winning through disruption in the transport...
TRANSCRIPT
1 | © 2016 Infinera
Winning Through Disruption in the Transport Market
Investor Overview February 2016
2 | © 2016 Infinera
This presentation contains "forward-looking" statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact could be deemed forward-looking, including, but not limited to, any statements about future market performance and similar statements; any statements about historical results that may suggest trends for our business; any statements of the plans, strategies, and objectives of management for future operations; any statements of expectation or belief regarding future events, potential markets or market size, technology and product developments, or enforceability of our intellectual property rights; and any statements of assumptions underlying any of the items mentioned.
These statements are based on estimates and information available to us at the time of this presentation and are not guarantees of future performance. These risks and uncertainties include, but are not limited to, the risk that Transmode’s and Infinera’s businesses will not be integrated successfully; the risk that synergies will not be realized or realized to the extent anticipated; the risk that the combined company will not realize on its financing or operating strategies; the risks of competitive responses and shifts in the market; delays in the release of new products or updates to existing products; fluctuations in customer demand, changes in industry trends, and changes in the macro economic market; the effect that changes in product pricing or mix, and/or increases in component costs could have on our gross margin; our ability to respond to rapid technological changes; our reliance on single-source suppliers; aggressive business tactics by our competitors; our ability to protect our intellectual property; claims by others that we infringe their intellectual property; war, terrorism, public health issues, natural disasters and other circumstances that could disrupt supply, delivery or demand of products; and other risks and uncertainties detailed in our SEC filings from time to time. More information on potential factors that may impact our business are set forth in its Quarterly Report on Form 10-Q for the quarter ended on September 26, 2015 as filed with the SEC on November 5, 2015, as well as subsequent reports filed with or furnished to the SEC from time to time. Our SEC filings are available on our website at www.infinera.com and the SEC’s website at www.sec.gov. Forward-looking statements are subject to change, and we may not inform you when changes occur. We assume no obligation to, and do not currently intend to, update any such forward-looking statements.
Safe Harbor
3 | © 2016 Infinera
Redefining what the network will be • Unique technology innovation with PIC • Best-in class systems with Automation,
Convergence and Scalability
Industry leading global service & support Unmatched reliability Right tools for right job Focused on customer success
Infinera: A Differentiated Technology Company
Enabling An Infinite Pool of Intelligent Bandwidth
DTN-X XT
DTN Cloud Xpress
DTN-X XTC
TM-Series
Photonic Integrated Circuit (PIC)
4 | © 2016 Infinera
Leader in Intelligent Transport Network™ solutions Growth over last 3 years: Revenue up greater than 20% YoY, more than double DWDM market growth* Diversified customer base across multiple verticals
- Several Tier 1s globally - 3 of top 4 Internet Content Providers - Several major global Cable/MSOs - Multiple top Wholesale and Enterprise Carriers
Infinera – A Global Business
*IHS overall DWDM growth: 2013 = 11%; 2014 = 6%; 2015 = 7%
5 | © 2016 Infinera
Infinera Differentiators
PIC-enabled Technology • PIC enables scalable, intelligent
functions: SDN, integrated switching, sliceable bandwidth
• High capacity applications: Long-Haul, Metro Cloud, Metro Core
Infinera differentiates due to its technology, market expansion opportunities and vertically
integrated business model
Infinera PIC Fab
Vertical Integration • Lower cost structure
than competition • Supply chain control
New Purpose-Built Products • Cloud Xpress for DC Interconnect • Transmode Metro portfolio • Infinera Metro Aggregation • ~3x TAM expansion to >$15B in 2019*
Cloud Xpress TM-Series XTC-2 XT-500
* Based on average of latest forecasts from Ovum, IHS, Dell’Oro and ACG
6 | © 2016 Infinera
-20%
0%
20%
40%
60%
80%
100%
120%
140%
Jun '12 Dec '12 Jun '13 Dec '13 Jun '14 Dec '14 Jun '15 Dec '15
INFN
CIEN
JNPR
CSCO
ADV
ALU
Revenue Growth: Trailing 12-month revenue
114%
DTN-X for 100G Long-Haul
Cloud Xpress for 100G DCI
37%
3x Revenue Growth
Outpacing Other SP Networking Players
* Based on latest financials available; Adva and ALU assumed flat for Dec 15 as results not yet available
7 | © 2016 Infinera
Disruptive Technology Innovation: The Infinera Way
8 | © 2016 Infinera
Uniquely Delivers Massive Optical Bandwidth with PICs
3rd Party Discrete Optics Industry’s only 500G large scale Photonic Integrated Circuit
500G PIC
• 500G “WDM on a chip” • Integrates over 600 optical functions
Competition
Moore’s Law-like for Optical
9 | © 2016 Infinera
PIC Leveraged for Disruptive Systems Intelligent Transport Network
Scalability, Convergence, Automation Own Key Technologies & Processes
500+ patents filed/granted
Purpose-Built Systems
Switching ASICs
Intelligent Software
Photonic Integrated Circuits 500G Super-Channels
Vertically Integrated
Cloud Xpress XTC-2/2E XTC-10/4 XT DTN DTN-X
10 | © 2016 Infinera
Market Expansion Strategy
11 | © 2016 Infinera
Market Inflections
Transport becoming is Strategic
• Networks Simplifying to New Model of Cloud Services and Intelligent Transport
Vision: Enable An Infinite Pool of Intelligent Bandwidth
100G Long Haul
2012
100G Metro Cloud
2014
100G Metro Aggregation
2016
Poised to take off
• Scalable Optics and Integrated Packet-Optical Key for Simplification
Accelerated 100G uptake & 40G decline
1st to market with purpose-built solution
Infinera Core + Transmode
portfolio
12 | © 2016 Infinera
Data Center Interconnect Capturing emerging cloud infrastructures
13 | © 2016 Infinera
Cloud Architecture Drives New Traffic Patterns
Source: Facebook
1KB HTTP
Network
930x
Distributed Compute Model
Server-to-Server traffic growing faster than Server-to-User traffic
DCI
Home User
14 | © 2016 Infinera
• 500Gb/s input and output in 2 RU • 500G PIC based super-channel line side • 500G client w/mix of 10/40/100 GbE • Instant Bandwidth™
Cloud Xpress Platform
Hyper-Scale Density • 2RU, smaller than most servers • 3X to 10X density improvement
Simple Operation • Simple 1-2-3 step provisioning
• Server-like operational experience
Minimal Power • ~100W per 100G: ALL INCLUSIVE • 50% better than industry leaders
Cloud Xpress – Optimized for DCI
15 | © 2016 Infinera
The Metro Market A new market for Infinera as technology upgrades
16 | © 2016 Infinera
CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19
400
350
300
350
200
150
100
50
0
Port
s (Th
ousa
nds)
TM Portfolio Ready for 100G Coherent Metro Ramp
Source: 2015 IHS 100G Coherent Optical Equip Ports Mkt Fcst
100G starting to ramp, rapid acceleration
68% CAGR
17 | © 2016 Infinera
Transmode’s Leadership in Metro
Lowest Power
& Space
50000+ Systems
650+ Customers
#1 Packet Optical EMEA
TM-Series 10G/100G Packet-Optical Ethernet, Wireless back-
haul / fronthaul
TG-Series Biz. Service Wireless backhaul
CPE / PON Biz. Service Wireless backhaul
WDM access
Metro Edge &
Core Network
Metro Access
Metro Access
Rich Eth. Biz Service
Storage Networks
FTTx/PON Triple Play
xDSL Triple Play
CATV/MSO Triple Play
Mobile Back/ Fronthaul
18 | © 2016 Infinera
Metro Networks Are Application-Oriented
100G and Packet-Optical in Metro
Cable MSO Evolution
Business Ethernet
Mobile Evolution
Metro Access/ Aggregation
Metro/Micro DC
Metro Core/ Regional
Long-Haul
IP IP
TM-Series
DTN-X Family
19 | © 2016 Infinera
XTC-2 Extends DTN-X to Lower Capacity Sites
Spokane Boise Salt Lake City
XTC-10
Seattle Las Vegas
E.g. Right-sized DTN-X XTC for Smaller Cities
500G Super-channels
XTC-4 100G
100G 100G
100G
XTC-2 100G
Common Hardware, E2E Network Management & Automation
20 | © 2016 Infinera
Long Haul Adding new tools to solve customer needs
21 | © 2016 Infinera
Introducing the DTN-X XT Series
Long-Haul Interconnect Optically Switched (ROADM)
DTN-X XT-500
Super-channel; ILS integration Scalable
~1W/Gig, 1Tb/s IO 2RU Efficient
Instant Bandwidth, SDN enabled Programmable
22 | © 2016 Infinera
End-to-End Solutions
23 | © 2016 Infinera
FlexILS
MTC-9
DTN-X Family
TM- Series
Cloud Xpress
XTC-10 XTC-4 XTC-2E XTC-2 TM-3000 TM-301 TM-102
TM-Series NID
EDU
LONG HAUL / SUBSEA METRO DC INTERCONNECT
TG-Series
XT-500
AGGREGATION ACCESS CORE
Mobile Front/ Backhaul
Business Ethernet
Cable Broadband
Triple Play Broadband
SDN and INFINERA NMS
The Infinera Unified End-to-End Portfolio
$15B* (2019) – Transport Market * Based on average of latest forecasts from Ovum, IHS, Dell’Oro and ACG
24 | © 2016 Infinera
XTC-4
XTC-10
Pan-European Network 500G
Super-channels
Large LH Core
Converged Packet Aggregation & OTN Switched Metro Core
Frankfurt Metro Area, Germany
XTC-2 100G
XTC-10
XT-500
Point-to-Point Interconnect
Value of End-to-End
Mobile Front/ Backhaul
Business Ethernet
Triple Play Broadband
Cable Broadband
Packet-Optical Switching Access & Aggregation
Infinera DNA
TM-Series DTN-X Family
XTC-4
XTC-10
Pan-European Network 500G
Super-channels
Large LH Core
XT-500
Point-to-Point Interconnect
Frankfurt Metro Area, Germany
XTC-2 100G
Converged Packet Aggregation & OTN Switched Metro Core
XTC-10
25 | © 2016 Infinera
Optical Market exceeds $15 billion by 2019
$4,855 $5,195 $5,513 $5,814 $6,020
$5,858 $6,583 $7,192 $7,885 $8,253
$552 $828
$1,209 $1,705
$2,353
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
CY15 CY16 CY17 CY18 CY19
Long Haul* Metro* Incremental DCI**
CAGR 7.5%
CAGR 5.4%
CAGR 43.7%
* Long Haul and Metro forecasts based on average of latest forecasts from Ovum, IHS, Dell’Oro and ACG ** We estimate 50% of DCI market to be incremental to Long Haul and Metro DWDM; underlying market estimate from ACG WW Optical Forecast, December 2015
26 | © 2016 Infinera
Infinera’s Ascending Global Market Position
Source: Dell’Oro Optical Report Jan 2015
$0.0
$500.0
$1,000.0
$1,500.0
$2,000.0
$2,500.0
HUAW
EICI
ENA
ZTE
ALCA
TEL-
LUCE
NT
FUJIT
SUCO
RIAN
TIN
FIN
ERA
CISC
OAD
VA NEC
TRAN
SMO
DEER
ICSS
ON
ECI T
ELEC
OM BT
IM
RVO
THER
SReve
nues
($M
)
Global Metro + LH WDM (2014)
INFN
+ T
RMO
Cross-selling and revenue synergies create opportunity to go higher
27 | © 2016 Infinera
Differentiated Financial Results
28 | © 2016 Infinera
Infinera – A Growth Story
$668
FY14
$544
FY13
$438
FY12
$888
FY15
44.0%
8.3% 41.6%
1.4%
47.8%
13.1%
-9.4%
37.9%
Revenue (in $m)
GM%:
OM%:
3 years of >20% revenue growth
All figures are Non-GAAP (reconciliation to GAAP numbers may be found at www.Infinera.com)
Q4 ‘15 Performance $261 million revenue 48.3% gross margin $112 million net income
Q1 ’16 Guidance $240 - $250 million revenue 47.5% - 49.5% gross margin 10% - 12% operating margin $0.15 - $0.19 EPS
Industry leading revenue growth and profitability Solid Balance Sheet $207M net cash (end FY15) FY15: Positive Cash Flow from Ops every quarter
Cash Flow from Ops = $133 million Free Cash Flow/Revenue = 10.3%
29 | © 2016 Infinera
Purpose-Built Products: Good for Customers & Infinera
Innovating to address entire $15B* opportunity
New XTC-2/2E: Packet-OTN Switching
for Regional / Metro Core
New XT-Series: High Capacity LH Data Center Interconnect
TM-Series: Packet-Optical for Metro
Core, Aggregation, Access
* Based on average of latest forecasts from Ovum, IHS, Dell’Oro and ACG
30 | © 2016 Infinera
Margin Growth Opportunity
$ $ $
Margin Drivers
Expanding Markets Drive Margin Growth
Vertical integration Footprint vs fill Instant bandwidth Purpose-Built Products
Long-Haul
$ $ Cloud Xpress $ Metro $ $ $
$ $ $
Infinera PIC Fab
31 | © 2016 Infinera
Great Time To Be In Optical For Infinera
End-to-end packet-optical
portfolio
Vertical IP ownership
Consolidating market TAM > $15B*
* Based on average of latest forecasts from Ovum, IHS, Dell’Oro and ACG