Infinera (NASDAQ: INFN), a maker of telecommunications equipment, reported its fourth-quarter results on Wednesday, Feb. 7. Last quarter, management predicted that top-line growth was going to be modest for the current quarter and that its net loss was going to expand. Thankfully, the actual results were not nearly as bad as some investors had feared.
Infinera fourth-quarter results: The raw numbers
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What happened with Infinera this quarter?
- Product revenue grew 6% to $160 million while services revenue increased 19% to $35 million. Total revenue of $196 topped management's guidance.
- Non-GAAP gross margin contracted 430 basis points year over year to 37.5%.
- Non-GAAP net loss was $19 million, or $0.12 per share. That came in at the high end of guidance.
Turning to the full year, here are the headline numbers from the company's rough 2017:
- Revenue fell 15% to $740 million.
- Non-GAAP gross margin declined 900 basis points to 39.3%.
- Net loss was $80 million, or $0.54 per share.
What management had to say
CEO Tom Fallon stated that the company's cost-containment efforts and commitment to product development throughout the recent downturn are starting to pay dividends: "In Q4 we made some difficult but necessary decisions to reposition the company for crisper execution and increased focus on our go to market strategy. With our full product refresh nearing completion, positive sales momentum ending the year, and a significant pipeline of opportunities, we enter 2018 with confidence that our recent positive revenue trajectory will continue."
He also credited the company's better-than-expected revenue growth to strong adoption of its next-generation ICE4 product line. Fallon commented that ICE4 sales comprised about 20% of total product revenue during the quarter. He also stated that they added seven new ICE4 customers during the quarter, bringing the total at the year's end to 17.
In light of its momentum and opportunities, here's a look at the guidance that is being offered up for Q1:
On the call with investors, CFO Brad Feller also stated that he expects gross margin to gradually expand as the year progresses. While he wouldn't commit to an exact number, he did state that a 300- to 500-basis-point improvement by the end of the year isn't an unreasonable goal.
What's more, Feller also stated that there could be upside to the company's full-year revenue projections: "Last quarter, we expressed confidence in outgrowing the market during 2018, though we're less confident in our ability to grow 10% or greater for the full year. Given our better-than-expected outlook for Q1 and solid visibility for Q2, we now see a path to achieving better than 10% growth for the full year, with a potential to exceed this as some things fall the right way over the course of the year."
At the end of his prepared remarks, Feller admitted that investors just had to endure a rough patch in the company's history, but he feels strongly that Infinera is in a great position to deliver for its shareholders from here: "Today we have a clear path to improving profitability by lowering our cost structure, leveraging our vertical integrated manufacturing model and ramping revenue. Over time, we believe our refreshed product portfolio and faster technology cadence will enable us to get back to delivering best-in-class financial results."
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