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1 | © 2016 Infinera
Winning Through Disrup8on in the Transport Market
Investor Overview May 2016
2 | © 2016 Infinera
This presenta8on contains "forward-‐looking" statements that involve risks, uncertain8es and assump8ons. If the risks or uncertain8es ever materialize or the assump8ons 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 objec8ves of management for future opera8ons; any statements of expecta8on or belief regarding future events, poten8al markets or market size, technology and product developments, or enforceability of our intellectual property rights; and any statements of assump8ons underlying any of the items men8oned.
These statements are based on es8mates and informa8on available to us at the 8me of this presenta8on and are not guarantees of future performance. These risks and uncertain8es include, but are not limited to, the risks of compe88ve responses and shiPs in the market; delays in the release of new products or updates to exis8ng products; fluctua8ons in customer demand, changes in industry trends, and changes in the macro economic market; the risk that Transmode’s and Infinera’s businesses will not be integrated successfully and/or the risk that synergies will not be realized or realized to the extent an8cipated; 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 tac8cs by our compe8tors; 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 the supply, delivery or demand of Infinera’s products; and other risks and uncertain8es detailed in our SEC filings from 8me to 8me. More informa8on on poten8al factors that may impact our business are set forth in Infinera’s Annual Report on Form 10-‐K for the fiscal year ended on December 26, 2015 as filed with the SEC on February 23, 2016, as well as subsequent reports filed with or furnished to the SEC from 8me to 8me. 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 obliga8on to, and do not currently intend to, update any such forward-‐looking statements.
Safe Harbor
3 | © 2016 Infinera
ê Redefining what the network will be • Unique technology innova8on with PIC • Best-‐in class systems with Automa8on,
Convergence and Scalability
ê Industry leading global service & support ê Unmatched reliability ê Right tools for right job ê Focused on customer success
Infinera: A Differen8ated Technology Company
Enabling An Infinite Pool of Intelligent Bandwidth
DTN-‐X XT
DTN Cloud Xpress
DTN-‐X XTC
TM/TG-‐Series
Photonic Integrated Circuit (PIC)
4 | © 2016 Infinera
ê A leader in Intelligent Transport Network™ solu8ons ê Revenue growth for past 3 years of greater than 20% YoY, more than double DWDM market growth* ê Diversified customer base across mul8ple ver8cals
-‐ Several Tier 1s globally -‐ 3 of top 4 Internet Content Providers -‐ Several major global Cable/MSOs -‐ Mul8ple top Wholesale and Enterprise Carriers
Infinera – A Global Business
* Based on average of data from Ovum, IHS, Dell’Oro and ACG
5 | © 2016 Infinera
Infinera Differen8ators
PIC-‐enabled Technology • PIC enables scalable, intelligent
func8ons: SDN, integrated switching, sliceable bandwidth
• High capacity applica8ons: Long-‐Haul, Metro Cloud, Metro Core
Infinera differen:ates due to its technology, market expansion opportuni:es and ver:cally
integrated business model
Infinera PIC Fab
Ver:cal Integra:on • Lower cost structure
than compe88on • Supply chain control
New Purpose-‐Built Products • Cloud Xpress for DC Interconnect • TM-‐Series & XTC-‐2 for Metro • XT-‐500 for Long Haul • ~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
Outpacing Other SP Networking Players
Based on latest publicly-‐available financials
-‐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
Revenue Growth: Trailing 12-‐month revenue
128%
DTN-‐X for 100G Long-‐Haul
Cloud Xpress for 100G DCI
3x Revenue Growth
Mar ‘16
New Metro PorXolio introduced
7 | © 2016 Infinera
Disrup8ve Technology Innova8on: The Infinera Way
8 | © 2016 Infinera
Uniquely Delivers Massive Op8cal Bandwidth with PICs
3rd Party Discrete Op:cs Industry’s only 500G large scale Photonic Integrated Circuit
500G PIC
• 500G “WDM on a chip” • Integrates over 600 op8cal func8ons
Compe::on
Moore’s Law-like for Optical
9 | © 2016 Infinera
PIC Leveraged for Disrup8ve Systems Intelligent Transport Network
Scalability, Convergence, Automa8on Own Key Technologies & Processes
500+ patents filed/granted
Purpose-‐Built Systems
Switching ASICs
Intelligent So`ware
Photonic Integrated Circuits 500G Super-‐Channels
Ver:cally Integrated
XTC-‐2/2E XTC-‐10/4 XT DTN-‐X
Cloud Xpress DTN
10 | © 2016 Infinera
Industry’s first 2.4 Tb/s transport technology
Introducing: The Infinite Capacity Engine
ê Advanced electronics (DSP/ASIC): Next-‐gen FlexCoherent™ processor
ê Cuyng-‐edge photonics: Fourth-‐gen Photonic Integrated Circuit (PIC)
The next step func:on in op:cal with Infinite Capacity Engine
DSP PIC
Infinera Infinite Capacity Engine
11 | © 2016 Infinera
A Quantum Leap in Op8cal Transport to Terabits
Infinera Infinite Capacity
Engine
Bigger ê Mul8-‐terabit super-‐channels, up to 12x bigger
ê Mul8-‐terabit wire-‐rate L1 encryp8on
Smaller ê One of world’s smallest mul8-‐terabit subsystems
ê Lower power: 82%↓ vs. compe88on
Beeer ê Sliceable photonics, 53% lower TCO ê Advanced coherent, 40-‐60% improved capacity-‐reach performance
12 | © 2016 Infinera
Market Expansion Strategy
13 | © 2016 Infinera
Market Inflec:ons
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 Aggrega:on
2016
• Scalable Op:cs and Integrated Packet-‐Op:cal Key for Simplifica8on
Accelerated 100G uptake & 40G decline
1st to market with purpose-‐built solu8on
Infinera Core + Transmode por|olio
14 | © 2016 Infinera
Poised to Benefit from ICP-‐driven Bandwidth Demand
0
10
20
30
40
50
60
70
Netflix Google Apple Facebook Microsoft Hulu Amazon Gnutella
Cumulative % of North American Internet Traffic
1H11 2H14
Source: Sandvine Global Internet Traffic Reports Spring 2014 and 2H2014, TeleGeography
Top 7 Cloud & Content Providers: > 67% of delivered Internet traffic
Private backbones replacing Internet transit (i.e., massive server-‐to-‐server traffic growth)
Private
Internet
Trans-‐Atlan8c Bandwidth
15 | © 2016 Infinera
Data Center Interconnect Capturing emerging cloud infrastructures
16 | © 2016 Infinera
Cloud Architecture Drives Network Demands
sources: google.com, facebook.com
Search Query
930x Network Traffic
Cloud Data Center Network
1500 Miles
HTTP request
17 | © 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 PlaXorm
Hyper-‐Scale Density • 2RU, smaller than most servers • 3X to 10X density improvement
Simple Opera:on • Simple 1-‐2-‐3 step provisioning
• Server-‐like opera:onal experience
Minimal Power • ~100W per 100G: ALL INCLUSIVE • 50% beeer than industry leaders
Cloud Xpress – Op8mized for DCI
18 | © 2016 Infinera
The Metro Market A new market for Infinera as 100G Metro begins to ramp
19 | © 2016 Infinera
0
50
100
150
200
250
300
350
400
CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19
400
350
300
350
200
150
100
50
0
Ports (Th
ousand
s)
Infinera Ready for 100G Coherent Metro Ramp
Source: 2015 IHS 100G Coherent Op8cal Equip Ports Mkt Fcst
100G star:ng to ramp, rapid accelera:on
68% CAGR
20 | © 2016 Infinera
Keys to Winning In Metro
ê Follow the fiber • Strong shiP from copper to fiber • Fiber is founda8onal for mobile fronthaul, backhaul and 5G
ê Hiyng the right power and cost points • Metro environments are fiber-‐constrained; Modular and efficient
footprints are vital to ensure network and cost efficiencies • Low power is impera8ve to minimize customers’ opex
ê Mee8ng service providers’ needs • Solu8on Range: Passive & semi-‐passive, ac8ve transparent transport
of range of L1 services (OTN, FC, Eth) • Packet Op8cal integra8on; increasing network efficiency • TDM as overlay; smart management of cost of legacy • Opera8ng efficiency, ease of use, quick response 8mes on supply and
new features
21 | © 2016 Infinera
ê 1G to 100G Packet-‐Op8cal ê All metro/regional Layer T
applica8ons in a single pla|orm ê Applica8on specific characteris8cs
• Low Power • High Density • Superior Sync • Low latency
Metro Solu8ons from Core to Access
30000+
Systems
650+
Customers
TM-‐Series
Metro Aggregation
& Core Network
Metro Access
Metro Access
Triple Play Broadband
Cable Broadband
Mobile Front/Backhaul
Business Ethernet
TG-‐Series Passive CWDM, DWDM and WDM-‐PON access infrastructure
20000+
Systems
22 | © 2016 Infinera
XTC-‐2 Extends DTN-‐X to Lower Capacity Sites
Spokane Boise Salt Lake City
XTC-‐10
Sea~le Las Vegas
E.g. Right-‐sized DTN-‐X XTC for Smaller Ci8es
500G Super-‐channels
XTC-‐4 100G
100G 100G 100G XTC-‐2
100G
Common Hardware, E2E Network Management & Automa8on
23 | © 2016 Infinera
XTC-‐4
XTC-‐10
Pan-‐European Network 500G
Super-‐channels
Large LH Core
Converged Packet Aggrega:on & 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-‐Op:cal Switching Access & Aggrega:on
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 Aggrega:on & OTN Switched Metro Core
XTC-‐10
24 | © 2016 Infinera
Infinera Packet-‐Op8cal = Transport Op8mized Ethernet
Carrier Ethernet Switch
Infinera Packet-‐Op:cal
Line System
ROADM, Add-‐Drop, Amplifier
Layer 2 services
Transponders
EMXP
Advantages with WDM & Ethernet (L2) integra8on § Op8miza8on of wavelength u8liza8on with L2 aggrega8on
§ Minimiza8on of router/switch hops with DWDM § Flexible op8cal layer to handle capacity needs
§ Single management system WDM + Ethernet § Space, Power, Spares, Training, …
Single, integrated system
25 | © 2016 Infinera
ê Mobile operators are increasingly evalua8ng and adop8ng Mobile Fronthaul • Significant cost savings -‐ Lower power and less equipment than tradi8onal Backhaul • More space efficient – Fewer Central Offices, less equipment at cell site
ê Fronthaul spending expected to exceed $1B by 2020 (~$350m today)* ê Infinera: Won 3 Fronthaul deals to date and in trials with mul8ple Tier 1s
Metro: Mobile Fronthaul Opportunity
Cell sitecabinet
RRH
RRH
RRH
RRH
RRH
RRH
D-‐RoFFronthaul Backhaul IP MPLS Network
Stacking of BBUsin Central Office
CO
CO
CO
COBBU
Central Office
Load balancing
RRH
RRH
RRH
Fiber all the way from antenna to Central Office
Cell sitecabinet
Cell sitecabinet
*Source: Ovum “Mobile Backhaul and Fronthaul Forecast Report: 2015-‐20 (September 2015
26 | © 2016 Infinera
Reasons Infinera Wins in the Metro Market
4. Innova:ve Solu:ons in the Op:cal Access Market
2. End-‐to-‐end Packet-‐op:cal Integra:on from Access to Metro core
5. Significant opportunity to expand rela:onships with exis:ng Customer Base
3. Compe::ve solu:ons for the Mobile Front/Backhaul and 5G Transport
1. Cost and Power Efficiency Leadership
27 | © 2016 Infinera
Long Haul Adding new tools to solve customer needs
28 | © 2016 Infinera
Introducing the DTN-‐X XT Series
Long-‐Haul Interconnect Op:cally Switched (ROADM)
DTN-‐X XT-‐500
Super-‐channel; ILS integra8on Scalable
~1W/Gig, 1Tb/s IO 2RU Efficient
Instant Bandwidth, SDN enabled Programmable
29 | © 2016 Infinera
End-‐to-‐End Solu8ons
30 | © 2016 Infinera
The Infinera Unified End-‐to-‐End Por|olio
* Based on average of latest forecasts from Ovum, IHS, Dell’Oro and ACG
$15B* (2019) – Transport Market
31 | © 2016 Infinera
Op8cal Market exceeds $15 billion by 2019
$4,764 $5,083 $5,398 $5,688 $5,934
$5,660 $6,220 $6,839 $7,529
$7,995 $517
$786 $1,093
$1,442 $1,843
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
CY15 CY16 CY17 CY18 CY19
Long Haul* Metro* Incremental DCI**
CAGR 9.0%
CAGR 5.6%
CAGR 37.4%
* Long Haul and Metro forecasts based on average of latest forecasts from Ovum, IHS, Dell’Oro and ACG ** We es8mate 50% of DCI market to be incremental to Long Haul and Metro DWDM; underlying market es8mate from ACG WW Op8cal Forecast, December 2015
32 | © 2016 Infinera
Infinera’s Ascending Global Market Posi8on
Source: Dell’Oro 4Q 15 Market Share report (Q1-‐15 to Q4-‐15).
Revenu
es ($
M)
Global Long Haul + Metro WDM – 2015
$2,000
$1,500
$1,000
$500
$0
$2,500
Cross-‐selling and revenue synergies create opportunity to con:nue to ascend
33 | © 2016 Infinera
Differen8ated Financial Results
34 | © 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 (reconcilia8on to GAAP numbers may be found at www.Infinera.com) * All figures as of end of Q1-‐FY2016
Q1 ‘16 Performance ê $245 million revenue (31% y/y growth) ê 50.2% gross margin ê 12.3% opera8ng margin Q2 ’16 Guidance ê $250 -‐ $260 million revenue ê 47% -‐ 49% gross margin ê 10% -‐ 12% opera8ng margin ê $0.15 -‐ $0.19 EPS
Industry leading profitable revenue growth Solid Balance Sheet* ê $211M net cash ê 8 consecu8ve quarters of posi8ve Cash Flow from Ops ê Last 4 quarters Cash Flow from Ops = $123 million ê Last 4 quarters Free Cash Flow/Revenue = 8.2%
35 | © 2016 Infinera
Purpose-‐Built Products: Good for Customers & Infinera
Innova8ng to address en8re $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-‐Op8cal for Metro Core, Aggrega8on, Access
* Based on average of latest forecasts from Ovum, IHS, Dell’Oro and ACG
36 | © 2016 Infinera
Margin Growth Opportunity
$$$
Margin Drivers
Expanding Markets Drive Margin Growth
ê Ver8cal Integra8on ê Footprint vs Fill ê Instant Bandwidth ê Purpose-‐Built Products
Long-‐Haul
$ $Cloud Xpress $Metro $$$
$$$
Infinera PIC Fab
37 | © 2016 Infinera
Great Time To Be In Op8cal For Infinera
End-‐to-‐end packet-‐op:cal
porXolio
Ver:cal IP ownership
Consolida:ng market TAM > $15B*
* Based on average of latest forecasts from Ovum, IHS, Dell’Oro and ACG
38 | © 2016 Infinera
Thank You www.infinera.com