Infinera (INFN) Q3 2011 Earnings Call October 18, 2011 5:00 pm ET Executives Thomas Fallon - Chief Executive Officer, President and Director Bob Blair - Investor Relations David F. Welch - Co-Founder, Chief Marketing & Strategy Officer, Executive Vice President and Director Ita M. Brennan - Chief Financial Officer Analysts Kevin J. Dennean - Citigroup Inc, Research Division Blair King - Avondale Partners, LLC, Research Division Ashwin Kesireddy - JP Morgan Chase & Co, Research Division David Kaczorowski - Stifel, Nicolaus & Co., Inc., Research Division Jody Farquhar - Jefferies & Company, Inc., Research Division Nathan Johnsen - Pacific Crest Securities, Inc., Research Division Jeremy David - Morgan Stanley, Research Division Presentation Operator
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Today's press releases, including Q3 2011 results and associated financial tables and investor information summary, will be available today on the Investors section of Infinera's website at infinera.com. The company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call.This afternoon's press release and today's conference call will also include certain non-GAAP financial measures. In our earnings release, we announced operating results for the third quarter of 2011, which exclude the impact of restructuring and other related costs and noncash stock-based compensation expenses. These non-GAAP financial measures are provided to facilitate meaningful year-over-year comparisons. Please see the exhibit of the earnings release for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, and an explanation of why these non-GAAP financial measures are useful and how they are used by management, which will be available today on the Investors section of our website. On this call, we'll also give guidance for the fourth quarter of 2011. We have excluded noncash stock-based compensation expenses from this guidance because we cannot readily estimate the impact of our future stock price on future stock-based compensation expenses. I will now turn the call over to Infinera's President and Chief Executive Officer, Tom Fallon. Thomas Fallon Good afternoon, and thanks for joining us. With me, our Chief Strategy Officer, Dave Welch; and CFO, Ita Brennan. I'll spend a few minutes today commenting on our market position, touch on our Q3 results and then conclude with some thoughts on our technology and the recent launch of our new DTN-X platform. Ita will then review our Q3 performance and Q4 outlook in detail, as well as provide some directional commentary on how we believe 2012 will trend in the context of the anticipated ramp of our new products.
With the recently announced DTN-X and the newly enhanced DTN, we have a portfolio of products that provide a wide range of transport capabilities, including 10G, 40G FlexCoherent and 500G FlexCoherent super-channels to address several growth markets. Coupled with our investments in an expanded and focused sales force, we are now position to service more opportunities with more customers than ever before in both key vertical markets and across geographies.Consistent with my commentary last quarter, we continue to see an active market. In particular, we believe that the cable, content and subsea providers remain in investment cycle as the North American and European wholesale carriers. While there is demand for 40G in fiber-constrained environments, particularly in submarine, it is also worth noting that demand for 10G remains strong. We believe that most carriers planning to expand capacity are looking to upgrade to 100 Gig and 500 Gig super-channels in 2012 and beyond. All of this activity is reflected in our recent financial performance and continued good momentum and bookings. Relative to guidance, our Q3 revenues came in at the high end with a net loss that was better than forecast. We also experienced a continuation of healthy TAM purchases by an increasingly broad set of customers looking to meet their bandwidth growth needs. As evidence of our deeper focus on verticals, in Q3, our top customer was one of the leading cable providers, and our submarine pipeline remained strong. I'm also pleased to note that one of our Tier 1 customers was among our top 5 accounts for the quarter. We added 3 new customers in Q3, bringing our total to 93. One of them was a broadband stimulus customer. We continue to see this funding as an ongoing opportunity, but as we've said before, timing of these awards can be unpredictable, and we don't bake them into our business outlook. We believe our recently launched DTN-X and the roadmap it provides for customers has underpinned some of this overall increased activity.
On the new product front, we have received initial orders for our new 40 Gig product. We have begun shipping the 40G Coherent line cards, and we anticipate recognizing some revenue in Q4, which is dependent on the timing of customer acceptance. In Q3, we completed 6 trials or qualification tests for the 40G offering, and 14 additional trials are scheduled or are being scheduled across the next 2 quarters.Read the rest of this transcript for free on seekingalpha.com