Q3 2023 Infinera Corp Earnings Call

Infinera Corporation Q3 2023 Earnings Call Participants

Head of Investor Relations: Amitabh Passi
CEO & Director: David W. Heard
CFO: Nancy L. Erba
Senior Analyst: Alexander Henderson
Senior Research Analyst & Partner: Christian David Schwab
MD & Equity Research Analyst: George Charles Notter
Research Associate: Karan Juvekar
Senior Research Analyst of Optical Components: Ku Kang
Senior Comm and Cloud Infrastructure Analyst: Michael Edward Genovese
MD & Equity Research Analyst: Ruben Roy
Research Analyst: Simon Matthew Leopold

Hello, this is Chris, your conference operator. Welcome to the Infinera Corp. Q3 2023 Earnings Call. (Operator Instructions) Amitabh Passi, Head of Investor Relations, you may begin.

Thank you, Chris. Good afternoon, everyone. Welcome to Infinera’s third quarter fiscal 2023 conference call. You can find the press release on our website. This call is being recorded and will be available for replay.

Today’s call will cover forward-looking statements, our business plans, growth opportunities, competition, and expectations for our financial performance, it’s important to note that these statements are subject to risks and uncertainties. Please refer to our SEC filings for more information. Please note that all statements are made as of today, and Infinera undertakes no obligation to update or revise any forward-looking statements.

Today’s conference call includes references to non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is available in our earnings press release on our website.

And finally, we’ll allow plenty of time for Q&A today, so please limit yourselves to one question and one follow-up.

I’ll now turn the call over to our Chief Executive Officer, David Heard.

Thank you, Amitabh. Good afternoon, everyone. I’ll begin with the highlights from our preliminary third quarter results and then turn the call over to Nancy to cover the preliminary financial details of our third quarter performance and the outlook for the fourth quarter and the items referenced in the press release and Form 8-K we filed earlier this afternoon.

Overall, the third quarter was another solid quarter for us with all preliminary financial metrics, revenue growth, margin, operating margin, and EPS expected to exceed the midpoint of our outlook range. We delivered strong bookings with a book-to-bill ratio above 1 and continued to land new Tier 1 design wins for our Systems business. We are also forecasting growth to be in line with the consensus view for Q4.

Looking ahead to the full year of 2023, we project that we’re still on track to grow revenue and deliver our sixth consecutive year of revenue growth, expand operating profit and EBITDA, and drive over 25% improvement in earnings per share, which would represent our fourth consecutive year of significant EPS expansion. These accomplishments directly reflect strong execution against the strategy we outlined in our past 2 Analyst Days.

Bookings in the quarter were up sequentially and on a year-over-year basis with most of the growth driven by customers in EMEA and the Americas. On a year-to-date basis through Q3, we expect to report growth in revenue, expanded gross margin, increased operating margin, and improved EBITDA.

Our Systems group saw new strategic deals globally, including wins with 2 Tier 1 service providers in Europe, subsea consortium, and a nationwide network expansion for a Tier 1 operator in Asia Pacific. We also continued our momentum with U.S. hyperscalers and booked our first orders and recognized revenue from the metro win we referenced during last quarter’s earnings call.

In our Subsystems group, both the CFP2 and QSFP-DD versions of our 400-gig ICE-X pluggables are now commercially available. We also received our first set of vertically integrated orders for our ICE-X pluggables and are in the process of shipping our first metro systems with our own pluggables this quarter. Additionally, we are on track to deliver the highest performing and lowest power 800-gig pluggable and have gained new members in the Open XR Forum in the quarter.

We are also continuing to pursue government funding available at both the state and Federal levels to continue to supply U.S.-made optical components.

In conclusion, we are pleased with our performance in the third quarter and are on track to achieve our full-year targets. Thank you to our team for their hard work and dedication. We look forward to continuing to execute our strategy and delivering strong results in the future. Thank you.

Operator, we are now ready for the Q&A session.

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