Preliminary F4Q20 Results: Slight Miss on Top-Line But $0.11 Bottom Line Beat, Guide Flat

23 February 2021

Key Points

  • CEO David Heard described the quarter as “strong” with “solid execution across the board.”  Heard said the company is well on its way to achieving its target business model, which we should hear more about at its upcoming analyst day in March.
  • The F4Q20 $0.13 non-GAAP EPS was aided by $0.05 of FX.  While FX is often volatile, we agree that it should be included in non‑GAAP results as it is part of company earnings every quarter.
  • Revenue guidance of flat YoY ($320‑340 million) is slightly below consensus of $332 million. The company guided non-GAAP operating margin to improve 700bps to ‑2.0% at the mid-point. The company expects C2H21 to benefit from better demand and maturation of its new products at 600 and 800G.
  • The company began to see some supply chain tightness at the end of F4Q20, for about a $5 million negative impact. For F1Q21 the company sees a potential negative impact of $10 million, which it has included in its guidance.
  • The stock is trading at a forward P/S of 1.2x, above its three-year average P/S of 0.8x but below its high of 1.5x, which it hit earlier this year. The stock fell 3% in the aftermarket before the call but recovered during the call to a 5% gain.
  • Read our initiation and other reports on Infinera on our website. The reports are free for all investors.

Our Insights

With North American service provider capex down 22% YoY in 2020, the company expects the second half of 2021 to be something of a rebound. The company highlighted a number of design wins in 800G, which should begin to ramp in 2H21. Combine this with continued share gain possibilities from Huawei and the company is looking for revenue acceleration in 2H21.

With the Cisco Acacia deal finalizing in January, the combination was highlighted by CEO Heard as an integrated vendor against which Infinera will be happy to compete.