress on 600-gig technology - Management remains optimistic about meaningful shipments of 600-gig technology in the second half of the year, despite delays in adoption [96]