Infinera Corporation
2024 Proxy Statement
and
2023 Annual Report on Form 10-K
Infinera Corporation
6373 San Ignacio Avenue
San Jose, California 95119
Dear Stockholders,
I am pleased to report another year of solid financial results and continued progress toward our long-term business
objectives. Despite prevailing macroeconomic challenges, geopolitical uncertainty and adverse industry conditions, we made
strong progress toward our overall financial goals in 2023 while deepening customer relationships across the market
segments we serve. Highlights of our achievements over the past year included:
• Delivered strong financial performance – 2023 marked our sixth consecutive year of revenue growth. In
addition, on a year over year basis we expanded our gross margin by approximately 450 basis points, expanded
our operating margin by approximately 350 basis points, and enhanced our earnings per share.
• Advanced our go-to-market strategy – during the year we continued to deliver on our core strategy of scaling our
optical transport systems business, expanding our customer offerings with a newly launched line of pluggable
optics and leveraging our U.S.-based optical semiconductor fab and innovative technology to open new
opportunities.
•
Improved our customer experience metrics – we believe the success of our brand is based on the quality of our
products and our customers’ experience when working with us. We continued to enhance our brand and build
customer trust through improvements in both customer experience and quality. In 2023, we won the
Telecommunications Industry Association (TIA) QuEST Forum Participant Company of the Year Award, recognizing
Infinera’s instrumental role in the development and maintenance of the TL 9000 Quality Management System
standard.
I would like to thank the global Infinera team for another solid year of execution and results, as well as for their resolve
and commitment to delivering an unrivaled customer experience founded upon our Power of Orange cultural values of
innovation, inclusivity, collaboration, and integrity. Despite short term challenges in the environment and market, we believe
we have the right strategy, product portfolio team and customer trust to drive meaningful long-term value for our
stockholders, customers, partners and employees.
Your voting support of the proposals described in the accompanying proxy statement would be deeply appreciated as
we work together to increase the value of your investment in Infinera. We thank you for your continued commitment to
Infinera and belief in our team.
Sincerely,
David W. Heard
Chief Executive Officer
Infinera Corporation
6373 San Ignacio Avenue
San Jose, California 95119
Dear Fellow Stockholders,
In 2023, Infinera continued to further establish itself as a market leader and innovator in coherent optical networking.
We are pleased with the Company’s financial performance and portfolio advances in 2023 as it rose to the challenge of
navigating another year of profound global uncertainty and macroeconomic challenges impacting not only our industry, but
the world at large. I am very proud of our global management team for its perseverance through these continuing challenges
and its focus on building an innovative, sustainable, inclusive and profitable company.
Market trends continue to reinforce the critical role of optics in the communications industry and support our growth
prospects. These trends include continued year-over-year bandwidth growth of over 30 percent driving web-scaler and
carrier capacity demands, increased deployment of fiber optics closer to end users, and accelerated adoption of new
applications such as artificial intelligence that is driving unprecedented demand for network bandwidth. By focusing on
innovation that matters, we believe we are uniquely positioned to meet our customers’ evolving connectivity needs with our
best-in-class portfolio of open optical networking solutions and drive continued progress toward our long-term business
model.
Our strategy includes an ongoing commitment to strengthen our environmental, social, and governance (“ESG”)
practices. I am proud we submitted new emissions targets to the Science-based Targets Initiative (“SBTi”) and committed
publicly to achieving net-zero scope 2 emissions by 2050. Our years-long commitment to greater environmental
sustainability has positioned us well to continue to reduce the potential impact of our operations and products and maximize
the positive impact we can have on the world. Underpinning Infinera’s culture and our approach to these commitments are
three core principles that unite our Board, management team and global employees: innovation that matters, better together
and we care.
Our highly qualified, independent and diverse Board remains inspired by the ability of the Infinera team and its core
values and vision to overcome challenging external conditions to deliver strong results while looking after its customers,
partners and employees. We are excited about the future ahead and the Company’s potential for value creation for
stockholders.
In closing, as you review the accompanying proxy statement, I am confident that our collective commitment to
excellence in our corporate governance and executive compensation practices will be evident. Thank you for your ongoing
support of Infinera.
Sincerely,
George A. Riedel
Independent Board Chair
Infinera Corporation
6373 San Ignacio Avenue
San Jose, California 95119
NOTICE OF 2024 ANNUAL MEETING OF STOCKHOLDERS
Date:
June 12, 2024
Record Date:
April 30, 2024
Time:
10:00 a.m. Pacific Time
Attendance:
www.virtualshareholdermeeting.com/INFN2024.
Dear Stockholder:
You are cordially invited to attend the virtual 2024 Annual Meeting of Stockholders of Infinera Corporation (“Infinera”), a
Delaware corporation, and any postponement, adjournment or other delay thereof (the “Annual Meeting”). The Annual
Meeting will be held via live webcast at www.virtualshareholdermeeting.com/INFN2024 on Wednesday, June 12, 2024 at
10:00 a.m. Pacific Time. You will be able to attend the Annual Meeting online and submit questions during the Annual
Meeting by visiting the website listed above. You will also be able to vote your shares electronically at the Annual Meeting.
This Annual Meeting is being held for the following purposes:
1. To elect three Class II directors to the Board of Directors to hold office until the 2027 annual meeting of
stockholders or until their respective successors have been duly elected and qualified, or until their earlier
death, resignation or removal from the Board of Directors.
2. To approve the Infinera Corporation 2016 Equity Incentive Plan (the “2016 Plan”), as amended, including
increasing the number of shares authorized for issuance thereunder by 7,100,000 shares.
3. To approve, on an advisory basis, the compensation of Infinera’s named executive officers, as described in the
Proxy Statement.
4. To ratify the appointment of Ernst & Young LLP as Infinera’s independent registered public accounting firm for
the fiscal year ending December 28, 2024.
5. To transact such other business that may properly come before the meeting or any postponement or
adjournment thereof.
These items of business are more fully described in the Proxy Statement accompanying this Notice.
The record date for the Annual Meeting was April 30, 2024 (the “Record Date”). Only stockholders of record at the
close of business on that date may vote at the Annual Meeting. Your vote is important. Whether or not you expect to
attend the Annual Meeting, it is important that you vote as soon as possible so that your shares are represented. To
vote your shares, please follow the instructions in the Proxy Card or Voting Instruction Form included in your
Proxy Materials, which is being mailed to you on or about May 17, 2024. The proxy materials and our annual report can
be accessed by visiting www.virtualshareholdermeeting.com/INFN2024.
On behalf of the Board of Directors, thank you for your participation in this important annual process.
By Order of the Board,
Nancy Erba
Chief Financial Officer
San Jose, California
May 17, 2024
Cautionary Note Regarding Forward-Looking Statements
This Proxy Statement contains certain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 that are subject to risks and uncertainties. You can identify forward-looking statements by
words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,”
“estimate,” “predict,” “potential,” “continue” or other similar expressions. Actual results may differ from those set forth in the
forward-looking statements due to a variety of factors, including those contained in the Company’s Annual Report on Form
10-K for the year ended December 30, 2023 and the Company’s other filings with the U.S. Securities and Exchange
Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the
date on which they are made. We undertake no obligation to update or revise any forward-looking statements.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting
to be Held on June 12, 2024
The Proxy Statement, including the Notice of Annual Meeting therein, and Form of Proxy are first being mailed on or
about May 17, 2024 to all stockholders entitled to vote at the Annual Meeting. This Proxy Statement and our 2023 Annual
Report are also available on the Investors page at investors.infinera.com.
Virtual Meeting Admission
Stockholders of record as of April 30, 2024 will be able to participate in the Annual Meeting by visiting our Annual
Meeting website at www.virtualshareholdermeeting.com/INFN2024. To participate in the Annual Meeting, you will need the
16-digit control number included on your proxy card.
The Annual Meeting will begin promptly at 10:00 a.m. Pacific time on Wednesday, June 12, 2024. Online check-in will
begin at 9:45 a.m. Pacific time, and you should allow approximately 15 minutes for the online check-in procedures.
Voting. Whether or not you plan to virtually attend the Annual Meeting and regardless of the number of shares of
common stock that you own, please cast your vote, at your earliest convenience, as instructed on your proxy card and/or
voting instruction form. Your vote is very important. Your vote before the Annual Meeting will ensure representation of your
shares at the Annual Meeting even if you are unable to virtually attend. You may submit your vote by the Internet, telephone,
mail or virtually at the Annual Meeting. Voting over the Internet or by telephone is fast and convenient, and your vote is
immediately confirmed and tabulated. By using the Internet or telephone, you help us reduce postage, printing and proxy
tabulation costs. We encourage all holders of record to vote in accordance with the instructions on the proxy card and/or
voting instruction form prior to the Annual Meeting even if they plan on virtually attending the Annual Meeting. Submitting a
vote before the Annual Meeting will not preclude you from voting your shares at the Annual Meeting should you decide to
virtually attend.
You may vote using the following methods:
Prior to the Annual Meeting, visit the website listed on your proxy card/voting
instruction form to vote via the Internet.
During the Annual Meeting, visit our Annual Meeting website at
www.virtualshareholdermeeting.com/INFN2024
Sign, date and return your proxy card/voting instruction form to vote by mail.
Call the telephone number on your proxy card/voting instruction form to vote
by telephone.
About Infinera
INFINERA AT A GLANCE
Our Mission
Our mission is to lead in the era of open optical networking by leveraging our deep vertical
integration and innovation in optical semiconductor technologies to provide the most efficient and
scalable high-speed connectivity solutions that help network operators cope with growing
bandwidth demand and offer new, innovative, and differentiated services.
What Inspires Us
A connected world with unlimited bandwidth for everyone — Everywhere, Always and Instantly
What Motivates Us
Delivering Innovative and Impactful Coherent Optical Technologies and Open Optical Solutions
that unlock New Value for our customers.
What Drives Us
To be a valued investment for our Stockholders’ money, our Customers’ capital expenditures,
and our Employees’ time by delivering an Unrivaled Customer Experience from an Inclusive
Culture of Innovation for our customers
Our Company, Solutions and Customers(1)
$1.6B+ in Revenue
1,480+ Patents
3,000+ Employees
40+ Countries with Operations
Coherent Optical
Engines &
Subsystems
Optical Transport Systems for
Network Infrastructure
Automation Software
Professional Services
1,000+ Customers
Worldwide
9 of the Top 10 Tier 1
Operators
5 of the Top 6 Internet Content
Providers
330+ GX Series Customers
History of Technology Innovation
Leveraging its US-based optical semiconductor fab, Infinera has a distinguished history of delivering breakthrough
innovation through multi-discipline opto-electronic R&D including: industry-leading high-performance optical engines,
revolutionary point-to-multipoint coherent optics, and customized design and production
AISC/DSP Design
Analog Electronics Design
PIC Design and Fabrication
Solution Packaging
Holistic Co-design
RF Interconnects
TROSA Design and Production
Coherent Pluggables Design
and Production
_________________
(1)
As of the end of fiscal 2023.
TABLE OF CONTENTS
Proxy Statement Summary ...................................................................................................................................................
Meeting Agenda and Voting Matters ..........................................................................................................................
Board Nominees .............................................................................................................................................................
Board and Governance Highlights ...............................................................................................................................
Executive Compensation Program Highlights ............................................................................................................
Our Board of Directors ...........................................................................................................................................................
Proposal 1—Election of Class II Directors ..................................................................................................................
How We Are Selected and Elected ..............................................................................................................................
Who We Are ....................................................................................................................................................................
How We Govern and Are Governed ............................................................................................................................
How We Are Organized .................................................................................................................................................
How to Communicate with Us ......................................................................................................................................
How We Are Paid ............................................................................................................................................................
Our Pay ....................................................................................................................................................................................
Compensation Discussion and Analysis .....................................................................................................................
Executive Summary .......................................................................................................................................................
Overview of our Executive Compensation Program Philosophy and Process .....................................................
Fiscal 2023 Compensation ............................................................................................................................................
Additional Information Regarding Our Compensation Practices ...........................................................................
Compensation Committee Report ................................................................................................................................
Executive Compensation Tables ..................................................................................................................................
2023 CEO Pay Ratio ......................................................................................................................................................
Pay Versus Performance ...............................................................................................................................................
Estimated Payments and Benefits Upon Termination, Change of Control or Death/Disability ..........................
Risk Assessment of Compensation Practices ....................................................................................................................
Proposal 2—Approval of the Infinera Corporation 2016 Equity Incentive Plan, as Amended ....................................
Proposal 3—Advisory Approval of Named Executive Officer Compensation ...............................................................
Our Auditors .............................................................................................................................................................................
Proposal 4—Ratification of Appointment of Independent Registered Public Accounting Firm ..........................
Report of the Audit Committee .....................................................................................................................................
Certain Relationships and Related Party Transactions ....................................................................................................
Delinquent Section 16(a) Reports ........................................................................................................................................
Equity Compensation Plan Information ...............................................................................................................................
Our Stockholders ....................................................................................................................................................................
Security Ownership of Certain Beneficial Owners and Management ...................................................................
Stockholder Proposals for 2025 Annual Meeting ......................................................................................................
Delivery of Documents to Stockholders Sharing the Same Last Name and Address .........................................
Other Matters ..........................................................................................................................................................................
User’s Guide ............................................................................................................................................................................
Annual Meeting ...............................................................................................................................................................
Stock Ownership .............................................................................................................................................................
Quorum and Voting ........................................................................................................................................................
Additional Information ....................................................................................................................................................
Appendix A—Unaudited Reconciliations from GAAP to Non-GAAP ..............................................................................
Appendix B—Infinera Corporation 2016 Equity Incentive Plan .......................................................................................
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This summary highlights important information you will find in this Proxy Statement. As it is only a summary,
please review the complete Proxy Statement carefully before voting.
PROXY STATEMENT SUMMARY
Virtual Stockholder Meeting
Our 2024 Annual Meeting will be conducted as a virtual meeting held over the Internet, allowing all of our
stockholders the option to participate in the live, online meeting from any location convenient to them. Stockholders at the
close of business on April 30, 2024 will be allowed to communicate with us and ask questions in our virtual stockholder
meeting forum before and during the meeting. All directors and executive officers are expected to be available to answer
questions. Representatives of Ernst & Young LLP will be available to respond to appropriate questions. For further
information on the virtual meeting, please see the “User’s Guide” at the back of this Proxy Statement. Please note that
there will not be a physical meeting.
Voting Matters and Board Recommendations
Proposal
1. To elect three Class II directors to the Board of Directors to hold office
until the 2027 annual meeting of stockholders or until their respective
successors have been duly elected and qualified, or until their earlier
death, resignation or removal from the Board of Directors.
2. To approve the Infinera Corporation 2016 Equity Incentive Plan (the
“2016 Plan”), as amended, including increasing the number of shares
authorized for issuance thereunder by 7,100,000 shares.
3. To approve, on an advisory basis, the compensation of Infinera’s
named executive officers, as described in the Proxy Statement.
4. To ratify the appointment of Ernst & Young LLP as Infinera’s
independent registered public accounting firm for the fiscal year ending
December 28, 2024.
Board Vote
Recommendation
Page Reference
(for more detail)
ü FOR each
director nominee
ü FOR
ü FOR
ü FOR
4
54
64
65
Board Nominees
Name
David W. Heard
Class II
Paul J. Milbury
David F. Welch, Ph.D.
_________________
Age
Director Since
Independent(1)
56
75
63
2020
2010
2010
—
—
—
Committee Memberships(2)
AC
—
M
—
CC
—
M
—
NGC
—
—
—
AC = Audit Committee; CC = Compensation Committee; NGC = Nominating and Governance Committee; M = Member
(1)
Under the rules and regulations of the SEC and the listing standards of The Nasdaq Stock Market (“Nasdaq”).
(2)
Committee memberships shown are effective upon the conclusion of our 2024 Annual Meeting of Stockholders.
1
Board and Governance Highlights
Board Independence
Board Diversity
Seven out of nine of our directors, including our Chair, are independent in
accordance with the rules and regulations of the SEC and the listing
standards of Nasdaq.
The Board consists of a diverse group of professionals who bring significant
experience, leadership and distinct qualities and skill sets to Infinera. Three
out of nine of our directors are female (33%), one of whom was appointed as
chair of our Compensation Committee during 2023 upon relinquishing her
position as chair of our Nominating and Governance Committee. One of our
directors is an “underrepresented minority,” as such term is defined under
Nasdaq Rule 5605(f) (the “Nasdaq Board Diversity Rule”). While we believe
the current composition of the Board provides a diverse range of
perspectives and experience to engage each other and management to
effectively represent our stockholders, we will continue to consider gender,
cultural and ethnic diversity when evaluating potential changes to our Board
membership.
Leadership Structure
We have separated the positions of Chair and Chief Executive Officer
(“CEO”).
Board and Committee Evaluation
The Board and its committees assess their performance through an annual
self-evaluation.
Board Tenure
Board Committees
The average tenure of our current Board members is approximately six
years. We have refreshed our Board by appointing five new directors since
the beginning of fiscal 2020.
We have three standing committees of the Board – Audit, Compensation,
and Nominating and Governance. All committees are composed entirely of
independent directors.
Director Stock Ownership
Each non-employee director is required to own shares of Infinera common
stock having a value of at least four times the annual cash retainer for
service as a director.
Risk Oversight
Members of our senior management team are responsible for
implementation of our day-to-day risk management processes, while the
Board, as a whole and through its committees, has oversight of risk
management.
Executive Compensation Program Highlights
The design of our executive compensation program for fiscal 2023 reflects our ongoing commitment to pay-for-
performance and the continued strong alignment of the interests of our named executive officers (“NEOs”) with those of our
stockholders. At the beginning of fiscal 2023, when a majority of executive compensation decisions were made, the
Compensation Committee considered the performance of our company as we exited fiscal 2022 and the goals of achieving
profitable revenue growth, achieving non-GAAP Operating Income growth despite a challenging macroeconomic
environment, expanding our gross margins and growing our total addressable market. The decisions made reflected a
continuing effort to maintain a strong pay-for-performance profile and supported accountability of our leadership team for our
financial performance.
2
Fiscal 2023 Executive Compensation Highlights
Pay-for-Performance
Expense Reduction and Cash
Preservation
Longer-Term Strategic Goals
We emphasize performance-based incentives for compensation of all of our
NEOs, including, in particular, our CEO. Our compensation programs are
designed to reward executives with realized compensation that exceeds
target through a combination of strong stockholder returns and performance
that exceeds the targets approved for our short- and long-term incentive
plans. In furtherance of our pay-for-performance goals, we continued to focus
on the Company’s financial performance in setting compensation programs.
For example, 41% of our CEO’s targeted equity awards in fiscal 2023 were
granted in the form of a performance share award (“PSA”).
In fiscal 2023, our Compensation Committee continued to focus on expense
reduction and cash preservation in the face of a challenging macroeconomic
environment, while balancing the need to effectively retain critical talent and
incentivize achievement of key business objectives by our NEOs. The
Compensation Committee also approved the full transition back to executive
compensation practices in place prior to the COVID-19 pandemic, with our
Chief Legal Officer (“CLO “) and SVP, Worldwide Sales participating in our
annual corporate bonus plan instead of being granted retention equity
awards in lieu thereof.
During fiscal 2023, we continued to make progress toward achievement of
our longer-term strategic goals. In support of our compensation policy
promoting strong pay and performance alignment:
– 69.6% of our PSAs granted to our NEOs in 2021 became eligible to vest
based on performance during 2023, and none of the shares under the
PSAs granted to our NEOs in 2022 became eligible to vest based on
performance during 2023; and
– Realized compensation value for our CEO in fiscal 2023 was 41.2% of
his target compensation.
As a complement to the executive compensation highlights referenced above, we continue to maintain sound
corporate governance policies and practices. During fiscal 2023, the following policies and practices continued to be in
effect:
Compensation At-Risk
Compensation Recovery Policy
Anti-Hedging Policy
Majority Voting for the Election of Directors
Stock Ownership Policy
“Double-Trigger” Change-of-Control Agreements
No Pledging of our Common Stock by NEOs
Annual Compensation Risk Assessment
Independent Compensation Consultant Reporting Directly
to Compensation Committee
Fully Independent Audit, Compensation and Nominating and
Governance Committees
3
INFINERA CORPORATION
PROXY STATEMENT
2024 ANNUAL MEETING OF STOCKHOLDERS
OUR BOARD OF DIRECTORS
PROPOSAL 1—ELECTION OF CLASS II DIRECTORS
HOW WE ARE SELECTED AND ELECTED
Director Qualifications
The Nominating and Governance Committee reviews candidates for service on the Board and recommends nominees
for election to fill vacancies on the Board, including nomination for re-election of directors whose terms are due to expire. In
discharging its responsibilities to nominate candidates for election to the Board, the Nominating and Governance Committee
endeavors to identify, recruit and nominate candidates who demonstrate character, sound judgment, independence,
expertise and diversity of experience. The Nominating and Governance Committee seeks to ensure that the Board is
composed of individuals of diverse backgrounds who have a variety of complementary experience, training, attributes and
relationships relevant to our business. In nominating candidates to fill vacancies created by the expiration of the term of a
director, the Nominating and Governance Committee determines whether the incumbent director is willing to stand for re-
election. The Nominating and Governance Committee evaluates each director’s performance to determine suitability for re-
election, taking into consideration, among other things, each director’s willingness to fully participate and contribute to the
Board and its committees, ability to work constructively with the rest of the members of the Board, personal and professional
integrity and familiarity with our business, operations and markets.
Our Amended and Restated Bylaws (“Bylaws”) provide that, in an election of directors where the number of nominees
does not exceed the number of directors to be elected, a nominee for director is elected if the votes cast for such nominee
exceed the votes cast against such nominee. If a nominee for director fails to receive the required number of votes for re-
election, such director shall offer to properly tender his or her resignation (to the extent not already tendered) to the
Nominating and Governance Committee, which shall then make a recommendation to the Board as to whether to accept or
reject such director’s resignation or whether other action should be taken. Thereafter, the Board will act on the Nominating
and Governance Committee’s recommendation. The Board will publicly disclose its decision and its rationale within 90 days
of the certification of the election results. The director whose resignation is under consideration shall abstain from
participating in any decision regarding that resignation.
We will also disclose the voting results from the Annual Meeting on a Current Report on Form 8-K that we will file with
the SEC within four business days after the meeting. If final voting results are not available to us in time to file a Form 8-K,
we will file a Form 8-K to publish preliminary results and will provide the final results in an amendment to the Form 8-K as
soon as they become available.
WHO WE ARE
Our Board consists of nine directors and is divided into three classes with staggered three-year terms. At each annual
meeting of stockholders, a class of directors will be elected for a three-year term to succeed the class whose term is then
expiring. This year, our Class II Directors are standing for election. The Class II director nominees are David W. Heard, Paul
J. Milbury and David F. Welch, Ph.D.
The nomination of these directors to stand for election at the Annual Meeting has been recommended by the
Nominating and Governance Committee and has been approved by the Board. Each of the nominees for our Class II
directors, if elected, will serve for a three-year term expiring at the 2027 Annual Meeting of Stockholders, or until his or her
successor is duly elected and qualified, or until his or her earlier death, resignation or removal from the Board.
Each of the Class II director nominees has consented to serve if elected. However, if any of the persons nominated by
the Board subsequently declines to accept election, or is otherwise unavailable for election prior to the Annual Meeting,
proxies solicited by the Board will be voted by the proxy holders for the election of any other person or persons as the Board
may recommend, at its option, or may decide to further reduce the number of directors that constitute the entire Board.
Director Skills Matrix
Our Board believes that the caliber of our Board members and the breadth, diversity and complementary nature of
their skills, attributes and experiences are among the most important aspects of our governance best practices, and
enhances our Board’s effectiveness while aligning with the Company’s long-term strategy. Our Board members have created
4
and patented technologies, founded and grown companies, managed complex financial, accounting and technology matters
and spent significant time representing customers, investors and stockholders.
The Board skills matrix below highlights some of the key skills, attributes and experiences that our Board has identified
as particularly valuable to the effective oversight of the Company and the execution of our long-term strategy.
Skill, Attribute or Experience
Bucklin Dougherty Heard Holt Lakkaraju Milbury Rice Riedel Welch
Current or Former CEO
Senior Management/Operations
Industry Experience/Knowledge
Financial Reporting/Accounting
Enterprise Risk Management
Environment, Social and Governance
Cybersecurity/Information Security
Public Company Board/Corporate Governance
Financings/Investments/Capital Markets
Strategy/M&A
Human Capital Management
Sales and Marketing
Product Development
Global Business
Strategic Planning
Technology/Intellectual Property
Board Diversity
ü
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We believe the current Board consists of a diverse group of professionals, including former CEOs, CFOs and industry
leaders, who bring significant leadership and distinct qualities and skill sets to Infinera, including direct stockholder
representation by our second largest stockholder. This group provides a diverse range of perspectives and experience to
engage each other and management to effectively represent our stockholders. In addition, the Board added its first female
director in June 2019 and second and third female directors in 2020. In 2020, the Board appointed a female director as chair
of our Nominating and Governance Committee; in 2022, she relinquished this role when she was appointed as chair of our
Compensation Committee. In 2022, the Board also added a director who is an “underrepresented minority,” as such term is
defined under the Nasdaq Board Diversity Rule. These actions further highlight our commitment to diversity. Any search
firms retained to assist the Nominating and Governance Committee will be specifically advised to seek to include qualified,
diverse candidates from traditional and nontraditional environments, including members of underrepresented communities,
as was done for the Board search process conducted in 2021.
The following table provides certain information regarding the diversity of our Board as of May 17, 2024. As shown
below in the board diversity matrix, the Company is currently in compliance with the diversity requirements of the Nasdaq
listing rules (5605 and 5606) that mandate gender and other diversity disclosure on our Board and require us to disclose
information on each director’s voluntary self-identified characteristics in a board diversity matrix.
Board Diversity Matrix As of May 17, 2024
Total number of directors
Gender Identity
Directors
Demographic Background
Asian
White
Did Not Disclose Demographic Background
Directors Who Are Military Veterans
Female
Male
Did Not Disclose Gender
9
3
3
5
1
4
1
1
1
5
Director Nominees and Continuing Directors
Class II Nominees for terms expiring at the 2027 Annual Meeting of Stockholders.
David W. Heard
Class II Director
Professional Experience:
David W. Heard has served as our CEO and has been a member of our Board of Directors
since November 2020. Mr. Heard joined Infinera in June 2017 and served as our Chief
Operating Officer from October 2018 to November 2020. During his time as COO, Mr. Heard
was responsible for leading the innovation of new solutions and the overall operational
excellence of the company, overseeing functions including corporate development, facilities,
human resources, information technology, marketing, operations, product lifecycle
management, quality, research and development, and services. Mr. Heard brings a proven
track record of technology industry leadership, with more than 25 years of success in the
industry. Prior to Infinera, Mr. Heard served as President of Network and Service Enablement
at JDS Uniphase from 2010 to 2015, and as COO at BigBand Networks (now Arris) from 2007
to 2010. Earlier roles included President and Chief Executive Officer (CEO) at Somera (now
Jabil), President and General Manager, Switching Division, at Tekelec (now Oracle), President
and CEO at Santera Systems, and various positions at Lucent Technologies and AT&T.
Mr. Heard holds a B.A. in Production and Operations Management from Ohio State University,
an MBA from the University of Dayton, and an M.S. in Management from Stanford Graduate
School of Business, where he was a Sloan Fellow.
Key Skills and Qualifications:
• Expertise in operations and corporate strategy
• Extensive knowledge of Infinera and the optical networking industry
Director since
November 2020
Chief Executive Officer
of Infinera
Current Committees:
• None
Age: 56
Paul J. Milbury
Class II Director
Professional Experience:
Paul J. Milbury has been a member of our Board of Directors since July 2010. Mr. Milbury
served as Vice President of Operations and CFO of Starent Networks Corp., a provider of
mobile network solutions, from January 2007 until its acquisition by Cisco in 2009. From
December 2009 to July 2010, he played a key role in integrating Starent Networks into Cisco
to create the Mobile Internet Technology Group. From December 2000 to March 2007, Mr.
Milbury served as Vice President and CFO of Avid Technology, Inc., a digital media creation,
management, and distribution solutions company. Mr. Milbury previously served as audit
committee chair for public companies Gigamon, Inc., a provider of network traffic visibility
solutions and Aerohive Networks, a pioneer in cloud-managed WLAN. Mr. Milbury has served
on the public company board of Markforged Holding Corporation since May 2019, and he also
serves on several private company boards.
Mr. Milbury holds a B.B.A. in Business and Economics and an M.B.A. from the University of
Massachusetts, Amherst.
Key Skills and Qualifications:
• Significant finance, accounting and technology operations experience
• Wide executive management and board experience at leading public and private technology
companies
• Audit Committee Financial Expert
Independent Director
since July 2010
Current Committees:
• Audit
• Compensation
Age: 75
6
David F. Welch, Ph.D.
Class II Director
Director since October
2010
(Previously served as a
Director from May 2001
to November 2006)
Founder and Chief
Innovation Officer of
Infinera
Current Committees:
• None
Age: 63
Professional Experience:
David F. Welch, Ph.D. is Founder and Chief Innovation Officer at Infinera, a role he has held
since October 2018. In this role, he drives deep business and technology innovation through
forward-looking strategies, including breakthrough technologies and technology partnerships,
in addition to innovative business and market directions. Dr. Welch is currently a member of
Infinera’s Board of Directors, where he has served since 2010. Dr. Welch’s past roles at
Infinera include Chief Strategy and Technology Officer from 2017 to 2018, President from
2013 to 2017, Executive Vice President and Chief Strategy Officer from 2004 to 2013, and
Chief Technology Officer (CTO) from 2001 to 2004. Prior to co-founding Infinera, he served as
CTO, Transmission Division at JDS Uniphase, and in various executive roles, including CTO
and Vice President of Corporate Development, at Spectra Diode Labs (SDL).
Dr. Welch currently serves on the board of directors of several start-up companies, including
the public benefit corporation board of NosTerra Ventures, a position he has held since May
2023. He previously served on the board of CytoDyn Inc., a biopharmaceutical company from
January 2019 to September 2020. He holds over 130 patents and has authored over 300
technical publications, and he has been awarded the Optical Society of America’s (OSA)
Adolph Lomb Medal, Joseph Fraunhofer Award and John Tyndall Award, as well as the
Institution of Engineering Technology’s J J Thomson Medal for Electronics. He is a Fellow of
the OSA and the Institute of Electrical and Electronics Engineers, and he is a member of the
National Academy of Engineering.
Dr. Welch holds a B.S. in Electrical Engineering from the University of Delaware and a Ph.D.
in Electrical Engineering from Cornell University.
Key Skills and Qualifications:
• One of the most highly regarded innovators in our sector
• Deep technology knowledge in the optical networking industry
• Experience as an Infinera founder, executive leader and board member
• Product development, marketing and sales strategies insights
Class III Directors whose terms expire at the 2025 Annual Meeting of Stockholders
Christine B. Bucklin
Class III Director
Professional Experience:
Christine B. Bucklin has been a member of our Board of Directors since June 2020. Ms.
Bucklin served as Managing Director, Operations Group at Gryphon Investors, Inc., a private
equity firm, from 2015 to 2018. From 2008 to 2010, Ms. Bucklin served as Senior Vice
President, Corporate Strategic Planning at Sun Microsystems, Inc., a technology company,
prior to its acquisition by Oracle Corporation in 2010. From 1999 to 2007, Ms. Bucklin served
as Chief Operating Officer of Internet Brands, Inc., an internet media company. From 1988 to
1999, Ms. Bucklin worked at McKinsey & Company, a consulting company, including as a
partner. From 2011 to 2019, Ms. Bucklin served as a director of Local Media San Diego, LLC,
a radio station and event company. From 2015 to 2018, Ms. Bucklin served as a director of
Leadership Platform Acquisition Corporation, a portfolio company of Gryphon Investors related
to educational services.
Ms. Bucklin received an AB in Mathematics from Dartmouth College and an MBA from
Stanford Business School.
Key Skills and Qualifications:
• Substantial experience in operations, strategic planning and sales and marketing
• Provides perspective from outside the optical networking industry
Independent Director
since June 2020
Current Committees:
• Audit
Age: 61
7
Gregory P. Dougherty
Class III Director
Independent Director
since January 2019
Current Committees:
• Compensation
• Nominating and
Governance
Age: 64
Professional Experience:
Greg P. Dougherty has been a member of our Board of Directors since January 2019. Mr.
Dougherty served on the board of Fabrinet, an optical, electro-mechanical and electronic
manufacturing services company from February 2019 to January 2022. Mr. Dougherty served
as Chief Executive Officer of Oclaro from June 2013 until its acquisition by Lumentum in
December 2018. Mr. Dougherty also served as a director of Oclaro from April 2009 until the
completion of the sale in December 2018. Prior to Oclaro, Mr. Dougherty served as a director
of Avanex Corporation, a leading global provider of intelligent photonic solutions, from April
2005 to April 2009, when Avanex and Bookham merged to become Oclaro. Mr. Dougherty also
served as a director of Picarro, Inc., a manufacturer of ultra-sensitive gas spectroscopy
equipment using laser-based technology, from October 2002 to August 2013, and as its
Interim Chief Executive Officer from January 2003 to April 2004. Earlier in his career, Mr.
Dougherty served as the Chief Operating Officer at SDL from 1997 to 2001, when the
company was acquired by JDS Uniphase Corporation, where he continued in the role until
2002. From 1989 to 1997, Mr. Dougherty was the Director of Product Management and
Marketing at Lucent Technologies Microelectronics in the Optoelectronics Strategic Business
Unit. Mr. Dougherty has served on the public company boards of IPG Photonics Corporation,
a fiber laser manufacturer, since January 2019, and MaxLinear, a fabless integrated circuit
design company, since March 2020.
Mr. Dougherty also served as a board member of the Ronald McDonald House at Stanford
from January 2004 to December 2009, and the Bay Area Make-A-Wish Foundation. Mr.
Dougherty currently serves on the board of directors of IPG Photonics Corporation, a fiber
laser manufacturer, and MaxLinear, a fabless integrated circuit design company.
Mr. Dougherty received a B.Sc. in Optics in 1983 from the University of Rochester.
Key Skills and Qualifications:
• Board expertise as Lead Independent Director and Compensation Committee Chair
• Extensive knowledge of the fiber optic component and transceiver markets
• Significant restructuring and integration experience
Sharon E. Holt
Class III Director
Independent Director
since June 2019
Current Committees:
• Compensation
(Chair)
Age: 59
Professional Experience:
Sharon E. Holt has been a member of our Board of Directors since June 2019. Ms. Holt has
served as a Principal at Fraser Stuart Ventures, LLC, a private investment and advisory firm,
since 2016. From 2016 to May 2021, Ms. Holt was on the board of Immersion Corporation, a
leading developer and licensor of touch feedback technology. Since 2012, she has served as
an advisor to several technology companies. Ms. Holt was a senior executive at Rambus Inc.,
a leading technology development and licensing company, from 2004 to 2012, where she
served as Senior Vice President of Sales, Licensing and Marketing, and Senior Vice President
and General Manager of the Semiconductor Business Group. From 1999 to 2004, Ms. Holt
was an executive at Agilent Technologies in the Semiconductor Products Group (now
Broadcom), where her last position was Vice President & General Manager of Americas Field
Operations, overseeing sales and technical support operations for the semiconductor
business, including ASICs, ASSPs, optical and wireless ICs. Prior to that, she ran sales
operations focused on Agilent’s largest global customers. From 1986 to 1999, Ms. Holt worked
at HP in Applications Engineering, Sales and Distribution Channel Management for the
Semiconductor Products Group.
Ms. Holt received a B.S. in Electrical Engineering from Virginia Polytechnic Institute and State
University (Virginia Tech).
Key Skills and Qualifications:
• Board expertise as Lead Independent Director, and Nominating and Governance and
Compensation Committee chairs
• Wide technology sector executive leadership experience and intellectual property expertise
8
Class I Directors whose terms expire at the 2026 Annual Meeting of Stockholders
Roop K. Lakkaraju
Class I Director
Professional Experience:
Roop K. Lakkaraju has been a member of our Board of Directors since February 2022. Mr.
Lakkaraju is the Executive Vice President, Chief Financial Officer at Bio-Rad, a position he
has held since April 2024. From January 2018 to April 2024, Mr. Lakkaraju served as
Executive Vice President, Chief Financial Officer of Benchmark Electronics, Inc. From
February 2017 to January 2018, he served as Chief Financial Officer of Maana, Inc., an
enterprise software company that pioneered an artificial intelligence-driven knowledge
platform. From October 2013 to February 2017, he served as Chief Operating Officer and
Chief Financial Officer of Support.com, a provider of cloud-based software and services for
technology support. From July 2011 to October 2013, he was Chief Financial Officer of
Quantros, Inc., a provider of enterprise SaaS-based solutions and information services that
advance healthcare quality and safety performance. Prior to that he held executive financial
and operational roles at 2Wire, Solectron Corporation, and Safeguard Scientifics. Mr.
Lakkaraju is currently on the board of directors of Greater Phoenix Economic Council. He
began his career in 1993 as an auditor with Grant Thornton before joining
PricewaterhouseCoopers in their Audit and Business Advisory Services.
Mr. Lakkaraju holds a B.S. in Business Administration from San Jose State University.
Key Skills and Qualifications:
• Management experience in overall financial strategy, including as a public company CFO
• Significant finance, accounting and technology operations experience
• Audit Committee Financial Expert
Independent Director
since February 2022
Current Committees:
• Audit (Chair)
Age: 53
Amy H. Rice
Class I Director
Professional Experience:
Amy H. Rice has been a member of our Board of Directors since April 2020. Ms. Rice is a
Managing Director with Oaktree’s Special Situations Group and has been with the firm since
2009. Prior to joining Oaktree, Ms. Rice spent two years as an associate at Lindsay Goldberg,
LLC, and before that, she spent two years as an analyst in the Leveraged Finance group at
Deutsche Bank. Ms. Rice has served on the board of GenesisCare, a private company
providing cancer and multi-specialty network services, since February 2024.
Ms. Rice has an A.B. from Harvard College and an M.B.A. from The Wharton School of the
University of Pennsylvania.
Key Skills and Qualifications:
• Expertise in capital markets transactions and merger and acquisition transactions.
• Representative of the investor perspective
Independent Director
since April 2020
Current Committees:
• Nominating and
Governance
Age: 44
9
George A. Riedel
Class I Director
Independent Director
since June 2020
Chair of the Board
since November 2020
Current Committees:
• Nominating and
Governance (Chair)
Age: 66
Professional Experience:
George A. Riedel has been a member of our Board of Directors since June 2020 and has
served as its Chair since November 2020. Mr. Riedel has served as a Senior Lecturer in the
General Management Unit at Harvard Business School since 2017. From 2014 to 2017, Mr.
Riedel served as the Chair and Chief Executive Officer of CloudMark, Inc., a cybersecurity
company, overseeing the company’s sale to Proofpoint, Inc. in 2017. From 2006 to 2011, Mr.
Riedel served in executive leadership roles at Nortel Networks Corporation, a Canadian
telecommunications and data networking equipment manufacturing company, including Chief
Strategy Officer and Vice President of Business Units. From 2003 to 2006, Mr. Riedel served
as Vice President of Strategy and M&A at Juniper Networks, a networking and cybersecurity
company. From 1987 to 2003, Mr. Riedel worked at McKinsey & Company, including as a
senior partner. Mr. Riedel has served as an independent director at Cerner Corporation, a
health information technology company, from April 2019 to June 2022. Between 2010 and
2020, Mr. Riedel served on various boards, including as chair of Accedian Networks Inc., a
Canadian network communications software company; as a director of PeerApp Ltd., a
caching solution provider; as a director of NextDocs Corporation, a compliance innovation
company (acquired by Aurea Software, Inc.); and as a director of Xperi Corporation, a
technology and intellectual property licensing company from May 2013 to June 2020. Mr.
Riedel has served on the public company board of Markforged Holding Corporation since May
2024. He is also currently chairman of the board of Juvare, a private company that provides
emergency preparedness and response software solutions, and a board member of
Bridgeway Benefit Technologies, a private company that provides healthcare and retirement
benefit administration software focused on the end-to-end needs of self-administered
multiemployer benefit funds and third-party administrators
Mr. Riedel received a BS with distinction in Mechanical Engineering from the University of
Virginia and an MBA from Harvard Business School.
Key Skills and Qualifications:
• Extensive executive leadership experience in the global networking and cybersecurity
industries
• Excellent track record in strategy and M&A
• Served on ten boards, including as chair of four of the boards, over the last decade.
Vote Required
A nominee for director is elected if the votes cast for such nominee exceed the votes cast against such nominee. If a
nominee for director fails to receive the required number of votes for re-election, such director shall offer to properly tender
his or her resignation (to the extent not already tendered) to the Nominating and Governance Committee, which shall then
make a recommendation to the Board as to whether to accept or reject such director’s resignation or whether other action
should be taken. Thereafter, the Board will act on the Nominating and Governance Committee’s recommendation.
Abstentions and broker non-votes will have no effect on the outcome of the vote with respect to any nominee.
Proposal 1—Recommendation of the Board of Directors
The Board unanimously recommends a vote “FOR” the election of each of
the three Class II nominees listed above
10
HOW WE GOVERN AND ARE GOVERNED
Although it is important and exciting to focus on opportunities and successes, we at Infinera believe it is also important
to focus on responsible compliance, risk management, and governance structures and functions. Success in our sector in
particular depends on maintaining an ability to identify challenges early, maintaining the best possible security and
governance practices, and fostering an ability to pivot quickly and continually.
Board Oversight of Risk
Risk is inherent with every business and the Board is responsible for overseeing our risk management function,
including a regular review of our strategic plans and business objectives. Members of our senior management team are
responsible for implementation of our day-to-day risk management processes, while the Board, as a whole and through its
committees, has responsibility for the oversight of overall risk management. In addition, each of the committees of the Board
considers any risks that may be within its area of responsibilities and Board members, or Board committee members,
periodically engage in discussions with members of our senior management team as appropriate. Specifically, the Audit
Committee assists the Board in fulfilling its oversight responsibilities with respect to risk management in the areas of
financial reporting, internal controls, key accounting and reporting policies, and cybersecurity, as well as meeting with the
Vice President of Internal Audit and our external independent auditors. The Compensation Committee assists the Board in
fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and
programs. The Nominating and Governance Committee assists the Board in fulfilling its oversight responsibilities with
respect to the management of risks associated with Board organization, membership and structure, succession planning for
our directors and executive officers, and corporate governance. Each of the committee chairs reports to the full Board at
regular meetings concerning the activities of the committee, the significant issues it has discussed, and the actions taken by
the committee.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics which applies to all of our employees, officers (including our
principal executive officer, principal financial officer, and principal accounting officer or controller, or persons performing
similar functions), agents and representatives, including our independent directors and consultants, who are not employees
of Infinera, with regard to their Infinera-related activities. The Code of Business Conduct and Ethics reflects our policy of
dealing honestly and with integrity with everyone, including our customers, employees, investors and suppliers. We require
all employees to complete training on our Code of Business Conduct and Ethics.
Our Code of Business Conduct and Ethics is just one element of the many practices and procedures we utilize to
support a diverse and inclusive culture that encourages helpful and honest communication both up and down reporting
relationship chains. Our executive leaders set the tone for this culture at the top and our ability to maintain a positive and
creative work environment depends on its success. Our annual Infinera Environmental, Social and Governance Report
describes some of the additional programs and practices we maintain to protect our people and promote their productivity,
health and well-being.
A copy of our Code of Business Conduct and Ethics is available on our website at investors.infinera.com/ by clicking
on “Governance Documents” under the “Governance” heading. You may also obtain a copy of our Code of Business
Conduct and Ethics without charge by writing to: Infinera Corporation, c/o Corporate Secretary, 6373 San Ignacio Avenue,
San Jose, California 95119. We intend to disclose future amendments to certain provisions of our Code of Business Conduct
and Ethics, or waivers of such provisions, applicable to any principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions and our directors on our website identified above or
on a Current Report on Form 8-K if required by the applicable listing standards.
Corporate Governance Guidelines
The Board has adopted Corporate Governance Guidelines which govern, among other things, Board composition,
Board responsibilities, committee composition, management succession and stockholder communications. You can access
these Corporate Governance Guidelines, along with other materials such as Board committee charters, on our website at
investors.infinera.com/ by clicking on “Governance Documents” under the “Governance” heading.
Stock Ownership Policy
The Board believes that it is important to link the interests of our directors and management to those of our
stockholders. Accordingly, the Board has adopted a Stock Ownership Policy for our directors and executive officers who are
designated as reporting officers under Section 16 (“Section 16 Officers”) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). For additional information regarding our Stock Ownership Policy, please see the section
11
entitled “Compensation Discussion and Analysis—Additional Information Regarding Our Compensation Practices—Stock
Ownership Policy.”
ESG and Corporate Responsibility
We focus our efforts on the elements of sustainability that are most important and impactful to our business and to our
stakeholders. Through our 2022 ESG materiality assessment, the following topics were determined to be the most material
ESG issues. Our programs, goals and disclosures have been aligned to emphasize these topics.
Environmental Responsibility
Climate, greenhouse gas emissions
and energy
Waste management
and recycling
Social Responsibility
Community engagement and
philanthropy
Employee health, safety
and well-being
Product sustainability
Diversity, equity and inclusion
Corporate Governance
Supply chain management and
responsible sourcing
Privacy, data protection and
information security
Leadership engagement, oversight
and accountability
We are committed to being a good corporate citizen and are dedicated to paving a sustainable path that strategically
considers our impact on our key stakeholders, our communities and our planet. In our operations and our supply chain, we
strive to act in ways that support a more sustainable, equitable and connected world and to execute our programs with
intention through our global sustainability program.
Each year we summarize our sustainability program and activities in the Infinera ESG Report, which describes our
practices, metrics, targets and disclosures. We encourage you to read our 2023 Infinera ESG Report. A copy of the Infinera
ESG Report can be found on the “Sustainability” page of our website at www.infinera.com/corporate-social-responsibility-
reports.
In 2023, we continued to make progress toward our ESG goals and improved our programs with dedicated resources.
Notable ESG Highlights
ESG Management
Our Global ESG Working Group collaborates with functions across the globe to set
goals, report progress, implement programs and meet customer expectations. In 2023,
this team worked closely with our executive leadership team to ensure alignment of our
ESG objectives and our corporate strategy. We created an overall ESG roadmap,
continued to refine our ESG objectives, assigned owners to focus on these objectives
and held quarterly ESG review meetings during 2023.
Transparency and Reporting
In 2023, we are proud to have been awarded EcoVadis’ silver medal in recognition of our
sustainability achievements in the areas of Environment, Labor & Human Rights, Ethics
and Sustainable Procurement.
Diversity, Equity and
Inclusion (“DEI”)
Integrity, trust, mutual commitment and respect for diversity are core Infinera values –
values brought to life by our talented, diverse and dedicated global workforce. In 2023,
we continued to invest in fostering a more inclusive work environment. In the U.S., we
have continued our partnerships with non-profit institutions and historically black
colleges and universities to increase our pipeline of diverse talent. We have also
continued to provide access to DEI training for our global employee base. Training topics
are focused on global diversity, employees' roles in workplace diversity and related
matters. We offer recruiters and managers training on topics such as leveraging
inclusive hiring practices. We continued to expand Women at Infinera ("WIN") employee
resource group activities and participation, including with our mentoring program and by
participating in local and regional women’s conferences and a speakers program
addressing topics including development, recruitment and retention of women. In various
locations, employees have also partnered with local nonprofit institutions and schools to
encourage female students to pursue STEM careers.
12
Commitment to our
Employees
Employee Health and Safety
Carbon Emissions
Supply Chain Management
Business Ethics
Product Sustainability
We are dedicated to providing an inclusive and informative learning experience for each
of our employees. In 2023, we continued to offer learning and development initiatives,
including a scalable, multi-language e-learning platform that enables the proliferation of
global, diverse, and professional education. We also provided education on topics that
include, but are not limited to, technical sessions, managerial training, effective time
management, unlocking executive presence, working in a multigenerational workplace,
next level delegation and breaking down barriers. In addition, all of our full-time
employees, and regular part-time employees working at least 24 hours per week, are
eligible for general Infinera benefits.
We are proud of our strong safety culture and comprehensive health and safety
management system, which is standardized around the globe. In 2023, we extended our
health and safety programs to all sites to better track, manage and improve health and
safety metrics. We also implemented an incident and near miss reporting and tracking
tool, which is available to all employees.
It takes industry-wide effort to move the needle in mitigating climate change, and we are
committed to doing our part to reduce emissions in our operations and from within our
value chain. We currently have seven global sites that use 100% carbon free energy. In
2023, we submitted our carbon report through CDP (formerly the Carbon Disclosure
Project) to share our emissions and progress toward our stated goals. Infinera received
a score of “B-, Managed” which is an improvement over our first submission score in
2021 of “C, Awareness”. In 2023, we committed to SBTi (Science-Based Targets
institute) to align with the Paris Agreement on climate change and reduce our
greenhouse gas emissions. Though we have more work to do to meet our goal of a
greater than 50% reduction of greenhouse gases by 2030, through our CDP disclosures
we intend to demonstrate transparency and accountability regarding our progress
toward this important ESG goal.
At Infinera, we recognize the importance of discipline, sustainability, and ethics in
managing our supply chain, and we also recognize the importance of ethical supply
chain management to our stakeholders. We also understand the need to remain vigilant
as the global regulatory environment evolves to ensure our supply chain not only follows
all applicable laws and regulations, but also aligns with our core values. To support
supply chain compliance, we have continued to invest in tools to better screen suppliers.
We also require our suppliers to comply with the Infinera Supplier Code of Conduct and
applicable law. Furthermore, our suppliers are required to ensure that their direct
suppliers and subcontractors also comply with the Supplier Code of Conduct and
applicable law. A copy of our Partner Code of Conduct can be found on our website at
www.infinera.com/social-responsibility/code-of-ethics/.
At Infinera, we strive to foster a culture of integrity and honesty and provide our
employees with the tools and training to make ethical decisions in their daily work. All
employees are expected to understand and comply with our Code of Business Conduct
and Ethics and are reminded of this expectation annually. Any breaches of that code
may be reported using our EthicsPoint Hotline. A copy of our Code of Business Conduct
and Ethics may be found on our website at www.infinera.com/social-responsibility/code-
of-ethics/.
In 2021, Infinera made a public commitment to increase power efficiency and reduce the
carbon footprint of our products. Our recent innovations in efficiency have enabled our
XR Optics solution to significantly reduce power consumption and CO2 emissions. In
2023, we received the Most Innovative Proof of Concept award for our passive optical
network (“PON”) overlay demonstration at FiberConnect 2023. Our PON overlay
technology reduces time, cost, energy, emissions, and the need for new infrastructure.
13
We strive to maintain the highest degree of product safety and compliance. To
accomplish this, we are members of the Responsible Minerals Initiative. We also
maintain compliance with local, state, federal and international regulations by
continuously updating our environmental compliance system and collecting data for the
following:
Product Compliance
– Banned substances under the Directive on the Restriction of the Use of Certain
Hazardous Substances in Electrical and Electronic Equipment;
– Reportable substances under Registration, Evaluation, Authorization, and
Restriction of Chemicals; and
– Waste management under the Waste Electrical and Electronic Equipment Directive.
We have implemented a comprehensive and robust cybersecurity risk management
program to guide and strengthen our cybersecurity posture to engender trust with
customers, employees, and stockholders while protecting the confidentiality, integrity,
and availability of our systems and data. In 2023, we took several measures to enhance
our cybersecurity strategy and program, including revising our cybersecurity policies to
ensure continued compliance with regulatory requirements while strengthening our
defenses against emerging threats, in addition to new risks from emerging technologies
such as artificial intelligence (“AI”). We also conducted tabletop exercises with expanded
participation from company leadership. Throughout our workforce, we used activities
and training to further imbue a culture of cybersecurity awareness and data protection.
In 2023, we continued to strengthen and scale our cybersecurity processes to reduce
the risk of existing and potential threats, including new technologies such as AI. We
launched a new cross-functional AI Steering Committee to address issues surrounding
AI including bias, reliability, and data security. We are committed to securing the
confidential and proprietary information of our employees and business partners,
including employee data and intellectual property. To support this commitment, Infinera
has internal security and privacy working groups that meet regularly to discuss
regulatory matters, internal compliance and policies and best practices for privacy and
data protection matters. In 2023, we did not experience a material cybersecurity
incident. We are also proud to maintain our certification to the International Organization
for Standardization (“ISO”) 27001 Information Security Management System standard,
which we held throughout 2023.
Privacy and Data Protection
In addition to the accomplishments, best practices, activities and disclosures summarized above, our products and
solutions help keep people connected socially and professionally; run their businesses more efficiently, fairly and globally;
and manage the risks that are created by living in a connected global economy.
HOW TO COMMUNICATE WITH US
The Board actively seeks input from stockholders, stakeholders, thought leaders and many others to perform its
functions optimally. As stockholders bring wide and relevant experiences and have a financial stake in the wisdom of their
input, the Board values maintaining a number of avenues to receive that input. These include:
•
•
•
•
Stockholder attendance or participation at our annual stockholders meetings
Input from proxy voting
Use of the company’s various reporting mechanisms such as its “hot lines” and reports to the internal audit
function
Participation in our numerous investor relations programs and conferences
Write to the Board as a whole, or to individual directors, at the following address:
Board of Directors c/o Corporate Secretary
Infinera Corporation
6373 San Ignacio Avenue
San Jose, California 95119
Communications are distributed to the Board or to any individual director, as appropriate, depending on the facts and
circumstances outlined in the communication. At the direction of the Board, all mail received may be opened and screened
for security purposes. Communications that are unduly hostile, threatening, illegal or similarly unsuitable will be excluded
14
with the provision that any communication that is filtered out will be made available to any independent or non-employee
director upon request.
HOW WE ARE ORGANIZED
Independence of the Board
On an annual basis, in accordance with the current listing standards of Nasdaq, the Board affirmatively determines the
independence of each director or nominee for election as a director. The Board has determined that seven out of nine of our
directors (with the exception of Mr. Heard and Dr. Welch, both of whom are employees of Infinera) are “independent” in
accordance with the rules and regulations of the SEC and the listing standards of Nasdaq. Also, all members of the Audit
Committee, Compensation Committee and Nominating and Governance Committee, as more fully described below, are
independent directors. In making these determinations, our Board considered the current and prior relationships that each
non-employee director has with our company and all other facts and circumstances that our Board deemed relevant in
determining their independence, including the beneficial ownership of our capital stock by each non-employee director, and
the transactions involving them described in the section titled “Certain Relationships and Related Person Transactions.”
There are no family relationships among any of our directors, director nominees or executive officers.
Board Leadership Structure
The Board believes its current leadership structure best serves the objectives of the Board’s oversight of management,
the Board’s ability to carry out its roles and responsibilities on behalf of our stockholders, and our overall corporate
governance. Separating the positions of Chair of the Board and CEO allows our CEO to focus on our day-to-day business,
while allowing the Chair of the Board to lead the Board in its fundamental role of providing advice to and independent
oversight of management. While our Bylaws do not require that our Chair of the Board and CEO positions be separate, the
Board believes that having separate positions is the appropriate leadership structure for Infinera at this time and
demonstrates our commitment to good corporate governance practices. The Board has assigned the Chair of the Board
responsibility for presiding over meetings of the Board, developing meeting agendas, facilitating communication between
management and the independent directors, representing the views of the independent directors to management and
improving meeting effectiveness, among other things.
The Board also believes that the combination of an independent Chair of the Board, all three of our current standing
committees being comprised entirely of independent directors and the regular use of executive sessions of the independent
directors enables the Board to maintain independent oversight of our strategies and activities.
Agreement with Oaktree Optical Holdings
In April 2020, we entered into a letter agreement with Oaktree Optical Holdings, L.P. (“Oaktree”) pursuant to which we
agreed, among other things, to nominate and support Ms. Rice for election as a director at the 2020 Annual Meeting of
Stockholders. Subject to certain exceptions set forth in the letter agreement, Oaktree and certain affiliates agreed to vote all
of its shares at the 2020 Annual Meeting of Stockholders in a manner consistent with the recommendation of our Board.
Oaktree also agreed to customary standstill restrictions. Our letter agreement with Oaktree also required that Infinera and
Oaktree reasonably cooperate to identify a director candidate (the “Independent Designee”) for consideration by our
Nominating and Governance Committee. In June 2020, Ms. Bucklin joined the Board as the Independent Designee.
Ms. Rice was re-elected as a Class I director at the 2023 Annual Meeting of Stockholders.
Information Regarding the Board and its Committees
The Board met eight times during fiscal 2023. During fiscal 2023, each director then in office attended 75% or more of
the meetings of the Board. During fiscal 2023, each director then in office attended 75% or more of the meetings of the
committees on which he or she served during the period for which he or she was a committee chair or committee member,
as applicable. Our independent directors meet in executive sessions, without management present, during most regular
meetings of the Board. Directors are encouraged, but not required, to attend our annual meetings of stockholders. All nine of
our then-serving members of the Board attended our 2023 Annual Meeting of Stockholders.
The Board had three standing committees as of the end of fiscal 2023: an Audit Committee, a Compensation
Committee and a Nominating and Governance Committee. Mr. Heard and Dr. Welch do not currently serve on any
committees of the Board. The following table presents our current Board and committee composition (and assuming the
election of the nominees for Class II directors who are standing for election at the 2024 Annual Meeting of Stockholders, this
15
table also presents our Board and committee composition effective upon the conclusion of our 2024 Annual meeting of
Stockholders).
Name
Christine B. Bucklin
Gregory P. Dougherty
David W. Heard
Sharon E. Holt
Roop K. Lakkaraju
Paul J. Milbury
Amy H. Rice
George A. Riedel
David F. Welch, Ph.D.
Total Meetings in Fiscal 2023
_________________
C = Chair; M = Member
Audit Committee
Board
Audit
Compensation
Nominating
and
Governance
M
M
M
M
M
M
M
C
M
8
M
—
—
—
C
M
—
—
—
17
—
M
—
C
—
M
—
—
—
6
—
M
—
—
—
—
M
C
—
4
The Audit Committee reviews and monitors our financial statements, financial reporting process and our external
audits, including, among other things, our internal controls and audit functions, the results and scope of the annual audit and
other services provided by our independent registered public accounting firm as well as our compliance with legal matters
that have a significant impact on our financial statements. The Audit Committee also consults and discusses with our
management and our independent registered public accounting firm prior to the presentation of financial statements to
stockholders. The Audit Committee also promotes the Company’s compliance with applicable law. The Audit Committee is
responsible for establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal
accounting controls or auditing matters, and for the confidential, anonymous submission by our employees of concerns
regarding questionable accounting or auditing matters. In addition, the Audit Committee is directly responsible for the
appointment, retention, compensation and oversight of the work of our independent registered public accounting firm,
including approving services and fee arrangements. The Audit Committee has oversight of the Company’s significant
financial risks and exposures, including related to cybersecurity matters. Any related party transactions are subject to
approval by the Audit Committee. A more detailed description of the Audit Committee’s functions can be found in our Audit
Committee charter. In addition, the Audit Committee meets in executive sessions, without management present and with the
independent registered public accounting firm, during most regular meetings of the Audit Committee. A copy of the Audit
Committee charter is available on our website at investors.infinera.com/ by clicking on “Governance Documents” under the
“Governance” heading.
The current members of the Audit Committee are Ms. Bucklin and Messrs. Lakkaraju and Milbury. Mr. Milbury chaired
the Audit Committee until May 18, 2023 when, upon the conclusion of our 2023 Annual Meeting, Mr. Lakkaraju became chair
of the Audit Committee and Mr. Milbury remained a member of the Audit Committee. Each current member of the Audit
Committee served the entirety of fiscal 2023. The Audit Committee met 17 times during fiscal 2023. Each member of the
Audit Committee is independent for Audit Committee purposes under the rules and regulations of the SEC and the
applicable Nasdaq listing standards. In addition to qualifying as independent under the Nasdaq rules, each member of the
Audit Committee can read and understand fundamental financial statements in accordance with Nasdaq Audit Committee
requirements. The Board has determined that Messrs. Lakkaraju and Milbury are each an “Audit Committee Financial
Expert” as defined in Item 407(d)(5)(ii) of Regulation S-K. The designation does not impose on Messrs. Lakkaraju and
Milbury any duties, obligations or liabilities that are greater than those generally imposed on them as members of the Audit
Committee and the Board.
Compensation Committee
The Compensation Committee has the responsibility, authority and oversight relating to the development of our overall
compensation strategy and compensation policies and programs. The Compensation Committee establishes our
compensation philosophy and policies, administers all of our compensation plans for executive officers, and recommends
the compensation for the non-employee directors of the Board. The Compensation Committee seeks to assure that our
compensation policies and practices promote stockholder interests and support our compensation objectives and philosophy
as described in more detail in the “Compensation Discussion and Analysis” section of this Proxy Statement.
16
The Compensation Committee also oversees, reviews and administers all of our material employee benefit plans,
including our 401(k) plan, and reviews and approves various other compensation policies and matters. The Compensation
Committee assists the Board in its oversight of our strategies, initiatives and programs relating to human capital
management, including culture, talent acquisition, employee development, retention, and diversity, equity and inclusion. The
Compensation Committee may form and delegate authority to one or more subcommittees as appropriate. A more detailed
description of the Compensation Committee’s functions can be found in our Compensation Committee charter. A copy of the
Compensation Committee charter is available on our website at investors.infinera.com/ by clicking on “Governance
Documents” under the “Governance” heading.
The current members of the Compensation Committee are Ms. Holt and Messrs. Dougherty and Milbury. Ms. Holt
chairs the Compensation Committee. Each current member of the Compensation Committee served the entirety of fiscal
2023. The Compensation Committee met six times during fiscal 2023. Each member of the Compensation Committee is a
non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act, an outside director, as defined
pursuant to Section 162(m) (“Section 162(m)”) of the Internal Revenue Code, as amended (the “Code”) and satisfies the
director and compensation committee independence requirements under the applicable Nasdaq listing standards.
Nominating and Governance Committee
The Nominating and Governance Committee is responsible for reviewing developments in corporate governance
practices, evaluating and making recommendations to the Board concerning corporate governance matters, and
recommending changes to the Company's corporate governance policies and practices. In addition, the Nominating and
Governance Committee is responsible for identifying, evaluating and making recommendations of nominees to the Board
and evaluating the performance of the Board and individual directors, including those eligible for re-election at the annual
meeting of stockholders. The Nominating and Governance Committee also oversees an annual board evaluation process to
determine whether the Board is functioning effectively. In addition, the Nominating and Governance Committee oversees our
succession planning process. A more detailed description of the Nominating and Governance Committee’s functions can be
found in our Nominating and Governance Committee charter. A copy of the Nominating and Governance Committee charter
is available on our website at investors.infinera.com/ by clicking on “Governance Documents” under the “Governance”
heading.
The current members of the Nominating and Governance Committee are Ms. Rice and Messrs. Dougherty and
Riedel. Mr. Riedel chairs the Nominating and Governance Committee. Each current member of the Nominating and
Governance Committee served the entirety of fiscal 2023 as a member of this committee. The Nominating and Governance
Committee met four times during fiscal 2023. Each member of the Nominating and Governance Committee satisfies the
independence requirements under the applicable Nasdaq listing standards.
Board Nominees and Diversity
The Nominating and Governance Committee reviews and reports to the Board on a periodic basis with regard to
matters of corporate governance, and reviews, assesses and makes recommendations on the effectiveness of our corporate
governance policies. In addition, the Nominating and Governance Committee reviews and makes recommendations to the
Board regarding the size and composition of the Board and the appropriate skills and characteristics required of our
directors in the context of the then-current composition of the Board. This includes an assessment of each candidate’s
independence, personal and professional integrity, financial literacy or other professional or business experience relevant to
an understanding of our business, ability to think and act independently and with sound judgment, and ability to serve our
stockholders’ long-term interests. The Board and the Nominating and Governance Committee follow a process in which we
consider governance best practices when reviewing the overall composition of the Board and considering the slate of
nominees for annual election to the Board and the appointment of individual directors to the Board. The Board and
Nominating and Governance Committee evaluate the skill sets needed to provide the right level of guidance and oversight to
the management team. Within the context of evaluating the skills needed on the Board, the Nominating and Governance
Committee also considers diversity attributes, including gender, race, ethnicity, specialized expertise and a range of insight
gathered from relevant industries. These factors, and others considered useful by the Nominating and Governance
Committee, are reviewed in the context of an assessment of the perceived needs of the Board at a particular point in time.
The Nominating and Governance Committee leads the search for, selects and recommends candidates for election to
the Board. Consideration of new director candidates typically involves a series of committee discussions, review of
information concerning candidates and interviews with selected candidates. From time to time, the Nominating and
Governance Committee may engage the services of a search firm to identify director candidates. Any search firms retained
to assist the Nominating and Governance Committee will be specifically advised to seek to include qualified, diverse
candidates from traditional and nontraditional environments, including members of underrepresented communities, as was
done for the Board search process conducted in 2021. The Nominating and Governance Committee will also consider
candidates proposed in writing by stockholders, provided such proposal meets the eligibility requirements for submitting
stockholder proposals for inclusion in our next proxy statement and is accompanied by the required information about the
17
candidate specified in Section 2.4 of our Bylaws. Candidates proposed by stockholders are evaluated by the Nominating
and Governance Committee using the same criteria as for all other candidates.
If a stockholder wishes to recommend a director candidate for consideration by the Nominating and Governance
Committee, pursuant to our Corporate Governance Guidelines, the stockholder must have held at least 1,000 shares of our
common stock for at least six months and must notify the Nominating and Governance Committee by writing to our Chief
Legal Officer at our principal executive offices, and must include the following information:
•
•
•
•
To the extent reasonably available, information relating to such director candidate that would be required to be
disclosed in a proxy statement pursuant to Regulation 14A under the Exchange Act, in which such individual
would be a nominee for election to the Board;
The director candidate’s written consent to (a) if selected, be named in our proxy statement and proxy, and (b) if
elected, to serve on the Board;
The other information set forth in the applicable sections of Section 2.4 of our Bylaws; and
Any other information that such stockholder believes is relevant in considering the director candidate.
Non-Executive Equity Award Subcommittee
The guidelines for the size of new hire, promotional and annual retention equity awards for Section 16 Officers are
periodically reviewed and approved by the Compensation Committee. The Compensation Committee has delegated to the
Non-Executive Equity Award Subcommittee (the “Subcommittee”) the authority to formally approve new hire, promotional
and retention equity awards to certain employees and consultants pursuant to guidelines pre-approved from time to time by
the Compensation Committee. The delegation to the Subcommittee does not include the authority to grant equity awards to
new employees who are or are reasonably expected to become Section 16 Officers or to current Section 16 Officers. The
delegation of authority to the Subcommittee is not exclusive and the Board and Compensation Committee have retained the
right to approve any equity awards at their discretion. This Subcommittee is currently comprised solely of our CEO (who is
also a Board member).
Compensation Committee Interlocks and Insider Participation
During fiscal 2023, Ms. Holt and Messrs. Dougherty and Milbury served on the Compensation Committee. None of
these individuals was an executive officer or employee of Infinera at any time during fiscal 2023, or at any other time. No
member of the Compensation Committee had any relationship with Infinera during fiscal 2023 requiring disclosure under
Item 404 of Regulation S-K under the Exchange Act. None of our executive officers has ever served as a member of the
board or compensation committee of any other entity that has or has had one or more executive officers serving as a
member of the Board or Compensation Committee.
HOW WE ARE PAID
Our compensation program for our non-employee directors is designed to attract and retain highly qualified,
independent directors to represent stockholders on the Board and to act in our stockholders’ best interests. Non-employee
directors receive a mix of cash compensation and equity awards under this program. Directors who are also employees of
Infinera do not participate in our director compensation program, nor do they receive any additional compensation for their
service as directors. The Compensation Committee, which consists solely of independent directors, has the primary
responsibility for reviewing and recommending any changes to our director compensation program, with compensation
changes approved or ratified by the full Board.
From time to time, the Compensation Committee engages Compensia, Inc. (“Compensia”), an independent
compensation consultant, to help the Compensation Committee review our director compensation program by providing
relevant market data regarding director compensation derived from the same peer group used at the time for evaluating our
executive compensation. During late fiscal 2022, the Compensation Committee engaged Compensia to provide market data
on director compensation. Compensia provided such market data to the Compensation Committee for the peer group which
the Compensation Committee had approved in September 2022 for use in evaluating our executive compensation for fiscal
2023. The Compensation Committee concluded that in light of our director compensation program generally aligning with
market competitive levels, no change in director compensation would be recommended at that time. As a result, in fiscal
2023, no changes were made to our director compensation program.
18
Director Fees
During fiscal 2023, our cash compensation program for our non-employee directors was as follows:
Position
Non-Employee Director
Chair of the Board
Audit Committee Chair
Audit Committee Member
Compensation Committee Chair
Compensation Committee Member
Nominating and Governance Committee Chair
Nominating and Governance Committee Member
Annual
Retainer Fee
($)
50,000
70,000
30,000
12,500
20,000
10,000
11,000
6,000
We do not pay meeting fees for the Board or any of the committees of the Board. We pay the retainer fees set forth
above in quarterly installments. Retainer fees are paid in arrears. In addition, we have a policy of reimbursing our non-
employee directors for reasonable travel, lodging and other expenses incurred in connection with their attendance at Board
and committee meetings.
Director Equity Awards
During fiscal 2023, our equity compensation program for our non-employee directors was as follows:
Annual Restricted Stock Unit (“RSU”)
Award
Prorated Annual RSU Award For
New Directors
On the date of each annual meeting of stockholders, each individual who
continues to serve as a non-employee director after that annual meeting will
automatically be granted an RSU award covering a number of shares
determined by dividing $200,000 by the closing price of the Company’s
common stock on the date of grant, with any resulting fractional share
rounded down to the nearest whole share (the “Annual RSU Award”). The
Annual RSU Award will vest as to 100% of the underlying shares on the
earlier of the date of the next annual meeting of stockholders or the one-year
anniversary of the date of grant provided that the non-employee director
remains a service provider of Infinera on the applicable vesting date.
Each new non-employee director will be automatically granted an annual
RSU award covering a number of shares determined by first prorating
$200,000 for the number of months remaining until the next scheduled
annual meeting of stockholders and then dividing such prorated dollar
amount by the closing price of the Company’s common stock on the date of
grant, with any resulting fractional share rounded down to the nearest whole
share (the “Prorated Annual RSU Award”). The Prorated Annual RSU Award
will vest as to 100% of the underlying shares on the earlier of the date of the
next annual meeting of stockholders or the one-year anniversary of the most
recently held annual meeting of stockholders, provided that the non-
employee director remains a service provider of Infinera on the applicable
vesting date.
19
Effective March 27, 2024, new Annual RSU Awards and Prorated Annual RSU Awards granted to non-employee
directors will vest as to 100% of the underlying shares on the earlier of (i) the date of the next annual meeting of
stockholders, provided that it occurs at least 50 weeks after the prior annual stockholders meeting or (ii) the one-year
anniversary of the date of grant, provided that the non-employee director remains a service provider of Infinera on the
applicable vesting date.
Fiscal 2023 Director Compensation
The following table sets forth all of the compensation awarded to or earned by the non-employee members of the
Board in fiscal 2023. In addition, the table sets forth compensation awarded to or earned by Dr. Welch for his services as an
employee of Infinera; Dr. Welch does not receive compensation for his services as a director. Compensation information for
Dr. Welch is not disclosed in “Our Pay—Fiscal 2023 Compensation” below because he is not a Named Executive Officer.
Name
Christine B. Bucklin
Gregory P. Dougherty
Sharon E. Holt
Roop K. Lakkaraju
Paul J. Milbury
Amy H. Rice(4)
George A. Riedel
David F. Welch, Ph.D.
Fees Earned
or Paid in Cash
($)(1)
62,500
66,000
70,000
73,413
79,087
—
131,000
—
Stock
Awards
($)(2)
199,996 (3)
199,996 (3)
199,996 (3)
199,996 (3)
199,996 (3)
—
199,996 (3)
738,000 (5)
All Other
Compensation
($)
—
—
—
—
—
—
—
205,704 (6)
Total
($)
262,496
265,996
269,996
273,409
279,083
—
330,996
943,704
_________________
(1)
For a description of the annual non-employee director retainer fees and retainer fees for committee chair positions and for service as
Chair of the Board, see the disclosure above under “Director Fees.”
(2)
(3)
The amounts reported in this column represent the aggregate grant date fair value of the RSU awards granted in fiscal 2023 computed
in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, “Compensation – Stock
Compensation” (“ASC 718”). See Notes 2 and 14 of the notes to our consolidated financial statements contained in our 2023 Annual
Report on Form 10-K for a discussion of all assumptions made by us in determining the ASC 718 values of equity awards.
Reflects for each director the value of the Annual RSU Award awarded in connection with the 2023 Annual Meeting of Stockholders,
which value was determined by multiplying for each director 39,447 shares of Infinera common stock by Infinera’s closing stock price of
$5.07 per share on May 18, 2023, the date of grant.
(4) Ms. Rice has waived any participation in the compensation benefits available to the Company’s non-employee directors, except for
customary reimbursement of expenses.
(5)
(6)
Reflects the value of Dr. Welch’s equity awards granted as compensation in 2023 for his services as an employee of Infinera.
Reflects Dr. Welch’s 2023 employee salary in the amount of $200,000, plus the total value of Company paid life insurance premiums
and 401(k) match in the amount of $5,704.
During fiscal 2023, Dr. Welch, our Chief Innovation Officer and employee member of the Board, did not receive
compensation for his services as a director. Dr. Welch’s base salary for fiscal 2023 was $200,000. Dr. Welch was not eligible
for an incentive target bonus opportunity during fiscal 2023. On March 9, 2023, Dr. Welch was granted an RSU award
covering 100,000 shares, which is scheduled to vest over a three-year period, with one-third of the underlying shares vesting
on April 5, 2024, and one-twelfth of the underlying shares vesting quarterly thereafter, subject to his continued service to
Infinera through each applicable vesting date. This RSU award had an aggregate grant date fair market value of $738,000,
computed in accordance with ASC 718. See Notes 2 and 14 of the notes to our consolidated financial statements contained
in our 2023 Annual Report on Form 10-K for a discussion of all assumptions made by us in determining the ASC 718 values
of equity awards.
On March 4, 2020, Dr. Welch was granted a performance share award covering 650,000 shares (at target level
achievement). The award provided for a number of quantitative and qualitative performance objectives related to the
successful development of the Company's XR Optics program to be achieved over different periods from fiscal 2020 through
fiscal 2024. On March 24, 2023, the Compensation Committee determined that the achievement of one of the performance
metrics, which related to generating $50 million of ICE-X-related revenues by the end of fiscal 2022, had not been achieved.
As a result, 150,000 shares of common stock underlying the award were forfeited on this date. On May 12, 2024, the
Compensation Committee determined that the achievement of another of the performance metrics, which related to
generating $100 million of ICE-X-related revenues by the end of fiscal 2023, had not been achieved. As a result, 150,000
shares of common stock underlying the award were forfeited on this date.
20
Additional Information with Respect to Director Equity Awards
Name
Christine B. Bucklin
Gregory P. Dougherty
Sharon E. Holt
Roop K. Lakkaraju
Paul J. Milbury
Amy H. Rice(2)
George A. Riedel
David F. Welch, Ph.D.(3)
Number of Shares Subject to
Outstanding Stock Awards
at Fiscal Year-End
(#)(1)
39,447
39,447
39,447
52,403
39,447
—
39,447
500,001
_________________
(1)
Unvested time-based RSU awards, except as noted below with respect to Dr. Welch.
(2) Ms. Rice has waived any participation in the compensation benefits available to the Company’s non-employee directors, except for
customary reimbursement of expenses.
(3)
Comprised of 150,001 shares subject to unvested time-based RSUs and 350,000 shares subject to performance share awards (at
target level achievement), 150,000 of which had a performance goal that was not met as of completion of the applicable performance
period ending at the end of fiscal 2023 and 200,000 of which had a performance goal based on fiscal 2024 performance.
21
OUR PAY
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis provides information related to the fiscal 2023 compensation program and
related decisions for our NEOs identified below.
Our Named Executive Officers
For fiscal 2023, our NEOs were the following:
•
•
•
•
David W. Heard, our CEO;
Nancy L. Erba, our Chief Financial Officer (“CFO”);
David L. Teichmann, our Chief Legal Officer (“CLO”) and Corporate Secretary; and
Nicholas R. Walden, our Senior Vice President, Worldwide Sales.
Executive Summary
Fiscal 2023 Business Results
Fiscal 2023 was a year in which we continued to strengthen our product portfolio, accelerate growth and expand
margins. We continued to make strong progress toward our overall financial and strategic goals. Below are four key
accomplishments in fiscal 2023.
First
Second
Third
Fourth
We delivered against our major financial milestones, as we grew revenue for the 6th consecutive
year, expanded gross margin by approximately 450 bps in the year, expanded operating margin by
approximately 350 bps in the year, and enhanced our earnings per share. During the year, we
strengthened our balance sheet further by refinancing a portion of our debt and reducing our 2024
convertible debt to approximately $19 million (down from approximately $100 million). We continue
to maintain an asset-backed lending facility as an additional source of funds to address any short-
term financing requirements.
We drove commercial success across our customer footprint as we secured new global service
provider and internet content provider (“ICP”) design wins. In fiscal 2023, we delivered another year
of 30%-plus revenue growth with ICPs which have now grown to represent almost 50% of product
revenue (both on a direct and indirect basis). Furthermore, we expanded our share in the Metro
segment, landed major service provider deals in the U.S., Europe, the Middle East and Southeast
Asia, and maintained our position as a top vendor in the Subsea segment, a segment characterized
by stringent capacity and reach requirements.
We continued to refresh and expand our Systems portfolio, as we increasingly converged our
Systems portfolio on the flagship GX-series platform, introduced a next-generation GX-based line
system, invested in software and automation, and continued to scale and add customers on our
flagship 800G ICE-6 embedded engine. In 2023, our GX-Series portfolio represented almost 50% of
the company’s product revenue. As we exited the year, we also shipped our first vertically integrated
Metro systems with our own coherent pluggables, an important milestone for the continued
expansion of our gross margin.
We successfully launched and scaled our Subsystems portfolio as we booked more than $10 million
in orders for Subsystems products during the year. To date, we have received purchase orders for
our suite of ICE-X 100G, 400G, and 800G pluggables and components from more than 26
customers. The commercialization of our Subsystems products expands our addressable market
and will be critical to accelerating our revenue growth and expanding margins from higher levels of
vertical integration across the portfolio. In addition, the Open XR Forum, which was launched in
June 2021, now has more than 40 members, including service providers and network equipment
manufacturers, demonstrating continued momentum within our industry for this new technology as
well as our commitment to open networks in the industry.
22
The following tables illustrates our GAAP revenue and non-GAAP Operating Income (loss) over the last three fiscal
years:
_______________
(1)
For a reconciliation of GAAP to non-GAAP Operating Income for fiscal 2023, 2022 and 2021 referenced in this table or elsewhere in
this Proxy Statement, please see Appendix A.
The following graph shows our 1-, 3- and 5-year TSR as compared to the Nasdaq Telecommunications Index (“Nasdaq
Telecommunications Index”), measured from the last trading day of fiscal 2023.
Fiscal 2023 Executive Compensation Program Overview
At the beginning of fiscal 2023, when a majority of executive compensation decisions were made, the Compensation
Committee considered the performance of our company as we exited fiscal 2022 and the goals of achieving profitable
revenue growth and non-GAAP Operating Income growth despite a challenging macroeconomic environment and the desire
to return to a customary executive compensation framework as the world normalized from the COVID-19 pandemic. The
decisions made reflected our continuing commitment to a strong pay-for-performance profile and supported accountability of
our leadership team for our financial performance.
As indicated below, a significant portion of our executive compensation program is designed to align the compensation
outcomes for our participating NEOs with performance against measurable objectives.
23
Fiscal YearRevenue (in millions)$1,425.2$1,573.2$1,614.1FY21FY22FY23$0$200$400$600$800$1,000$1,200$1,400$1,600$1,800Fiscal YearNon-GAAP Operating Income (in millions)(1)$29.6$69.0$87.2FY21FY22FY23$0$10$20$30$40$50$60$70$80$90Annualized 1-Year, 3-Year and 5-YearTotal Shareholder Return-29.5%-56.7%21.2%10.6%-17.4%8%INFNNasdaq Telecommunications1- Year3- Year5- Year-80%-60%-40%-20%0%20%40%
Executive Compensation Program Structure
Compensation Element
(CEO/Average NEO Allocation of
Elements in Target Total Direct
Compensation)
Structure and Attributes
Base Salary
(11% CEO/23% NEOs)
• Competitively set
• Each NEO received a pay increase in FY’23
Target Annual
Incentive
(14% CEO/20% NEOs)
Long-Term Performance-
Based Stock Awards
(41% CEO/28% NEOs)
Long-Term Time-Based RSU
Awards
(34% CEO/28% NEOs)
• Annual target bonuses are payable in cash
• 2023 Corporate Bonus Plan funding level determined by non-GAAP
Operating Income to emphasize achievement of profitable growth
• SVP, Worldwide Sales participates in the 2023 Corporate Bonus Plan but
also a separate incentive plan tied to achievement of financial targets for
bookings and non-GAAP product standard margin to emphasize bookings
growth and profitable growth for the Company
• Based on non-GAAP gross margin, an objective performance metric
• Vesting occurs when performance objective has been certified as having
been achieved by the Compensation Committee for full fiscal year during
performance period and time-based vesting requirement is met
• CEO received performance-based shares valued at 41% of target total
direct compensation (55% of target long-term incentive (“LTI”) value); other
NEOs received performance-based shares valued at 28% of target total
direct compensation (50% of target LTI value)
• Designed for long-term retention and to promote strong long-term
stockholder alignment
• RSUs vest over three years, with one-third vesting after one year and then
quarterly for the remaining two years
• CEO received RSUs valued at 34% and other NEOs received RSUs valued
at 28% of target total direct compensation
Pay-for-Performance Outcome in Fiscal 2023
During fiscal 2023, we continued to make progress toward achievement of our longer-term strategic goals despite a
challenging macroeconomic environment. Under our fiscal 2023 executive compensation program, and consistent with our
compensation policy promoting strong pay and performance alignment:
•
•
•
•
Annual Corporate Bonus Plan incentives were earned between approximately 68.9% and 83.5% of target for
each NEO;
69.6% of the performance shares granted in 2021 became eligible to vest in 2024 based on performance during
2023;
None of the performance shares granted in 2022 and 2023 became eligible to vest based on performance during
2023; and remain outstanding and eligible to be earned based on the level of achievement of the Company's
longer-term strategic goals during the applicable performance period; and
Realized compensation value for our CEO in fiscal 2023 was 41.2% of his target compensation (as further
discussed below).
24
Pay-for-Performance with Respect to Fiscal 2023 CEO Compensation
We emphasize performance-based compensation for all of our NEOs, including in particular our CEO. The chart below
displays the target total direct compensation (i.e., base salary, target cash incentive opportunity, and equity awards at target)
of our CEO versus our CEO’s actual realized compensation during the most recent three fiscal years, as well as our stock
price during that time period. Mr. Heard served as our CEO during fiscal 2021, 2022 and 2023. The target value of equity
awards reflects the modeling value of such award based on an $8.00 per share reference price, which is used during the
compensation modeling process and which differs from the value reported in the Summary Compensation Table provided
further below. Actual realized compensation includes the base salary and any cash annual incentive earned during the year
plus the sum of any RSUs and performance shares that vested during the year, valued using the share price on the vesting
date, which differs from the values shown in the Pay Versus Performance table provided further below given the specific
requirements with respect to “compensation actually paid” under such table.
As described above, our CEO target total direct compensation emphasizes compensation that aligns with investor
interests, including an at-risk annual incentive opportunity and long-term vesting equity awards. When the Company’s
performance is strong, our compensation programs are designed to reward executives with realized compensation that
exceeds target through a combination of strong stockholder returns and performance that exceeds the targets approved for
our short- and long-term incentive plans. Realized compensation for fiscal 2023 for our CEO was 41.2% of target. This
reflected in part the depreciation in the value of equity awards granted in prior years but that vested during fiscal 2023, as
the closing share price of our common stock decreased from $10.48 on December 31, 2020 (the start of the 3-year period
detailed in the chart above) to a closing price of $4.75 on December 29, 2023 (which was the last trading day of our fiscal
2023). The forfeiture of the performance share awards granted in fiscal 2020 with a performance period ending in fiscal 2022
also contributed to the decline in the realized compensation for fiscal 2022 (see the section below titled “Performance Share
Awards” for more information regarding these performance share awards). As a result of our emphasis on pay-for-
performance, the realized compensation of our CEO fell significantly below his target total direct compensation in fiscal 2022
and fiscal 2023, but was slightly above target in fiscal 2021. In furtherance of our pay-for-performance goals, 55% of
Mr. Heard’s targeted equity awards in fiscal 2023 were also granted in the form of performance share awards.
25
Governance of Executive Compensation
Our executive compensation program includes the following executive compensation governance policies and
practices:
Compensation At Risk
Compensation Recovery Policy
Our executive compensation program is designed so that a significant portion
of our NEO compensation is “at risk” based on corporate performance, as
well as equity-based to more closely align the interests of our NEOs and
stockholders.
We maintain a compensation recovery policy that applies to our Section 16
Officers and certain other individuals and provides for recovery of both cash
and equity incentive compensation under specified circumstances. Our policy
is compliant with applicable Nasdaq listing rules and SEC regulations.
Anti-Hedging Policy
Our Insider Trading Policy prohibits all employees, including our NEOs, and
Board members from hedging their Infinera common stock.
Anti-Pledging Policy
Our Insider Trading Policy prohibits our NEOs and Board members from
pledging Infinera common stock as collateral for a loan.
Fully Independent Compensation
Committee
Our executive compensation program is administered by the Compensation
Committee, which consists solely of independent directors.
Stock Ownership Policy
Our Section 16 Officers and Board members are subject to minimum stock
ownership requirements.
“Double-trigger” Change of Control
Arrangements
Our change of control agreements contain “double-trigger” arrangements that
require a termination of employment without cause or a constructive
termination of employment following a change of control of Infinera before
payments and benefits are triggered, unless otherwise set forth in a specific
equity award agreement.
Annual Compensation Risk
Assessment
The Compensation Committee annually conducts a compensation risk
assessment to determine whether our compensation arrangements, or
components thereof, create risks that are reasonably likely to have a material
adverse effect on Infinera.
Independent Compensation Consultant
Reporting Directly to Compensation
Committee
The Compensation Committee utilizes input from Compensia, an
independent compensation consultant that is retained directly by the
Compensation Committee and performed no services for Infinera during
fiscal 2023 other than services provided to the Compensation Committee.
Fiscal 2023 Compensation
Base Salaries
For fiscal 2023, the Compensation Committee reviewed the base salaries in March 2023 for each of our NEOs. After
considering market data provided by Compensia and taking into account each NEO’s respective individual performance
during this period, the Compensation Committee approved increases to the base salaries for the NEOs as shown in the
table below. The Compensation Committee did not consider these increases to be material changes for any of the NEO’s
base salaries.
26
The following table shows the annual base salary for each of our NEOs for fiscal 2022 and fiscal 2023.
Name
David W. Heard
Nancy L. Erba
David L. Teichmann
Nicholas R. Walden
Fiscal 2022
Annual Base
Salary
($)
Fiscal 2023
Annual Base
Salary
($)(1)
700,000
475,000
415,000
420,000
758,000
500,000
445,000
430,000(2)
_________________
(1)
2023 annual base salary increases became effective as of July 1, 2023.
(2)
In August 2023, Mr. Walden relocated from the United States to the United Kingdom (“UK”). Following such relocation, Mr. Walden
received his salary in Pound Sterling (“GBP”). The salary amount paid to Mr. Walden in GBP was determined by converting into GBP
his annual salary amount stated above in United States Dollars (“USD”) using the exchange rate of 1.286 USD to 1 GBP.
Annual Incentive Compensation
Target Bonus Opportunities. In March 2023, the Compensation Committee reviewed the target bonus opportunities
(which are expressed as a percentage of base salary) for fiscal 2023 for each of our NEOs, and determined that the target
bonus opportunity for our CEO, CFO and CLO would remain the same in fiscal 2023 as in fiscal 2022 and that the target
bonus opportunity for our Senior Vice President, Worldwide Sales would be increased as set forth in the table below for
fiscal 2023. In considering the target bonus opportunities for our NEOs, the Compensation Committee considered the
competitive market data provided by Compensia and its desire to provide appropriate competitive compensation to our
NEOs given their critical leadership roles. In the case of Mr. Walden, the Compensation Committee determined to increase
his target bonus opportunity from 90% to 100% of base salary. The Compensation Committee believed it would be
appropriate to provide additional incentive under his bonus opportunity to further emphasize achievement of the Company’s
profitable growth, in further alignment of pay versus performance for an important financial performance objective for the
Company.
The following table shows the annual target bonus opportunities for each of our NEOs for fiscal 2022 and fiscal 2023.
In addition, the Compensation Committee approved a variable cash compensation program for Mr. Walden for fiscal 2023.
Name
David W. Heard
Nancy L. Erba
David L. Teichmann
Nicholas R. Walden(1)
Target Bonus Opportunity as a
Percentage of Base Salary
Fiscal 2022
Target Bonus
Fiscal 2023
Target Bonus
125%
90%
75%
90%
125%
90%
75%
100%
_________________
(1)
For fiscal 2023, Mr. Walden’s total target bonus of 100% of base salary was split with 25% of his target value tied to the 2023
Corporate Bonus Plan and 75% of his target value tied to achievement under the Walden 2023 Variable Compensation Program.
Please see below for information regarding the Walden 2023 Variable Compensation Program.
2023 Bonus Plan Design. In March 2023, the Compensation Committee approved a 2023 corporate bonus plan (the
“2023 Corporate Bonus Plan”) that was applicable to our NEOs. The Company’s non-GAAP Operating Income achievement
in fiscal 2023 was used to determine the plan’s funding level. The Compensation Committee determined that this financial
performance objective supported the Company’s objectives for profitable growth. If the Company achieved the target level of
non-GAAP Operating Income of $98.3 million for fiscal 2023, the 2023 Corporate Bonus Plan would be funded at 100%. If
the Company achieved the threshold level of non-GAAP Operating Income of $78.6 million for fiscal 2023, the 2023
Corporate Bonus Plan would be funded at 80%. There was no guaranteed minimum funding under the plan if the threshold
is not met. If the Company achieved above the target level of non-GAAP Operating Income of $98.3 million for fiscal 2023,
then 50% of each additional dollar of non-GAAP Operating Income would be added to the bonus funding level. Although the
Compensation Committee did not set a maximum level of non-GAAP Operating Income under the 2023 Corporate Bonus
Plan, it retains authority to increase, reduce or eliminate any bonus award, and to increase, reduce or eliminate any amount
allocated to the bonus pool. The Compensation Committee reserves such discretion in order to take into consideration any
other relevant factors in determining bonus payouts, such as overall Company performance, functional performance,
individual performance, financial considerations, or any other internal or external factors that it deems appropriate. Based on
such other factors, bonus payouts may be adjusted up or down to pay out at a higher or lower level than otherwise would
become payable based solely on achievement of non-GAAP Operating Income.
27
For fiscal 2023, each of our NEOs participated in the 2023 Corporate Bonus Plan. Mr. Walden’s participation in the
2023 Corporate Bonus Plan was limited to 25% of his total target bonus opportunity. With respect to the remaining 75% of
his total target bonus opportunity, Mr. Walden participated in a separate variable compensation program, as discussed below
under the “Walden 2023 Variable Compensation Program.”
2023 Bonus Plan Results. The Compensation Committee considered the Company’s actual achievement level of non-
GAAP Operating Income of $87.2 million, which otherwise would result in achievement at the 88.7th percentile funding for
the 2023 Corporate Bonus Plan. In determining funding as well as payout for the NEOs, the Compensation Committee
considered additional factors, including that the Company’s revenue for fiscal 2023 was $1,614.1 million, which was below
our expectations. Further, the Company’s bookings for fiscal 2023 were below our expectations. Given these additional
factors relating to the Company’s overall performance for the year, and notwithstanding the achievement level of non-GAAP
Operating Income, the Compensation Committee believed it appropriate to apply negative discretion for funding bonuses
under the 2023 Corporate Bonus Plan and resolved to approve funding at 83.5% of target. The Compensation Committee
further considered departmental function objectives and performance with respect to financial goals overall for the Company
and applied discretion to reduce Ms. Erba’s bonus amount to approximately 68.9% of her target. The following table sets
forth the payouts that will be paid to our NEOs during the second fiscal quarter of 2024 under the 2023 Corporate Bonus
Plan. For a reconciliation of GAAP to non-GAAP Operating Income for fiscal 2023 referenced above or elsewhere in this
proxy statement, please see Appendix A.
Name
David W. Heard
Nancy L. Erba
David L. Teichmann
Nicholas R. Walden
Bonus
Amount
Earned
($)(1)
791,163
309,994
278,681
89,762
_________________
(1) Mr. Walden's bonus amount is stated in USD using the exchange rate of 1.286 USD to 1 GBP. Payout of his bonus will be in GBP
under our UK payroll.
The Compensation Committee also determined that the annual incentive compensation for our NEOs under the 2023
Corporate Bonus Plan would be payable entirely in cash.
The Compensation Committee decided it was appropriate that the annual incentive compensation for our NEOs with
respect to fiscal 2023 would be fully at risk and payable in cash based on achievement of the target goal given their ability to
drive the Company’s financial performance. This completed the transition started in fiscal 2022 of all of our NEOs back to a
more customary executive compensation framework continuing to emphasize closer alignment between the interests of our
NEOs and those of our stockholders.
Walden 2023 Variable Compensation Program. In March 2023, the Compensation Committee approved a fiscal
2023 variable compensation program for Mr. Walden (the “2023 Walden Variable Plan”). Under the 2023 Walden Variable
Plan, 75% of Mr. Walden’s total target bonus opportunity for fiscal 2023 is tied to achievement of financial targets for
bookings and non-GAAP product standard margin (the “Walden Financial Goals”). With respect to the Walden Financial
Goals under the 2023 Walden Variable Plan, the achievement of the bookings objective is weighted at 50% and the
achievement of the non-GAAP product standard margin objective is weighted at 50%. The Compensation Committee
believed that these objectives, as well as Mr. Walden’s participation in the 2023 Walden Variable Plan in addition to his
participation in the 2023 Corporate Bonus Plan, would be appropriate given Mr. Walden’s critical role leading the Company’s
efforts in driving revenue, and for focusing efforts on our profitable revenue growth by emphasizing bookings, which are
closely correlated with revenue balancing, and non-GAAP product standard margin, which is an important measure of the
Company’s business success.
Bookings
Minimum
Threshold
Bookings
Target
Bookings
Maximum
Non-GAAP
Product
Standard
Margin
Threshold
Non-GAAP
Product
Standard
Margin
Target
Non-GAAP
Product
Standard
Margin
Maximum
Amount
$1.7 billion
$1.9 billion
$2.1 billion
$660.1 million
$680.4 million
$707.5 million
Funding % of Target
35%
100%
200%
70%
100%
200%
Actual Results
$1.4 billion
$640.7 million
Achievement between the minimum threshold and the target level would be determined based on linear interpolation.
The maximum payout potential with respect to each of the bookings and non-GAAP product standard margin objectives was
28
set at 200%, with achievement between the target level and the maximum payout potential determined based on linear
interpolation.
We did not achieve the minimum threshold for the bookings or the non-GAAP product standard margin objectives
under the 2023 Walden Variable Plan. The CEO recommended that the Compensation Committee use discretion to provide
a partial payout with respect to the non-GAAP product standard margin achievement result in recognition of the significant
year-over-year improvement in non-GAAP product standard margin during fiscal 2023. After careful consideration of the
contribution of the Company’s improvement in non-GAAP product standard margin to the Company’s performance, the
Compensation Committee approved the use of discretion to approve a partial payout of $66,564 or 41.28% of the target
payout, attributable solely to the non-GAAP product standard margin objective. This payout amount was determined by
applying linear interpolation between the target and actual amount of non-GAAP product standard margin achieved. For a
reconciliation of GAAP to non-GAAP product standard margin for fiscal 2023 referenced above or elsewhere in this proxy
statement, please see Appendix A.
Fiscal 2024 Bonus Plan. In March 2024, the Compensation Committee approved a fiscal 2024 Bonus Plan (the “2024
Corporate Bonus Plan”), which will be payable in cash. Mr. Walden will participate in the 2024 Corporate Bonus Plan as to
50% of his target incentive opportunity and will also participate in a separate incentive compensation program as to 50% of
his target value that is tied to achievement of new financial targets for bookings and standard margin, measured on a non-
GAAP basis. The Compensation Committee determined to shift a greater percentage of Mr. Walden’s target incentive
compensation to be allocated to his participation in the 2024 Corporate Bonus Plan (as compared to the prior fiscal year) to
further enhance alignment with the rest of the executive team.
Long-Term Incentive Compensation
Our long-term incentive compensation opportunities are delivered in the form of equity awards. Under the 2016 Plan,
the Compensation Committee grants equity awards to eligible employees, including our NEOs. All awards to our NEOs were
made pursuant to the 2016 Plan. Annual equity awards for NEOs are generally approved by the Compensation Committee
during the first open trading window of each new calendar year. The Compensation Committee actively monitors our annual
aggregate equity utilization as measured by our burn rate.
Equity Compensation Design. The Compensation Committee believes that it is in the best interests of the Company
and our stockholders to grant a combination of time-based and performance-based equity awards to senior level employees,
including our NEOs. It also believes that our performance-based equity awards foster a “pay-for-performance” culture and
multi-year vesting schedules create longer-term incentives that maintain alignment of the interests of our NEOs with those of
our stockholders. Our NEOs benefit from these equity awards based on our sustained performance over time and the ability
of our NEOs to create the results that drive stockholder value.
In determining the appropriate mix of such equity awards, the Compensation Committee considered how each equity
vehicle supports our compensation strategy as follows:
Type of Award
Performance Share Award
Restricted Stock Unit Award
Description
Why It Is Used
•
•
•
•
Provides the opportunity to earn shares
of Infinera common stock upon the
achievement of pre-established
performance objectives.
If the threshold performance level is not
achieved, the entire portion of the award
tied to such performance objective is
forfeited.
Provides the opportunity to earn a
specified number of shares of Infinera
common stock subject to the
participant’s continued employment for a
specified period.
Typically has a three-year or four-year
vesting period to encourage a long-term
perspective and to encourage key
employees to remain at Infinera.
•
•
•
•
•
Supports pay-for-performance
philosophy.
Increases alignment with interests of
stockholders.
Supports retention and succession
planning.
Provides a direct incentive for future
performance.
Useful in recruiting new executives.
Target Award Size. In determining the size of these annual equity awards, the Compensation Committee considered
the factors described above in the sections entitled “Use of Market Data” and “Relevant Qualitative Factors,” with particular
attention to market data, internal equity considerations, the potential dilutive impact of the equity awards, and the amount
29
and value of unvested equity awards held by each of our NEOs. For our CEO, the Compensation Committee also
considered his tenure and performance in the role in determining the size of his annual equity awards. The Compensation
Committee believed a combination of time-based and performance-based equity awards promote close alignment of the
interests of our NEOs with those of our stockholders.
For fiscal 2023, the Compensation Committee first determined the target value of long-term incentive compensation for
each executive. The number of RSUs and performance shares granted to each executive was then determined based on an
assumed stock price of $8.00 per share and assuming a 55% allocation of target value into performance shares for
Mr. Heard, our CEO, and a 50% allocation of target value into performance shares for our other NEOs. Due to Mr. Heard’s
significant responsibilities in leading the Company and executing on our business strategy, the Compensation Committee
believed it appropriate for the mix of Mr. Heard’s equity awards to be more heavily weighted toward performance shares as
compared to the other NEOs. The Compensation Committee determined to utilize an $8.00 per share reference price in
order to facilitate the equity planning process, which was set after considering recent stock price history and volatility at a
price per share that was projected to be higher than the stock price per share at the date of grant. The actual grant date
value for these equity awards was below $8.00 per share, and as a result, the target value approved by the Compensation
Committee differs from the value of equity reported in the Summary Compensation Table set forth on page 41 below. The
following table sets forth the fair market value of each award granted to our NEOs in March 2023 on the basis of the $8.00
per share reference price used by the Compensation Committee and the actual grant date per share value.
Grant Date
Fair Value
of RSUs
($)(1)
2,311,875
867,150
Value of
Performance
Shares
Based on
$8.00 Per
Share
Reference
Price
($)
Grant Date
Fair Value of
Performance
Shares
($)(1)
RSUs
Granted
(#)
Value of
RSUs Based
on $8.00 Per
Share
Reference
Price
($)
Performance
Shares
Granted
(#)
Grant Date
David W. Heard
3/13/2023
412,500 3,300,000
2,825,625
337,500 2,700,000
Nancy L. Erba
David L. Teichmann
Nicholas R. Walden
3/9/2023
3/9/2023
3/9/2023
117,500
57,500
940,000
460,000
65,000
520,000
867,150
424,350
479,700
117,500
940,000
57,500
460,000
65,000
520,000
424,350
479,700
_________________
(1)
The fair market value of our common stock (based on the closing sale price) was $7.38 per share for awards granted on March 9, 2023
and $6.85 per share for awards granted on March 13, 2023.
Fiscal 2023 Equity Awards. In March 2023, the Compensation Committee granted annual equity awards for fiscal 2023
in the form of a time-based RSU award and a performance share award to each of our NEOs. The following table sets forth
the equity awards granted to our NEOs in March 2023.
Name
David W. Heard
Nancy L. Erba
David L. Teichmann
Nicholas R. Walden
Number of
Shares
Subject to
2023
RSU Awards(1)
337,500
117,500
57,500
65,000
Number of
Shares
Subject to
2023
Performance
Share Awards
(at Target)
412,500
117,500
57,500
65,000
________________
(1)
The RSU awards vest over a three-year period, with one-third of the underlying shares vesting on April 5, 2024, and one-twelfth of the
underlying shares vesting quarterly thereafter, in each case subject to the NEO’s continued service to the Company through the
applicable vesting date.
Performance Share Awards
Determining the Performance Goal. In determining the performance criteria for the 2023 performance share awards for
our NEOs, the Compensation Committee considered the importance of growing our margins. The Compensation Committee
also considered that the performance share awards should be designed to work in concert with grants made in previous
years that will have overlapping performance cycles with the awards granted in 2023. Fiscal 2021 awards were structured to
encourage executives to accelerate our profitable revenue growth combined with non-GAAP Operating Income growth.
30
Fiscal 2022 awards were structured to encourage executives to focus on profitability, to accelerate the Company’s external
pluggables sales and to accelerate cost savings from using the Company’s pluggables in our products.
Performance Criteria. Accordingly, the Compensation Committee decided the fiscal 2023 performance share
awards would be subject to a performance goal relating to non-GAAP gross margin (the “2023 PSA”). The performance
period of the 2023 PSAs covers the three years of fiscal 2023 through fiscal 2025 (the “2023 PSA Performance Period”) and
the 2023 PSA requires achievement of a non-GAAP gross margin goal at a specified level (the “2023 PSA Goal”) during the
2023 PSA Performance Period, as further explained below. We estimate that the achievement of the 2023 PSA performance
goals will be challenging but possible based on effective execution of and focus on our long-term business model during the
2023 PSA Performance Period.
In establishing the performance goals for our NEOs under the 2023 PSA, the Compensation Committee reflected that
the prior awards included goals targeted at specific financial objectives that ultimately tie to stockholder value, and that the
2023 awards should as well. The Compensation Committee believes the overlapping, multiyear performance period design
provides our NEOs with significant incentives to achieve various objectives that are important for our long-term success.
Achievement and Vesting. If the non-GAAP gross margin is certified by the Compensation Committee to be at a
certain percentage level for the last year of the 2023 PSA Performance Period, fiscal 2025 (the “Minimum Threshold”), then
50% of the target number of shares will become eligible shares. If the non-GAAP gross margin is certified by the
Compensation Committee to be at a higher specified percentage level for fiscal 2025 (the “Target Threshold”), then 100% of
the target number of shares will become eligible shares. If the non-GAAP gross margin is certified by the Compensation
Committee to be at a higher specified percentage level for fiscal 2025 (the “Maximum Threshold”), then 150% of the target
number of shares will become eligible shares. If the Minimum Threshold is not attained, then no shares will become eligible
shares. If non-GAAP gross margin for fiscal 2025 is certified by the Compensation Committee to be between the Minimum
Threshold and the Target Threshold, then the percentage of shares that become eligible shares will be determined by
applying linear interpolation between the Minimum Threshold and the Target Threshold. If non-GAAP gross margin for fiscal
2025 is certified by the Compensation Committee to be between the Target Threshold and the Maximum Threshold, then the
percentage of shares that become eligible shares will be determined by applying linear interpolation between the Target
Threshold and the Maximum Threshold. The number of shares that become eligible shares may not exceed 150% of the
target number of shares. Shares that become eligible for fiscal 2025 performance will vest upon the applicable certification
date, subject to the NEO remaining a service provider through the applicable vesting date. If non-GAAP gross margin is
certified by the Compensation Committee to be at the Target Threshold level or greater for the second year of the 2023 PSA
Performance Period, for fiscal 2024 (“Early Achievement”), then 150% of the target shares will become eligible shares and
2/3 of such eligible shares will vest on such certification date and the remaining 1/3 of eligible shares will vest on the last day
of fiscal 2025, subject to the NEO remaining a service provider through the applicable vesting date.
In the event a change in control occurs during the 2023 PSA Performance Period but after fiscal 2024, the
Compensation Committee will complete a certification for fiscal 2024 to the extent a certification has not yet been completed,
and no later than immediately prior to the change in control. In the event of a change in control that occurs during the 2023
PSA Performance Period and none of the shares have become eligible shares, then 100% of the target shares will have
their vesting accelerated as of immediately prior to the change in control, provided that the NEO remains a service provider
through the date of the change in control. In the event of a change in control that occurs during the 2023 PSA Performance
Period but shares have already become eligible shares pursuant to Early Achievement, then 100% of the shares will
become eligible shares and will have their vesting accelerated as of immediately prior to the change in control, provided that
the NEO remains a service provider through the date of the change in control.
Outstanding Performance Share Awards Granted in Prior Fiscal Years. The following table provides information
regarding outstanding performance share awards granted prior to fiscal 2023 that were eligible to be earned in fiscal 2023
by our NEOs based on the achievement of performance with respect to the objectives underlying such performance share
awards.
31
Total
Number of
Performance
Shares
Remaining
at Target
(#)
Target Number
of Shares that
Could Vest
for Fiscal 2023
Performance
Period
(#)
Maximum
Number of
Shares that
Could Vest
for Fiscal 2023
Performance
Period
(#)
258,000
346,666
60,000
92,500
50,000
55,000
55,000
64,000
258,000
346,666
60,000
92,500
50,000
55,000
55,000
64,000
258,000
346,666
60,000
92,500
50,000
55,000
55,000
64,000
Fiscal
Year
of
Grant
2021 (1)
2022 (3)
2021 (1)
2022 (3)
2021 (1)
2022 (3)
2021 (1)
2022 (3)
Actual Number
of Shares
Vested for
Fiscal 2023
Performance
Period
(#)
179,567 (2)
0 (4)
41,760 (2)
0 (4)
34,800 (2)
0 (4)
38,279 (2)
0 (4)
Name
David W. Heard
Nancy L. Erba
David L. Teichmann
Nicholas R. Walden
_________________
(1)
In fiscal 2021, the Compensation Committee granted to the NEOs in the table above a performance share award (the “2021 PSA”) with
two sets of performance goals that could be earned during fiscal 2021 through fiscal 2023 (the “2021 PSA Performance Period”), with
each set of goals covering one-half of the 2021 PSA (each such half, a tranche). The goals applicable to the first tranche included both
an operating income goal, measured on a non-GAAP basis over a full fiscal year during the performance period, and a revenue goal,
measured over a full fiscal year during the performance period. If for a fiscal year, the operating income goal for the first tranche was
achieved at $50 million or greater and the revenue goal was achieved at $1.66 billion or greater, then 100% of such tranche (half of the
2021 PSA) becomes eligible to vest. Alternatively, if in fiscal 2023, the operating income goal is achieved at $50 million or greater and
the revenue goal is achieved at $1.56 billion or greater, then 50% of such tranche will become eligible to vest (and linear interpolation
is applied with respect to achievement of revenue between $1.56 and $1.66 billion). The second tranche required an operating income
goal, measured on a non-GAAP basis over a full fiscal year during the performance period, to be achieved at $116 million or greater for
100% of such tranche (half of the 2021 PSA) to become eligible to vest. Alternatively, if in fiscal 2023, the operating income goal for the
second tranche was achieved at $78 million or greater, then 50% of such tranche will become eligible to vest (and linear interpolation is
applied with respect to achievement of operating income between $78 million and $116 million). For purposes of the 2021 PSA, non-
GAAP Operating Income was calculated by excluding from the Company’s GAAP operating income the following: acquisition-related
deferred revenue adjustment, stock-based compensation expense, amortization of acquired intangible assets, acquisition and
integration costs, restructuring and other related costs, inventory related charges, global distribution center transition costs, warehouse
fire loss (recovery) and litigation charges.
(2)
(3)
In May 2024, following approval by the Audit Committee of the Company’s fiscal 2023 non-GAAP Operating Income achieved of $87.2
million, and revenue achieved of $1,614.1 million, the Compensation Committee certified that (i) based on the achievement level of the
goals for the first tranche of the 2021 PSA, 77.06% of the shares subject to the 2021 PSA became eligible to vest and 22.94% of the
shares subject to the 2021 PSA were forfeited; and (ii) based on the level of achievement of the goal for the second tranche of the
2021 PSA, 62.14% of the shares subject to the 2021 PSA became eligible to vest and 37.86% of the shares subject to the 2021 PSA
were forfeited. For a reconciliation of GAAP to non-GAAP Operating Income for fiscal 2023 referenced above or elsewhere in this
proxy statement, please see Appendix A.
In fiscal 2022, the Compensation Committee granted to the NEOs in the table above a performance share award (the “2022 PSA”) that
would be subject to two performance goals, each covering one-half of the fiscal 2022 PSA (each such half, a tranche). The first tranche
was subject to the requirement that a GAAP net income goal be achieved at a specified level for a full fiscal year during a performance
period covering fiscal 2023 through fiscal 2024. Upon achievement of the performance during the performance period, 100% of the
shares subject to the first tranche will become eligible to vest. If the GAAP net income goal is not achieved at such specified level
during the performance period, then none of the shares subject to the first tranche would become eligible to vest. The second tranche
of the 2022 PSAs was subject to a requirement to achieve a specified level of gross profit dollars determined in accordance with GAAP
generated by revenue from external sales of our pluggables and by cost savings resulting from use of our pluggables in our products
during the performance period covering fiscal 2022 through fiscal 2024. If the total amount from these gross profit dollars meets a
threshold level during the relevant performance period, then 100% of the shares subject to the second tranche will become eligible to
vest. If the gross profit dollars meets a lower specified level or greater during the relevant performance period, then 25% of the shares
subject to the second tranche will become eligible to vest. If the gross profit dollar amount does not meet this lower specified level
during the relevant performance period, then none of the shares subject to the second tranche would become eligible to vest. We
estimate that the achievement of the goals under the 2022 PSAs would be challenging but possible based on effective execution of
and focus on our long-term business model during the respective performance periods.
(4) We did not achieve the performance objectives for the 2022 PSA during fiscal 2023. As a result, as of the end of fiscal 2023, the target
number of shares subject to the 2022 PSA remain eligible to be earned and vest during the applicable performance periods.
Employee Benefits and Perquisites
Generally, our NEOs are only eligible to receive the same benefits as our U.S. salaried employees. Upon relocation to
the UK in 2023, Mr. Walden has received our standard UK benefits package applicable generally to our other full-time
employees based in the UK. Infinera and the Compensation Committee believe this approach is reasonable and consistent
with the overall compensation objectives to attract and retain employees. For our NEOs based in the U.S., these benefits
32
include medical, dental, vision and disability benefits, a Section 401(k) plan, and other plans and programs, including the
2007 ESPP, made available on a broad basis to other eligible employees. We provide a matching contribution of up to
$2,500 under the Section 401(k) plan that is applicable to all eligible participants, including our NEOs other than Mr. Walden
following his relocation. Mr. Walden’s benefits in the UK include similar benefits to the other NEOs except for the Section
401(k) plan. Mr. Walden is eligible for a UK Pension plan similar to other UK employees plus other plans and programs,
including the 2007 ESPP, made available on a broad basis to other eligible employees based in the UK. Employee benefits
and perquisites are reviewed periodically to ensure that benefit levels remain competitive but are not included in the
Compensation Committee’s annual determination of the total compensation for each of our NEOs.
All exempt U.S. employees, at any U.S. work location, participate in our “As Needed” Flexible Time-Off (“FTO”)
Program providing flexible time off. Under this program, these employees may schedule FTO as they see fit and as business
necessity allows, although they must continue to meet all job expectations and remain responsible for ensuring appropriate
coverage for the time they will be out of the office. Under this program, FTO does not accrue for these employees. The FTO
Program is not available in the UK, and Mr. Walden receives the standard UK vacation benefits.
From time to time, Infinera may provide other benefits based on the particular circumstances and any business needs
(for example, in order to recruit an individual to join the Company or retain key employees).
In 2023, Infinera agreed to pay up to $238,000 in relocation costs for Mr. Walden, SVP, Worldwide Sales, in connection
with his move to the UK on the basis of our belief that such relocation would strengthen Infinera’s strategic focus on
improving global sales coverage in key markets outside of North America. Please see footnote 5 to the Summary
Compensation Table set forth on page 41 below for the lower total amount of relocation costs actually paid by Infinera in
2023.
Overview of Our Executive Compensation Program Philosophy and Process
Compensation Objectives and Philosophy
Our executive compensation program is designed to attract, retain, and reward talented executive officers and to
motivate them to pursue our corporate objectives, while fostering the creation of long-term value for our stockholders. To
achieve this mission, we take a “pay-for-performance” approach that forms the foundation for the design of our executive
compensation program. The Compensation Committee also designs the various components of our executive compensation
program to support our company culture and performance (i.e., increasing levels of accountability through the use of “at risk”
pay for more senior level employees), current business priorities and strategy and product development cycles, and takes
into consideration in its design the current market practices of our peer group. Further, certain elements of our compensation
program measure progress on similar metrics in the short and long term and contain rewards for our executives that are
earned when certain strategically important financial milestones are met and sustained. We believe this program is in the
best interests of and aligned with our stockholders and maximizes the incentive for our employees and executive team to
deliver stockholder value.
Advisory Vote on Fiscal 2023 Named Executive Officer Compensation—“Say-on-Pay” Vote
In 2023, stockholders were provided with the opportunity to cast an advisory (non-binding) vote on the compensation
of our NEOs (a “say-on-pay” proposal) for fiscal 2022. Our stockholders overwhelmingly approved this say-on-pay proposal,
with more than 98% of votes cast voting in favor of our executive compensation program. Noting the results of this vote, the
Compensation Committee considered this stockholder approval when making compensation decisions for fiscal 2023 as well
as fiscal 2024.
In light of the 2023 say-on-pay vote, the Compensation Committee maintained the consistent general approach to our
executive officer compensation program for fiscal 2023. This included a continued emphasis on pay-for-performance through
the use of performance shares that reward executive officers only if they deliver value for our stockholders.
The Compensation Committee will continue to consider input from our stockholders as reflected in the outcome of our
annual say-on-pay vote when making executive compensation program decisions.
Compensation-Setting Process
Role and Authority of Compensation Committee. The Compensation Committee is responsible for our executive
compensation program and all related policies and practices. The Compensation Committee has the responsibility to
establish and approve the compensation of each of our executive officers, including our NEOs. In addition, the
Compensation Committee reviews and administers our equity and employee benefit plans and programs, which are
generally available to our employees, including our NEOs. The Compensation Committee also has the authority to engage
33
its own advisors to assist it in carrying out its responsibilities, and the reasonable compensation for such advisor services is
paid by Infinera.
Role of Compensation Consultant. During fiscal 2023, the Compensation Committee engaged the services of
Compensia, a national compensation consulting firm, as its independent compensation consultant to provide advice on
matters relating to the compensation of our executives and non-employee directors. Compensia attended several of the
Compensation Committee’s meetings during fiscal 2023 and provided the Compensation Committee with an analysis of
industry-sector competitive market data regarding NEO compensation, information on compensation trends, peer group and
general market data, as well as assistance with the parameters used to determine the peer group, base salary, incentive
plan design, equity compensation and the structure of our executive compensation program. During fiscal 2023, Compensia
also provided general observations about our compensation programs and reviewed and provided input on this
Compensation Discussion and Analysis section.
Compensia reports directly to the Compensation Committee. During fiscal 2023, Compensia interacted with
management at the direction of the Compensation Committee but did not provide any other services for Infinera or its
management team. Compensia’s fees in fiscal year 2023 were paid by Infinera. The Compensation Committee annually
reviews the independence of its compensation consultant and during fiscal 2023 determined that there were no conflicts of
interest in connection with Compensia’s work.
Determination of CEO Compensation. Compensia provides market data and considerations for the Compensation
Committee regarding the amount and form of our CEO’s compensation. As part of this process, the Compensation
Committee considers input from the Board and feedback from the Chair of the Board, in particular with respect to the
performance of our CEO. After considering the feedback and recommendations received, all decisions regarding our CEO’s
compensation are made by the Compensation Committee, based on its own judgment and after considering the interests of
our stockholders, in executive sessions excluding our CEO.
Determination of Non-CEO NEO Compensation. As a result of his close working relationship with each of the other
NEOs, our CEO is asked to provide his assessment of their performance to the Compensation Committee, including
considerations regarding retention and importance of their contributions to Infinera. Our CEO is assisted by our Chief
Human Resources Officer in making these assessments. Our CEO then presents his performance assessment of the other
NEOs and makes formal recommendations to the Compensation Committee regarding adjustments to base salary, annual
cash incentive award opportunities, and equity awards for our NEOs (other than himself). While the Compensation
Committee considers the recommendations of our CEO in determining compensation for our other NEOs, ultimately its
decisions are based on its own judgment and the interests of our stockholders. None of our NEOs makes any
recommendations regarding his or her own compensation and none of our NEOs are present at meetings at the time their
compensation is determined.
Executive Compensation Elements
We consider the following to constitute the key elements of our executive compensation programs. We believe each is
necessary to attract, retain and motivate our executive officers, on whom our success largely depends.
Pay Element
Base Salary
Type
Fixed
Form/Purpose
We pay base salaries to attract, retain and motivate our executive
officers for their day-to-day contributions.
Annual Incentive
Compensation
Variable
We provide annual incentive cash compensation to link payments to the
achievement of our annual financial and/or operational objectives.(1)
Long-Term Incentive
Compensation
Variable
________________
We provide long-term incentive compensation delivered in the form of
time-based and performance-based equity awards to more closely align
the interests of our executive officers with those of our stockholders and
provide significant motivational and retention value to our executive
officers.
(1)
In response to impacts from the COVID-19 pandemic, we cancelled this program for the second half of fiscal 2020 and all of fiscal
2021. In fiscal 2022, we fully reinstated an annual incentive cash compensation program for our CEO and CFO, and for our other
NEOs, we treated fiscal 2022 as a transition year with 50% of the target value of their annual incentive compensation program issued
in retention RSUs and 50% of the target value in cash. In 2023, the annual incentive cash compensation program was fully reinstated
for all of our NEOs, with our SVP, Worldwide Sales participating as to 25% of his cash target value and also participating in a separate
34
incentive compensation program as to 75% of his target value that was tied to achievement of new financial targets for bookings and
non-GAAP product standard margin.
In addition, we also provide employee benefits that are generally available to all our employees including our NEOs,
and certain severance and “double-trigger” change of control payments and benefits pursuant to change of control
severance agreements entered into with our NEOs or our Executive Severance Policy in which NEOs participate, as
described further below.
Allocation of Compensation Across Pay Elements
In determining how to allocate an NEO’s target total direct compensation opportunity among these various elements,
the Compensation Committee considers market-competitive practices for companies of a similar size and with a comparable
business focus. Individual retention considerations are also factored in the Compensation Committee’s final determination of
target total direct compensation. Equity awards, which for fiscal 2023 consisted of awards of time-based RSUs and
performance shares, represented the largest component of our NEOs’ target total direct compensation opportunity. This
approach was designed to encourage sustained, long-term performance and to ensure closer alignment of the interests of
our NEOs with those of our stockholders. Consistent with our “pay-for-performance” philosophy, a significant portion of our
NEOs’ fiscal 2023 target total direct compensation opportunity was completely “at risk,” including 55% of Mr. Heard’s target
total direct compensation opportunity. We define “at risk” compensation as opportunities for which vesting eligibility or payout
is contingent upon achievement of specified performance conditions. In fiscal 2023, this included annual target incentive
compensation under the 2023 Corporate Bonus Plan and performance share awards, where the value of performance
shares is included in the charts below based on the grant date target value of shares awarded.
The following charts show the target total direct compensation mix for fiscal 2023 for Mr. Heard and our other NEOs,
with the value of equity awards determined using grant date fair value.
Role of the Compensation Peer Group and Market Data
In making compensation decisions for our executive officers, the Compensation Committee reviews and analyzes
competitive market practices using data prepared by Compensia that is drawn from a group of peer companies, as
supplemented by data from the Radford Global Technology survey as not all peer companies provide publicly available data
for each role.
In September 2022, the Compensation Committee reviewed the peer group used for executive compensation decision-
making for purposes of fiscal 2023 compensation planning. The target selection criteria for the peer group identified in
September 2022 and used for fiscal 2023 compensation planning were:
•
•
Industry: companies in the communications equipment sector and Infinera’s direct competitors, as well as other
companies in broader technology sectors, with a focus on companies that overlap with key elements of Infinera’s
business;
Annual Revenue: $726 million to $2.9 billion;
• Market Capitalization: $312 million to $5 billion; and
•
Headquarters and Location: Companies that have headquarters in the U.S., with a preference for Bay Area-
headquartered companies.
35
FY23 Pay Mix: CEOBase Salary11%Target Incentive14%Time-Based RSUs34%Performance Shares41%FY23 Pay Mix: Other NEO AverageBase Salary23%Target Incentive20%Time-Based RSUs28%Performance Shares28% Our peer group for fiscal 2023 compensation planning consisted of the following companies:
ADTRAN Holdings, Inc. [ADTN]
Advanced Energy Industries, Inc. [AEIS]
Calix, Inc. [CALX]
Ciena Corporation [CIEN]
Cirrus Logic, Inc. [CRUS]
Diodes Incorporated [DIOD]
Extreme Networks, Inc. [EXTR]
Lumentum Holdings Inc. [LITE]
MaxLinear, Inc. [MXL]
NETGEAR, Inc. [NTGR]
NetScout Systems, Inc. [NTCT]
OSI Systems, Inc. [OSIS]
Ribbon Communications Inc. [RBBN]
Synaptics Incorporated [SYNA]
ViaSat, Inc. [VSAT]
Viavi Solutions Inc. [VIAV]
Due to the limited data available from the peer group with respect to the roles of certain of our NEOs, the
Compensation Committee also reviewed market data prepared by Compensia that was derived from the Radford Global
Technology survey to supplement the available peer group data in determining the compensation of Mr. Teichmann, our
Chief Legal Officer and Mr. Walden, our Senior Vice President, Worldwide Sales. The Compensation Committee reviewed
data from the Radford Global Technology survey in the aggregate and did not review data of any specific companies
comprising such survey. In this discussion, where we refer to “market” levels of pay and the “market data,” we are referring
to the combined compensation peer group and survey data described above that were then in effect and applicable to our
NEOs.
Use of Market Data
For its fiscal 2023 compensation decisions, the Compensation Committee continued to maintain a holistic and flexible
approach in its use of market data. The Compensation Committee’s goal is generally to set all elements of compensation to
be competitive, using a balanced approach that does not use rigid percentiles to target pay levels for each compensation
element, but instead makes its compensation decisions based on a variety of relevant factors, including those listed below.
While the Compensation Committee continues to review and reference market data, the data generally is used to inform the
Compensation Committee of market practices to ensure that our executive compensation program remains generally
competitive with our peers. In addition to the market data, several other factors are taken into account in setting the amount
of each NEO’s target total direct compensation opportunity. These factors include:
Recruitment, retention and
historical factors
The Compensation Committee reviews existing NEO compensation and
retention levels relative to estimated replacement cost with respect to the
scope, responsibilities and skills required of the particular position.
Lack of directly comparable data for
some of our key roles
Compensation data for some of our key positions are often not explicitly
reported by companies in our compensation peer group or survey data. This
results in limited sample sizes and/or inconclusive data that can be
misleading if targeting a specific percentile for market positioning.
Market positioning may be distorted
by the source of the data
Certain elements of compensation reported from one source can be
consistently higher or lower than the data collected from another, given
differences in methods and samples used by each source to collect market
data. Given this variability and volatility within the market data, the
Compensation Committee has determined that targeting pay levels at
specific percentiles of this data could result in outcomes that do not align with
the internal value and strategic importance of various roles at Infinera.
Desire to account for other factors
not captured in the market data
As discussed below, the Compensation Committee also considers several
qualitative factors.
36
Relevant Qualitative Factors
In addition to our uses of competitive market data as described above, the Compensation Committee considers a
range of subjective and qualitative factors when making compensation decisions for our NEOs, including:
•
•
•
•
•
•
•
•
•
•
The role the executive officer plays and the importance of such individual’s contributions to our ability to execute
on our business strategy and to achieve our strategic objectives;
Each executive officer’s tenure, skills and experience;
The responsibilities and particular nature of the functions performed or managed by the executive officer;
Our CEO’s recommendations and his assessment of each executive officer’s performance (other than his own
performance), and with respect to the CEO’s performance, assessment and input by the Board including
feedback from the Chair of the Board;
The value of unvested equity awards held by each executive officer and in comparison to other members of our
executive management team and senior employees;
Internal pay equity across the executive management team;
The impact of our compensation decisions on key financial and other measures such as our equity award “burn
rate”;
Our overall performance as compared to internal plans and external benchmarks;
The potential impact on stockholder dilution of our compensation decisions relative to peers and historical
practices; and
Competitive labor market pressures and the likely cost, difficulty and impact on our business and strategic
objectives that would be encountered in recruiting a replacement for the role filled by each of our NEOs.
The Compensation Committee does not assign relative weights or rankings to any of these factors and does not solely
use any quantitative formula, target percentile or multiple for establishing compensation among the executive officers or in
relation to the market data. Instead, the Compensation Committee relies upon its members’ knowledge and judgment in
assessing the various qualitative and quantitative inputs it receives regarding each individual and makes compensation
decisions accordingly.
Additional Information Regarding Our Compensation Practices
The estimated payments and benefits that would be received by each NEO in connection with a qualifying termination
of employment, as described immediately below, are presented in the section entitled “Estimated Payments and Benefits
upon Termination, Change of Control or Death/Disability” below.
Change of Control Payments and Benefits
The Compensation Committee considers maintaining a stable and effective management team to be essential to
protecting the best interests of Infinera and its stockholders. Accordingly, Infinera has entered into Change of Control
Agreements (the “COC Agreements”) with each of our NEOs to encourage their continued attention, dedication and
continuity with respect to their roles and responsibilities without the distraction that may arise from the possibility or
occurrence of a change of control of Infinera. The current terms of these COC Agreements are included below.
An NEO will receive payments and benefits under the COC Agreement only if his or her employment is terminated
without “cause,” or by him or her as a result of a “constructive termination” (as more fully described in the section entitled
“Estimated Payments and Benefits upon Termination, Change of Control or Death/Disability” below), beginning on the date
three months prior to the first change of control to occur following the effective date of the COC Agreement and ending on
the date 18 months following a change of control of Infinera. The Compensation Committee believes that this “double-
trigger” structure provides an appropriate balance between the corporate objectives described above and the potential
compensation payable to each NEO upon a change of control. The Compensation Committee also believes that should
Infinera engage in any discussions or negotiations relating to a change of control that the Board believes is in the best
interests of our stockholders, these COC Agreements will help to ensure that our NEOs remain focused on the
consummation of such potential transaction, without significant distraction or concern regarding their personal
circumstances, such as continued employment.
The following terms apply with respect to each of the NEOs if Infinera undergoes a change of control and the NEO’s
employment is terminated without cause or as a result of a constructive termination during the Change of Control Period
37
(that is, the period beginning three months prior to, and ending eighteen months after, a change of control), subject to such
individual entering into and not revoking a release of claims in our favor within 60 days of the termination date:
•
•
•
•
100% of all outstanding equity awards will vest (awards based on the achievement of performance criteria will
vest as to 100% of the amount of the award assuming the performance criteria have been achieved at target
levels, unless otherwise provided in the agreement relating to such performance-based award);
Our CEO will be paid a lump sum severance payment (less applicable tax withholdings) equal to two times his
annual base salary and our other NEOs will be paid a lump sum severance payment (less applicable tax
withholdings) equal to one and one-half times their annual base salary;
Our CEO will be paid a lump sum severance payment (less applicable tax withholdings) equal to two times his
annual target incentive bonus amount and our other NEOs will be paid a lump sum severance payment (less
applicable tax withholdings) equal to one and one-half times their annual target incentive bonus amount; and
Our CEO will be reimbursed for premiums under COBRA for a period of up to 24 months and our other NEOs will
be reimbursed for premiums under COBRA for a period of up to 18 months.
Each COC Agreement will have an initial term of three years commencing on the effective date of such COC
Agreement. On the third anniversary of the effective date, such COC Agreement will renew automatically for an additional,
one-year term unless either party provides the other party with written notice of non-renewal at least one year prior to the
date of automatic renewal.
In addition, the award agreements of certain performance share awards granted to our NEOs specify additional terms
that apply to such awards in the event of our change in control. These additional terms are described below on page 50 in
the section titled “Estimated Payments and Benefits Upon Termination, Change Of Control Or Death/Disability.”
Executive Severance Policy
In addition to the change of control-related payments and benefits discussed above, the Compensation Committee has
taken appropriate steps to provide competitive post-employment compensation arrangements that promote the continued
attention, dedication and continuity of the members of our senior management team, including our NEOs, and enable us to
continue to recruit talented senior executive officers. Accordingly, the Compensation Committee has adopted an executive
severance policy, under which the following severance payments and benefits will become payable if the employment of one
of our NEOs is terminated by us without “cause” (as defined in the policy) subject to such individual entering into and not
revoking a release of claims in our favor:
•
•
Our CEO will be paid a lump sum severance payment equal to one and one-half times his annual base salary,
and our other NEOs will be paid a lump sum severance payment equal to their annual base salary; and
Our CEO will be reimbursed for premiums under COBRA for a period of 18 months, and our other NEOs will be
reimbursed for premiums under COBRA for a period of 12 months.
If an NEO’s employment with Infinera is less than one year, the amount of severance payable to such individual will be
equal to the lesser of (x) the base salary paid to such individual during his or her period of employment, or (y) the severance
amount set forth above.
Acceleration of Equity Awards upon Death or Disability
In addition, all awards granted under our equity incentive plans permit accelerated vesting in the event of termination
of service due to an employee’s death or terminal illness (with exceptions in certain circumstances). Because we do not
have any policy with respect to severance payments or benefits in the event of an employee’s death or disability other than
certain disability and life insurance benefits generally available to our employees, the Compensation Committee believes
that in the event of an employee’s death or terminal illness, it would be appropriate to provide the accelerated vesting of his
or her RSU awards and performance share awards at target.
Equity Award Subcommittee
The Compensation Committee has delegated to a subcommittee (the “Subcommittee”) the authority to grant new hire,
retention, promotion and consultant equity awards to non-executive employees pursuant to certain pre-approved guidelines.
At this time, the sole member of the Subcommittee is our CEO.
The Subcommittee generally approves the award by written consent on the second Monday of each month to approve
new hire, retention, promotion and consultant equity awards. Annual focal equity awards are approved by the Compensation
Committee. The delegation to the Subcommittee does not include the authority to grant equity awards to new employees
who are or are reasonably expected to become Section 16 Officers or to current Section 16 Officers.
38
Compensation Recovery Policy
We maintain a compensation recovery policy that applies to our Section 16 Officers (which includes each of our NEOs)
and which complies with applicable Nasdaq listing rules and SEC regulations. Under the policy, if we are required to prepare
an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement
under the securities laws, including any required accounting restatement to correct an error in previously issued financial
statements that is material to the previously issued financial statements, or that would result in a material misstatement if the
error were corrected in the current period or left uncorrected in the current period (an “Accounting Restatement”), then the
Compensation Committee must determine the Excess Compensation, if any, that must be recovered.
This policy applies to certain types of incentive-based compensation received on or after October 2, 2023 during the
covered period that have been received by a person after such person became an Executive Officer and the person served
as an Executive Officer at any time during the performance period to which the incentive-based compensation applies. The
“Excess Compensation” that is subject to recovery under the policy is the amount of eligible incentive-based compensation
that exceeds the amount of such incentive-based compensation that otherwise would have been received had such
incentive-based compensation been determined based on the restated amounts. For the purposes of this policy, “incentive-
based compensation” means any compensation that is granted, earned, or vested based wholly or in part upon the
attainment of a financial reporting measure. For the purposes of the policy, “financial reporting measures” are measures that
are determined and presented in accordance with the accounting principles used in preparing the Company’s financial
statements, and any measures that are derived wholly or in part from such measures, as well as stock price and total
shareholder return. Incentive-based compensation is “received” under the policy in the Company’s fiscal period during which
the financial reporting measure specified in the incentive-based compensation award is attained, even if the payment,
vesting, settlement or grant of such compensation occurs after the end of that period. Under the policy, the applicable
“covered period” means the three completed fiscal years immediately preceding the earliest to occur of: (a) the date the
Board, a committee of the Board, or one or more of the officers of the Company authorized to take such action if Board
action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare an
Accounting Restatement; and (b) the date a court, regulator, or other legally authorized body directs the Company to
prepare an Accounting Restatement.
Stock Ownership Policy
The Board believes that it is important to link the interests of our NEOs to those of our stockholders. Our Stock
Ownership Policy requires our Section 16 Officers (which includes each of our NEOs) and directors to accumulate and hold
a minimum number of shares of Infinera common stock within three years of the later of (i) the effective date of the policy or
(ii) the date of appointment of the director or appointment/promotion of the Section 16 Officer. As of April 30, 2024, each of
our Section 16 Officers and directors has either satisfied these ownership guidelines or had time remaining to do so. Our
stock ownership requirements for our Section 16 Officers and directors are as follows:
Position
CEO
CFO
Other Section 16 Officers and employee directors
Ownership Requirement
4x annual base salary
2x annual base salary
1x annual base salary
Non-employee directors
4x annual cash retainer for annual Board service
Shares of Infinera common stock that count towards satisfaction of this policy include: (i) shares owned outright by the
Section 16 Officer or director or his or her immediate family members residing in the same household and (ii) shares held in
trust for the benefit of the Section 16 Officer or director or his or her family. The value of a share of Infinera common stock is
measured on the last trading day of the most recently completed fiscal quarter as the greater of (i) the closing price on the
date of calculation or (ii) the purchase price actually paid by the person for such share of Infinera common stock. For the
avoidance of doubt, the purchase price for shares of Infinera common stock subject to RSU awards, performance share
awards and other similar full value awards is zero.
Anti-Hedging Policy
Under our Insider Trading Policy, we prohibit our employees, including our NEOs, and Board members from hedging
the risk associated with ownership of shares of Infinera common stock and other securities.
Anti-Pledging Policy
Under our Insider Trading Policy, we prohibit our NEOs and directors from pledging any Infinera securities as collateral
for a loan.
39
Tax and Accounting Treatment of Compensation
Prior to 2018, Section 162(m) of the Code generally limited the tax deductibility of compensation paid to the CEO and
each of the next three most highly compensated executive officers (excluding the CFO) that exceeded $1 million in any
taxable year unless the compensation over $1 million qualified as “performance-based” within the meaning of
Section 162(m).
The ability to rely on the “performance-based” compensation exception under Section 162(m) was eliminated in 2017
and the $1 million limitation on deductibility generally was expanded to include any individuals serving as the CEO or CFO
during the tax year, the next three most highly compensated executive officers during the tax year and any other individual
who was considered a covered employee for any prior tax year beginning after 2016. Thus, we generally will not be able to
take a deduction for any compensation paid to our NEOs in excess of $1 million unless the compensation qualifies for
transition relief applicable to certain arrangements in place on November 2, 2017. We cannot guarantee that any
compensation payable to our NEOs will qualify for the transition relief or that the compensation will ultimately be deductible.
Although the Compensation Committee has not adopted a formal policy regarding tax deductibility of compensation paid to
our CEO and other senior executive officers, the Compensation Committee intends to maintain an approach to executive
compensation that strongly links pay to performance.
We account for the equity compensation awarded to our executive officers and other employees under ASC 718,
which requires us to estimate and record an expense for each award of equity compensation over the service period of the
award. Accounting rules also require us to record cash compensation as an expense at the time the obligation is incurred.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with
management. Based on its review and discussions with management, the Compensation Committee has recommended to
the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and the Company’s Annual
Report on Form 10-K for the fiscal year ended December 30, 2023.
Compensation Committee
Sharon E. Holt (Chair)
Gregory P. Dougherty
Paul J. Milbury
The information contained in this report shall not be deemed to be “soliciting material” or “filed” with the SEC or subject
to the liabilities of Section 18 of the Exchange Act, except to the extent that Infinera specifically requests that the information
be treated as soliciting material or incorporates it by reference into a document filed under the Securities Act of 1933, as
amended (“Securities Act”), or the Exchange Act.
40
EXECUTIVE COMPENSATION TABLES
The following tabular information and accompanying narratives and footnotes provide all of the compensation awarded
to, earned by, or paid to the individuals who served as our principal executive officer, principal financial officer and our two
other executive officers during fiscal 2023. As previously noted, we refer to these executive officers as our NEOs.
Fiscal 2023 Summary Compensation Table
Name and Principal
Position
David W. Heard
Chief Executive Officer
Nancy L. Erba
Chief Financial Officer
David L. Teichmann
Chief Legal Officer and
Corporate Secretary
Nicholas R. Walden
Senior Vice President,
Worldwide Sales
Year
2023
2022
2021
2023
2022
2021
2023
2022
2021
2023
2022
2021
Salary
($)(1)
729,000
700,000
Bonus
($)
Stock
Awards
($)(2)(3)
—
—
5,137,500
4,855,638
700,000
200,000
3,702,300
487,500
463,461
439,615
430,000
409,231
395,962
426,103 (6)
416,154
400,577
—
—
—
—
—
—
—
—
—
1,734,300
1,604,875
1,273,419
848,700
1,099,244
1,062,474
959,400
1,154,395
1,009,953
_________________
(1)
Salary data is provided from payroll records based on the fiscal year.
Non-Equity
Incentive Plan
Compensation
($)(4)
All
Other
Compensation
($)(5)
Total
($)
791,163
700,000
—
309,994
342,000
—
278,681
124,500
5,985
6,663,648
5,062
6,260,700
4,665
4,606,965
5,985
2,537,779
5,985
2,416,322
5,986
1,719,020
10,350
1,567,731
10,350
1,643,325
—
11,530
1,469,965
156,326 (7)
250,425
412,082
183,217
1,725,045
4,665
1,825,639
34,665
1,857,277
(2)
(3)
(4)
(5)
(6)
(7)
The amounts reported in this column represent the aggregate grant date fair value of the listed equity awards, computed in accordance
with ASC 718. See Notes 2 and 14 of the notes to our consolidated financial statements contained in our 2023 Annual Report on Form
10-K for a discussion of all assumptions made by us in determining the ASC 718 values of equity awards.
For grants made in 2023, the stock awards reported in this column were in the amounts set forth in the “Fiscal 2023 Grants of Plan-
Based Awards” table below. The fair market value of our common stock (based on the closing sale price) was $7.38 per share for
awards granted on March 9, 2023 and $6.85 per share for awards granted on March 13, 2023. The grant date fair value of PSAs
included in this column assumes a payout at the target performance level. For additional information, including PSA awards at target
and maximum performance on a per executive basis, refer to the “Fiscal 2023 Grants of Plan-Based Awards Table,” below.
Non-equity incentive plan compensation reported for the applicable year was based on performance in that year, but will be paid during
the second fiscal quarter of the following year. For additional information regarding the bonuses paid to our NEOs, refer to “Fiscal 2023
Compensation—Annual Incentive Compensation” in the Compensation Discussion and Analysis above.
The amounts in this column represent the payment of life insurance premiums and 401(k) match for each NEO, and for Mr. Walden,
the reimbursement of taxable relocation expenses in the amount of $178,999.
In August 2023, Mr. Walden relocated from the United States to the UK. Following such relocation, Mr. Walden received his salary in
GBP. The salary amount paid to Mr. Walden in GBP was determined by converting into GBP his annual salary amount determined in
USD using the exchange rate of 1.286 USD to 1 GBP. For purposes of calculating the total salary paid to Mr. Walden in 2023, the
portion of his 2023 salary paid in GBP was converted to USD using the same exchange rate applied upon his relocation.
Represents (i) cash bonus in the amount of $66,564 as a result of Compensation Committee discretion applied under the 2023 Walden
Variable Plan to recognize Company performance notwithstanding that the minimum threshold for a bonus payout under the 2023
Walden Variable Plan was not achieved, plus (ii) the payout of $89,762 being the cash bonus portion of Mr. Walden’s 2023 annual
incentive bonus pursuant to the terms of our 2023 Corporate Bonus Plan. For additional information on Mr. Walden’s fiscal 2023 bonus
payout, please see the section entitled “Annual Incentive Compensation–2023 Bonus Plan Results” in the Compensation Discussion
and Analysis section above.
41
The following table sets forth information regarding fiscal 2023 annual cash incentive compensation and equity awards granted to our NEOs during fiscal 2023.
Fiscal 2023 Grants of Plan-Based Awards Table
Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards(1)
Estimated Future Payouts
Under Equity
Incentive Plan Awards(2)
Name
David W. Heard
Nancy L. Erba
David L. Teichmann
Nicholas R. Walden
Grant
Date
Threshold
($)
3/13/2023 758,000
3/9/2023 360,000
3/9/2023 267,000
3/9/2023
3/9/2023
86,000 (7)
56,438 (7)
Target
($)
947,500 (4)
450,000 (4)
333,750 (4)
107,500 (4)
322,500 (4)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
— (5)
— (5)
— (5)
(5)
206,250
412,500
618,750
58,750
28,750
32,500
117,500
176,250
57,500
65,000
86,250
97,500
645,000
All Other
Stock
Awards:
Number
of Shares
of Stock or
Units
(#)
337,500 (6)
117,500 (6)
57,500 (6)
65,000 (6)
Grant Date
Fair Value
of Stock
and Option
Awards
($)(3)
5,137,500
1,734,300
848,700
959,400
_________________
(1)
Amounts listed in these columns do not represent amounts actually paid or that may be paid in the future. Rather, these amounts are the target award opportunities that were established
under the Company’s annual incentive compensation plan for 2023 as discussed in the section entitled “Fiscal 2023 Compensation—Annual Incentive Compensation” in the
Compensation Discussion and Analysis section above. Any payments that will be made to the NEOs with respect to these award opportunities during the second fiscal quarter of 2024 for
2023 performance are listed in the “2023 Summary Compensation Table” above under the “Non-Equity Incentive Plan Compensation” column for 2023.
(2)
(3)
(4)
(5)
(6)
Each performance share award was granted under the 2016 Plan. The performance shares vest based on the Company’s achievement of a non-GAAP gross margin goal which can be
earned during fiscal 2023 through fiscal 2025. For additional information regarding these performance share awards granted to our NEOs in fiscal 2023, please see the section entitled
“Fiscal 2023 Compensation—Performance Share Awards” in the Compensation Discussion and Analysis above.
Each RSU award was granted under the 2016 Plan. For RSUs, represents the aggregate grant date fair value of each equity award computed in accordance with ASC 718. For
performance shares, represents the aggregate grant date fair value of each equity award at the target payout level computed in accordance with ASC 718. See Notes 2 and 14 of the
notes to our consolidated financial statements contained in our 2023 Annual Report on Form 10-K for a discussion of all assumptions made by us in determining the ASC 718 values of
equity awards. The fair market value of our common stock (based on the closing sale price) was $7.38 per share for awards granted on March 9, 2023 and $6.85 per share for awards
granted on March 13, 2023.
Assuming target performance is achieved, our 2023 Corporate Bonus Plan is designed to pay cash bonuses at target.
There is no maximum under our 2023 Corporate Bonus Plan, provided that the Compensation Committee retains authority to increase, reduce or eliminate any bonus award under such
plan.
This RSU award is scheduled to vest over a three-year period, with one-third of the underlying shares vesting on April 5, 2024, and one-twelfth of the underlying shares vesting quarterly
thereafter, subject to each NEO’s continued service to Infinera through each applicable vesting date.
(7) Mr. Walden participated in our 2023 Corporate Bonus Plan with respect to 25% of his total target bonus and in the 2023 Walden Variable Plan with respect to 75% of his total target
bonus. For additional information on Mr. Walden’s fiscal 2023 variable compensation program, please see the section entitled “Fiscal 2023 Compensation – Walden 2023 Variable
Compensation Program” in the Compensation Discussion and Analysis section above.
42
Fiscal 2023 Outstanding Equity Awards at Fiscal Year-End Table
The following table sets forth information regarding outstanding RSU awards and performance share awards held by
each of our NEOs as of December 30, 2023. The vesting conditions for each award are set forth in the footnotes below the
table.
Number of
Shares or
Units of Stock
That Have Not
Vested
(#)
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(1)
28,667 (2)
96,296 (4)
—
337,500 (6)
10,000 (2)
38,542 (4)
—
117,500 (6)
8,334 (2)
22,917 (4)
—
57,500 (6)
9,167 (2)
26,667 (4)
—
65,000 (6)
136,168
457,406
—
1,603,125
47,500
183,075
—
558,125
39,587
108,856
—
273,125
43,543
126,668
—
308,750
Grant
Date
3/9/2021
3/5/2022
3/21/2022
3/13/2023
3/9/2021
3/1/2022
3/21/2022
3/9/2023
3/9/2021
3/1/2022
3/21/2022
3/9/2023
3/9/2021
3/1/2022
3/21/2022
3/9/2023
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights
That Have Not
Vested
(#)
258,000 (3)
—
346,666 (5)
412,500 (7)
60,000 (3)
—
92,500 (5)
117,500 (7)
50,000 (3)
—
55,000 (5)
57,500 (7)
55,000 (3)
—
64,000 (5)
65,000 (7)
Equity
Incentive Plan
Awards:
Market or
Payout Value
or Unearned
Shares, Units
or Other
Rights
That Have Not
Vested
($)(1)
1,225,500
—
1,646,664
1,959,375
285,000
—
439,375
558,125
237,500
—
261,250
273,125
261,250
—
304,000
308,750
Name
David W. Heard
Nancy L. Erba
David L. Teichmann
Nicholas R. Walden
_________________
(1)
The market value of unvested and unearned stock awards is based on an assumed price of $4.75 per share, which was the Nasdaq
closing price per share of our common stock on December 29, 2023 (the last trading day of our 2023 fiscal year end).
(2)
(3)
(4)
This RSU award is scheduled to vest over a three-year period, with one-third of the underlying shares vesting on April 5, 2022, and
one-twelfth of the underlying shares vesting quarterly thereafter, subject to the NEO’s continued service to Infinera through each
applicable vesting date.
This performance share award can be earned during fiscal 2021 through fiscal 2023. The first half of the performance shares (each
half, a "tranche”) vests based on the Company’s achievement of both an operating income goal, measured on a non-GAAP basis over
a full fiscal year, and a revenue goal, measured on a GAAP basis over a full fiscal year. The second tranche of the award vests based
on the Company’s achievement of an operating income goal, measured on a non-GAAP basis over a full fiscal year. For additional
information regarding these performance share awards granted to our NEOs in fiscal 2021, please see the section entitled “Fiscal 2023
Compensation—Performance Share Awards” in the Compensation Discussion and Analysis above. With respect to achievement of the
goals applicable to the first tranche of the awards, the Compensation Committee certified on May 12, 2024, that 77.06% of the
applicable shares vested on such date. With respect to achievement of the goal applicable to the second tranche of the awards, the
Compensation Committee certified on May 12, 2024, that 62.14% of the applicable shares vested on such date. The shares that did
not vest were forfeited as of such certification date.
This RSU award is scheduled to vest over a three-year period, with one-third of the underlying shares vesting on March 5, 2023, and
one-twelfth of the underlying shares vesting quarterly thereafter, subject to the NEO’s continued service to Infinera through each
applicable vesting date.
(5) One-half of the performance shares vest on the Company’s achievement of a GAAP net income goal which can be earned during fiscal
2023 through fiscal 2024. The other half of the performance shares vest on the Company achieving a target related to gross profit
dollars determined in accordance with GAAP generated by revenue from external sales of our pluggables and by cost savings resulting
from use of our pluggables in our products which can be earned during fiscal 2022 through fiscal 2024. For additional information
regarding these performance share awards granted to our NEOs in fiscal 2023, please see the section entitled “Fiscal 2023
Compensation—Performance Share Awards” in the Compensation Discussion and Analysis above. No performance shares subject to
this award vested with respect to the Company’s performance in fiscal 2023.
(6)
This RSU award is scheduled to vest over a three-year period, with one-third of the underlying shares vesting on April 5, 2024, and
one-twelfth of the underlying shares vesting quarterly thereafter, subject to the NEO’s continued service to Infinera through the
applicable vesting date.
43
(7)
This performance share award can be earned during fiscal 2023 through fiscal 2025. The performance shares vest on the Company’s
achievement of a gross margin goal, measured on a non-GAAP basis over a full fiscal year. For additional information regarding these
performance share awards granted to our NEOs in fiscal 2023, please see the section entitled “Fiscal 2023 Compensation—
Performance Share Awards” in the Compensation Discussion and Analysis above. No performance shares subject to this award vested
with respect to the Company’s performance in fiscal 2023.
The following table sets forth the number of shares acquired and the value realized upon the vesting of RSU awards
and performance share awards during fiscal 2023 by each of our NEOs.
Fiscal 2023 Stock Vested Table
Name
David W. Heard
Nancy L. Erba
David L. Teichmann
Nicholas R. Walden
Number of Shares
Acquired on
Vesting
(#)
Value Realized
on Vesting
($)(1)
285,898
228,017
132,608
66,667
1,654,003
1,160,177
872,043
402,485
_________________
(1)
The value realized on the vesting date is based on the fair market value of our common stock on the vesting date and does not
necessarily reflect the proceeds actually received by the NEO.
44
We are providing the following information regarding the relationship of the annual total compensation of our median
employee to the annual total compensation of our CEO (in each case, the annual total compensation was calculated in
accordance with SEC rules applicable to the Summary Compensation Table above). The pay ratio included in this
information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.
2023 CEO PAY RATIO
For 2023:
•
•
•
Our median employee’s annual total compensation (not including our CEO) was $134,941.
Our CEO’s annual total compensation, as reported on page 41 in the Summary Compensation Table, was
$6,663,648.
Based on this information, the ratio of the annual total compensation of our CEO to the annual total
compensation of our median employee is 49 to 1.
Pay Ratio Methodology. The SEC rules allow us to select a methodology for identifying our median employee in a
manner that is most appropriate based on our size, organizational structure and compensation plans, policies and
procedures.
For fiscal 2023, we calculated the pay ratio using the same median employee that we used to calculate the pay ratio in
fiscal 2022, as there has been no significant change in our employee population or compensation arrangements during the
fiscal year that we reasonably believe would result in a significant change to our pay ratio disclosure. In fiscal 2022, we
selected December 1, 2022, as the date on which to determine our median employee, which is a date within the last three
months of our 2022 fiscal year. As of that date, we had 3,264 employees, with 1,250 employees based in the United States
and 2,014 employees located outside of the United States. The pay ratio disclosure rules provide an exemption for
companies to exclude non-U.S. employees from the median employee calculation if non-U.S. employees in a particular
jurisdiction account for five percent (5%) or less of the company's total number of employees. We applied this de minimis
exemption when identifying the median employee by excluding 23 countries: 13 employees in Taiwan, 12 employees in
Netherlands, 12 employees in France, 11 employees in Japan, 10 employees in United Arab Emirates, 10 employees in
Spain, 9 employees in Kazakhstan, 8 employees in Saudi Arabia, 8 employees in Colombia, 7 employees in Thailand, 7
employees in Poland, 6 employees in Indonesia, 6 employees in Vietnam, 6 employee in Republic of Korea, 5 employees in
Ireland, 5 employees in Egypt, 4 employees in Hungary, 4 employees in Belgium, 3 employees in Denmark, 2 employees in
Greece, 2 employees in Serbia, 1 employee in Norway and 1 employee in Israel.
After taking into account the de minimis exemption, 1,250 employees based in the United States and 1,862 employees
located outside of the United States were considered for identifying the median employee.
For purposes of identifying the median employee from our employee population base, we considered total cash
compensation (base salary, including overtime, annual bonus and the sum of other bonuses, which included retention
bonuses), as compiled from our payroll records. We selected total cash compensation as this information is readily available
in each country. In addition, we measured compensation for purposes of determining the median employee using the year-
to-date period ended December 31, 2022, and annualized for employees (other than any temporary or seasonal employees)
who were employed on December 1, 2022, but did not work for us for all of 2022. Compensation paid in foreign currencies
was converted to U.S. dollars based on exchange rates in effect on December 1, 2022.
The CEO pay ratio reported above is a reasonable estimate, calculated in a manner consistent with SEC rules, based
on the methodologies and assumptions described above. SEC rules for identifying the median employee and determining
the CEO pay ratio permit companies to employ a wide range of methodologies, estimates, and assumptions. As a result, the
CEO pay ratios reported by other companies, which may have employed other permitted methodologies or assumptions,
and which may have a significantly different workforce structure from ours, might not be comparable to our CEO pay ratio.
45
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the
following information regarding the relationship between executive compensation actually paid and certain financial performance of the Company. For further information
concerning our pay-for-performance philosophy and how we align executive compensation with the Company’s performance, refer to “Our Pay–Compensation Discussion
and Analysis,” above. Fair value amounts below are computed in accordance with ASC 718. See Notes 2 and 14 of the notes to our consolidated financial statements
contained in our 2023 Annual Report on Form 10-K for a discussion of all assumptions made by us in determining the ASC 718 values of equity awards.
PAY VERSUS PERFORMANCE
Pay Versus Performance Table
Summary
Compensation
Table Total for
PEO
($)
Compensation
Actually Paid
to PEO
($)(2)
Summary
Compensation
Table Total for
Second PEO
($)
Compensation
Actually Paid
for Second
PEO
($)(2)
6,663,648
2,991,185
6,260,700
1,963,303
4,606,965
3,073,908
—
—
—
—
—
—
Average
Summary
Compensation
Table Total for
Non-PEO
NEOs
($)
1,943,518
1,961,762
Average
Compensation
Actually Paid
to Non-PEO
NEOs
($)(2)
968,440
227,172
1,682,087
1,044,985
4,139,627
7,316,489
3,787,396
8,713,585
927,392
1,801,224
Year(1)
2023
2022
2021
2020
Value of Initial Fixed
$100
Investment Based on:
Total
Stockhold
er Return
(TSR)
($)(3)
61
87
123
141
Peer
Group
TSR
($)(4)
91
82
112
110
Net
Income
($)(in
thousands)
Non-GAAP
Operating
Income
($)(in
thousands)
(25,213)
(76,043)
(170,778)
87,225
68,988
29,586
(206,723)
(6,274)
_________________
(1)
The Principal Executive Officer (“PEO”) and Other NEOs for each applicable year are:
• 2023 - PEO: Mr. Heard. Other NEOs: Ms. Erba, and Messrs. Teichmann and Walden.
• 2022 - PEO: Mr. Heard. Other NEOs: Ms. Erba, and Messrs. Teichmann and Walden.
• 2021 - PEO: Mr. Heard. Other NEOs: Ms. Erba, and Messrs. Teichmann and Walden.
• 2020 - PEOs: Mr. Heard and Tom Fallon. Mr. Fallon transitioned from his position of Chief Executive Officer to Advisor as of November 23, 2020. Mr. Heard is referred to as the first
PEO and Mr. Fallon is referred to as the second PEO in the table above. Other NEOs: Ms. Erba, and Messrs. Teichmann and Walden, and Robert Jandro. Mr. Jandro resigned from
his position of SVP, Worldwide Sales as of January 3, 2020.
(2) SEC rules require certain adjustments be made to the “Summary Compensation Table” totals to determine “compensation actually paid” as reported in the “Pay Versus Performance”
table above. The following table details the applicable adjustments that were made to determine “compensation actually paid.”
46
FY2023
FY2022
FY2021
FY2020
PEO
($)
6,663,648
Average
Other NEO
($)
1,943,518
PEO
($)
6,260,700
Average
Other NEO
($)
1,961,762
PEO
($)
4,606,965
Average
Other NEO
($)
1,682,087
PEO
($)
4,139,627
Second
PEO
($)
3,787,396
Average
Other NEO
($)
927,392
5,137,500
1,180,800
(4,855,638) (1,286,171) (3,702,300) (1,115,282) (3,532,500) (3,239,500)
(596,452)
3,562,500
760,000
3,894,217
1,001,002
4,106,500
1,237,043
5,485,000
6,033,500
1,059,154
(1,824,514)
(405,864) (2,423,828) (1,058,559) (1,614,753)
(713,504) 1,520,786
2,439,280
680,099
—
—
—
—
—
—
—
—
—
(272,949)
(148,414)
(912,149)
(390,862)
(322,504)
(45,359)
(296,424)
(307,091)
(136,708)
—
—
—
—
—
—
—
—
(132,260)
Summary Compensation Table - Total Compensation
(Deduct) Grant Date Fair Value of Stock Awards and
Option Awards Granted in Fiscal Year
(Increase) Fair Value at Fiscal Year End of
Outstanding and Unvested Stock Awards and Option
Awards Granted in Fiscal Year
(Increase/Deduct) Change in Fair Value of
Outstanding and Unvested Stock Awards and Option
Awards Granted in Prior Fiscal Years
(Increase) Fair Value at Vesting of Stock Awards and
Option Awards Granted in Fiscal Year that Vested
During Fiscal Year
(Increase/Deduct) Change in Fair Value as of Vesting
Date of Stock Awards and Option Awards Granted in
Prior Fiscal Years for which Applicable Vesting
Conditions were Satisfied During Fiscal Year
(Deduct) Fair Value as of Prior Fiscal Year End of
Stock Awards and Option Awards Granted in Prior
Fiscal Years that Failed to Meet Applicable Vesting
Conditions During Fiscal Year
Compensation Actually Paid
2,991,185
968,440
1,963,303
227,172
3,073,908
1,044,985
7,316,489
8,713,585
1,801,224
(3)
(4)
Represents the Company’s common stock cumulative TSR on a fixed investment of $100 over the fiscal year starting from the market close on the last trading day of fiscal 2019 through
the end of each applicable fiscal year in the table, assuming reinvestment of any dividends.
Represents the cumulative TSR of the Nasdaq Telecommunications Index, the Company’s peer group for this Pay Versus Performance disclosure, on a fixed investment of $100 over the
fiscal year starting from the market close on the last trading day of fiscal 2019 through the end of each applicable fiscal year in the table. This is the same peer group the Company uses
for its disclosure under Item 201(e) of Regulation S-K.
List of Most Important Performance Measures
The four performance measures listed below represent an unranked list of the most important performance measures for fiscal 2023 the Company used to align
compensation to the Company’s financial performance. While these performance measures are the most important measures in fiscal 2023 the Company used to align
compensation and the Company’s financial performance, additional financial and other measures were also used to align pay and performance, as further described in
the section “Our Pay–Compensation Discussion and Analysis.”
The most important performance measures are:
Key Performance Measures
Non-GAAP Operating Income
Revenue
Non-GAAP Gross Margin
Bookings
47
Pay Versus Performance Relationship Disclosure
The chart below provides a comparison between the compensation actually paid to each of our first and second PEO (Messrs. Heard and Fallon, respectively) and
our average compensation actually paid to our other NEOs against the Company TSR and the peer group TSR, which was the Nasdaq Telecommunications Index. As
demonstrated below, the trend in NEO compensation has largely been aligned to the trend in TSR.
48
The chart below illustrates the correlation between compensation actually paid to each of our first and second PEO
and average compensation actually paid to our other NEOs against the Company’s GAAP net income for fiscal years 2020,
2021, 2022 and 2023. Although GAAP net income has increased from fiscal 2020 to fiscal 2023, compensation actually paid
to our NEOs has decreased in large part because of the significant emphasis the Company places on equity incentives,
which are sensitive to stock price fluctuations.
The chart below illustrates the correlation between compensation actually paid to each of first and second PEOs and
average compensation actually paid to our other NEOs against the Company’s non-GAAP Operating Income for fiscal years
2020, 2021, 2022 and 2023. Although non-GAAP Operating Income has increased from fiscal 2020 to fiscal 2023,
compensation actually paid to our NEOs has decreased in large part because of the significant emphasis the Company
places on equity incentives, which are sensitive to stock price fluctuations.
49
ESTIMATED PAYMENTS AND BENEFITS UPON TERMINATION, CHANGE OF CONTROL OR DEATH/DISABILITY
Executive Severance Policy
As discussed above in more detail in the section entitled “Compensation Discussion and Analysis – Additional
Information Regarding Our Compensation Practices—Executive Severance Policy,” the Compensation Committee has taken
appropriate steps to provide competitive post-employment compensation arrangements that promote the continued
attention, dedication and continuity of the members of our senior management team, including our NEOs, and enable us to
continue to recruit talented senior executive officers. Infinera shall not pay severance pursuant to this policy to the
individuals subject to this policy in the event of (i) a change of control of Infinera (as defined below), or (ii) if such individual is
terminated for Cause (as defined below).
Death and Disability Benefits
Pursuant to the 2016 Plan, accelerated vesting of RSU awards and performance share awards is provided in the event
of the termination of service due to death (with exceptions in certain circumstances) or permanent disability of an employee,
including our NEOs, as discussed above in the section entitled “Compensation Discussion and Analysis – Additional
Information Regarding Our Compensation Practices—Acceleration of Equity Awards upon Death or Disability.”
Change of Control Payments and Benefits
As discussed above in more detail in the section entitled “Compensation Discussion and Analysis – Additional
Information Regarding Our Compensation Practices—Change of Control Payments and Benefits,” we entered into COC
Agreements with each of our NEOs to encourage their continued attention, dedication and continuity with respect to their
roles and responsibilities without the distraction that may arise from the possibility or occurrence of a change of control of
Infinera.
For purposes of these benefits, the terms below generally have the following meanings:
Change of Control
(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of Infinera representing fifty percent (50%) or more of
the total voting power represented by Infinera’s then outstanding voting securities; (ii) the
consummation of the sale or disposition by Infinera of all or substantially all of Infinera’s
assets; (iii) the consummation of a merger or consolidation of Infinera with any other
corporation, other than a merger or consolidation which would result in the voting
securities of Infinera outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the surviving
entity or its parent) at least fifty percent (50%) of the total voting power represented by
the voting securities of Infinera or such surviving entity or its parent outstanding
immediately after such merger or consolidation; or (iv) a change in the composition of the
Board occurring within a two (2) year period, as a result of which less than a majority of
the directors are Incumbent Directors. “Incumbent Directors” means directors who either
(A) are directors of Infinera as of the date hereof, or (B) are elected, or nominated for
election, to the Board with the affirmative votes of at least a majority of the directors of
Infinera at the time of such election or nomination (but will not include an individual
whose election or nomination is in connection with an actual or threatened proxy contest
relating to the election of directors to Infinera).
50
Constructive Termination
Cause
The executive officer’s resignation as a result of, and within three (3) months following
the expiration of any company cure period (discussed below) following the occurrence of
one or more of the following: (i) a material reduction in the executive officer’s job, duties
or responsibilities in a manner that is substantially inconsistent with the position, duties or
responsibilities held by the executive officer immediately before such reduction; (ii) a
material reduction in the executive officer’s base salary (in other words, a reduction of
more than five percent of executive’s base salary within the twelve-month period
following a Change of Control); or (iii) a material change in the work location at which the
executive officer is required to perform services for Infinera (in other words, a
requirement that the executive officer relocate to a work location that is more than 50
miles from the executive’s work location in effect as of the date immediately prior to a
Change in Control). The executive officer will not resign as the result of a Constructive
Termination without first providing Infinera with written notice of the acts or omissions
constituting the grounds for “Constructive Termination” within ninety (90) days of the
initial existence of the grounds for “Constructive Termination” and a cure period of thirty
(30) days following the date of such notice.
(i) The executive officer’s willful failure to substantially perform his or her duties and
responsibilities to Infinera or deliberate violation of a company policy; (ii) the executive
officer’s commission of any act of fraud, embezzlement, dishonesty or any other willful
misconduct that has caused or is reasonably expected to result in material injury to
Infinera; (iii) unauthorized use or disclosure by the executive officer of any proprietary
information or trade secrets of Infinera or any other party to whom the executive officer
owes an obligation of nondisclosure as a result of his or her relationship with Infinera; or
(iv) the executive officer’s willful breach of any of his or her obligations under any written
agreement or covenant with Infinera. The determination as to whether the executive
officer is being terminated for Cause will be made in good faith by Infinera and will be
final and binding on the executive officer.
Additionally, we granted performance share awards in 2023 to our NEOs, as described further above in the section
titled “Performance Share Awards” (referred to as the “2023 PSAs”), as well as performance share awards in 2022 (referred
to as the “2022 PSAs”) and 2021 (referred to as the “2021 PSAs”) to each of our NEOs. The performance period for the
2023 PSAs continues through the end of fiscal 2025. The performance period for the 2022 PSAs continues through the end
of fiscal 2024. The performance period for the 2021 PSAs continued through the end of fiscal 2023.
The 2023 PSAs, 2022 PSAs and 2021 PSAs provide that, in the event of our change in control (as defined in the
2016 Plan, pursuant to which each of such awards were granted) that occurs during the performance period applicable to
the performance share award, such award will vest at the target level. Under our 2016 Plan, change in control generally
means (i) a person (or more than one person acting as a group) acquires ownership of our shares resulting in their holding
more than 50% of the total voting power of our shares (with certain exceptions where a person or group of persons that
already holds more than 50% of the total voting power of our shares acquires additional shares, or where our stockholders
after such transaction retain beneficial ownership of 50% or more of the voting power of our shares in substantially the same
proportions); (ii) a change in our effective control that occurs when a majority of our Board members are replaced in a 12-
month period by directors whose appointment or election is not endorsed by a majority of our Board members before the
date of appointment or election; or (iii) a change in ownership of a substantial portion of our assets, which occurs when a
person (or group of persons acting as a group) acquires our assets having a gross fair market value of at least 50% of the
total gross fair market value of all of our assets.
51
Fiscal 2023 Estimated Payments and Benefits Table
The amount of compensation and benefits payable to each of our NEOs (as of the last day of fiscal 2023 and
assuming that no portion of the 2021 PSAs had vested or been forfeited) in the event of (a) a termination of employment by
Infinera, (b) a termination of employment without Cause or as a result of a Constructive Termination in connection with a
Change of Control transaction (as described above) within 3 months prior to, through 18 months after, a Change of Control,
(c) a termination of employment due to death or permanent disability, or (d) a Change in Control transaction (within the
meaning of our 2016 Plan as described above) has been estimated in the table below.
Name
Type of Benefit
Termination
Under
Severance
Policy
($)
Termination
After a
Change
of Control
($)
Termination
Upon Death
or
Disability
($)
Upon
Change of
Control
($)
David W. Heard
Cash Severance
1,137,000
1,516,000
1,895,000
—
—
—
—
7,028,238
7,028,238
4,831,539
Bonus
Vesting Acceleration(1)(2)(3)
Continued Coverage of
Employee Benefits
Bonus
Vesting Acceleration(1)(4)(5)
Continued Coverage of
Employee Benefits
Bonus
Vesting Acceleration(1)(6)(7)
Continued Coverage of
Employee Benefits
Bonus
Vesting Acceleration(1)(8)(9)
Continued Coverage of
Employee Benefits
Total Benefits
1,180,831
10,497,680
7,028,238
4,831,539
43,831
58,442
—
—
750,000
675,000
—
—
—
—
2,071,200
2,071,200
1,282,500
Total Benefits
516,772
3,521,358
2,071,200
1,282,500
16,772
25,158
—
—
667,500
500,625
—
—
—
—
1,193,442
1,193,442
771,875
Total Benefits
469,446
2,398,236
1,193,442
771,875
24,446
36,669
—
—
645,000
645,000
—
—
—
—
1,352,962
1,352,962
874,000
3,700
5,549
—
—
—
—
—
—
—
—
—
—
David L. Teichmann
Cash Severance
445,000
Nicholas R. Walden
Cash Severance
430,000
Nancy L. Erba
Cash Severance
500,000
Total Benefits
433,700
2,648,511
1,352,962
874,000
_________________
(1)
The value of accelerated vesting of equity awards is calculated by (i) multiplying the number of accelerated shares of common stock
underlying unvested, in-the-money equity awards by $4.75 per share, which was the Nasdaq closing price per share of our common
stock on December 29, 2023 (the last trading day of our 2023 fiscal year end).
(2)
(3)
(4)
(5)
(6)
The vesting of 1,479,629 shares of common stock would accelerate if Mr. Heard was terminated (a) without Cause or (b) as a result of
a Constructive Termination within 3 months prior to, through 18 months after, a Change of Control, or upon death or permanent
disability as of December 30, 2023. The 1,479,629 shares of common stock that accelerate in these scenarios include, and are not in
addition to, the 1,017,166 target number of unvested shares of common stock subject to the 2021 PSAs, 2022 PSAs and 2023 PSAs.
1,017,166 shares of common stock, representing the target number of unvested shares subject to the 2021 PSAs, 2022 PSAs and
2023 PSAs, would vest upon a Change in Control, assuming such Change in Control occurs during the award’s performance period.
The vesting of 436,042 shares of common stock would accelerate if Ms. Erba was terminated (a) without Cause or (b) as a result of a
Constructive Termination within 3 months prior to, through 18 months after, a Change of Control, or upon death or permanent disability
as of December 30, 2023. The 436,042 shares of common stock that accelerate in these scenarios include, and are not in addition to,
the 270,000 target number of unvested shares of common stock subject to the 2021 PSAs, 2022 PSAs and 2023 PSAs.
270,000 shares of common stock, representing the target number of unvested shares subject to the 2021 PSAs, 2022 PSAs and 2023
PSAs, would vest upon a Change in Control, assuming such Change in Control occurs during the award’s performance period.
The vesting of 251,251 shares of common stock would accelerate if Mr. Teichmann was terminated (a) without Cause or (b) as a result
of a Constructive Termination within 3 months prior to, through 18 months after, a Change of Control, or upon death or permanent
disability as of December 30, 2023. The 251,251 shares of common stock that accelerate in these scenarios include, and are not in
addition to, the 162,500 target number of unvested shares of common stock subject to the 2021 PSAs, 2022 PSAs and 2023 PSAs.
52
(7)
(8)
(9)
162,500 shares of common stock, representing the target number of unvested shares subject to the 2021 PSAs, 2022 PSAs and 2023
PSAs, would vest upon a Change in Control, assuming such Change in Control occurs during the award’s performance period.
The vesting of 284,834 shares of common stock would accelerate if Mr. Walden was terminated (a) without Cause or (b) as a result of
a Constructive Termination within 3 months prior to, through 18 months after, a Change of Control, or upon death or permanent
disability as of December 30, 2023. The 284,834 shares of common stock that accelerate in these scenarios include, and are not in
addition to, the 184,000 target number of unvested shares of common stock subject to the 2021 PSAs, 2022 PSAs and 2023 PSAs.
184,000 shares of common stock, representing the target number of unvested shares subject to the 2021 PSAs, 2022 PSAs and 2023
PSAs, would vest upon a Change in Control, assuming such Change in Control occurs during the award’s performance period.
RISK ASSESSMENT OF COMPENSATION PRACTICES
At the request of the Compensation Committee, a review of the risks associated with our organization-wide
compensation policies and practices was conducted for fiscal 2023. This assessment covered topics including: our
compensation policies and practices; a review of each of the compensation vehicles that we employ; the identification of any
compensation design features that could encourage excessive risk taking; and the controls, policies and plan features that
mitigate our compensation risk.
Although all compensation programs were considered, particular attention was paid to incentive-based plans and
arrangements involving variable payouts, where an employee might be able to influence payout factors and compensation
plans and arrangements involving our executive team. The review found that, because our incentive programs are based
primarily on financial objectives important to Infinera, we avoid an over-emphasis on shorter-term financial goals. In addition,
the financial objectives used to determine the performance measures for our incentive-based compensation plans and
arrangements were found to be substantially derived from our annual operating plan, which is approved by the Board.
In addition, the assessment considered our controls and other mitigating factors that serve to offset elements of our
compensation policies and practices that may introduce or encourage risk-taking. Those elements include the
Compensation Committee’s ability to use discretion to adjust payouts on most awards; strong stock ownership requirements
and a compensation recovery policy for our Section 16 Officers; the existence of, and training related to, corporate
standards of business conduct and ethics; effective internal controls over financial reporting; and the participation by
Mr. Walden in his variable compensation program, which enables a level of independence in establishing the sales
commission plan design and quotas for our global sales team.
This risk assessment was presented to and reviewed by the Compensation Committee. The Compensation Committee
agreed with the result of the review, which concluded that the risks associated with our compensation policies and practices
were being effectively managed. We have determined that the risks associated with our compensation policies and practices
are not reasonably likely to result in a material adverse effect on Infinera.
53
PROPOSAL 2—APPROVAL OF THE INFINERA CORPORATION
2016 EQUITY INCENTIVE PLAN, AS AMENDED
The Board believes that our future success depends on our ability to attract and retain talented employees and that the
ability to grant equity awards is a necessary and powerful recruiting and retention tool for Infinera. The Board believes that
equity awards motivate high levels of performance, more closely align the interests of employees and stockholders by giving
employees an opportunity to hold an ownership stake in Infinera, and provide an effective means of recognizing employee
contributions to the success of Infinera. At the Annual Meeting, we are requesting that stockholders approve our 2016 Plan,
as amended, which, among other changes as described in this Proposal 2, increases the number of shares of our common
stock (the “Shares”) authorized for issuance thereunder by 7,100,000 Shares.
Upon recommendation of the Compensation Committee, the Board approved amendments to the 2016 Plan on March
27, 2024 and May 14, 2024, subject to the approval of our stockholders at the Annual Meeting (the “Amendment”).
As of May 14, 2024, there were 2,370,129 Shares available for issuance pursuant to awards that may be granted
under the 2016 Plan. If the proposed Amendment to the 2016 Plan is not approved by our stockholders, the 2016 Plan will
remain in effect without the Amendment and awards will continue to be made under the 2016 Plan to the extent Shares
remain available. However, in this event, we may not be able to continue our equity incentive program in the future. This
could preclude us from successfully attracting and/or retaining highly skilled employees. The Board and the Compensation
Committee believe that the additional Shares under the increased Share reserve will enable us to continue to use the 2016
Plan to achieve our recruiting, retention and incentive goals and will be essential to our future success.
If our stockholders approve the Amendment to the 2016 Plan, we currently anticipate that the Shares will be sufficient
to meet our expected needs through the date of our 2025 annual meeting of stockholders (“2025 Annual Meeting”). In
determining the number of Shares to be reserved for issuance under the 2016 Plan, the Compensation Committee and the
Board considered the following:
•
•
•
Historical Grant Practices. The Compensation Committee and the Board considered the historical amounts of
equity awards that we granted in the past three years. In fiscal years 2021, 2022 and 2023, we granted equity
awards covering 8.037 million, 9.796 million and 8.987 million Shares, respectively, or a total of approximately
26.82 million Shares over the three-year period.
Forecasted Grants. In determining the projected Share utilization, the Compensation Committee and the Board
considered a forecast that included the following factors: (i) the Shares that would be available for grant under
the 2016 Plan, if our stockholders approve this Amendment to the 2016 Plan, is 9,470,129 Shares (consisting of
2,370,129 Shares available for issuance under the 2016 Plan as of May 14, 2024, plus the 7,100,000 additional
Shares pursuant to this amendment to the 2016 Plan); and (ii) forecasted future grants, which are “value-based,”
meaning that Share amounts granted will be determined based on a dollar value of the award to be granted to
the participant and the stock price of Infinera common stock. Due to our value-based grant program, any
significant changes in our stock price as compared to the stock price we assumed for forecasting purposes could
cause our actual Share usage to deviate significantly from our anticipated Share usage.
Proxy Advisory Firm Guidelines. Given our significant institutional stockholder base, the Compensation
Committee and the Board considered proxy advisory firm guidelines.
Outstanding Awards
The following table sets forth information regarding all outstanding stock options, RSUs and performance shares under
all of our equity plans (other than our 2007 Employee Stock Purchase Plan (the “2007 ESPP”)) as of May 14, 2024. We do
not currently have any outstanding stock options under the 2016 Plan. The last sales price of our common stock as reported
on The Nasdaq Global Select Market on May 14, 2024 was $5.80 per share.
Outstanding Options
Weighted Average
Exercise Price
Weighted Average
Remaining
Contractual Term
(in years)
Unvested
Performance Shares/
RSUs Outstanding(1)
Number of Shares
Available for
Grant(2)
0
N/A
N/A
19,129,909
2,730,767
_________________
(1)
This amount includes outstanding unvested performance share awards assuming target performance is achieved under such awards.
If the amount were to include outstanding unvested performance share awards based on maximum performance being achieved under
such awards, the amount would be 21,232,091 shares.
(2)
This amount includes the following:
•
•
2,370,129 shares available for grant under the 2016 Plan; and
360,638 shares available for grant under the 2019 Inducement Equity Incentive Plan.
54
Reasons for Voting for the Proposal
The 2016 Plan has been designed consistent with best corporate governance practices.
•
•
•
Administration. The 2016 Plan is administered by the Compensation Committee of the Board, which is comprised
entirely of independent non-employee directors.
Stockholder Approval is Required for Additional Shares. The 2016 Plan does not contain an annual “evergreen”
provision but instead reserves a fixed maximum number of Shares for issuance. Stockholder approval is required
to increase that number.
Share Counting Provisions. Under the 2016 Plan, if an option or stock appreciation right expires or becomes
unexercisable without having been exercised in full, or if Shares subject to other types of awards are forfeited to
or repurchased by us due to failure to vest, those Shares will become available for issuance again under the
2016 Plan. Shares used to pay the exercise or purchase price of an award will not become available for future
grant or sale under the 2016 Plan. Shares used to satisfy the tax withholding obligations for awards other than
options and stock appreciation rights will become available for future grant under the 2016 Plan. With respect to
stock appreciation rights settled in Shares, the gross number of Shares exercised under the stock appreciation
right award will cease to be available under the 2016 Plan. In addition, to the extent that we pay out an award in
cash rather than Shares, such cash payment will not reduce the number of Shares available for issuance under
the 2016 Plan. No Shares purchased by us with proceeds received from the exercise of an option will become
available for issuance under the 2016 Plan.
• Minimum Vesting Requirements. Awards granted under the 2016 Plan will vest no earlier than one year from the
date of grant with the exception of the following: (x) the vesting of such awards is accelerated due to the
participant’s death, disability, or retirement, or a termination of the participant’s service that occurs in connection
with our change in control, or (y) pursuant to the Amendment, the awards were granted to non-employee
directors that vest on the earlier of the one-year anniversary of the grant date of such award and the next annual
meeting of stockholders of the Company which is at least 50 weeks after the immediately preceding year’s
annual meeting of stockholders of the Company, or (z) with respect to awards that result in the issuance in the
aggregate of not more than 5% of the total maximum number of Shares that are or have been reserved for
issuance under the 2016 Plan upon and after the 2016 Plan’s effectiveness in 2016.
•
•
•
•
Limited Vesting Acceleration Upon a Change in Control. Except (x) as permitted under the minimum vesting
requirements and (y) for any awards made to non-employee directors, the administrator shall not be permitted to
accelerate the vesting of an award upon a change in control other than in the event an award is not assumed or
substituted for as described in this proposal below in the section entitled “Description of the 2016 Plan—Merger
or Change in Control.”
Repricing Prohibition. The 2016 Plan prohibits any program providing participants the opportunity to transfer
outstanding awards to a financial institution or other person or entity selected by the administrator, exchange
awards for awards of the same type, awards of a different type, and/or cash, or have the exercise price of awards
repriced (i.e., increased or reduced).
Non-Employee Director Award Limits. Under the 2016 Plan, in any fiscal year, a non-employee director may be
granted equity awards (with an aggregate grant date fair value) and any other compensation (including cash
retainers or fees) of no more than an aggregate of $750,000, increased to $1,000,000 in our fiscal year of his or
her initial service as a non-employee director. Any equity awards or other compensation provided to the director
for his or her services as an employee or consultant (other than as a non-employee director) will be excluded for
purposes of these limits.
No Dividends on Options and Stock Appreciation Rights Until Shares are Issued or on Other Equity Awards
While Unvested. Under the 2016 Plan, no participant will have any rights to dividends or any other stockholder
rights with respect to any Shares subject to options or stock appreciation rights until such Shares are issued
following award exercise, and any dividends that the administrator may determine will be payable on any other
equity awards will be subject to the same vesting criteria, forfeitability, and/or transferability restrictions as apply
to the Shares subject to the awards on which such dividends would be paid.
Our executive officers and directors have an interest in the approval of the 2016 Plan by our stockholders because
they would be eligible to receive awards under the 2016 Plan.
Description of the 2016 Plan
The following paragraphs provide a summary of the principal features of the 2016 Plan, as amended, and its operation.
However, this summary is not a complete description of all of the provisions of such plan and is qualified in its entirety by the
specific language of such plan. A copy of the 2016 Plan, as amended, is provided as Appendix B to this Proxy Statement.
Purposes. The purposes of the 2016 Plan are to attract and retain the best available personnel for positions of
substantial responsibility; to provide additional incentive to employees, directors, and consultants; and to promote the
55
success of our business. These incentives will be provided through the grant of stock options, stock appreciation rights,
restricted stock, RSUs, performance units, and performance shares as the administrator of the 2016 Plan may determine.
Authorized Shares. Subject to the adjustment provisions contained in the 2016 Plan, and prior to the Amendment for
which we are seeking approval, the maximum number of Shares that may be issued pursuant to awards under the 2016
Plan is equal to the sum of (1) 51,750,000 Shares plus (2) Shares subject to awards granted under the Infinera Corporation
2007 Equity Incentive Plan (the “2007 Plan”) that after May 12, 2016, expire, are forfeited or otherwise terminate without
being exercised in full (to the extent they were exercisable), or are forfeited to or repurchased by us due to failure to vest
(provided that the maximum number of Shares that may be added to the 2016 Plan with respect to awards granted under
the 2007 Plan pursuant to this clause (2) above is 7,700,000 Shares). No awards granted under the 2007 Plan remained
outstanding as of March 26, 2022. Our stockholders are being asked to approve an increase of 7,100,000 Shares in the
maximum number of Shares that may be issued pursuant to awards under the 2016 Plan. Thus, if our stockholders approve
the Amendment to the 2016 Plan, the maximum number of Shares that may be issued pursuant to awards under the 2016
Plan will be increased to 58,850,000 Shares, plus the number of Shares described in clause (2) above.
Shares may be authorized, but unissued, or reacquired Shares. If an option or stock appreciation right expires or
becomes unexercisable without having been exercised in full, the unexercised Shares under such award will become
available for issuance again under the 2016 Plan. If Shares subject to other types of awards are forfeited to or repurchased
by us due to failure to vest, those forfeited or repurchased Shares will become available for issuance again under the 2016
Plan. Shares used to pay the exercise or purchase price of an award will cease to be available for future grant or sale under
the 2016 Plan. Shares used to satisfy the tax withholding obligations related to an award, except with respect to options and
stock appreciation rights, will become available for future grant under the 2016 Plan. With respect to stock appreciation
rights settled in Shares, the gross number of Shares exercised under the stock appreciation right award will cease to be
available under the 2016 Plan. In addition, to the extent that we pay out an award in cash rather than Shares, such cash
payment will not reduce the number of Shares available for issuance under the 2016 Plan. No Shares purchased by us with
proceeds received from the exercise of an option will become available for issuance under the 2016 Plan. Except for the
repurchased Shares described above in this paragraph, Shares that actually have been issued under the 2016 Plan under
any award granted under the 2016 Plan will not be returned to the 2016 Plan and will not become available for issuance
again under the 2016 Plan.
Plan Administration. The Compensation Committee (or other committee appointed by the Board) administers the 2016
Plan, provided that the Compensation Committee does not grant awards to non-employee directors under the 2016 Plan.
The Board or any committee of directors or other individuals satisfying applicable laws appointed by the Board or a duly
authorized committee of the Board may administer the 2016 Plan. To the extent desirable to exempt transactions under the
2016 Plan pursuant to Rule 16b-3 of the Exchange Act (“Rule 16b-3”), the transactions will be structured to satisfy such
applicable requirements for exemption under Rule 16b-3.
Subject to the provisions of the 2016 Plan, the administrator will have the power to determine the award recipients and
the terms of the awards not inconsistent with the 2016 Plan, including the exercise price, the number of Shares (or dollar
amounts, as applicable) subject to each such award, the exercisability of the awards, and the form of consideration, if any,
payable by an option holder upon exercise. The administrator also will have the authority to amend existing awards, to
determine fair market value of Shares, to construe and interpret the 2016 Plan and awards granted under the 2016 Plan, to
establish rules and regulations, including sub-plans to facilitate compliance with applicable non-U.S. laws, ease the
administration of the 2016 Plan or qualify for favorable tax treatment under, applicable laws in jurisdictions outside of the
U.S., as necessary or desirable, to temporarily suspend the exercisability of awards if the administrator determines such
suspension to be necessary or appropriate for administrative purposes or comply with applicable laws, and to make all other
determinations necessary or advisable for administering the 2016 Plan. The administrator determines the methods by which
participants may satisfy tax withholding obligations of awards granted under the 2016 Plan, which may include, in whole or
in part: cash, having us withhold otherwise deliverable cash or shares having a fair market value equal to the minimum
statutory amount required to be withheld, delivering to us already owned Shares having a fair market value equal to the
minimum statutory amount required to be withheld, selling a sufficient number of Shares otherwise deliverable to the
participant through means that the administrator may determine equal to the amount required to be withheld. The
administrator’s decisions and interpretations will be final and binding on all participants and any other holders of awards and
will be given the maximum deference permitted by law.
No Repricing. The 2016 Plan prohibits any program providing participants the opportunity to transfer outstanding
awards to a financial institution or other person or entity selected by the administrator, exchange awards for awards of the
same type, awards of a different type, and/or cash, or have the exercise price of awards repriced (i.e., increased or
reduced).
Vesting Requirements. Awards granted under the 2016 Plan are required to vest no earlier than the one-year
anniversary of the awards’ grant date, except that (a) without regard to such limitation, vesting of awards (or portions
thereof) can be accelerated due to a participant’s death, disability or retirement, or service termination in connection with our
change in control, (b) as a result of the Amendment, additionally awards (or applicable portion(s) thereof) granted to non-
56
employee directors that vest on the earlier of the one-year anniversary of the grant date of such award and the next annual
meeting of stockholders of the Company which is at least 50 weeks after the immediately preceding year’s annual meeting
of stockholders of the Company will not be subject to such minimum vesting period requirement, and (c) to the extent not
otherwise qualifying for an exception under the foregoing clauses (a) and (b), awards (or applicable portion(s) thereof) that
result in the issuance of an aggregate of up to 5% of the total maximum number of Shares that are or have been reserved
for issuance under the 2016 Plan upon and after the 2016 Plan initially became effective in 2016 may be granted and/or
modified under the 2016 Plan without regard to such limitation. The administrator may provide for the acceleration of an
award granted under the 2016 Plan in connection with the termination of a participant’s service upon or in connection with
our change in control. Except for any awards granted to non-employee directors or as described above in this paragraph,
the administrator will not be permitted to accelerate the vesting of awards upon our change in control other than if the
awards are not assumed or substituted for in our change in control.
Eligibility. We will be able to grant stock options, stock appreciation rights, restricted stock, RSUs, performance units
and performance shares under the 2016 Plan to our employees (including our officers), consultants and non-employee
directors, and employees (including officers) and consultants of our parent or subsidiary corporations. We will be able to
grant incentive stock options under the 2016 Plan only to individuals who, as of the time of grant, are employees of ours or
of any parent or subsidiary corporation of ours. As of April 30, 2024, we had seven non-employee directors, and 3,332
employees (including four executive officers who constitute all of our NEOs) and 67 independent contractors.
Non-Employee Director Award Limits. The 2016 Plan provides that all non-employee directors will be eligible to receive
all types of awards (except for incentive stock options) under the 2016 Plan. However, in any fiscal year, a non-employee
director may be granted equity awards (with an aggregate grant date fair value) and any other compensation (including cash
retainers or fees) of no more than an aggregate of $750,000, increased to $1,000,000 in our fiscal year of his or her initial
service as a non-employee director. Any equity awards or other compensation provided to the director for his or her services
as an employee or consultant (other than as a non-employee director) will be excluded for purposes of these limits.
Certain Other Limits. Prior to the Amendment, the 2016 Plan provided that in any fiscal year, subject to any adjustment
provisions contained in the 2016 Plan, the maximum aggregate number of Shares covering equity awards that a participant
is permitted to receive (the “annual per-person limits”) under the 2016 Plan is:
• With respect to stock options, 1,500,000 Shares, plus an additional 1,500,000 Shares in connection with his or her
initial service as an employee;
• With respect to stock appreciation rights, 1,500,000 Shares, plus an additional 1,500,000 Shares in connection with
his or her initial service as an employee;
• With respect to restricted stock, 1,500,000 Shares, plus an additional 1,500,000 Shares in connection with his or
her initial service as an employee;
• With respect to RSUs, 1,500,000 Shares, plus an additional 1,500,000 Shares in connection with his or her initial
service as an employee; and
• With respect to performance shares, 1,500,000 Shares, plus an additional 1,500,000 Shares in connection with his
or her initial service as an employee.
The 2016 Plan also provided prior to the Amendment that during any fiscal year, the maximum aggregate initial
value (based on the fair market value of the Shares underlying the award on the award’s grant date) of performance units
that a participant is permitted to receive under the 2016 Plan is $7,500,000 (the “annual per-person performance unit limit”).
Historically, the provisions relating to per-person limits on awards in any fiscal year (other than limits with respect to non-
employee directors) under the 2016 Plan had been adopted as one of various requirements intended to qualify certain
awards as eligible to receive income tax deductions under Section 162(m) of the Code. However, as a result of the Tax Cuts
and Jobs Act of 2017, generally for taxable years beginning on or after January 1, 2018, and except for certain
grandfathered arrangements, under Section 162(m) of the Code, any compensation over $1,000,000 paid to certain
individuals (who are referred to as covered employees under Section 162(m) of the Code) no longer is deductible to the
Company. As part of the Amendment, these annual per-person limits and the annual per-person performance unit limit have
been removed from the 2016 Plan.
Dividends. Until Shares are issued under a stock option or stock appreciation right granted under the 2016 Plan, the
holder of such awards will have no right to receive dividends or any other rights as a stockholder with respect to the Shares
subject to the award and no adjustment will be made for a dividend or other right for which the record date occurs before the
date the related Shares are issued under the stock option or stock appreciation right award (other than subject to the
adjustment provisions contained in the 2016 Plan, as discussed under “Certain Adjustments” further below). The 2016 Plan
provides that whether payable in Shares or otherwise, any dividends or distributions payable with respect to Shares subject
to a restricted stock award granted under the 2016 Plan will be subject to the same restrictions on transferability and/or
forfeitability as the Shares subject to such award. The Administrator also may determine, in its discretion, that such restricted
stock awards will not be eligible to receive any dividends or other distributions during the period of restriction applicable to
57
the award. The 2016 Plan provides further that holders of any restricted stock units, performance shares and performance
units granted thereunder will have no right to receive dividends or other distributions as a stockholder with respect to the
Shares subject to such awards unless the Administrator determines otherwise, in which case any such dividends or
distributions will be subject to the same vesting criteria and forfeitability provisions as the Shares subject to such award on
which they are paid. For clarity, the Shares reserved for issuance under the 2016 Plan will not be reduced by dividends or
other distributions that are reinvested into additional Shares or credited as additional Shares subject to or paid on such
award.
Stock Options. We are able to grant stock options under the 2016 Plan. Each option will be evidenced by an award
agreement that specifies the exercise price, the number of Shares subject to the option, the maximum term of the option,
forms of consideration for exercise, and such other terms and conditions as the administrator determines, subject to the
terms of the 2016 Plan. The per share exercise price of options granted under the 2016 Plan must be at least equal to the
fair market value of a share of our common stock on the date of grant, except in special, limited circumstances relating to
certain transactions, as set forth in the 2016 Plan. The maximum term of a stock option must not exceed 10 years. However,
with respect to any participant who owns more than 10% of the voting power of all classes of outstanding stock of ours or of
any parent or subsidiary of ours, the maximum term of an incentive stock option granted to such participant must not exceed
five years and such option’s per share exercise price must equal at least 110% of the fair market value of a Share on the
grant date. Generally, unless the administrator determines otherwise, the fair market value of a Share is the closing sales
price of a Share on the relevant date as quoted on Nasdaq. Options will be exercisable at such times and under such
conditions as determined by the administrator and as set forth in the applicable award agreement. The administrator will
determine and specify in each award agreement, and solely in its discretion, the period of post-termination exercise
applicable to each option. In the absence of such a determination by the administrator, the participant generally will be able
to exercise the vested portion of the option for three months following his or her service termination for reasons other than
death or disability, and for 12 months following his or her service termination due to disability or death while holding the
option (to the extent vested on the date of disability or death). However, in no event can an option be exercised after the
expiration of the term of the option. The administrator also determines the form of consideration for exercising an option,
which may consist of cash, check, promissory note (if permitted by applicable laws), certain other Shares, payment through
a cashless exercise program established by us for the 2016 Plan, net exercise, other consideration or method permitted by
applicable laws, or any combination of the above.
Stock Appreciation Rights. We are able to grant stock appreciation rights under the 2016 Plan. Stock appreciation
rights allow the recipient to receive the appreciation in the fair market value of the underlying Shares between the exercise
date and the date of grant. Each stock appreciation right will be evidenced by an award agreement that specifies the
exercise price, the term of the stock appreciation right, and other terms and conditions as determined by the administrator,
subject to the terms of the 2016 Plan. The per Share exercise price of a stock appreciation right will be no less than 100% of
the fair market value per Share on the date of grant.
Stock appreciation rights will be exercisable at such times and under such conditions as determined by the
administrator and set forth in the applicable award agreement. The maximum term of a stock appreciation right must not
exceed 10 years. The administrator will determine and specify in each award agreement, and solely in its discretion, the
period of post-termination exercise applicable to each stock appreciation right. In the absence of such a determination by the
administrator, the participant generally will be able to exercise the vested portion of the stock appreciation right for three
months following his or her service termination for reasons other than death or disability, and for 12 months following his or
her service termination due to disability or death while holding the stock appreciation right (to the extent vested on the date
of disability or death). However, in no event can a stock appreciation right be exercised after the expiration of the term of the
stock appreciation right. At the discretion of the administrator, the payment upon exercise of a stock appreciation right may
be paid in cash, Shares, or a combination of both.
Restricted Stock. We are able to grant restricted stock under the 2016 Plan. Restricted stock awards are grants of
Shares that may be subject to various restrictions, which may include restrictions on transferability and forfeiture provisions.
Each restricted stock award granted will be evidenced by an award agreement specifying the number of Shares subject to
the award, any period of restriction, and other terms and conditions of the award, as determined by the administrator, subject
to the terms of the 2016 Plan.
Restricted stock awards may (but are not required to) be subject to vesting conditions, as the administrator specifies
(subject to the minimum vesting requirements under the 2016 Plan), and the Shares acquired may not be transferred by the
participant until the vesting conditions (if any) are satisfied. The administrator, in its sole discretion, may accelerate the time
at which any restrictions will lapse or be removed (subject to minimum vesting requirements under the 2016 Plan).
Recipients of restricted stock awards generally will have full voting rights with respect to such Shares upon grant without
regard to vesting, unless the administrator provides otherwise. Unless otherwise determined by the administrator, a
participant generally will forfeit any Shares of restricted stock as to which the restrictions have not lapsed as of a date
specified in the award agreement (such as termination of the participant’s service).
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Restricted Stock Units. We are able to grant RSUs under the 2016 Plan. Each RSU granted is a bookkeeping entry
representing an amount equal to the fair market value of one Share. Each RSU award will be evidenced by an award
agreement that specifies the number of RSUs subject to the award, any vesting criteria (which may include accomplishing
specified performance criteria or continued service to us), form of payout, and other terms and conditions of the award, as
determined by the administrator, subject to the terms of the 2016 Plan. RSUs result in a payment to a participant if the
performance goals or other vesting criteria are achieved or the awards otherwise vest. The administrator, in its sole
discretion, may accelerate the time at which any restrictions will lapse or be removed (subject to the minimum vesting
requirements under the 2016 Plan). The administrator determines in its sole discretion whether an award will be settled in
cash, Shares, or a combination of both. On a date set forth in the award agreement (such as termination of the participant’s
service), any unearned RSUs subject to such award agreement will be forfeited to us.
Performance Units and Performance Shares. We are able to grant performance units and performance shares under
the 2016 Plan. Performance units and performance shares are awards that will result in a payment to a participant only if
performance goals or other vesting criteria, if any, established by the administrator are achieved or the awards otherwise
vest. Each award of performance units or performance shares will be evidenced by an award agreement specifying the
performance period and other terms and conditions of the award, as determined by the administrator, subject to the terms
and conditions of the 2016 Plan. On or before the date of grant, the administrator will establish an initial dollar value for each
performance unit. Each performance share will have an initial value equal to the fair market value of a Share on the date of
grant. The administrator in its discretion will establish performance goals or other vesting criteria (which may include
continued service), which, depending on the extent to which they are met, will determine the value or number of
performance units or performance shares to be paid out. After the grant of performance units or performance shares, the
administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such
performance units or performance shares (subject to the minimum vesting requirements). The administrator, in its sole
discretion, may pay earned performance units or performance shares in the form of cash, Shares, or in some combination of
both. On a date set forth in the award agreement (such as termination of the participant’s service), any unearned or
unvested performance units or performance shares subject to such award agreement will be forfeited to us.
Non-Transferability of Awards. Unless the administrator provides otherwise, the 2016 Plan generally will not allow for
the transfer of awards, and only the recipient of an award may exercise an award during his or her lifetime.
Certain Adjustments. In the event of any dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock split, reorganization, reincorporation, reclassification,
merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or our other securities, or other
change in our corporate structure affecting Shares (other than any ordinary dividends or other ordinary distributions), then in
order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the
2016 Plan, the administrator will adjust the number and class of shares that may be delivered under the 2016 Plan and/or
the number, class and price of shares covered by each outstanding award, and the numerical share limits set forth in the
2016 Plan.
Merger or Change in Control. The 2016 Plan provides that in the event of our merger with or into another corporation
or entity or our change in control, as defined in the 2016 Plan, each outstanding award will be treated as the administrator
determines (subject to the following paragraph) without a participant’s consent, in accordance with the following: (i) the
assumption of the award or substitution of the award with an equivalent option or right by the acquirer or successor
corporation or its parent or subsidiary (with appropriate adjustments made to such awards), (ii) termination of the award
upon or immediately prior to the consummation of the merger or change in control following written notice and subject to the
next paragraph, (iii) subject to the next paragraph, (A) termination of the award in exchange for an amount of cash and/or
property in an amount that would have been attained upon exercise or realization of the award as of the date of the merger
or change in control, or (B) replacement of the award with other rights or property, or (iv) any combination of the above. The
administrator will not be required to treat all awards, all awards held by a participant, all awards of the same type, or all
portions of awards, similarly.
If outstanding awards (or portion of the awards) are not assumed or substituted for as provided in the 2016 Plan, then
the awards (or portions thereof) not assumed or substituted for will fully vest and become exercisable and all restrictions will
lapse under such awards (or the portions thereof) not assumed or substituted for, except that with respect to awards subject
to performance-based vesting (or portions thereof) not assumed or substituted for, performance criteria will be deemed
achieved based on actual performance measured through the last date that the awards remain outstanding (or such earlier
date that the administrator may determine), with any performance period shortened proportionately and applicable
performance goals or other vesting criteria adjusted proportionately to reflect the adjusted performance period (or to the
extent applicable, the value of the consideration to be received by our stockholders in connection with the merger or change
in control). In addition, if an option or stock appreciation right (or portion thereof) is not assumed or substituted in the event
of a merger or change in control as provided in the 2016 Plan, the administrator will notify the participant that such award (or
its applicable portion) not assumed or substituted for will be exercisable for a specified period prior to the transaction, and
such award (or its applicable portion) will terminate upon the expiration of such period.
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Dissolution or Liquidation. In the event of our dissolution or liquidation, the administrator will notify each participant as
soon as practicable before the effective date of the proposed transaction. To the extent not previously exercised (as
applicable), an award granted under the 2016 Plan will terminate immediately before the consummation of such proposed
transaction.
Plan Amendment; Termination. The administrator has the authority to amend, alter, suspend, or terminate the 2016
Plan at any time, provided such action does not impair the existing rights of any participant unless mutually agreed in writing.
The 2016 Plan will terminate automatically in 2026, unless we terminate it sooner.
Forfeiture of Awards. The 2016 Plan grants the administrator authority to specify in an award agreement that a
participant’s rights, payments and benefits with respect to an award granted under the 2016 Plan will be subject to reduction,
cancellation, forfeiture, recoupment, reimbursement, or reacquisition upon the occurrence of certain specified events. Such
events may include, without limitation, termination of such participant’s status as an employee and/or other service provider
for cause or any specified action or inaction by a participant, whether before or after such termination of employment and/or
other service, that would constitute cause for termination of such participant’s status as an employee and/or other service
provider. The 2016 Plan also provides that awards granted under the 2016 Plan will be subject to reduction, cancellation,
forfeiture, recoupment, reimbursement, or reacquisition under any Company clawback policy that the Company is required
to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s
securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other
applicable laws (the “Clawback Policy”). The administrator may require a participant to forfeit or return to the Company or
reimburse the Company for all or a portion of an award and any amounts paid under the award pursuant to the terms of
Infinera’s Clawback Policy or in order to comply with applicable laws, including without limitation any reacquisition right
regarding previously acquired Shares or other cash or property. Any such recovery of compensation will not constitute an
event that triggers or contributes to any participant resigning for good reason or constructive termination (or similar term)
under any agreement with us or any of our parent, subsidiaries or affiliates, unless this provision under the 2016 Plan
relating to compensation recovery specifically is waived.
Number of Awards Granted to Employees and Directors
Our executive officers and non-employee directors have an interest in this proposal because they are eligible to
receive awards under the 2016 Plan, including that non-employee directors are eligible to receive certain annual equity
awards as described above in the section titled “Our Board of Directors—How We Are Paid.”
As of the date of our 2024 Annual Meeting, each individual continuing as a non-employee director after such date will
automatically be granted an annual equity award of RSUs under the 2016 Plan. These RSU awards will be scheduled to
vest as to 100% of the underlying shares on the earlier of (i) the date of our next annual meeting of stockholders, provided
that it occurs at least 50 weeks after the prior annual stockholders meeting or (ii) the one-year anniversary of the date of
grant, subject to the non-employee director’s continued service through the applicable vesting date. The following table sets
forth the dollar value of such RSU awards expected to be granted to our non-employee directors under the 2016 Plan on the
date of our 2024 Annual Meeting, assuming election of the nominees for Class I director who are standing for election at the
2024 Annual Meeting. The number of Shares that will be subject to such RSU awards will not be known until their date of
grant.
Name of Non-Employee Director or Group
Christine B. Bucklin
Gregory P. Dougherty
Sharon E. Holt
Roop K. Lakkaraju
Paul J. Milbury
Amy H. Rice
George A. Riedel
All current directors who are not executive officers, as a group
Dollar
Value
of Award(s)
($)
200,000
200,000
200,000
200,000
200,000
—
200,000
1,200,000
Number of Shares
Subject to
RSUs Expected
to be
Granted
(#)
(1)
(1)
(1)
(1)
(1)
(2)
(1)
(1)
_________________
(1)
The number of Shares subject to each such RSU award will be determined by dividing $200,000 by the closing price of a Share on the
date of grant, with any resulting fractional Share rounded down to the nearest whole Share.
(2) Ms. Rice has waived any participation in the compensation benefits available to the Company’s non-employee directors, except for
customary reimbursement of expenses.
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The number of awards, and Shares subject thereunder, that an employee, director, or consultant may receive under
the 2016 Plan is in the discretion of the administrator and therefore cannot be determined in advance (other than the
automatic annual RSU awards described above for our non-employee directors). The following table sets forth the
aggregate number of shares subject to RSUs and performance shares (at target) granted under the 2016 Plan during fiscal
2023 to each of our NEOs; our current executive officers, as a group; directors who are not executive officers, as a group;
and all employees who are not executive officers, as a group. There were no stock options granted to any employees
(including our NEOs) or directors in fiscal 2023.
Name of Individual or Identity of Group and
Principal Position
David W. Heard
Chief Executive Officer
Nancy L. Erba
Chief Financial Officer
David L. Teichmann
Chief Legal Officer and Corporate Secretary
Nicholas R. Walden
Senior Vice President, Worldwide Sales
All current executive officers as a group
All current directors who are not executive officers as a group(2)
All employees (excluding executive officers) as a group(3)
Dollar
Value
of Award(s)
($)(1)
5,137,500
Number of RSUs
and
Performance
Shares
Granted
(#)
750,000
1,734,300
235,000
848,700
115,000
959,400
130,000
8,679,900
1,937,978
52,167,731
1,230,000
336,682
7,357,939
_________________
(1)
For RSUs, represents the aggregate grant date fair value of each equity award computed in accordance with ASC 718. For
performance shares, represents the aggregate grant date fair value of each equity award at the target payout level computed in
accordance with ASC 718. See Notes 2 and 14 of the notes to our consolidated financial statements contained in our 2023 Annual
Report on Form 10-K for a discussion of all assumptions made by us in determining the ASC 718 values of equity awards.
(2)
(3)
This group includes Dr. Welch.
This group includes Dr. Welch.
U.S. Federal Income Tax Consequences
The following paragraphs are a summary of the general federal income tax consequences to U.S. taxpayers and
Infinera of awards granted under the 2016 Plan. Tax consequences for any particular individual may be different.
Incentive Stock Options. A participant generally recognizes no taxable income as the result of the grant or exercise of
an incentive stock option qualifying under Section 422 of the Code (unless the participant is subject to the alternative
minimum tax). If the participant exercises the option and then later sells or otherwise disposes of the Shares acquired
through the exercise of the option after both the two-year anniversary of the grant date and the one-year anniversary of the
exercise date, the difference between the sale price and the exercise price will be taxed as capital gain or loss. If the
participant exercises the option and then later sells or otherwise disposes of the Shares on or before the two- or one-year
anniversaries described above (a “disqualifying disposition”), the participant generally will have ordinary income at the time
of the sale equal to the fair market value of the Shares on the exercise date (or the sale price, if less) minus the exercise
price of the option.
Nonstatutory Stock Options. A participant generally recognizes no taxable income on the date of grant of a
nonstatutory stock option with an exercise price equal to the fair market value of the underlying stock on the date of grant.
Upon the exercise of a nonstatutory stock option, the participant generally will recognize ordinary income equal to the
excess of the fair market value of the Shares on the exercise date over the exercise price of the option. If the participant is
an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of
Shares acquired through the exercise of a nonstatutory stock option, any subsequent gain or loss (generally based on the
difference between the sale price and the fair market value on the exercise date) will be treated as long-term or short-term
capital gain or loss, depending on how long the Shares were held by the participant.
Stock Appreciation Rights. A participant generally recognizes no taxable income on the date of grant of a stock
appreciation right with an exercise price equal to the fair market value of the underlying stock on the date of grant. Upon
exercise of the stock appreciation right, the participant generally will be required to include as ordinary income an amount
equal to the sum of the amount of any cash received and the fair market value of any Shares received upon the exercise. If
61
the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes.
Upon the sale of Shares acquired by an exercise of the stock appreciation right, any gain or loss (generally based on the
difference between the sale price and the fair market value on the exercise date) will be treated as long-term or short-term
capital gain or loss, depending on how long the Shares were held by the participant.
Restricted Stock. A participant generally will not have taxable income at the time an award of restricted stock is
granted. Instead, the participant generally will recognize ordinary income in the first taxable year in which the participant’s
interest in the Shares underlying the award becomes either (i) freely transferable, or (ii) no longer subject to substantial risk
of forfeiture. If the participant is an employee, such ordinary income generally is subject to withholding of income and
employment taxes. However, the recipient of a restricted stock award may elect to recognize income at the time the recipient
receives the award in an amount equal to the fair market value of the Shares underlying the award (less any cash paid for
the Shares) on the date the award is granted. Any additional gain or loss recognized upon any later disposition of any shares
received would be capital gain or loss.
Restricted Stock Units, Performance Units and Performance Shares. A participant generally will not have taxable
income at the time an award of RSUs, performance shares, or performance units is granted. Instead, the participant
generally will be required to recognize ordinary income in an amount equal to the fair market value of shares issued to the
participant at the end of the applicable vesting period or, if later, the settlement date of the award. If the participant is an
employee, such ordinary income generally is subject to withholding of income and employment taxes. Any additional gain or
loss recognized upon any later disposition of any shares received would be capital gain or loss.
Section 409A. Section 409A of the Code (“Section 409A”) provides certain requirements for non-qualified deferred
compensation arrangements with respect to an individual’s deferral and distribution elections and permissible distribution
events. Awards granted under the 2016 Plan with a deferral feature will be subject to the requirements of Section 409A. If an
award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary
income on the amounts deferred under the award, to the extent vested, which may be prior to when the compensation is
actually or constructively received. Also, if an award that is subject to Section 409A fails to comply with Section 409A’s
provisions, Section 409A imposes an additional 20% tax on compensation recognized as ordinary income, as well as
interest on such deferred compensation.
Medicare Surtax. In addition, a participant’s annual “net investment income,” as defined in Section 1411 of the Code,
may be subject to a 3.8% federal surtax. Net investment income may include capital gain and/or loss arising from the
disposition of Shares issued pursuant to awards granted under the 2016 Plan. Whether a participant’s net investment
income will be subject to this surtax will depend on the participant’s level of annual income and other factors.
Tax Effect for Infinera. We generally will be entitled to a tax deduction in connection with an award under the 2016
Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such
income (for example, the exercise of a nonstatutory stock option). However, special rules limit the deductibility of
compensation paid to our CEO and other “covered employees” as determined under Section 162(m) and applicable
guidance. Under Section 162(m), the annual compensation paid to any of these specified individuals will be deductible only
to the extent that it does not exceed $1,000,000. However, under Section 162(m) as it was in effect during fiscal year 2018,
we could preserve the deductibility of certain compensation in excess of $1,000,000 if the conditions of Section 162(m) were
met. These conditions included (among others) stockholder approval of the 2016 Plan and its material terms, setting certain
limits on the number of Shares subject to awards and, for awards other than options and stock appreciation rights,
establishing performance criteria that must be met before the award actually was vested or paid. As a result of the Tax Cuts
and Jobs Act of 2017, for taxable years beginning on or after January 1, 2018, and except for certain grandfathered
arrangements, under Section 162(m), any compensation over $1,000,000 paid to the covered employees is not deductible to
Infinera.
THE FOREGOING IS ONLY A SUMMARY OF THE TAX EFFECT OF U.S. FEDERAL INCOME TAXATION UPON
PARTICIPANTS AND INFINERA WITH RESPECT TO THE GRANT AND VESTING OR EXERCISE OF AWARDS UNDER
THE 2016 PLAN. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS THE TAX CONSEQUENCES
OF A SERVICE PROVIDER’S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY,
STATE, OR NON-U.S. COUNTRY TO WHICH THE SERVICE PROVIDER MAY BE SUBJECT.
Summary
The Board believes that it is in the best interests of our company and our stockholders to continue to provide
employees, consultants and directors with the opportunity to acquire an ownership interest in Infinera through the grant of
equity awards under the 2016 Plan and thereby encourage them to remain in our service and more closely align their
interests with those of our stockholders.
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Vote Required
Approval of Proposal 2 requires the affirmative vote of a majority of the voting power of the shares cast for or against
this proposal. Abstentions and broker non-votes will have no effect on the outcome of the vote.
Proposal 2—Recommendation of the Board of Directors
The Board unanimously recommends a vote “FOR” the approval of the 2016 Plan, as amended, including increasing the
number of shares authorized thereunder by 7,100,000 shares
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PROPOSAL 3—ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, enables our
stockholders to vote to approve, on an advisory basis, the compensation of our NEOs as disclosed in the Compensation
Discussion and Analysis and the tabular disclosures of this Proxy Statement. This proposal, commonly known as a “say-on-
pay” proposal, provides our stockholders with the opportunity to express their views on the compensation of our NEOs.
As described in the section entitled “Compensation Discussion and Analysis,” we believe that the skill, talent, judgment
and dedication of our executive officers are critical factors affecting the long-term value of Infinera. The goals of our
executive compensation programs are to fairly compensate our executives, attract and retain highly qualified executives able
to contribute to our long-term success, encourage performance consistent with clearly defined corporate goals and align our
executives’ long-term interests with those of our stockholders. The specific goals that our current executive compensation
programs reward are focused on corporate objectives, including specific non-GAAP Operating Income targets and certain
strategic and financial objectives related to our pluggables. Please read the “Compensation Discussion and Analysis”
section of this Proxy Statement beginning on page 22 for additional details about our executive compensation programs,
including information about the fiscal 2023 compensation of our NEOs.
The Board is asking our stockholders to indicate their support for the compensation of our NEOs as described in this
Proxy Statement. This vote is not intended to address any specific item of compensation, but rather the overall
compensation of our NEOs and the philosophy, policies, practices and objectives described in this Proxy Statement.
Accordingly, the Board recommends that our stockholders vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED: That the stockholders approve, on an advisory basis, the compensation of the named executive officers,
as disclosed in the Proxy Statement for the 2024 Annual Meeting of Stockholders pursuant to the compensation
disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis,
the compensation tables, and the accompanying footnotes and narrative disclosures.”
As an advisory vote, this say-on-pay proposal is not binding upon Infinera, the Board or the Compensation Committee.
However, Infinera, the Board and the Compensation Committee, which are responsible for overseeing, reviewing and
administering our executive compensation programs, value the opinions expressed by our stockholders and will continue to
consider our stockholders’ feedback in evaluating future compensation options for our NEOs.
Vote Required
Approval of Proposal 3 requires the affirmative vote of a majority of the voting power of the shares cast for or against
this proposal. Abstentions and broker non-votes will have no effect on the outcome of the vote on this proposal.
Proposal 3—Recommendation of the Board of Directors
The Board unanimously recommends a vote “FOR” the approval of the compensation of our NEOs, as disclosed in this
Proxy Statement pursuant to the compensation disclosure rules of the SEC
64
OUR AUDITORS
PROPOSAL 4—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has selected Ernst & Young LLP, independent registered public accounting firm, as
our independent auditors for the fiscal year ending December 28, 2024 and has further directed that we submit the
appointment of independent auditors for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP has
audited our financial statements since fiscal 2001. Representatives of Ernst & Young LLP are expected to attend the Annual
Meeting, and will have an opportunity to make a statement if they so desire and will be available to respond to appropriate
questions.
Ratification of appointment of Ernst & Young LLP as our independent registered public accounting firm is not required
pursuant to our Bylaws, our other governing documents or law. However, we are submitting the appointment of Ernst &
Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the
appointment, the Audit Committee will reconsider whether or not to retain that firm. Even if the appointment is ratified, the
Audit Committee in its discretion may direct the appointment of different independent auditors at any time during the year if it
determines that such change would be in the best interests of Infinera and its stockholders.
Independent Registered Public Accounting Firm’s Fees
The following table sets forth the aggregate fees for audit, audit-related, tax and other services provided by Ernst &
Young LLP for the fiscal years ended December 30, 2023 and December 31, 2022. All of the services described in the
following table were approved in conformity with the Audit Committee’s pre-approval processes and procedures.
Audit Fees
Audit-Related Fees
Tax Fees
All Other Fees
Total Fees
Audit Fees
2023
6,545,000 $
75,000
70,000
2,000
6,692,000 $
2022
4,785,000
—
321,000
2,000
5,108,000
$
$
This category includes Ernst & Young LLP’s audit of our annual financial statements and internal control over financial
reporting, review of financial statements included in our Quarterly Reports on Form 10-Q, and services that are typically
provided by the independent registered public accounting firm in connection with statutory and regulatory filings or
engagements for those fiscal years. This category also includes statutory audits required by non-U.S. jurisdictions,
consultation and advice on new accounting pronouncements, and technical advice on various accounting matters related to
the consolidated financial statements or statutory financial statements that are required to be filed by non-U.S. jurisdictions,
comfort letters, and consents issued in connection with SEC filings. Fiscal 2023 fees were higher than fiscal 2022 fees
primarily due to the additional audit procedures required in connection with Ernst & Young LLP’s audit of our consolidated
financial statements for the fiscal year ended December 31, 2022 and the material weakness in internal control over
financial reporting described in Part II, Item 9A, “Controls and Procedures” in our 2023 Annual Report on Form 10-K.
Audit-Related Fees
This category consists of assurance and related services provided by Ernst & Young LLP that are reasonably related to
the performance of the audit or review of our financial statements and are not included in the fees reported in the table
above under “Audit Fees.”
Tax Fees
This category includes fees for tax compliance, tax advice, tax planning and transfer pricing.
All Other Fees
This category consists of any permitted services provided by Ernst & Young LLP that are not included in the category
descriptions under “Audit Fees,” “Audit-Related Fees” or “Tax Fees” in the table above, and principally includes non-audit
services, including permissible business and advisory consulting services.
65
Auditor Independence
In 2023, there were no other professional services provided by Ernst & Young LLP, other than those listed above, that
would have required our Audit Committee to consider their compatibility with maintaining the independence of Ernst & Young
LLP.
Pre-Approval Policies and Procedures
The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services rendered by Ernst & Young
LLP, our independent registered public accounting firm. The Audit Committee can pre-approve specified services in defined
categories of audit services, audit-related services and tax services up to specified amounts, as part of the Audit
Committee’s approval of the scope of the engagement of Ernst & Young LLP or on an individual case-by-case basis before
Ernst & Young LLP is engaged to provide a service. The Audit Committee has determined that the rendering of the services
other than audit services by Ernst & Young LLP is compatible with maintaining the principal accountant’s independence.
Vote Required
Approval of Proposal 4 requires the affirmative vote of a majority of the voting power of the shares cast for or against
this proposal. Abstentions and broker non-votes will have no effect on the outcome of the vote on this proposal.
Proposal 4—Recommendation of the Board
The Board unanimously recommends a vote “FOR” the ratification of the appointment of Ernst & Young LLP as
Infinera’s independent registered public accounting firm for its fiscal year ending December 28, 2024.
Proposal 4—Recommendation of the Board of Directors
The Board unanimously recommends a vote “FOR” the ratification of the appointment of Ernst & Young LLP as
Infinera’s independent registered public accounting firm for its fiscal year ending December 28, 2024
66
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board currently consists of the three non-employee directors named below. The Board
annually reviews the Nasdaq listing standards’ definition of independence for Audit Committee members and has determined
that each member of the Audit Committee meets that standard. The Board has also determined that Messrs. Lakkaraju and
Milbury are each an Audit Committee Financial Expert as described in applicable rules and regulations of the Securities and
Exchange Commission (“SEC”).
The principal purpose of the Audit Committee is to assist the Board in its general oversight of our accounting practices,
system of internal controls, audit processes and financial reporting processes. The Audit Committee is responsible for
appointing and retaining our independent auditor and approving the audit and non-audit services to be provided by our
independent registered public accounting firm. In addition, the Audit Committee has primary responsibility for oversight of
enterprise risk management and cybersecurity risk management. The Audit Committee’s function is more fully described in
its charter, which the Board has adopted and which the Audit Committee reviews on an annual basis. A copy of the Audit
Committee charter is available on our website at www.infinera.com in the Governance section on our Investors page.
Our management is responsible for preparing our financial statements and ensuring they are complete and accurate
and prepared in accordance with generally accepted accounting principles. Ernst & Young LLP, our independent registered
public accounting firm, is responsible for performing an independent audit of our consolidated financial statements in
accordance with generally accepted auditing standards and expressing an opinion on the effectiveness of our internal
control over financial reporting.
The Audit Committee met seventeen times during fiscal 2023. Its agenda included reviewing our financial statements,
internal control over financial reporting, and audit and other matters. The Audit Committee met with our internal auditors and
independent auditors, including in periodic executive sessions without management present, to discuss the scope, plan,
status, and results of their respective audits. In addition, the Audit Committee met with management and the independent
auditors each quarter to review our interim financial results and quarterly earnings press releases prior to their issuance. The
Audit Committee also reviewed our Quarterly Reports on Form 10-Q and Annual Report on Form 10-K prior to their filing
with the SEC, including any amendments thereto. At quarterly meetings, the Audit Committee reviewed and discussed with
management, and management gave presentations regarding, our financial reporting and controls, financing activities, taxes
and insurance, and related risks, including cybersecurity and enterprise risk management, as well as other topics with
potential significant financial impact. The Audit Committee oversaw our anonymous and confidential ethics reporting system,
which encourages and allows employees to submit concerns directly to senior management and the Audit Committee.
The Audit Committee has reviewed and discussed the audited financial statements for the year ended December 30,
2023 with our management and Ernst & Young LLP. The Audit Committee has also discussed with Ernst & Young LLP the
matters required to be discussed by Auditing Standard No. 1301, “Communications with Audit Committees” issued by Public
Company Accounting Oversight Board (“PCAOB”) and the SEC. The Audit Committee also has received and reviewed the
written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the PCAOB regarding
Ernst & Young LLP’s communications with the Audit Committee concerning independence, and has discussed with Ernst &
Young LLP its independence from Infinera.
Based upon the review and discussions described above, the Audit Committee recommended to the Board that the
audited financial statements referred to above be included in our Annual Report on Form 10-K for the year ended
December 30, 2023 for filing with the SEC.
Submitted by the members of the Audit Committee:
Roop K. Lakkaraju (Chair)
Christine Bucklin
Paul J. Milbury
This audit committee report shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to
Regulation 14A promulgated by the SEC or to the liabilities of Section 18 of the Exchange Act, and shall not be deemed
incorporated by reference into any prior or subsequent filing by Infinera under the Securities Act or the Exchange Act, except
to the extent Infinera specifically requests that the information be treated as “soliciting material” or specifically incorporates it
by reference.
67
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
We have adopted a formal policy that our executive officers, directors, and principal stockholders, including their
immediate family members and affiliates, are not permitted to enter into a related party transaction with us without the prior
consent of the Audit Committee, or other independent members of the Board in the case it is inappropriate for the Audit
Committee to review such transaction due to a conflict of interest. Any request for us to enter into a transaction with an
executive officer, director, principal stockholder, or any of such persons’ immediate family members or affiliates, in which the
amount involved exceeds $120,000 must first be presented to the Audit Committee for review, consideration and approval.
All of our directors, executive officers and employees are required to report to the Audit Committee any such related party
transaction. In approving or rejecting the proposed agreement, the Audit Committee shall consider the relevant facts and
circumstances available and deemed relevant to the Audit Committee, including, but not limited to the risks, costs and
benefits to us, the terms of the transaction, the availability of other sources for comparable services or products, and, if
applicable, the impact on a director’s independence. The Audit Committee shall approve only those agreements that, in light
of known circumstances, are, or are not inconsistent with, our best interests, as the Audit Committee determines in the good
faith exercise of its discretion.
For a description of compensation received by Dr. Welch, our founder and an employee member of our Board, please
see “How We Are Paid—Fiscal 2023 Director Compensation,” above.
We did not engage in any other related party transactions during fiscal 2023 within the meaning of the applicable SEC
rules.
DELINQUENT SECTION 16(a) REPORTS
The members of the Board, our executive officers and persons who hold more than 10% of our outstanding common
stock are subject to the reporting requirements of Section 16(a) of the Exchange Act, which requires them to file reports with
respect to their ownership of our common stock and certain transactions in our common stock. Based solely upon (i) the
copies of Section 16(a) reports that we received from such persons for their fiscal 2023 transactions in our common stock
and their common stock holdings and (ii) the written representations received from one or more of such persons, including
that no Form 5 is required, we believe that all reporting requirements under Section 16(a) were met in a timely manner
during fiscal 2023.
The following table provides information as of December 30, 2023 with respect to the shares of our common stock that
may be issued under our existing equity compensation plans.
EQUITY COMPENSATION PLAN INFORMATION
Plan Category
Equity compensation plans approved by security holders
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights
15,189,297 (1)
Equity compensation plans not approved by security holders
$
—
Total
15,189,297
________________
(1)
This amount includes the following:
Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans (Excluding
Securities
Reflected in
First Column)
11,163,150 (2)
360,638
11,523,788
Weighted Average
Exercise Price
of Outstanding
Options, Warrants
and Rights
N/A
N/A
•
•
11,537,197 shares subject to RSUs granted under the 2016 Plan. Since these awards have no exercise price, they are not
included in the weighted average exercise price calculation in the second column; and
3,652,100 shares issuable pursuant to outstanding unvested performance share awards assuming target performance under
such awards. The number of shares, if any, to be issued pursuant to such outstanding awards will be determined based on
certain performance metrics, as discussed above in the section entitled “Fiscal 2023 Compensation—Long-Term Incentive
Compensation” in the Compensation Discussion and Analysis. Since these awards have no exercise price, they are not
included in the weighted average exercise price calculation in the second column.
(2)
This amount includes 1,098,245 shares of common stock available for future issuances under the 2007 ESPP.
68
The following table sets forth certain information known to us regarding beneficial ownership of our common stock as
of April 30, 2024 by:
OUR STOCKHOLDERS
•
•
•
•
Each person known by us to be the beneficial owner of more than 5% of any class of our voting securities;
Our NEOs;
Each of our directors; and
All current executive officers and directors as a group.
The information provided in this table is based on our records, information filed with the SEC and information provided
to Infinera, except where otherwise noted. To our knowledge and unless as otherwise indicated, each stockholder
possesses sole voting and investment power over the shares listed, except for shares owned jointly with such person’s
spouse. Percentage beneficially owned is based on 233,974,025 shares of common stock outstanding on April 30, 2024.
Unless otherwise indicated, the principal address of each of the stockholders below is c/o Infinera Corporation, 6373 San
Ignacio Avenue, San Jose, California 95119.
Name of Beneficial Owner
5% or More Stockholders
FMR LLC(2)
Oaktree Optical Holdings, L.P.(3)
The Vanguard Group(4)
Shapiro Capital Management LLC(5)
BlackRock, Inc.(6)
Brown Advisory Incorporated(7)
Named Executive Officers and Directors
David W. Heard
Nancy L. Erba
David L. Teichmann
Nicholas R. Walden
Christine B. Bucklin
Gregory P. Dougherty
Sharon E. Holt
Roop K. Lakkaraju
Paul J. Milbury
Amy H. Rice
George A. Riedel
David F. Welch, Ph.D.(8)
All Executive Officers and Directors as a
Group (12 Persons)
_________________
Common
Shares
Currently
Held
Common Shares
That May Be Acquired
Within 60 Days of
April 30, 2024
Total
Beneficial
Ownership
Percent
Beneficially
Owned(1)
34,038,565
25,175,384
24,750,346
18,767,200
17,754,504
14,820,495
917,000
525,441
272,740
129,082
95,572
177,174
192,727
48,229
153,484
—
128,572
403,982
—
—
—
—
—
—
19,259
7,708
4,583
5,333
39,447
39,447
39,447
39,447
39,447
—
39,447
8,333
34,038,565
25,175,384
24,750,346
18,767,200
17,754,504
14,820,495
14.55 %
10.76 %
10.58 %
8.02 %
7.59 %
6.33 %
936,259
533,149
277,323
134,415
135,019
216,621
232,174
87,676
192,931
—
168,019
412,315
*
*
*
*
*
*
*
*
*
*
*
*
3,044,003
281,898
3,325,901
1.42 %
*
(1)
(2)
(3)
Less than 1% of the outstanding shares of common stock.
Includes shares represented by RSUs or other rights that are expected to vest within 60 days of April 30, 2024. These shares are
deemed to be outstanding for the purpose of computing the percentage ownership of the person holding the RSUs but are not treated
as outstanding for the purpose of computing the percentage ownership of any other person.
According to a Schedule 13G/A filed with the SEC on February 9, 2024 by FMR LLC (“FMR”), Abigail P. Johnson (FMR’s Director,
Chair and CEO) and Fidelity Growth Company Fund Commingled Pool (“Fidelity”). Such amendment states that FMR is deemed to be
the beneficial owner of 34,038,565 shares by virtue of its control over Fidelity, which is deemed to be the beneficial owner of
15,290,064 shares. Such amendment further states that (a) FMR has sole voting power over 34,037,308 shares, shared voting power
over zero shares, sole dispositive power over 34,038,565 shares, and shared dispositive power over zero shares; and (b) Ms. Johnson
has sole voting power over zero shares, shared voting power over zero shares, sole dispositive power over 34,038,565 shares, and
shared dispositive power over zero shares. The address of FMR is 245 Summer Street, Boston, Massachusetts 02210.
According to Forms 4 filed on March 18, 2020 and March 23, 2020 and a Schedule 13D/A filed with the SEC on March 2, 2023 jointly,
pursuant to a joint filing agreement, by (i) Oaktree Optical Holdings, L.P., a Delaware limited partnership (“Optical”), whose principal
69
business is to invest in securities; (ii) Oaktree Fund GP, LLC, a Delaware limited liability company (“GP LLC”), whose principal
business is to serve as and perform the functions of the general partner of certain investment funds including Optical; (iii) Oaktree Fund
GP I, L.P., a Delaware limited partnership (“GP I”), whose principal business is (A) serve as, and perform the functions of, the general
partner of certain investment funds or to serve as, and perform the functions of, the managing member of the general partner of certain
investment funds or (B) to act as the sole stockholder of certain controlling entities of certain investment funds; (iv) Oaktree Capital I,
L.P., a Delaware limited partnership (“Capital I”), whose principal business is to serve as, and perform the functions of, the general
partner of GP I; (v) OCM Holdings I, LLC, a Delaware limited liability company (“Holdings I”), whose principal business is to serve as,
and perform the functions of, the general partner of Capital I and to hold limited partnership interests in Capital I; (vi) Oaktree Holdings,
LLC, a Delaware limited liability company (“Holdings”), whose principal business is to serve as, and perform the functions of, the
managing member of Holdings I; (vii) Oaktree Capital Group, LLC, a Delaware limited liability company (“OCG”), whose principal
business is to act as the holding company and controlling entity of each of the general partner and investment adviser of certain
investment funds and separately managed accounts; (viii) Oaktree Capital Group Holdings GP, LLC, a Delaware limited liability
company (“OCGH GP”); (ix) Brookfield Corporation, solely in its capacity as the indirect owner of the Class A units of OCG
(“Brookfield”); and (x) BAM Partners Trust, solely in its capacity as the sole owner of Class B Limited Voting Shares of Brookfield
(“BAM” and together with Optical, GP LLC, GP I, Capital I, Holdings I, Holdings, OCG, OCGH GP and Brookfield, collectively, the
“Reporting Persons”), whose principal business is to serve as, and perform the functions of, the manager of OCG, each of the
Reporting Persons may be deemed the beneficial owner of, and to have sole voting power and sole dispositive power over, 25,175,384
shares. The principal business address of each of the Reporting Persons is c/o Oaktree Capital Group Holdings GP, LLC, 333 South
Grand Avenue, 28th Floor, Los Angeles, California 90071.
According to a Schedule 13G/A filed with the SEC on February 13, 2024 by The Vanguard Group (“Vanguard”), Vanguard is the
beneficial owner of 24,750,346 shares and has sole voting power over zero shares, shared voting power over 365,147 shares, sole
dispositive power over 24,209,540 shares and shared dispositive power over 540,806 shares. The address of Vanguard is 100
Vanguard Boulevard, Malvern, Pennsylvania 19355.
According to a Schedule 13G filed with the SEC on February 14, 2024 by Shapiro Capital Management LLC (“Shapiro”). Shapiro is the
beneficial owner of 18,767,200 shares and has sole voting power over 16,648,638 shares, shared voting power over 2,118,562 shares,
sole dispositive power over 18,767,200 shares and shared dispositive power over zero shares. The address of Shapiro is 3060
Peachtree Road, Suite 1555 N.W., Atlanta, Georgia 30305.
According to a Schedule 13G/A filed with the SEC on January 26, 2024 by BlackRock, Inc. (“BlackRock”). BlackRock is the beneficial
owner of 17,754,504 shares and has sole voting power over 17,537,634 shares, shared voting power over zero shares, sole dispositive
power over 17,754,504 shares and shared dispositive power over zero shares. The address of BlackRock is 50 Hudson Yards, New
York, NY 10001.
According to a Schedule 13G/A filed with the SEC on February 9, 2024 jointly by Brown Advisory Incorporated, a Maryland corporation
whose principal business is as parent holding company or control person (“BAI”), Brown Investment Advisory & Trust Company, a
Maryland trust company, whose principal business is banking (“BIATC”), and Brown Advisory LLC, a Maryland limited liability company
whose principal business is as an investment advisor (“BALLC”). Such amendment states that BAI is deemed to be the beneficial
owner of 14,820,495 shares by virtue of its control over BIATC, which is deemed to be the beneficial owner of 74,834 shares, and
BALLC, which is deemed to be the beneficial owner of 14,745,661 shares. Such amendment further states that (a) BAI has sole voting
power over 12,903,329 shares, shared voting power over zero shares, sole dispositive power over zero shares, and shared dispositive
power over 14,820,495 shares; (b) BIATC has sole voting power over 74,834 shares, shared voting power over zero shares, sole
dispositive power over zero shares, and shared dispositive power over 74,834 shares, and (c) BALLC has sole voting power over
12,828,495 shares, shared voting power over zero shares, sole dispositive power over zero shares, and shared dispositive power over
14,745,661 shares. The address of BAI is 901 South Bond Street, Suite #400, Baltimore, Maryland 21231.
Shares held consist of (i) 401,482 shares held by The Welch Family Trust U/A DTD 4/3/1996 and (ii) 2,500 shares held by Dr. Welch as
trustee for his children. Dr. Welch disclaims beneficial ownership of the shares held in trust for his children.
(4)
(5)
(6)
(7)
(8)
STOCKHOLDER PROPOSALS FOR 2025 ANNUAL MEETING
To be considered for inclusion in our Proxy Statement for the 2025 Annual Meeting, stockholder proposals must
comply with our Bylaws and the requirements of Rule 14a-8 under the Exchange Act and be received by our Corporate
Secretary at our principal executive offices no later than January 17, 2025, or no later than 120 calendar days before the
one-year anniversary of the date on which we first mailed our Proxy Statement to stockholders in connection with this year’s
Annual Meeting.
Under Rule 14a-8 of the Exchange Act, if the date of the 2025 Annual Meeting changes by more than 30 days from the
anniversary of this year’s Annual Meeting, to be included in our Proxy Statement, stockholder proposals must be received by
us within a reasonable time before our solicitation is made.
To be raised at the 2025 Annual Meeting, stockholder proposals must comply with our Bylaws. Under our Bylaws, a
stockholder must give timely notice thereof in proper written form to our Corporate Secretary of any business, including
nominations of directors for the Board that the stockholder wishes to raise at our 2025 Annual Meeting. To be timely, the
stockholder notice must be received by our Corporate Secretary no later than 5:00 p.m. Pacific time on April 2, 2025 nor
earlier than 8:00 a.m. on March 3, 2025. To be in proper written form, the stockholder notice must contain a brief description
of such business and the reasons for conducting such business at the meeting, as well as certain other information as set
forth in greater detail in our Bylaws and SEC rules and regulations. In connection with a stockholder nomination of a
candidate for the Board, the stockholder notice must also include certain information as set forth in our Bylaws about both
the nominee and the stockholder making the nomination. If you wish to bring a stockholder proposal or nominate a
candidate for director, you are advised to review our Bylaws, which contain additional requirements about advance notice of
70
stockholder proposals and director nominations. Our current Bylaws may be found on our website at www.infinera.com in
the Corporate Governance section on our Investors page.
Under our Bylaws, if the date of the 2025 Annual Meeting is changed by more than 25 days from the one-year
anniversary of the date of this year’s Annual Meeting, then, for notice by the stockholder to be timely, it must be received by
our Corporate Secretary no earlier than 8:00 a.m., Pacific time on the 120th day prior to the 2025 Annual Meeting and no
later than 5:00 p.m. Pacific time on the later of (i) the 90th day prior to the 2025 Annual Meeting, or (ii) the tenth day following
the day on which disclosure in a press release reported by Dow Jones News Service, Associated Press or a comparable
national news service or in a document publicly filed by Infinera with the SEC pursuant to Section 13, 14 or 15(d) of the
Exchange Act of the date of the 2025 Annual Meeting is first made.
In addition to satisfying the requirements of our bylaws, including the earlier notice deadlines set forth above and
therein, to comply with universal proxy rules, stockholders who intend to solicit proxies in support of director nominees (other
than our nominees) must also provide notice that sets forth the information required by Rule 14a-19 of the Exchange Act, no
later than April 14, 2025.
DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING THE SAME LAST NAME AND ADDRESS
To reduce the expense of delivering duplicate proxy materials to stockholders who may have more than one account
holding our common stock, but sharing the same address, we have adopted a procedure, approved by the SEC, called
“householding.” Under this procedure, stockholders who have the same last name and address, and who do not participate
in electronic delivery of proxy materials, will receive only one copy of the proxy materials and, as applicable, any additional
proxy materials that are delivered. This procedure reduces duplicate mailings and saves printing costs and postage fees, as
well as natural resources. Stockholders who participate in “householding” will continue to have access to and utilize
separate proxy voting instructions.
Once you have received notice from your broker that they will be “householding” communications to your address,
“householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer
wish to participate in “householding” and would prefer to receive a separate set of proxy materials or if you would like an
additional copy of any of the proxy materials, please notify your broker or direct your written request to Infinera Corporation,
6373 San Ignacio Avenue, San Jose, California 95119, Attention: Corporate Secretary, or call (408) 572-5200. Upon receipt
of such a request, we will promptly deliver a separate copy of the requested materials. Stockholders who currently receive
multiple copies of the Proxy Statement at their address and would like to request “householding” of their communications
should contact their broker.
OTHER MATTERS
The Board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other
matters are properly brought before the Annual Meeting, it is the intention of the persons named in the accompanying proxy
to vote on such matters in accordance with their best judgment.
It is important that your shares be represented at the Annual Meeting, regardless of the number of shares that you
hold. You are, therefore, urged to vote as promptly as possible to ensure your vote is recorded.
San Jose, California
May 17, 2024
By Order of the Board,
Nancy Erba
Chief Financial Officer
71
USER’S GUIDE
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS
AND VOTING PROCEDURAL MATTERS
Annual Meeting
Q: Why am I being provided access to these proxy materials?
A: We are providing you access to these proxy materials in connection with the solicitation of proxies by the Board for
use at the 2024 Annual Meeting of Stockholders to be held exclusively virtually on Wednesday, June 12, 2024 at
10:00 a.m. Pacific time, and at any adjournment or postponement thereof, for the purpose of considering and acting
upon the matters described herein. These proxy materials were first sent or given to stockholders on or about
May 17, 2024. You are invited to virtually attend the Annual Meeting and requested to vote on the items described in
this proxy statement.
Q: Where is the Annual Meeting?
A: The Annual Meeting will be held virtually at www.virtualshareholdermeeting.com/INFN2024.
Q: How can I attend the virtual Annual Meeting?
A: The Annual Meeting will be a completely virtual meeting of stockholders conducted exclusively by a live audio
webcast.
If you are a stockholder of record as of the close of business on April 30, 2024, the record date for the Annual
Meeting, you will be able to virtually attend the Annual Meeting, vote your shares and submit your questions online
during the meeting by visiting www.virtualshareholdermeeting.com/INFN2024. You will need to enter the 16-digit
control number included on your proxy card or on the voting instruction form that accompanied your proxy materials.
If you are a stockholder holding your shares in “street name” as of the close of business on April 30, 2024, you may
gain access to the meeting by following the instructions in the voting instruction form provided by your broker, bank,
trustee or other nominee. You may not vote your shares electronically at the Annual Meeting unless you receive a
valid “legal proxy” from your broker, bank, trustee or other nominee.
The online meeting will begin promptly at 10:00 a.m., Pacific time. We encourage you to access the meeting prior to
the start time. Online check-in will begin at 9:45 a.m., Pacific time, and you should allow approximately 15 minutes for
the online check-in procedures.
If you wish to submit a question for the Annual Meeting, you may do so in advance at
www.virtualshareholdermeeting.com/INFN2024, or you may type it into the dialog box provided at any point during
the virtual meeting (until the floor is closed to questions). If we receive substantially similar questions, we may group
such questions together and provide a single response to avoid repetition. We reserve the right to edit profanity or
other inappropriate language.
Q: What can I do if I need technical assistance during the Annual Meeting?
A:
If you encounter any difficulties accessing the virtual Annual Meeting webcast, please call the technical support
number that will be posted on the Annual Meeting website log-in page.
Q: What proposals will be voted on at the Annual Meeting?
A: At the Annual Meeting, stockholders will be asked to vote on:
•
•
•
•
The election of three Class II directors to serve until the 2027 Annual Meeting of Stockholders or until their
successors have been duly elected and qualified, or until his or her earlier death, resignation or removal from
the Board;
The approval of the 2016 Plan, as amended, including increasing the number of shares authorized thereunder
by 7,100,000 shares;
The approval, on an advisory basis, of the compensation of Infinera’s NEOs, as described in the Proxy
Statement; and
The ratification of the appointment of Ernst & Young LLP as Infinera’s independent registered public
accounting firm for the fiscal year ending December 28, 2024.
72
We are not currently aware of any other business to be acted upon at the Annual Meeting. If any other matters are
properly submitted for consideration at the Annual Meeting, the persons named as proxies will vote the shares
represented thereby at their discretion. Adjournments of the Annual Meeting may be made for the purpose of, among
other things, soliciting additional proxies. Any adjournment may be made from time to time by the chairperson of the
meeting or approval of the holders of common stock representing a majority of the votes present virtually or by proxy
at the Annual Meeting, whether or not a quorum exists, without further notice other than by an announcement at the
Annual Meeting.
Q: What is the voting requirement to approve each of the proposals and how does the Board recommend that I
vote?
A: Proposal 1—A nominee for director is elected if the votes cast for such nominee exceed the votes cast against such
nominee. You may vote “FOR,” “AGAINST,” or “ABSTAIN.” If a nominee for director fails to receive the required
number of votes for re-election, such director shall offer to properly tender his or her resignation (to the extent not
already tendered) to the Nominating and Governance Committee, which shall then make a recommendation to the
Board as to whether to accept or reject such director’s resignation or whether other action should be taken.
Thereafter, the Board will act on the Nominating and Governance Committee’s recommendation. Abstentions and
broker non-votes will have no effect on the outcome of the vote with respect to any nominee. The Board
unanimously recommends that you vote your shares “FOR” the nominees listed in Proposal 1.
Proposal 2—The approval of the 2016 Plan, as amended, including increasing the number of shares authorized
thereunder by 7,100,000 shares, requires the affirmative vote of a majority of the voting power of the shares cast for
or against this proposal. You may vote “FOR,” “AGAINST,” or “ABSTAIN.” Abstentions and broker non-votes will have
no effect on the outcome of the vote on this proposal. The Board unanimously recommends that you vote your
shares “FOR” Proposal 2.
Proposal 3—The approval, on an advisory basis, of the compensation of Infinera’s NEOs requires the affirmative vote
of a majority of the voting power of the shares cast for or against this proposal. You may vote “FOR,” “AGAINST,” or
“ABSTAIN.” Abstentions and broker non-votes will have no effect on the outcome of the vote on this proposal. The
Board unanimously recommends that you vote your shares “FOR” Proposal 3.
Proposal 4— The ratification of the appointment of Ernst & Young LLP as Infinera’s independent registered public
accounting firm for the fiscal year ending December 28, 2024, requires the affirmative vote of a majority of the voting
power of the shares cast for or against this proposal. You may vote “FOR,” “AGAINST,” or “ABSTAIN.” Abstentions
and broker non-votes will have no effect on the outcome of the vote on this proposal. The Board unanimously
recommends that you vote your shares “FOR” Proposal 4.
Stock Ownership
Q: What is the difference between holding shares as a stockholder of record and as a beneficial owner?
A: Stockholders of Record—If your shares are registered directly in your name with our transfer agent, Computershare,
Inc., you are the stockholder of record with respect to those shares, and the proxy materials have been sent directly
to you.
Beneficial Owners—If your shares are held through a broker, bank, trustee or other nominee, rather than directly in
their own name, you are considered the “beneficial owner” of shares held in “street name.” The proxy materials have
been forwarded to you by your broker, trustee or other nominee who is considered, with respect to those shares, the
stockholder of record. As the beneficial owner, you have the right to direct your broker, bank, trustee or other nominee
on how to vote your shares. For directions on how to vote shares beneficially held in street name, please refer to the
voting instruction form provided by your broker, bank, trustee or other nominee. Because a beneficial owner is not the
stockholder of record, you may not vote these shares virtually at the Annual Meeting unless you obtain a legal proxy
issued in your name from the broker, bank, trustee or other nominee that holds your shares, giving you the right to
vote your shares at the Annual Meeting.
Quorum and Voting
Q: Who is entitled to vote at the Annual Meeting?
A: Stockholders of record of our common stock at the close of business on the Record Date are entitled to receive notice
of and to vote their shares at the Annual Meeting. Such stockholders are entitled to cast one vote for each share of
common stock held as of the Record Date. As of the close of business on the Record Date, there were 233,974,025
shares of common stock outstanding and entitled to vote at the Annual Meeting. Shares held as of the Record Date
include shares that are held directly in your name as the stockholder of record and those shares held for you as a
beneficial owner through a broker, bank, trustee or other nominee.
73
Q: How many shares must be present or represented to conduct business at the Annual Meeting?
A: The presence virtually of the holders of a majority of the shares of our common stock entitled to vote at the Annual
Meeting is necessary to constitute a quorum at the Annual Meeting. Such stockholders are counted as present at the
meeting if they (i) are present virtually at the Annual Meeting or (ii) have properly submitted a proxy.
Under the General Corporation Law of the State of Delaware, as amended, abstentions and broker non-votes are
counted as present and entitled to vote and are included for purposes of determining whether a quorum is present at
the Annual Meeting.
Q: What is a broker non-vote and how are they counted at the Annual Meeting?
A: A broker non-vote occurs when the broker holding shares for a beneficial owner does not vote on a non-routine
proposal because the broker does not have discretionary voting power with respect to such proposal. Broker non-
votes will be counted towards the presence of a quorum, but will not be counted towards the vote total for any
proposal.
Q: Which proposals are considered “routine” or “non-routine?”
A: The election of directors (Proposal 1), the amendment of the 2016 Plan (Proposal 2), and the non-binding advisory
vote on Infinera’s NEO compensation (Proposal 3) are “non-routine” matters for which discretionary voting power
does not exist under applicable rules. A broker, bank, trustee or other nominee cannot vote without instructions on
non-routine matters, and therefore, broker non-votes may exist in connection with Proposals 1, 2, and 3. Thus, if you
hold your shares beneficially in street name and you do not instruct your broker, bank, trustee or other nominee how
to vote with respect to Proposals 1, 2, and 3, no votes will be cast on your behalf.
The ratification of Ernst & Young LLP as our independent registered public accounting firm (Proposal 4) is considered
a “routine” matter for which discretionary voting power exists under applicable rules. A broker, bank, trustee or other
nominee may generally vote on routine matters without instructions from the beneficial owner of the shares being
voted, and therefore no broker non-votes are expected to exist in connection with Proposal 4.
Q: How can I vote my shares virtually at the Annual Meeting?
A: Stockholders of Record—Shares held in your name as the stockholder of record may be voted virtually at the Annual
Meeting, even if previously voted by another method. You will need the 16-digit control number on your proxy card or
voting instruction form to vote at the Annual Meeting.
Beneficial Owners—Shares held beneficially in street name may be voted virtually at the Annual Meeting only if you
obtain a legal proxy issued in your name from the broker, bank, trustee or other nominee that holds your shares,
giving you the right to virtually vote the shares at the Annual Meeting. Otherwise, you will not be permitted to virtually
vote at the Annual Meeting. You will need the 16-digit control number on your proxy card or voting instruction form to
vote at the Annual Meeting.
Even if you plan to virtually attend the Annual Meeting, we recommend that you submit your vote as
described in the proxy card or voting instruction form delivered with these proxy materials and below, so
that your vote will be counted if you later decide not to attend the Annual Meeting.
Q: How can I vote my shares without virtually attending the Annual Meeting?
A: Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your
shares are voted without attending the Annual Meeting. If you are a stockholder of record, you may vote by submitting
a proxy (please refer to the voting instruction form received with these proxy materials or below). If you hold shares
beneficially in street name, you may vote by submitting your completed voting instruction form to your broker, bank,
trustee or other nominee (please refer to the instructions on the voting instruction form provided to you by your broker,
bank, trustee or other nominee).
Internet—Stockholders of record with Internet access may submit proxies by following the instructions on the proxy
card. Stockholders who hold shares beneficially in street name may vote by accessing the website specified in the
voting instruction form provided by their brokers, banks, trustees or other nominees.
Telephone—Depending on how your shares are held, you may be able to vote by telephone. If this option is available
to you, you will receive information explaining this procedure.
Mail—Stockholders who have received a paper copy of a proxy card or voting instruction form by mail may submit
their vote by completing, signing and dating their proxy card or voting instruction form where indicated and returning it
in the accompanying prepaid envelope.
74
Q: How will my shares be voted if I submit a proxy via the Internet, by telephone or by mail and do not make
specific choices?
A:
If you are a stockholder of record or have obtained a proxy voting form from your broker, bank, trustee or other
nominee that holds your shares giving you the right to vote the shares, and you submit a proxy via the Internet, by
telephone or by mail and do not make voting selections, the shares represented by that proxy will be voted “FOR” the
nominees listed in Proposal 1, and “FOR” Proposals 2, 3 and 4. If you are a beneficial owner of shares and your
broker, bank, trustee or other nominee does not receive instructions from you about how your shares are to be voted,
the shares represented by that proxy will not be voted with respect to Proposals 1, 2 or 3 and will be counted as
broker non-votes with respect to these proposals. With respect to Proposal 4, your broker, bank, trustee or other
nominee will have the discretion to vote your shares.
Q: Can I change or revoke my vote?
A: Subject to any rules your broker, bank, trustee or other nominee may have, you may change your proxy instructions
at any time before your proxy is voted at the Annual Meeting.
Stockholders of Record—If you are a stockholder of record, you may change your vote by (1) filing with our Corporate
Secretary, prior to your shares being voted at the Annual Meeting, a written notice of revocation or a duly executed
proxy card, in either case dated later than the prior proxy relating to the same shares, or (2) virtually attending the
Annual Meeting and voting (although virtual attendance at the Annual Meeting will not, by itself, revoke a proxy). Any
written notice of revocation or subsequent proxy card must be received by our Corporate Secretary prior to the taking
of the vote at the Annual Meeting. Such written notice of revocation or subsequent proxy card should be hand
delivered to our Corporate Secretary or should be sent to our principal executive offices, Attn: Corporate Secretary. A
stockholder of record who has voted via the Internet or by telephone may also change his or her vote by making a
timely and valid Internet or telephone vote at a later time but prior to 11:59 p.m. Eastern Time, on the day prior to the
Annual Meeting.
Beneficial Owners—If you are a beneficial owner of shares held in street name, you may change your vote by
(1) submitting a new voting instruction form by any of the applicable voting methods allowed through your broker,
trustee or other nominee, or (2) virtually attending the Annual Meeting and voting if you have obtained a proxy voting
form from the broker, trustee or other nominee that holds your shares giving you the right to vote the shares.
Q: Who will bear the cost of soliciting votes for the Annual Meeting?
A: We will bear all expenses of soliciting proxies for the Annual Meeting. We may reimburse brokerage firms, custodians,
nominees, fiduciaries and other persons representing beneficial owners of common stock for their reasonable
expenses in forwarding solicitation materials to such beneficial owners. Directors, officers and employees of Infinera
may also solicit proxies in person or by other means of communication. Such directors, officers and employees will
not be additionally compensated, but may be reimbursed for reasonable out-of-pocket expenses in connection with
such solicitation. We have engaged the services of Morrow Sodali LLC, 333 Ludlow Street, 5th Floor, South Tower,
Stamford, CT 06902, as our proxy solicitor to aid in the solicitation of proxies from certain brokers, banks, trustees,
nominees and other institutional owners. Morrow’s fees for this service are estimated to be $13,250 plus expenses.
Q: Where can I find the voting results of the Annual Meeting?
A: We intend to announce preliminary voting results at the Annual Meeting and will publish final results on a Current
Report on Form 8-K filed with the SEC.
Q: Are votes confidential? Who counts the votes?
A: Proxy instructions, ballots, and voting tabulations that identify individual stockholders are handled in a manner that
protects your voting privacy. We will not disclose the proxy instructions or ballots of individual stockholders, except:
•
•
•
•
as necessary to meet applicable legal requirements and to assert or defend claims for or against Infinera;
to facilitate a successful proxy solicitation;
if a stockholder makes a written comment on the proxy card or otherwise communicates his or her vote to
management; or
to allow the independent inspector of election to certify the results of the vote.
A representative provided by Broadridge Financial Solutions, Inc. will serve as the inspector of election.
75
Additional Information
Q: What should I do if I receive more than one set of proxy materials?
A:
If you receive more than one set of proxy materials, your shares are likely registered in more than one name or with
more than one broker, bank, trustee or nominee. Please follow the voting instructions on each proxy card or voting
instruction form that you receive to ensure that all of your shares are voted.
Q: Can I access Infinera’s proxy materials and Annual Report on Form 10-K via the Internet?
A: Our proxy materials, including this Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended
December 30, 2023 (the “2023 Annual Report”), will be available on our website at www.infinera.com/annual-meeting.
All stockholders of record and beneficial owners will have the ability to vote their shares free of charge online at
www.proxyvote.com using the control number referred to in their proxy card or voting instruction form. The 2023
Annual Report is not incorporated into this Proxy Statement and is not considered proxy soliciting material.
Q: What information from this proxy statement is incorporated by reference into certain Company SEC filings?
A: We have made previous filings under the Securities Act of 1933, as amended, and the Exchange Act that incorporate
future filings, including this proxy statement, in whole or in part. However, the Compensation Committee Report and
the Report of the Audit Committee shall not be incorporated by reference into any such filings.
Q: How can I view or request copies of Infinera’s corporate documents and SEC filings?
A: Our website contains our Bylaws, Corporate Governance Guidelines, Board committee charters and our Code of
Business Conduct and Ethics. To view these documents, please go to investors.infinera.com/ and then click on
“Governance Documents” under the “Governance” heading. Our website also contains our SEC filings and Forms 3,
4 and 5 filed by or on behalf of our directors and our Section 16 officers. To view these filings, please go
investors.infinera.com/ and then click on “SEC Filings” under the “Financials” heading.
We will promptly deliver free of charge, upon request, a copy of our Corporate Governance Guidelines, Board
committee charters or Code of Business Conduct and Ethics to any stockholder requesting a copy. Requests should
be directed to Infinera Corporation, c/o Corporate Secretary, 6373 San Ignacio Avenue, San Jose, California 95119.
76
APPENDIX A—UNAUDITED RECONCILIATIONS FROM GAAP TO NON-GAAP
Infinera Corporation
Unaudited Reconciliations from GAAP to Non-GAAP
(In thousands, except percentages and per share data)
December 30,
2023
Years Ended
December 31,
2022
December 25,
2021
Reconciliation of Revenue:
U.S. GAAP as reported ............................................................................
1,614,128
Acquisition-related deferred revenue adjustment ................................
—
Non-GAAP as adjusted ............................................................................ $ 1,614,128
$ 1,573,242
—
$ 1,573,242
$ 1,425,205
3,913
$ 1,429,118
Reconciliation of Gross Profit:
U.S. GAAP as reported ............................................................................ $
Acquisition-related deferred revenue adjustment ................................
Stock-based compensation .....................................................................
Amortization of acquired intangible assets ............................................
Restructuring and other related costs ....................................................
Inventory related charges ........................................................................
Global distribution center transition costs ..............................................
Warehouse fire loss (recovery) ...............................................................
Non-GAAP as adjusted ............................................................................ $
622,912
—
10,000
10,621
2,218
—
—
(1,985)
643,766
$
$
535,776
—
9,485
23,138
222
14,381
2,109
2,232
587,343
$
$
497,974
3,913
7,928
19,621
1,531
6,582
—
—
537,549
Reconciliation of Gross Margin:
U.S. GAAP as reported ............................................................................
Acquisition-related deferred revenue adjustment ................................
Stock-based compensation .....................................................................
Amortization of acquired intangible assets ............................................
Restructuring and other related costs ....................................................
Inventory related charges ........................................................................
Global distribution center transition costs ..............................................
Warehouse fire loss (recovery) ...............................................................
Non-GAAP as adjusted ............................................................................
38.6 %
— %
0.6 %
0.7 %
0.1 %
— %
— %
(0.1) %
39.9 %
34.1 %
— %
0.6 %
1.5 %
— %
0.9 %
0.1 %
0.1 %
37.3 %
34.9 %
0.2 %
0.5 %
1.4 %
0.1 %
0.5 %
— %
— %
37.6 %
Reconciliation of Income (Loss) from Operations:
U.S. GAAP as reported ............................................................................ $
Acquisition-related deferred revenue adjustment ................................
Stock-based compensation .....................................................................
Amortization of acquired intangible assets ............................................
Acquisition and integration costs ............................................................
Restructuring and other related costs ....................................................
Inventory related charges ........................................................................
(4,840)
—
62,150
22,965
—
8,935
—
$
$
(60,157)
—
61,015
37,714
—
10,344
14,381
(87,479)
3,913
51,812
37,076
614
14,777
6,582
A- 1
Global distribution center transition costs ..............................................
Warehouse fire loss (recovery) ...............................................................
Litigation charges ......................................................................................
Non-GAAP as adjusted ............................................................................ $
—
(1,985)
—
87,225
$
2,109
2,232
1,350
68,988
$
—
—
2,291
29,586
December 30,
2023
Years Ended
December 31,
2022
December 25,
2021
Reconciliation of Operating Margin:
U.S. GAAP as reported ............................................................................
Acquisition-related deferred revenue adjustment ................................
Stock-based compensation .....................................................................
Amortization of acquired intangible assets ............................................
Restructuring and other related costs ....................................................
Inventory related charges ........................................................................
Global distribution center transition costs ..............................................
Warehouse fire loss (recovery) ...............................................................
Litigation charges ......................................................................................
Non-GAAP as adjusted ............................................................................
-0.3 %
— %
3.8 %
1.4 %
0.6 %
— %
— %
-0.1 %
— %
5.4 %
-3.8 %
— %
3.9 %
2.4 %
0.7 %
0.9 %
0.1 %
0.1 %
0.1 %
4.4 %
Reconciliation of Non-GAAP Net Income (Loss) per Common
Share:
U.S. GAAP as reported ............................................................................ $
Acquisition-related deferred revenue adjustment ................................
Stock-based compensation .....................................................................
Amortization of acquired intangible assets ............................................
Acquisition and integration costs ............................................................
Restructuring and other related costs ....................................................
Inventory related charges ........................................................................
Global distribution center transition costs ..............................................
Warehouse fire loss (recovery) ...............................................................
Litigation charges ......................................................................................
Amortization of debt discount on Infinera’s convertible senior notes
Gain on extinguishment of debt ..............................................................
Foreign exchange (gains) losses, net ....................................................
Income tax effects .....................................................................................
Non-GAAP as adjusted ............................................................................ $
(0.11)
—
0.28
0.10
—
0.04
—
—
(0.01)
—
—
—
(0.07)
0.01
0.24
$
$
(0.35)
—
0.27
0.17
—
0.05
0.07
0.01
0.01
0.01
—
(0.07)
(0.06)
0.01
0.12
$
$
-6.1 %
0.3 %
3.6 %
2.6 %
1.0 %
0.5 %
— %
— %
0.2 %
2.1 %
(0.82)
0.02
0.25
0.18
—
0.07
0.03
—
—
0.01
0.15
—
0.08
(0.01)
(0.04)
A- 2
Three Months Ended
December 30,
2023
September 30,
2023
July 1,
2023
April 1,
2023
Reconciliation of Gross Profit:
U.S. GAAP as reported .............................................. $
Stock-based compensation .......................................
Amortization of acquired intangible assets .............
Restructuring and other related costs ......................
Warehouse fire loss (recovery) .................................
Non-GAAP as adjusted .............................................. $
174,902
2,328
—
2,218
—
179,448
$
$
158,320
2,515
3,528
—
—
164,363
$
$
142,792
2,881
3,537
—
(1,475)
147,735
$
$
146,898
2,276
3,556
—
(510)
152,220
Reconciliation of Gross Margin:
U.S. GAAP as reported ..............................................
Stock-based compensation .......................................
Amortization of acquired intangible assets .............
Restructuring and other related costs ......................
Warehouse fire loss (recovery) .................................
Non-GAAP as adjusted ..............................................
38.6 %
0.5 %
— %
0.5 %
— %
39.6 %
40.3 %
0.7 %
0.9 %
— %
— %
41.9 %
38.0 %
0.8 %
0.9 %
— %
-0.4 %
39.3 %
37.5 %
0.5 %
0.9 %
— %
-0.1 %
38.8 %
Reconciliation of Income (Loss) from Operations:
U.S. GAAP as reported .............................................. $
Stock-based compensation .......................................
Amortization of acquired intangible assets .............
Restructuring and other related costs ......................
Warehouse fire loss (recovery) .................................
Non-GAAP as adjusted .............................................. $
11,261
12,757
2,256
6,314
—
32,588
$
$
7,655
15,745
6,504
400
—
30,304
$
$
(14,291) $
17,997
7,060
1,431
(1,475)
10,722
$
(9,465)
15,651
7,145
790
(510)
13,611
Reconciliation of Operating Margin:
U.S. GAAP as reported ..............................................
Stock-based compensation .......................................
Amortization of acquired intangible assets .............
Restructuring and other related costs ......................
Warehouse fire loss (recovery) .................................
Non-GAAP as adjusted ..............................................
Reconciliation of Non-GAAP Net Income (Loss) per
Common Share:
2.5 %
2.8 %
0.5 %
1.4 %
— %
7.2 %
2.0 %
3.9 %
1.7 %
0.1 %
— %
7.7 %
-3.8 %
4.7 %
1.9 %
0.4 %
-0.4 %
2.8 %
U.S. GAAP as reported .............................................. $
Stock-based compensation .......................................
Amortization of acquired intangible assets .............
Restructuring and other related costs ......................
Warehouse fire loss (recovery) .................................
Foreign exchange (gains) losses, net ......................
Income tax effects .......................................................
Non-GAAP as adjusted .............................................. $
0.06
0.04
0.01
0.03
—
(0.02)
0.00
0.12
$
$
(0.04) $
0.07
0.03
0.00
—
0.03
0.00
0.09
$
(0.09) $
0.09
0.03
0.01
(0.01)
(0.04)
0.01
0.00
$
-2.4 %
4.0 %
1.8 %
0.2 %
-0.1 %
3.5 %
(0.04)
0.07
0.03
—
0.00
(0.03)
0.00
0.03
A- 3
Reconciliation of Product Standard Margin for the year ended December 30, 2023 (in thousands):
Revenue
Product
Cost of revenue
Cost of product - standard
Cost of product - other
Total cost of product
Total product standard margin
GAAP as
reported
Warehouse fire
loss (recovery)
Non-GAAP as
adjusted
$
1,304,229 $
— $
1,304,229
661,578
149,267
810,845 $
642,651 $
(1,985)
—
(1,985) $
1,985 $
663,563
149,267
812,830
640,666
$
$
The non-GAAP financial measures of revenue, product standard margin, gross profit, gross margin, operating income (loss),
operating margin, and net income (loss) per common share exclude acquisition-related deferred revenue adjustments, non-
cash stock-based compensation expenses, amortization of acquired intangible assets, acquisition and integration costs,
restructuring and other related costs, inventory related charges, global distribution center transition costs, warehouse fire
loss (recovery), litigation charges, amortization of debt discount on Infinera’s convertible senior notes, gain on
extinguishment of debt, foreign exchange (gains) losses, net, and income tax effects. We believe these adjustments are
appropriate to enhance an overall understanding of our underlying financial performance and also our prospects for the
future and are considered by management for the purpose of making operational decisions. In addition, these results are the
primary indicators management uses as a basis for its planning and forecasting of future periods. The presentation of this
additional information is not meant to be considered in isolation or as a substitute for revenue, gross margin, net loss from
operations or operating margin prepared in accordance with GAAP. Non-GAAP financial measures are not based on a
comprehensive set of accounting rules or principles and are subject to limitations.
A- 4
APPENDIX B—INFINERA CORPORATION 2016 EQUITY INCENTIVE PLAN
INFINERA CORPORATION
2016 EQUITY INCENTIVE PLAN
(as amended and restated on May 24, 2018, as amended May 23, 2019, May 21, 2020,
May 21, 2021, May 19, 2022, May 18, 2023, and [ ], 2024)
1. Purposes of the Plan. The purposes of this Plan are:
•
•
•
to attract and retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Employees, Directors and Consultants, and
to promote the success of the Company’s business.
The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Restricted
Stock Units, Stock Appreciation Rights, Performance Units and Performance Shares.
2. Definitions. As used herein, the following definitions will apply:
(a)
with Section 4 of the Plan.
“Administrator” means the Board or any of its Committees as will be administering the Plan, in accordance
(b)
“Applicable Laws” means the legal and regulatory requirements relating to the administration of equity-
based awards, including but not limited to U.S. federal and state corporate laws, U.S. federal and state securities laws, the
Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of
any non-U.S. country or jurisdiction where Awards are, or will be, granted under the Plan.
(c)
“Award” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, Performance Units or Performance Shares.
(d)
“Award Agreement” means the written or electronic agreement setting forth the terms and provisions
applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.
(e)
“Board” means the Board of Directors of the Company.
(f)
“Change in Control” means the occurrence of any of the following events:
(i) A change in the ownership of the Company which occurs on the date that any one person, or
more than one person acting as a group (“Person”), acquires ownership of the stock of the Company that, together with the
stock held by such Person, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company;
provided, however, that for purposes of this subsection, (A) the acquisition of additional stock by any one Person, who is
considered to own more than fifty percent (50%) of the total voting power of the stock of the Company will not be considered
a Change in Control, and (B) if the stockholders of the Company immediately before the change in ownership continue to
retain, immediately after the change in ownership, in substantially the same proportions as their ownership of shares of the
Company’s voting stock immediately prior to the change in ownership, the direct or indirect beneficial ownership of fifty
percent (50%) or more of the total voting power of the shares of the Company or of the ultimate parent entity of the
Company, such event will not be considered a Change in Control; or
(ii) A change in the effective control of the Company which occurs on the date that a majority of
members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not
endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this
clause (ii), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the
Company by the same Person will not be considered a Change in Control; or
(iii) A change in the ownership of a substantial portion of the Company’s assets which occurs on the
date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent
acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more
than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately prior to such
acquisition or acquisitions. For purposes of this subsection (iii), gross fair market value means the value of the assets of the
Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such
assets.
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For purposes of this definition, persons will be considered to be acting as a group if they are owners
of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction
with the Company.
Notwithstanding the foregoing, a transaction will not be deemed a Change in Control unless the
transaction qualifies as a change in control event within the meaning of Section 409A. Further and for the avoidance of
doubt, a transaction will not constitute a Change in Control if: (x) its sole purpose is to change the jurisdiction of the
Company’s incorporation, or (y) its sole purpose is to create a holding company that will be owned in substantially the same
proportions by the persons who held the Company’s securities immediately before such transaction.
(g)
“Code” means the Internal Revenue Code of 1986, as amended. Reference to a specific section of the
Code or regulation thereunder shall include such section or regulation, any valid regulation or other formal guidance of
general or direct applicability promulgated under such section, and any comparable provision of any future legislation or
regulation amending, supplementing or superseding such section or regulation.
(h)
“Committee” means a committee of Directors or of other individuals satisfying Applicable Laws appointed
by the Board, or a duly authorized committee of the Board, in accordance with Section 4 hereof.
(i)
(j)
“Common Stock” means the common stock of the Company.
“Company” means Infinera Corporation, a Delaware corporation, or any successor thereto.
(k)
“Consultant” means any natural person, including an advisor, engaged by the Company or a Parent or
Subsidiary of the Company to render bona fide services to such entity, provided the services (i) are not in connection with
the offer or sale of securities in a capital-raising transaction, and (ii) do not directly promote or maintain a market for the
Company’s securities, in each case, within the meaning of Form S-8 promulgated under the Securities Act, and provided,
further, that a Consultant will include only those persons to whom the issuance of Shares may be registered under Form S-8
promulgated under the Securities Act.
(l)
“Director” means a member of the Board.
(m)
“Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code, provided that
in the case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a
permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the
Administrator from time to time.
(n)
“Employee” means any person, including Officers and Directors, employed by the Company or any Parent
or Subsidiary of the Company. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient
to constitute “employment” by the Company.
(o)
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
(p)
“Exchange Program” means a program under which (i) outstanding Awards are surrendered or cancelled
in exchange for awards of the same type (which may have higher or lower exercise prices and different terms), awards of a
different type, and/or cash, (ii) Participants would have the opportunity to transfer any outstanding Awards to a financial
institution or other person or entity selected by the Administrator, and/or (iii) the exercise price of an outstanding Award is
increased or reduced. For the avoidance of doubt, as set forth in Section 5(e), the Administrator may not implement an
Exchange Program.
(q)
“Fair Market Value” means, as of any date, and unless the Administrator determines otherwise, the value
of Common Stock determined as follows:
(i)
If the Common Stock is listed on any established stock exchange or a national market system,
including without limitation the New York Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or
the Nasdaq Capital Market of The Nasdaq Stock Market, its Fair Market Value will be the closing sales price for such stock
(or the closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as
reported in The Wall Street Journal or such other source as the Administrator deems reliable;
(ii)
If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are
not reported, the Fair Market Value of a Share will be the mean between the high bid and low asked prices for the Common
Stock on the day of determination (or, if no bids and asks were reported on that date, as applicable, on the last trading date
such bids and asks were reported), as reported in The Wall Street Journal or such other source as the Administrator deems
reliable; or
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determined in good faith by the Administrator.
(iii)
In the absence of an established market for the Common Stock, the Fair Market Value will be
In addition, for purposes of determining fair market value of Shares for any reason other than the determination
of the exercise price of Options or Stock Appreciation Rights, fair market value will be determined by the Administrator in a
manner compliant with Applicable Laws and applied consistently for such purpose. The determination of fair market value for
federal, state and local income tax reporting or withholding purposes, fair market value will be determined by the Company
(or its delegate) in accordance with uniform and nondiscriminatory standards adopted by it from time to time which is not
required to be consistent with the determination of fair market value for other purposes.
(r)
“Fiscal Year” means the fiscal year of the Company.
(s)
“Incentive Stock Option” means an Option that by its terms qualifies and otherwise is intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
(t)
“Initial Value” means (i) with respect to any Option or Stock Appreciation Right, the value of such Option or
Stock Appreciation Right calculated in accordance with the Black-Scholes option valuation methodology on the grant date,
and (ii) with respect to any Award other than an Option or Stock Appreciation Right, the product of (A) the Fair Market Value
of one Share on the grant date of the Award and (B) the aggregate number of Shares subject to the Award, as applicable.
(u)
“Inside Director” means a Director who is an Employee.
(v)
“Nonstatutory Stock Option” means an Option that by its terms does not qualify or is not intended to
qualify as an Incentive Stock Option.
(w)
“Officer” means a person who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.
(x)
“Option” means a stock option granted pursuant to the Plan.
(y)
“Outside Director” means a Director who is not an Employee.
(z)
“Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of
the Code.
(aa)
“Participant” means the holder of an outstanding Award.
(bb)
“Performance Goals” means performance goals relating to one or more business criteria, which may
provide for a targeted level or levels of achievement including without limitation: (i) revenue; (ii) gross margin; (iii) operating
margin; (iv) operating income; (v) pre-tax profit; (vi) earnings before stock-based compensation expense, interest, taxes and
depreciation and amortization; (vii) earnings before interest, taxes and depreciation and amortization; (viii) earnings before
interest and taxes; (ix) net income; (x) expenses; (xi) new product development; (xii) stock price; (xiii) earnings per share;
(xiv) return on stockholder equity; (xv) return on capital; (xvi) return on net assets; (xvii) economic value added; (xviii) market
share; (xix) customer service; (xx) customer satisfaction; (xxi) sales; (xxii) total stockholder return; (xxiii) free cash flow;
(xxiv) net operating income; (xxv) operating cash flow; (xxvi) return on investment; (xxvii) employee satisfaction;
(xxviii) employee retention; (xxix) balance of cash, cash equivalents and marketable securities; (xxx) product development;
(xxxi) research and development expenses; (xxxii) completion of an identified special project; (xxxiii) completion of a joint
venture or other corporate transaction; (xxxiv) inventory balance; or (xxxv) inventory turnover ratio. Any criteria used may be
measured, as applicable, (A) in absolute terms, (B) in combination with another Performance Goal or Goals (for example,
but not by way of limitation, as a ratio or matrix), (C) in relative terms (including, but not limited to, results for other periods,
passage of time and/or against another company or companies or an index or indices), (D) on a per-share or per-capita
basis, (E) against the performance of the Company as a whole or a segment of the Company (including, but not limited to,
any combination of the Company and any subsidiary, division, business unit, joint venture and/or other segment), and/or
(F) on a pre-tax or after-tax basis. The Performance Goals may differ from Participant to Participant and from Award to
Award. The Administrator will determine whether any significant element(s) will be included in or excluded from the
calculation of any Performance Goal with respect to any Participant. In all other respects, Performance Goals will be
calculated in accordance with the Company’s financial statements, generally accepted accounting principles, or under a
methodology established by the Administrator prior to the issuance of an Award.
(cc)
“Performance Period” means the time period of any Fiscal Year of the Company or such other period as
determined by the Administrator in its sole discretion.
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“Performance Share” means an Award denominated in Shares which may be earned in whole or in part
upon attainment of Performance Goals or other vesting criteria as the Administrator may determine pursuant to Section 11.
(dd)
(ee)
“Performance Unit” means an Award which may be earned in whole or in part upon attainment of
Performance Goals or other vesting criteria as the Administrator may determine and which may be settled for cash, Shares
or other securities or a combination of the foregoing pursuant to Section 11.
(ff)
“Period of Restriction” means the period during which the transfer of Shares of Restricted Stock are
subject to restrictions and therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based
on the passage of time, continued service, the achievement of target levels of performance, the achievement of
Performance Goals, or the occurrence of other events as determined by the Administrator.
(gg)
“Plan” means this 2016 Equity Incentive Plan, as may be amended from time to time.
(hh)
“Restricted Stock” means Shares issued pursuant to a Restricted Stock award under Section 8 of the
Plan, or issued pursuant to the early exercise of an Option.
(ii)
“Restricted Stock Unit” means a bookkeeping entry representing an amount equal to the Fair Market Value
of one Share, granted pursuant to Section 9. Each Restricted Stock Unit represents an unfunded and unsecured obligation
of the Company.
(jj)
“Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when
discretion is being exercised with respect to the Plan.
(kk)
“Securities Act” means the Securities Act of 1933, as amended.
(ll)
“Section 16(b)” means Section 16(b) of the Exchange Act.
(mm) “Section 409A” means Section 409A of the Code and the final regulations and any guidance promulgated
thereunder, as may be amended from time to time.
(nn)
“Service Provider” means an Employee, Director or Consultant.
(oo)
“Share” means a share of the Common Stock, as adjusted in accordance with Section 14 of the Plan.
(pp)
“Stock Appreciation Right” means an Award, granted alone or in connection with an Option, that pursuant
to Section 10 is designated as a Stock Appreciation Right.
(qq)
Section 424(f) of the Code.
“Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in
(rr)
“Tax Obligations” means tax, social insurance and social security liability obligations and requirements in
connection with the Awards, including, without limitation, (i) all federal, state, and local income, employment and any other
taxes (including the Participant’s Federal Insurance Contributions Act (FICA) obligation) that are required to be withheld by
the Company (or Company’s Parent or Subsidiary, as applicable), (ii) the Participant’s and, to the extent required by the
Company (or its Parent or Subsidiary, as applicable), the Company’s (or its Parent’s or Subsidiary’s) fringe benefit tax
liability, if any, associated with the grant, vesting, or exercise of an Award or sale of Shares issued under the Award, and
(iii) any other taxes or social insurance or social security liabilities or premium the responsibility for which the Participant has,
or has agreed to bear, with respect to such Award (or exercise thereof or issuance of Shares or other consideration
thereunder).
3. Stock Subject to the Plan.
(a) Stock Subject to the Plan. Subject to the provisions of Section 14 of the Plan, the maximum aggregate
number of Shares that may be issued under the Plan is (i) 58,850,000 Shares, plus (ii) any Shares subject to awards
granted under the Company’s 2007 Equity Incentive Plan (the “Existing Plan”) that, after the effective date of the Plan,
expire, are forfeited or otherwise terminate without having been exercised in full to the extent such awards were exercisable,
and Shares issued pursuant to awards granted under the Existing Plan that, after the effective date of the Plan, are forfeited
to or repurchased by the Company due to failure to vest, with the maximum number of Shares to be added to the Plan
pursuant to clause (ii) equal to 7,700,000 Shares. The Shares may be authorized, but unissued, or reacquired Common
Stock.
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(b)
Lapsed Awards. Shares that actually have been issued under the Plan under any Award will not be
returned to the Plan and will not become available for future distribution under the Plan (unless repurchased as specified in
this subsection (b) below). If an Option or Stock Appreciation Right Award expires or becomes unexercisable without having
been exercised in full, the unexercised Shares which were subject thereto will become available for future grant or sale
under the Plan (unless the Plan has terminated). If an Award of Restricted Stock, Restricted Stock Units, Performance Units
or Performance Shares (each, a “Full Value Award”) is forfeited or repurchased by the Company due to failure to vest, then
the forfeited or repurchased Shares subject thereto will become available for future grant or sale under the Plan (unless the
Plan has terminated). With respect to Stock Appreciation Rights settled in Shares, the gross number of Shares covered by
the portion of the Award so exercised will cease to be available under the Plan. Shares used to pay the exercise or purchase
price of an Award will cease to be available for future grant or sale under the Plan. Shares used to satisfy the Tax
Obligations related to an Option or Stock Appreciation Right will not become available for future grant or sale under the Plan.
Shares used to satisfy the Tax Obligations related to a Full Value Award will be available for future grant or sale under the
Plan. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in
reducing the number of Shares available for issuance under the Plan. For purposes of clarification, no Shares purchased by
the Company with proceeds received from the exercise of an Option will become available for issuance under this Plan or
the Existing Plan. Notwithstanding the foregoing and, subject to adjustment as provided in Section 14, the maximum number
of Shares that may be issued upon the exercise of Incentive Stock Options will equal the aggregate Share number stated in
Section 3(a), plus, to the extent allowable under Section 422 of the Code and the Treasury Regulations promulgated
thereunder, any Shares that become available for issuance under the Plan pursuant to Section 3(b).
(c)
Share Reserve. The Company, during the term of this Plan, will at all times reserve and keep available
such number of Shares as will be sufficient to satisfy the requirements of the Plan.
4. Administration of the Plan.
(a) Procedure.
Providers may administer the Plan.
(i) Multiple Administrative Bodies. Different Committees with respect to different groups of Service
(ii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule
16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule
16b-3.
Board or (B) a Committee, which committee will be constituted to satisfy Applicable Laws.
(iii) Other Administration. Other than as provided above, the Plan will be administered by (A) the
(b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject
to the specific duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion:
(i)
to determine the Fair Market Value;
(ii)
to select the Service Providers to whom Awards may be granted hereunder;
hereunder;
(iii)
to determine the number of Shares or dollar amounts to be covered by each Award granted
(iv) to approve forms of Award Agreements for use under the Plan;
(v)
to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award
granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when
Awards may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Award or the Shares relating thereto (including but not limited to,
temporarily suspending the exercisability of an Award if the Administrator deems such suspension to be necessary or
appropriate for administrative purposes or to comply with Applicable Laws, provided that such suspension must be lifted
prior to the expiration of the maximum term or post-termination exercisability period, as applicable, of an Award), based in
each case on such factors as the Administrator will determine;
(vi) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;
regulations relating to sub-plans established for the purpose of facilitating compliance with applicable non-U.S. laws, easing
(vii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and
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the administration of the Plan and/or for qualifying for favorable tax treatment under applicable non-U.S. laws, in each case
as the Administrator may deem necessary or advisable;
not limited to the discretionary authority to extend the post-termination exercisability period of Awards;
(viii) to modify or amend each Award (subject to Section 5 and Section 19 of the Plan), including but
Plan;
(ix) to allow Participants to satisfy Tax Obligations in such manner as prescribed in Section 15 of the
the grant of an Award previously granted by the Administrator;
(x)
to authorize any person to execute on behalf of the Company any instrument required to effect
would otherwise be due to such Participant under an Award; and
(xi) to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that
(xii) to make all other determinations deemed necessary or advisable for administering the Plan.
(c)
Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations will be
final and binding on all Participants and any other holders of Awards and will be given the maximum deference permitted by
law.
5. Limits.
(a) Reserved
(b) Outside Director Share Limits. No Outside Director may be granted, in any Fiscal Year, Awards (the value
of which will be based on their grant date fair value determined in accordance with U.S. generally accepted accounting
principles) and any other compensation (including without limitation any cash retainers or fees) that, in the aggregate,
exceed $750,000, provided that such amount is increased to $1,000,000 in the Fiscal Year of his or her initial service as an
Outside Director. Any Awards or other compensation provided to an individual for his or her services as an Employee, or for
his or her services as a Consultant other than an Outside Director, will be excluded for purposes of this Section 5(b).
(c)
Vesting Limits.
(i) One-Year Vesting Requirement. Awards granted under the Plan shall vest no earlier than the one
(1) year anniversary of the Award’s date of grant, provided that, notwithstanding the foregoing in this sentence, (x) the
Administrator, in its sole discretion, may provide that an Award (or portion(s) thereof) may accelerate vesting by reason of
the Participant’s death, Disability or retirement, or a termination of the Participant’s service that occurs in connection with a
Change in Control; (y) Awards (or applicable portion(s) thereof) granted to Outside Directors that vest on the earlier of the
one-year anniversary of the grant date of such Award and the next annual meeting of stockholders of the Company which is
at least fifty (50) weeks after the immediately preceding year’s annual meeting of stockholders of the Company will not be
subject to such minimum vesting period requirement; and (z) to the extent not otherwise qualifying for an exception under
the foregoing clauses (x) and (y), Awards (or applicable portion(s) thereof) that result in the issuance of an aggregate of up
to 5% of the total maximum number of Shares that are or have been reserved for issuance under the Plan upon and after
the Plan initially became effective in 2016 pursuant to Section 3(a) may be granted and/or modified, without satisfying such
minimum vesting provisions.
(ii) Limited Vesting Acceleration upon a Change in Control. Except (x) as permitted under
Section 5(c)(i) and (y) for any Awards made to Outside Directors, the Administrator shall not be permitted to accelerate the
vesting of an Award upon a Change in Control other than in the event an Award is not assumed or substituted for as
provided for in Section 14(c). For purposes of clarification, the Administrator will be permitted to provide for the acceleration
of an Award in connection with a termination of service upon or in connection with a Change in Control as provided in
Section 5(c)(i)(x).
(d)
Incentive Stock Options.
(i)
$100,000 Limitation. Notwithstanding any designation of an Option as an Incentive Stock Option,
to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or
Subsidiary) exceeds one hundred thousand dollars ($100,000), the portion of the Options falling within such limit will be
Incentive Stock Options and the excess Options will be treated as Nonstatutory Stock Options. For these purposes,
Incentive Stock Options will be taken into account in the order in which they were granted. The fair market value of the
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Shares will be determined as of the time the Option with respect to such Shares is granted, and calculation will be performed
in accordance with Code Section 422.
(ii) Maximum Option Term. In the case of an Incentive Stock Option, the term of an Option will be ten
(10) years from the date of grant or such shorter term as may be provided by the Administrator and set forth in the Award
Agreement. Moreover, in the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock
Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be five (5) years from the date
of grant or such shorter term as may be provided in the Award Agreement.
(iii) Option Exercise Price. In the case of an Incentive Stock Option granted to an Employee who, at
the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of
all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price will be no less than one
hundred ten percent (110%) of the Fair Market Value per Share on the date of grant. With respect to an Incentive Stock
Option granted to any Employee other than an Employee described in the immediately preceding sentence, the per Share
exercise price will be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.
Notwithstanding the foregoing provisions of this subsection (iii), Incentive Stock Options may be granted with a per Share
exercise price of less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant pursuant to
a transaction described in, and in a manner consistent with, Section 424(a) of the Code.
(e) No Exchange Program or Repricing. The Administrator may not implement an Exchange Program.
(f)
Dividends. With respect to any Options and Stock Appreciation Rights, until the Shares are issued (as
evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company)
thereunder, no right to receive dividends or any other rights as a stockholder will exist with respect to the Shares subject to
such Award, including without limitation notwithstanding any exercise of such Award. Further, no adjustment will be made for
a dividend or other right for which the record date is prior to the date the Shares are issued under an Option or Stock
Appreciation Right, except as provided in Section 14 of the Plan. During any applicable Period of Restriction, Service
Providers holding Shares of Restricted Stock will be entitled to receive all dividends and other distributions paid with respect
to such Shares, unless the Administrator provides otherwise; provided, however, that any such dividends or distributions
payable with respect to such Shares will be subject to the same restrictions on transferability and/or forfeitability as the
Shares of Restricted Stock with respect to which they were paid. With respect to Awards of Restricted Stock Units,
Performance Units and Performance Shares, until the Shares are issued (as evidenced by the appropriate entry on the
books of the Company or a duly authorized transfer agent of the Company), no right to receive dividends or any other rights
as a stockholder will exist with respect to the Shares subject to such Award, unless determined otherwise by the
Administrator; provided, however, that any such dividends or distributions that the Administrator determines will be payable
with respect to such Shares will be subject to the same vesting criteria and forfeitability provisions as the Shares subject to
such Award with respect to which they were paid. For the avoidance of doubt, the number of Shares available for issuance
under the Plan will not be reduced to reflect any dividends or other distributions that are reinvested into additional Shares or
credited as additional Shares subject to or paid with respect to an Award.
6. Eligibility. Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units,
Performance Shares and Performance Units may be granted to Service Providers. Incentive Stock Options may be granted
only to Employees.
7. Stock Options.
(a) Grant of Options. Subject to the terms and conditions of the Plan, an Option may be granted to Service
Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion. Each Option will
be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
(b) Number of Shares. The Administrator will have complete discretion to determine the number of Shares
subject to Options granted to any Participant, subject to Section 5.
(c)
Term of Option. The term of each Option will be determined by the Administrator and stated in the Award
Agreement, but in no event shall the term of an Option be more than ten (10) years from the date of grant.
(d) Option Exercise Price and Consideration.
(i) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of
an Option will be determined by the Administrator, but shall in no event be less than one hundred percent (100%) of the Fair
Market Value per Share on the date of grant, subject to Section 5. Notwithstanding the foregoing, Options may be granted
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with a per Share exercise price of less than one hundred percent (100%) of the Fair Market Value per Share on the date of
grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code.
(ii) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator will fix the
period within which the Option may be exercised and will determine any conditions that must be satisfied before the Option
may be exercised.
(iii) Form of Consideration. The Administrator will determine the acceptable form of consideration for
exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator will
determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of: (1) cash;
(2) check; (3) promissory note, to the extent permitted by Applicable Laws, (4) other Shares, provided that such Shares have
a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option
will be exercised and provided that accepting such Shares will not result in any adverse accounting consequences to the
Company, as the Administrator determines in its sole discretion; (5) consideration received by the Company under a broker-
assisted (or other) cashless exercise program (whether through a broker or otherwise) implemented by the Company in
connection with the Plan; (6) by net exercise; (7) such other consideration and method of payment for the issuance of
Shares to the extent permitted by Applicable Laws; or (8) any combination of the foregoing methods of payment.
(e) Exercise of Option.
(i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder will be
exercisable according to the terms of the Plan and at such times and under such conditions as determined by the
Administrator and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share.
An Option will be deemed exercised when the Company receives: (i) a notice of exercise (in such
form as the Administrator may specify from time to time) from the person entitled to exercise the Option, and (ii) full payment
for the Shares with respect to which the Option is exercised (together with applicable withholding taxes). Full payment may
consist of any consideration and method of payment authorized by the Administrator and permitted by the Award Agreement
and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant or, if requested by the
Participant, in the name of the Participant and his or her spouse. The Company will issue (or cause to be issued) such
Shares promptly after the Option is exercised.
purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
Exercising an Option in any manner will decrease the number of Shares thereafter available, both for
(ii) Termination of Relationship as a Service Provider. If a Participant ceases to be a Service
Provider, other than as the result of the Participant’s death or Disability, the Participant may exercise his or her Option within
such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of termination
of Participant’s status as a Service Provider (but in no event later than the expiration of the term of such Option as set forth
in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for
three (3) months following the termination of Participant’s status as a Service Provider, but in no event later than the
expiration of the term of such Option as set forth in the Award Agreement. Unless otherwise provided by the Administrator, if
on the date of termination of Participant’s status as a Service Provider, the Participant is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant
does not exercise his or her Option within the time specified by the Administrator, the Option will terminate, and the Shares
covered by such Option will revert to the Plan.
(iii) Disability of Participant. If a Participant ceases to be a Service Provider as a result of the
Participant’s Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award
Agreement to the extent the Option is vested on the date of such cessation (but in no event may the Option be exercised
later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time
in the Award Agreement, the Option will remain exercisable for twelve (12) months following termination of Participant’s
status as a Service Provider, but in no event later than the expiration of the term of such Option as set forth in the Award
Agreement. Unless otherwise provided by the Administrator, if on the date of termination of Participant’s status as a Service
Provider, the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the
Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified
herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
(iv) Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised
following the Participant’s death within such period of time as is specified in the Award Agreement to the extent the Option is
vested on the date of termination of Participant’s status as a Service Provider (but in no event later than the expiration of the
term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the
Option will remain exercisable for twelve (12) months following termination of Participant’s status as a Service Provider, but
in no event may the Option be exercised later than the expiration of the term of such Option as set forth in the Award
B- 8
Agreement. Unless otherwise provided by the Administrator, if at the time of death Participant is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option will immediately revert to the Plan. If the Option is
not so exercised within the time specified herein, the Option will terminate, and the Shares covered by such Option will
revert to the Plan.
In the event that the Participant dies while a Service Provider, but before the expiration of the Participant’s Option as
set forth in subsections (iii) or (iv), as applicable, all or part of the Option (to the extent vested) may be exercised (prior to
expiration) by the Participant’s designated beneficiary, provided such beneficiary has been properly designated prior to
Participant’s death in a form acceptable to the Administrator and to the extent permitted by Applicable Law. In the absence of
such designated beneficiary (or to the extent not permitted by Applicable Law), such Option may be exercised by the
personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the
Participant’s will or in accordance with the laws of descent and distribution.
8. Restricted Stock.
(a) Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Administrator, at any time
and from time to time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its
sole discretion, will determine.
(b) Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by an Award Agreement
that will specify the Period of Restriction (if any), the number of Shares granted, and such other terms and conditions as the
Administrator, in its sole discretion, will determine. Unless the Administrator determines otherwise, the Company as escrow
agent will hold Shares of Restricted Stock until the restrictions on such Shares have lapsed.
(c)
Transferability. Except as provided in this Section 8 or the Award Agreement, Shares of Restricted Stock
may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable
Period of Restriction.
(d) Other Restrictions. The Administrator, in its sole discretion, may impose such other restrictions on Shares
of Restricted Stock as it may deem advisable or appropriate.
(e) Removal of Restrictions. Except as otherwise provided in this Section 8, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the
last day of the Period of Restriction or at such other time as the Administrator may determine. Subject to the vesting
limitations under Section 5, the Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or
be removed.
(f)
Voting Rights. During the Period of Restriction, Service Providers holding Shares of Restricted Stock
granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines
otherwise.
(g) Return of Restricted Stock to Company. On the date set forth in the Award Agreement, the Restricted
Stock for which restrictions have not lapsed will revert to the Company and again will become available for grant under the
Plan.
9. Restricted Stock Units.
(a) Grant. Restricted Stock Units may be granted at any time and from time to time as determined by the
Administrator. Each Restricted Stock Unit grant will be evidenced by an Award Agreement that will specify such terms and
conditions as the Administrator in its sole discretion determines, including all terms, conditions, and restrictions related to the
grant, the number of Restricted Stock Units and the form of payout, which, subject to Section 9(d), may be left to the
discretion of the Administrator.
(b) Vesting Criteria and Other Terms. The Administrator will set vesting criteria in its discretion, which,
depending on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid
out to the Participant. The Administrator may set vesting criteria based upon the achievement of Company-wide, divisional,
business unit, or individual goals (including, but not limited to, continued employment or service), applicable federal or state
securities laws or any other basis determined by the Administrator in its sole discretion.
(c)
Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the Participant will be entitled
to receive a payout as determined by the Administrator. Notwithstanding the foregoing, subject to the vesting limitations
under Section 5, at any time after the grant of Restricted Stock Units, the Administrator, in its sole discretion, may reduce or
waive any vesting criteria that must be met to receive a payout.
B- 9
(d)
Form and Timing of Payment. Payment of earned Restricted Stock Units will be made at the time(s)
determined by the Administrator and set forth in the Award Agreement. The Administrator, in its sole discretion, may pay
earned Restricted Stock Units in cash, Shares, or a combination of both.
(e) Cancellation. On the date set forth in the Award Agreement, all unearned Restricted Stock Units will be
forfeited to the Company.
10. Stock Appreciation Rights.
(a) Grant of Stock Appreciation Rights. Subject to the terms and conditions of the Plan, a Stock Appreciation
Right may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its
sole discretion.
(b) Number of Shares. The Administrator will have complete discretion to determine the number of Stock
Appreciation Rights granted to any Service Provider.
(c)
Exercise Price and Other Terms. The per share exercise price for the Shares to be issued pursuant to
exercise of a Stock Appreciation Right will be determined by the Administrator and will be no less than one hundred percent
(100%) of the Fair Market Value per Share on the date of grant. Otherwise, the Administrator, subject to the provisions of the
Plan, will have complete discretion to determine the terms and conditions of Stock Appreciation Rights granted under the
Plan.
(d) Stock Appreciation Right Agreement. Each Stock Appreciation Right grant will be evidenced by an Award
Agreement that will specify the exercise price, the term of the Stock Appreciation Right, the conditions of exercise, and such
other terms and conditions as the Administrator, in its sole discretion, will determine.
(e) Expiration of Stock Appreciation Rights. A Stock Appreciation Right granted under the Plan will expire
upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement. Notwithstanding
the foregoing, the rules of Section 7(c) relating to the maximum term and Section 7(e) relating to exercise also will apply to
Stock Appreciation Rights.
(f)
Payment of Stock Appreciation Right Amount. Upon exercise of a Stock Appreciation Right, a Participant
will be entitled to receive payment from the Company in an amount determined by multiplying:
exercise price; times
(i) The difference between the Fair Market Value of a Share on the date of exercise over the
(ii) The number of Shares with respect to which the Stock Appreciation Right is exercised.
At the discretion of the Administrator, the payment upon Stock Appreciation Right exercise may be in cash, in Shares
of equivalent value, or in some combination thereof.
11. Performance Units and Performance Shares.
(a) Grant of Performance Units/Shares. Performance Units and Performance Shares may be granted to
Service Providers at any time and from time to time, as will be determined by the Administrator, in its sole discretion. The
Administrator will have complete discretion in determining the number of Performance Units and Performance Shares
granted to each Participant.
(b) Value of Performance Units/Shares. Each Performance Unit will have an initial value that is established by
the Administrator on or before the date of grant. Each Performance Share will have an initial value equal to the Fair Market
Value of a Share on the date of grant.
(c)
Performance Objectives and Other Terms. The Administrator will set performance objectives or other
vesting provisions (including, without limitation, continued status as a Service Provider) in its discretion which, depending on
the extent to which they are met, will determine the number or value of Performance Units/Shares that will be paid out to the
Participant. Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will specify the
Performance Period, and such other terms and conditions as the Administrator, in its sole discretion, will determine. The
Administrator may set performance objectives based upon the achievement of Company-wide, divisional, business unit or
individual goals (including, but not limited to, continued employment or service), applicable federal or state securities laws,
or any other basis determined by the Administrator in its discretion.
B- 10
(d) Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder of
Performance Units/Shares will be entitled to receive a payout of the number of Performance Units/Shares earned by the
Participant over the Performance Period, to be determined as a function of the extent to which the corresponding
performance objectives or other vesting provisions have been achieved or met. After the grant of a Performance Unit/Share,
subject to the vesting limitations under Section 5, the Administrator, in its sole discretion, may reduce or waive any
performance objectives or other vesting provisions for such Performance Unit/Share.
(e)
Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units/Shares
will be made as soon as practicable after the expiration of the applicable Performance Period. The Administrator, in its sole
discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market
Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period) or in a
combination thereof.
(f)
Cancellation of Performance Units/Shares. On the date set forth in the Award Agreement, all unearned or
unvested Performance Units/Shares will be forfeited to the Company, and again will be available for grant under the Plan.
12. Service Provider Status.
(a)
Leaves of Absence/Transfer Between Locations. Unless the Administrator provides otherwise or as
otherwise required by Applicable Laws, vesting of Awards granted hereunder will be suspended during any unpaid leave of
absence. A Service Provider will not cease to be an Employee or Director in the case of (i) any leave of absence approved
by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, or any of its
Subsidiaries. For purposes of Incentive Stock Options, no leave of absence may exceed three (3) months, unless
reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave
of absence approved by the Company is not so guaranteed, then six (6) months following the first (1st) day of such leave
any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated
for tax purposes as a Nonstatutory Stock Option.
13. Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution
and may be exercised, during the lifetime of the Participant, only by the Participant. If the Administrator makes an Award
transferable, such Award will contain such additional terms and conditions as the Administrator deems appropriate.
14. Adjustments; Dissolution or Liquidation; Merger or Change in Control.
(a) Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Shares,
other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, reincorporation,
reclassification, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities
of the Company, or other change in the corporate structure of the Company affecting the Shares occurs (other than any
ordinary dividends or other ordinary distributions), the Administrator, in order to prevent diminution or enlargement of the
benefits or potential benefits intended to be made available under the Plan, will adjust the number and class of shares of
stock that may be delivered under the Plan and/or the number, class, and price of shares of stock covered by each
outstanding Award, and the numerical Share limits in Sections 3 and 5 of the Plan.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the
Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To
the extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such
proposed action.
(c) Merger or Change in Control. In the event of a merger of the Company with or into another corporation or
other entity or a Change in Control, each outstanding Award will be treated as the Administrator determines (subject to the
provisions of the following paragraph) without a Participant’s consent, in accordance with the following (i) Awards will be
assumed or an equivalent option or right substituted by the acquiring or succeeding corporation or a Parent or Subsidiary
thereof with appropriate adjustments as to the number and kind of shares and prices, (ii) upon written notice to a Participant
and subject to the next paragraph, that the Participant’s Awards will terminate upon or immediately prior to the
consummation of such merger or Change in Control; (iii) subject to the next paragraph, (A) the termination of an Award in
exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the
exercise of such Award or realization of the Participant’s rights as of the date of the occurrence of the transaction (and, for
the avoidance of doubt, if as of the date of the occurrence of the transaction the Administrator determines in good faith that
no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such
Award may be terminated by the Company without payment), or (B) the replacement of such Award with other rights or
property selected by the Administrator in its sole discretion; or (iv) any combination of the foregoing. In taking any of the
actions under this Section 14(c), the Administrator will not be required to treat all Awards, all Awards held by a Participant, or
all Awards of the same type, or all portions of Awards, similarly in the transaction.
B- 11
In the event that the acquiring or successor corporation (or a Parent or Subsidiary thereof) does not assume or
substitute for the Award (as provided in clause (i) above and for the avoidance of doubt, notwithstanding the vesting
limitations under Section 5) (or portion of the Award), (A) the Participant will fully vest in and have the right to exercise such
outstanding Option and Stock Appreciation Right (or portions thereof) not so assumed or substituted for, including Shares as
to which such Award would not otherwise be vested or exercisable, (B) all restrictions on such Restricted Stock and
Restricted Stock Units (or portions thereof) not so assumed or substituted for will lapse, and (C) with respect to such Award
with performance-based vesting (or portions thereof) not so assumed or substituted for, all performance goals or other
vesting criteria will be deemed achieved based on actual performance measured through the last date that the Award
remains outstanding (or such earlier date, as determined by the Administrator, in its sole discretion), with any performance
period shortened proportionately and applicable performance goals or other vesting criteria adjusted proportionately to
reflect the shortened performance period (or to the extent applicable, the value of the consideration to be received by the
Company’s stockholders in connection with the merger or Change in Control), as determined by the Administrator, in its sole
discretion. In addition, if an Option or Stock Appreciation Right (or portion thereof) is not assumed or substituted in the event
of a merger or Change in Control, the Administrator will notify the Participant in writing or electronically that the Option or
Stock Appreciation Right (or its applicable portion) will be exercisable for a period of time determined by the Administrator in
its sole discretion, and the Option or Stock Appreciation Right (or its applicable portion) will terminate upon the expiration of
such period.
For the purposes of this subsection (c), an Award will be considered assumed if, following the merger or
Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior
to the merger or Change in Control, the consideration (whether stock, cash, or other securities or property) received in the
merger or Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the
outstanding Shares); provided, however, that if such consideration received in the merger or Change in Control is not solely
common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor
corporation, provide for the consideration to be received upon the exercise of an Option or Stock Appreciation Right or upon
the payout of a Restricted Stock Unit, Performance Unit or Performance Share, for each Share subject to such Award, to be
solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration
received by holders of Common Stock in the merger or Change in Control.
Notwithstanding anything in this Section 14(c) to the contrary, an Award that vests, is earned or paid-out upon
the satisfaction of one or more performance goals will not be considered assumed if the Company or its successor modifies
any of such performance goals without the Participant’s consent, unless specifically provided otherwise under the applicable
Award Agreement or other written agreement authorized by the Administrator between the Participants and the Company (or
Parent or Subsidiary of the Company, as applicable); provided, however, a modification to such performance goals only to
reflect the successor corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise
valid Award assumption.
Notwithstanding anything in this Section 14(c) to the contrary, and unless otherwise provided in an Award
Agreement, if an Award that vests, is earned or paid out under an Award Agreement is subject to Section 409A and if the
change in control definition contained in the Award Agreement (or other agreement related to the Award, as applicable) does
not comply with the definition of “change in control” for purposes of a distribution under Section 409A, then any payment of
an amount that otherwise is accelerated under this Section will be delayed until the earliest time that such payment would be
permissible under Section 409A without triggering any penalties applicable under Section 409A.
15. Tax.
(a) Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise
thereof) or such earlier time as any Tax Obligations are due, the Company (or any of its Parent, Subsidiaries or affiliates
employing or retaining the services of a Participant, as applicable) will have the power and the right to deduct or withhold, or
require a Participant to remit to the Company (or any of its Parent, Subsidiaries or affiliates employing or retaining the
services of a Participant, as applicable) or a relevant tax authority, an amount sufficient to satisfy all Tax Obligations with
respect to such Award (or exercise thereof).
(b) Withholding Arrangements. The Administrator, in its sole discretion and pursuant to such procedures as it
may specify from time to time, may permit a Participant to satisfy such Tax Obligation, in whole or in part by such methods
as the Administrator will determine, including without limitation (a) paying cash, (b) having the Company withhold otherwise
deliverable cash or Shares having a fair market value equal to the minimum statutory amount required to be withheld,
(c) delivering to the Company already-owned Shares having a Fair Market Value equal to the minimum statutory amount
required to be withheld, provided the delivery of such Shares will not result in adverse accounting consequences as the
Administrator determines in its sole discretion, or (d) selling a sufficient number of Shares otherwise deliverable to the
Participant through such means as the Administrator may determine in its sole discretion (whether through a broker or
otherwise) equal to the amount required to be withheld. The fair market value of the Shares to be withheld or delivered will
be determined as of the date that such Shares are withheld or delivered, as applicable.
B- 12
(c) Compliance with Section 409A. Awards will be designed and operated in such a manner that they are
either exempt from the application of, or comply with, the requirements of Section 409A such that the grant, payment,
settlement or deferral will not be subject to the additional tax or interest applicable under Section 409A, except as otherwise
determined in the sole discretion of the Administrator. The Plan and each Award Agreement under the Plan is intended to
meet the requirements of Section 409A and will be construed and interpreted in accordance with such intent (including with
respect to any ambiguities or ambiguous terms), except as otherwise determined in the sole discretion of the Administrator.
To the extent that an Award or payment, or the settlement or deferral thereof, is subject to Section 409A the Award will be
granted, paid, settled or deferred in a manner that will meet the requirements of Section 409A, such that the grant, payment,
settlement or deferral will not be subject to the additional tax or interest applicable under Section 409A. Notwithstanding the
foregoing, in no event will the Company or any Parent, Subsidiary or other affiliate of the Company have any responsibility,
liability or obligation to reimburse, indemnify, or hold harmless any Participant (or any other person) for any taxes, interest,
or penalties imposed, or other costs incurred, as a result of Section 409A.
16. No Effect on Employment or Service. Neither the Plan nor any Award will confer upon a Participant any right with
respect to continuing the Participant’s relationship as a Service Provider with the Company or any Parent or Subsidiary, nor
will they interfere in any way with the Participant’s right or the right of the Company or any Parent or Subsidiary, as
applicable, to terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws.
17. Date of Grant. The date of grant of an Award will be, for all purposes, the date on which the Administrator makes
the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the
determination will be provided to each Participant within a reasonable time after the date of such grant.
18. Term of Plan. Subject to Section 23 of the Plan, the Plan will become effective upon approval of the Plan by the
stockholders of the Company. It will continue in effect for a term of ten (10) years from the date of such stockholder approval,
unless terminated earlier under Section 19 of the Plan.
19. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Administrator may at any time amend, alter, suspend or terminate the
Plan.
(b) Stockholder Approval. The Company will obtain stockholder approval of any Plan amendment to the
extent necessary and desirable to comply with Applicable Laws.
(c)
Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan will
impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which
agreement must be in writing and signed by the Participant and the Company. Termination of the Plan will not affect the
Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to
the date of such termination.
20. Forfeiture Events. The Administrator may specify in an Award Agreement that the Participant’s rights, payments,
and benefits with respect to an Award will be subject to reduction, cancellation, forfeiture, , recoupment, reimbursement, or
reacquisition upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance
conditions of an Award. Such events may include, without limitation, termination of such Participant’s status as an employee
and/or other service provider for cause or any specified action or inaction by a Participant, whether before or after such
termination of employment and/or other service, that would constitute cause for termination of such Participant’s status as
an employee and/or other service provider. Notwithstanding any provisions to the contrary under this Plan, an Award shall
be subject to reduction, cancellation, forfeiture, recoupment, reimbursement, or reacquisition under any Company clawback
policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or
association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform
and Consumer Protection Act or other Applicable Laws (the “Clawback Policy”). The Administrator may require a Participant
to forfeit or return to the Company, or reimburse the Company for, all or a portion of the Award and any amounts paid
thereunder pursuant to the terms of the Clawback Policy or as necessary or appropriate to comply with Applicable Laws,
including without limitation any reacquisition right regarding previously acquired Shares or other cash or property. Unless
this Section 20 specifically is mentioned and waived in an Award Agreement or other document, no recovery of
compensation under a Clawback Policy or otherwise as specified under this Section will constitute an event that triggers or
contributes to any right of a Participant to resign for “good reason” or “constructive termination” (or similar term) under any
agreement with the Company (or any Parent, Subsidiary or affiliate of the Company).
21. Conditions upon Issuance of Shares.
(a)
Legal Compliance. Shares will not be issued pursuant to an Award unless the exercise or vesting of such
Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the
approval of counsel for the Company with respect to such compliance.
B- 13
(b)
Investment Representations. As a condition to the exercise or vesting of an Award, the Company may
require the person exercising or vesting in such Award to represent and warrant at the time of any such exercise or vesting
that the Shares are being acquired only for investment and without any present intention to sell or distribute such Shares if,
in the opinion of counsel for the Company, such a representation is required.
22. Inability to Obtain Authority. If the Company determines it to be impossible or impractical to obtain authority from
any regulatory body having jurisdiction or to complete or comply with the requirements of any registration or other
qualification of the Shares under any U.S. state or federal law or non-U.S. law or under the rules and regulations of the
Securities and Exchange Commission, the stock exchange on which Shares of the same class are then listed, or any other
governmental or regulatory body, which authority, registration, qualification or rule compliance is deemed by the Company’s
counsel to be necessary or advisable for the issuance and sale of any Shares hereunder, the Company will be relieved of
any liability in respect of the failure to issue or sell such Shares as to which such requisite authority, registration, qualification
or rule compliance will not have been obtained.
23. Stockholder Approval. The Plan will be subject to approval by the stockholders of the Company within twelve
(12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and
to the degree required under Applicable Laws.
24. Captions. Captions are provided herein for convenience only, and will not serve as a basis for interpretation or
construction of the Plan.
* * *
B- 14
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 30, 2023
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-33486
OR
Infinera Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
77-0560433
(IRS Employer
Identification No.)
6373 San Ignacio Avenue
San Jose, CA 95119
(Address of principal executive offices, including zip code)
(408) 572-5200
(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(g) of the Act: None
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common shares, par value $0.001 per share
Trading Symbol
INFN
Name of exchange on which registered
The Nasdaq Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging
growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm
that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the registrant’s common stock, $0.001 par value per share, held by non-affiliates of the registrant on July 1,
2023, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $687,781,925 (based on the
closing sales price of the registrant’s common stock on that date). Shares of the registrant’s common stock held by each officer and director and
each person who owns more than 10% or more of the outstanding common stock of the registrant have been excluded in that such persons may be
deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of May 10, 2024,
234,108,176 shares of the registrant’s common stock, $0.001 par value per share, were issued and outstanding.
Portions of the registrant’s definitive proxy statement relating to its 2024 Annual Meeting of Stockholders (the “2024 Proxy Statement”) are
incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2024 Proxy Statement will be filed with the U.S.
Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.
DOCUMENTS INCORPORATED BY REFERENCE
INFINERA CORPORATION
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 30, 2023
Table of Contents
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4. Mine Safety Disclosures
Part I
Part II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Item 6.
[RESERVED]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Part III
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Item 15. Exhibits, Financial Statement Schedules
Item 16. Form 10-K Summary
Signatures
Part IV
Appendix A - Unaudited Reconciliations From GAAP To NON-GAAP
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Part I
ITEM 1.
BUSINESS
Overview
Infinera Corporation (“we,” “us,” “our”, “Infinera” or the "Company") is a semiconductor manufacturer
and global supplier of networking solutions comprised of networking equipment, optical semiconductors, software
and services. Our portfolio of solutions includes optical transport platforms, converged packet-optical transport
platforms, compact modular platforms, optical line systems, coherent optical engines and subsystems, a suite of
automation software offerings, and support and professional services. Leveraging our U.S.-based compound
semiconductor fabrication plant ("fab") and in-house test and packaging capabilities, we design, develop and
manufacture industry-leading indium phosphide-based photonic integrated circuits ("PICs") for use in our
vertically integrated, high-capacity optical communications products.
Our customers include operators of fixed line and mobile networks, including telecommunications
service providers, internet content providers (“ICPs”), cable providers, wholesale carriers, research and
education institutions, large enterprises, utilities and government entities. Our networking solutions enable our
customers to build infrastructure networks that support and deliver high-bandwidth business and consumer
communications services. Our edge-to-core portfolio of networking solutions also enables our customers to scale
their transport networks as consumer and business services and applications continue to drive growth in demand
for network bandwidth. These consumer and business services and applications include, but are not limited to,
high-speed internet access, 4G/5G mobile broadband, cloud-based services, high-definition video streaming
services, virtual and augmented reality, the Internet of Things (“IoT”), artificial intelligence ("AI"), machine learning
("ML"), business Ethernet services and data center interconnect ("DCI").
As an optical semiconductor manufacturer, we specialize in the manufacturing of optical compound
semiconductors using indium phosphide ("InP"). This technology is used in infrastructure networks to transmit
massive amounts of data and support delivery of consumer and business communications services. We have
made significant investments in our unique research, development, fabrication and packaging facilities, including
our optical compound semiconductor fab in Silicon Valley and advanced test and packaging center in Allentown,
Pennsylvania. We optimize the manufacturing process by using InP to build our PICs, which enables the
integration of hundreds of optical functions onto a single, monolithic optical semiconductor chip. The unique
capabilities of our optical semiconductor fab, which has provided our customers with a critical and secure source
of U.S.-produced optical semiconductors and strengthened the supply chain, have enabled us to consistently
pioneer critical technology advancements. For example, our latest generation of technology has made it possible
to transmit information at a rate of 800 gigabits per second (“Gb/s”) using a single laser. Our ongoing research
and development initiatives continue to create a path to higher speed transmission and lower cost per bit
performance for our customers.
We support U.S. government efforts to advance and increase the domestic manufacturing base for
semiconductors as a matter of economic and national security. Compound semiconductors – including those
based in InP – are an important part of the domestic semiconductor industry and will enable the next-generation
of leading-edge technologies. Domestic manufacturing is critical in order to reduce our reliance on foreign
sources of compound semiconductor materials and components, which is essential to economic growth and to
the security of our domestic communications infrastructure.
The large-scale integration of our PICs and advanced digital signal processors (“DSPs”) enables us to
develop and manufacture high-performance optical engines that are used in our coherent optical networking
system and subsystem solutions. These optical engine solutions, branded as Infinite Capacity Engine ("ICE"),
include features that customers care about the most, including lowest cost per bit, lowest power per bit, reduced
footprint and increased flexibility, reliability and security. Coherent optical solutions are becoming increasingly
important across the network as our customers transition to 800 Gb/s per wavelength transmission speeds and
beyond in the network core, 400 Gb/s in metro networks and 100 Gb/s in the access market segment. We
believe our vertical integration strategy provides a competitive advantage by enabling leading optical
performance at higher optical speeds with increased spectral efficiency, greater control over our supply chain and
an overall lower cost structure.
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We have grown our solutions portfolio through internal development as well as acquisitions, including
the acquisition of Telecom Holding Parent LLC (“Coriant”), a privately held global supplier of open network
solutions for the largest global network operators (the “Acquisition”). These developments positioned us to be
one of the leading providers of vertically integrated optical networking solutions in the world with the ability to
serve a broader global customer base with accelerated delivery of the innovative solutions our customers
demand. In 2021, we announced an expansion of our portfolio with the introduction of a suite of coherent optical
pluggable. Pluggable optics are optical transmission solutions packaged in smaller and more versatile form
factors. They are designed to seamlessly address the rapidly growing market for point-to-point optical transport
solutions as well as create a new category of point-to-multipoint solutions that can enable a dramatically more
cost-efficient network architecture. Based on our vertically integrated optical semiconductor technology and
supporting a range of high-speed transport rates that include 800 Gb/s, 400 Gb/s and 100 Gb/s, this suite of
coherent optical pluggables builds on our history of delivering innovative, vertically integrated optical engine
technology that powers our differentiated optical networking solutions.
Our products are designed to be managed by a suite of software solutions that enable simplified
network management, increased service agility and automated operations. We also provide software-enabled
programmability that offers differentiated capabilities such as Instant Bandwidth. Combined with our differentiated
hardware solutions, Instant Bandwidth enables our customers to purchase and activate bandwidth as needed
through our unique software licensing feature set. This, in turn, allows our customers to accomplish two key
objectives: (1) limit their initial network startup costs and investments; and (2) instantly activate new bandwidth as
their customers’ and their own network capacity needs evolve.
We believe our systems and subsystems solutions benefit our customers by providing a unique
combination of highly scalable capacity and advanced networking features that address edge-to-core transport
network applications and ultimately simplify and automate network operations. Our high-performance optical
transport solutions leverage the industry shift to open optical network architectures and enable our customers to
efficiently and cost-effectively keep pace with bandwidth demands, which continue to grow 30% or more year-
over-year.
We were incorporated in December 2000 and originally operated under the name “Zepton Networks.”
We are incorporated in the State of Delaware. Our principal executive offices are located at 6373 San Ignacio
Avenue, San Jose, CA 95119. Our telephone number is (408) 572-5200. “Infinera,” “FlexCoherent,” and the
Infinera logo, are trademarks or service marks of Infinera Corporation in the United States, certain other
countries and/or the European Union. Any other trademarks or trade names mentioned are the property of their
respective owners.
Industry Background
Optical transport networking equipment carries digital information using light waves over fiber optic
cables. With the advent of dense wavelength division multiplexing (“DWDM”) systems, data is transmitted by
using multiple wavelengths of light using different frequencies or colors over a single optical fiber. Customers
deploy DWDM systems to carry information between continents, across countries, between cities and within
metropolitan areas, and in some cases all the way to the ultimate consumer or business user. Fiber optic
networks are generally capable of carrying most types of communications traffic. Coherent optical technology is
the latest innovation in DWDM transmission that dramatically increases the amount of information a single laser
can transmit.
We believe that a number of trends in the communications industry are driving demand for large
amounts of network bandwidth and ultimately will increase demand for advanced optical transport networking
solutions. These trends include:
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growth of cloud services and DCI connectivity capacities;
growth of over-the-top services and high-definition video streaming;
growth of mobile broadband services, such as 5G;
growth of edge computing resources closer to ultimate consumer or business users;
increasing use of connected virtual and augmented reality devices;
the IoT, which continues to drive massive growth in the number of network-connected devices; and
emerging network capacity and power consumption demands of AI and ML workloads.
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As network traffic grows, network operators will need to continue to add transmission capacity to
existing optical networks or deploy new systems and/or subsystems to address bandwidth demand and offer new
consumer and business services.
We believe we are in the midst of an important shift in transport network architectures that impact the
markets we serve. The shift to open and disaggregated networks is increasingly being embraced by the
communications industry. Examples of this trend include separation of compute, storage and networking in data
centers, the separation of hardware, operating system and applications in smart phones, hardware/software
separation in network function virtualization and hardware and software routing stack routers, and open radio
access network initiatives for 5G. Industry evolution is now enabling optical networking to leverage these same
principles of openness and disaggregation.
Optical networking technology has evolved to enable open networks at the physical and management
layer. These technologies allow network operators to move from a traditional vendor locked-in model to a more
flexible model where they can choose from a collection of modular, best-of-breed solutions from different
suppliers for each network function. Open and standards-based interfaces ease the integration into a unified
network architecture.
The shift to open optical networking provides network operators with key benefits that include:
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Accelerated innovation cycles: By leveraging the full innovation capabilities of the optical
ecosystem, network operators are able to select best-in-class technologies and vendors
independently throughout the network lifecycle. Solution providers can also develop innovative
technologies for specific network functions without having to supply end-to-end networking
solutions, significantly broadening the innovation ecosystem.
Optimized network architectures: By selecting the ideal products and technologies for each layer
and domain of the network independently, network operators are able to optimize their optical
network for specific applications and services and avoid the constraints of a single-vendor for one-
size-fits-all solutions.
Improved network economics: Open optical networks enable the introduction of lower cost per bit
and lower power per bit innovations to be quickly deployed throughout the network lifecycle, with
customized multi-vendor network designs providing additional scope for cost-optimization as
capacity and service demands evolve.
A second shift is happening at the edge of the network, where capacity is growing beyond the ability of
traditional, non-coherent optical transmission solutions to address. This increasing capacity demand is driving the
need for innovative edge- and access-optimized coherent optical transport solutions. These include more
compact, efficient and cost-effective solutions as well as innovative coherent optical pluggable solutions such as
ICE-X optics point-to-point and point-to-multipoint technology that can enable significant cost savings by
dramatically simplifying network architectures.
Strategy
Our goal is to be the preeminent provider of high-performance optical transport technologies and
solutions that enable our customers to cost-efficiently scale network capacity and simplify network operations in
response to increasing bandwidth demand. Key aspects of our strategy include:
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Leveraging our U.S.-based optical semiconductor fab and packaging capabilities and vertically
integrated solutions to deliver lowest total cost network solutions. We will continue to provide our
customers with differentiated value by leveraging our vertically integrated capabilities. Our strategy
is to continue to evolve our unique optical technology with higher speed and lower cost and power
per bit efficiencies, integrating our vertically integrated optical engines across a broad range of our
open optical networking systems and expanding our addressable market with a suite of with
vertically integrated subsystem and coherent optical pluggable products.
Driving cost structure optimization and achieving cost advantages of scale. Leveraging scale as
part of our vertical integration strategy, which includes integration of our optical engine across our
broad portfolio of systems and subsystems, enables us to achieve cost advantages and cost
structure efficiencies that enhance our ability to continue to invest in research and development in
our optical engine and edge-to-core portfolio, as well as drive profitability. In particular, we believe
our vertically integrated, in-house optical semiconductor manufacturing capabilities serve as a
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competitive advantage from a technology and supply chain perspective and enable a lower cost
structure and higher profitability.
Building open optical networking solutions. Our strategy is focused on leveraging open optical
networking principles, including disaggregated networking solutions and industry-leading optical
technology with open application programming interfaces (“APIs”) and standardized data models to
offer our customers best-in-class solutions and create insertion opportunities to gain market share.
Open optical networking provides benefits for both network operators and innovative solution
providers. These benefits include accelerating innovation cycles, enabling optimized and
differentiated networking solutions, and the ability to transform network economics.
Delivering a superior customer experience. Our success will continue to be driven by our
commitment to providing a superior experience to all customers. In addition to product delivery
capability that efficiently and predictably delivers innovative technology and high-quality products to
market, we bring value to our customers by providing differentiated capabilities that include usage-
based bandwidth provisioning, service agility and ease-of-use that accelerates time-to-revenue.
Additionally, our global customer services team is committed to making our customers successful
by providing the highest quality support services that help our customers deploy, operate and
maintain their networks. We believe our technology leadership combined with our ability to provide
the most reliable products and a differentiated customer experience contribute to customer success
and represent major differentiators.
Utilizing software-driven automation to deliver differentiated solutions. We believe we lead the
industry in ease-of-use and automation, both integrated into our system and subsystem product
designs and facilitated by our software capabilities. We continue to invest in our differentiated
technologies, including enhancing capabilities of Instant Bandwidth offerings and introducing
advanced automation and programmability capabilities. Additionally, based on our customers’
desire for open networking solutions, we have introduced new cloud-based software capabilities
designed to streamline and simplify operations of multi-vendor optical networks. This includes the
addition of open APIs in our networking platforms and intelligent coherent optical pluggable
management capabilities, as well as the use of AI to enhance our customer support offerings.
Customers, Products and Services
The customer verticals we serve include:
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Tier 1 carriers with domestic and international infrastructure networks;
Tier 2 and Tier 3 communications service providers;
ICPs, web-scale providers (also referred to as hyper-scalers) and cloud providers;
cable providers and Multiple System Operators ("MSOs");
wholesale carriers;
submarine network operators;
utilities;
large enterprise customers spanning diverse vertical industries;
research and education institutions;
government and public sector entities; and
third-party network equipment manufacturers.
In the markets we serve, we believe our customers seek the following solutions to meet growing
bandwidth needs, increase their revenue, expand their service offerings and lower the total cost of their network
operations:
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high-bandwidth solutions that scale optical transmission capacity to meet increasing bandwidth
demand while providing efficiency through service granularity;
flexible, efficient and easy to deploy core-to-edge coherent optical solutions that optimize
performance and increase reliability while reducing physical space and power consumption, leading
to lower operational and capital expenses;
easy-to-use solutions that are highly programmable, open and automated, which help reduce the
time and complexity of deploying and managing transmission bandwidth;
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sustainable products and solutions that deliver meaningful reduction in power and associated
emissions; and
strong encryption at the transport layer to ensure maximum security for data transport.
We sell our products via a direct sales force and through indirect channel partners. One end-customer
accounted for 10% of our revenue in fiscal year 2023. One end-customer accounted for 11% of our revenue in
fiscal year 2022 and no end-customer accounted for 10% or more of our revenue in fiscal year 2021. For the
years ended December 30, 2023, December 31, 2022 and December 25, 2021, our top ten end-customers
accounted for approximately 52%, 48% and 42% of our total revenue, respectively.
We have focused our efforts and capital investments on developing high-performance, vertically
integrated transport technologies and solutions that enable customers to cost-efficiently scale network capacity,
reduce cost and power per bit, increase flexibility and launch new services in response to increasing bandwidth
demand. Our products feature industry-leading optical performance for capacity and reach, high service port
density, a low power profile and open automation software that allows fast and simple provisioning of network
services.
We believe one of our key differentiating capabilities is our deep vertical integration of high-end optical
technology, including optical semiconductors. We have a world-class team of scientists and engineers that is
responsible for driving the opto-electronic innovations that are integrated into our coherent systems and
subsystems solutions. Core engineering disciplines include coherent application-specific integrated circuit
("ASIC")/DSP design, PIC design and manufacture, analog ASIC design, advanced packaging design and
manufacture, and holistic co-design, including the RF interconnect. Our experts have achieved many industry
firsts, including the first large-scale PIC, the first coherent PIC, the first commercial super-channels, the first
digital subcarriers, and the first point-to-multipoint coherent technology. Additional innovation highlights include
soft-decision forward error correction gain sharing techniques and long-codeword probabilistic constellation
shaping. These innovations are the foundation for the superior reach performance of our 1.6 Terabit per second
("Tb/s")-capable ICE6 optical engine and our industry-first point-to-multipoint technology. They have resulted in
Infinera setting numerous industry records for optical transmission.
Financially, we believe our in-house developed technology approach coupled with our unique monolithic
InP semiconductor technology enables improved manufacturing economics for optical networking, allowing future
optical transport cost and power per bit reductions to be viably sustained on a cost curve defined by volume
manufacturing efficiencies and greater functional integration. These advantages also allow us to develop new
technologies and solutions that offer our customers innovative ways to solve their business needs.
Product Portfolio
Our hardware product portfolio consists of compact modular platforms, packet-optical platforms, optical
line systems, and optical subsystems. Software products include the Infinera Transcend Software Suite, which
includes automation and network management software. These products address multiple market segments in
the end-to-end transport infrastructure, including metro, long-haul and subsea. DCI is a subset of these markets.
We also provide customer support services, including professional service offerings designed to help customers
optimize their network assets and migrate legacy services.
Compact Modular Platforms
Infinera GX Series Compact Modular Platform
The Infinera GX Series of highly compact, modular and sled-based platforms includes integrated
muxponder and optical line system capabilities optimized to support a variety of transport network applications.
With a compact and flexible architectural design, the GX Series supports up to 800 Gb/s per wavelength (via our
embedded ICE6 optical engine) and provides an evolution path to 1.2 Tb/s transmission with its next-generation
optical engine, providing customers with a seamless path to future growth and cost-optimized reach in metro and
long-haul applications. The GX muxponder solution supports deployment over virtually any optical line system,
enabling network operators to easily introduce our best-of-breed, high-performance transmission capabilities
over existing network infrastructure.
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Infinera Cloud Xpress Family
The Infinera Cloud Xpress Family is designed to meet the varying needs of ICPs, communication
service providers, internet exchange service providers, enterprises and other large-scale data center operators.
The first generation of the Cloud Xpress has a 500 Gb/s DWDM super-channel output in 2 rack unit ("RU") form
factor. Our second generation, the Cloud Xpress 2, released in June 2017, leverages the ICE4 optical engine,
and has a 1.2 Tb/s super-channel output in 1RU. These platforms are designed with a rack-and-stack form factor
and utilize a software approach that enables them to easily plug into existing cloud provisioning systems using
open software defined networking ("SDN") APIs, an approach similar to the server and storage infrastructure
deployed in the cloud.
Infinera XT Series
The Infinera XT Series of compact, open and disaggregated platforms, powered by our ICE4 optical
engine, delivers up to 2.4 Tb/s of line-side capacity for metro, DCI, regional and long-haul networks in compact
1RU and 4RU form factors, with ultra-long-haul and submarine reach. These platforms are designed to power
cloud scale network services over metro, DCI, long-haul and subsea networks.
Optical Line Systems
Infinera GX Series Optical Line System
In addition to muxponder functionality, the Infinera GX Series Compact Modular Platform also supports
a variety of multi-haul optical line system capabilities. From compact plug-and-play optical function to
comprehensive multi-degree reconfigurable optical add-drop multiplexer (“ROADM”) capabilities, the GX Series
provides a single configurable system to address virtually any optical networking application. With natively open
interfaces, the GX Series supports seamless integration into a variety of networks and open optical applications.
Infinera 7300 Series
The Infinera 7300 Series is an SDN-ready coherent optical transport system. Supporting the latest
optical technology, the 7300 Series addresses the needs of regional, long-haul, and ultra-long-haul optical
networking, including long, unrepeatered single-span and festoon subsea networks. The 7300 enables network
operators to achieve the highest network resiliency with fast optical protection switching and the use of
autonomous and SDN-controlled restoration capabilities.
Infinera FlexILS Open Optical Line System
The Infinera FlexILS open optical line system connects various Infinera and third-party terminal
equipment platforms over long-distance fiber optic cable while providing switching, multiplexing, amplification and
management channels. The FlexILS solution is designed to support over 50 Tb/s of fiber capacity when used
with the Infinera platforms over extended C-band and L-band. The FlexILS supports ROADM functionality with a
flexible grid architecture and provides unconstrained optical switching by eliminating the restrictions of fixed
wavelengths by port or direction. This platform is designed to provide open APIs interfacing with SDN control for
multi-layer switching when combined with other platforms featuring DWDM, optical transport network ("OTN")
and packet switching.
Packet-Optical Platforms
Infinera XTM Series
The Infinera XTM Series packet-optical transport platform enables high-performance metro connectivity
solutions with service-aware capabilities optimized for 5G, Fiber Deep, business services and other metro
transport applications. The XTM Series offers superior density, lower power consumption and higher scalability
for multi-service metro access and aggregation networks, including integrated Layer 1 and Layer 2 support and
Time Sensitive Networking features required for 5G mobile x-haul applications. The platform is designed for
application-rich packet-optical metro networks providing cable, mobile, broadband and business services that
require 10 Gb/s, 100 Gb/s or 200 Gb/s wavelengths with differentiated performance. This offering includes Auto-
Lambda, a feature that provides a unique solution for deploying access and aggregation networks. Auto-Lambda
enables network operators to simply plug DWDM optics into aggregation and access nodes, which allows the
packet-optical network element to automatically tune each of the optical signals to the appropriate wavelength.
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Infinera 7100 Series
Infinera 7100 Series of packet-optical transport platforms are right-sized and support a flexible mix of
transponders, muxponders, packet switching, OTN switching, SONET/SDH switching, and ROADM-based
optical line systems, providing compact and flexible transport for metro networks. The 7100 Series includes the
7100 Nano, a 5RU platform optimized for metro transport and the 7100 Pico, a 2RU platform that extends
services to the metro edge and enables metro access applications. The 7100 Series also includes the PSX-3S, a
1RU 376 Gb/s packet switch optimized for aggregation and access applications.
Infinera mTera Series
The Infinera mTera Universal Transport Platform is a flexible and efficient network transport solution
supporting scalable grooming and an innovative protocol-agnostic switch fabric in which each and every port on
virtually every card can be software-configured between OTN and Ethernet. The mTera Series includes a
compact 8-slot, 4 Tb/s shelf and a higher capacity 14-slot, 7 Tb/s shelf, with paired 14-slot shelves able to deliver
12 Tb/s of electrical switching. The mTera Series combines SDN-ready, advanced ROADM capabilities and
support for the universal switching of OTN, packet and SONET/SDH traffic at the electrical layer.
Infinera XTC Series
The Infinera XTC Series includes multi-terabit packet optical transport platforms that integrate digital
OTN switching and optical DWDM transmission. The XTC Series delivers converged packet, OTN, and DWDM
for metro core, regional, long-haul, and subsea applications. The XTC Series features ICE4, Instant Bandwidth,
and massively simple operations to drive cost reduction and speed time to revenue. These platforms also
support a broad range of Ethernet and OTN client interfaces for flexibility and are designed for metro, long-haul
and subsea networks.
Infinera 7090 Series
The Infinera 7090 Packet Transport Platforms provide both Multiprotocol Label Switching Transport
Profile ("MPLS-TP") and Carrier Ethernet-based options, addressing applications including business Ethernet
services, migration from TDM to packet, and residential and mobile backhaul. The 7090 Series includes MPLS-
TP platforms with capacities ranging from 5 Gb/s to 960 Gb/s and Carrier Ethernet-based platforms that provide
a range of compact gigabit Ethernet (“GbE”) and 10 GbE access devices.
Coherent Optical Subsystems
ICE-X Coherent Pluggable Optics
ICE-X is a suite of coherent pluggable optics designed to seamlessly address point-to-point (including
ZR+) and point-to-multipoint transport applications from the network edge to the core. The suite of vertically
integrated ICE-X coherent optical pluggables will offer network operators the performance, scale, efficiency, and
manageability critical to infrastructure support for the delivery of differentiated 5G, enhanced broadband, and
next-generation cloud and business services. ICE-X coherent optical pluggables support a range of transport
rates, including 800 Gb/s, 400 Gb/s and 100 Gb/s, and utilize industry-standard form factors to enable ease of
deployment in a wide variety of networking elements. These networking elements include optical transport
platforms, compact modular platforms, routers, switches, servers and mobile radio units. Customers for Infinera’s
suite of ICE-X coherent optical pluggables include communications service providers, ICPs, enterprises and
third-party network equipment manufacturers.
Our subsystems solutions include a line of high-performance transmit-receive optical sub-assemblies,
innovative programmable DSPs and a line of high-performance, intelligent pluggable optical transceivers. These
solutions leverage an innovative building block approach whereby subsystems can be mixed and matched
flexibly, maximizing the value of each element, providing more solution options for customers, and simplifying
integration into in-house and third-party optical engines.
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Software
Transcend Software Suite
Leveraging cloud-native technologies and SDN principles, the Infinera Transcend Software Suite is a
comprehensive software platform that provides automation capabilities designed to help network operators
reduce operational costs, optimize network assets, speed time to revenue, and maximize network and service
availability. Our programmable Transcend Network Management System ("NMS") provides full end-to-end
network and service management across multiple technologies and equipment vendors, while the Transcend
Controller enables new, efficient, and innovative applications for network control and automation, extracting the
most value out edge-to-core transmission networks and open optical architectures.
Open Optical Networking Software
The Transcend Software Suite also includes software tools and applications that enable network
operators to simplify the management of multi-vendor optical networks and leverage best-in-class technology
from any number of suppliers in an open network environment. As part of this toolkit, Transcend Open Wave
Manager makes it operationally simple to deploy, operate, and troubleshoot open wavelengths and our Intelligent
Pluggables Manager brings the holistic, edge-to-core optical networking operational capabilities of DWDM
transponders to intelligent pluggable optics in any network platform.
System Software
Our networking platforms and ICE-X coherent optical pluggable solutions include system software
designed to maximize reliability and streamline automation. This software controls all aspects of system
operations, including command processing, system security, policy management, fault monitoring, and alarm
reporting. Our system software is designed to be field upgradable, with minimal impact on customer traffic.
Services
In connection with our product offerings, we provide a comprehensive range of professional, support
and training services for all Infinera hardware and software products. These services cover all phases of network
ownership, from the initial installation through ongoing operations and maintenance activities. Professional
services extend to network optimization, expansion and modernization including migration of legacy transport
services. Our global services organization is experienced and prepared to efficiently manage complex projects
and assist with customer network operations in the face of today's ever-increasing demands for lower operational
costs and minimized downtime.
We continue to expand and enhance our services portfolio, organization and capabilities to meet the
evolving needs of our customers.
Competition
Our current technologies and solutions support the access, aggregation, metro, DCI, long-haul and
subsea markets. The optical networking equipment market is highly competitive and competition in the markets
we serve is based on any one or a combination of the following factors:
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the ability of products and services to meet customers’ immediate and future network requirements;
price and other commercial terms;
optical reach and capacity performance;
features and functionality;
the availability of components required to manufacture key products;
existing business and customer relationships;
power consumption, heat dissipation, form factor and density;
installation and operational simplicity;
network and service manageability;
quality and reliability;
service and support;
security and encryption requirements;
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scalability and investment protection; and
product availability and lead times.
Competition in the optical transport systems market is intense, with consolidation and geopolitical
market shifts creating new competitive dynamics. In the long-haul market, our main competitors include DWDM
systems suppliers such as Ciena and Nokia, as well as China-based suppliers Huawei and ZTE. In the metro
market, we face the same competitors as in long-haul, in addition to Cisco, ADTRAN, Ribbon Communications,
and Fujitsu, among others. Competition in the optical subsystems and pluggable optics market includes, but is
not limited to, Cisco (via their acquisition of Acacia), Lumentum, Marvell and Coherent, as well as a wide range of
China-based suppliers. We also encountered competitor consolidation in the markets in which we compete and
may continue to do so, which could lead to a changing competitive landscape, capabilities and market share, and
could impact our results of operations.
Some of our competitors have substantially greater name recognition, technical, financial, sales and
marketing resources and may be perceived by our customers and suppliers to have greater financial stability,
and better-established relationships with potential customers than we have. Many of our competitors have more
resources and more experience in developing or acquiring new products and technologies, as well as in creating
greater market awareness for those products and technologies. In addition, many of our competitors have the
financial resources to offer competitive products at aggressive pricing levels that could prevent us from
competing effectively. Some of our competitors offer optical products at a substantial discount or for free when
bundled together with broader technology purchases, such as router or wireless equipment purchases. Further,
many of our competitors have built long-standing relationships with some of our prospective and existing
customers and have the ability to provide financing to customers and could, therefore, have an inherent
advantage in selling products to those customers.
Sales and Marketing
We market and sell our products and related support services primarily through our direct sales force,
supported by marketing and product management personnel. We also use channel distribution or support
partners to enter new markets or when requested by a potential customer. Our sales team has significant
experience with the buying process and sales cycles typical of high-value telecommunications systems and
subsystems products.
The sales process for our products entails discussions with prospective customers, analyzing their
networks and identifying how they can utilize our solutions capabilities within their networks. This process
requires developing strong customer relationships and leveraging our sales force, technical experts and
customer support team and associated capabilities.
Over the course of the sales cycle, potential customers often test our products before buying. Prior to
commercial deployment, the customer will generally perform a field trial of our products. Upon successful
completion, the customer generally accepts the products installed in its network and may continue with
commercial deployment of additional products. We anticipate that our sales cycle, from initial contact with a
prospective customer through the signing of a purchase agreement may, in some cases, take several quarters.
Direct Sales Force. Our sales team sells directly to service providers worldwide and is organized
geographically around the following markets: (i) United States and Canada (“North America”); (ii) Latin America
and South America (“LATAM”); (iii) Europe, Middle East and Africa (“EMEA”); and (iv) Asia Pacific and Japan
(“APAC”). Within each geographic area, we maintain specific teams or personnel that focus on a particular
region, country, customer or market vertical. We believe that we will need to further invest in the growth of our
direct sales force to compete effectively against our competitors that have built long-standing relationships with
some of our prospective and existing customers.
Indirect Sales Force. We employ business consultants and resale and logistics partners to assist in our
sales efforts. These partners have deep knowledge of regional business practices and strong relationships with
key local operators. We expect to work with business partners to assist our customers in the sale, deployment
and maintenance of our systems and have entered into distribution and resale agreements to facilitate the sale
and support of our products.
Marketing and Product Management. Our product management team is responsible for defining the
product features and go-to-market plan required to maximize our success in the marketplace. Product
management supports our sales efforts with product and application expertise. Our corporate marketing team
works to create demand for our products by communicating our value proposition and differentiation through a
9
variety of marketing and customer engagement programs, including public relations, industry analyst relations,
event and trade show marketing, web-based promotions, social media, email marketing, and advertising, among
other marketing vehicles.
Research and Development
Continued investment in research and development is critical to our business. To this end, we have a
team of engineers with expertise in various fields, including photonic integrated circuits, components, systems,
sub-systems and software. Our research and development efforts are currently focused in San Jose, California;
Allentown, Pennsylvania; Annapolis, Maryland; Bangalore and Ahmedabad, India; Kanata, Canada; Stockholm,
Sweden; Munich, Germany; Lisbon, Portugal; and Shanghai, PRC. We utilize a mix of internal resources and
supplement our staffing with development personnel provided by third parties on a contract basis. We have
invested significant time and financial resources into the enhancement of existing products and the development
of new products. We will continue to expand our product offerings and the capabilities of existing products in the
future and plan to dedicate significant resources to these continued research and development efforts. We are
continually increasing the scalability and software features of our current platforms. We are investing in
leveraging our vertical integration capabilities across a broader portion of our platforms. We are also working to
develop new generations of optical engines at a faster cadence than we have historically in order to bring new
products to market more rapidly and meet evolving customer demands. We believe these efforts will enhance our
competitiveness in the markets we currently serve and also allow us to address adjacent markets to fuel our
future growth.
Human Capital
Integrity, trust, mutual commitment and respect for diversity are core Infinera values – values brought to
life by our talented, diverse, and dedicated global workforce. Employee health and safety are also cornerstones
of our human capital management. Our goal is to continuously improve employee engagement as we strive to
build and maintain a culture of human connection, individual responsibility and mutual integrity.
As of December 30, 2023, we had 3,389 employees, with 2,119 of those employees located outside of
the United States. Our U.S. employees are not subject to a collective bargaining agreement. Employees in
certain foreign jurisdictions are represented by local workers’ councils or collective bargaining agreements, as
required by local laws or customs. We have not experienced any work stoppages to date. We consider the
relationships with our employees to be positive.
Organizational Culture
We believe that developing and fostering a global organizational culture is a key component of our
human capital management practice and critical to our long-term success. In 2023, we strengthened our core
culture to drive the evolution of our business and human capital strategy. We have intensified efforts to involve
leaders at all levels in cultural initiatives and decision-making processes. For example, in 2023, we continued our
cross-functional leadership program, Second Circle, which is a global initiative to accelerate the leadership
development of our talent. Through regular feedback sessions and leadership forums, Second Circle aims to
ensure that our culture reflects the diverse perspectives and experiences within our Company. Our executives
are also evaluated and held accountable for upholding our cultural values and leading by example. Our culture is
underpinned by three core principles that unite our workforce: (1) innovation that matters (empowering our
people); (2) better together (workforce unified in mission and purpose) and (3) we care (engaging people to
reach their potential, fostering integrity and empathy, standing with employees and respecting individuality).
Diversity, Equity and Inclusion
At Infinera, we strive to create an inclusive culture for a workforce that is unified in mission and purpose.
This is reflected in the way we treat each other, the way we respect our differences across our global workforce,
and how we conduct business with our customers and partners around the world. We believe that our culture of
inclusion and belonging enables us to leverage the strengths of our people to exceed customer expectations and
growth objectives.
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In 2020, we launched Infinera ALL-In ("ALL-In"), an employee-led, executive-sponsored, company-wide
effort to promote, facilitate and support sustainable diversity, equity and inclusion ("DEI") efforts. ALL-In is
sponsored by our Chief Executive Officer ("CEO"), Chief Financial Officer ("CFO"), and Chief Human Resources
Officer ("CHRO"), and is led by other executives and employee leaders from each region in which we have
employees and do business. In the last three years, ALL-In has contributed to our inclusive culture, raised
awareness and fostered meaningful dialogue, and helped guide the overall development of our DEI initiatives.
In 2023, we have continued our partnerships with non-profits and historically black colleges and
universities to increase our pipeline of diverse talent. Through our partnership with the United Negro College
Fund (“UNCF”), Infinera sponsors internships with a focus on providing job opportunities to candidates within the
historically black colleges and universities network that may have never worked in technology before or that may
be the first person in their family to attend a university. By positioning Infinera as an accessible avenue into a
technical career working on the frontier of optical networking technology, we hope to further expand our
candidate pool and access the best talent across the nation. Our apprenticeships also provide a direct avenue to
a technical career to candidates that might not have completed a university degree. Leveraging the candidates’
passion and potential, we offer the opportunity for candidates with high school diplomas or equivalency
certificates to learn and earn within our Registered Apprentice Program. In our larger sites globally, we also post
roles on platforms and job boards targeted at diverse talent pools enabling greater access to diverse talent. In
our larger sites globally, we post roles on platforms and job boards targeted at diverse talent pools enabling
greater access to diverse talent.
In 2023, we continued to provide DEI training for our global employee base. Training topics are focused
on global diversity, employees' roles in workplace diversity and related matters. We offer recruiters and managers
training on topics such as leveraging inclusive hiring practices.
As of December 30, 2023, women represented 20% of our global employees, based on those who
identify, and 19% based on total population. In the U.S., minorities represented approximately 45% of our U.S.
population, based on those who identify, and approximately 38% of our total U.S. population.
Employee engagement
Employee engagement is critical to building a unified and global culture that values local needs and
perspectives. We create an engaging workplace culture by consistently listening to and acting on employee
feedback. This employee engagement has directly led to the evolution of our culture as referenced above. We
continuously evolve our approach to employee communications, from a company-wide platform, to function or
departmental communications, to one-on-one discussions to better understand employee expectations and
assess the effectiveness of our people practices. From our employee engagement survey feedback, we created
a new program where managers can invite executives from other functions to attend their internal staff meetings.
This program has fostered candid, thoughtful and cross-functional collaboration. We also encourage our
employees to share direct feedback about working for our company through other feedback channels, including
employee surveys and on public forums such as Glassdoor.com. This helps us determine how connected
employees are to their roles, each other, customers, and other stakeholders and helps us continuously improve
our employee experience.
To further foster inclusion and promote our culture and values throughout our diverse workforce, we
support several employee resource groups (“ERGs”) including African Descent/Black at Infinera, Infinera
Veterans Employee Resource Group and Women at Infinera ("WIN"). As an example of ERG evolution and
effectiveness, WIN works to provide our female employees with access to conferences, networking events and
other prominent engagements in the technology industry, as well as to support greater opportunities for career
growth, internships, and leadership. In 2023, we continued our WIN mentoring program, participation in local and
regional women’s conferences and a speakers series including industry and thought leaders addressing topics
such as development, recruitment, and retention of women. In various locations, employees have also partnered
with local nonprofits and schools to encourage female students to pursue science, technology, engineering, and
mathematics, or STEM, careers.
We also continue to design strategic initiatives with the intent to reduce barriers and enhance
collaboration. For example, in 2023, the Company hosted three events where multiple levels of management,
technologists and individual contributors engaged directly with our Board of Directors. These initiatives allowed
the Board of Directors to interact with the Company’s leadership and talent, while also providing leadership direct
access and visibility to the Board of Directors.
11
Compensation, Benefits and Well-being
Our goal is to incentivize our talented employees with a total compensation package that is market-
competitive as validated through independent data sources. Our total compensation for eligible employees
includes base salary, bonuses and equity awards. We intend to maintain ongoing competitiveness for attracting,
engaging, retaining, and developing the best talent. We continuously improve our human resources information
systems for workforce data collection, monitoring, and reporting, and expect that this will allow us to improve our
understanding of compensation equity around the globe to ensure fair pay. We also seek to provide market-
competitive benefits as part of our total reward structure for all employees around the globe and their
dependents.
We have also invested in creating safe work environments for our workforce, which is important given
our status as a critical infrastructure business with manufacturing facilities in the U.S. and research and
development sites in several countries. To advance these efforts, we have a global leadership team comprised of
local site leaders that meets regularly to support compliance with all local and international guidelines and
establishes best practices at every site. We are committed to providing employees with a healthy and safe work
environment by striving to prevent accidents and improve workplace conditions, and continuously working to
improve our processes and performance. Our health and safety programs emphasize personal accountability,
professional conduct, and regulatory compliance, while our culture fosters a sense of proactivity, caution,
empathy, and communication.
We have also continued to emphasize employee well-being. For example, in the U.S., the Employee
Assistance Program benefit includes mental health counseling for help with personal issues, childcare and
eldercare referrals, financial coaching, legal consultation and wellness tools. Employees are provided medical,
dental, vision, long-term and short-term disability, and life insurance, and employees covered under our health
insurance have access to various wellness programs. Employees are provided paid parental leave as new
parents (birth or adoption). Eligible employees are also qualified to receive unlimited flexible time off.
Growth and Development
Consistent with our commitment to innovation that matters, our employee growth and development
initiatives are designed to provide opportunities for employees to learn, innovate and enhance their skillsets at
every stage of their role and long-term career. To ensure business continuity and employee development, the
executive leadership team regularly reviews the talent pipeline, identifies, and develops succession candidates,
and builds succession plans for leadership positions. The Board and its Nominating and Governance Committee
provide oversight of CEO and succession planning of key executive roles.
Part of a healthy culture is also ensuring the Company attracts and develops new talent. In 2023, the
Company provided internships to candidates in high school, community colleges and universities globally.
Internships enable the Company to access talent who can join the Company’s workforce as an employee, while
also providing such interns with opportunities to work for an innovative technology company.
Experiential learning is powerful in career development, which is why we also provide global job-based
learning opportunities including cross-functional transfers and expanded roles. Education also enables the
advancement of our DEI initiatives, which is one of our core values and a continued area of focus for us. Our
learning and development initiatives include a scalable, multi-language e-learning platform that enables the
proliferation of global, diverse, and professional education. We also provide education on topics that include, but
are not limited to, technical sessions, managerial training, effective time management, unlocking executive
presence, working in a multigenerational workplace, next level delegation and breaking down barriers.
We also have a global mentorship program to empower all employees within Infinera to advance their
careers and realize their full potential. By facilitating mentor-mentee relationships, this program provides a unique
opportunity for reflection, self-examination, and the development of practical skills for mentees while
simultaneously providing mentors with fresh perspectives, insights, opinions, and an opportunity to have a direct
hand in the development of future leaders.
12
Manufacturing
We have invested significant time and capital to develop and improve the manufacturing processes we
use to produce and package our products. This includes significant investments in personnel, equipment and the
facilities needed to manufacture and package our products in California and Pennsylvania. We also have
invested in automating our manufacturing process and in training and maintaining the quality of our
manufacturing workforce. As a leader in the development of photonic integration, our manufacturing processes
have been developed over many years and are protected through a combination of patents, trade secrets and
contractual protections. We believe that the investments we have made towards the manufacturing and
packaging of our products provide us with a significant competitive advantage. We also believe that our current
manufacturing facilities, including our fabrication facility for our PICs in California and our module manufacturing
facility in Pennsylvania, can accommodate an increase in production capacity as our business continues to grow.
We also use contract manufacturers to assemble portions of our products. Each contract manufacturer
procures components necessary to assemble products according to our specifications and bills of material. For
elements of our business where we outsource, we perform rigorous in-house quality control testing to ensure the
reliability of our products. Our supply chain risk mitigation strategies are continuous and institutionalized in our
supply chain design for external manufacturing and for procurement of components. We currently use three
contract manufacturers in several different countries, including Thailand, Malaysia, and China, and we maintain
the capability to transfer select manufacturing activities to U.S. qualified factories of three electronic
manufacturing services partners.
We expect all suppliers to comply with our Supplier Code of Conduct, which addresses the rights of
workers to safe and healthy working conditions, environmental responsibility, and compliance with applicable
laws.
Backlog
Our backlog represents purchase orders received from customers for future product shipments and
services to be provided in future periods. Our backlog is subject to future events that could cause the amount or
timing of the related revenue to change, and, in certain cases, purchase orders may be canceled without penalty.
Orders in backlog may be fulfilled several quarters following order receipt and may relate to multi-year support
service obligations. As a result, we believe that backlog should not be viewed as an accurate indicator of future
operating results for any particular period. A backlogged purchase order may not result in revenue in a particular
period, and the actual revenue may not be equal to our backlog amounts. Our presentation of backlog may not
be comparable with that of other companies in our industry.
Intellectual Property
Our innovative software and optical engine technologies, including our PIC, DSP, module and related
technologies, are foundational to our products and we believe they are highly valued by our customers and
provide us with a competitive advantage.
We believe our success depends upon our ability to protect our core technology and intellectual
property. To accomplish this, we rely on a combination of intellectual property rights, including patents, trade
secrets, copyrights and trademarks, as well as customary contractual protections. However, there can be no
assurances that these protections will be sufficient to provide us with a competitive advantage or that others have
not or will not reverse engineer our designs or discover, develop or disclose the same or similar designs and
manufacturing processes.
As of December 30, 2023, we held 1,019 U.S. patents and 470 international patents expiring between
2024 and 2042, and held 177 U.S. and 98 foreign pending patent applications. We do not know whether any of
our pending patent applications will result in the issuance of patents or whether the examination process will
require us to narrow our claims.
We may not receive any competitive advantages from the rights granted under our patents and other
intellectual property. Any patents granted to us may be contested, circumvented or invalidated over the course of
our business, and we may not be able to prevent third parties from infringing these patents. Therefore, the impact
of these patents cannot be predicted with certainty.
13
We believe that the frequency of assertions of patent infringement is increasing as patent holders,
including entities that are not in our industry and who purchase patents as an investment or to monetize such
rights by obtaining royalties, use such actions as a competitive tactic as well as a source of additional revenue.
For example, we are currently involved in litigation for alleged patent infringement. See the information set forth
under the heading “Legal Matters” in Note 12, Commitments and Contingencies, in Part II, Item 8 for additional
information regarding such litigation. Any claim of infringement from a third party, even those without merit, could
cause us to incur substantial costs defending against such claims, and could distract our management from
running our business. Furthermore, a party making such a claim, if successful, could secure a judgment that
requires us to pay substantial damages or could include an injunction or other court order that could prevent us
from offering our products. In addition, we might be required to seek a license for the use of such intellectual
property, which may not be available on commercially reasonable terms or at all. Alternatively, we may be
required to develop non-infringing technology, which would require significant effort and expense and may
ultimately not be successful.
In addition to trade secret and patent protections, we generally control access to and the use of our
proprietary software and other confidential information. This protection is accomplished through a combination of
internal and external controls, including contractual protections with employees, contractors, customers and
partners, and through a combination of U.S. and international copyright laws.
We license some of our software pursuant to agreements that impose restrictions on our customers’
ability to use such software, such as prohibiting reverse engineering and limiting the use of copies. We also seek
to avoid disclosure of our intellectual property by relying on non-disclosure and assignment of intellectual
property agreements with our employees and consultants that acknowledge our exclusive ownership of all
intellectual property developed by the individual within the scope of and during the course of his or her work with
us. The agreements also require that each person maintain the confidentiality of all proprietary information
disclosed to them. Other parties may not comply with the terms of their agreements with us, and we may not be
able to enforce our rights adequately against these parties. We also rely on contractual rights to establish and
protect our proprietary rights in our products.
We incorporate free and open source licensed software into our products. Although we monitor our use
of such open source software closely, the terms of many open source licenses have not been interpreted by U.S.
courts, and there is a risk that such licenses could be construed in a manner that could impose unanticipated
conditions or restrictions on our ability to commercialize our products. In addition, non-compliance with open
source software license terms and conditions could subject us to potential liability, including intellectual property
infringement and/or contractual claims. In such event, we could be required to seek licenses from third parties in
order to continue offering our products, to re-engineer our products or to discontinue the sale of our products in
the event re-engineering cannot be accomplished in a timely manner, any of which could adversely affect our
business, operating results and financial condition.
Governmental Regulations
Environmental Laws and Regulations. We are committed to maintaining compliance with all
environmental laws and regulations applicable to our operations, products and services. Our business and
operations are subject to various federal, state, local and foreign laws and regulations that have been adopted
with respect to the environment, including the Waste Electrical and Electronic Equipment Directive ("WEEE"),
Directive on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment
("RoHS"), and Registration, Evaluation, Authorization, and Restriction of Chemicals ("REACH") regulations
adopted by the European Union. Environmental regulation is increasing and we expect that our operations will be
subject to additional environmental compliance requirements, which may expose us to additional costs. We are
also subject to disclosure requirements related to the presence of “conflict minerals” in our products. To date, our
compliance costs relating to environmental regulations have not resulted in a material adverse effect on our
business, results of operations or financial condition.
14
Other Laws and Regulations. We are subject to U.S. and foreign laws and regulations across the
jurisdictions in which we operate. In addition to the environmental laws and regulations discussed above, we are
subject to laws and regulations addressing the telecommunications industry, cybersecurity, privacy and data
protection, export and import control, trade sanctions, and anti-bribery and anti-corruption. To date, our
compliance costs relating to these laws and regulations have not resulted in a material adverse effect on our
business, operating results or financial condition.
For further discussion of risks associated with these governmental laws and regulations, see Part I, Item
1A, “Risk Factors – Legal and Regulatory Risk Factors.”
Information about our Executive Officers
Our executive officers and their ages and positions as of December 30, 2023, are set forth below:
Name
David W. Heard
Nancy L. Erba
David L. Teichmann
Nicholas R. Walden
Age Position
55
Chief Executive Officer and Director
57
67
52
Chief Financial Officer
Chief Legal Officer and Corporate Secretary
Senior Vice President, Worldwide Sales
David W. Heard has served as our Chief Executive Officer and has been a member of our Board of
Directors since November 2020. Mr. Heard served as our Chief Operating Officer from October 2018 to
November 2020. Mr. Heard previously served as our General Manager, Products and Solutions, from June 2017
to October 2018. Prior to joining us, Mr. Heard served as a private consultant from 2015 to June 2017. From
2010 to 2015, Mr. Heard served as President of Network and Service Enablement at JDS Uniphase. From 2007
to 2010, Mr. Heard served as Chief Operating Officer at BigBand Networks (now part of Arris). From 2004 to
2006, Mr. Heard served as President and Chief Executive Officer at Somera (now part of Jabil). From 2003 to
2004, Mr. Heard served as President and General Manager Switching Division at Tekelec (now part of Oracle).
From 1995 to 2003, Mr. Heard served in a number of leadership roles at Santera Systems Spatial Networks and
at Lucent Technologies (both now part of Nokia). Mr. Heard holds an M.B.A. from the University of Dayton, an
M.S. in management from Stanford Graduate School of Business, where he was a Sloan Fellow, and a B.A. in
production and operations management from Ohio State University.
Nancy L. Erba has served as our Chief Financial Officer since August 2019 after joining us as Senior
Vice President, Strategic Finance earlier in the same month. Prior to joining us, from September 2016 to March
2019, Ms. Erba served as Chief Financial Officer of Immersion Corporation, a leader in touch feedback
technology. From February 2015 to October 2015, Ms. Erba was Vice President, Financial Planning and Analysis
of Seagate Technology plc, a data storage company. Prior executive roles at Seagate Technology include
Division CFO and Vice President of Finance for Strategic Growth Initiatives from 2013 to 2015; Vice President,
Business Operations and Planning from 2009 to 2013; Division CFO and Vice President of Finance of the
Consumer Solutions Division from 2008 to 2009; and Vice President, Corporate Development from 2006 to 2008.
Ms. Erba currently serves on the board of directors of PDF Solutions, Inc., a software and engineering services
company. Ms. Erba holds an M.B.A. from Baylor University and a B.A. in mathematics from Smith College.
David L. Teichmann has served as our Chief Legal Officer and Secretary since April 2019. Prior to
joining us, Mr. Teichmann served as Executive Vice President, General Counsel and Corporate Secretary of
Oclaro, Inc., a maker of optical components and modules for the long-haul, metro and data center markets, from
January 2014 until its acquisition by Lumentum in December 2018. From 2007 to 2012, he served as the
Executive Vice President, General Counsel and Corporate Secretary of Trident Microsystems, Inc., a public
fabless semiconductor company that sold television and set top box integrated circuits. From August 1998 to
February 2006, he served as the Senior Vice President, General Counsel and Secretary of GoRemote Internet
Communications, Inc., a secure managed global remote access solutions provider, guiding the company through
its initial public offering in 1999 and its acquisition by iPass, Inc. in 2006. Mr. Teichmann held various senior legal
counsel positions from 1989 to 1998 handling legal matters in Europe, Asia Pacific, Latin America and Canada
and began his career with the Fenwick & West law firm. Mr. Teichmann holds a J.D. from the William S.
Richardson School of Law at the University of Hawaii, an M.A. in law and diplomacy from the Fletcher School of
Law and Diplomacy, and a B.A. in political science from Trinity College.
15
Nicholas R. Walden has served as our Senior Vice President, Worldwide Sales since January 2020.
Mr. Walden served as Senior Vice President, Strategic Accounts from January 2019 to January 2020. He served
as Senior Vice President, EMEA Sales from September 2015 to January 2019. Prior to joining us, Mr. Walden
served in a variety of senior sales roles at Ciena Corporation from 1999 to 2015, most recently as its Vice
President and Managing Director, Regional Carrier Business, EMEA. Mr. Walden studied HVAC Mechanical
Engineering at the College of Technology at Reading, Berkshire, United Kingdom.
Available Information
We may use our website (http://www.infinera.com), press releases, public conference calls and public
webcasts as means of disclosing material non-public information and for complying with our disclosure
obligations under Regulation FD. Information contained on our website or any website referred to in this Form
10-K is not incorporated by reference unless expressly noted. We file reports with the Securities and Exchange
Commission (“SEC”), which we make available on our website free of charge. These reports include Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to such
reports, each of which is provided on our website as soon as reasonably practicable after we electronically file
such materials with or furnish them to the SEC. The SEC also maintains a website that contains our SEC filings.
The address of the SEC website is https://www.sec.gov.
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ITEM 1A.
RISK FACTORS
Investing in our securities involves a high degree of risk. A description of the risks and uncertainties
associated with our business is set forth below. These risks, together with many other factors described in this
report and in our other public filings, and additional risks and uncertainties not currently known to us or that we
currently deem to be immaterial, could adversely affect our operations, performance and financial condition. Our
actual results could differ materially from our forward-looking statements.
Risk Factors Summary
The following is a summary of the principal risks that could adversely affect our business, operations
and financial results.
Business and Operational Risk Factors
•
•
•
•
•
•
Our quarterly results may vary significantly from period to period.
Our ability to increase our revenue will depend upon continued demand growth for additional
network capacity and on the level and timing of customer capital spending.
Any delays in the development, introduction or acceptance of our new products or in releasing
enhancements to our existing products may harm our business.
Aggressive business tactics by our competitors and new entrants may harm our business.
The markets in which we compete are highly competitive and we may be unable to compete
effectively.
Supply chain and logistics issues, including delays, shortages, longer lead times, unfavorable
contractual terms, components that have been discontinued and increased costs, and our
dependency on sole source, limited source or high-cost suppliers, could harm our business and
operating results.
• We are dependent on a small number of key customers for a significant portion of our revenue.
•
•
•
•
•
Product performance problems, deployment delays and product security vulnerabilities could harm
our business and reputation.
The manufacturing process for our optical engine and the assembly of our products are very
complex.
If we lose key personnel or fail to attract qualified personnel, our business may be harmed.
If our contract manufacturers do not perform as we expect, our business may be harmed.
Increased consolidation among our customers and suppliers in the communications networking
industry has had, and could continue to have, an adverse effect on our business and results of
operations.
• We rely on various third-party service partners to help complement our global operations.
• We must respond to rapid technological change for our products to be successful.
•
•
•
•
•
•
Failure to accurately forecast manufacturing requirements or customer demand could incur
additional costs.
Actions that we are taking or may in the future take to restructure or streamline our business may
not be as effective as anticipated and may have negative consequences.
Our large customers have substantial negotiating leverage, which may harm our results of
operations.
Our sales cycle can be long and unpredictable, which could result in unexpected revenue shortfalls.
The effects of public health emergencies could have a material adverse effect on our business,
manufacturing operations and results of operations.
Any acquisitions or strategic transactions that we undertake could disrupt our business and harm
our financial condition and operations.
17
Financial and Macroeconomic Risk Factors
• We may be unable to generate the cash flow necessary to make anticipated capital expenditures,
service our debt or grow our business.
•
•
•
•
•
•
Unfavorable macroeconomic and market conditions may adversely affect our financial results.
Inflation may increase our costs beyond what we can recover through price increases.
If we need additional capital in the future, it may not be available to us on favorable terms, or at all.
Our Loan Agreement and any other credit or similar agreements into which we may enter in the
future may restrict our operations.
Our debt obligations may adversely affect our ability to raise additional capital and will be a burden
on our future cash resources.
Our international sales and operations subject us to additional risks.
• We may be adversely affected by fluctuations in currency exchange rates.
•
Our effective tax rate may increase or fluctuate, which could increase our income tax expense and
reduce our net income.
• We may issue additional shares of our common stock in connection with conversions of the 2024
Notes, the 2027 Notes and the 2028 Notes (as defined below).
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The fundamental change provisions of the 2024 Notes, the 2027 Notes and the 2028 Notes may
delay or prevent an otherwise beneficial takeover attempt of us.
The Capped Calls (as defined below) may affect the value of the 2024 Notes and our common
stock.
• We are subject to counterparty risk with respect to the Capped Calls.
Legal and Regulatory Risk Factors
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If we fail to protect our intellectual property rights, our competitive position could be harmed, or we
could incur significant expense to enforce our rights.
Claims by others that we infringe their intellectual property rights could harm our business.
Security incidents, such as data breaches and cyber-attacks, could cause significant damage to our
business and reputation.
If we fail to remediate our material weaknesses or discover additional weaknesses or otherwise fail
to maintain an effective system of internal controls, the accuracy and timing of our financial
reporting may be adversely affected.
• We are subject to various governmental export control, trade sanctions and import laws and
regulations that could impair our ability to compete in international markets or subject us to liability.
• We are subject to environmental regulations that could adversely affect our business.
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Regulations relating to environmental, social and governance matters, as well as customer,
supplier, investor or other stakeholder demands, may add operational complexity for us.
• We are subject to global data privacy and data protection laws and regulations that could adversely
affect our business or subject us to liability.
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A portion of our revenue is generated by sales to government entities, which are subject to a
number of uncertainties, challenges and risks.
Our business could be adversely affected if we cannot obtain and maintain required security
clearances, or we do not comply with obligations regarding the safeguarding of classified
information.
Failure to comply with anti-bribery and similar laws could subject us to adverse consequences.
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General Risk Factors
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The trading price of our common stock has been volatile and is likely to be volatile in the future.
Future sales of our common stock could cause our stock price to fall.
Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or
prevent a change in control of our company and may affect the trading price of our common stock.
Exclusive forum provisions in our bylaws will restrict our stockholders’ ability to choose the judicial
forum for disputes with us or our directors, officers or employees.
Events that are outside of our control, such as natural disasters, terrorist attacks, wars and armed
conflicts, such as between Russia and Ukraine and Israel and Hamas, or other catastrophic events,
could harm our operations.
For a more complete discussion of the material risks facing our business, see below.
Business and Operational Risk Factors
Our quarterly results may vary significantly from period to period, which could make our future results
difficult to predict and could cause our operating results to fall below investor, analyst or our
expectations.
Our quarterly results and, in particular, our revenue, gross margins, operating expenses, operating
margins and net income (loss), have historically varied significantly from period to period and may continue to do
so in the future. As a result, comparing our operating results on a period-to-period basis may not be meaningful.
Our budgeted expense levels are based, in large part, on our expectations of future revenue and the
development efforts associated with that future revenue. Consequently, if our revenue does not meet projected
levels in the short term, our inventory levels, cost of goods sold and operating expenses would be high relative to
revenue, resulting in potential operating losses. If our revenue or operating results do not meet the expectations
of investors or securities analysts or fall below any guidance we provide to the market, the price of our common
stock may decline substantially.
Factors that may contribute to fluctuations in our quarterly results, many of which are outside our control
and may be difficult to predict, include:
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fluctuations in demand, sales cycles and prices for products and services, including discounts given
in response to competitive pricing pressures or to secure long-term customer relationships, as well
as the timing of purchases by our key customers;
changes in customers’ budgets for optical transport network purchases and changes or variability in
their purchasing cycles;
the timing, market acceptance and rate of adoption of our new product releases and our
competitors' new product releases;
the price, quality, lead times, timing of delivery and availability of key components from suppliers,
including any price or shipping cost increases or delays in the supply of components that may result
from supply disruptions as well as impacts due to consolidations amongst our suppliers;
fluctuations in our customer, product or geographic mix, including the impact of new customer
deployments, which typically carry lower gross margins, customer consolidation, which may affect
our ability to grow revenue, and products powered by our next-generation technologies, which
initially tend to be lower margin due to higher per unit production costs and may have greater
variability in production yields;
our ability to manage manufacturing costs, maintain or improve quality, and increase volumes and
yields on products manufactured in our internal manufacturing facilities;
our ability to manage inventory while timely meeting customer demand and avoiding charges for
excess or obsolete inventory;
our ability to control costs, including our operating expenses, the costs and availability of
components and materials we purchase for our products and our capital expenditures;
our ability to successfully restructure or transform our operations within our anticipated time frame
and realize our anticipated savings;
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order cancellations or reductions or delays in delivery schedules by our customers;
any significant changes in the competitive dynamics of the markets we serve, including any new
entrants, new technologies, or customer or competitor consolidation, as well as aggressive pricing
tactics by our competitors;
any delay in collecting or failure to collect accounts receivable;
readiness of customers for installation of our products, which has been impacted by the budget
constraints and personnel availability of our customers;
the timing of revenue recognition and revenue deferrals;
any future changes in U.S. GAAP or new interpretations of existing accounting rules;
the impact of a significant natural disaster or public health emergency, as well as interruptions or
shortages in the supply of utilities such as water and electricity, in a key location such as our
Northern California facilities, which are located near major earthquake fault lines, in areas of high
fire risk and in a designated flood zone; and
general economic, market and political conditions in domestic and international markets, including
those related to any policy changes by the federal government or by the presidential administration
in the U.S., and other factors beyond our control, including the ongoing effects of continuing
inflation and high interest rates.
Our ability to increase our revenue will depend upon continued growth of demand by consumers and
businesses for additional network capacity, on the level and timing of capital spending by our
customers, and on the continued demand for our services support.
Our future success depends on factors that increase the amount of data transmitted over
communications networks and the growth of optical transport networks to meet the increased demand for optical
capacity. These factors include the growth of mobile, video and cloud-based services, increased broadband
connectivity and the continuing adoption of high-capacity, revenue-generating services. If demand for such
bandwidth does not continue, or slows down, the market for optical transport networking equipment may not
continue to grow and our product sales would be negatively impacted.
In addition, demand for our products depends on the level and timing of capital spending in optical
networks by service providers as they construct, expand and upgrade the capacity of their optical networks.
Capital spending is cyclical in our industry and spending by customers can change on short notice. Customer
demand is dependent in part on the level of inventory held by customers and, to the extent that such inventory
levels have been or will be built up by customers to address global supply issues or otherwise, overall customer
demand may be dampened in subsequent periods until the level of inventory held by such customers returns to
more normalized levels. Any future decisions by our customers to reduce capital spending, whether caused by
lower customer demand, weakening economic conditions, high borrowing costs, inflation, customer-specific
supply chain issues, changes in government regulations relating to telecommunications and data networks, or
other reasons, could have a material adverse effect on our business, financial condition and results of
operations.
Revenue we receive for our services offerings is highly dependent on product sales and the
implementation processes of our customers. If our customers have internal services teams or if our products
such as our pluggables do not otherwise require our services support, our revenue related to services and our
related gross margins may be impacted and our results of operations may be harmed.
Any delays in the development, introduction or acceptance of our new products or in releasing
enhancements to our existing products may harm our business.
Our products are based on complex technologies, including, in many cases, the development of next-
generation PICs, DSPs and specialized ASICs, each of which are key components of our optical engines. In
addition, we may also depend on technologies from outside suppliers, all of which may cause us to experience
unanticipated delays in developing, improving, manufacturing or deploying our products. The development
process for our optical engines is lengthy, and any modifications entail significant development cost and risks.
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At any given time, various new product introductions and enhancements to our existing products are in
the development phase and are not yet ready for commercial manufacturing or deployment. We rely on third
parties, some of which are relatively early-stage companies, to develop, manufacture and deliver components for
our next-generation products, which can often require custom development. The development process from
laboratory prototype to customer trials, and subsequently to general availability, involves a significant number of
simultaneous efforts. These efforts often must be completed in a timely and coordinated manner so that they may
be incorporated into the product development cycle for our systems, and include:
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completion of product development, including the development and completion of our next-
generation optical engines, and the completion of associated module development;
the qualification and multiple sourcing of critical components;
validation of manufacturing methods and processes;
extensive quality assurance and reliability testing and staffing of testing infrastructure;
validation of software; and
establishment of systems integration and systems test validation requirements.
Each of these steps, in turn, presents risks of failure, rework or delay, any one of which could decrease
the speed and scope of product introduction and marketplace acceptance of our products. New generations of
our optical engines as well as intensive software testing are important to the timely introduction of new products
and enhancements to our existing products, which are subject to these development risks. In addition,
unexpected intellectual property disputes, inability to obtain licenses to utilize third party development tools or
other intellectual property on commercially acceptable terms, failure of critical design elements, limited or
constrained engineering resources, changes in product designs and a host of other development execution risks
may delay, or even prevent, the introduction of new products or enhancements to our existing products. If we
have longer development lead times than our competitors for comparable products, or if we do not develop and
successfully introduce or enhance products ahead of our competitors or in a timely manner, including the
successful development of our next generation optical engine, our competitive position will suffer.
As we transition customers to new products and technologies, we face significant risk that our new
products or technologies may not be accepted by our current or new customers. To the extent that we fail to
introduce new and innovative products and technologies that are adopted by customers, we could fail to obtain
an adequate return on these investments and could lose market share to our competitors, which could be difficult
or impossible to regain. Similarly, we may face decreased revenue, gross margins and profitability due to a rapid
decline in sales of current products as customers hold spending to focus purchases on new product platforms. In
addition, the sale of new products and technologies may result in the cannibalization of sales for existing
products, which may harm our results of operations. We could also incur significant costs in completing the
transition, including costs of inventory write-downs of the current product as customers transition to new product
platforms. In addition, products or technologies developed by others may render our products noncompetitive or
obsolete and result in significant reduction in orders from our customers and the loss of existing and prospective
customers. Any delays in the introduction of new components that we are developing for use in our other
products as part of our vertical integration strategy may also prevent us from realizing the anticipated cost
savings of such development. This may negatively impact our gross margins and harm our business and
operating results.
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Aggressive business tactics by our competitors and new entrants may harm our business.
The markets that we compete in are extremely competitive, which often results in aggressive business
tactics by our competitors and new entrants, including:
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aggressively pricing their optical transport products and other portfolio products, including offering
significant one-time discounts and guaranteed future price decreases;
offering optical products at a substantial discount or for free when bundled together with broader
technology purchases, such as router or wireless equipment purchases;
• marketing product availability on aggressive timelines to influence customer purchasing decisions;
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providing financing, marketing and advertising assistance to customers; and
influencing customer requirements to emphasize different product capabilities, which better suit
their products.
The level of competition and pricing pressure tend to increase when competing for large or high-profile
opportunities or during periods of economic weakness when there are fewer network build-out projects. If we fail
to compete successfully against our current and future competitors, or if our current or future competitors
continue or expand their aggressive business tactics, including those described above, demand for our products
could decline, we could experience delays or cancellations of customer orders or we could be required to reduce
our prices to compete in the market.
The markets in which we compete are highly competitive and we may not be able to compete effectively.
The optical networking equipment market is competitive. Our main competitors in the optical transport
systems market include dense wavelength division multiplexing system suppliers, such as ADTRAN, Ciena
Corporation, Cisco Systems, Fujitsu, Huawei, Nokia, Ribbon Communications and ZTE. Competition in the
optical subsystems and pluggable optics market includes, but is not limited to, Cisco (via their acquisition of
Acacia), Lumentum, Marvell and Coherent, as well as a wide range of China-based suppliers. Moreover, other
companies have developed, or may in the future develop, products that are or could be competitive with our
products. We also could encounter competitor consolidation in the markets in which we compete, which could
lead to a changing competitive landscape, capabilities and market share, and could impact our results of
operations.
Competition in the markets we serve is based on any one or a combination of the following factors:
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the ability of products and services to meet customers’ immediate and future network requirements;
price and other commercial terms;
optical reach and capacity performance;
features and functionality;
the availability of components required to manufacture key products;
existing business and customer relationships;
power consumption, heat dissipation, form factor and density;
installation and operational simplicity;
network and service manageability;
quality and reliability;
service and support;
security and encryption requirements;
scalability and investment protection; and
product availability and lead times.
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Some of our competitors have substantially greater name recognition and technical, financial, sales and
marketing resources. Many of our competitors have more resources and more experience in developing or
acquiring new products and technologies, customizing product features specific to certain geographic
requirements and in creating market awareness for those products and technologies. In addition, many of our
competitors have the financial resources to offer competitive products at aggressive pricing levels or have the
ability to provide financing to customers, which could prevent us from competing effectively. Further, many of our
competitors have built long-standing relationships with some of our prospective and existing customers and
could, therefore, have an inherent advantage in selling products to those customers.
We also compete with low-cost producers that may increase pricing pressure on us and with a number
of smaller companies that provide competition for a specific product, customer segment or geographic market. In
addition, we may also face increased competition from system and component companies that develop products
based on off-the-shelf hardware that offers the latest commercially available technologies. Due to the narrower
focus of their efforts, these competitors may achieve commercial availability of their products more quickly than
we can and may provide attractive alternatives to our customers.
Supply chain and logistics issues, including delays, shortages, longer than normal lead times,
unfavorable contractual terms, components that have been discontinued and increased costs, and our
dependency on sole source, limited source or high-cost suppliers, could harm our business and
operating results.
We are reliant on our global supply chain for the production of components for our products. For
example, the global supply chain has experienced disruptions beginning in 2020 as a result of the COVID-19
pandemic, leading to delays, shortages, longer than normal lead times, unfavorable contractual terms relating to
refundability and cancellation, discontinued components and increased costs. These supply disruptions have
negatively impacted our revenue and our results of operations. For example, shortages of and longer lead times
for certain key components have adversely affected our ability to deliver products to customers in a timely
manner. Additionally, price increases within our supply chain have continued to negatively affect our gross
margin. We cannot predict with certainty the scope, magnitude or duration of the impact that these supply chain
disruptions will have on our business and results of operations. Any efforts that we make to mitigate supply chain
issues, such as by making additional or long-term purchase commitments with our suppliers or by holding higher
levels of inventory, could negatively impact our cash flow and financial results if we do not accurately forecast
customer demand or if our customers change their purchasing patterns in response to the evolving supply chain
environment. Further, the lead times required for these mitigation efforts may not allow us to take advantage of
market price decreases or meet increased customer demand in a timely manner.
We currently purchase several key components for our products from sole or limited sources. In
particular, we rely on our own production of certain components of our products, such as PICs, and on third
parties, including sole source and limited source suppliers, for certain of the components of our products,
including ASICs, field-programmable gate arrays, processors, and other semiconductor and optical components.
We have increased our reliance on third parties to develop and manufacture components for certain products,
some of which require custom development. We purchase most of these components on a purchase order basis
and generally only have long-term contracts with these sole source or limited source suppliers. If any of our sole
source or limited source suppliers suffer from capacity constraints, materials shortages, lower than expected
yields, deployment delays, geopolitical-related disruptions, work stoppages or any other reduction or disruption in
output, they may be unable to meet our delivery schedule, which could result in lost revenue, additional product
costs and deployment delays that could harm our business and customer relationships. In addition, these same
suppliers may decide to no longer manufacture or support specific components necessary for some of our legacy
products, which could lead to our inability to fulfill demand without increased engineering and material costs
necessary to replace such components or cause us to transition such products to end-of-life status sooner than
planned. Further, our suppliers could enter into exclusive arrangements with our competitors, refuse to sell their
products or components to us at commercially reasonable prices or at all, go out of business or discontinue their
relationships with us. If any of these developments were to occur, we may be unable to develop alternative
sources for these components within a suitable time frame to be able to operate our business, or at all.
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The loss of a source of supply, or lack of sufficient availability of key components, could require us to
redesign products that use such components, which could result in lost revenue, additional product and
engineering costs and deployment delays that could harm our business and customer relationships. Due to cross
dependencies, any supply chain disruptions could negatively impact the demand for our products in the short
term. In addition, if our contract manufacturers do not receive critical components in a timely manner to build our
products, then we would not be able to ship certain products in a timely manner and would, therefore, be unable
to meet our prospective customers’ product delivery requirements. In the past, we have experienced delivery
delays because of lack of availability of components or reliability issues with components that we were
purchasing. In addition, some of our suppliers have gone out of business, merged with other suppliers, or limited
their supply of components to us, which may cause us to experience longer than normal lead times, supply
delays and increased prices. We may in the future experience a shortage of certain components as a result of
our own manufacturing issues, manufacturing issues at our suppliers or contract manufacturers, capacity
problems experienced by our suppliers or contract manufacturers, strong demand in the industry for such
components, or other disruptions in our supply chain. For example, during 2022, several of our materials
suppliers with manufacturing facilities near Shanghai, China were affected by COVID-19-related quarantines,
which have since been lifted. At certain times, these quarantines led to delayed shipments to certain of our
contract manufacturers, which subsequently constrained the ability of these contract manufacturers to supply
certain components to us on a timely basis. Disruptions to global macroeconomic conditions may also make it
more difficult for us and our suppliers to accurately project overall component demand and manufacturing
capacity. These supplier disruptions may continue to occur in the future, which could limit our ability to produce
our products and cause us to fail to meet a customer’s delivery requirements. Any failure to meet our customers’
product delivery requirements could harm our reputation and our customer relationships, either of which would
harm our business and operating results.
We are dependent on a small number of key customers for a significant portion of our revenue from
period to period and the loss of, or a significant reduction in, orders from one or more of our key
customers would reduce our revenue and harm our operating results.
A relatively small number of customers accounts for a large percentage of our revenue from period to
period. For example, for the year ended December 30, 2023, our top ten end-customers accounted for
approximately 52% of our total revenue and one end-customer accounted for 10% of our total revenue. For 2022,
our top ten end-customers accounted for approximately 48% of our total revenue and one end-customer
accounted for 11% of our total revenue. For 2021, our top ten end-customers accounted for approximately 42%
of our total revenue and no end-customer accounted for 10% or more of our revenue.
Our business will likely be harmed if any of our key customers, for whatever reason, substantially
reduce, delay or stop their orders from us. In addition, our business will be harmed if we fail to maintain our
competitive advantage with our key customers or do not add new large and medium customers over time. We
continue to expect a relatively small number of customers to continue to account for a large percentage of
revenue from period to period. However, customer consolidation could reduce the number of key customers that
generate a significant percentage of our revenue and may increase the risks relating to dependence on a small
number of customers.
Our ability to continue to generate revenue from our key customers will depend on our ability to maintain
strong relationships with these customers and introduce competitive new products at competitive prices. In most
cases, our sales are made to these customers pursuant to standard purchase agreements, which may be
canceled or reduced readily, rather than long-term purchase commitments that would require these customers to
purchase any minimum or guaranteed volumes orders. In the event of a cancellation or reduction of an order, we
may not have enough time to reduce operating expenses to minimize the effect of the lost revenue on our
business. Our operating results will continue to depend on our ability to sell our products to our key customers. In
addition, we must regularly compete for and win business with existing and new customers across all of our
customer segments.
In addition, global economic conditions may affect the network spending, procurement strategies, or
business practices of our key customers. If any of our key customers experience a loss in revenue due to
weakening economic conditions, their corporate borrowing costs being materially impacted by high interest rates,
or other adverse occurrences, they may reduce or delay capital spending generally or with respect to our
products, which could materially adversely affect our business and results of operations.
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Product performance problems, including undetected errors in our hardware or software, or deployment
delays, and product security vulnerabilities, could harm our business, results of operations and
reputation.
The development and production of products with high technology content is complicated and often
involves problems with hardware, software, components and manufacturing methods. Complex hardware and
software systems that are built with and include increasingly sophisticated technology, such as our products, can
often contain undetected errors or bugs when first introduced or as new versions are released. In addition, errors
associated with components we purchase from third parties, including customized components, may be difficult
to resolve. We have experienced issues in the past in connection with our products, including failures due to the
receipt of components from our suppliers that are either faulty or do not meet our product specifications, and
performance issues related to software updates. From time to time, we have had to replace certain components
or provide software remedies or other remediation in response to errors or bugs, and we may have to do so
again in the future. In addition, performance issues can be heightened during periods where we are developing
and introducing multiple new products to the market, as any performance issues we encounter in one technology
or product could impact the performance or timing of delivery of other products. Our products may also suffer
degradation of performance and reliability over time.
If reliability, quality, security or network monitoring problems develop, a number of negative effects on
our business could result, including:
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reduced orders from existing customers;
declining interest from potential customers;
delays in our ability to recognize revenue or in collecting accounts receivables;
increased costs associated with fixing hardware or software defects or replacing products;
high service and warranty expenses;
delays in shipments;
high inventory excess and obsolescence expense;
high levels of product returns;
diversion of our engineering personnel from our product development efforts; and
payment of liquidated damages, performance guarantees or similar penalties.
Because we outsource the manufacturing of certain components of our products, we may also be
subject to product performance problems as a result of the acts or omissions of third parties, and we may not
have adequate compensating remedies against such third parties or otherwise implement effective measures to
mitigate such problems.
From time to time, we encounter interruptions or delays in the activation of our products at a customer’s
site. These interruptions or delays may result from product performance problems or from issues with installation
and activation, some of which are outside our control, such as supply chain disruptions affecting our customers
or us. For example, in 2022, we experienced project delays due to incomplete customer readiness and the
unavailability of certain customer resources and customer furnished prerequisites required for project
implementation. If we experience significant interruptions or delays that we cannot promptly resolve, the
associated revenue for these installations may be delayed.
In addition, our products are subject to security vulnerabilities and attempts by third parties to identify
additional vulnerabilities. Such vulnerabilities are not always mitigated before they become known by us, our
customers or the users of our products. Mitigation techniques designed to address security vulnerabilities in our
products, including software and firmware updates or other preventative measures, are not always available on a
timely basis - or at all - and at times do not operate as intended or effectively resolve vulnerabilities. Security
vulnerabilities and any limitations or adverse effects of mitigation techniques may result in warranty or other
claims, litigation, or regulatory actions, and may adversely affect our results of operations, financial condition,
customer relationships, prospects, and reputation in a number of ways, any of which may be material.
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The manufacturing process for our optical engine and the assembly of our finished products are
complex. The partial or complete loss of any of our manufacturing facilities, a reduction in yields of our
PICs or an inability to scale capacity to meet customer demands could harm our business.
The manufacturing process for our optical engine, including the PICs, DSPs and specialized ASICs, and
the assembly of our finished products are complex. In the event that any of our manufacturing facilities utilized to
build these components and assemble our finished products was fully or partially destroyed, or shut down, as a
result of a natural disaster, work stoppage or otherwise, it could severely limit our ability to deliver and sell our
products or support new product development. Because of the complex nature of our manufacturing facilities,
such loss would take a considerable amount of time to repair or replace. The partial or complete loss of any of
our manufacturing facilities, or an event causing the interruption in our use of any such facilities, whether as a
result of a natural disaster, a public health crisis, work stoppage or otherwise, for any extended period of time,
could cause our business, financial condition and results of operations to be harmed.
Minor deviations in the PIC manufacturing process can cause substantial decreases in yields and, in
some cases, cause production to be suspended. In the past, we have had significant variances in our PIC yields,
including production interruptions and suspensions, and may in the future have continued yield variances,
including additional interruptions or suspensions. Lower than expected yields from our PIC manufacturing
process or defects, integration issues or other performance problems in our products could limit our ability to
satisfy customer demand requirements and could damage customer relations and harm our business, reputation
and operating results.
Our inability to obtain sufficient manufacturing capacity to meet demand, either in our own facilities or
through foundry or similar arrangements with third parties, could also harm our relationships with our customers,
our business and our results of operations. Additionally, if we are unable to fully utilize our own manufacturing
facilities, this may also reduce our efficiency and lower our gross margins.
If we lose key personnel or fail to attract, upskill and retain qualified personnel when needed, our
business may be harmed.
Our success depends to a significant degree upon the continued contributions of our key management,
engineering, sales and marketing, and finance personnel, many of whom will be approaching retirement age in
the next decade and many of whom would be difficult to replace. For example, senior members of our
engineering team have unique technical experience that would be difficult to replace. Because our products are
complex, we must also hire and retain highly trained customer service and support personnel to ensure that the
deployment of our products does not result in network disruption for our customers. We believe our future
success will depend in large part upon our ability to identify, attract, upskill and retain highly skilled and diverse
personnel, and competition for these individuals is intense in our industry, especially in the San Francisco Bay
Area where we are headquartered and, increasingly, in certain cities and regions where we have operations
outside the U.S. as well. The loss of the services of any of our key personnel, the inability to identify, attract or
retain qualified personnel in the future or delays in hiring qualified personnel, particularly engineers and sales
personnel, could make it difficult for us to manage our business and meet key objectives, such as timely product
introductions. These risks may be exacerbated due to a strong labor market with a competitive wage
environment and attrition or a decline in the pool of available talent. In addition, we do not have long-term
employment contracts or key person life insurance covering any of our key personnel. If we are unable to identify,
attract and retain qualified personnel, we may be unable to manage our business effectively, and our results of
operations could suffer.
If our contract manufacturers do not perform as we expect, our business may be harmed.
We rely on third-party contract manufacturers to perform a portion of the manufacturing of our products,
and our future success will depend on our ability to have sufficient volumes of our products manufactured in a
cost-effective and quality-controlled manner. We have engaged third parties to manufacture certain elements of
our products at multiple contract manufacturing sites located around the world but do not have long-term
agreements in place with some of our manufacturers and suppliers that would guarantee product availability, or
the continuation of particular pricing or payment terms. We face a number of risks due to our dependence on
contract manufacturers, including:
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reduced control over delivery schedules, particularly for international contract manufacturing sites;
risks related to dependency on certain contract manufacturers;
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reliance on the quality assurance procedures of third parties;
potential uncertainty regarding manufacturing yields and costs;
potential lack of adequate capacity during periods of high demand or inability to fulfill manufacturing
orders due to supply issues;
potential variability of pricing or payment terms due to agreement length;
risks and uncertainties associated with the locations or countries where our products are
manufactured or otherwise operate, including potential disruptions caused by geopolitical events,
military actions, work stoppages or other social factors, natural disasters, environmental factors, or
public health emergencies;
counterparty risk, particularly if our contract manufacturers are sensitive to inflation and interest-
rate risk;
limited warranties on components; and
potential misappropriation of our intellectual property.
Any of these risks could impair our ability to fulfill orders. Our products are built with and incorporate
increasingly sophisticated technology and any delays by our contract manufacturers or their inability to meet our
product specifications or quality standards may cause us to be unable to meet the delivery requirements of our
customers, which could decrease customer satisfaction and harm our product sales. In addition, if our contract
manufacturers are unable or unwilling to continue manufacturing our products or components of our products in
required volumes or our relationship with any of our contract manufacturers is discontinued for any reason, we
would be required to identify and qualify alternative manufacturers, which could cause us to be unable to meet
our supply requirements to our customers and result in the breach of our customer agreements. Qualifying a new
contract manufacturer and commencing volume production is expensive and time-consuming. If we are required
to change or qualify a new contract manufacturer, we could lose revenue and damage our customer
relationships.
Increased consolidation among our customers and suppliers in the communications networking industry
has had, and could continue to have, an adverse effect on our business and results of operations.
We have seen increased consolidation in the communications networking industry over the past few
years, which has adversely affected our business and results of operations. Customer consolidation in the past
has led to changes in buying patterns, slowdowns in spending, redeployment of existing equipment and re-
architecture of parts of existing networks or future networks, as the combined companies evaluate the needs of
the combined business. Moreover, the significant purchasing power of these large companies can increase
pricing and competitive pressures for us, including the potential for decreases in our average selling prices. If one
of our customers is acquired by another company that does not rely on us to provide it with products or relies on
another provider of similar products, we may lose that customer’s business. Such consolidation may further
reduce the number of customers that generate a significant percentage of our revenue and may exacerbate the
risks relating to dependence on a small number of customers. Any of the foregoing results will adversely affect
our business, financial condition and results of operations.
In addition, our suppliers in the communications networking industry have recently continued to
consolidate. For example, II-VI acquired Coherent in 2022. Supplier consolidation may lead to increased prices
of components for our products, deployment delays or a disruption in output. In addition, such consolidation may
exacerbate the risks relating to our dependence on a small number of suppliers for certain components and
materials that are required to manufacture our products.
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We rely on various third-party service partners to help complement our global operations, and failure to
adequately manage these relationships could adversely impact our financial results and relationships
with customers.
We rely on a number of third-party service partners, both domestic and international, to complement our
global operations. We rely upon these partners for certain installation, maintenance, logistics and support
functions. Services provided by these partners typically relate to the design, construction and operation of
customer networks. Over time, the scope of work performed by our service partners is likely to increasingly
include areas where we have less experience providing or managing such services. We must successfully
identify, assess, train and certify qualified service partners in order to ensure the proper installation, deployment
and maintenance of our products. The vetting and certification of these partners, particularly outside the U.S.,
can be costly and time-consuming, and certain partners may not have the same operational history, financial
resources and scale as we have. Additionally, certain service partners may provide similar services for other
companies, including our competitors. We may not be able to manage our relationships with our service partners
effectively, and we cannot be certain that they will be able to deliver services in the manner or time required, that
we will be able to maintain the continuity of their services, or that they will adhere to our approach to ethical
business practices. We may also be exposed to a number of risks or challenges relating to the performance of
our service partners, including:
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delays in recognizing revenue;
liability for injuries to persons, damage to property or other claims relating to the actions or
omissions of our service partners;
our services revenue and gross margin may be adversely affected; and
our relationships with customers could suffer.
If we do not effectively manage our relationships with third-party service partners, or if they fail to
perform the services we request in the manner or time required, our financial results and relationships with our
customers could be adversely affected.
We must respond to rapid technological change and comply with evolving industry standards and
requirements for our products to be successful.
The optical transport networking equipment market is characterized by rapid technological change,
changes in customer requirements and evolving industry standards. We continually invest in research and
development to sustain or enhance our existing products, but the introduction of new communications
technologies and the emergence of new industry standards or requirements could render our products obsolete.
Further, in developing our products, we have made, and will continue to make, assumptions with respect to which
standards or requirements will be adopted by our customers and competitors. If the standards or requirements
adopted by our prospective customers are different from those on which we have focused our efforts, market
acceptance of our products would be reduced or delayed, and our business would be harmed. We are continuing
to invest a significant portion of our research and development efforts in the development of our next-generation
products. We expect our competitors will continue to improve the performance of their existing products and
introduce new products and technologies and to influence customers’ buying criteria so as to emphasize product
capabilities that we do not, or may not, possess. To be competitive, we must increase our understanding of
competitive dynamics in our markets, better anticipate future customer requirements and continue to invest
significant resources in research and development, sales and marketing, and customer support. The demand for
investment resources may also increase as the technologies we develop and utilize become more complex and
the skills required to undertake such development become more scarce and expensive to obtain. If we do not
anticipate or meet these future customer requirements, including with respect to the energy efficiency of our
products, and invest in the technologies, including artificial intelligence and machine learning, necessary to
enable us to create, manufacture and sell the appropriate solutions on a timely basis, our competitive position
and future sales may be limited, which would have an adverse effect on our business and financial condition. We
may not have sufficient resources to undertake these investments and we may not be able to make the
technological advances necessary to be competitive and successful in the markets we serve.
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If we fail to accurately forecast our manufacturing requirements or customer demand, we could incur
additional costs, including inventory write-downs or equipment write-offs, which would adversely affect
our business and results of operations.
We generate forecasts of future demand for our products several months prior to the scheduled delivery
to our prospective customers. This requires us to make significant investments before we know if corresponding
revenue will be recognized. Lead times vary significantly for materials and components, including ASICs, that we
need to order for the manufacture of our products and depend on factors such as the specific supplier, contract
terms and demand for each component at a given time. In the past, we have experienced lengthened lead times
for certain components, which makes forecasting more challenging. We may be required to purchase increased
levels of such components to satisfy our delivery commitments to our customers as a result of longer lead times
for components. In addition, we must manage our inventory to ensure we continue to meet our commitments as
we introduce new products or make enhancements to our existing products.
If we overestimate market demand for our products, including as a result of customers changing the
timing or volume of their purchases in response to the evolving supply chain environment or broader
macroeconomic conditions, and, as a result, increase our inventory in anticipation of customer orders that do not
materialize, we will have excess inventory. This could result in increased risk of obsolescence and significant
inventory write-downs. If we underestimate demand for our products, we will have inadequate inventory, which
could slow down or interrupt the manufacturing of our products, cause delays in shipments and our ability to
recognize revenue, and result in potential loss of customers or orders to competitors. In addition, we may be
unable to meet our supply commitments to customers, which could result in a loss of certain customer
opportunities or a breach of our customer agreements.
Actions that we may in the future take to restructure or streamline our business to cut costs and align
our operating structure with current or future opportunities may not be as effective as anticipated and
may have negative consequences.
We have incurred, and may in the future incur, substantial costs in connection with restructuring plans.
Although such restructuring initiatives may be taken to improve our operating efficiency and to reallocate
resources to align more closely with our evolving business model and current and future opportunities, they may
not result in the benefits we anticipate. We incur substantial costs to implement restructuring plans, and our
restructuring activities, if any, may subject us to reputational and litigation risks. Our past restructuring plans do
not provide any assurance that we will realize anticipated cost savings or other benefits from any restructuring
plans we may implement. In addition, restructuring plans may have other consequences, such as attrition beyond
any planned reductions in workforce or a negative effect on employee morale and productivity or our ability to
attract highly skilled employees. Restructuring presents other potential significant risks such as the actual or
perceived disruption of service or reduction in service standards to customers, loss of sales, the failure to
preserve supplier relationships and diversion of management attention. In addition, as a result of any
restructuring actions we may take, our ability to execute on product development, address key market
opportunities or meet customer demand could be materially and adversely affected. Further, any anticipated
benefits from any restructuring initiatives we may take may be realized later than expected or not at all, and the
ongoing costs of implementing these measures, if any, may be greater than anticipated. As a result, current or
future restructuring plans may affect our revenue and other operating results.
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Our large customers have substantial negotiating leverage, which may cause us to agree to terms and
conditions that result in lower average selling prices and potentially increased cost of sales leading to
lower gross margin, each of which would harm our results of operations.
Many of our customers are large service providers and ICPs that have substantial purchasing power
and leverage in negotiating contractual arrangements with us. In addition, customer consolidation in the past few
years has created combined companies that are even larger and have greater negotiating leverage. Our
customers have sought and may continue to seek advantageous pricing, payment and other commercial terms.
This may further impact our profitability if we are unable to recover through price increases passed along to these
customers additional costs we have incurred from inflationary pressures to the supply chain or shipping and
freight. We have also occasionally agreed and may continue to agree to unfavorable commercial terms with
these customers, including the potential of reducing the average selling price of our products, increasing cost of
sales or agreeing to extended payment terms in response to these commercial requirements or competitive
pricing pressures. Continued inflation could decrease the profitability of customer contracts, particularly those
with extended payment terms, that are not indexed to inflation. If we are compelled to agree to disadvantageous
terms and conditions, unable to comply with such terms and conditions, or unable to adapt our business model
and operations to such terms and conditions, then our operating results will be negatively impacted.
Our sales cycle can be long and unpredictable, which could result in an unexpected revenue shortfall in
any given quarter.
Our products can have a lengthy sales cycle, which can extend from six to twelve months and may take
even longer for larger prospective customers. Our prospective customers conduct significant evaluation, testing,
implementation and acceptance procedures before they purchase our products. We incur substantial sales and
marketing expenses and expend significant management effort during this time, regardless of whether we make
a sale. Supply chain disruptions have also at times lengthened, and may in the future lengthen, our sales cycle
due to delays in the customer certification process for our products.
Because our sales cycle is long, we are likely to recognize higher inflation-related costs before
recognizing the benefits of any price increases that we implement for our products. Moreover, the costs
associated with our sales cycle may increase faster than our ability to increase prices. In addition, changes in
regulatory requirements or uncertainty associated with the regulatory environment could delay or impede
investment in network infrastructures and adversely affect our business, financial condition and results of
operations.
Because the purchase of our equipment involves substantial cost, most of our customers wait to
purchase our equipment until they are ready to deploy it in their network. As a result, it is difficult for us to
accurately predict the timing of future purchases by our customers. In addition, product purchases are often
subject to budget constraints, multiple approvals and unplanned administrative processing and other delays,
including the need for the customer to obtain external financing. If sales expected from customers for a particular
quarter are not realized in that quarter or at all, our revenue will be negatively impacted.
The effects of public health emergencies could have a material adverse effect on our business,
manufacturing operations and results of operations.
The impact of public health emergencies on our business and results of operations in the future remains
uncertain and is dependent in part on infection, morbidity and disability rates, the emergence of new viruses, the
continued effectiveness and availability of vaccinations, and broader global macroeconomic developments.
During the COVID-19 pandemic, we at times temporarily closed or substantially limited the presence of
personnel in some of our offices, implemented travel restrictions and modified our participation in various industry
events. The COVID-19 pandemic also at times contributed to delays in certain operational processes, and it led
to disruption and delays in our global supply chain and manufacturing operations, logistics operations and
customer support operations, including shipping delays, higher transport costs, and certain limitations on our
ability to access customer fulfillment and service sites. It also led to capacity issues, longer lead times, increased
costs and shortages with certain component suppliers, including for semiconductors, impacting our operational
processes and results of operations. If we experience pronounced disruptions in our operations or in our ability to
service our customers, including due to impacts from public health emergencies, or if we face continued supply
chain disruption or curtailed customer demand, these factors may materially adversely impact our business and
results of operations. We could also face negative impacts on our liquidity and capital resources in the future due
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to the effects of public health emergencies, and their impacts on our customers, suppliers, third-party service
providers and capital markets.
Any acquisitions or strategic transactions that we undertake could disrupt our business and harm our
financial condition and results of operations.
We have made strategic acquisitions of businesses, technologies and other assets in the past, including
most recently the Acquisition. We may engage in acquisitions, divestitures or other strategic transactions in the
future. In order to undertake certain of these transactions, we may use cash, issue equity that could dilute our
current stockholders, or incur debt or assume indebtedness. If we are unable to achieve the anticipated
efficiencies and strategic benefits of such transactions, it could adversely affect our business, financial condition
and results of operations. In addition, the market price of our common stock could be adversely affected if
investors and securities analysts react unfavorably to a strategic transaction or if the integration or the anticipated
financial and strategic benefits of such transactions are not realized as rapidly as or to the extent anticipated by
investors and securities analysts.
Acquisitions, divestitures or other strategic transactions can also result in adverse tax consequences,
warranty or product liability exposure related to acquired assets, additional stock-based compensation expense,
and write-up of acquired inventory to fair value. Divestitures can also result in contractual, employment or
intellectual property liability related to divested assets. In addition, we may record goodwill and other purchased
intangible assets in connection with an acquisition and incur impairment charges in the future. If our actual
results, or the plans and estimates used in future impairment analyses, are less favorable than the original
estimates used to assess the recoverability of these assets, we could incur additional impairment charges.
Acquisitions, divestitures or other strategic transactions also involve numerous risks that could disrupt
our ongoing business and distract our management team, including:
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problems integrating the acquired operations, technologies or products with our own;
challenges in divesting assets and intellectual property without negatively affecting our retained
business;
diversion of management’s attention from our core business;
adverse effects on existing business relationships with suppliers and customers;
risks associated with entering new markets or exiting existing markets; and
loss of key employees.
Our failure to adequately manage the risks associated with an acquisition, divestment or strategic
transaction could have an adverse effect on our business, financial condition and results of operations.
Financial and Macroeconomic Risk Factors
We may be unable to generate the cash flow necessary to make anticipated capital expenditures, service
our debt or grow our business.
We may not be able to generate sufficient cash flow from operations to make anticipated capital
expenditures, service our debt or grow our business. Our ability to pay our expenses, service our debt and fund
planned capital expenditures will depend on our future performance, which will be affected by general economic,
competitive, legislative, political, regulatory and other factors beyond our control, and our ability to continue to
realize synergies and anticipated cost savings. If we are unable to generate sufficient cash flow from operations
to service our debt or to make anticipated capital expenditures, we may be required to sell assets, reduce capital
expenditures, borrow additional funds or evaluate alternatives for efficiently funding our capital expenditures and
ongoing operations, including the issuance of equity, equity-linked and debt securities.
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Unfavorable macroeconomic and market conditions may adversely affect our industry, business and
financial results.
In the past, unfavorable macroeconomic and market conditions, including recessionary environments,
have resulted in sustained periods of decreased demand for optical communications products and slowdowns in
the telecommunications industry in which we operate. Such slowdowns may result in:
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reduced or delayed demand for our products as a result of constraints on capital spending by our
customers or excess inventory held by our customers;
increased price competition for our products, not only from our competitors, but also as a result of
the utilization of inventoried or underutilized products by our customers or potential customers,
which could put additional downward pressure on our near-term gross profits;
risk of excess or obsolete inventories;
our customers facing financial difficulties, including bankruptcy;
delayed collections of accounts receivable amounts or payment defaults;
excess internal manufacturing capacity and higher associated overhead costs as a percentage of
revenue; and
• more limited ability to accurately forecast our business, operating capital needs and future financial
performance.
High inflation, high interest rates, the recent collapse of several financial institutions, and other signs of
economic disruption or recession, have also contributed to adverse global macroeconomic conditions. These
conditions may also result in the tightening of credit markets, which could limit or delay our customers’ ability to
obtain necessary financing for their purchases of our products.
Our customers may delay or cancel their purchases or increase the time they take to pay or default on
their payment obligations due to a lack of liquidity in the capital markets, the continued uncertainty in the global
economic environment or inflationary concerns, which could result in a higher level of bad debt expense and
would negatively affect our business and operating results. In addition, currency fluctuations could negatively
affect our international customers’ ability or desire to purchase our products.
A lack of liquidity and economic uncertainty may also adversely affect our suppliers or the terms on
which we purchase products from these suppliers. These impacts could limit our ability to obtain components for
our products from these suppliers and could adversely impact our supply chain or the delivery schedule to our
customers. Suppliers could also require us to purchase more expensive components, or re-design our products,
which could cause increases in the cost of our products and delays in the manufacturing and delivery of our
products. Such events could harm our gross margin and harm our reputation and our customer relationships,
either of which could harm our business and operating results.
Inflation may adversely affect us by increasing costs beyond what we can recover through price
increases.
Inflation, which has continued in the U.S. and globally, can adversely affect us by increasing the costs of
labor, supplies and other costs of doing business, and price increases within our supply chain have negatively
affected our gross margin. In an inflationary environment, our ability to raise prices or add additional cost-
recovery surcharges of a magnitude sufficient to match the rate of inflation, on a timely basis, may be
constrained by customer resistance and competitive concerns, as well as industry-specific and other economic
conditions, which would reduce our profit margins. Moreover, even if we seek to implement price increases in
response to inflationary pressures, because of our long sales cycle, we may recognize increased costs as a
result of inflation before we are able to recognize the benefits of any such price increases. We have experienced
increases in the prices of labor, supplies and other costs of doing business and continued inflationary pressures
could continue to adversely impact our profitability.
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If we need additional capital in the future, it may not be available to us on favorable terms, or at all.
Our business requires significant capital. We have historically relied on outside debt or equity financing
as well as cash flow from operations to fund our operations, capital expenditures and expansion. For example, in
September 2018, we issued our 2.125% Convertible Senior Notes due 2024 (the "2024 Notes") to pay the cost of
the Capped Calls, to fund the cash portion of the purchase price of the Acquisition, and for general corporate
purposes. In August 2019 and as amended thereafter, we entered into the Prior Credit Agreement to provide
additional working capital flexibility to manage our business. In addition, in March 2020, we issued our 2.5%
Convertible Senior Notes due 2027 (the “2027 Notes") to raise additional funds for general corporate purposes,
including working capital to fund growth and potential strategic projects. On August 12, 2020, we entered into an
Open Market Sales Agreement with Jefferies LLC ("Jefferies") under which we issued and sold through Jefferies,
acting as agent or principal, shares of our common stock having an aggregate offering price of $96.3 million, to
raise funds for general corporate purposes, including working capital and capital expenditures. In June 2022, we
terminated the Prior Credit Agreement and entered into the Loan Agreement to repay existing debt (including
amounts outstanding under the Prior Credit Agreement) and for working capital and general corporate purposes,
including to fund growth. In August 2022, we issued our 3.75% Convertible Senior Notes due 2028 (the "Existing
2028 Notes") to repurchase a portion of the 2024 Notes, for general corporate purposes, including working
capital and to fund growth and potential strategic projects. In June 2023, we issued additional 3.75% Convertible
Senior Notes due 2028 (the "Additional 2028 Notes," together with the Existing 2028 Notes, the "2028 Notes,"
and the 2028 Notes, together with the 2024 Notes and the 2027 Notes, the “convertible senior notes”) to
repurchase a portion of the 2024 Notes, for general corporate purposes, including working capital and to fund
growth and potential strategic projects.
We may require additional capital from equity or equity-linked financing, debt financing or other
financings in the future to fund our operations, respond to competitive pressures or strategic opportunities or to
refinance our existing debt obligations. In the event that we require additional capital, we may not be able to
secure timely additional financing, or restructure existing debt, on favorable terms, or at all, and may be affected
by the impacts on capital markets of global economic uncertainty, uncertainty in the financial and banking
industry and inflationary pressures. The terms of any additional financings or restructurings may place limits on
our financial and operating flexibility and we may not be able to obtain terms as favorable as the terms of our
existing debt, including any debt being refinanced. If we raise additional funds through further issuances of
equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer
dilution in their percentage ownership of our company, and any new securities we issue could have rights,
preferences and privileges senior to those of holders of our common stock. If we are unable to obtain adequate
financing or financing on terms satisfactory to us, if and when we require it, our ability to grow or support our
business and to respond to business challenges could be limited and our business will be harmed.
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Our Loan Agreement and any other credit or similar agreements into which we may enter in the future
may restrict our operations, particularly our ability to respond to changes or to take certain actions
regarding our business.
Our Loan Agreement contains a number of restrictive covenants that impose operating and financial
restrictions on us and limit our ability to engage in acts that may be in our long-term interest, including restrictions
on our ability to incur debt, create liens and encumbrances, engage in certain fundamental changes, dispose of
assets, prepay certain indebtedness, make restricted payments, make investments, and engage in transactions
with affiliates, in each case subject to limitations and exceptions set forth in the Loan Agreement. The Loan
Agreement also contains a financial covenant that requires the Company to maintain a minimum fixed charge
coverage ratio.
The Loan Agreement also contains customary events of default, such as the failure to pay obligations
when due, a material breach of representations and warranties or covenants, the entry of material judgments
against certain of our subsidiaries, the initiation of bankruptcy or insolvency proceedings of certain of our
subsidiaries, defaults on certain other indebtedness, a change of control, the failure of the guaranty of certain of
our subsidiaries to be in effect or the failure of the security documents to create valid and perfected liens or the
loan documents to be valid and enforceable, which could have a material adverse effect on our business,
operations, and financial results. Upon an event of default, the lenders may, subject to customary cure rights,
require the immediate payment of all amounts outstanding and foreclose on collateral, which could force us into
bankruptcy or liquidation. In the event that our lenders accelerated the repayment of the borrowings, we may not
have sufficient assets to repay that indebtedness. Any acceleration of amounts due under the Loan Agreement
would likely have a material adverse effect on us and may constitute a default under our convertible debt
securities. As a result of these restrictions, we may be limited in how we conduct business, unable to raise
additional debt or equity financing to operate during general economic or business downturns, or unable to
compete effectively or to take advantage of new business opportunities.
In addition, we may enter into other credit agreements or other debt arrangements from time to time
which contain similar or more extensive restrictive covenants and events of default, in which case we may face
similar or additional limitations as a result of the terms of those credit agreements or other debt arrangements.
Our debt obligations may adversely affect our ability to raise additional capital and will be a burden on
our future cash resources, particularly if we elect to settle these obligations in cash upon conversion or
upon maturity or required repurchase.
As of December 30, 2023, the outstanding aggregate principal amount of the 2024 Notes, the 2027
Notes and the 2028 Notes was $18.7 million, $200.0 million and $473.8 million, respectively. The degree to which
we are leveraged could have important consequences, including, but not limited to, the following:
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our ability to obtain additional financing in the future for working capital, capital expenditures,
acquisitions, litigation, general corporate or other purposes may be limited; and
a substantial portion of our future cash balance may be dedicated to the payment of the principal of
our indebtedness as we have stated the intention to pay the principal amount of each series of
convertible senior notes in cash upon conversion or when otherwise due, such that we would not
have those funds available for use in our business.
Our ability to meet our payment obligations under our debt instruments, including the convertible senior
notes, depends on our future cash flow performance. This, to some extent, is subject to general economic,
financial, competitive, legislative and regulatory factors, as well as other factors that may be beyond our control.
There can be no assurance that our business will generate positive cash flow from operations, or that additional
capital will be available to us, in an amount sufficient to enable us to meet our debt payment obligations and to
fund other liquidity needs. If we are unable to generate sufficient cash flow to service our debt obligations, we
may need to refinance or restructure our debt, sell assets, reduce or delay capital investments, or seek to raise
additional capital. If we are unable to implement one or more of these alternatives, we may be unable to meet our
debt payment obligations. As a result, we may be more vulnerable to economic downturns, less able to withstand
competitive pressures and less flexible in responding to changing business and economic conditions.
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Our international sales and operations subject us to additional risks that may harm our operating results.
Sales of our products into international markets continue to be an important part of our business. During
2023, 2022 and 2021, we derived approximately 38%, 45% and 53%, respectively, of our revenue from
customers outside of the U.S. We expect that significant management attention and financial resources will be
required for our international activities over the foreseeable future as we continue to operate in international
markets. In some countries, our success in selling our products and growing revenue will depend in part on our
ability to form relationships with local partners. Our inability to identify appropriate partners or reach mutually
satisfactory arrangements for international sales of our products could impact our ability to maintain or increase
international market demand for our products. In addition, many of the companies we compete against
internationally have greater name recognition and a more substantial sales and marketing presence.
We have sales and support personnel in the Americas, EMEA (with offices in the Middle East) and
APAC (including China). In addition, we have established development centers in Canada, China, Finland,
Germany, India, Portugal and Sweden. There is no assurance that our reliance upon development resources in
international locations will enable us to achieve meaningful cost reductions or greater resource efficiency. We are
also aggressively pursuing opportunities with customers in additional geographies, including EMEA, APAC and
Latin America. Our efforts to increase our sales and capture market share in international markets may ultimately
be unsuccessful and may limit our growth and adversely impact our business, financial condition and results of
operations.
New or continuing disruptions of the global supply chain or the manufacture of our customer’s
components caused by events outside of our control could impact our results of operations by impairing our
ability to timely and efficiently deliver our products or provide installation and maintenance services to our
customers.
In addition, our operations in Russia have been impacted by sanctions and other trade controls imposed
by the U.S. and other governments in response to Russia's military operations in Ukraine which started in
February 2022. The imposition of these sanctions and controls have prevented us from performing existing
contracts. For the year ended December 30, 2023, less than 1% of our revenue was derived from customers in
Russia. A de minimis percentage of our revenue is derived from Russian customers including channel partners
and customers in other countries whose contracts with us may involve Russian entities.
The ongoing armed conflict between Israel and Hamas in the Gaza Strip may also broaden into a
regional conflict that could impact our ability to maintain and expand our customer base in the Middle East.
Our international operations are subject to inherent risks, and our future results could be adversely
affected by a variety of factors, many of which are outside of our control, including:
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greater difficulty in collecting accounts receivable and longer collection periods;
difficulties of managing and staffing international offices, and the increased travel, infrastructure and
legal compliance costs associated with such international locations;
political, social and economic instability, including wars, terrorism, political unrest, boycotts,
curtailment of trade and other business restrictions;
tariff and trade barriers and other regulatory requirements, contractual limitations, or customer
specifications impacting our ability to sell or develop our products in certain foreign markets;
less effective protection of intellectual property than is afforded to us in the U.S. or other developed
countries;
potentially adverse tax consequences;
natural disasters, acts of war or terrorism, and public health crises;
changes to free trade agreements, trade protection measures, tariffs, export compliance, domestic
preference procurement requirements, qualification to transact business and additional regulatory
requirements, including changes related to policy and other changes made by the federal
government in the U.S., other national governments or multinational bodies; and
effects of changes in currency exchange rates, particularly relative increases in the exchange rate
of the U.S. dollar compared to other currencies that could negatively affect our financial results and
cash flows.
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The concentration of the storage and distribution of our inventory primarily in one location in
southeastern Asia also increases the risks of our global operations. As a result, our operations are susceptible to
local and regional risks there, including accidents, system failures and weather conditions, natural disasters
(including floods and earthquakes and related fires), acts of war and other unforeseen events and circumstances.
Any significant interruption in the operations or availability of the storage and distribution facilities in which our
inventory is held could lead to logistical and fulfillment issues or increased costs, which could have a material
adverse effect on our results of operations, financial condition and cash flows.
International customers may also require that we comply with certain testing or customization of our
products to conform to local standards. The product development costs to test or customize our products could
be extensive and a material expense for us.
Our international operations are also subject to increasingly complex foreign and U.S. laws and
regulations, including, but not limited to, anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act of
1977, as amended (the "FCPA"), and the United Kingdom Bribery Act 2010, as amended (the “UK Bribery Act”),
antitrust or competition laws, anti-money laundering laws, various trade controls, national security related
regulations, and data privacy laws, among others. Violations of these laws and regulations could result in fines
and penalties, criminal sanctions against us, our officers, or our employees, prohibitions on the conduct of our
business and on our ability to offer our products and services in one or more countries, and could also materially
affect our reputation, our international expansion efforts, our ability to attract and retain employees, our business,
and our operating results. Although we have implemented policies, procedures and training designed to ensure
compliance with these laws and regulations, there can be no complete assurance that any individual employee,
contractor or agent will not violate our policies. Additionally, the costs of complying with these laws (including the
costs of investigations, auditing and monitoring) could also adversely affect our current or future business.
As we continue to expand our business globally, our success will depend, in large part, on our ability to
effectively anticipate and manage these and other risks and expenses associated with our international
operations. Our failure to manage any of these risks successfully could harm our international operations and
reduce our international sales, adversely affecting our business, financial condition and results of operations.
We may be adversely affected by fluctuations in currency exchange rates.
A portion of our sales and expenses stem from countries outside of the U.S., and are in currencies other
than U.S. dollars, and therefore subject to foreign currency fluctuation. Accordingly, fluctuations in foreign
currency rates could have a material impact on our financial results in future periods. We have from time to time
entered into foreign currency exchange forward contracts to reduce the impact of foreign currency fluctuations on
certain non-functional currency account balances. Even if we have forward contracts in place, while they may
reduce some of the impact of currency exchange rate movements on certain transactions, they would not cover
all foreign-denominated transactions and therefore may not entirely eliminate the impact of fluctuations in
exchange rates on our results of operations and financial condition.
Our effective tax rate may increase or fluctuate, which could increase our income tax expense and
reduce our net income.
Our effective tax rate can be adversely affected by several factors, many of which are outside of our
control, including:
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changes in the valuation of our deferred tax assets and liabilities, and in deferred tax valuation
allowances;
changes in the relative proportions of revenue and income before taxes in the various jurisdictions
in which we operate that have differing statutory tax rates;
changing tax laws, regulations, rates and interpretations in multiple jurisdictions in which we
operate;
changes to the financial accounting rules for income taxes;
the tax effects of acquisitions; and
the resolution of issues arising from tax audits.
In August 2022, the U.S. enacted the Inflation Reduction Act, which, among other changes, implements
a 1% excise tax on certain stock buybacks, that applies to repurchases of stock by U.S. corporations, and which
could include certain transactions that we may undertake with respect to our Capped Calls.
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Many countries and organizations, such as the Organization for Economic Cooperation and
Development, are actively considering changes to existing tax laws or have proposed or enacted new laws,
including an agreement to implement a 15% global minimum corporate tax, that could increase our tax
obligations in countries where we do business or cause us to change the way we operate our business. While it
is uncertain if the U.S. will adopt the minimum tax directive, several countries in which we operate have adopted
the minimum tax directive, and other countries are in the process of introducing legislation to implement the
minimum tax directive. Although we currently do not anticipate any materially adverse impacts on our business or
results of operations, we cannot provide any assurances that these provisions will not have a materially adverse
impact on our effective tax rate in the future years. We continue monitoring developments and evaluating the
impacts these new rules may have on our tax rate. Any additional changes in U.S. federal or state or international
tax laws or tax rulings could adversely affect our effective tax rate and our results of operations.
Beginning January 1, 2022, the Jobs Act eliminated the right to deduct research and development
expenditures for tax purposes in the period the expenses were incurred and instead requires all U.S. and foreign
research and development expenditures to be amortized over five and 15 tax years, respectively. This provision
may materially increase our effective tax rate and reduce our operating cash flows over time as we continue to
utilize available net operating losses and tax credits. Infinera continues to monitor and record the impact while
waiting for final guidance from the IRS.
We may issue additional shares of our common stock in connection with conversions of the 2024 Notes,
the 2027 Notes or the 2028 Notes, and thereby dilute our existing stockholders and potentially adversely
affect the market price of our common stock.
In the event that some or all of each series of convertible senior notes are converted and we elect to
deliver shares of common stock to the extent permitted, the ownership interests of existing stockholders will be
diluted, and any sales in the public market of any shares of our common stock issuable upon such conversion
could adversely affect the prevailing market price of our common stock. In addition, the anticipated conversion of
any series of convertible senior notes we have issued could depress the market price of our common stock.
The fundamental change provisions of the 2024 Notes, the 2027 Notes and the 2028 Notes may delay or
prevent an otherwise beneficial takeover attempt of us.
If a fundamental change (as defined in the applicable indenture governing our convertible senior notes),
such as an acquisition of our company, occurs prior to the maturity of the 2024 Notes, the 2027 Notes or the
2028 Notes, as applicable, holders of the applicable series of convertible senior notes will have the right, at their
option, to require us to repurchase all or a portion of their convertible senior notes of such series. In addition, if
such fundamental change also constitutes a make-whole fundamental change, the conversion rate for the
applicable series of convertible senior notes may be increased upon conversion of the such series of convertible
senior notes in connection with such make-whole fundamental change. Any increase in the conversion rate will
be determined based on the date on which the make-whole fundamental change occurs or becomes effective
and the price paid (or deemed paid) per share of our common stock in such transaction. Any such increase will
be dilutive to our existing stockholders. Our obligation to repurchase any series of convertible senior notes or
increase the conversion rate upon the occurrence of a make-whole fundamental change may, in certain
circumstances, delay or prevent a takeover of us that might otherwise be beneficial to our stockholders.
The Capped Calls may affect the value of the 2024 Notes and our common stock.
In connection with the issuance of the 2024 Notes, we entered into capped call transactions (the
"Capped Calls") with certain financial institutions who are the option counterparties. The Capped Calls are
expected generally to reduce or offset the potential dilution upon conversion of the 2024 Notes or offset any cash
payments we are required to make in excess of the principal amount of converted 2024 Notes, as the case may
be, with such reduction or offset subject to a cap.
From time to time, the option counterparties or their respective affiliates may modify their hedge
positions by entering into or unwinding various derivatives with respect to our common stock or purchasing or
selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the
2024 Notes. This activity could also cause an increase or a decrease in the market price of our common stock.
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We are subject to counterparty risk with respect to the Capped Calls.
The option counterparties to the Capped Calls are financial institutions, and we will be subject to the risk
that any or all of them might default under the Capped Calls. Our exposure to the credit risk of the counterparties
will not be secured by any collateral. Past global economic conditions have resulted in the actual or perceived
failure or financial difficulties of many financial institutions. If an option counterparty becomes subject to
insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our
exposure at the time under the Capped Calls with such option counterparty. Our exposure will depend on many
factors but, generally, an increase in our exposure will be correlated to an increase in the market price and in the
volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax
consequences and more dilution than we currently anticipate with respect to our common stock. We can provide
no assurance as to the financial stability or viability of the option counterparties.
Legal and Regulatory Risk Factors
If we fail to protect our intellectual property rights, our competitive position could be harmed, or we
could incur significant expense to enforce our rights.
We depend on our ability to protect our proprietary technology. We rely on a combination of methods to
protect our intellectual property, including limiting access to certain information, and utilizing trade secret, patent,
copyright and trademark laws and confidentiality agreements with employees and third parties, all of which offer
only limited protection. The steps we have taken to protect our proprietary rights may be inadequate to preclude
misappropriation or unauthorized disclosure of our proprietary information or infringement of our intellectual
property rights, and our ability to police such misappropriation, unauthorized disclosure or infringement is
uncertain, particularly in countries outside of the U.S. This is likely to become an increasingly important issue as
we expand our operations, product offerings and product development into countries that provide a lower level of
intellectual property protection. We do not know whether any of our pending patent applications will result in the
issuance of patents or whether the examination process will require us to narrow our claims, and even if patents
are issued, they may be contested, circumvented or invalidated. Moreover, the rights granted under any issued
patents may not provide us with a competitive advantage, and, as with any technology, competitors may be able
to develop similar or superior technologies to our own now or in the future.
Protecting against the unauthorized use of our products, trademarks and other proprietary rights is
expensive, difficult, time consuming and, in some cases, impossible. Litigation may be necessary in the future to
enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity or scope
of the proprietary rights of others. Such litigation could result in substantial cost and diversion of management
resources, either of which could harm our business, financial condition and results of operations. Furthermore,
many of our current and potential competitors have the ability to dedicate substantially greater resources to
enforce their intellectual property rights than we do. Accordingly, despite our efforts, we may not be able to
prevent third parties from infringing upon or misappropriating our intellectual property.
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Claims by others that we infringe on their intellectual property rights could harm our business.
Our industry is characterized by the existence of a large number of patents and frequent claims and
related litigation regarding patent and other intellectual property rights. In particular, many leading companies in
the optical transport networking industry, including our competitors, have extensive patent portfolios with respect
to optical transport networking technology. In addition, non-practicing patent holding companies seek to monetize
patents they have purchased or otherwise obtained. We expect that infringement claims may increase as the
number of products and competitors in our market increases and overlaps in technology implementation occur.
From time to time, third parties may assert exclusive patent, copyright, trademark and other intellectual property
rights to technologies and related standards that are important to our business or seek to invalidate the
proprietary rights that we hold. Competitors or other third parties have asserted, and may continue to assert,
claims or initiate litigation or other proceedings against us or our manufacturers, suppliers or customers alleging
infringement of their proprietary rights, or seeking to invalidate our proprietary rights, with respect to our products
and technology. In addition, in the past we have had certain patent licenses with third parties that have not been
renewed, and if we cannot successfully renew these licenses, we could face claims of infringement. In the event
that we are unsuccessful in defending against any such claims, or any resulting lawsuits or proceedings, we
could incur liability for damages or have valuable proprietary rights invalidated. For additional information
regarding certain of the legal proceedings in which we are involved, see the information set forth under the
heading “Legal Matters” in Note 12, Commitments and Contingencies, in Part II, Item 8.
Any claim of infringement from a third party, even one without merit, could cause us to incur substantial
costs defending against the claim, and could distract our management from running our business. Furthermore, a
party making such a claim, if successful, could secure a judgment that requires us to pay substantial damages or
could include an injunction or other court order that could prevent us from offering our products. In addition, we
might be required to seek a license for the use of such intellectual property, which may not be available on
commercially reasonable terms or at all. Alternatively, we may be required to develop non-infringing technology,
which would require significant effort and expense and may ultimately not be successful. Any of these events
could harm our business, financial condition and results of operations.
Competitors and other third parties have and may continue to assert infringement claims against our
customers and sales partners. Any of these claims may require us to initiate or defend potentially protracted and
costly litigation on their behalf, regardless of the merits of these claims, because we generally indemnify our
customers and sales partners from claims of infringement of proprietary rights of third parties. If any of these
claims succeed, we may be forced to pay damages on behalf of our customers or sales partners, which could
have an adverse effect on our business, financial condition and results of operations.
We also incorporate free and open source licensed software into our products. Although we monitor our
use of such open source software closely, the terms of many open source licenses have not been interpreted by
U.S. courts, and there is a risk that such licenses could be construed in a manner that could impose
unanticipated conditions or restrictions on our ability to commercialize our products. In addition, non-compliance
with open source software license terms and conditions could subject us to potential liability, including intellectual
property infringement or contract claims. In such events, we may be required to seek licenses from third parties
in order to continue offering our products, to re-engineer our products or to discontinue the sale of our products in
the event re-engineering cannot be accomplished in a timely manner, any of which could adversely affect our
business, financial condition and results of operations.
39
Security incidents, such as data breaches and cyber-attacks, could compromise our intellectual property
and proprietary or confidential information and cause significant damage to our business and reputation.
In the ordinary course of our business, we maintain sensitive data on our networks and systems,
including data related to our intellectual property and data related to our business, customers and business
partners, which may be considered proprietary or confidential information. This sensitive data includes certain
personal information and other data relating to our employees and others. We also utilize third-party service
providers to host, transmit, or otherwise process data in connection with our business activities, including our
supply chain processes, operations, and communications. Companies, especially in the technology industry,
have been increasingly subject to a wide variety of security incidents, cyber-attacks, malicious activity, including
ransomware, malware and viruses, and other attempts to gain unauthorized access and disrupt systems and the
confidentiality, security, and integrity of information, and we and our third-party service providers and suppliers
have faced and may continue to face security threats and attacks from a variety of sources. Geopolitical tensions
or conflicts have in the past led to, and may in the future lead to, increased risk of cybersecurity attacks.
Moreover, advancements in technology, such as artificial intelligence and machine learning, are changing and
may continue to change the way companies are subjected to attempts to gain unauthorized access and disrupt
systems, thereby increasing the risks of security threats and attacks. In accordance with our flexible approach to
work arrangements, many of our employees are also working from home and accessing our corporate network
via remote devices, which may be less secure than those used in our offices and thus could increase the
potential for such events to occur.
While the secure maintenance of this information and the security of the systems used in our business
are critical to our business and reputation, our network and storage applications, and those systems and other
business applications maintained by our third-party providers, may be subject to unauthorized access by hackers
or breached or otherwise compromised due to operator error, malfeasance or other system disruptions. It may be
difficult to anticipate or immediately detect such security incidents or breaches and to prevent or mitigate damage
caused as a result. Accordingly, a data breach, security incident, cyber-attack, attack using ransomware or other
malware, or any other unauthorized access to systems used in our business or unauthorized acquisition,
disclosure, or other processing of our information or other information that we or our third-party vendors maintain
or otherwise process could compromise our intellectual property, disrupt our operations, or result in loss of or
unauthorized access to or acquisition, disclosure, modification, misuse, corruption, unavailability, or destruction
of proprietary or confidential information. While we work to safeguard our internal networks and systems and
validate the security of our third-party suppliers and providers to mitigate these potential risks, including through
information security policies and employee awareness and training, there is no assurance that such actions will
be sufficient to prevent cyber-attacks or security breaches or incidents, and we cannot guarantee that our
systems and networks or our third-party service providers’ systems and networks have not been breached or that
they or any components of our supply chain do not contain exploitable defects or bugs, including defects or bugs
that could result in a breach of or disruption to our systems and networks or the systems and networks of third
parties that support our operations. We and third-party service providers also may face difficulties or delays in
identifying or responding to security breaches and other security-related incidents. We have been subjected in
the past to a range of immaterial incidents resulting from, for example, phishing, emails purporting to come from
an executive or vendor seeking payment requests, malware and communications from look-alike corporate
domains. While they have not had a material effect on our business or our network security to date, security
breaches or incidents involving access to or improper use of our systems, networks or products, or those of third-
party service providers, could compromise confidential or otherwise protected information, result in unauthorized
acquisition, disclosure, modification, misuse, corruption, unavailability, or destruction of data, cause payments to
be diverted to fraudulent accounts, or otherwise disrupt our operations. Security breaches or incidents, or any
reports or perceptions that they have occurred, could cause us to incur significant costs and expenses to
remediate and otherwise respond to any actual or suspected breach or incident, subject us to regulatory actions
and investigations, disrupt key business operations, result in claims, demands, and liability, and divert attention of
management and key information technology resources, any of which could cause significant harm to our
business and reputation. Even the perception of inadequate security may damage our reputation and negatively
impact our business. Further, we could be required to expend significant capital and other resources to address
any security incident or breach and to attempt to prevent future security incidents and breaches.
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Although we maintain insurance coverage that may cover certain liabilities in connection with some
security breaches and other security incidents, we cannot be certain our insurance coverage will be adequate for
liabilities actually incurred, including any consequential damages that may arise from such security incidents, that
insurance will continue to be available to us on commercially reasonable terms (if at all) or that any insurer will
not deny coverage as to any future claim. The successful assertion of one or more large claims against us that
exceed available insurance coverage, the occurrence of changes in our insurance policies, including premium
increases or the imposition of large deductible or co-insurance requirements, or denials of coverage could have a
material adverse effect on our business, including our financial condition, results of operations and reputation.
We have identified material weaknesses in our internal control over financial reporting. If we are unable
to remediate the identified material weaknesses, or if we experience additional material weaknesses or
deficiencies in the future or if we otherwise fail to maintain an effective system of internal controls, our
ability to produce timely and accurate financial statements or comply with applicable regulations could
be impaired.
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002
("Sarbanes-Oxley Act") and the rules and regulations of The Nasdaq Stock Market LLC. We expect that the
requirements of these rules and regulations will continue to increase our legal, accounting and financial
compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on
our personnel, systems and resources. The Sarbanes-Oxley Act requires, among other things, that we maintain
effective disclosure controls and procedures and internal control over financial reporting. We continue to develop
and refine our disclosure controls, internal control over financial reporting and other procedures that are designed
to ensure that information required to be disclosed by us in the reports that we will file with the SEC, is recorded,
processed, summarized and reported within the time periods specified in SEC rules and forms, and that
information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our
principal executive and financial officers.
As described under the heading "Controls and Procedures" in Part II, Item 9A of this Annual Report on
Form 10-K, we identified control deficiencies within the revenue portion of our quote to cash cycle (revenue
cycle) and inventory cycle, and with respect to these, our internal resources, expertise and policies required to
maintain an effective control environment, that, individually or in the aggregate, constitute material weaknesses
in our internal control over financial reporting, resulting in the determination that our disclosure controls and
procedures were not effective as of December 30, 2023. A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely
basis. In particular, we determined that (i) within the revenue cycle, controls over the annual establishment of the
stand-alone selling prices (“SSPs”) for our performance obligations were not designed to include an adequate
review and evaluation of whether the methodology used to develop and establish SSPs, including related
financial statement disclosures, was in conformity with ASC 606, Revenue from Contracts with Customers, (ii)
within the inventory cycle, controls over judgements used in the estimation of reserves for excess and obsolete
inventory were not designed and operating effectively to support such judgements, (iii) controls over the
application of our policy for capitalizing variances from standard costs as part of the cost of inventory, did not
operate effectively and (iv) as related to our revenue and inventory cycles, certain key controls were not
sufficiently designed to assess the completeness and accuracy of Information Produced by the Entity ("IPE").
These material weaknesses indicate that we had insufficient personnel with an appropriate level of technical
accounting knowledge, experience, and training in the application of GAAP commensurate with the complexity of
our business and our financial accounting and reporting requirements, which impacted our ability to adequately
design, implement and monitor financial reporting controls related to our revenue cycle and inventory cycle that
identify and mitigate risks of material misstatements in our financial statements.
In response to the identified material weaknesses, management has implemented or plans to implement
the remediation measures described under the heading "Controls and Procedures" in Part II, Item 9A of this
Annual Report on Form 10-K. While management believes these remediation measures will remediate the
identified material weaknesses and strengthen our overall internal control over financial reporting, the identified
material weaknesses will not be considered remediated until the applicable remediated controls operate for a
sufficient period of time and management has concluded, through testing, that these controls are operating
effectively. As management continues to evaluate and work to enhance our internal control over financial
reporting, management may take additional measures to address control deficiencies or we may modify some of
the remediation measures. Despite these efforts, we may nevertheless be unsuccessful in remediating the
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identified material weaknesses. Further, additional weaknesses in our internal control over financial reporting or
disclosure controls and procedures may be discovered in the future. Any failure to develop or maintain effective
controls, or any difficulties encountered in their implementation or improvement, could harm our operating results
or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements
for prior periods. For example, we were unable to file this Annual Report on Form 10-K by the initial deadline of
February 28, 2024, due to the reasons described in the Notification of Late Filing on Form 12b-25, filed with the
SEC on February 29, 2024. Our failure to file periodic and certain current reports with the SEC in a timely
manner could impact our operations. Any failure to implement and maintain effective internal controls also could
adversely affect the results of periodic management evaluations and annual independent registered public
accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that
we are required to include in our periodic reports we will file with the SEC under Section 404 of the Sarbanes-
Oxley Act. Ineffective disclosure controls and procedures and internal control over financial reporting could also
cause investors to lose confidence in our reported financial and other information, which would likely have a
negative effect on the market price of our securities and could adversely impact our business.
In order to restore, maintain and improve the effectiveness of our disclosure controls and procedures
and internal control over financial reporting to comply with the SEC rules that implement Sections 302 and 404 of
the Sarbanes-Oxley Act, we have expended and anticipate that we will continue to expend significant resources
and undertake various actions, implementing a remediation plan, incurring accounting-related costs and
implementing new internal controls and procedures, and providing significant management oversight. As part of
our remediation plan, we plan to review and enhance our personnel with the appropriate level of technical
accounting knowledge, experience, and training in the application of GAAP commensurate with the complexity of
our business and our financial accounting and reporting requirements, particularly in areas related to our revenue
and inventory cycles. Any failure to maintain the adequacy of our internal controls, or consequent inability to
produce accurate financial statements on a timely basis, could increase our operating costs and could materially
impair our ability to operate our business and could have a material and adverse effect on our operating results
and could cause a decline in the price of our securities. In addition, if we are unable to continue to meet these
requirements, we may not be able to maintain our listing on the Nasdaq Global Select Market.
We are subject to various governmental export control, trade sanctions, and import laws and regulations
that could impair our ability to compete in international markets or subject us to liability if we violate
these controls.
In some cases, our products are subject to U.S. and foreign export control laws and regulations that
may limit where and to whom we are permitted to sell our products, including the Export Administration
Regulations administered by the U.S. Department of Commerce, and our activities may be subject to trade and
economic sanctions, including those administered by the U.S. Department of the Treasury’s Office of Foreign
Assets Control (collectively, “Trade Controls”). As such, a license may be required to export or re-export our
products, or provide related services, to certain countries and end-users, and for certain end-uses. Further, our
products incorporating encryption functionality may be subject to special controls applying to encryption items or
certain reporting requirements.
We have procedures in place designed to ensure our compliance with Trade Controls, with respect to
which failure to comply could subject us to both civil and criminal penalties, including substantial fines, possible
incarceration of responsible individuals for willful violations, possible loss of our export or import privileges, or
reputational harm. Further, the process for obtaining necessary licenses may be time-consuming or
unsuccessful, potentially causing delays in sales or losses of sales opportunities. Trade Controls are complex
and dynamic regimes, and monitoring and ensuring compliance can be challenging, particularly given that our
products are widely distributed throughout the world. Although we have no knowledge that our activities have
resulted in material violations of Trade Controls, any failure by us or our partners to comply with applicable laws
and regulations would have negative consequences for us, including reputational harm, government
investigations and penalties.
In addition, various countries regulate the import of certain technologies and have enacted laws that
could limit our ability to distribute our products and certain product features or could limit our customers’ ability to
implement our products in those countries. Changes in our products or changes in U.S. and foreign import and
export regulations may create delays in the introduction of our products in international markets, prevent our
customers with international operations from deploying our products throughout their global systems or, in some
cases, prevent the import and export of our products to certain countries altogether. For example, the U.S. has
imposed tariffs on a large variety of products originating from China, including some on components that are
42
supplied to us from China. Depending upon the duration and implementation of these and future tariffs, as well
as our ability to mitigate their impact, these tariffs could materially affect our business, including in the form of
increased cost of goods sold, increased pricing for customers and reduced sales. Additionally, the U.S.
government has continued to expand controls affecting the ability to send certain products and technology
related to semiconductors, semiconductor manufacturing and supercomputing to China without an export license
and adding additional entities to restricted party lists. It remains unclear what additional actions, if any, will be
taken by the governments of the U.S. or China with respect to such trade and tariff matters. Any change in import
and export regulations or related legislation, shift in approach to the enforcement or scope of existing regulations,
or change in the countries, persons or technologies impacted by such regulations, could result in decreased use
of our products by, or in our decreased ability to export or sell our products to, existing or potential customers
with international operations. Failure to comply with these and similar laws on a timely basis, or at all, or any
limitation on our ability to develop, export or sell our products would adversely affect our business, financial
condition and results of operations.
We are subject to environmental regulations that could adversely affect our business.
We are subject to complex U.S. and foreign environmental rules and regulations or other social
initiatives that impact how and where we manufacture our products. In particular, our manufacturing operations
use substances that are regulated by various federal, state, local, foreign and international laws and regulations
governing health, safety and the environment, including U.S. Environmental Protection Agency regulations and
WEEE, RoHS and REACH regulations adopted by the E.U. From time to time, the E.U. restricts or considers
restricting certain substances under these directives. For example, InP has been considered for restriction under
RoHS. Any restriction of InP or any other substance integral to our systems could materially adversely affect our
business, financial condition and operating results. In addition, if we experience a problem complying with these
laws and regulations, it could cause an interruption or delay in our manufacturing operations or it could cause us
to incur liabilities or costs related to health, safety or environmental remediation or compliance. We could also be
subject to liability if we do not handle these substances in compliance with safety standards for handling, storage
and transportation and applicable laws and regulations. If we experience a problem or fail to comply with such
safety standards or laws and regulations, our business, financial condition and operating results may be harmed.
Regulations relating to environmental, social and governance matters, as well as customer, supplier,
investor or other stakeholder demands, may add operational complexity for us.
There has been an increased focus on environmental, social and governance (“ESG”) matters that
affect companies globally, including by the SEC, the E.U. and certain state governments. A number of customers
have adopted, or may adopt, procurement policies that include ESG provisions or requirements that may impose
additional burdens and costs on us as suppliers. An increasing number of investors are also requiring companies
to disclose corporate ESG policies, practices, goals and metrics. In addition, various governmental authorities
are developing ESG and disclosure-related laws or regulations that could cause us to incur significant
compliance costs and other direct and indirect costs. Any disclosed goals and aspirations related to ESG are
subject to assumptions that could change over time, may evolve as the Company and global ESG practices
change, and may not be achieved. In addition, ESG-related standards and regulations are continuing to evolve
and may not be adequately harmonized. Our efforts to abide by these regulations, to report against these
standards and to accomplish our ESG-related goals and aspirations present operational, reputational, financial,
audit, legal and other risks. Our processes and controls may not always align with evolving standards, laws and
regulations, our interpretation thereof may differ from governmental authorities and other parties and the
regulations and standards may continue to evolve, any of which could result in significant revisions to our goals,
reported progress toward those goals, or other ESG information we disclose. In addition, any failure or perceived
failure to pursue or fulfill previously stated goals and aspirations may result in reputational damage and loss of
business, and could expose us to government enforcement actions, private litigation or other adverse
consequences, and may adversely affect our business and results of operations.
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We are subject to global laws and regulations governing privacy, data protection, and cybersecurity that
could adversely affect our business or subject us to liability.
Data privacy, data protection, and cybersecurity are areas of increasing focus for our customers,
governmental regulators and privacy advocates, and many jurisdictions, including the E.U., the U.S., China and
other regions, are evaluating or have implemented laws and regulations relating to cybersecurity, privacy and
data protection, which can affect the market and requirements for networking and communications equipment.
For example, the General Data Protection Regulation (“GDPR”) in effect in the E.U., and similar regulatory
standards in effect in the United Kingdom ("UK"), the Personal Information Protection Law ("PIPL") in China, the
California Consumer Privacy Act (“CCPA”) and the California Privacy Rights Act (“CPRA”), other enacted or
proposed legislation in the U.S., including comprehensive privacy legislation similar to the CCPA proposed, and
in certain cases enacted, in numerous states, and enacted or proposed legislation in other jurisdictions, have
created new compliance obligations with respect to data processing, privacy, data protection, and cybersecurity.
The laws, rules, regulations, standards and other actual and asserted obligations relating to privacy,
data protection and cybersecurity to which we may be subject, or that otherwise apply to our business, are
constantly evolving, and we expect that there will continue to be new proposed laws, regulations and industry
standards concerning these matters in the U.S., the E.U. and other jurisdictions. We cannot fully predict the
impact of the GDPR, the PIPL, the CCPA, the CPRA or other laws or regulations, including those that may be
modified or enacted in the future, or new or evolving industry standards or actual or asserted obligations, relating
to cybersecurity, privacy, or data protection or processing on our business or operations. These laws, regulations,
and standards have required us to modify our practices and policies relating to privacy, data protection,
cybersecurity, and data processing, and to incur substantial costs and expenses in an effort to comply, and we
expect to continue to incur such costs and expenses in the future and may find it necessary or appropriate to
further modify our relevant practices and policies. Any actual or perceived failure by us or our customers,
partners or vendors to comply with laws, regulations, or other actual or asserted obligations to which we are or
are alleged to be subject relating to cybersecurity, privacy or data protection could result in claims, litigation, and
regulatory investigations and other proceedings, as well as damage to our reputation. These could result in
substantial costs, diversion of resources, fines, penalties, and other damages, and harm to our customer
relationships, our market position, and our ability to attract new customers. Any of these could harm our
business, financial condition and results of operations.
A portion of our revenue is generated by sales to government entities, which are subject to a number of
uncertainties, challenges, and risks.
We currently sell many of our solutions to various government entities, and we may in the future
increase sales to government entities. Sales to government entities are subject to a number of risks, including
risks related to a highly competitive, expensive, and time-consuming sales process, which often requires
significant upfront time and expense without any assurance that we will complete a sale. Additionally, the sales
process may be delayed by a shutdown of the U.S. federal government. If we are successfully awarded a
government contract, such award may be subject to appeals, disputes, or litigation, including, but not limited to,
bid protests by unsuccessful bidders. Government demand and payment for our solutions may be impacted by
public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting
public sector demand for our solutions. Government entities may also have statutory, contractual, or other legal
rights to terminate contracts for convenience or due to a default. For purchases by the U.S. federal government,
the government may require certain products to be made in, or be products of, the U.S. or other high-cost
manufacturing locations, and all of our products may not be made in or products of jurisdictions that meet
government requirements, and as a result, our business and results of operations may suffer. Contracts with
government entities may also include preferential pricing terms, including, but not limited to, “most favored
customer” pricing.
Additionally, we may be required to obtain special certifications to sell some or all of our solutions to
government or quasi-government entities. Such certification requirements for our solutions may change, thereby
restricting our ability to sell into the federal government sector until we have attained the revised certification. If
our products and subscriptions are late in achieving or fail to achieve compliance with these certifications and
standards, or our competitors achieve compliance with these certifications and standards before us, we may be
disqualified from selling our products to such governmental entities, or be at a competitive disadvantage, which
would harm our business, financial condition and results of operations. There are no assurances that we will find
the terms for obtaining such certifications to be acceptable or that we will be successful in obtaining or
maintaining the certifications.
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As a government contractor or subcontractor, we must comply with laws, regulations, and contractual
provisions relating to the formation, administration, and performance of government contracts and inclusion on
government contract vehicles, which affect how we and our partners do business with government agencies. As
a result of actual or perceived noncompliance with government contracting laws, regulations, or contractual
provisions, we may be subject to non-ordinary course audits and internal investigations which may prove costly
to our business financially, divert management time, or limit our ability to continue selling our products and
services to our government customers. These laws and regulations may impose other added costs on our
business, and failure to comply with these or other applicable regulations and requirements, including non-
compliance in the past, could lead to claims for damages from our channel partners, downward contract price
adjustments or refund obligations, civil or criminal penalties, termination of contracts or suspension or debarment
from government contracting for a period of time with government agencies. Any such damages, penalties,
disruption, or limitation in our ability to do business with a government would adversely impact, and could have a
material adverse effect on, our business, financial condition, results of operations, reputation and growth
prospects.
Our business could be adversely affected if our employees cannot obtain and maintain required security
clearances or we cannot maintain a required facility security clearance, or we do not comply with legal
and regulatory obligations regarding the safeguarding of classified information.
Our U.S. government contract revenue includes income derived from contracts that require our
employees to maintain various levels of security clearances and may require us to maintain a facility security
clearance, to comply with Department of Defense (“DoD”) requirements. The DoD has strict security clearance
requirements for personnel who perform work in support of classified programs. In general, access to classified
information, technology, facilities, or programs are subject to additional contract oversight and potential liability. In
the event of a security incident involving classified information, technology, facilities, programs, or personnel
holding clearances, we may be subject to legal, financial, operational and reputational harm. We are limited in
our ability to provide specific information about these classified programs, their risks, or any disputes or claims
relating to such programs. As a result, investors have less insight into our classified programs than our other
businesses and therefore less ability to fully evaluate the risks related to our classified business or our business
overall. Obtaining and maintaining security clearances for employees involves a lengthy process, and it is difficult
to identify, recruit, and retain employees who already hold security clearances. If our employees are unable to
obtain security clearances in a timely manner, or at all, or if our employees who hold security clearances are
unable to maintain their clearances or terminate employment with us, then a customer requiring classified work
could terminate an existing contract or decide not to renew the contract upon its expiration. To the extent we are
not able to obtain or maintain a facility security clearance, we may not be able to bid on or win new classified
contracts, and existing contracts requiring a facility security clearance could be terminated.
Failure to comply with anti-bribery, anti-corruption, anti-money laundering laws, and similar laws, could
subject us to penalties and other adverse consequences.
We are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S.
Travel Act, the UK Bribery Act, and possibly other anti-bribery and anti-money laundering laws in the U.S. and in
countries outside of the U.S. in which we conduct our activities. Anti-corruption and anti-bribery laws have been
enforced aggressively and are interpreted broadly to generally prohibit companies, their employees, agents,
representatives, business partners, and third-party intermediaries from authorizing, offering, or providing, directly
or indirectly, improper payments or benefits to recipients in the public or private sector.
We sometimes leverage third parties to sell our products and conduct our business abroad. We or our
employees, agents, representatives, business partners or third-party intermediaries may have direct or indirect
interactions with officials and employees of government agencies or state-owned or affiliated entities and may be
held liable for the corrupt or other illegal activities of these employees, agents, representatives, business partners
or third-party intermediaries even if we do not explicitly authorize such activities. We cannot assure you that all of
our employees and agents will refrain from taking actions in violation of applicable law for which we may be
ultimately held responsible. As we increase our international sales and business, our risks under these laws may
increase.
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These laws also require that we keep accurate books and records and maintain internal controls and
compliance procedures designed to prevent any such actions. While we have policies and procedures to address
compliance with such laws, we cannot assure you that none of our employees, agents, representatives, business
partners or third-party intermediaries will take actions in violation of our policies and applicable law, for which we
may be ultimately held responsible.
Any allegations or violation of the FCPA or other applicable anti-bribery, anti-corruption or anti-money
laundering laws, could result in whistleblower complaints, sanctions, settlements, prosecution, enforcement
actions, fines, damages, adverse media coverage, investigations, loss of export privileges, severe criminal or civil
sanctions, or suspension or debarment from U.S. government contracts, all of which may have an adverse effect
on our reputation, business, results of operations, and prospects. Responding to any investigation or action will
likely result in a materially significant diversion of management’s attention and resources and significant defense
costs and other professional fees.
General Risk Factors
The trading price of our common stock has been volatile and may be volatile in the future.
The trading prices of our common stock and the securities of other technology companies have been
and may continue to be highly volatile. Factors affecting the trading price of our common stock include:
• market conditions in our industry, the industries of our customers and the economy as a whole,
including inventory adjustments, supply chain disruptions, global trade tariffs, and fluctuations in
currency exchange rates, interest rates or inflation rates;
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variations in our operating results;
announcements of technological innovations, new services, service or manufacturing
enhancements or government funding opportunities, strategic alliances or agreements by us or by
our competitors;
the gain or loss of customers;
recruitment or departure of key personnel;
changes in the estimates of our future operating results or external outlook on those results or
changes in recommendations or business expectations by any securities analysts that elect to
follow our common stock;
• mergers and acquisitions by us, by our competitors or by our customers or suppliers;
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social, geopolitical, environmental or health factors, including pandemics or other public health
emergencies where we operate; and
adoption or modification of regulations, policies, procedures or programs applicable to our
business.
An economic downturn, negative financial news, continued inflation, high interest rates, declines in
income or asset values, market conditions, changes to fuel and other energy costs, and other economic factors,
may lead to market volatility and associated uncertainty. In addition, if the market for technology stocks or the
broader stock market experiences a loss of investor confidence, the trading price of our common stock could
decline for reasons unrelated to our business, financial condition or results of operations. Each of these factors,
among others, could harm the value of an investment in our common stock. Some companies that have had
volatile market prices for their securities have had securities class action lawsuits filed against them. If a suit
were filed against us, regardless of its merits or outcome, it could result in substantial costs and divert
management’s attention and resources.
Future sales of our common stock could cause our stock price to fall.
We have sold, and may in the future sell, shares of our common stock in underwritten offerings and
have established, and may in the future establish, “at-the-market” offering programs pursuant to which we may
offer and sell shares of our common stock. Sales of securities have resulted and will continue to result in dilution
of our existing stockholders, and such sales could cause our stock price to fall.
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In addition, if our existing stockholders sell, or indicate an intent to sell, a large number of shares of our
common stock in the public market, it could cause our stock price to fall. We may also issue shares of common
stock or securities convertible into our common stock from time to time in connection with financings,
acquisitions, investments or otherwise. Any such issuance would result in dilution to our existing stockholders
and could cause our stock price to fall.
Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent
a change in control of our company and may affect the trading price of our common stock.
We are a Delaware corporation and the anti-takeover provisions of the General Corporation Law of the
State of Delaware ("DGCL"), which apply to us, may discourage, delay or prevent a change in control by
prohibiting us from engaging in a business combination with an interested stockholder for a period of three years
after the person becomes an interested stockholder, even if a change of control would be beneficial to our
existing stockholders. In addition, our amended and restated certificate of incorporation and amended and
restated bylaws may discourage, delay or prevent a change in our management or control over us that
stockholders may consider favorable. Our amended and restated certificate of incorporation and amended and
restated bylaws:
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authorize the issuance of “blank check” convertible preferred stock that could be issued by our board of
directors to thwart a takeover attempt;
establish a classified board of directors, as a result of which the successors to the directors whose
terms have expired will be elected to serve from the time of election and qualification until the third
annual meeting following their election;
require that directors only be removed from office for cause;
provide that vacancies on the board of directors, including newly created directorships, may be filled
only by a majority vote of directors then in office rather than by stockholders;
prevent stockholders from calling special meetings; and
prohibit stockholder action by written consent, requiring all actions to be taken at a meeting of the
stockholders.
Our amended and restated bylaws designate the Court of Chancery of the State of Delaware and the
federal district courts of the U.S. as the exclusive forums for substantially all disputes between us and
our stockholders, which will restrict our stockholders’ ability to choose the judicial forum for disputes
with us or our directors, officers or employees.
Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware or, if
such court lacks jurisdiction, any other state or federal court located in the State of Delaware, is the exclusive
forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary
duty; any action arising pursuant to the DGCL, our amended and restated certificate of incorporation or our
amended and restated bylaws; or any action asserting a claim governed by the internal affairs doctrine. However,
such exclusive forum provisions would not apply to any such claim as to which such court determines that there
is an indispensable party not subject to the jurisdiction of such court (and the indispensable party does not
consent to the personal jurisdiction of such court within 10 days following such determination), which is vested in
the exclusive jurisdiction of a court or forum other than such court or for which such court does not have subject
matter jurisdiction.
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These provisions would not apply to suits brought to enforce a duty or liability created by the Exchange
Act or any other claim for which the U.S. federal courts have exclusive jurisdiction. Furthermore, Section 22 of
the Securities Act of 1933, as amended (the “Securities Act”) creates concurrent jurisdiction for federal and state
courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain
such claims. Our stockholders cannot waive compliance with the federal securities laws and the rules and
regulations thereunder. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent
or contrary rulings by different courts, among other considerations, our amended and restated bylaws provide
that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the U.S. will
be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the
Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid,
a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive
forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the
exclusive forum provisions of our amended and restated bylaws. This may require significant additional costs
associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will
be enforced by a court in those other jurisdictions.
These exclusive choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial
forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may
discourage lawsuits against us and our directors, officers, and other employees. If a court were to find such
exclusive-forum provisions to be inapplicable or unenforceable in an action, we may incur further significant
additional costs associated with resolving the dispute in other jurisdictions, all of which could harm our business.
Events that are outside our control, such as natural disasters, violence or other catastrophic events,
could harm our operations.
Our headquarters and the majority of our infrastructure, including our PIC fabrication manufacturing
facility, are located in Northern California, an area that is susceptible to earthquakes, fires, floods and other
natural disasters. Further, attacks and violence aimed at Northern California or at the U.S. energy or
telecommunications infrastructure could hinder or delay the development and sale of our products. In the event
that an earthquake, targeted attack or other man-made or natural catastrophe were to destroy any part of our or
our contract manufacturers’ or suppliers' facilities, destroy or disrupt vital infrastructure systems, or interrupt our
operations or supply chain for any extended period of time, our business, financial condition and results of
operations would be harmed. For related risks concerning the operations and availability of the storage facilities
in which our inventory is held, see also the Risk Factor titled "Our international sales and operations subject us to
additional risks that may harm our operating results."
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ITEM 1B.
UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 1C.
CYBERSECURITY
Risk Management and Strategy
Infinera has comprehensive and integrated enterprise risk management and cybersecurity risk
management programs which use structured, proactive, and continuous processes to identify, understand,
assess, mitigate, and report on enterprise and cybersecurity risks in alignment with business objectives. Our risk
management program is used to guide and strengthen our cybersecurity posture to engender trust with
customers, employees, and stockholders while protecting the confidentiality, integrity, and availability of our
systems and data.
We have established a risk assessment methodology which includes requirements for treatment plans,
risk acceptance thresholds, prioritization, and control analysis, as well as likelihood and impact analysis. A risk
assessment is performed annually. Treatment plans are monitored and reported to management on a quarterly
basis.
Governance
Cybersecurity and risk management is a shared responsibility that applies to the Infinera team across all
levels of the organization.
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The Board of Directors conducts informed oversight of our risk management processes. The Audit
Committee of the Board of Directors has primary responsibility for oversight of enterprise risk
management and cybersecurity risk management. Reports on enterprise and cybersecurity risk,
risk treatment plans, and key performance indicators of our cybersecurity program are provided to
the Audit Committee by management, including our Chief Information Security Officer (CISO), on a
quarterly basis and are provided to the Board of Directors as requested and as part of routine Audit
Committee updates to the Board of Directors.
The Executive Leadership Team (ELT), a cross-functional leadership group that includes our Senior
Vice President, Information Systems, is responsible for assessing and managing enterprise risks,
including cybersecurity risks. The ELT reviews enterprise and cybersecurity risks, risk treatment
plans, and key performance indicators regarding the Company’s enterprise risk and cybersecurity
risk management programs quarterly.
The CISO is responsible for cybersecurity strategy and reporting on cybersecurity risks to the ELT,
Audit Committee, and Board of Directors. The CISO collaborates with a cross-functional group of
the Company’s business leaders to assess cybersecurity risk, establish and monitor cybersecurity
processes, and report program effectiveness. Our CISO has over 25 years of cybersecurity and
Information Technology experience across multiple industries with expertise in governance, risk and
compliance, cybersecurity operations and cybersecurity engineering.
The Cybersecurity Advisory Committee supports cybersecurity risk assessment, advises on
program enhancements, and acts as a cybersecurity advocate across the business. The committee
is comprised of employees with extensive experience across a diverse range of disciplines.
All employees are responsible for adherence to the Company’s cybersecurity processes and for
remaining vigilant to potential cybersecurity threats. This employee commitment to operational
excellence is strengthened by ongoing cybersecurity education, training, and awareness programs.
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Engaging Third Parties
Companies, especially in the technology industry, have been subject to an increasing number of
complex cybersecurity risks. Infinera has engaged with a range of external service providers, including
consultants, auditors, and cybersecurity service providers, to understand, manage, and mitigate cybersecurity
risks. These engagements help Infinera drive improvements in our processes, identify new and emerging threats,
and respond rapidly to the ever-evolving cybersecurity risk landscape.
Third-Party Risk Management
Infinera has implemented a robust third-party risk management program to identify and manage risks to
the confidentiality, availability, and integrity of our systems and data. This includes contractual requirements
related to data privacy and confidentiality, contractual commitments of third parties to maintain comprehensive
security programs, and code of conduct requirements designed to ensure such third parties act ethically,
responsibly, and safely. Infinera has also implemented processes to assess the effectiveness of third-party
security programs and adherence to Infinera’s standards both prior to engaging with a new service provider and
to monitor performance on an ongoing basis.
Cybersecurity Incident Response
Infinera has implemented a cybersecurity incident response plan in line with industry standards. The
plan defines roles and responsibilities regarding potential cybersecurity incidents, establishes processes
regarding identification, containment, eradication, and recovery from potential cybersecurity incidents and
clarifies communication and notification policies regarding such potential cybersecurity incidents. The plan also
captures lessons learned to drive continuous improvement. Additionally, the plan is evaluated, tested, and
enhanced through training, table-top exercises, and by engaging with third-party service providers.
Infinera has not experienced a material cybersecurity incident. For additional information regarding
whether any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have
materially affected or are reasonably likely to materially affect our company, including our business strategy,
results of operations, or financial condition, please refer to the section titled “Risk Factors” included in Part I, Item
1A of this Annual Report on Form 10-K.
ITEM 2.
PROPERTIES
Our headquarters are located in San Jose, California, which consist of approximately 82,000 square
feet under lease. As of December 30, 2023, we leased approximately 57,000 square feet for research and
development and manufacturing in Sunnyvale, California.
In addition to the leased buildings in San Jose and Sunnyvale, California, we also lease approximately
443,000 square feet of office spaces for research and development centers and for sales, service and support in
various countries within (i) North America; (ii) LATAM; (iii) EMEA; and (iv) APAC.
All of these leases expire between 2024 and 2037. We also own a facility in Allentown, Pennsylvania.
We intend to adjust our facility space to meet our requirements and we believe that suitable additional or
substitute space will be available as needed to accommodate our business needs for our operations. We believe
that our existing facilities are adequate to meet our business needs through the next 12 months.
ITEM 3.
LEGAL PROCEEDINGS
The information set forth under the heading “Legal Matters” in Note 12, Commitments and
Contingencies, in Part II, Item 8 of this Annual Report on Form 10-K is incorporated herein by reference.
ITEM 4.
MINE SAFETY DISCLOSURES
Not Applicable.
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PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed on the Nasdaq Global Select Market under the symbol “INFN.” As of
May 10, 2024, there were 67 registered holders of record of our common stock. A substantially greater number of
holders of our common stock are “street name” or beneficial holders, whose shares are held by banks, brokers
and other financial institutions.
We have not paid any cash dividends on our common stock and do not intend to pay any cash
dividends on our common stock in the near future.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative five-year total return provided stockholders on our
common stock relative to the cumulative total returns of the Nasdaq Composite Index and the Nasdaq
Telecommunications Index. An investment of $100 (with reinvestment of all dividends, if any) is assumed to have
been made in our common stock and in each of the indexes on December 29, 2018 and its relative performance
is tracked through December 30, 2023. The Nasdaq Telecommunications Index contains securities of Nasdaq-
listed companies classified according to the Industry Classification Benchmark as Telecommunications and
Telecommunications Equipment. They include providers of fixed-line and mobile telephone services, and makers
and distributors of high-technology communication products. This graph is not deemed to be “filed” with the SEC
or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and the graph shall not be deemed to be incorporated by reference into any prior or subsequent filing by us
under the Securities Act of 1933, as amended, or the Exchange Act.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
Among Infinera Corporation, the Nasdaq Composite Index, and the Nasdaq Telecommunications Index
*
Assumes $100 invested on December 29, 2018 in our common stock, in the Nasdaq Composite Index and the Nasdaq
Telecommunications Index, with reinvestment of all dividends, if any. Indexes calculated on month-end basis.
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Infinera CorporationNasdaq CompositeNasdaq Telecommunications12/29/1812/28/1912/26/2012/25/2112/31/2212/30/23050100150200250300350 ITEM 6.
[RESERVED]
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ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Annual Report on Form 10-K contains “forward-looking statements” that involve risks and
uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to
differ materially from those expressed or implied by such forward-looking statements. Such forward-looking
statements include, but are not limited to, our expectations regarding revenue, gross margin, operating
expenses, cash flows and other financial items and the drivers related to these; the competitive advantages
derived from sales of our vertically integrated products; demand growth for additional network capacity, the level
and timing of customer capital spending and the impact on customer demand from customers holding excess
inventory beyond normalized levels; the magnitude and duration of supply constraints, including delays,
shortages and increased costs and our ability to mitigate such supply constraints, and the extent to which supply-
related impacts could materially and adversely affect our business operations, financial performance, results of
operations, financial position, and stock price; the adverse impact inflation and higher interest rates may have on
us by increasing costs beyond what we can recover through price increases; achievement of strategic objectives,
any statements regarding our plans, strategies and objectives; the impact of new customer network footprint on
our gross margin; factors that may affect our operating results; anticipated customer acceptance of our solutions;
statements concerning new products or services, including new product features; our beliefs about who we may
compete with and how we are differentiated from those competitors; our ability to respond to technological
changes; statements regarding our relationships with contract manufacturers and other third-party partners;
statements regarding our production capacity and facilities requirements; statements related to capital
expenditures; statements related to working capital and liquidity; the sufficiency of our cash to operate our
business and our ability to raise capital; expectations regarding research and development investments and
initiatives; our ability to realize deferred tax assets; statements related to future economic conditions,
performance, market growth, competitor consolidation or our sales cycle; our ability to identify, attract, upskill and
retain highly skilled personnel; the extent to which public health emergencies could materially and adversely
affect our business operations, financial performance, results of operations, financial position, stock price and
personnel; our ability to protect our technology and intellectual property, the frequency of claims related to our
intellectual property and the value of our intellectual property; statements related to our convertible senior notes
and our Credit Facility; our ability to prevent and respond to data breaches and cyber-attacks; statements related
to the impact of tax regulations; statements related to our internal control over financial reporting and material
weaknesses; statements related to our disclosure controls and procedures; statements related to the effects of
trade sanctions and similar regulations; statements related to the proliferation and impact of environmental,
social and governance regulation; statements related to the effects of litigation on our financial position, results of
operations or cash flows; the impacts of any restructuring plans or other strategic efforts on our business;
statements related to factors beyond our control, such as natural disasters, acts of war or terrorism, epidemics,
pandemics and armed conflicts, such as between Russia and Ukraine and Israel and Hamas; statements related
to new accounting standards; expectations about the outcome of legal proceedings; statements as to industry
trends and other matters that do not relate strictly to historical facts; and statements of assumptions underlying
any of the foregoing. These statements are often identified using words such as “anticipate,” “believe,” “could,”
“estimate,” “expect,” “intend,” “may,” "should," "will," or "would," and similar expressions or variations. These
statements are based on the beliefs and assumptions of our management based on information currently
available to management. Such forward-looking statements are subject to risks, uncertainties and other factors
that could cause actual results and the timing of certain events to differ materially from future results expressed
or implied by such forward-looking statements. Factors that could cause or contribute to such differences include,
but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in
Part I, Item 1A of this Annual Report on Form 10-K. You should review these risk factors for a more complete
understanding of the risks associated with an investment in our securities. Such forward-looking statements
speak only as of the date of this report. We disclaim any obligation to update any forward-looking statements to
reflect events or circumstances after the date of such statements. The following discussion and analysis should
be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this
Annual Report on Form 10-K.
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Overview
We are a semiconductor manufacturer and global supplier of networking solutions comprised of
networking equipment, optical semiconductors, software and services. Our portfolio of solutions includes optical
transport platforms, converged packet-optical transport platforms, compact modular platforms, optical line
systems, coherent optical engines and subsystems, a suite of networking and automation software offerings, and
support and professional services. Leveraging our U.S.-based compound semiconductor fab and in-house test
and packaging capabilities, we design, develop, and manufacture industry-leading InP-based PICs for use in our
vertically integrated, high-capacity optical communications products.
Our customers include operators of fixed and mobile networks, including telecommunications service
providers, ICPs, cable providers, wholesale carriers, research and educational institutions, large enterprises,
utilities and government entities. Our networking solutions enable our customers to deliver high-bandwidth
business and consumer communications services. Our comprehensive portfolio of networking solutions also
enables our customers to build infrastructure networks that support and deliver high-bandwidth business and
consumer communications services. Our edge-to-core portfolio of networking solutions also enables our
customers to scale their transport networks as consumer and business services and applications continue to
drive growth in demand for network bandwidth. These consumer and business services and applications include,
but are not limited to, high-speed internet access, 4G/5G mobile broadband, cloud-based services, high-
definition video streaming services, virtual and augmented reality, IoT, AI, ML, business Ethernet services and
DCI.
As an optical semiconductor manufacturer, we specialize in the manufacturing of optical compound
semiconductors using InP. This technology is used in infrastructure networks to transmit massive amounts of
data and support delivery of business and communications services. We have made significant investments in
our unique research, development, fabrication, and packaging facilities, including our optical compound
semiconductor fab in Silicon Valley and advanced test and packaging center in Allentown, Pennsylvania. We
optimize the manufacturing process by using InP to build our PICs, which enables the integration of hundreds of
optical functions onto a onto a single, monolithic optical semiconductor chip. The unique capabilities of our
optical semiconductor fab, which has provided our customers with a critical and secure source of U.S.-produced
optical semiconductors and strengthened the supply chain, have enabled us to consistently pioneer critical
technology advancements. For example, our latest generation of technology has made it possible to transmit
information at a rate of 800 Gb/s using a single laser. Our ongoing research and development initiatives continue
to create a path to higher speed transmission and lower cost per bit performance for our customers.
We support U.S. government efforts to advance and increase the domestic manufacturing base for
semiconductors as a matter of economic and national security. Compound semiconductors – including those
based in InP – are an important part of the domestic semiconductor industry and will enable the next-generation
of leading-edge technologies. Domestic manufacturing is critical in order to reduce our reliance on foreign
sources of compound semiconductor materials and components, which is essential to economic growth and to
the security of our domestic communications infrastructure.
The large-scale integration of our PICs and advanced DSPs enables us to develop and manufacture
high-performance optical engines that are used in our coherent optical networking system and subsystem
solutions. These solutions include features that customers care about the most, including lowest cost per bit,
lowest power per bit, reduced footprint and increased flexibility, reliability and security. Coherent optical solutions
are becoming increasingly important across the network as our customers transition to 800 Gb/s per wavelength
transmission speeds and beyond in the network core, 400 Gb/s in the metro networks, and 100 Gb/s in the
access market segment. We believe our vertical integration strategy provides a competitive advantage by
enabling leading optical performance at higher optical speeds with increased spectral efficiency, greater control
over our supply chain, and an overall lower cost structure.
We have grown our solutions portfolio through internal development as well as acquisitions, including
the acquisition of Coriant. These developments positioned us to be one of the leading providers of vertically
integrated optical networking solutions in the world with the ability to serve a global customer base with
accelerated delivery of the innovative solutions our customers demand. In 2021, we announced an expansion of
our portfolio with the introduction of a suite of coherent optical pluggables designed to seamlessly address the
rapidly growing market for point-to-point optical transport solutions as well as create a new category of point-to-
multipoint solutions that can enable a dramatically more cost-efficient network architecture. Based on our
vertically integrated optical semiconductor technology and supporting a range of high-speed transport rates that
include 800 Gb/s, 400 Gb/s and 100 Gb/s, this suite of coherent optical pluggables builds on our history of
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delivering innovative, vertically integrated coherent optical technology that powers our differentiated optical
networking solutions.
Our products are designed to be managed by a suite of software solutions that enable simplified
network management, increased service agility and automated operations. We also provide software-enabled
programmability that offers differentiated capabilities such as Instant Bandwidth. Combined with our differentiated
hardware solutions, Instant Bandwidth enables our customers to purchase and activate bandwidth as needed
through our unique software licensing feature set. This, in turn, allows our customers to accomplish two key
objectives: (1) limit their initial network startup costs and investments; and (2) instantly activate new bandwidth as
their customers’ and their own network needs evolve.
We sell our products via a direct sales force and through indirect channel partners.
We believe our systems and subsystems solutions benefit our customers by providing a unique
combination of highly scalable capacity and advanced networking features that address edge-to-core transport
network applications and ultimately simplify and automate network operations. Our high-performance optical
transport solutions leverage the industry shift to open optical network architectures and enable our customers to
efficiently and cost-effectively keep pace with bandwidth demands, which continue to grow 30% or more year-
over-year.
Financial and Business Highlights
Total revenue was $1,614.1 million in 2023 as compared to $1,573.2 million in 2022, representing a 3%
increase. The total year-over-year increase in revenue was driven by the continued ramp and deployment of our
products within both our ICP and our other service provider verticals, which was modestly offset by lower
revenue from our Tier 1 and Cable verticals. In 2024, we anticipate benefiting from a more diversified customer
base and see several prospective opportunities to grow revenue by driving adoption of new and existing vertically
integrated solutions. Our results will depend on overall market conditions and, as is typical, quarter-over-quarter
revenue could be volatile, affected by, among other factors, customer buying patterns, component availability
within our supply chain and the timing of customer network deployments.
One end-customer accounted for 10% of our revenue in fiscal year 2023. One end-customer accounted
for 11% of our revenue in 2022 and no end-customer accounted for 10% or more of our revenue in fiscal year
2021.
Gross margin increased to 39% in 2023 from 34% in 2022. The year-over-year increase in gross margin
was driven by higher sales volume, favorable mix, lower component costs and improved absorption of fixed costs
from higher sales volumes. In 2024, we intend to continue to expand our vertical integration capabilities into a
broader range of our optical networking solutions utilizing our own internally developed optical engines. We
remain focused on improving our gross margin over time through engineering design efforts to lower component
costs in our supply chain as well as driving other efficiencies within our operations.
Operating expenses increased to $627.8 million in 2023 from $595.9 million in 2022, representing a 5%
increase. The increase was primarily attributable to higher employee-related costs and higher depreciation
expense. In 2024, we intend to continue to balance prudent cost management with strategic investments in
technology innovation and in our go-to-market efforts globally to expand our customer reach and drive additional
market share gains in the long term.
We primarily sell our products through our direct sales force, with the remainder sold through channel
partners. We derived 66% and 76% of our revenue from direct sales to customers in 2023 and 2022,
respectively. In the future, we expect to continue generating a majority of our revenue from direct sales.
We are headquartered in San Jose, California, with employees located throughout North America,
LATAM, EMEA and APAC.
55
3 %
2 %
3 %
(5) %
4 %
Results of Operations
A discussion regarding our financial condition and results of operations for the fiscal year ended
December 30, 2023 compared to our fiscal year ended December 31, 2022 is presented below. A discussion
regarding our financial condition and results of operations for our fiscal year ended December 31, 2022
compared to our fiscal year ended December 25, 2021 can be found under Item 7 of our Amendment No. 1 to
our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2022, filed with the SEC on February
29, 2024.
The following tables set forth, for the periods presented, certain consolidated statements of operations
information (in thousands, except percentages):
Years Ended
December 30,
2023
% of total
revenue
December 31,
2022
% of total
revenue
Change
% Change
Revenue:
Product
Services
$ 1,304,229
81 % $ 1,268,624
81 % $ 35,605
309,899
19 %
304,618
19 %
5,281
Total revenue
$ 1,614,128
100 % $ 1,573,242
100 % $ 40,886
Cost of revenue:
Product
Services
Amortization of intangible
assets
Restructuring and other
related costs
$
810,845
50 % $
852,476
54 % $ (41,631)
167,532
10 %
161,630
10 %
5,902
10,621
1 %
23,138
1 %
(12,517)
(54) %
2,218
— %
222
— %
1,996
899 %
Total cost of revenue $
991,216
61 % $ 1,037,466
66 % $ (46,250)
Gross profit
$
622,912
39 % $
535,776
34 % $ 87,136
(4) %
16 %
56
Years Ended
December 31,
2022
% of total
revenue
December 25,
2021
% of total
revenue
Change
% Change
Revenue:
Product
Services
$ 1,268,624
81 % $ 1,099,376
77 % $ 169,248
304,618
19 %
325,829
23 %
(21,211)
Total revenue
$ 1,573,242
100 % $ 1,425,205
100 % $ 148,037
Cost of revenue:
Product
Services
Amortization of intangible
assets
Restructuring and other
related costs
$
852,476
54 % $
732,071
51 % $ 120,405
161,630
10 %
174,008
12 %
(12,378)
23,138
1 %
19,621
1 %
3,517
222
— %
1,531
— %
(1,309)
Total cost of revenue $ 1,037,466
66 % $
927,231
65 % $ 110,235
Gross profit
$
535,776
34 % $
497,974
35 % $ 37,802
15 %
(7) %
10 %
16 %
(7) %
18 %
(85) %
12 %
8 %
Revenue
2023 Compared to 2022. Product revenue increased by $35.6 million, or 3%, in 2023 from 2022. This
increase was primarily driven by the growth of optical line system products as well as deployments of our
vertically integrated optical products.
Services revenue increased by $5.3 million, or 2%, in 2023 from 2022. This increase was primarily
attributable to higher professional services revenue from new and existing customer deployment projects.
Revenue will be lower in the first quarter of 2024 as compared to the fourth quarter of 2023 due to the
seasonality of our business.
Revenue by geographic region is based on the shipping address of the customer. The following tables
summarize our revenue by geography and sales channel for the periods presented (in thousands, except
percentages):
Total revenue by geography
Domestic
International
Total revenue by sales channel
Direct
Indirect
Years Ended
December 30,
2023
% of total
revenue
December 31,
2022
% of total
revenue
Change
% Change
$
994,311
62 % $
870,282
55 % $ 124,029
619,817
38 %
702,960
45 %
(83,143)
$ 1,614,128
100 % $ 1,573,242
100 % $ 40,886
$ 1,067,570
66 % $ 1,191,584
76 % $ (124,014)
546,558
34 %
381,658
24 % 164,900
$ 1,614,128
100 % $ 1,573,242
100 % $ 40,886
14 %
(12) %
3 %
(10) %
43 %
3 %
57
Total revenue by geography
Domestic
International
Total revenue by sales channel
Direct
Indirect
Years Ended
December 31,
2022
% of total
revenue
December 25,
2021
% of total
revenue
Change % Change
$
870,282
55 % $
663,808
47 % $ 206,474
702,960
45 %
761,397
53 % (58,437)
$ 1,573,242
100 % $ 1,425,205
100 % $ 148,037
$ 1,191,584
76 % $ 1,099,632
77 % $ 91,952
381,658
24 %
325,573
23 % 56,085
$ 1,573,242
100 % $ 1,425,205
100 % $ 148,037
31 %
(8) %
10 %
8 %
17 %
10 %
2023 Compared to 2022. Domestic revenue increased by $124.0 million, or 14%, in 2023 compared to
2022, driven primarily by increased revenue from each of our ICP and other service provider verticals, which was
partially offset by decreased revenue from certain Tier 1 customers and our cable vertical.
International revenue decreased by $83.1 million, or 12%, in 2023 compared to 2022, primarily from
lower other service provider revenue in EMEA and lower Tier 1 revenue in APAC.
Direct revenue decreased by $124.0 million, or 10%, in 2023 compared to 2022, primarily from lower
revenue from Tier 1 customers, which vary period to period based upon the timing of customer deployment
projects.
Indirect revenue increased $164.9 million, or 43%, related to revenue growth within ICP and other
service provider verticals, which was modestly offset by lower Tier 1 revenue.
2023 Compared to 2022. Gross profit increased by $87.1 million, with gross margin increasing to 39% in
2023 from 34% in 2022. The gross margin improvement was driven by favorable product mix, cost reductions,
including relief from elevated supply chain costs, and increased vertical integration. In 2024, we intend to
continue to expand our vertical integration capabilities, drive down direct material costs through further design
efforts coupled with vendor negotiations. We believe we will be able to improve our gross margin over time by
leveraging our existing infrastructure as volumes increase.
In any given quarter, gross margins can fluctuate based on a number of factors, including the mix of
optical line system footprint versus capacity utilization, product mix, customer mix and overall volume.
Amortization of Intangible Assets
2023 Compared to 2022. Amortization of intangible assets decreased by $12.5 million, or 54%, in 2023
from 2022. The decrease was due to certain developed technology assets that were fully amortized in 2022.
Restructuring and Other Related Costs
2023 Compared to 2022. Restructuring and other related costs increased by $2.0 million in 2023 from
2022. The increase was due to the 2023 Restructuring Plan and the costs incurred comprised of severance and
related payroll charges. See Note 8, “Restructuring and Other Related Costs” to the notes to consolidated
financial statements for more information on our restructuring plans.
58
Operating Expenses
The following tables summarize our operating expenses for the periods presented (in thousands, except
percentages):
Years Ended
December 30,
2023
% of total
revenue
December 31,
2022
% of total
revenue
Change
% Change
Research and development
$
316,879
20 % $
306,188
19 % $ 10,691
Sales and marketing
General and administrative
166,938
124,874
10 %
146,445
9 %
20,493
8 %
118,602
8 %
6,272
3 %
14 %
5 %
Amortization of intangible
assets
Restructuring and other related
costs
12,344
1 %
14,576
1 %
(2,232)
(15) %
6,717
— %
10,122
1 %
(3,405)
(34) %
Total operating expenses
$
627,752
39 % $
595,933
38 % $ 31,819
5 %
Years Ended
December 31,
2022
% of total
revenue
December 25,
2021
% of total
revenue
Change
% Change
Research and development
$
306,188
19 % $
299,894
21 % $
6,294
Sales and marketing
General and administrative
Amortization of intangible
assets
Acquisition and integration
costs
Restructuring and other
related costs
146,445
118,602
9 %
8 %
138,829
115,415
10 %
8 %
7,616
3,187
14,576
1 %
17,455
1 %
(2,879)
(16) %
—
— %
614
— %
(614)
(100) %
2 %
5 %
3 %
(24) %
2 %
10,122
1 %
13,246
1 %
(3,124)
Total operating expenses $
595,933
38 % $
585,453
41 % $
10,480
59
The following table summarizes the stock-based compensation expense included in our operating
expenses for the periods presented (in thousands):
Research and development
Sales and marketing
General and administration
Total
Research and Development Expenses
Years Ended
December 30,
2023
December 31,
2022
December 25,
2021
$
22,474 $
23,553 $
13,699
15,977
13,311
14,666
$
52,150 $
51,530 $
18,554
12,345
12,985
43,884
2023 Compared to 2022. Research and development expenses increased by $10.7 million, or 3%, in
2023 from 2022. The increase was primarily attributable to increases in employee-related expenses, outside
professional services and depreciation expense. In 2024, we expect to make additional targeted investments
focused on product enhancements to both new and existing products. Our goal is to continue expanding the
breadth and performance of our product portfolio while simultaneously driving down component costs through
design innovation, which we believe will ultimately result in additional market share capture.
Sales and Marketing Expenses
2023 Compared to 2022. Sales and marketing expenses increased by $20.5 million, or 14%, in 2023
from 2022. This increase was driven by higher employee-related expenses, increased travel, higher trials and
marketing-related costs. In 2024, we plan to modestly grow this spend and strategically invest in our go-to-
market programs in an effort to expand our customer reach to drive long-term market share gains.
General and Administrative Expenses
2023 Compared to 2022. General and administrative expenses increased by $6.3 million, or 5%, in
2023 from 2022. The increase was attributable to higher employee-related expenses, higher depreciation
expense and increased indirect taxes, partially offset by lower litigation spend and lower outside professional
fees. In 2024, we anticipate a modest increase in general and administrative expenses as we invest in system
automation initiatives, personnel and other outside professional services.
Amortization of Intangible Assets
2023 Compared to 2022. Amortization of intangible assets decreased by $2.2 million or 15%, in 2023
from 2022. The decrease was largely due to lower amortization of certain customer relationships and backlog
being fully amortized in the first quarter of 2023.
60
Restructuring and Other Related Costs
2023 Compared to 2022. Restructuring and other related costs decreased by $3.4 million, or 34%, in
2023 compared to 2022. The decrease was primarily due to lower lease-related impairment charges in 2023.
See Note 8, “Restructuring and Other Related Costs” to the notes to consolidated financial statements for more
information on our restructuring plans.
Other Income (Expense), Net
Interest income
Interest expense
Gain on extinguishment of debt
Other gain (loss), net
Years Ended
December 30,
2023
December 31,
2022
December 25,
2021
(In thousands)
$
2,716 $
893 $
455
(30,609)
(26,015)
(49,099)
—
15,325
15,521
14,247
—
(22,667)
Total other income (expense), net
$
(12,568) $
4,646 $
(71,311)
2023 Compared to 2022. Interest income increased by $1.8 million in 2023 compared to 2022 primarily
due to increased interest from investments in money market funds.
Interest expense increased by $4.6 million in 2023 compared to 2022. The increase in interest expense
was primarily due to the issuance of the $373.8 million and $100.0 million, aggregate principal amount of the
Existing 2028 Notes and the Additional 2028 Notes in August 2022 and June 2023, respectively, partially offset
by repurchase of the 2024 Notes. See Note 11, “Debt” to the notes to consolidated financial statements for more
information.
Gain on extinguishment of debt was $15.5 million in 2022 due to the partial repurchase of our 2024
Notes at a price that was below their par value. The gain includes and was reduced by the write-off of related
deferred issuance costs of $3.5 million.
The change in other gain (loss), net, 2023 compared to 2022, was $1.1 million primarily due to an
increase in foreign exchange gains driven by foreign currency exchange rate changes.
Provision for Income Taxes
We recognized an income tax expense of $7.8 million on a loss before income taxes of $17.4 million,
and $20.5 million on a loss before income taxes of $55.5 million, in 2023 and 2022, respectively. The resulting
effective tax rates were (44.8)% and (37.1)% for 2023 and 2022, respectively. The 2023 and 2022 effective tax
rates differ from the expected statutory rate of 21% based on state income taxes, tax credits, stock-based
compensation expenses, foreign income taxed at different rates, impact due to foreign currency translation,
foreign income inclusions in the U.S., foreign tax credit expiration, and losses in foreign jurisdictions that require
a valuation allowance. The decrease in 2023 income tax provision compared to 2022 is due to benefit received
from material foreign discrete.
Because of our U.S. operating loss in 2023, significant loss carryforward position, and corresponding
valuation allowance in all years, other than separate filing state taxes, a few combined states and minimum
taxes, we have not been subject to federal or state tax on our U.S. income because of the availability of loss
carryforwards. If these losses and other tax attributes become fully utilized, our taxes will increase significantly to
a more normalized, expected rate on U.S. earnings. The release of transfer pricing reserves in the future may
have a beneficial impact to tax expense, but the timing of the impact depends on factors such as expiration of the
statute of limitations or settlements with tax authorities. No significant releases are expected in the near future
based on information available at this time.
61
Liquidity and Capital Resources
Net cash flow provided by (used in):
Operating activities
Investing activities
Financing activities
Cash and cash equivalents
Restricted cash
Years Ended
December 30,
2023
December 31,
2022
December 25,
2021
(In thousands)
$
$
$
49,510 $
(37,560) $
28,128
(62,314) $
(46,053) $
(41,379)
13,713 $
82,346 $
(101,544)
Years Ended
December 30,
2023
December 31,
2022
(In thousands)
$
$
172,505 $
178,657
1,354
10,546
173,859 $
189,203
Our restricted cash balance amounts are primarily pledged as collateral for certain standby letters of
credit related to customer performance guarantees, value added tax licenses and property leases.
Operating Activities
Net cash provided by operating activities was $49.5 million for 2023, as compared to net cash used in
operating activities of $37.6 million for 2022 and net cash provided by operating activities of $28.1 million for
2021.
Net loss for 2023 was $25.2 million, which included non-cash charges of $152.6 million such as
depreciation, stock-based compensation, amortization of intangibles assets, operating lease expense,
restructuring charges and related costs, and amortization of debt issuance costs, compared to a net loss of $76.0
million in 2022, which included non-cash charges of $152.1 million. Net cash used in working capital was $77.9
million in 2023. Accounts receivable decreased by $38.5 million due to timing of billings and collections. Inventory
levels increased by $57.9 million due to changes in customer order patterns that reduced the amount of inventory
drawdown following our efforts to build inventory to manage previous lead time challenges. Prepaid and other
assets decreased by $9.7 million primarily due to decrease in customer contract assets. Accounts payable
decreased by $2.9 million primarily due timing of payments to suppliers. Accrued liabilities and other expenses
decreased by $40.1 million primarily due to lower contract manufacturing accruals and decreases in accrued
taxes, partially offset by increases in restructuring and other compensation related expenses. Deferred revenue
decreased by $25.3 million due to amortization of maintenance renewals during the period.
Net loss for 2022 was $76.0 million, which included non-cash charges of $152.1 million such as
depreciation, stock-based compensation, amortization of intangibles assets, operating lease expense,
restructuring charges and related costs, and amortization of debt issuance costs, compared to a net loss of
$170.8 million in 2021, which included non-cash charges of $193.8 million. Net cash used in working capital was
$113.7 million in 2022. Accounts receivable increased by $69.0 million due to higher billings to customers and
timing of collections. Inventory levels increased by $89.5 million due to our efforts to purchase more inventory to
manage lead time challenges resulting from the industry-wide supply chain environment. Prepaid and other
assets increased by $34.0 million primarily due to increase in contract manufacturer deposits and increase in
customer contract assets. Accounts payable increased by $88.3 million primarily due timing of payments to
suppliers. Accrued liabilities and other expenses decreased by $24.4 million primarily due to timing of payments
of other compensation related expenses and decreased restructuring and tax liabilities. Deferred revenue
62
increased by $15.1 million due to higher maintenance renewals during the period attributable to expanding our
installed base. Maintenance contracts are typically contracted on an annual or multi-year basis.
Investing Activities
Net cash used in investing activities was for the purchase of property and equipment and amounted to
$62.3 million and $46.1 million for 2023 and 2022, respectively. The increase was primarily due to capital
expenditures related to laboratory and manufacturing equipment.
Financing Activities
Net cash provided by financing activities was $13.7 million for 2023. Financing activities in 2023
primarily included net proceeds of $15.3 million from issuance of the 2028 Notes and partial repurchase of the
2024 Notes, and $14.9 million from the issuance of shares of our common stock under the ESPP. These
proceeds were offset by $10.4 million term license purchases, $2.1 million payment of debt issuance costs
incurred in connection with the issuance of the 2028 Notes and entering into the asset-based revolving credit
facility under the Loan Agreement, $1.0 million payments on finance lease obligations, and tax withholdings in
the amount of $2.5 million paid on behalf of certain employees for net share settlements of restricted stock units
(“RSUs”).
Net cash provided by financing activities was $82.3 million for 2022. Financing activities in 2022
primarily included net proceeds of $92.9 million from issuance of the 2028 Notes and partial repurchase of the
2024 Notes, and $15.2 million from the issuance of shares of our common stock under the ESPP. These
proceeds were offset by $7.7 million term license purchases, $12.5 million payment of debt issuance costs
incurred in connection with the issuance of the 2028 Notes and entering into the asset-based revolving credit
facility under the Loan Agreement, $1.3 million payments on finance lease obligations, and tax withholdings in
the amount of $3.7 million paid on behalf of certain employees for net share settlements of RSUs.
Liquidity
We believe that our current cash, along with the Credit Facility (as defined below) will be sufficient to
meet our anticipated cash needs for working capital and capital expenditures, the repayment of our 2024 Notes
and the interest payments on the 2027 Notes, the 2028 Notes and the Credit Facility for at least 12 months. If the
impact to our business and financial position from weakness in the global economy, banking sector and financial
markets is more extensive or prolonged than expected and our existing sources of cash are insufficient to satisfy
our liquidity requirements, we may require additional capital from equity or debt financings to fund our operations,
to respond to competitive pressures or strategic opportunities, or otherwise. In addition, we are continuously
evaluating alternatives for efficiently funding our capital expenditures and ongoing operations. We may, subject to
market conditions and other considerations, from time to time engage in a variety of financing transactions for
such purposes, including the issuance of securities or the incurrence of additional debt and the refinancing of
existing debt. We may not be able to secure timely additional financing, or restructure existing debt, on favorable
terms or at all. The terms of any additional financings or restructurings may place limits on our financial and
operating flexibility. If we raise additional funds through further issuances of equity or equity-linked securities, our
existing stockholders could suffer dilution in their percentage ownership of us, and any new securities we issue
could have rights, preferences and privileges senior to those of holders of our common stock.
On August 8, 2022, and on June 16, 2023, we issued the Existing 2028 Notes, and the Additional 2028
Notes, respectively which will mature on August 1, 2028, unless earlier repurchased, redeemed or converted.
Interest is payable semi-annually in arrears on February 1 and August 1 of each year, which commenced on
February 1, 2023. In the event that all of the 2028 Notes are converted, we would be required to repay the
principal amount in cash and the conversion premium in any combination of cash and shares of its common
stock at our election.
The net proceeds from the issuance of the Additional 2028 Notes, after deducting the repurchase price
for the 2024 Notes and offering expenses and fees, was approximately $12.5 million. We used the net proceeds
from this offering for general corporate purposes, including working capital and to fund growth and potential
strategic projects.
63
On March 9, 2020, we issued the 2027 Notes, which will mature on March 1, 2027, unless earlier
repurchased, redeemed or converted. Interest is payable semi-annually in arrears on March 1 and September 1
of each year, which commenced on September 1, 2020. For the conversion obligation, we intend to pay or
deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our
common stock, at our election.
On September 11, 2018, we issued the 2024 Notes, which will mature on September 1, 2024, unless
earlier repurchased, redeemed or converted. Interest is payable semi-annually in arrears on March 1 and
September 1 of each year, which commenced on March 1, 2019. For the conversion obligation, we intend to pay
or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our
common stock, at our election.
For more information regarding the convertible senior notes, see Note 11, “Debt” to the notes to
consolidated financial statements. Refer to the contractual obligations section below for future payment
obligations.
On June 24, 2022, we entered into a Loan, Guaranty and Security Agreement (the "Loan Agreement")
with the lenders party thereto, and Bank of America, N.A., as agent. The Loan Agreement provides for a senior
secured asset-based revolving credit facility of up to $200 million (the "Credit Facility"), which we may draw upon
from time to time. We may increase the total commitments under the revolving credit facility by up to an
additional $100 million, subject to certain conditions. In addition, the Loan Agreement provides for a $50 million
letter of credit subfacility and a $20 million swingline loan facility.
As of December 30, 2023, we had no drawings on the Credit Facility and we had availability of
$177.7 million under the Credit Facility. For more information regarding the Credit Facility, see Note 11, “Debt” to
the notes to consolidated financial statements.
As of December 30, 2023, we had $173.9 million of cash, cash equivalents and restricted cash including
$48.1 million of cash held by our foreign subsidiaries. Our policy with respect to undistributed foreign
subsidiaries' earnings is to consider those earnings to be indefinitely reinvested. As a result of the enactment in
the United States of the Tax Cuts and Jobs Act of 2017 (the "Jobs Act"), if and when funds are actually distributed
in the form of dividends or otherwise, we expect minimal tax consequences, including foreign withholding taxes,
which would be applicable in some jurisdictions.
We had standby letters of credit and bank guarantees as of the years ended December 30, 2023 and
December 31, 2022. See Note 13, “Guarantees” to the notes to consolidated financial statements for further
information.
Contractual Obligations
The following is a summary of our contractual obligations as of December 30, 2023 and December 31,
2022 (in thousands):
December 30,
2023
December 31,
2022
Change
% Change
Operating leases(1)
Finance lease obligations
Purchase obligations(2)
2028 Notes, including interest(3)
2027 Notes, including interest(3)
2024 Notes, including interest(3)
Mortgage payable, including interest
$
111,316 $
71,903 $
39,413
5,220
466,346
562,579
217,500
19,145
6,830
966
4,254
744,777
(278,431)
457,572
222,500
107,015
7,611
105,007
(5,000)
(87,870)
(781)
Total contractual obligations(4)
$
1,388,936 $
1,612,344 $
(223,408)
55 %
440 %
(37) %
23 %
(2) %
(82) %
(10) %
(14) %
(1) We lease facilities under non-cancelable operating lease agreements. These leases have varying terms that range
from one to 14 years, and contain leasehold improvement incentives, rent holidays and escalation clauses. In
addition, some of these leases have renewal options for up to six years. We also have contractual commitments to
remove leasehold improvements and return certain properties to a specified condition when the leases terminate.
See Note 12, "Commitments and Contingencies" to the notes to consolidated financial statements for more
information.
64
(2) We have service agreements with certain production suppliers under which we are committed to purchase certain
parts. The decrease in purchase obligations compared with the end of fiscal 2022 was primarily due to our efforts to
reduce inventory and overall spend.
(3)
(4)
For additional information regarding our asset-based revolving credit facility and 2028, 2027 and 2024 Notes, see
Note 11, “Debt” to the notes to consolidated financial statements.
Certain commitments and contingencies are not included in the table because we cannot reliably estimate the timing
and amount of future payments, if any. For example, tax liabilities of $8.1 million related to uncertain tax positions
and expected future payments to our pension and post-employment plans are excluded from the contractual
obligation table because they do not represent contractual cash outflows as they are dependent on various factors.
See Note 17, "Employee Benefit and Pension Plans" to the notes to consolidated financial statements for more
information relating to our pension and post-retirement benefit plans.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. These accounting
principles require us to make certain estimates, assumptions and judgments that can affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated
financial statements, as well as the reported amounts of revenue and expenses during the periods presented.
See Note 2, “Significant Accounting Policies” to the notes to consolidated financial statements, which is included
in Part II, Item 8 of this Annual Report on Form 10-K. Financial Statements and Supplementary Data, which
describes our significant accounting policies and methods used in preparation of our consolidated financial
statements. Management believes that the estimates, assumptions and judgments upon which they rely are
reasonable based upon information available to them at the time that these estimates and judgments are made.
To the extent there are material differences between these estimates and actual results, our consolidated
financial statements will be affected.
We believe our critical accounting policies and estimates are those related to revenue recognition,
accounting for income taxes, and inventory valuation. Management considers these policies critical because they
are both important to the portrayal of our financial condition and results of operations, and they require
management to make judgments and estimates about inherently uncertain matters.
Revenue Recognition
We recognize revenue when control of the promised goods or services is transferred to our customers,
in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We determine revenue recognition by applying the following five-step approach:
•
•
•
•
•
identification of the contract, or contracts, with a customer;
identification of the performance obligations in the contract;
determination of the transaction price;
allocation of the transaction price to the performance obligations in the contract; and
recognition of revenue when, or as, we satisfy a performance obligation.
Many of our product sales are sold in combination with installation and deployment services along with
initial hardware and software support. Our product sales are also sold at times with spares management, on-site
hardware replacement services, network operations management, software subscription services, extended
hardware warranty and training. Initial software and hardware support services are generally delivered over a
one-year period in connection with the initial purchase. Software warranty provides customers with maintenance
releases during the warranty support period and hardware warranty provides replacement or repair of equipment
that fails to perform in line with specifications. Software subscription services include software warranty and
additionally provides customers with rights to receive unspecified software product upgrades released during the
support period.
Spares management and on-site hardware replacement services include the replacement of defective
units at customer sites in accordance with specified service level agreements. Network operations management
includes the day-to-day operation of a customer's network. These services are generally delivered on an annual
basis. We evaluate each promised good and service in a contract to determine whether it represents a distinct
performance obligation or should be accounted for as a combined performance obligation.
65
Services revenue includes software subscription services, installation and deployment services, spares
management, on-site hardware replacement services, network operations management, extended hardware
warranty and training. Revenue from software subscription services, spares management, on-site hardware
replacement services, network operations management and extended hardware warranty contracts is deferred
and is recognized ratably over the contractual support period, which is generally one year, as services are
provided over the course of the entire period. Revenue related to training and installation and deployment
services is recognized upon completion of the services.
Contracts and customer purchase orders are generally used to determine the existence of an
arrangement. In addition, shipping documents and customer acceptances, when applicable, are used to verify
delivery and transfer of title. We typically satisfy our performance obligations upon shipment or delivery of
product depending on the contractual terms. Payment terms to customers generally range from net 30 to 120
days from invoice, which are considered to be standard payment terms. We assess our ability to collect from our
customers based primarily on the creditworthiness and past payment history of the customer.
Customer product returns are generally approved on a case by case basis. Specific reserve provisions
are made based upon a specific review of all the approved product returns where the customer has yet to return
the products to generate the related sales return credit at the end of a period. Estimated sales returns are
recorded as a reduction to revenue.
For sales to resellers, the same revenue recognition criteria apply. It is our practice to identify an end-
customer prior to shipment to a reseller. We do not offer rights of return or price protection to our resellers.
We report revenue net of any required taxes collected from customers and remitted to government
authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government
authority.
Customer Purchase Commitments
We sell software licenses that provide customers the ability to purchase incremental bandwidth capacity
on an already-deployed piece of hardware. Instant Bandwidth-enabled systems generally include a specific initial
capacity and incremental capacity can be added by the purchase of Instant Bandwidth licenses. Instant
Bandwidth licenses are considered distinct performance obligations because customers can provision additional
transmission capacity on demand without the deployment of any incremental equipment.
Some contracts commit the customer to purchase incremental Instant Bandwidth licenses within a
specified time frame from the initial shipment of the Instant Bandwidth-enabled hardware. The time frame varies
by customer and generally ranges between 12 to 24 months. If the customer does not purchase the additional
capacity within the time frame as stated in the contract, we have the right to deliver and invoice such Instant
Bandwidth licenses to the customer. Future committed licenses are considered to be additional performance
obligations when a minimum purchase obligation is present, as evidenced by enforceable rights and obligations.
As such, we are required to estimate the variable consideration for future Instant Bandwidth licenses as part of
determining the contract transaction price.
Contract Termination Rights
The contract term is determined on the basis of the period over which the parties to the contract have
present enforceable rights and obligations. Certain customer contracts include a termination for convenience
clause that allows the customer to terminate services without penalty, upon advance notification. For such
contracts, the service duration is limited to the non-cancelable portion of the contract.
Variable Consideration
The consideration associated with customer contracts is generally fixed. Variable consideration includes
discounts, rebates, refunds, credits, incentives, penalties, or other similar items. The amount of consideration
that can vary is not a substantial portion of total consideration.
Variable consideration estimates are re-assessed at each reporting period until a final outcome is
determined. The changes to the original transaction price due to a change in estimated variable consideration will
be applied on a retrospective basis, with the adjustment recorded in the period in which the change occurs.
66
Stand-alone Selling Price
The transaction price for a contract is allocated among the performance obligations on a relative SSP
basis. The SSP is the price at which an entity would sell a promised product or service separately to a customer.
While certain services we sell have readily observable SSPs, the majority of our products and services
are generally not sold on a stand-alone basis and therefore SSPs for such products and services are not directly
observable. If there is no observable SSP, it is estimated using judgment and considering all reasonably available
information, including but not limited to, gross margin objectives, pricing practices in customer contracts with
multiple goods and services, internal costs, historical profitability data, competitor pricing strategies, as well as
other observable inputs. The determination of SSPs for performance obligation is assessed on a periodic basis
and estimates are revised to reflect any significant changes to underlying assumptions, as needed.
Transaction Price Allocated to the Remaining Performance Obligation
Our remaining performance obligations represent the transaction price allocated to performance
obligations that are unsatisfied or partially satisfied, as of period end, consisting of deferred revenue and non-
cancellable backlog. Our backlog represents purchase orders received from customers for future product
shipments and services that are unsatisfied or partially satisfied as of period end. Our backlog is subject to future
events that could cause the amount or timing of the related revenue to change. Orders in backlog may be fulfilled
several quarters following receipt or may relate to multi-year support service obligations.
Accounting for Income Taxes
As part of the process of preparing our consolidated financial statements, we are required to estimate
our taxes in each of the jurisdictions in which we operate. We estimate actual current tax expense together with
assessing temporary differences resulting from different treatment of items, such as accruals and allowances not
currently deductible for tax purposes. These differences result in deferred tax assets and liabilities, which are
included in our consolidated balance sheets. In general, deferred tax assets represent future tax benefits to be
received when certain expenses previously recognized in our consolidated statements of operations become
deductible expenses under applicable income tax laws or loss, or credit carryforwards are utilized. Accordingly,
realization of our deferred tax assets is dependent on future taxable income within the respective jurisdictions
against which these deductions, losses and credits can be utilized within the applicable future periods.
We must assess the likelihood that some portion or all of our deferred tax assets will be recovered from
future taxable income within the respective jurisdictions. To the extent the Company believes that recovery does
not meet the “more-likely-than-not” standard, it must establish a valuation allowance. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income during the periods in which those
temporary differences become deductible. Management judgment is required in determining its provision for
income taxes, its deferred tax assets and liabilities and any valuation allowance recorded against our net
deferred tax assets. In evaluating the need for a full or partial valuation allowance, all positive and negative
evidence must be considered, including the Company's forecast of taxable income over the applicable
carryforward periods, its current financial performance, its market environment, and other factors. Based on the
available objective evidence, at December 30, 2023, management believes it is not more likely than not that the
domestic net deferred tax assets will be realizable in the foreseeable future. Accordingly, the domestic net
deferred tax assets are subject to a full valuation allowance. To the extent that the Company determines that
deferred tax assets are realizable on a more likely than not basis, and an adjustment is needed, that adjustment
will be recorded in the period that the determination is made.
Inventory Valuation
Inventories consist of raw materials, work-in-process and finished goods and are stated at standard cost
adjusted to approximate the lower of actual cost or net realizable value. Costs are recognized utilizing the first-in,
first-out method. Net realizable value is based upon an estimated selling price reduced by the estimated cost of
disposal. The determination of market value involves numerous judgments including estimated average selling
prices based upon recent sales volumes, industry trends, existing customer orders, current contract price, future
demand and pricing and technological obsolescence of our products.
67
Inventory that is obsolete or in excess of our forecasted demand or is anticipated to be sold at a loss is
written down to its estimated net realizable value based on historical usage and expected demand. In valuing our
inventory costs and deferred inventory costs, we considered whether the net realizable value of inventory
delivered or expected to be delivered at less than cost, primarily comprised of common equipment, had declined.
We concluded that, in the instances where the net realizable value of inventory delivered or expected to be
delivered was less than cost, it was appropriate to value the inventory costs and deferred inventory costs at cost
or net realizable value, whichever is lower, thereby recognizing the cost of the reduction in net realizable value of
inventory in the period in which the reduction occurred or can be reasonably estimated. We have, therefore,
recognized inventory write-downs as necessary in each period in order to reflect inventory at the lower of actual
cost or net realizable value.
We consider whether we should accrue losses on firm purchase commitments related to inventory
items. Given that the net realizable value of common equipment is below contractual purchase price, we have
also recorded losses on these firm purchase commitments in the period in which the commitment is made. When
the inventory parts related to these firm purchase commitments are received, that inventory is recorded at the
purchase price less the accrual for the loss on the purchase commitment.
Recent Accounting Pronouncements
See Note 2, “Significant Accounting Policies” to the notes to consolidated financial statements for a full
description of recent accounting pronouncements including the respective expected dates of adoptions and
effects on us.
68
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Risk
We operate in international markets, which expose us to market risk associated with foreign currency
exchange rate fluctuations between the U.S. dollar and various foreign currencies, the most significant of which
is the euro. The majority of our revenue contracts are denominated in U.S. dollars, with the most significant
exception being in Europe, where we invoice primarily in euros. Additionally, a portion of our expenses, primarily
the cost of personnel for research and development and sales and sales support to deliver technical support on
our products and professional services and the cost to manufacture, are denominated in foreign currencies,
primarily the Indian rupee, the euro, the SEK and the British pound. Revenue resulting from selling in local
currencies and costs incurred in local currencies are exposed to foreign currency exchange rate fluctuations that
can affect our operating income. As exchange rates vary, operating income may differ from expectations.
We may enter into foreign currency exchange forward contracts to reduce the impact of currency
exchange rate movements on certain transactions from time to time, but do not cover all foreign-denominated
transactions and therefore do not entirely eliminate the impact of fluctuations in exchange rates that could
negatively affect our results of operations and financial condition. We also may enter into foreign currency
exchange forward contracts to reduce the impact of foreign currency fluctuations on certain non-functional
currency denominated account balances primarily in euros and British pounds from time to time. As a result, we
do not expect a significant impact to our results from a change in exchange rates on foreign denominated non-
functional account balances in the near-term. Gains and losses on these contracts are intended to offset the
impact of foreign exchange rate fluctuations on the underlying foreign currency denominated non-functional
currency account balances. Accordingly, the effect of an immediate 10% adverse change in foreign exchange
rates on these transactions during 2023 would not be material to our results of operations.
Interest Rate Risk
We had cash, cash equivalents and restricted cash totaling $173.9 million and $189.2 million as of
December 30, 2023 and December 31, 2022, respectively. The unrestricted cash is held for working capital
purposes. We do not enter into investments for speculative purposes. The effect of an immediate 10% adverse
change in interest rates would not be material to our results of operations.
The 2024 Notes, 2027 Notes and 2028 Notes have a fixed annual interest rate of 2.125%, 2.50% and
3.75%, respectively, and, therefore, we do not have economic interest rate exposure on the convertible senior
notes. However, the fair values of the convertible senior notes are subject to interest rate risk, credit risk and
other factors due to the convertible feature. The fair value of the convertible senior notes will generally increase
as interest rates fall and decrease as interest rates rise. In addition, the fair value of the convertible senior notes
will generally increase as our common stock price increases and will generally decrease as our common stock
price declines in value. The fair value of the convertible senior notes will generally increase as our credit
worthiness improves and decrease when our creditworthiness weakens. The interest and market value changes
affect the fair value of the convertible senior notes but do not impact our financial position, cash flows or results
of operations due to the fixed nature of the debt obligation. Additionally, we do not carry the convertible senior
notes at fair value. We present the fair value for required disclosure purposes only. As of December 30, 2023, the
fair value of the 2024 Notes, 2027 Notes and 2028 Notes was $18.0 million, $183.2 million and $457.4 million,
respectively. The fair value was determined based on the estimated fair value or quoted bid price as applicable of
the 2024 Notes, 2027 Notes and 2028 Notes in an over-the-counter market on December 29, 2023. The
convertible senior notes are classified as Level 2 of the fair value hierarchy.
Holders may convert the convertible senior notes prior to maturity upon the occurrence of certain
circumstances. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock
or a combination of cash and shares of our common stock, at our election (provided, however, that with respect
to the 2028 Notes, we would be required to repay the principal amount in cash and the conversion premium in
any combination of cash and shares of our common stock at our election). If our common stock price is above
the initial conversion price of $9.87, $7.66 and $6.80 for the 2024 Notes, 2027 Notes and 2028 Notes,
respectively, upon conversion or at maturity, the amount of cash or shares of common stock required to pay the
conversion premium is not fixed and would increase if our common stock price increases.
See Note 11, “Debt” to the notes to consolidated financial statements for further information.
69
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Note 1: Organization and Basis of Presentation
Note 2: Significant Accounting Policies
Note 3: Leases
Note 4: Revenue Recognition
Note 5: Fair Value Measurements
Note 6: Goodwill and Intangibles
Note 7: Balance Sheet Details
Note 8: Restructuring and Other Related Costs
Note 9: Accumulated Comprehensive Income (Loss)
Note 10: Basic and Diluted Net Loss Per Common Share
Note 11: Debt
Note 12: Commitments and Contingencies
Note 13: Guarantees
Note 14: Stockholders' Equity
Note 15: Income Taxes
Note 16: Segment Information
Note 17: Employee Benefit and Pension Plans
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70
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Infinera Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Infinera Corporation (the Company) as of
December 30, 2023 and December 31, 2022, the related consolidated statements of operations, comprehensive
income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 30,
2023, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively
referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company at December 30, 2023 and
December 31, 2022, and the results of its operations and its cash flows for each of the three years in the period
ended December 30, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company's internal control over financial reporting as of December 30, 2023,
based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) and our report dated May 17, 2024, expressed an
adverse opinion thereon.
Adoption of ASU No. 2020-06
As discussed in Note 11 to the consolidated financial statements, the Company changed its method for
accounting for convertible debt in the year ended December 31, 2022 due to the adoption of Accounting
Standards Update ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible
Instruments and Contracts in an Entity’s Own Equity.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate
to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective or complex judgments. The communication of the critical audit matters does not alter in
any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
71
Inventory Valuation
Description of the Matter
How We Addressed the
Matter in Our Audit
As discussed in Note 2 of the consolidated financial statements, the Company
assesses the valuation of inventories, including raw materials, work-in-process, and
finished goods, in each reporting period. Obsolete inventory or inventory in excess of
management’s forecasted demand is written down to its estimated net realizable
value if less than cost.
Auditing management’s estimates for excess and obsolete inventory involved
subjective auditor judgement because the estimates rely on a number of factors that
are affected by market and economic conditions outside the Company’s control. In
particular, the excess and obsolete inventory calculations are sensitive to significant
assumptions, including forecasted demand for the Company’s products. Additionally,
auditing management’s judgments and estimates was complex as there were material
weaknesses in internal controls over the information and judgements used in the
estimation of reserves for excess and obsolete inventory.
After consideration of the material weaknesses, our audit procedures included,
among others, evaluating the significant assumptions, including forecasted demand,
and the accuracy and completeness of the underlying data management used to
value excess and obsolete inventory by preparing a comparable analysis based on
historical and subsequent period consumption and sales and compared the results to
management’s forecasted demand. We obtained corroborative information about
management’s estimated lifecycle of the Company’s products to support the
quantities on hand. Where applicable we obtained evidence of contemporaneous
communications with vendors, customers, or the Company’s Board of Directors to
support the ability and intent to consume on hand inventory. We also tested the
completeness and accuracy of underlying data used in management’s analysis,
including historical and subsequent period consumption and sales. For certain
assumptions or inputs, we performed sensitivity analyses to test the reasonableness
of management’s judgements.
Revenue Recognition – Estimation of Stand-alone Selling Prices
Description of the Matter
As described in Note 2 to the consolidated financial statements, the Company’s
contracts with customers generally contain promises to transfer products and services
which are not sold separately. The Company allocates the transaction price for a
contract among the performance obligations on a relative stand-alone selling price
(SSP) basis.
Auditing management’s estimates of SSP of its various performance obligations was
challenging and complex due to a lack of stand-alone sales transactions that provide
observable evidence. Because of this lack of stand-alone sales transactions, the
Company must apply judgment and consider all reasonably available information,
including but not limited to gross margin objectives, pricing practices in customer
contracts with multiple goods and services, internal costs, historical profitability data
and other observable inputs when estimating SSP. Additionally, auditing
management’s estimates of SSP was complex as there were material weaknesses in
internal controls over the information and judgments used in the estimation of such
prices.
72
How We Addressed the
Matter in Our Audit
After consideration of the material weaknesses, our audit procedures included,
among others, evaluating the appropriateness of the Company’s estimates based on
the Company’s gross margin objectives and pricing practices in customer contracts.
We tested the completeness and accuracy of the data used in the SSP methodology,
including cost data used in determining historical profitability and pricing practices.
We evaluated the Company’s identification and consideration of available information,
and the use of such information in estimating SSP. We tested the accuracy of the
Company’s calculations of SSP. We also tested, for a sample of transactions, the
Company’s allocation of the transaction price among performance obligations based
on relative SSP.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2001.
San Jose, California
May 17, 2024
73
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Infinera Corporation
Opinion on Internal Control over Financial Reporting
We have audited Infinera Corporation’s internal control over financial reporting as of December 30, 2023, based
on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, because of the
effect of the material weaknesses described below on the achievement of the objectives of the control criteria,
Infinera Corporation (the Company) has not maintained effective internal control over financial reporting as of
December 30, 2023, based on the COSO criteria.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of the company’s annual or interim
financial statements will not be prevented or detected on a timely basis. The following material weaknesses have
been identified and included in management's assessment. Management has identified material weaknesses in
controls related to the Company’s revenue cycle, inventory cycle, and with respect to these, their internal
resources, expertise and policies required to maintain an effective control environment.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company’s consolidated balance sheets as of December 30, 2023 and December
31, 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity
and cash flows for each of the three years in the period ended December 30, 2023, and the related notes and the
financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated
financial statements”). These material weaknesses were considered in determining the nature, timing and extent
of audit tests applied in our audit of the December 30, 2023 consolidated financial statements, and this report
does not affect our report dated May 17, 2024, which expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that
a material weakness exists, testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
74
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company; and (3)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/ Ernst & Young LLP
San Jose, California
May 17, 2024
75
INFINERA CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except par values)
December 30,
2023
December 31,
2022
$
$
$
ASSETS
Current assets:
Cash and cash equivalents
Short-term restricted cash
Accounts receivable, net
Inventory
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Operating lease right-of-use assets
Intangible assets, net
Goodwill
Long-term restricted cash
Other long-term assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Accrued compensation and related benefits
Short-term debt, net
Accrued warranty
Deferred revenue
Total current liabilities
Long-term debt, net
Long-term accrued warranty
Long-term deferred revenue
Long-term deferred tax liability
Long-term operating lease liabilities
Other long-term liabilities
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock, $0.001 par value
Authorized shares—25,000 and no shares issued and outstanding
Common stock, $0.001 par value
Authorized shares—500,000 in 2023 and 500,000 in 2022
Issued and outstanding shares—230,994 in 2023 and 220,408 in 2022
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders' equity
Total liabilities and stockholders’ equity
$
172,505 $
517
381,981
431,163
129,218
1,115,384
206,997
39,973
24,819
240,566
837
50,662
1,679,238 $
178,657
7,274
419,735
374,855
152,451
1,132,972
172,929
34,543
47,787
232,663
3,272
44,972
1,669,138
299,005 $
110,758
85,203
25,512
17,266
136,248
673,992
658,756
15,934
21,332
1,805
47,464
43,364
304,880
141,450
78,849
510
19,747
158,501
703,937
667,719
16,874
23,178
2,348
45,862
29,573
—
—
231
1,976,014
(34,848)
(1,724,806)
216,591
1,679,238 $
220
1,901,491
(22,471)
(1,699,593)
179,647
1,669,138
The accompanying notes are an integral part of these consolidated financial statements.
76
INFINERA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Revenue:
Product
Services
Total revenue
Cost of revenue:
Cost of product
Cost of services
Amortization of intangible assets
Restructuring and other related costs
Total cost of revenue
Gross profit
Operating expenses:
Research and development
Sales and marketing
General and administrative
Amortization of intangible assets
Acquisition and integration costs
Restructuring and other related costs
Total operating expenses
Loss from operations
Other income (expense), net:
Interest income
Interest expense
Gain on extinguishment of debt
Other gain (loss), net
Total other income (expense), net
Loss before income taxes
Provision for income taxes
Net loss
Net loss per common share:
Basic
Diluted
Weighted average shares used in computing net loss per
common share:
Basic
Diluted
Years Ended
December 30,
2023
December 31,
2022
December 25,
2021
$
1,304,229 $
1,268,624 $
1,099,376
309,899
1,614,128
304,618
1,573,242
325,829
1,425,205
810,845
167,532
10,621
2,218
991,216
622,912
316,879
166,938
124,874
12,344
—
6,717
627,752
852,476
161,630
23,138
222
1,037,466
535,776
306,188
146,445
118,602
14,576
—
10,122
595,933
732,071
174,008
19,621
1,531
927,231
497,974
299,894
138,829
115,415
17,455
614
13,246
585,453
(4,840)
(60,157)
(87,479)
2,716
(30,609)
—
15,325
(12,568)
(17,408)
7,805
(25,213)
893
(26,015)
15,521
14,247
4,646
(55,511)
20,532
(76,043)
455
(49,099)
—
(22,667)
(71,311)
(158,790)
11,988
(170,778)
$
$
(0.11) $
(0.11) $
(0.35) $
(0.35) $
(0.82)
(0.82)
226,726
226,726
216,376
216,376
207,377
207,377
The accompanying notes are an integral part of these consolidated financial statements.
77
INFINERA CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
Net loss
Other comprehensive income (loss), net of tax:
Years Ended
December 30,
2023
December 31,
2022
December 25,
2021
$
(25,213) $
(76,043) $
(170,778)
Foreign currency translation adjustment and other
(9,962)
(40,839)
Actuarial (loss) gain on pension liabilities
Amortization of net actuarial (gain) loss
(2,002)
22,538
(413)
326
Net change in accumulated other comprehensive income (loss)
(12,377)
(17,975)
(8,561)
12,580
3,383
7,402
Comprehensive loss
$
(37,590) $
(94,018) $
(163,376)
The accompanying notes are an integral part of these consolidated financial statements.
78
INFINERA CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Years Ended December 30, 2023, December 31, 2022 and December 25, 2021
(In thousands)
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders'
Equity
Balance at December 26, 2020
201,397 $
201 $ 1,965,245 $
(11,898) $ (1,527,264) $ 426,284
Stock options exercised
ESPP shares issued
Shares withheld for tax
obligations
Restricted stock units released
Stock-based compensation
Other comprehensive income
Net loss
46
2,272
(808)
8,474
—
—
—
—
2
—
8
—
—
—
332
16,164
(7,178)
—
51,535
—
—
Balance at December 25, 2021
211,381 $
211 $ 2,026,098 $
ESPP shares issued
Shares withheld for tax
obligations
Restricted stock units released
Stock-based compensation and
other
Cumulative-effect adjustment
from adoption of ASU 2020-06(1)
Other comprehensive loss
Net loss
2,552
(550)
7,025
—
—
—
—
2
—
7
—
—
—
—
15,189
(3,714)
—
60,411
(196,493)
—
—
—
—
—
7,402
—
—
—
—
—
—
332
16,166
(7,178)
8
51,535
7,402
—
(170,778) (170,778)
(4,496) $ (1,698,042) $ 323,771
—
—
—
—
—
—
—
—
—
15,191
(3,714)
7
60,411
74,492
(122,001)
—
—
(17,975)
—
(17,975)
—
(76,043)
(76,043)
Balance at December 31, 2022
220,408 $
220 $ 1,901,491 $
(22,471) $ (1,699,593) $ 179,647
ESPP shares issued
Restricted stock units released
Shares withheld for tax
obligations
Stock-based compensation
Other comprehensive loss
Net loss
3,514
7,495
(423)
—
—
—
4
7
—
—
—
—
14,927
—
(2,465)
62,061
—
—
—
—
—
—
(12,377)
— $ 14,931
—
—
—
—
7
(2,465)
62,061
(12,377)
—
(25,213)
(25,213)
Balance at December 30, 2023
230,994 $
231 $ 1,976,014 $
(34,848) $ (1,724,806) $ 216,591
(1) Effective December 26, 2021, the Company adopted ASU 2020-06, Accounting for Convertible Instruments and
Contracts in an Entity’s Own Equity ("ASU 2020-06"). Accordingly, the Company recorded a $196.5 million reduction
to additional paid in capital and a net reduction to accumulated deficit of $74.5 million due to the cumulative of
adopting this new standard.
The accompanying notes are an integral part of these consolidated financial statements.
79
INFINERA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
December
30, 2023
Years Ended
December
31, 2022
December
25, 2021
$
(25,213) $
(76,043) $ (170,778)
78,784
1,200
3,862
7,464
62,150
—
(823)
38,511
(57,864)
9,683
(2,921)
(40,063)
(25,260)
49,510
83,830
6,066
6,109
9,421
61,015
(15,521)
1,218
(69,024)
(89,527)
(34,046)
88,256
(24,443)
15,129
(37,560)
83,583
6,805
32,455
14,993
51,812
—
4,147
(45,783)
(28,022)
(424)
32,304
39,283
7,753
28,128
(62,314)
(62,314)
(46,053)
(46,053)
(41,379)
(41,379)
98,751
373,750
(83,446)
(280,842)
(2,108)
(12,451)
50,000
80,000
(50,000)
(80,000)
—
(510)
(1,023)
(10,417)
14,931
(2,465)
13,713
—
(533)
(1,314)
(7,739)
15,189
(3,714)
82,346
—
—
—
—
(77,000)
(24,610)
(350)
(1,631)
(7,272)
16,497
(7,178)
(101,544)
(16,253)
(15,344)
189,203
1,933
(112,862)
315,383
$ 173,859 $ 189,203 $ 202,521
(12,051)
(13,318)
202,521
Cash Flows from Operating Activities:
Net loss
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization
Non-cash restructuring charges and other related costs
Amortization of debt discount and issuance costs
Operating lease expense
Stock-based compensation expense
Gain on extinguishment of debt
Other, net
Changes in assets and liabilities:
Accounts receivable
Inventory
Prepaid expenses and other current assets
Accounts payable
Accrued expenses and other current liabilities
Deferred revenue
Net cash provided by (used in) operating activities
Cash Flows from Investing Activities:
Purchase of property and equipment
Net cash used in investing activities
Cash Flows from Financing Activities:
Proceeds from issuance of 2028 Notes
Repayment of 2024 Notes
Payment of debt issuance cost
Proceeds from asset-based revolving credit facility
Repayment of asset-based revolving credit facility
Repayment of third-party manufacturing funding
Repayment of mortgage payable
Principal payments on finance lease obligations
Payment of term license obligation
Proceeds from issuance of common stock
Tax withholding paid on behalf of employees for net share settlement
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash, cash equivalents, and
restricted cash
Net change in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of period
Cash, cash equivalents, and restricted cash at end of period(1)
80
December
30, 2023
Years Ended
December
31, 2022
December
25, 2021
Supplemental disclosures of cash flow information:
Cash paid for income taxes, net
Cash paid for interest
Supplemental schedule of non-cash investing and financing
activities:
Transfer of inventory to fixed assets
Property and equipment included in accounts payable and accrued
liabilities
Unpaid term licenses (included in accounts payable, accrued liabilities
and other long term liabilities)
$
$
$
$
$
14,109 $
22,394 $
15,126 $
14,787 $
18,703
18,261
1,847 $
9,332 $
2,279
10,104 $
7,435 $
9,011
23,326 $
9,178 $
9,339
(1)
Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets:
Cash and cash equivalents
Short-term restricted cash
Long-term restricted cash
December 30,
2023
December 31,
2022
December 25,
2021
(In thousands)
$
172,505 $
178,657 $
190,611
517
837
7,274
3,272
2,840
9,070
Total cash, cash equivalents and restricted cash
$
173,859 $
189,203 $
202,521
The accompanying notes are an integral part of these consolidated financial statements.
81
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Organization and Basis of Presentation
Infinera Corporation (“Infinera” or the “Company”), headquartered in San Jose, California, was founded
in December 2000 and incorporated in the State of Delaware. Infinera is a global supplier of networking solutions
comprised of networking equipment, optical semiconductors, software and services. Infinera’s portfolio of
solutions includes optical transport platforms, converged packet-optical transport platforms, optical line systems,
disaggregated router platforms, and a suite of networking and automation software offerings, and support and
professional services. Infinera leverages its U.S.-based compound semiconductor fab and in-house packaging
capabilities to design, develop, and manufacture industry-leading indium phosphide-based photonic integrated
circuits for use in its high-capacity optical communications products.
The Company operates and reports financial results on a fiscal year of 52 or 53 weeks ending on the
last Saturday of December in each year. Accordingly, fiscal year 2023 was a 52-week year that ended on
December 30, 2023. Fiscal year 2022 was a 53-week year that ended on December 31, 2022 and fiscal year
2021 was a 52-week year that ended on December 25, 2021. The next 53-week year will end on December 30,
2028.
The accompanying consolidated financial statements have been prepared in conformity with U.S.
generally accepted accounting principles (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S.
Securities and Exchange Commission (the “SEC”). The consolidated financial statements include all adjustments
necessary for a fair presentation of the Company's annual results. All adjustments are of a normal recurring
nature.
The consolidated financial statements include the accounts for the Company and its subsidiaries and
affiliates in the Company which the Company has a controlling financial interest or is the primary beneficiary. All
inter-company balances and transactions have been eliminated. The Company reclassified certain amounts
reported in previous periods to conform to the current presentation.
2.
Significant Accounting Policies
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires
management to make certain estimates, assumptions and judgments that can affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial
statements, as well as the reported amounts of revenue and expenses during the reporting periods. Estimates,
assumptions and judgements made by management include inventory valuation, revenue recognition, accounting
for income taxes, stock-based compensation, employee benefit and pension plans, manufacturing partner and
supplier liabilities, allowances for sales returns, allowances for credit losses, useful life of intangibles and
property, plant and equipment, impairment loss related to lease abandonment, accrued warranty, operating and
finance lease liabilities, restructuring and other related costs and loss contingencies. The Company bases its
assumptions on historical experience and also on assumptions that it believes are reasonable. Actual results
could differ materially from those estimates. These estimates may change as new events occur and additional
information emerges, and such changes are recognized or disclosed in the Company's consolidated financial
statements.
Revenue Recognition
The Company recognizes revenue when control of the promised goods or services is transferred to its
customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for
those goods or services.
The Company determines revenue recognition by applying the following five-step approach:
•
•
•
•
identification of the contract, or contracts, with a customer;
identification of the performance obligations in the contract;
determination of the transaction price;
allocation of the transaction price to the performance obligations in the contract; and
82
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
•
recognition of revenue when, or as, the Company satisfies a performance obligation.
Many of the Company's product sales are sold in combination with installation and deployment services
along with initial hardware and software support. The Company's product sales are also sold at times with spares
management, on-site hardware replacement services, network operations management, software subscription
services, extended hardware warranty and training. Initial software and hardware support services are generally
delivered over a one-year period in connection with the initial purchase. Software warranty provides customers
with maintenance releases during the warranty support period and hardware warranty provides replacement or
repair of equipment that fails to perform in line with specifications. Software subscription services include
software warranty and additionally provides customers with rights to receive unspecified software product
upgrades released during the support period.
Spares management and on-site hardware replacement services include the replacement of defective
units at customer sites in accordance with specified service level agreements. Network operations management
includes the day-to-day operation of a customer's network. These services are generally delivered on an annual
basis. The Company evaluates each promised good and service in a contract to determine whether it represents
a distinct performance obligation or should be accounted for as a combined performance obligation.
Services revenue includes software subscription services, installation and deployment services, spares
management, on-site hardware replacement services, network operations management, extended hardware
warranty and training. Revenue from software subscription services, spares management, on-site hardware
replacement services, network operations management and extended hardware warranty contracts is recognized
ratably over the contractual support period, which is generally one year, as services are provided over the course
of the entire period. Revenue related to training and installation and deployment services is recognized upon
completion of the services.
Contracts and customer purchase orders are generally used to determine the existence of an
arrangement. In addition, shipping documents and customer acceptances, when applicable, are used to verify
delivery and transfer of title. The Company typically satisfies its performance obligations upon shipment or
delivery of product depending on the contractual terms. Payment terms to customers generally range from net 30
to 120 days from invoice, which are considered to be standard payment terms. The Company assesses its ability
to collect from its customers based primarily on the creditworthiness and past payment history of the customer.
For sales to resellers, the same revenue recognition criteria apply. It is the Company’s practice to
identify an end-customer prior to shipment to a reseller. The Company does not offer rights of return or price
protection to its resellers.
The Company reports revenue net of any required taxes collected from customers and remitted to
government authorities, with the collected taxes recorded as current liabilities until remitted to the relevant
government authority.
Customer Purchase Commitments
The Company sells software licenses that provide customers the ability to purchase incremental
`bandwidth capacity on an already-deployed piece of hardware. Infinera Instant Bandwidth-enabled systems
generally include a specific initial capacity and incremental capacity can be added by the purchase of Instant
Bandwidth licenses. Instant Bandwidth licenses are considered distinct performance obligations because
customers can provision additional transmission capacity on demand without the deployment of any incremental
equipment.
Some contracts commit the customer to purchase incremental Instant Bandwidth licenses within a
specified time frame from the initial shipment of the Instant Bandwidth-enabled hardware. The time frame varies
by customer and generally ranges between 12 to 24 months. If the customer does not purchase the additional
capacity within the time frame as stated in the contract, the Company has the right to deliver and invoice such
Instant Bandwidth licenses to the customer. Future committed licenses are considered to be additional
performance obligations when a minimum purchase obligation is present, as evidenced by enforceable rights and
obligations. As such, the Company is required to estimate the variable consideration for future Instant Bandwidth
licenses as part of determining the contract transaction price.
83
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Contract Termination Rights
The contract term is determined on the basis of the period over which the parties to the contract have
present enforceable rights and obligations. Certain customer contracts include a termination for convenience
clause that allows the customer to terminate services without penalty, upon advance notification. For such
contracts, the service duration is limited to the non-cancelable portion of the contract.
Variable Consideration
The consideration associated with customer contracts is generally fixed. Variable consideration includes
discounts, rebates, refunds, credits, incentives, penalties, or other similar items. The amount of consideration
that can vary is not a substantial portion of total consideration.
Variable consideration estimates are re-assessed at each reporting period until a final outcome is
determined. The changes to the original transaction price due to a change in estimated variable consideration will
be applied on a retrospective basis, with the adjustment recorded in the period in which the change occurs.
Stand-alone Selling Price
The Company allocates the transaction price for a contract among the performance obligations on a
relative stand-alone selling price (SSP) basis. The SSP is the price at which an entity would sell a promised
product or service separately to a customer.
While certain services sold by the Company have readily observable SSPs, the majority of the
Company's products and services are generally not sold on a stand-alone basis and therefore SSPs for such
products and services are not directly observable. If there is no observable SSP, it is estimated using judgment
and considering all reasonably available information including but not limited to, gross margin objectives, pricing
practices in customer contracts with multiple goods and services, internal costs, historical profitability data,
competitor pricing strategies, as well as other observable inputs. The determination of SSPs for performance
obligations is assessed on a periodic basis and estimates are revised to reflect any significant changes to
underlying assumptions as needed.
Shipping and Handling
The Company treats shipping and handling activities as costs to fulfill the Company's promise to transfer
products. Shipping and handling fees billed to customers are recorded as a reduction to cost of product.
Capitalization of Costs to Obtain a Contract
The Company has assessed the treatment of costs to obtain or fulfill a contract with a customer. Under
Accounting Standards Codification ("ASC") Topic 606, "Revenue from Contracts with Customers" ("ASC 606"),
the Company capitalizes sales commissions related to multi-year service contracts, which are paid for upfront,
and amortizes the asset over the period of benefit, which is the service period. Sales commissions paid on
service contract renewals are commensurate with the sales commissions paid on the initial contracts. Sales
commissions are expensed as incurred.
Transaction Price Allocated to the Remaining Performance Obligation
The Company’s remaining performance obligations represent the transaction price allocated to
performance obligations that are unsatisfied or partially satisfied as of period end, consisting of deferred revenue
and non-cancellable backlog. The Company’s backlog represents purchase orders received from customers for
future product shipments and services that are unsatisfied or partially satisfied as of period end. The Company’s
backlog is subject to future events that could cause the amount or timing of the related revenue to change.
Orders in backlog may be fulfilled several quarters following receipt or may relate to multi-year support service
obligations.
84
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Stock-Based Compensation
Stock-based compensation cost is measured at the grant date based on the fair value of the award and
is recognized as expense over the requisite service period (generally the vesting period) under the straight-line
amortization method. The Company accounts for forfeitures as they occur.
The Company estimates the fair value of the rights to acquire stock under its 2007 Employee Stock
Purchase Plan (the “ESPP”) using the Black-Scholes option pricing formula. The ESPP, which was indefinitely
suspended effective upon the expiration of the offering period that ended August 15, 2023, provides for
consecutive six-month offering periods.
The Company accounts for the fair value of restricted stock units (“RSUs”) using the closing market
price of the Company’s common stock on the date of grant. RSUs typically vest ratably over a service period
ranging from one to four years.
Performance Stock Units ("PSUs") granted to the Company's executive officers, senior management
and certain other employees during 2020, 2021, 2022 and 2023 are based on performance criteria related to
specific financial targets over the span of a two or three-year performance period. These PSUs may become
eligible for vesting to begin before the end of the applicable performance period, if the applicable financial target
is met. The number of shares to be issued upon vesting of these PSUs range from 0 to 1.5 times the target
number of PSUs granted. The Company assesses the achievement status of these PSUs on a quarterly basis
and records the related stock-based compensation expenses based on the estimated achievement payout.
In addition, the Company granted other PSUs to certain employees that only vest upon the achievement
of specific operational performance criteria. The Company assesses the achievement status of these PSUs on a
quarterly basis and records the related stock-based compensation expenses based on the estimated
achievement payout.
Employee Benefit and Pension Plans
The Company operates a number of post-employment plans in Germany, as well as smaller post-
employment plans in other countries, including both defined contribution and defined benefit plans. Benefit cost
and obligations pertaining to these plans are based on assumptions for the discount rate, expected return on
plan assets, mortality rates, expected salary increases, health care cost trend rates and attrition rates. The
discount rate assumption is based on current investment yields of high-quality fixed-income securities with
maturities similar to the expected benefits payment period. Mortality rates help predict the expected life of plan
participants. The expected increase in the compensation levels assumption reflects the Company's actual
experience and future expectations. The expected long-term return on plan assets is determined based on asset
allocations, historical portfolio results, historical asset correlations and management’s expected returns for each
asset class. The Company evaluates its expected return assumptions annually including reviewing current capital
market assumptions to assess the reasonableness of the expected long-term return on plan assets. The
Company updates the expected long-term return on assets when the Company observes a sufficient level of
evidence that would suggest the long-term expected return has changed.
Research and Development
All costs to develop the Company’s hardware products are expensed as incurred. Software
development costs are capitalized beginning when a product’s technological feasibility has been established and
ending when a product is available for general release to customers. Generally, the Company’s software
products are released soon after technological feasibility has been established. As a result, costs subsequent to
achieving technological feasibility have not been significant and all software development costs have been
expensed as incurred.
85
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Advertising
All advertising costs are expensed as incurred. Advertising expenses in 2023, 2022 and 2021 were $1.5
million, $1.5 million, and $1.6 million, respectively.
Accounting for Income Taxes
As part of the process of preparing its consolidated financial statements, the Company is required to
estimate its taxes in each of the jurisdictions in which it operates. The Company estimates actual current tax
expense together with assessing temporary differences resulting from different treatment of items, such as
accruals and allowances not currently deductible for tax purposes. These differences result in deferred tax assets
and liabilities, which are included in consolidated balance sheets. In general, deferred tax assets represent future
tax benefits to be received when certain expenses previously recognized in consolidated statements of
operations become deductible expenses under applicable income tax laws or loss, or credit carryforwards are
utilized. Accordingly, realization of deferred tax assets is dependent on future taxable income within the
respective jurisdictions against which these deductions, losses and credits can be utilized within the applicable
future periods.
The Company must assess the likelihood that some portion or all of its deferred tax assets will be
recovered from future taxable income within the respective jurisdictions, and to the extent the Company believes
that recovery does not meet the “more-likely-than-not” standard, it must establish a valuation allowance. The
ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management judgment is required in
determining its provision for income taxes, its deferred tax assets and liabilities and any valuation allowance
recorded against our net deferred tax assets. In evaluating the need for a full or partial valuation allowance, all
positive and negative evidence must be considered, including the Company's forecast of taxable income over the
applicable carryforward periods, its current financial performance, its market environment, and other factors.
Based on the available objective evidence, at December 30, 2023, management believes it is not more likely
than not that the domestic net deferred tax assets will be realizable in the foreseeable future. Accordingly, the
domestic net deferred tax assets are subject to a full valuation allowance. To the extent that the Company
determines that deferred tax assets are realizable on a more likely than not basis, and an adjustment is needed,
that adjustment will be recorded in the period that the determination is made.
Foreign Currency Translation and Transactions
The Company considers the functional currencies of its foreign subsidiaries to be the local currency.
Assets and liabilities recorded in foreign currencies are translated at the exchange rate as of the balance sheet
date, revenue, costs and expenses are translated at average exchange rates in effect during the period. Equity
transactions are translated using historical exchange rates. The effects of foreign currency translation
adjustments are recorded as a separate component of accumulated other comprehensive income (loss) in the
accompanying consolidated balance sheets and consolidated statements of comprehensive loss.
For all non-functional currency account balances, the re-measurement of such balances to the
functional currency will result in either a foreign exchange transaction gain or loss, which is recorded to other
income (loss), net, in the Company's consolidated statement of operations, in the same period that the re-
measurement occurred. Aggregate foreign exchange transactions recorded was gain of $14.8 million in 2023,
gain of $12.8 million in 2022, and loss of $17.2 million 2021.
Cash and Cash Equivalents
Cash consists primarily of cash in bank deposit accounts which, at times, a portion may exceed
federally insured limits. The Company has not experienced any losses in such accounts.
The Company considers all highly liquid investments with original maturities of three months or less at
the date of purchase to be cash equivalents.
86
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair Value Measurement
Pursuant to the accounting guidance for fair value measurements and its subsequent updates, fair value
is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. When determining the fair value
measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers
the principal or most advantageous market in which it would transact and it considers assumptions that market
participants would use when pricing the asset or liability.
Valuation techniques used by the Company are based upon observable and unobservable inputs.
Observable or market inputs reflect market data obtained from independent sources, while unobservable inputs
reflect the Company’s assumptions about market participant assumptions based on the best information
available. Observable inputs are the preferred source of values. These two types of inputs create the following
fair value hierarchy:
Level 1
– Quoted prices in active markets for identical assets or liabilities.
Level 2
– Quoted prices for similar instruments in active markets, quoted prices for identical or similar
instruments in markets that are not active, and model-based valuation techniques for which all
significant assumptions are observable in the market or can be corroborated by observable
market data for substantially the full term of the assets or liabilities.
Level 3
–
Prices or valuations that require management inputs that are both significant to the fair value
measurement and unobservable.
The Company measures its cash equivalents and debt securities at fair value and classifies them in
accordance with the fair value hierarchy on a recurring basis.
Facilities-related Charges
The Company classifies certain facilities-related charges within Level 3 of the fair value hierarchy and
applies fair value accounting on a nonrecurring basis when impairment indicators exist or upon the existence of
observable fair values. The impairment charges incurred for operating lease right-of-use assets are calculated at
fair value based on the estimated future sublease rental receipts that the Company can reasonably obtain over
the remaining lease term at the discount rate. These charges are classified as Level 3 measurement due to the
significance of these unobservable inputs.
Accounts Receivable and Allowances for Credit Losses
Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company
maintains an allowance for estimated credit losses resulting from the inability of its customers to make required
payments and reviewed the allowance quarterly. The Company determines expected credit losses by performing
credit evaluations of its customers' financial condition, establishing both a general reserve and specific reserve
for customers in adverse financial condition and adjusting for its expectations of changes in conditions that may
impact the collectability of outstanding receivables. The Company considers a customer's receivable balance
past due when the amount is due beyond the credit terms extended, The Company considers factors such as
historical experience, credit quality, age of the accounts receivable balances, and geographic or country-specific
risks. Amounts are written off when receivables are determined to be uncollectible.
Allowances for Sales Returns
Customer product returns are approved on a case by case basis. Specific reserve provisions are made
based upon a specific review of all the approved product returns where the customer has yet to return the
products to generate the related sales return credit at the end of a period. Estimated sales returns are provided
for as a reduction to revenue. At December 30, 2023, December 31, 2022 and December 25, 2021, revenue was
reduced for estimated sales returns by $0.3 million, $3.6 million, and $0.8 million, respectively.
Concentration of Risk
Financial instruments that are potentially subject to concentrations of credit risk consist primarily of
cash, cash equivalents and restricted cash and accounts receivable.
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INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The risk with respect to accounts receivable is mitigated by ongoing credit evaluations that the
Company performs on its customers. As the Company continues to expand its sales internationally, it may
experience increased levels of customer credit risk associated with those regions. Collateral is generally not
required for accounts receivable but may be used in the future to mitigate credit risk associated with customers
located in certain geographical regions.
No customer accounted for 10% or more of the Company's accounts receivable balance, net on the
consolidated balance sheets as of December 30, 2023. One customer accounted for over 10% of the Company's
accounts receivable balance, net on the consolidated balance sheets as of December 31, 2022.
One end-customer accounted for 10% of the Company's revenue in fiscal year 2023. One end-customer
accounted for 11% of the Company's revenue in fiscal year 2022 and no end-customer accounted for 10% or
more of the Company's revenue in fiscal year 2021.
The Company depends on sole source or limited source suppliers for several key components and raw
materials. The Company generally purchases these sole source or limited source components and raw materials
through standard purchase orders and does not have long-term contracts with many of these limited-source
suppliers. While the Company seeks to maintain sufficient reserve stock of such components and raw materials,
the Company’s business and results of operations could be adversely affected if any of its sole source or limited
source suppliers suffer from capacity constraints, lower than expected yields, deployment delays, work
stoppages or any other reduction or disruption in output.
Derivative Instruments
From time to time, the Company has entered into factoring agreements to sell certain receivables to
unrelated third-party financial institutions. These transactions are accounted for in accordance with ASC 860,
Transfers and Servicing (“ASC 860”). ASC 860 and result in a reduction in accounts receivable because the
agreements transfer effective control over and risk related to the receivables to the buyers. The Company's
factoring agreements do not allow for recourse in the event of uncollectability, and the Company does not retain
any interest in the underlying accounts receivable once sold.
Inventory Valuation
Inventories consist of raw materials, work-in-process and finished goods and are stated at standard cost
adjusted to approximate the lower of actual cost or net realizable value. Costs are recognized utilizing the first-in,
first-out method. Net realizable value is based upon an estimated selling price reduced by the estimated cost of
disposal. The determination of market value involves numerous judgments including estimated average selling
prices based upon recent sales volumes, industry trends, existing customer orders, current contract price, future
demand and pricing and technological obsolescence of the Company’s products.
Inventory that is obsolete or in excess of the Company’s forecasted demand or is anticipated to be sold
at a loss is written down to its estimated net realizable value based on historical usage and expected demand. In
valuing its inventory costs and deferred inventory costs, the Company considered whether the net realizable
value of inventory delivered or expected to be delivered at less than cost, primarily comprised of common
equipment, had declined. The Company concluded that, in the instances where the net realizable value of
inventory delivered or expected to be delivered was less than cost, it was appropriate to value the inventory costs
and deferred inventory costs at cost or net realizable value, whichever is lower, thereby recognizing the cost of
the reduction in net realizable value of inventory in the period in which the reduction occurred or can be
reasonably estimated. The Company has, therefore, recognized inventory write-downs as necessary in each
period in order to reflect inventory at the lower of actual cost or net realizable value.
The Company considers whether it should accrue losses on firm purchase commitments related to
inventory items. Given that the net realizable value of common equipment is below contractual purchase price,
the Company has also recorded losses on these firm purchase commitments in the period in which the
commitment is made. When the inventory parts related to these firm purchase commitments are received, that
inventory is recorded at the purchase price less the accrual for the loss on the purchase commitment.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Property, Plant and Equipment
Property, plant and equipment are stated at cost. This includes enterprise-level business software that
the Company customizes to meet its specific operational needs and certain software licenses. Depreciation is
calculated using the straight-line method over the estimated useful lives of the respective assets. Leasehold
improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful
life of the asset. An assumption of lease renewal where a renewal option exists is used only when the renewal
has been determined to be reasonably certain. Repair and maintenance costs are expensed as incurred. The
estimated useful life for each asset category is as follows:
Building
Laboratory and manufacturing equipment
Furniture and fixtures
Computer hardware
Computer software
Leasehold and building improvements
Estimated Useful Lives
20 years
1.5 to 10 years
3 to 5 years
3 to 5 years
3 years
1 to 11 years
The Company reviews long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of these assets may not be recoverable or that the useful life is shorter than
originally estimated. If impairment indicators are present and the projected future undiscounted cash flows are
less than the carrying value of the assets, the carrying values are reduced to the estimated fair value. If assets
are determined to be recoverable, but the useful lives are shorter than originally estimated, the carrying value of
the assets is depreciated over the newly determined remaining useful lives.
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INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Accrued Warranty
In the Company's contracts with its customers, the Company warrants that its products will operate
substantially in conformity with product specifications. Hardware warranties provide the purchaser with protection
in the event that the product does not perform to product specifications. During the warranty period, the
purchaser’s sole and exclusive remedy in the event of such defect or failure to perform is limited to the correction
of the defect or failure by repair, refurbishment or replacement, at the Company’s sole option and expense. The
Company's hardware warranty periods generally range from one to five years from date of acceptance for
hardware and the Company's software warranty is 90 days. Upon delivery of the Company's products, the
Company provides for the estimated cost to repair or replace products that may be returned under warranty. The
hardware warranty accrual is based on actual historical returns and cost of repair experience and the application
of those historical rates to the Company's in-warranty installed base. The provision for warranty claims fluctuates
depending upon the installed base of products and the failure rates and costs of repair associated with these
products under warranty. Furthermore, the Company's costs of repair vary based on repair volume and its ability
to repair, rather than replace, defective units. In the event that actual product failure rates and costs to repair
differ from the Company's estimates, revisions to the warranty provision are required. In addition, from time to
time, specific hardware warranty accruals may be made if unforeseen technical problems arise with specific
products. The Company regularly assesses the adequacy of its recorded warranty liabilities and adjusts the
amounts as necessary.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price of an acquired business over the fair value of the
identifiable assets acquired and liabilities assumed. The Company tests for impairment of goodwill on an annual
basis in the fourth quarter and at any other time when events occur or circumstances indicate that the carrying
amount of goodwill may not be recoverable. The Company has the option to first assess qualitative factors to
determine whether it is necessary to perform the quantitative goodwill impairment test. If the Company
determines that as a result of the qualitative assessment that it is more likely than not (i.e., greater than 50%
likelihood) that the fair value of a reporting unit is less than its carrying amount, then the quantitative test is
required or it can directly perform the quantitative analysis. The Company recognizes an impairment charge for
the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized
does not exceed the total amount of goodwill allocated to that reporting unit. The Company completed its annual
qualitative impairment test of goodwill as of the first day of the fourth fiscal quarter of 2023, or October 1, 2023,
and determined that it was not more likely than not that the fair value of the reporting unit is less than its carrying
amount. As a result it was determined that it was not necessary for the Company to perform a quantitative
goodwill impairment test for the year ended December 30, 2023.
The Company evaluates events and changes in circumstances that could indicate carrying amounts of
purchased intangible assets may not be recoverable. When such events or changes in circumstances occur, the
Company assesses the recoverability of these assets by determining whether or not the carrying amount will be
recovered through undiscounted expected future cash flows. If the total of the future undiscounted cash flows is
less than the carrying amount of an asset, the Company records an impairment loss for the amount by which the
carrying amount of the asset exceeds the fair value of the asset.
Intangible assets with finite lives are carried at cost, less accumulated amortization. Amortization is
computed over the estimated useful lives of the respective assets.
Leases
The Company has operating leases primarily for real estate (facilities) and automobiles. The Company
has finance leases primarily for computer hardware, laboratory and manufacturing equipment and leasehold and
building improvements.
The Company leases facilities under non-cancelable operating lease agreements. These leases have
varying terms that range from one to 14 years and contain leasehold improvement incentives, rent holidays and
escalation clauses. In addition, some of these leases have renewal options for up to six years.
The Company determines if an arrangement contains a lease at inception. Operating leases are
included in operating lease right-of-use ("ROU") assets, accrued expenses and other current liabilities and
operating lease liabilities on the Company's consolidated balance sheets. Finance leases are included in
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INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
property, plant and equipment, net, accrued expenses and other current liabilities and other long-term liabilities
on the Company's consolidated balance sheets.
Operating lease ROU assets and operating lease liabilities are recognized based on the present value
of the future minimum lease payments over the lease term at commencement date. As most of the Company's
leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information
available at commencement date in determining the present value of future payments. Operating lease ROU
assets also include any lease payments made and exclude lease incentives and initial direct costs incurred.
Variable lease payments are expensed as incurred and are not included within the ROU asset and lease liability
calculation. Variable lease payments primarily include reimbursements of costs incurred by lessors for common
area maintenance and utilities. The Company's lease terms may include options to extend or terminate the lease
when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease
payments is recognized on a straight-line basis over the lease term. The Company rents or subleases certain
real estate under agreements that are classified as operating leases.
Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company
recognizes lease expense for these leases on a straight-line basis over the lease term. The Company does not
account for lease components (e.g., fixed payments including rent) separately from the non-lease components
(e.g., common-area maintenance costs).
Upon abandoning or committing to a plan to abandon a leased property in the short term before the
lease term expires, the Company assesses the fair value of its remaining obligation under the lease and records
an impairment of the ROU asset, if needed. The impairment loss is calculated as the present value of the amount
by which the remaining lease obligation, adjusted for the effects of any one-time costs to sublease, exceeds the
estimated sublease rentals that could be reasonably obtained. The estimated sublease rentals consider
Company's ability and intent to sublease the space. The significant assumptions used in the Company's
discounted cash flow model include the amount and timing of estimated sublease rental receipts and the
discount rate which involve a number of risks and uncertainties, some of which are beyond control, including
future real estate market conditions and the Company's ability to successfully enter into subleases or termination
agreements with terms as favorable as those assumed when arriving at its estimates. The Company monitors
these estimates and assumptions on at least a quarterly basis for changes in circumstances and any
corresponding adjustments to the accrual are recorded in its statement of operations in the period when such
changes are known.
The loss recorded or to be recorded may change significantly as a result of the re-measurement of the
liability, if the timing or amount of estimated cash flows change.
Restructuring and Other Related Costs
The Company records costs associated with exit activities related to restructuring plans in accordance
with ASC 420, Exit or Disposal Cost Obligations, or ASC 712, Compensation — Nonretirement Postemployment
Benefits. Liabilities for costs associated with an exit or disposal activity are recognized in the period in which the
liability is incurred. The timing of the associated cash payments is dependent upon the type of exit cost. The
Company records restructuring cost liabilities in “accrued expenses and other current liabilities” and "other long-
term liabilities" in the consolidated balance sheet.
Restructuring costs include employee and contract termination costs, facility consolidation and closure
costs, lease related impairment charges, equipment write-downs and inventory write-downs. One-time
termination benefits are recognized as a liability at estimated fair value when the approved plan of termination
has been communicated to employees, unless employees must provide future service, in which case the benefits
are recognized ratably over the future service period. Ongoing termination benefits arrangements are recognized
as a liability at estimated fair value when the amount of such benefits becomes estimable and payment is
probable.
Restructuring charges require significant estimates and assumptions, including estimates made for
employee separation costs and other contract termination charges. Management estimates involve a number of
risks and uncertainties, some of which are beyond control, including the Company's ability to successfully enter
into termination agreements with employees and others with terms as favorable as those assumed when arriving
at its estimates. The Company monitors these estimates and assumptions on at least a quarterly basis for
changes in circumstances and any corresponding adjustments to the accrual are recorded in its statement of
operations in the period when such changes are known.
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INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Recent Accounting Pronouncements
Accounting Pronouncements Not Yet Adopted
Segment Reporting Disclosures
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to
Reportable Segment Disclosures.” The standard improves reportable segment disclosure requirements for public
business entities primarily through enhanced disclosures about significant segment expenses that are regularly
provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment
profit (referred to as the “significant expense principle”). The standard will become effective for fiscal year 2024
annual financial statements and interim financial statements thereafter and will be applied retrospectively for all
prior periods presented in the financial statements, with early adoption permitted. The Company plans to adopt
the standard when it becomes effective beginning in fiscal year 2024 annual financial statements, and is currently
evaluating the impact this guidance will have on the disclosures included in the Notes to the Consolidated
Financial Statements.
Income Tax Disclosures
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to
Income Tax Disclosures.” The standard enhances income tax disclosure requirements for all entities by requiring
specified categories and greater disaggregation within the rate reconciliation table, disclosure of income taxes
paid by jurisdiction, and providing clarification on uncertain tax positions and related financial statement impacts.
The standard will be effective for fiscal year 2024 annual financial statements with early adoption permitted. The
Company plans to adopt the standard when it becomes effective beginning in fiscal year 2024 annual financial
statements, and expects the adoption of the standard will impact certain of the income tax disclosures.
3.
Leases
The Company has operating leases for real estate (facilities) and automobiles. For the fiscal years
ended December 30, 2023, December 31, 2022 and December 25, 2021, operating lease expense was $13.9
million, $21.1 million and $25.7 million, respectively. Included in operating lease expense were rent expense and
impairment charges due to restructuring resulting in abandonment of certain lease facilities, amounting to $3.0
million, $8.1 million and $6.5 million for the fiscal years ended December 30, 2023, December 31, 2022 and
December 25, 2021, respectively. Variable lease cost, short-term lease cost and sublease income were
immaterial during the fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021,
respectively.
The following table presents current and long-term portion of operating lease liabilities as classified in
the consolidated balance sheets (in thousands):
Accrued expenses and other current liabilities
Long-term operating lease liabilities
Total operating lease liability
$
$
11,888 $
47,464
59,352 $
10,948
45,862
56,810
December 30, 2023
December 31, 2022
The Company also has finance leases. The lease term for these arrangements range from three to five
years with option to purchase at the end of the term.
As of December 30, 2023 and December 31, 2022, finance leases included in property, plant, and
equipment, net in the consolidated balance sheets were $4.5 million and $1.9 million, respectively. Finance lease
expense includes amortization of the right-of-use assets and interest expense. Total finance lease expense
during the fiscal years ended December 30, 2023 and December 31, 2022 was not material.
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INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents maturity of lease liabilities under the Company's non-cancelable leases as
of December 30, 2023 (in thousands):
Total lease payments
Less: interest(1)
Present value of lease liabilities
(1)
Calculated using the interest rate for each lease.
Operating Lease
Finance Lease
$
$
111,316 $
51,964
59,352 $
5,220
692
4,528
The following table presents supplemental information for the Company's non-cancelable leases for the
fiscal year ended December 30, 2023 (in thousands, except for weighted average and percentage data):
Weighted average remaining lease term
Weighted average discount rate
Cash paid for amounts included in the measurement of lease liabilities $
Leased assets obtained in exchange for new lease liabilities
$
4.
Revenue Recognition
Disaggregation of Revenue
Operating Lease
Finance Lease
15.26 years
4.10 years
10.52 %
16,386 $
13,534 $
9.94 %
1,023
4,363
The following table presents the Company's revenue disaggregated by revenue source (in thousands):
Years Ended
Product
Services
Total revenue
December 30, 2023
December 31, 2022
December 25, 2021
$
$
1,304,229 $
1,268,624 $
309,899
304,618
1,614,128 $
1,573,242 $
1,099,376
325,829
1,425,205
The Company sells its products directly to customers who are predominantly service providers and to
channel partners that sell on its behalf. The following tables present the Company's revenue disaggregated by
geography, based on the shipping address of the end-customer and by sales channel (in thousands):
United States
Other Americas
Europe, Middle East and Africa
Asia Pacific
Total revenue
Direct
Indirect
Total revenue
Years Ended
December 30,
2023
December 31,
2022
December 25,
2021
$
994,311 $
870,282 $
663,808
99,920
359,201
160,696
101,600
405,328
196,032
107,963
477,787
175,647
$
1,614,128 $
1,573,242 $
1,425,205
Years Ended
December 30,
2023
December 31,
2022
December 25,
2021
$
1,067,570 $
1,191,584 $
1,099,632
546,558
381,658
325,573
$
1,614,128 $
1,573,242 $
1,425,205
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INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Contract Balances
The following table provides information about receivables, contract assets and contract liabilities from
contracts with customers (in thousands):
Assets (Liabilities)
Accounts receivable, net
Contract assets
Deferred revenue(1)
December 30,
2023
December 31,
2022
$
$
$
381,981 $
419,735
46,738 $
60,172
(157,580) $
(181,679)
(1)
Included in this balance are amounts related to services that are subject to cancellation and pro-rated refund rights of
$85.9 million and $82.5 million as of December 30, 2023 and December 31, 2022, respectively.
Revenue recognized for the fiscal year ended December 30, 2023 and December 31, 2022 that was
included in the deferred revenue balance at the beginning of the reporting period was $133.6 million and
$106.8 million, respectively. Changes in the contract asset and liability balances during the fiscal year ended
December 30, 2023 and December 31, 2022 were not materially impacted by other factors.
Transaction Price Allocated to the Remaining Performance Obligation
The Company’s remaining performance obligations represent the transaction price allocated to
performance obligations that are unsatisfied or partially satisfied, consisting of deferred revenue and non-
cancellable backlog. The Company’s backlog represents purchase orders received from customers for future
product shipments and services. The Company’s backlog is subject to future events that could cause the amount
or timing of the related revenue to change. Orders in backlog may be fulfilled several quarters following receipt or
may relate to multi-year support service obligations.
The following table includes estimated revenue expected to be recognized in the future related to
performance obligations that are unsatisfied (or partially satisfied) pursuant to contracts that are not subject to
cancellation without penalty at the end of the reporting period (in thousands):
2024
2025
2026
2027
2028
Thereafter
Total
Revenue expected to be
recognized in the future
as of December 30, 2023
$ 462,363 $ 23,925 $ 14,918 $ 8,521 $ 3,492 $ 2,738 $ 515,957
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INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
5.
Fair Value Measurements
Disclosure of Fair Values
Financial instruments that are not re-measured at fair value include accounts receivable, accounts
payable, accrued liabilities, and debt. The carrying values of these financial instruments, other than the
Company's 2024 Notes, 2027 Notes and 2028 Notes (collectively referred to as "convertible senior notes"
below), approximate their fair values. The fair value of each series of convertible senior notes was determined
based on the quoted bid price of the applicable series of convertible senior notes in an over-the-counter market
on December 29, 2023 (the last trading day of the fiscal quarter).
The following table presents the estimated fair values of the convertible senior notes (in thousands):
As of December 30, 2023
Fair Value Measured Using
Total
Level 2
Level 1
As of December 31, 2022
Fair Value Measured Using
Total
Level 2
Level 1
Convertible senior notes
$
— $ 658,609 $ 658,609 $
— $ 785,364 $ 785,364
Cash equivalents are measured and reported at fair value on a recurring basis. The following table
presents the fair value of these financial assets and their levels within the fair value hierarchy (in thousands):
As of December 30, 2023
As of December 31, 2022
Fair Value Measured Using
Level 1
Level 2
Total
Fair Value Measured Using
Level 1
Level 2
Total
Money market funds
$ 115,000 $
— $ 115,000 $ 95,000 $
— $ 95,000
During 2023 and 2022, there were no transfers of assets or liabilities between Level 1 and Level 2 of the
fair value hierarchy. As of December 30, 2023 and December 31, 2022, none of the Company’s existing
securities were classified as Level 3 securities.
The Company measures goodwill and intangible assets at fair value on a nonrecurring basis when there
are identifiable events or changes in circumstances that may have a significant adverse impact on the fair value
of these assets. The Company performed an analysis of impairment indicators of these assets and noted no
adverse impact to their fair values as of December 30, 2023.
Facilities-related Charges
The Company classifies certain facilities-related charges within Level 3 of the fair value hierarchy and
applies fair value accounting on a nonrecurring basis when impairment indicators exist or upon the existence of
observable fair values. The fair values are classified as Level 3 measurements due to the significance of
unobservable inputs. These analyses require management to make assumptions and estimates regarding
industry and economic factors, future operating results and discount rates.
In connection with its Restructuring Plans (as defined in Note 8, “Restructuring and Other Related
Costs” to the notes to consolidated financial statements), the Company incurred facilities related charges of $3.0
million, $8.1 million and $6.5 million for the years ended December 30, 2023, December 31, 2022 and
December 25, 2021, respectively. These charges primarily consisted of impairment charges incurred for
operating lease right-of-use assets and were calculated at fair value based on estimated future sublease rental
receipts that the Company could reasonably obtain over the remaining lease term at the discount rate. Facilities-
related charges are classified as Level 3 measurement due to the significance of these unobservable inputs.
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INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Cash and Cash Equivalents
As of December 30, 2023, the Company had $173.9 million of cash, cash equivalents and restricted
cash, including $48.1 million held by its foreign subsidiaries. As of December 31, 2022, the Company had $189.2
million of cash, cash equivalents and restricted cash including $65.9 million held by its foreign subsidiaries. The
Company's cash held by its foreign subsidiaries is used for operating and investing activities in those locations,
and the Company does not currently have the need or the intent to repatriate those funds to the United States.
6.
Goodwill and Intangible Assets
Goodwill
Goodwill is recorded when the purchase price of an acquisition exceeds the fair value of the net tangible
and identified intangible assets acquired.
The following table presents details of the Company’s goodwill for the fiscal year ended December 30,
2023 (in thousands):
Balance as of December 31, 2022
Foreign currency translation adjustments
Balance as of December 30, 2023
$
$
232,663
7,903
240,566
The gross carrying amount of goodwill may change due to the effects of foreign currency fluctuations as
a portion of these assets are denominated in foreign currency. To date, the Company has zero accumulated
impairment loss on goodwill.
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INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Intangible Assets
The following tables present details of the Company’s intangible assets as of December 30, 2023 and
December 31, 2022 (in thousands):
Intangible assets with finite lives:
Customer relationships
Total intangible assets
Intangible assets with finite lives:
Customer relationships and backlog
Developed technology
Total intangible assets
December 30, 2023
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Weighted
Average
Remaining
Useful Life (In
Years)
72,200
(47,381)
24,819
2.8
$ 72,200 $
(47,381) $ 24,819
December 31, 2022
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
151,461
170,467
(114,294)
37,167
(159,847)
10,620
$ 321,928 $
(274,141) $ 47,787
Weighted
Average
Remaining
Useful Life (In
Years)
3.5
0.7
The gross carrying amount of intangible assets and the related amortization expense of intangible
assets may change due to the effects of foreign currency fluctuations as a portion of these assets are
denominated in foreign currency. Amortization expense was $23.0 million, $37.7 million and $37.1 million for the
years ended December 30, 2023, December 31, 2022 and December 25, 2021, respectively.
The following table summarizes the Company’s estimated future amortization expense of intangible
assets with finite lives as of December 30, 2023 (in thousands):
Total future amortization
expense
$ 24,819 $ 9,025 $ 9,025 $ 6,769 $
— $
— $
—
Total
2024
2025
2026
2027
2028
Thereafter
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INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
7.
Balance Sheet Details
Restricted Cash
The Company’s restricted cash balance is held in deposit accounts at various banks globally. These
amounts primarily collateralize the Company’s issuances of standby letters of credit and bank guarantees.
Allowance for Credit Losses
The following table provides a rollforward of the allowance for credit losses for accounts receivable for
the fiscal year ended December 30, 2023 (in thousands):
Balance as of December 31, 2022
Additions(1)
Write offs(2)
Recoveries during the period
Balance as of December 30, 2023
$
$
1,422
521
(473)
(594)
876
(1)
(2)
The new additions during the fiscal year ended December 30, 2023 are primarily due to specific reserves.
The write offs during the fiscal year ended December 30, 2023 are primarily amounts fully reserved previously.
Accounts Receivable Factoring
The Company sells certain designated trade account receivables based on factoring arrangements with
well-established factoring companies. Pursuant to the terms of the arrangements, the Company accounts for
these transactions in accordance with ASC 860. The Company's factor purchases trade accounts receivables on
a non-recourse basis and without any further obligations. Trade accounts receivables balances sold are removed
from the consolidated balance sheets and cash received are reflected as cash provided by operating activities in
the consolidated statements of cash flow. The difference between the fair value of the Company's trade
receivables and the proceeds received is recorded as interest expense in the Company's consolidated
statements of operations. For the years ended December 30, 2023, December 31, 2022 and December 25,
2021, the Company's recognized factoring related interest expense was approximately $0.9 million, $0.9 million
and $0.4 million, respectively. The gross amount of trade accounts receivables sold totaled approximately $62.6
million and $101.0 million for the fiscal years ended December 30, 2023 and December 31, 2022 respectively.
98
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Selected Balance Sheet Items
The following table provides details of selected balance sheet items (in thousands):
Inventory
Raw materials
Work in process
Finished goods
Total
Property, plant and equipment, net
Computer hardware
Computer software(1)
Laboratory and manufacturing equipment
Land and building
Furniture and fixtures
Leasehold and building improvements
Construction in progress
Subtotal
Less accumulated depreciation and amortization(2)
Total
Accrued expenses and other current liabilities
Loss contingency related to non-cancelable purchase commitments
Taxes payable
Restructuring accrual
Short-term operating and finance lease liability
Other accrued expenses and other current liabilities
December 30,
2023
December 31,
2022
$
133,561 $
68,407
229,195
48,688
66,591
259,576
$
$
$
$
$
431,163 $
374,855
48,611 $
74,752
354,103
12,372
2,916
46,652
41,328
46,454
62,102
297,261
12,369
2,828
50,360
42,418
580,734 $
513,792
(373,737)
(340,863)
206,997 $
172,929
17,909 $
24,248
6,042
12,905
49,654
28,796
42,757
941
11,701
57,255
Total accrued expenses and other current liabilities
$
110,758 $
141,450
(1)
(2)
Included in computer software at December 30, 2023 and December 31, 2022 were $34.8 million and $29.3 million,
respectively, related to enterprise resource planning (“ERP”) systems that the Company implemented in prior years. The
unamortized ERP costs at December 30, 2023 and December 31, 2022 were $9.6 million and $9.0 million, respectively.
Also included in computer software at December 30, 2023 and December 31, 2022 was $29.6 million and $24.2 million,
respectively, related to term licenses. The unamortized term license costs at December 30, 2023 and December 31, 2022
was $23.6 million and $9.1 million, respectively.
Depreciation expense was $55.8 million, $46.1 million and $47.1 million (which includes depreciation of capitalized ERP
costs of $4.9 million, $3.5 million and $2.8 million) for 2023, 2022 and 2021, respectively. Also included in depreciation
expense for 2023, 2022 and 2021 was $9.5 million and $7.6 million, and $6.7 million respectively, related to term licenses.
99
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
8.
Restructuring and Other Related Costs
In 2021, the Company announced a plan to restructure certain international research & development
operations (the "2021 Restructuring Plan"). The 2021 Restructuring Plan is substantially completed. In 2023, the
Company implemented a restructuring initiative to reduce costs (the "2023 Restructuring Plan"). In 2023, the
Company incurred and recorded $5.9 million of restructuring costs related to the 2023 Restructuring Plan. The
2023 Restructuring Plan is expected to be completed in 2024 with the associated payments made in 2024.
Additional restructuring activities may occur in the future in connection with the Company’s ongoing
transformation initiatives.
The following table presents restructuring and other related costs included in cost of revenue and
operating expenses in the accompanying consolidated statements of operations under the restructuring plans (in
thousands):
Severance and related expenses
Lease related impairment charges
Asset impairment and others
Total
Years Ended
December 30, 2023
December 31, 2022
December 25, 2021
Cost of
Revenue
Operating
Expenses
Cost of
Revenue
Operating
Expenses
Cost of
Revenue
Operating
Expenses
$ 2,218 $ 3,665 $
203 $ 1,834 $
335 $ 4,615
—
—
2,996
56
—
19
8,059
—
229
1,196
6,534
2,097
$ 2,218 $ 6,717 $
222 $ 10,122 $ 1,531 $ 13,246
Restructuring liabilities are reported within accrued expenses in the accompanying consolidated
balance sheets (in thousands):
Severance
and related
expenses
Lease related
impairment
charges
Asset
impairment
and others
Total
Balance as of December 25, 2021
$
7,536 $
— $
1,346 $
8,882
Charges
Cash payments
Non-cash Settlements and Other
Balance as of December 31, 2022
$
Charges
Cash payments
Non-cash Settlements and Other
2,033
(8,503)
(274)
792 $
5,883
(801)
13
8,059
(2,267)
(5,792)
239
10,331
(1,436)
(12,206)
—
(6,066)
— $
149 $
2,996
(1,773)
(1,223)
56
(60)
10
941
8,935
(2,634)
(1,200)
Balance as of December 30, 2023
$
5,887 $
— $
155 $
6,042
As of December 30, 2023, the Company's restructuring liability was primarily related to the 2023
Restructuring Plan.
100
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
9.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) includes certain changes in equity that are excluded
from net income (loss). The following table sets forth the changes by component for the periods presented (in
thousands):
Foreign
Currency
Translation
Actuarial
Gain (Loss)
on Pension
Accumulated
Tax Effect
Total
Balance at December 26, 2020
$
732 $ (11,666) $
(964) $ (11,898)
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive loss
(8,561)
12,580
—
3,383
Net current-period other comprehensive income (loss)
(8,561)
15,963
—
—
—
4,019
3,383
7,402
Balance at December 25, 2021
$
(7,829) $
4,297 $
(964) $
(4,496)
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive loss
(41,803)
22,538
—
(19,265)
—
326
964
1,290
Net current-period other comprehensive income (loss)
(41,803)
22,864
964
(17,975)
Balance at December 31, 2022
$ (49,632) $ 27,161 $
— $ (22,471)
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive loss
(9,962)
(2,002)
—
(11,964)
—
(413)
—
(413)
Net current-period other comprehensive income (loss)
(9,962)
(2,415)
—
(12,377)
Balance at December 30, 2023
$ (59,594) $ 24,746 $
— $ (34,848)
101
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
10.
Basic and Diluted Net Loss Per Common Share
Basic net loss per common share is computed by dividing net loss by the weighted average number of
common shares outstanding during the period. Diluted net loss per common share is computed using net loss
and the weighted average number of common shares outstanding plus potentially dilutive common shares
outstanding during the period. Potentially dilutive common shares include the assumed exercise of outstanding
in-the-money stock options, assumed release of outstanding RSUs and PSUs, and assumed issuance of
common stock under the ESPP using the treasury stock method. Potentially dilutive common shares also include
the shares of common stock issuable upon conversion of the convertible senior notes using the if-converted
method, as further discussed in Note 11, “Debt” to the notes to consolidated financial statements. The Company
includes the common shares underlying PSUs in the calculation of diluted net income per common share only
when they become contingently issuable.
The following table sets forth the computation of net loss per common share (in thousands, except per
share amounts):
Net loss
Years Ended
December 30,
2023
December 31,
2022
December 25,
2021
$
(25,213) $
(76,043) $
(170,778)
Weighted average common shares outstanding - basic and
diluted
226,726
216,376
207,377
Net loss per common share - basic and diluted
$
(0.11) $
(0.35) $
(0.82)
The Company incurred net losses during 2023, 2022 and 2021, and as a result, potential common
shares from stock options, RSUs, PSUs and the assumed release of outstanding shares under the ESPP were
not included in the diluted shares used to calculate net loss per share, as their inclusion would have been anti-
dilutive. Additionally, due to the net loss position during these periods, the Company excluded the potential
shares issuable upon conversion of the 2028 Notes, the 2027 Notes and the 2024 Notes in the calculation of
diluted earnings per share, as their inclusion would have been anti-dilutive.
The following table sets forth the potentially dilutive shares excluded from the computation of the diluted
net loss per share because their effect was anti-dilutive (in thousands):
Convertible senior notes(1)
Restricted stock units
Performance stock units
Employee stock purchase plan shares
Total
(1)
As of
December 30,
2023
December 31,
2022
December 25,
2021
32,814
13,619
3,668
53
50,154
55,800
14,836
2,685
360
73,681
4,448
12,860
2,751
1,157
21,216
The convertible senior notes were calculated under the if-converted method for 2022 due to the adoption of ASU
2020-06 and under the treasury stock method for 2021.
Prior to the adoption of ASU 2020-06, the Company used the treasury stock method for calculating any
potential dilutive effect of the conversion spread of its convertible senior notes. The conversion spread had a
dilutive impact for the 2027 Notes during the fiscal year ended December 25, 2021 since the average market
price of the Company’s common stock during the periods exceeded the initial conversion price of $7.66 per
share. However, the potential shares of common stock issuable upon the conversion of the convertible senior
notes were excluded from the calculation of diluted net loss per share because their effect would have been anti-
dilutive.
102
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
After the adoption of ASU 2020-06, the Company used the if-converted method for calculating any
potential dilutive effect of the convertible senior notes for fiscal years ended December 30, 2023 and December
31, 2022. The Company calculates diluted earnings per share assuming that all of the convertible senior notes
permitted to be share settled were converted solely into shares of common stock at the beginning of the reporting
period. The potential impact upon the conversion of the convertible senior notes was excluded from the
calculation of diluted net loss per share for the fiscal years ended December 30, 2023, December 31, 2022 and
December 25, 2021 because the effect would have been anti-dilutive.
11.
Debt
The following is a summary of the Company's debt as of December 30, 2023 (in thousands):
2024 Notes
2027 Notes
2028 Notes
Mortgage
Total Debt
Net Carrying Value
Current
Long-Term
Unpaid
Principal
Balance
Contractual
Maturity Date
$
18,747 $
— $
18,747
September 2024
—
—
196,829
200,000
March 2027
461,927
473,750
August 2028
6,765
—
6,765
May 2024
$
25,512 $
658,756 $
699,262
The following is a summary of the Company's debt as of December 31, 2022 (in thousands):
2024 Notes
2027 Notes
2028 Notes
Mortgage
Total Debt
Net Carrying Value
Current
Long-Term
Unpaid
Principal
Balance
Contractual
Maturity Date
$
— $
101,726 $
102,652
September 2024
—
—
195,879
200,000
March 2027
363,349
373,750
August 2028
510
6,765
7,275
March 2024
$
510 $
667,719 $
683,677
103
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Convertible Senior Notes
In September 2018, the Company issued $402.5 million aggregate principal amount of 2.125%
Convertible Senior Notes due 2024 (the "2024 Notes"). In March 2020, the Company issued $200.0 million
aggregate principal amount of 2.5% Convertible Senior Notes due 2027 (the “2027 Notes"). In August 2022 and
in June 2023, the Company issued $373.8 million and $100 million, respectively, aggregate principal amount of
3.75% Convertible Senior Notes due 2028 (the "2028 Notes," and, together with the 2024 Notes and 2027 Notes,
the “convertible senior notes”). The 2024 Notes bear interest at a fixed rate of 2.125% per year, payable semi-
annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2019. The 2027 Notes
bear interest at a fixed rate of 2.5% per year, payable semi-annually in arrears on March 1 and September 1 of
each year, beginning on September 1, 2020. The 2028 Notes bear interest at a fixed rate of 3.75% per year,
payable semi-annually in arrears on February 1 and August 1 of each year, beginning on February 1, 2023. Each
series of the convertible senior notes is governed by an indenture between the Company, as the issuer, and U.S.
Bank Trust Company, National Association, as Trustee (individually, each an “Indenture,” and together, the
“Indentures”). The convertible senior notes of each series are unsecured and rank senior in right of payment to
any of the Company’s indebtedness that is expressly subordinated in right of payment to the convertible senior
notes; equal in right of payment to any of the Company's existing and future liabilities that are not so
subordinated, effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of
the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities
(including trade payables) of the Company’s current or future subsidiaries. The applicable Indenture governing
each series of the convertible senior notes does not contain any financial covenants or any restrictions on the
payment of dividends, the incurrence of senior debt or other indebtedness, or the issuance or repurchase of the
Company's other securities by the Company.
The net proceeds to the Company from the issuance of 2024 Notes were approximately $391.4 million,
of which approximately $48.9 million was used to pay the cost of the capped call transactions with certain
financial institutions (“Capped Calls”). The Company also used a portion of the remaining net proceeds to fund
the cash portion of the purchase price of the Acquisition, including fees and expenses relating thereto, and used
the remaining net proceeds for general corporate purposes.
The Capped Calls have an initial strike price of $9.87 per share, subject to certain adjustments, which
corresponds to the initial conversion price of the 2024 Notes. The Capped Calls have initial cap prices of $15.19
per share, subject to certain adjustments. The Capped Calls cover, subject to anti-dilution adjustments, 40.8
million shares of common stock. The Capped Calls transactions are expected generally to reduce or offset
potential dilution to the Company's common stock upon any conversion of the 2024 Notes and/or offset any cash
payments the Company is required to make in excess of the principal amount of converted 2024 Notes, as the
case may be, with such reduction and/or offset subject to a cap. The Capped Calls expire on various dates
between July 5, 2024 and August 29, 2024. The Capped Calls were recorded as a reduction of the Company’s
stockholders’ equity in the accompanying consolidated balance sheets.
The net proceeds to the Company from the issuance of 2027 Notes were approximately $193.3 million
after deducting initial purchasers' fee and other debt issuance costs. The Company used the remaining net
proceeds for general corporate purposes, including working capital to fund growth and potential strategic
projects.
The net proceeds to the Company from the issuance of Existing 2028 Notes (as defined below) were
approximately $362.4 million after deducting the initial purchasers' fee and other debt issuance costs. The
Company used approximately $283.6 million, which included accrued and unpaid interest, of the net proceeds
from this issuance to repurchase approximately $299.8 million in aggregate principal amount of its 2024 Notes
concurrently with the issuance. This transaction involved a contemporaneous exchange of cash between the
Company and holders of the 2024 Notes participating in the issuance of the Existing 2028 Notes. Accordingly,
the transaction was evaluated for modification or extinguishment accounting in accordance with ASC 470-50,
Debt – Modifications and Extinguishments on a creditor-by creditor basis depending on whether the exchange
was determined to have substantially different terms. The repurchase of the 2024 Notes and issuance of the
Existing 2028 Notes were deemed to have substantially different terms based on the present value of the cash
flows or significant difference between the value of the conversion option immediately prior to and after the
exchange. Therefore, the repurchase of the 2024 Notes was accounted for as a debt extinguishment. The
104
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Company recorded a $15.5 million gain on extinguishment of debt on its consolidated statements of operations
during the fiscal year ended December 31, 2022, which includes the write-off of related deferred issuance costs
of $3.5 million.
In June 2023, the Company issued $100.0 million in additional aggregate principal amount (the
"Additional 2028 Notes") of its currently outstanding 3.75% Convertible Senior Notes due 2028 (the "Existing
2028 Notes" and together with the Additional 2028 Notes, the “2028 Notes”). The Additional 2028 Notes were
issued under the indenture dated as of August 8, 2022, by and between the Company and U.S. Bank Trust
Company, National Association, as trustee. The Additional 2028 Notes constitute a further issuance of, and form
a single series with, the Existing 2028 Notes issued on August 8, 2022 in the aggregate principal amount of
$373.8 million and have substantially identical terms, including conversion rate, conversion price, convertible
dates, redemption rights, conditions for conversion, settlement provisions and ranking.
The net proceeds to the Company from this issuance of Additional 2028 Notes were approximately
$96.5 million after deducting the placement agent's fee, other debt issuance costs and discount. The Company
used approximately $84.0 million of the net proceeds from this issuance to repurchase approximately
$83.9 million in aggregate principal amount, which included accrued and unpaid interest, of its 2024 Notes
concurrently with the issuance. This transaction involved a contemporaneous exchange of cash between the
Company and holders of the 2024 Notes participating in the issuance of the Additional 2028 Notes. Accordingly,
the transaction was evaluated for modification or extinguishment accounting in accordance with ASC 470-50,
Debt – Modifications and Extinguishments on a creditor-by-creditor basis depending on whether the exchange
was determined to have substantially different terms. The repurchase of the 2024 Notes and issuance of the
Additional 2028 Notes were deemed to have substantially different terms based on the present value of the cash
flows or significant difference between the value of the conversion option immediately prior to and after the
exchange. Therefore, the repurchase of the 2024 Notes was accounted for as a debt extinguishment. The
Company recorded an immaterial loss on extinguishment of debt in interest expense, in the consolidated
statements of operations during the fiscal year ended December 30, 2023, which includes the write-off of the
related deferred issuance costs. After giving effect to the repurchase, the total remaining principal amount
outstanding under the 2024 Notes as of December 30, 2023 was $18.7 million.
The Company used the remaining net proceeds from the issuance of 2028 Notes for general corporate
purposes, including working capital and to fund growth and potential strategic projects.
The 2024 Notes, the 2027 Notes and the 2028 Notes mature on September 1, 2024, March 1, 2027 and
August 1, 2028, respectively. The Company did not have the right to redeem the 2024 Notes prior to September
5, 2021, and may not redeem the 2027 Notes prior to March 5, 2024 or the 2028 Notes prior to August 5, 2025.
The Company may redeem for cash all or any portion of the 2024 Notes at its option, on or after September 5,
2021, the 2027 Notes, at its option, on or after March 5, 2024, and the 2028 Notes, at its option, on or after
August 5, 2025, if the last reported sale price of its common stock has been at least 130% of the conversion price
then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day
period (including the last trading day of such period) ending on, and including the trading day immediately
preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of
the principal amount of the convertible senior notes to be redeemed, plus accrued and unpaid interest, if any, to,
but excluding, the redemption date. No sinking fund is provided for the convertible senior notes.
Conversion Rate and Initial Conversion Price for each series of convertible senior notes are presented
in the following table:
2024 Notes
2027 Notes
2028 Notes
Conversion Rate per
$1,000 Principal
Initial Conversion
Price
101.2812 $
130.5995 $
147.1183 $
9.87
7.66
6.80
105
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Throughout the term of the convertible senior notes, the conversion rate may be adjusted upon the
occurrence of certain events, including for any cash dividends. Holders of the convertible senior notes will not
receive any cash payment representing accrued and unpaid interest upon conversion. Accrued but unpaid
interest will be deemed to be paid in full upon conversion rather than canceled, extinguished or forfeited. Prior to
the close of business on the business day immediately preceding June 1, 2024 for the 2024 Notes, December 1,
2026 for the 2027 Notes and May 1, 2028 for the 2028 Notes (the convertible dates), holders may convert their
convertible senior notes under the following circumstances:
•
•
•
•
•
during any fiscal quarter commencing after the fiscal quarters ended on December 29, 2018 for the
2024 Notes, June 27, 2020 for the 2027 Notes and September 24, 2022 for the 2028 Notes (and
only during such fiscal quarter) if the last reported sale price of the common stock for at least 20
trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on
the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of
the conversion price on each applicable trading day;
during the five business day period after any five consecutive trading day period (the “measurement
period”) in which the trading price per $1,000 principal amount of the convertible senior notes for
each trading day of the measurement period was less than 98% of the product of the last reported
sale price of the Company’s common stock and the conversion rate on each such trading day;
if the Company calls any or all of the 2024 Notes, 2027 Notes, or 2028 Notes for redemption,
holders of such series may convert their notes at any time prior to the close of business on the
scheduled trading day immediately preceding the redemption date of such series called for
redemption;
upon the occurrence of specified corporate events described under the Indentures, such as a
consolidation, merger or binding share exchange;
or at any time on or after respective convertible dates, until the close of business on the second
scheduled trading day immediately preceding the maturity date for such series, holders may
convert their respective convertible senior notes at any time, regardless of the foregoing
circumstances.
Upon the receipt of conversion requests, the settlement of the convertible senior notes will be paid
pursuant to the terms of the respective governing Indentures. In the event that any of the 2024 Notes and 2027
Notes are converted, the Company would be required to repay the principal amount and any conversion premium
in any combination of cash and shares of its common stock at the Company’s option. In the event that any of the
2028 Notes are converted, the Company would be required to repay the principal amount in cash and the
conversion premium in any combination of cash and shares of its common stock at the Company’s option.
If the Company undergoes a fundamental change as defined in the Indentures, holders may require the
Company to repurchase for cash all or any portion of their convertible senior notes at a repurchase price equal to
100% of the principal amount of the convertible senior notes to be repurchased, plus accrued and unpaid interest
to, but excluding, the fundamental change repurchase date. In addition, upon the occurrence of a “make-whole
fundamental change” (as defined in each of the Indentures), the Company may, in certain circumstances, be
required to increase the conversion rate by a number of additional shares for a holder that elects to convert its
convertible senior notes in connection with such make-whole fundamental change.
There have been no changes to the initial conversion price of the convertible senior notes since
issuance. None of the conditions allowing holders of the convertible senior notes to convert early were met. The
convertible senior notes were therefore not convertible during 2023.
106
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Interest Expense
The following table presents the interest expense related to the contractual interest coupon, the
amortization of debt issuance costs, and the amortization of debt discounts on our convertible senior notes (in
thousands):
Contractual interest expense
Amortization of debt issuance costs
Amortization of debt discount
Total interest expense
Adoption of ASU 2020-06
Year Ended
December 30,
2023
December 31,
2022
December 25,
2021
$
22,263 $
16,589 $
4,064
—
3,404
—
$
26,327 $
19,993 $
13,553
1,892
29,411
44,856
Prior to the adoption of ASU 2020-06 on December 26, 2021 and in accounting for the issuance of the
convertible senior notes, the convertible senior notes were separated into liability and equity components. The
carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument
that does not have an associated conversion feature. The carrying amounts of the equity component
representing the conversion option related to the 2024 Notes and 2027 Notes were $128.7 million and
$67.8 million, respectively. This was determined by deducting the fair value of the liability component from its par
value. The equity component was recorded in additional paid-in-capital and was not re-measured as long as it
continued to meet the conditions for equity classification. The excess of the principal amount of the liability
component over its carrying amount (the “debt discount”) was amortized to interest expense over the respective
contractual term of the convertible senior notes at an effective interest rate of 9.92%.
Prior to the adoption of ASU 2020-06 on December 26, 2021 and in accounting for the debt issuance
costs of $12.9 million and $6.7 million related to the 2024 Notes and 2027 Notes, respectively, the Company
allocated the total amount incurred to the liability and equity components of the convertible senior notes based on
their relative values. Issuance costs attributable to the liability component were $8.7 million and $4.3 million,
related to the 2024 Notes and 2027 Notes, respectively, and were amortized to interest expense using the
effective interest method over the contractual term of the convertible senior notes. Issuance costs attributable to
the equity component were netted with the equity component in additional paid-in-capital.
On December 26, 2021, the Company adopted ASU 2020-06 based on a modified retrospective
transition method. Under such transition, prior-period information has not been retrospectively adjusted.
In accounting for the convertible senior notes after adoption of ASU 2020-06, the convertible senior
notes are accounted for as a single liability. The issuance cost related to the 2024 Notes, the 2027 Notes and the
2028 Notes are being amortized to interest expense over the respective contractual term, at effective interest
rates of 2.6%, 3.0% and 4.3%, respectively. Unamortized debt issuance costs will be amortized over the
remaining life of the 2024 Notes, the 2027 Notes and the 2028 Notes which is approximately 8 months, 38
months, and 55 months, respectively.
107
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The net carrying amount of the convertible senior notes as of December 30, 2023, and as of
December 31, 2022, (post-ASU 2020-06 adoption) was as follows (in thousands):
2024 Notes
2027 Notes
2028 Notes
December
30, 2023
December
31, 2022
December 30,
2023
December
31, 2022
December
30, 2023
December
31, 2022
$
Principal
Unamortized
issuance costs and
discount
Net carrying amount $
18,747 $ 102,652 $
200,000 $ 200,000 $ 473,750 $ 373,750
—
(926)
(3,171)
(4,121)
(11,823)
(10,401)
18,747 $ 101,726 $
196,829 $ 195,879 $ 461,927 $ 363,349
Asset-based revolving credit facility
On June 24, 2022, the Company entered into a Loan, Guaranty and Security Agreement (the “Loan
Agreement”) with the lenders party thereto, and Bank of America, N.A., as agent. The Loan Agreement provides
for a senior secured asset-based revolving credit facility of up to $200 million (the "Credit Facility"), which the
Company may draw upon from time to time. The Company may increase the total commitments under the
revolving credit facility by up to an additional $100 million, subject to certain conditions. In addition, the Loan
Agreement provides for a $50 million letter of credit subfacility and a $20 million swingline loan facility.
The proceeds of the loans under the Loan Agreement may be used to pay the fees, costs, and
expenses incurred in connection with the Loan Agreement, repay existing debt and for working capital and
general corporate purposes, including to fund growth. The Credit Facility has a stated maturity date of June 24,
2027. Availability under the Credit Facility will be based upon periodic borrowing base certifications valuing
certain inventory and accounts receivable, as reduced by certain reserves. The Credit Facility is secured by a
first-priority security interest (subject to certain exceptions) in inventory, certain related assets, specified deposit
accounts, and certain other accounts.
Outstanding borrowings accrue interest at floating rates plus an applicable margin of 1.25% to 1.75% for
Term Secured Overnight Financing Rate ("SOFR") rate loans and 0.25% to 0.75% for base rate loans. The
unused line fee rate payable on the unused portion of the Credit Facility is equal to 0.25% per annum based on
utilization of the Credit Facility.
The Loan Agreement contains customary affirmative covenants, such as financial statement reporting
requirements and delivery of borrowing base certificates. The Loan Agreement also contains customary
covenants that limit the ability of the Company to, among other things, incur debt, create liens and
encumbrances, engage in certain fundamental changes, dispose of assets, prepay certain indebtedness, make
restricted payments, make investments, and engage in transactions with affiliates. The Loan Agreement also
contains a financial covenant that requires the Company to maintain a minimum fixed charge coverage ratio. As
of December 30, 2023, the Company was in compliance with all covenants under the Loan Agreement.
In connection with the Credit Facility, the Company incurred lender and other third-party costs of
approximately $1.2 million, which are recorded as a deferred asset and will be amortized to interest expense
using a straight-line method over the term of the Credit Facility.
As of December 30, 2023, the Company had availability of $177.7 million under the Credit Facility. As of
December 30, 2023, the Loan Agreement included a $50.0 million letter of credit subfacility and $22.1 million
letters of credit issued and outstanding.
108
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Mortgage Payable
In March 2019, the Company mortgaged a property it owns. The Company received proceeds of $8.7
million in connection with the loan. The loan carried a fixed interest rate of 5.25% and was repayable in 59 equal
monthly installments of principal and interest with the remaining unpaid principal balance plus accrued unpaid
interest due five years from the date of the loan.
In September 2021, the loan was amended to reduce the interest rate from 5.25% to 3.80% for the
remaining 31 equal monthly installments of approximately $0.1 million, with the remaining principal payment at
maturity date. In March 2024, the loan was further amended to extend it's maturity to May 27, 2024 and as a
result, the interest rate increased to 7.50% effective March 27, 2024.
As of December 30, 2023, $6.8 million of the loan remained outstanding and is included in short-term
debt, net in the consolidated balance sheets.
109
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
12.
Commitments and Contingencies
The following table sets forth commitments and contingencies related to our various obligations (in
thousands):
Payments Due by Period
2024
Total
Thereafter
2025
Operating leases(1)(2) $ 111,316 $ 16,570 $ 14,517 $ 11,068 $ 8,690 $ 6,554 $ 53,917
Financing lease
obligations(3)
Purchase obligations
(4)
1,006
1,128
1,318
5,220
2026
2027
2028
956
812
—
466,346
445,633
19,844
869
—
—
—
2028 Notes, including
interest(5)
2027 Notes, including
interest(5)
2024 Notes, including
interest(5)
Mortgage Payable,
including interest(5)
Total contractual
obligations
562,579
17,766
17,766
17,766
17,766
491,515
217,500
5,000
5,000
5,000
202,500
19,145
19,145
6,830
6,830
—
—
—
—
—
—
—
—
—
—
—
—
—
$ 1,388,936 $ 512,262 $ 58,255 $ 35,709 $ 229,912 $ 498,881 $ 53,917
(1)
(2)
(3)
(4)
(5)
The Company leases facilities under non-cancelable operating lease agreements. These leases have varying terms
that range from one to 14 years. The above payment schedule includes interest. See Note 3, "Leases" to the notes to
consolidated financial statements for more information.
The Company has contractual commitments to remove leasehold improvements and return certain properties to a
specified condition when the leases terminate. At the inception of a lease with such conditions, the Company records
an asset retirement obligation liability and a corresponding capital asset in an amount equal to the estimated fair
value of the obligation. Asset retirement obligations were $4.6 million and $4.9 million as of December 30, 2023 and
December 31, 2022, respectively. Of the $4.6 million as of December 30, 2023, $4.4 million is classified as other
long-term liabilities on the accompanying consolidated balance sheets. The remainder is included in accrued
expenses and other current liabilities.
The Company has finance leases for computer hardware and leasehold improvements. The above payment
schedule includes interest. See Note 3, "Leases" to the notes to consolidated financial statements for more
information.
The Company has agreements with its major production suppliers, where the Company is committed to purchase
certain parts. As of December 30, 2023, December 31, 2022 and December 25, 2021, these non-cancelable
purchase commitments were $466.3 million, $744.8 million and $591.5 million, respectively.
See Note 11, "Debt" to the notes to consolidated financial statements for more information.
Legal Matters
NextGen Innovations, LLC
On August 9, 2022, NextGen Innovations, LLC ("NextGen") filed a complaint against us in the United
States District Court for the Eastern District of Texas. The complaint asserts that through certain products we
infringe on U.S. Patent Nos. 9,887,795, 10,263,723, and 10,771,181. The complaint alleges that NextGen is
entitled to unspecified damages, costs, fees, expenses, interest, and injunctive relief. A Markman hearing was
held on November 14, 2023, and the Court issued its claim construction order on December 22, 2023. Fact
discovery closed on December 6, 2023, and expert discovery closed on February 4, 2024. The Court set a May
6, 2024 date for expected trial. On April 14, 2023, we filed petitions with the US Patent and Trademark Office
("USPTO") seeking inter partes reviews to invalidate asserted claims of the asserted NextGen patents. On
December 4, 2023, the Patent Trial and Appeal Board of the USPTO denied institution of such inter partes
reviews. A mediation was held on March 13, 2024, which resulted in a settlement in principle of the action against
us. Following the mediation, the Court entered a stay of all litigation deadlines through May 20, 2024 to enable
110
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
NextGen and the Company to prepare a written settlement agreement and the appropriate dismissal papers for
the Court. The parties are continuing to finalize the written settlement agreement. The Company does not expect
that the terms of the settlement will have a material impact on its financial results.
In addition to the matter described above, we are subject to various legal proceedings, claims and
litigation arising in the ordinary course of business. While the outcome of these matters is currently not
determinable, we do not expect that the ultimate costs to resolve these matters will have a material effect on our
consolidated financial position, results of operations or cash flows.
Loss Contingencies
The Company is subject to the possibility of various losses arising in the ordinary course of business.
These may relate to disputes, litigation and other legal actions. In the preparation of its quarterly and annual
financial statements, the Company considers the likelihood of loss or the incurrence of a liability, including
whether it is probable, reasonably possible or remote that a liability has been incurred, as well as the Company’s
ability to reasonably estimate the amount of loss, in determining loss contingencies. In accordance with U.S.
GAAP, an estimated loss contingency is accrued when it is probable that a liability has been incurred and the
amount of loss can be reasonably estimated. The Company regularly evaluates current information to determine
whether any accruals should be adjusted and whether new accruals are required. As of each of December 30,
2023 and December 31, 2022, the Company has accrued the estimated liabilities associated with certain loss
contingencies.
Indemnification Obligations
From time to time, the Company enters into certain types of contracts that contingently require it to
indemnify parties against third-party claims. The terms of such indemnification obligations vary. These contracts
may relate to: (i) certain real estate leases under which the Company may be required to indemnify property
owners for environmental and other liabilities, and other claims arising from the Company’s use of the applicable
premises; and (ii) certain agreements with the Company’s officers, directors and certain key employees, under
which the Company may be required to indemnify such persons for liabilities.
In addition, the Company has agreed to indemnify certain customers for claims made against the
Company’s products, where such claims allege infringement of third-party intellectual property rights, including,
but not limited to, patents, registered trademarks, and/or copyrights. Under the aforementioned intellectual
property indemnification clauses, the Company may be obligated to defend the customer and pay for the
damages awarded against the customer under an infringement claim as well as the customer’s attorneys’ fees
and costs. These indemnification obligations generally do not expire after termination or expiration of the
agreement containing the indemnification obligation. In certain cases, there are limits on and exceptions to the
Company’s potential liability for indemnification. The Company cannot estimate the amount of potential future
payments, if any, that it might be required to make as a result of these agreements. The maximum potential
amount of any future payments that the Company could be required to make under these indemnification
obligations could be significant.
As permitted under Delaware law and the Company’s charter and bylaws, the Company has
agreements whereby it indemnifies certain of its officers and each of its directors. The term of the indemnification
period is for the officer’s or director’s lifetime for certain events or occurrences while the officer or director is, or
was, serving at the Company’s request in such capacity. The maximum potential amount of future payments the
Company could be required to make under these indemnification agreements could be significant; however, the
Company has a director and officer insurance policy that may reduce its exposure and enable it to recover all or
a portion of any future amounts paid. As a result of its insurance policy coverage, the Company believes the
estimated fair value of these indemnification agreements is minimal.
111
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
13.
Guarantees
Product Warranties
Activity related to product warranty was as follows (in thousands):
Beginning balance
Charges to operations
Utilization
Change in estimate(1)
December 30,
2023
December 31,
2022
$
36,621 $
22,304
(20,516)
(5,209)
44,310
27,176
(22,420)
(12,445)
Balance at the end of the period
$
33,200 $
36,621
(1)
The Company records product warranty liabilities based on the latest quality and cost information available as of the date
the revenue is recorded. The changes in estimate shown here are due to changes in overall actual failure rates, the mix of
new versus used units related to replacement of failed units, and changes in the estimated cost of repair and product
recalls. As the Company's products mature over time, failure rates and repair costs associated with such products
generally decline leading to favorable changes in warranty reserves.
Letters of Credit and Bank Guarantees
The Company had $24.1 million and $24.7 million of standby letters of credit, bank guarantees and
surety bonds outstanding as of December 30, 2023 and December 31, 2022, respectively. Details are set in
below table (in thousands).
Customer performance guarantees
Value added tax license
Property leases
Total
December 30, 2023
December 31, 2022
$
$
19,068 $
3,127
1,894
24,089 $
20,903
1,434
2,398
24,735
Of the $19.1 million related to customer performance guarantees, approximately $4.0 million was used
to secure surety bonds in the aggregate of $7.5 million as of December 30, 2023. Of the $20.9 million related to
customer performance guarantees, approximately $4.0 million was used to secure surety bonds in the aggregate
of $7.5 million as of December 31, 2022.
As of December 30, 2023, of the aforementioned standby letters of credit and bank guarantees
outstanding, $1.9 million was backed by cash collateral.
112
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
14.
Stockholders’ Equity
2016 Equity Incentive Plan
In February 2016, the Company's board of directors adopted the 2016 Plan and the Company's
stockholders approved the 2016 Plan in May 2016. In May 2023, the Company's stockholders approved
amendments to the 2016 Plan to increase the number of shares authorized for issuance under the 2016 Plan by
$8.1 million. As of December 30, 2023, the Company reserved a total of 51.8 million shares of common stock for
the award of stock options, RSUs and PSUs to employees, non-employees, consultants and members of the
Company's board of directors pursuant to the 2016 Plan, plus any shares subject to awards granted under the
2007 Plan that, after the effective date of the 2016 Plan, expire, are forfeited or otherwise terminate without
having been exercised in full to the extent such awards were exercisable, and shares issued pursuant to awards
granted under the 2007 Plan that, after the effective date of the 2016 Plan, are forfeited to or repurchased by the
Company due to failure to vest. The 2016 Plan has a maximum term of 10 years from the date of adoption, or it
can be earlier terminated by the Company's board of directors. The 2007 Plan was cancelled and there are no
outstanding grants under the 2007 Plan.
Employee Stock Purchase Plan
In February 2007, the Company's board of directors adopted the ESPP and the Company's
stockholders approved the ESPP in May 2007. The ESPP was amended by the stockholders in May 2019 to
increase the shares authorized under the ESPP to a total of approximately 31.6 million shares of common stock.
The ESPP has a 20-year term. Eligible employees may purchase the Company’s common stock through payroll
deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning or the
end of six-month offering periods. An employee’s payroll deductions under the ESPP are limited to a maximum of
15% of the employee’s compensation and an employee may not purchase more than 3,000 shares per purchase
period.
The Company's ESPP was indefinitely suspended, effective upon the expiration of the offering period
that ended August 15, 2023.
Shares Reserved for Future Issuances
Common stock reserved for future issuance was as follows (in thousands):
Outstanding stock awards
Reserved for future award grants
Reserved for future ESPP
Total common stock reserved for stock options and awards
Stock-based Compensation Plans
December 30,
2023
15,189
10,065
1,098
26,352
The Company has stock-based compensation plans pursuant to which the Company has granted stock
options, RSUs and PSUs. The Company also has an ESPP for all eligible employees. The following tables
summarize the Company’s equity award activity and related information (in thousands, except per share data):
113
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Outstanding at December 26, 2020
RSUs granted
RSUs released
RSUs canceled
Outstanding at December 25, 2021
RSUs granted
RSUs released
RSUs canceled
Outstanding at December 31, 2022
RSUs granted
RSUs released
RSUs canceled
Outstanding at December 30, 2023
Outstanding at December 26, 2020
PSUs granted
PSUs released
PSUs canceled
Outstanding at December 25, 2021
PSUs granted
PSUs released
PSUs canceled
Outstanding at December 31, 2022
PSUs granted
PSUs released
PSUs canceled
Outstanding at December 30, 2023
Number of
Restricted
Stock Units
Weighted-Average
Grant Date
Fair Value
Per Share
Aggregate
Intrinsic
Value
12,468 $
7,377 $
(7,509) $
(729) $
11,607 $
8,897 $
(6,690) $
(1,226) $
12,588 $
6,990 $
(7,496) $
(546) $
11,536 $
5.99 $
136,781
8.68
5.96 $
66,317
6.92
7.66 $
110,849
8.26
7.52 $
46,104
7.89
8.13 $
84,847
6.97
8.10 $
43,001
8.01
7.45 $
54,802
Number of
Performance
Stock Units
Weighted-Average
Grant Date
Fair Value Per Share
Aggregate
Intrinsic
Value
3,466 $
659 $
(964) $
(1,047) $
2,114 $
899 $
(335) $
(119) $
2,559 $
1,835 $
— $
(741) $
3,653 $
5.36 $
38,022
8.61
5.21 $
8,278
4.91
6.66 $
20,184
8.38
5.40 $
2,592
7.19
7.40 $
17,251
7.26
— $
—
5.94
7.63 $
17,352
The aggregate intrinsic value of unreleased RSUs and unreleased PSUs is calculated using the closing
price of the Company's common stock of $4.75 at December 29, 2023. The aggregate intrinsic value of RSUs
and PSUs released is calculated using the fair market value of the common stock at the date of release.
The following table presents total stock-based compensation cost for instruments granted but not yet
recognized, net of forfeitures, of the Company’s equity compensation plans as of December 30, 2023. These
costs are expected to be amortized on a straight-line basis over the following weighted-average periods (in
thousands, except for weighted-average period):
114
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
RSUs
PSUs
Employee Stock Purchase Plan
Unrecognized
Compensation
Expense, Net
Weighted-
Average Period
(in years)
$
$
67,456
16,477
1.85
2.10
The fair value of the ESPP shares was estimated at the date of grant using the following assumptions:
Volatility
Risk-free interest rate
Expected life
Estimated fair value
December 30,
2023
Years Ended
December 31,
2022
December 25,
2021
60% - 63%
39% - 63%
38% - 50%
3.12% - 4.98%
0.67% - 3.12%
0.05% - 0.06%
0.5 years
0.5 years
0.5 years
$1.91 - $2.37
$1.91 - $2.21
$2.22 - $3.11
The expected dividend yield is zero for the Company as it does not expect to pay dividends in the
future.
ESPP activity was as below (in thousands):
Stock-based compensation expense
Employee contributions
Shares purchased
Restricted Stock Units
Years Ended
December 30,
2023
December 31,
2022
December 25,
2021
$
$
3,798 $
5,551 $
14,930 $
15,189 $
3,514
2,552
5,879
16,167
2,272
Pursuant to the 2016 Plan, the Company has granted RSUs to employees, non-employee members of
the Company's board of directors and consultants. All RSUs awarded are subject to each individual's continued
service to the Company through each applicable vesting date. The Company accounted for the fair value of the
RSUs using the closing market price of the Company’s common stock on the date of grant.
Performance Stock Units
Pursuant to the 2016 Plan, the Company has granted PSUs to certain of the Company’s executive
officers, senior management and certain employees. All PSUs awarded are subject to each individual's continued
service to the Company through each applicable vesting date and if the performance metrics are not met within
the time limits specified in the award agreements, the PSUs will be canceled.
PSUs granted to the Company's executive officers, senior management and certain other employees
under the 2016 Plan during 2023, 2022, 2021 and 2020 are based on performance criteria related to a specific
financial target over the span of a two or three-year performance period. These PSUs may become eligible for
vesting to begin before the end of such two-year or three-year performance period, if the applicable financial
target is met. The number of shares to be issued upon vesting of these PSUs ranges from 0 to 1.5 times the
target number of PSUs granted. Certain other employees were awarded PSUs that will only vest upon the
achievement of specific financial and operational performance criteria.
115
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table summarizes by grant year, the Company’s PSU activity for the fiscal year ended
December 30, 2023 (in thousands):
Total Number of
Performance Stock
Units
2020
2021
2022
2023
Outstanding at December 31, 2022
2,559
1,058
602
899
PSUs granted
PSUs canceled
1,835
—
(741)
(708)
—
—
—
—
—
1,835
(33)
Outstanding at December 30, 2023
3,653
350
602
899
1,802
Stock-based Compensation Expense
The following table summarizes the amortization of stock-based compensation expense related to the
RSUs, and PSUs (in thousands):
RSUs
PSUs
Years Ended
December 30,
2023
December 31,
2022
December 25,
2021
$
$
52,723 $
54,102 $
5,545 $
1,636 $
42,344
3,316
The following table summarizes the effects of stock-based compensation on the Company’s
consolidated balance sheets and statements of operations for the periods presented (in thousands):
Years Ended
December 30,
2023
December 31,
2022
December 25,
2021
$
Stock-based compensation effects in inventory
Income tax benefit associated with stock-based compensation $
3,895 $
8,165 $
3,979 $
8,588 $
3,707
9,345
Stock-based compensation effects in net loss before income
taxes
Cost of revenue
Research and development
Sales and marketing
General and administrative
$
10,000 $
9,485 $
22,474
13,699
15,977
23,553
13,311
14,666
Total stock-based compensation expense
$
62,150 $
61,015 $
7,928
18,554
12,345
12,985
51,812
116
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
15.
Income Taxes
The following is a geographic breakdown of the provision for income taxes (in thousands):
Years Ended
December 30,
2023
December 31,
2022
December 25,
2021
Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Foreign
Total deferred
Total provision for income taxes
$
1,278 $
945 $
3,035
5,672
1,537
20,616
9,985 $
23,098 $
— $
—
— $
—
(2,180)
(2,566)
(2,180) $
(2,566) $
$
$
$
$
991
137
12,431
13,559
—
—
(1,571)
(1,571)
7,805 $
20,532 $
11,988
Loss before provision for income taxes from international operations was $65.0 million for the year
ended December 30, 2023, income before provision for income taxes from international operations was
$20.2 million for the year ended December 31, 2022, and loss before provision for income taxes from
international operations was $20.7 million for the year ended December 25, 2021.
The provisions for income taxes differ from the amount computed by applying the statutory federal
income tax rates as follows:
Expected tax at federal statutory rate
State taxes, net of federal benefit
Tax credits
Stock-based compensation
Change in valuation allowance
Foreign rate differential
Non-deductible expenses
Other taxes on foreign operations
Return to provision
Uncertain tax positions
Prior year adjustment
Other
Effective tax rate
Years Ended
December 30,
2023
December 31,
2022
December 25,
2021
21.0 %
(15.5) %
(37.9) %
(42.3) %
20.7 %
4.8 %
(5.7) %
(24.1) %
44.2 %
(3.6) %
(4.4) %
(2.0) %
21.0 %
(2.3) %
10.2 %
(10.2) %
(19.1) %
(7.6) %
(16.1) %
(5.0) %
(3.7) %
(1.8) %
(1.0) %
(1.5) %
(44.8) %
(37.1) %
21.0 %
(0.1) %
2.9 %
0.1 %
(20.0) %
(1.1) %
(6.4) %
(1.5) %
(2.7) %
4.0 %
(1.8) %
(1.9) %
(7.5) %
For 2023, the Company's income tax expense was $7.8 million with effective tax rate of (44.8)%. The
difference between the effective tax rate and the U.S federal statutory rate of 21% is due to state income taxes,
tax credits, stock-based compensation, foreign income taxed at different rates, impact due to foreign currency
translation, foreign income inclusions in the U.S., foreign tax credit expiration, and losses in foreign jurisdictions
117
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
that require a valuation allowance. For 2022, the Company's income tax expense was $20.5 million with an
effective tax rate of (37.1)%. The difference between the effective tax rate and the U.S federal statutory rate of
21% was primarily the result of tax credits, stock-based compensation, foreign income taxed at different rates
and valuation allowances. The Company recognized an income tax expense of $12.0 million in 2021 with an
effective tax rate of (7.5)%. The 2021 effective tax rate differs from the U.S. federal statutory rate of 21% based
on state income taxes, non-deductible stock-based compensation expenses and foreign taxes provided on
foreign subsidiary earnings.
Deferred tax assets and liabilities are recognized for the future tax consequences of differences
between the carrying amounts of assets and liabilities and their respective tax basis using enacted tax rates in
effect for the year in which the differences are expected to reverse. Significant deferred tax assets and liabilities
consist of the following (in thousands):
Deferred tax assets:
Net operating losses
Research and foreign tax credits
Non-deductible accruals
R&D expense capitalization
Inventory valuation
Leasing Liabilities
Stock-based compensation
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Property, plant and equipment
Right of use asset
Acquired intangible assets
Total deferred tax liabilities
Net deferred tax assets (liabilities)
Years Ended
December 30,
2023
December 31,
2022
$
296,449 $
293,179
137,130
140,828
63,763
65,125
13,612
23,917
4,016
57,480
49,135
14,329
16,890
5,138
604,012 $
576,979
(576,998)
(548,257)
27,014 $
28,722
(281) $
(11,912)
(17,946)
(10,482)
(4,113)
(4,293)
(22,340) $
(26,687)
4,674 $
2,035
$
$
$
$
$
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become deductible. The Company must
consider all positive and negative evidence, including the Company's forecasts of taxable income over the
applicable carryforward periods, its current financial performance, its market environment, and other factors in
evaluating the need for a full or partial valuation allowance against its net U.S. deferred tax assets. Based on the
available objective evidence, management believes it is not more likely than not that the domestic net deferred
tax assets will be realizable in the foreseeable future. Accordingly, the Company has provided a full valuation
allowance against its domestic deferred tax assets, net of deferred tax liabilities, as of December 30, 2023 and
December 31, 2022.
The Company intends to continue maintaining a full valuation allowance on its deferred tax assets until
there is sufficient evidence to support the reversal of all or some portion of these allowances. However,
considering the Company's current assessment of the probability of maintaining profitability, there is a reasonable
possibility that, within the next year or two, sufficient positive evidence may become available to reach a
conclusion that a portion of the valuation allowance will no longer be needed. As such, the Company may release
a portion of its valuation allowance against its deferred tax assets within the next 12-24 months. This release, if
118
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
any, would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the
period such release is recorded.
The Company files tax returns in numerous jurisdictions. The results of our operations outside of the
United States are consolidated for financial reporting; however, earnings from investments in non-U.S. operations
are included in domestic taxable income only when actually or constructively received. No deferred taxes have
been provided on the undistributed gross book-tax basis differences of our non-U.S. operations because we
have the ability to and intend to permanently reinvest these basis differences overseas.
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the right to deduct research and
development expenditures for tax purposes in the period the expenses were incurred and instead requires all
U.S. and foreign research and development expenditures to be amortized over five and fifteen tax years,
respectively. Due to this required capitalization of research and development expenditures, the Company has
recorded a U.S. current income tax expense of $3.0 million for the year ended December 30, 2023. The U.S.
current income tax provision is primarily for state taxes we anticipate paying as a result of statutory limitations on
our ability to offset expected taxable income with net operating loss and research and development credit carry
forwards. The increase in federal taxable income due to Section 174 capitalization is offset by net operating
carryover balance. It is expected that Section 174 capitalization will continue to generate federal and state
taxable income in future years and continue to utilize net operating loss and other available tax credits.
As of December 30, 2023, the Company had net operating loss carryforwards of approximately $456.2
million for federal income tax purposes. The Company had net operating loss carryforwards of approximately
$331.7 million for state income tax purposes which will begin to expire in 2024 if unused. The Company also had
foreign net operating loss carryforwards of approximately $812.3 million.
As of December 30, 2023, the Company also had R&D credit carryforwards of approximately $50.4
million for federal income tax and $57.4 million for state income tax purposes. The federal R&D tax credit will
begin to expire in 2024 if unused. State R&D tax credits will carry forward indefinitely.
As of December 30, 2023, the Company also had foreign tax credit carryforwards of approximately
$33.2 million for federal income tax. The foreign tax credit will begin to expire in 2024 if unused.
Infinera Canada Inc., an indirect wholly owned subsidiary, has Scientific Research and Experimental
Development Expenditures (“SRED”) credits available of $5.5 million to offset future Canadian income taxes
payable as of December 30, 2023, and will begin to expire in 2024 if unused. Infinera Portugal has a SIFIDE
Credit of $2.6 million to offset future Portugal's income tax payable as of December 30, 2023, and will begin to
expire in 2024 if unused.
The federal and state net operating loss carryforwards may be subject to significant limitations under
Section 382 and Section 383 of the Internal Revenue Code of 1986 and similar provisions under state law. The
Tax Reform Act of 1986 contains provisions that limit the federal net operating loss carryforwards that may be
used in any given year in the event of special occurrences, including significant ownership changes. The
Company has completed a Section 382 review and has determined that none of its operating losses will expire
solely due to Section 382 limitation(s).
119
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The aggregate changes in the balance of gross unrecognized tax benefits were as follows (in
thousands):
Beginning balance
Tax position related to current year
Additions
Tax positions related to prior years
Additions
Reductions
Lapses of statute of limitations
December 30,
2023
December 31,
2022
December 25,
2021
$
57,849 $
54,250 $
57,931
1,417
1,536
1,198
20,638
7,220
(5,578)
(4,832)
(155)
(325)
7,633
(9,569)
(2,943)
Ending balance
$
74,171 $
57,849 $
54,250
As of December 30, 2023, the cumulative unrecognized tax benefit was $74.2 million, of which $67.6
million are related to tax credits. The $67.6 million was netted against deferred tax assets, and would have
otherwise been subjected with a full valuation allowance. Of the total unrecognized tax benefit as of
December 30, 2023, approximately $8.1 million, if recognized, would impact the Company’s effective tax rate.
The amount of unrecognized tax benefit could be reduced upon expiration of the applicable statute of limitation.
The potential reduction in unrecognized tax benefits during the next 12 months is not expected to be material.
As of December 30, 2023, December 31, 2022 and December 25, 2021, the Company had $1.5 million,
$1.3 million and $2.1 million, respectively, of accrued interest and penalties related to unrecognized tax benefits,
of which less than $0.8 million was included in the Company’s provision for income taxes in each of the years
ended December 30, 2023, December 31, 2022 and December 25, 2021, respectively. The Company’s policy is
to include interest and penalties related to unrecognized tax benefits within the Company’s provision for income
taxes.
The Company files income tax returns in numerous tax jurisdictions, including the U.S., U.S. states and
non-U.S. jurisdictions around the world. The statute of limitations varies by jurisdiction in which the Company
operates. Because of the number of jurisdictions in which the Company files tax returns, in any given year the
statute of limitations in certain jurisdictions may expire without examination.
Included in the balance of income tax liabilities, accrued interest and penalties at December 30, 2023 is
an immaterial amount related to tax positions for which it is reasonably possible that the statute of limitations will
expire in various jurisdictions within the next twelve months.
16.
Segment Information
Operating segments are defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating decision maker, or decision making
group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating
decision maker is the Company’s Chief Executive Officer (“CEO”). The Company’s CEO reviews financial
information presented on a consolidated basis, accompanied by information about revenue by geographic region
for purposes of allocating resources and evaluating financial performance. The Company has one business
activity as a provider of optical transport networking equipment, software and services. Accordingly, the Company
is considered to be in a single reporting segment and operating unit structure.
Revenue by geographic region is based on the shipping address of the end-customer. For more
information regarding revenue disaggregated by geography, see Note 4, “Revenue Recognition” to the notes to
consolidated financial statements.
Additionally, the following table sets forth our property, plant and equipment, net by geographic region
(in thousands):
120
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
United States
Other Americas
Europe, Middle East and Africa
Asia Pacific
Total property, plant and equipment, net
17.
Employee Benefit and Pension Plans
Defined Contribution Plans
December 30,
2023
December 31,
2022
$
188,684 $
156,065
2,777
9,973
5,563
2,908
10,285
3,671
$
206,997 $
172,929
The Company has established a savings plan under Section 401(k) of the Code (the “401(k) Plan”). As
allowed under Section 401(k) of the Code, the 401(k) Plan provides tax-deferred salary contributions for eligible
U.S. employees. Employee contributions are limited to a maximum annual amount as set periodically by the
Code. The Company made voluntary cash contributions and matched a portion of employee contributions of
$3.0 million, $3.0 million and $2.8 million for 2023, 2022, and 2021, respectively. Expenses related to the 401(k)
Plan were insignificant for each of the years 2023, 2022, and 2021.
The Company has an ITP pension plan covering its Swedish employees. Commitments for old-age and
survivors' pension for salaried employees in Sweden are vested through an insurance policy. Expenses related to
the ITP pension plan were $2.2 million, $2.5 million and $2.8 million for 2023, 2022, and 2021, respectively.
The Company also provides defined contribution plans in certain foreign countries where required by
local statute or at the Company's discretion. The Company incurred $4.8 million, $4.9 million, and $6.2 million in
expense related to post-retirement costs for 2023, 2022, and 2021, respectively.
Pension Plans
Pension and Post-Retirement Benefit Plans
The Company has a number of post-employment plans in Germany, as well as a number of smaller
post-employment plans in other countries, including both defined contribution and defined benefit plans. The
defined benefit plans expose the Company to actuarial risks such as, investment risk, interest rate risk, life
expectancy risk and salary risk. The characteristics of the defined benefit plans and the risks associated with
them vary depending on legal, fiscal, and economic requirements.
121
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Obligations and Funded Status
The following table sets forth the changes in benefits obligations and the fair value of plan assets of the
Company's benefit plans (in thousands):
Benefit obligation at beginning of year
Service cost
Interest cost
Benefits paid
Actuarial loss (gain)
Employee contributions
Foreign currency exchange rate changes
Benefit obligation at end of year(1)
Fair value of plan assets at beginning of year
Actual (loss) return on plan assets
Payments
Employee contributions
Employer contributions
Foreign currency exchange rate changes
Fair value of plan assets at end of year
Net liability recognized
$
$
$
December 30,
2023
76,172 $
163
3,103
(4,700)
7,156
18
3,245
85,157 $
66,455 $
December 31,
2022
115,771
300
1,249
(3,382)
(30,779)
54
(7,041)
76,172
81,615
(5,305)
7,793
(767)
124
78
2,894
$
$
76,577 $
8,580 $
(5,316)
153
—
(4,692)
66,455
9,717
(1) The Company's accumulated benefit obligation was $84.7 million and $76.1 million at December 30, 2023 and
December 31, 2022, respectively.
The net liability is included in the line item other long-term liabilities in the Company's consolidated
balance sheets.
The following table presents net amounts of non-current assets and current and non-current liabilities
for the Company's pension and other post-retirement benefit plans recognized on its consolidated balance sheet
(in thousands):
Other non-current assets
Other long-term liabilities
Net liability recognized
December 30,
2023
December 31,
2022
$
$
76,577 $
66,455
(85,157)
(76,172)
(8,580) $
(9,717)
122
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Components of Net Periodic Benefit Cost
Net periodic benefit cost for the Company's pension and other post-retirement benefit plans consisted of
the following (in thousands):
Years ended
December 30,
2023
December 31,
2022
December 25,
2021
Service cost
Interest cost
Expected return on plan assets
Amortization of net actuarial (gain) loss
Total net periodic (benefit) cost
$
163 $
300 $
3,103
(2,639)
(413)
1,249
326
(2,936)
(2,895)
$
214 $
(1,061) $
351
1,265
3,383
2,104
Actuarial gains and losses are amortized using a corridor approach. The gain/loss corridor is equal to
10% of the greater of the pension benefit obligation and the market-related value of assets. Gains and losses in
excess of the corridor are generally amortized over the average future working lifetime of the pension plan
participants. The service cost component is included in operating expenses in the Company's consolidated
statements of operations. All other components are included in Other income (expense), net in the Company's
consolidated statements of operations.
The following table sets forth the changes in accumulated other comprehensive income (loss) for the
Company's benefit plans (pre-tax) (in thousands):
Beginning balance
Net actuarial (gain) loss arising in current year
Amortization of net actuarial (gain) loss(1)
Ending balance
December 30,
2023
December 31,
2022
$
27,161 $
(2,002)
(413)
4,297
22,538
326
$
24,746 $
27,161
(1) The actuarial gain for the fiscal year ended December 30, 2023 is primarily due to the change in the discount rate.
Amounts recorded in accumulated other comprehensive income (loss) expected to be amortized as a part of net periodic
pension cost during 2024 is $0.6 million (pre-tax).
Assumptions
Certain actuarial assumptions used in computing the benefit obligations for the major plans are as
follows:
Discount rate
Salary growth rate
Pension growth rate
Expected long-term rate of return on plan assets
December 30,
2023
December 31,
2022
3.51 %
2.50 %
2.25 %
3.93 %
4.17 %
2.50 %
2.25 %
3.93 %
123
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Investment Policy
The financial position of the Company’s funded status is the difference between the fair value of plan
assets and projected benefit obligations. Volatility in funded status occurs when asset values change differently
from liability values and can result in fluctuations in costs in financial reporting. The Company’s investment
policies and strategies are designed to increase the rate of assets to plan liabilities at an appropriate level of
funded status volatility. Asset allocation decisions are recommended by the trustees for the specific plan and
agreed to by the Company's management. Investment objectives are designed to generate returns that will
enable the plan to meet its future obligations. The Company's management reviews the investment strategy and
performance semi-annually and discuss alternatives to manage volatility.
Basis for Expected Long-Term Rate of Return on Plan Assets
The expected long-term rate of return on plan assets reflects the expected returns for each major asset
class in which the plan invests and the weight of each asset class in the target mix. Expected asset returns
reflect the current yield on government bonds, risk premiums for each asset class and expected real returns
which considers each country’s specific inflation outlook. The expected return is set using a low to medium risk
profile and to meet the market expectations over a longer period of time to meet the obligations in the future.
Fair Value of Plan Assets
The following tables present the fair value of plan assets for pension and other benefit plans by major
asset category (in thousands):
Cash
Equity fund
Insurance contracts
As of December 30, 2023
December 31, 2022
Fair Value Measured Using
Fair Value Measured Using
Level 1
Level 2
Total
Level 1
Level 2
Total
$
677 $
— $
677 $ 1,160 $
— $
1,160
—
—
51,226
24,674
51,226
24,674
—
—
41,492
23,803
41,492
23,803
Total plan assets at fair value
$
677 $ 75,900 $ 76,577 $ 1,160 $ 65,295 $ 66,455
Valuation Techniques
The following describes the valuation techniques used to measure the fair value of the assets shown in
the table above. Equity funds are invested in traded securities and are recorded at market value as of the
balance sheet date. Insurance contracts are recorded at cash surrender value of the policies. Mixed fund and
pension fund are valued at the amounts as provided by the insurance companies who manage the funds and
represent fair market value at the date of the balance sheet.
Transfers Between Levels
Any transfers between levels in the fair value hierarchy are recognized as of the end of the reporting
period. No material transfers between levels occurred during the fiscal year ended December 30, 2023.
Future Contributions
In 2024, the Company does not expect to make additional contributions to the plan.
124
INFINERA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Cash Flows
Estimated future benefit payments under the Company's pension plans as of December 30, 2023 are as
follows (in thousands):
2024
2025
2026
2027
2028
2029 to 2033
$
6,176
3,925
4,285
4,213
4,494
23,688
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A.
CONTROLS AND PROCEDURES
Attached as exhibits to this Form 10-K are certifications of our principal executive officer and principal
financial officer, which are required in accordance with Rule 13a-14 of the Exchange Act. This “Controls and
Procedures” section includes information concerning the internal controls and controls evaluation referred to in
the certifications.
Evaluation of Disclosure Controls and Procedures
An evaluation was performed by our management, with the participation of our principal executive
officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d -15(e) under the Exchange Act) as of the period covered by this report (the
"Evaluation Date"). Disclosure controls and procedures are designed to ensure that information required to be
disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated
and communicated to management, including our principal executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our principal
executive officer and principal financial officer concluded that, as of the Evaluation Date, our disclosure controls
and procedures were not effective due to the unremediated material weaknesses in our internal control over
financial reporting described below.
Notwithstanding the identified material weaknesses, our principal executive officer and principal
financial officer concluded that our consolidated financial statements included in Part II, Item 8, "Financial
Statements and Supplementary Data" of this report fairly present, in all material respects, our financial condition,
results of operations and cash flows as of and for the periods presented in conformity with U.S. GAAP.
Remediation of Previously Reported Material Weaknesses
As previously reported in the Company’s Form 10-Q for the quarter ended September 30, 2023, the
Amended Quarterly Report on Form 10-Q/A for the quarter ended July 1, 2023, the Amended Quarterly Report
on Form 10-Q/A for the quarter ended April 1, 2023 and the Amended Annual Report on Form 10-K/A for the
fiscal year ended December 31, 2022, we previously identified material weaknesses in internal control over
financial reporting due to control deficiencies within the revenue portion of our quote to cash cycle (revenue
cycle) and inventory cycle, and with respect to these, our internal resources, expertise and policies required to
maintain an effective control environment. Additionally, as related to both our revenue and inventory cycles,
certain key controls were not sufficiently designed to assess the completeness and accuracy of Information
Produced by the Entity (IPE).
125
Our management, under the oversight of the Audit Committee of our Board of Directors, has evaluated
the material weaknesses described above and designed a remediation plan to enhance our internal control
environment. To remediate the material weaknesses, we plan to:
a.
b.
c.
d.
revise the methodology used to determine our stand-alone selling prices ("SSPs"), including the design
and implementation of effective controls that provide adequate review and evaluation of such
methodology, and related financial statement disclosures;
review and revise the design and implementation of key controls related to inventory, including the
estimation of reserves for excess and obsolete inventory and the application of our policy for capitalizing
variances from standard costs;
design and implement effective controls over IPE to ensure adequate levels of evidence and
documentation to support controls procedures, augmented by training of our control preparers and
reviewers related to the assessment of completeness and accuracy; and
review and enhance our personnel with the appropriate level of technical accounting knowledge,
experience, and training in the application of GAAP commensurate with the complexity of our business
and our financial accounting and reporting requirements, particularly in areas related to our revenue and
inventory cycles.
We are committed to maintaining a strong internal control environment and implementing measures
designed to help ensure that control deficiencies contributing to our material weaknesses are remediated as
soon as possible. We believe our efforts listed above will enable us to successfully remediate our material
weaknesses, however, we cannot provide assurance as to when our remediation measures will be complete. We
will consider the material weaknesses remediated after the applicable controls operate for a sufficient period of
time and management has concluded, through testing, that such controls are operating effectively. We will
monitor the effectiveness of our remediation plan and refine our remediation plan as appropriate.
The effectiveness of our internal control over financial reporting as of the Evaluation Date, has been
audited by Ernst & Young, LLP, an independent registered public accounting firm, as stated in their report, which
is included elsewhere herein.
Management’s Report on Internal Control Over Financial Reporting
Our management, with the participation of our principal executive officer and principal financial officer, is
responsible for establishing and maintaining adequate internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability
of our financial reporting and the preparation of financial statements for external purposes in accordance with
U.S. GAAP.
Our management assessed the effectiveness of our internal control over financial reporting as of the
Evaluation Date. Management based its assessment on the framework established in the 2013 Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“2013 COSO framework”). Our management’s assessment included evaluation of elements such as the design
and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and
our overall control environment. This assessment is supported by testing and monitoring performed by our
internal audit and finance personnel utilizing the 2013 COSO framework.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of a company's annual or
interim financial statements will not be prevented or detected on a timely basis.
During the third quarter of fiscal 2023, as discussed above, our management identified material
weaknesses in internal control over financial reporting. The material weaknesses in internal control over financial
reporting resulted from control deficiencies with our revenue cycle, inventory cycle, and with respect to these, our
internal resources, expertise and policies required to maintain an effective control environment. Additionally, as
related to both our revenue and inventory cycles, certain key controls were not sufficiently designed to assess
the completeness and accuracy of IPE.
126
Within the revenue cycle, controls over the annual establishment of the SSPs for our performance
obligations were not designed to include an adequate review and evaluation of whether the methodology used to
develop and establish SSPs, including related financial statement disclosures, was in conformity with ASC 606,
Revenue from Contracts with Customers.
Within the inventory cycle, controls over judgements used in the estimation of reserves for excess and
obsolete inventory were not designed and operating effectively to support such judgements. In addition, controls
over the application of our policy for capitalizing variances from standard costs as part of the cost of inventory,
did not operate effectively.
Additionally, as related to both our revenue and inventory cycles, certain key controls were not
sufficiently designed to assess the completeness and accuracy of Information Produced by the Entity (IPE).
The material weaknesses identified above indicate that we had insufficient personnel with an
appropriate level of technical accounting knowledge, experience, and training in the application of GAAP
commensurate with the complexity of our business and our financial accounting and reporting requirements. In
turn, this impacted our ability to adequately design, implement and monitor financial reporting controls related to
our revenue cycle and inventory cycle that identify and mitigate risks of material misstatements in our financial
statements.
Notwithstanding the identified material weaknesses, our principal executive officer and principal
financial officer concluded that our consolidated financial statements included in Part II, Item 8, "Financial
Statements and Supplementary Data" of this Annual Report on Form 10-K, fairly present, in all material respects,
our financial condition, results of operations and cash flows as of and for the periods presented in conformity with
U.S. GAAP.
Changes in Internal Control over Financial Reporting
Except for the material weaknesses noted above, there were no changes in our internal control over
financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the
Exchange Act, that occurred during the fiscal year ended December 31, 2022 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Because of inherent limitations, internal control over financial reporting may not prevent or detect
misstatements and projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
ITEM 9B.
OTHER INFORMATION
No directors or officers, as defined in Rule 16a-1(f), adopted and/or terminated a “Rule 10b5-1 trading
arrangement” or a “non-Rule 10b5-1 trading arrangement,” each as defined in Regulation S-K Item 408, during
the last fiscal quarter.
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
127
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
For information pertaining to our executive officers, refer to the section entitled “Information about our
Executive Officers” in Part 1, Item 1 of this Annual Report on Form 10-K.
Directors
Name
Christine B. Bucklin
Gregory P. Dougherty
David W. Heard
Sharon E. Holt
Roop K. Lakkaraju
Paul J. Milbury
Amy H. Rice
George A. Riedel
David F. Welch, Ph.D.
Age
61
64
56
59
53
75
44
66
63
Position
Director
Director
Chief Executive Officer and Director
Director
Director
Director
Director
Director and Chair of the Board
Founder, Chief Innovation Officer and Director
Christine B. Bucklin has been a member of our Board of Directors since June 2020. Ms. Bucklin
served as Managing Director, Operations Group at Gryphon Investors, Inc., a private equity firm, from 2015 to
2018. From 2008 to 2010, Ms. Bucklin served as Senior Vice President, Corporate Strategic Planning at Sun
Microsystems, Inc., a technology company, prior to its acquisition by Oracle Corporation in 2010. From 1999 to
2007, Ms. Bucklin served as Chief Operating Officer of Internet Brands, Inc., an internet media company. From
1988 to 1999, Ms. Bucklin worked at McKinsey & Company, a consulting company, including as a partner. From
2011 to 2019, Ms. Bucklin served as a director of Local Media San Diego, LLC, a radio station and event
company. From 2015 to 2018, Ms. Bucklin served as a director of Leadership Platform Acquisition Corporation, a
portfolio company of Gryphon Investors related to educational services. Ms. Bucklin received an AB in
Mathematics from Dartmouth College and an MBA from Stanford Business School.
Greg P. Dougherty has been a member of our Board of Directors since January 2019. Mr. Dougherty
served on the board of Fabrinet, an optical,electo-mechanical and electronic manufacturing services company
from February 2019 to January 2022. Mr. Dougherty served as Chief Executive Officer of Oclaro from June 2013
until its acquisition by Lumentum in December 2018. Mr. Dougherty also served as a director of Oclaro from April
2009 until the completion of the sale in December 2018. Prior to Oclaro, Mr. Dougherty served as a director of
Avanex Corporation, a leading global provider of intelligent photonic solutions, from April 2005 to April 2009,
when Avanex and Bookham merged to become Oclaro. Mr. Dougherty also served as a director of Picarro, Inc.,
a manufacturer of ultra-sensitive gas spectroscopy equipment using laser-based technology, from October 2002
to August 2013, and as its Interim Chief Executive Officer from January 2003 to April 2004. Earlier in his career,
Mr. Dougherty served as the Chief Operating Officer at SDL from 1997 to 2001, when the company was acquired
by JDS Uniphase Corporation, where he continued in the role until 2002. From 1989 to 1997, Mr. Dougherty was
the Director of Product Management and Marketing at Lucent Technologies Microelectronics in the
Optoelectronics Strategic Business Unit. Mr. Dougherty currently serves on the public company boards of IPG
Photonics Corporation, a fiber laser manufacturer since January 2019 and MaxLinear, a fabless integrated circuit
design company since March 2020. Mr. Dougherty also served as a board member of the Ronald McDonald
House at Stanford from January 2004 to December 2009, and the Bay Area Make-A-Wish Foundation. Mr.
Dougherty received a B.Sc. in Optics in 1983 from the University of Rochester.
David W. Heard has served as our CEO and has been a member of our Board of Directors since
November 2020. Mr. Heard joined Infinera in June 2017 and served as our Chief Operating Officer from October
2018 to November 2020. During his time as COO, Mr. Heard was responsible for leading the innovation of new
solutions and the overall operational excellence of the company, overseeing functions including corporate
development, facilities, human resources, information technology, marketing, operations, product lifecycle
management, quality, research and development, and services. Mr. Heard brings a proven track record of
technology industry leadership, with more than 25 years of success in the industry. Prior to Infinera, Mr. Heard
128
served as President of Network and Service Enablement at JDS Uniphase from 2010 to 2015, and as COO at
BigBand Networks (now Arris) from 2007 to 2010. Earlier roles included President and Chief Executive Officer
(CEO) at Somera (now Jabil), President and General Manager, Switching Division, at Tekelec (now Oracle),
President and CEO at Santera Systems, and various positions at Lucent Technologies and AT&T. Mr. Heard
holds a B.A. in Production and Operations Management from Ohio State University, an MBA from the University
of Dayton, and an M.S. in Management from Stanford Graduate School of Business, where he was a Sloan
Fellow.
Sharon E. Holt has been a member of our Board of Directors since June 2019. Ms. Holt has served as
a Principal at Fraser Stuart Ventures, LLC, a private investment and advisory firm, since 2016. From 2016 to May
2021, Ms. Holt was on the board of Immersion Corporation, a leading developer and licensor of touch feedback
technology. Since 2012, she has served as an advisor to several technology companies. Ms. Holt was a senior
executive at Rambus Inc., a leading technology development and licensing company, from 2004 to 2012, where
she served as Senior Vice President of Sales, Licensing and Marketing, and Senior Vice President and General
Manager of the Semiconductor Business Group. From 1999 to 2004, Ms. Holt was an executive at Agilent
Technologies in the Semiconductor Products Group (now Broadcom), where her last position was Vice President
& General Manager of Americas Field Operations, overseeing sales and technical support operations for the
semiconductor business, including ASICs, ASSPs, optical and wireless ICs. Prior to that, she ran sales
operations focused on Agilent’s largest global customers. From 1986 to 1999, Ms. Holt worked at HP in
Applications Engineering, Sales and Distribution Channel Management for the Semiconductor Products Group.
Ms. Holt received a B.S. in Electrical Engineering from Virginia Polytechnic Institute and State University (Virginia
Tech).
Roop K. Lakkaraju has been a member of our Board of Directors since February 2022. Mr. Lakkaraju
is the Executive Vice President, Chief Financial Officer at Bio-Rad, a position he has held since April 2024. From
January 2018 to April 2024, Mr. Lakkaraju served as Executive Vice President, Chief Financial Officer of
Benchmark Electronics, Inc. From February 2017 to January 2018, he served as Chief Financial Officer of
Maana, Inc., an enterprise software company that pioneered an artificial intelligence-driven knowledge platform.
From October 2013 to February 2017, he served as Chief Operating Officer and Chief Financial Officer of
Support.com, a provider of cloud-based software and services for technology support. From July 2011 to October
2013, he was Chief Financial Officer of Quantros, Inc., a provider of enterprise SaaS-based solutions and
information services that advance healthcare quality and safety performance. Prior to that he held executive
financial and operational roles at 2Wire, Solectron Corporation, and Safeguard Scientifics. Mr. Lakkaraju is
currently on the board of directors of Greater Phoenix Economic Council. He began his career in 1993 as an
auditor with Grant Thornton before joining PricewaterhouseCoopers in their Audit and Business Advisory
Services. Mr. Lakkaraju holds a B.S. in Business Administration from San Jose State University.
Paul J. Milbury has been a member of our Board of Directors since July 2010. Mr. Milbury served as
Vice President of Operations and CFO of Starent Networks Corp., a provider of mobile network solutions, from
January 2007 until its acquisition by Cisco in 2009. From December 2009 to July 2010, he played a key role in
integrating Starent Networks into Cisco to create the Mobile Internet Technology Group. From December 2000 to
March 2007, Mr. Milbury served as Vice President and CFO of Avid Technology, Inc., a digital media creation,
management, and distribution solutions company. Mr. Milbury previously served as audit committee chair for
public companies Gigamon, Inc., a provider of network traffic visibility solutions and Aerohive Networks, a
pioneer in cloud-managed WLAN. Mr. Milbury has served on the public company board of Markforged Holding
Corporation since May 2019, and he also serves on several private company boards. Mr. Milbury holds a B.B.A.
in Business and Economics and an M.B.A. from the University of Massachusetts, Amherst.
Amy H. Rice has been a member of our Board of Directors since April 2020. Ms. Rice is a Managing
Director with Oaktree’s Special Situations Group and has been with the firm since 2009. Prior to joining Oaktree,
Ms. Rice spent two years as an associate at Lindsay Goldberg, LLC, and before that, she spent two years as an
analyst in the Leveraged Finance group at Deutsche Bank. Ms. Rice has served on the board of GenesisCare, a
private company providing cancer and multi-specialty network services, since February 2024. Ms. Rice has an
A.B. from Harvard College and an M.B.A. from The Wharton School of the University of Pennsylvania.
George A. Riedel has been a member of our Board of Directors since June 2020 and has served as its
Chair since November 2020. Mr. Riedel has served as a Senior Lecturer in the General Management Unit at
Harvard Business School since 2017. From 2014 to 2017, Mr. Riedel served as the Chair and Chief Executive
Officer of CloudMark, Inc., a cybersecurity company, overseeing the company’s sale to Proofpoint, Inc. in 2017.
From 2006 to 2011, Mr. Riedel served in executive leadership roles at Nortel Networks Corporation, a Canadian
telecommunications and data networking equipment manufacturing company, including Chief Strategy Officer
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and Vice President of Business Units. From 2003 to 2006, Mr. Riedel served as Vice President of Strategy and
M&A at Juniper Networks, a networking and cybersecurity company. From 1987 to 2003, Mr. Riedel worked at
McKinsey & Company, including as a senior partner. Mr. Riedel has served as an independent director at Cerner
Corporation, a health information technology company, from April 2019 to June 2022. Between 2010 and 2020,
Mr. Riedel served on various boards, including as chair of Accedian Networks Inc., a Canadian network
communications software company; as a director of PeerApp Ltd., a caching solution provider; as a director of
NextDocs Corporation, a compliance innovation company (acquired by Aurea Software, Inc.); and as a director of
Xperi Corporation, a technology and intellectual property licensing company from May 2013 to June 2020. Mr.
Riedel has served on the public company board of Markforged Holding Corporation since May 2024. He is also
currently chairman of the board of Juvare, a private company that provides emergency preparedness and
response software solutions, and a board member of Bridgeway Benefit Technologies, a private company that
provides healthcare and retirement benefit administration software focused on the end-to-end needs of self-
administered multiemployer benefit funds and third-party administrators. Mr. Riedel received a BS with distinction
in Mechanical Engineering from the University of Virginia and an MBA from Harvard Business School.
David F. Welch, Ph.D. is Founder and Chief Innovation Officer at Infinera, a role he has held since
October 2018. In this role, he drives deep business and technology innovation through forward-looking
strategies, including breakthrough technologies and technology partnerships, in addition to innovative business
and market directions. Dr. Welch is currently a member of Infinera’s Board of Directors, where he has served
since 2010. Dr. Welch’s past roles at Infinera include Chief Strategy and Technology Officer from 2017 to 2018,
President from 2013 to 2017, Executive Vice President and Chief Strategy Officer from 2004 to 2013, and Chief
Technology Officer (CTO) from 2001 to 2004. Prior to co-founding Infinera, he served as CTO, Transmission
Division at JDS Uniphase, and in various executive roles, including CTO and Vice President of Corporate
Development, at Spectra Diode Labs (SDL). Dr. Welch currently serves on the board of directors of several start-
up companies, including the public benefit corporation board of NosTerra Ventures, a position he has held since
May 2023. He previously served on the board of CytoDyn Inc., a biopharmaceutical company from January 2019
to September 2020. Dr. Welch holds over 130 patents and has authored over 300 technical publications, and he
has been awarded the Optical Society of America’s (OSA) Adolph Lomb Medal, Joseph Fraunhofer Award and
John Tyndall Award, as well as the Institution of Engineering Technology’s J J Thomson Medal for Electronics. He
is a Fellow of the OSA and the Institute of Electrical and Electronics Engineers, and he is a member of the
National Academy of Engineering. Dr. Welch holds a B.S. in Electrical Engineering from the University of
Delaware and a Ph.D. in Electrical Engineering from Cornell University.
Independence of the Board
On an annual basis, in accordance with the current listing standards of Nasdaq, the Board affirmatively
determines the independence of each director or nominee for election as a director. The Board has determined
that seven out of nine of our directors (with the exception of Mr. Heard and Dr. Welch, both of whom are
employees of Infinera) are “independent” in accordance with the rules and regulations of the SEC and the listing
standards of Nasdaq. Also, all members of the Audit Committee, Compensation Committee and Nominating and
Governance Committee, as more fully described below, are independent directors. In making these
determinations, our Board considered the current and prior relationships that each non-employee director has
with our company and all other facts and circumstances that our Board deemed relevant in determining their
independence, including the beneficial ownership of our capital stock by each non-employee director, and the
transactions involving them described in the section titled “Certain Relationships and Related Person
Transactions.” There are no family relationships among any of our directors, director nominees or executive
officers.
Board Leadership Structure
The Board believes its current leadership structure best serves the objectives of the Board’s oversight of
management, the Board’s ability to carry out its roles and responsibilities on behalf of our stockholders, and our
overall corporate governance. Separating the positions of Chair of the Board and CEO allows our CEO to focus
on our day-to-day business, while allowing the Chair of the Board to lead the Board in its fundamental role of
providing advice to and independent oversight of management. While our Bylaws do not require that our Chair of
the Board and CEO positions be separate, the Board believes that having separate positions is the appropriate
leadership structure for Infinera at this time and demonstrates our commitment to good corporate governance
practices. The Board has assigned the Chair of the Board responsibility for presiding over meetings of the Board,
developing meeting agendas, facilitating communication between management and the independent directors,
representing the views of the independent directors to management and improving meeting effectiveness, among
other things.
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The Board also believes that the combination of an independent Chair of the Board, all three of our
current standing committees being comprised entirely of independent directors and the regular use of executive
sessions of the independent directors enables the Board to maintain independent oversight of our strategies and
activities.
Agreement with Oaktree Optical Holdings
In April 2020, we entered into a letter agreement with Oaktree Optical Holdings, L.P. (“Oaktree”)
pursuant to which we agreed, among other things, to nominate and support Ms. Rice for election as a director at
the 2020 Annual Meeting of Stockholders. Subject to certain exceptions set forth in the letter agreement, Oaktree
and certain affiliates agreed to vote all of its shares at the 2020 Annual Meeting of Stockholders in a manner
consistent with the recommendation of our Board. Oaktree also agreed to customary standstill restrictions. Our
letter agreement with Oaktree also required that Infinera and Oaktree reasonably cooperate to identify a director
candidate (the “Independent Designee”) for consideration by our Nominating and Governance Committee. In
June 2020, Ms. Bucklin joined the Board as the Independent Designee. Ms. Rice was re-elected as a Class I
director at the 2023 Annual Meeting of Stockholders.
Information Regarding the Board and its Committees
The Board met eight times during fiscal 2023. During fiscal 2023, each director then in office attended
75% or more of the meetings of the Board. During fiscal 2023, each director then in office attended 75% or more
of the meetings of the committees on which he or she served during the period for which he or she was a
committee chair or committee member, as applicable. Our independent directors meet in executive sessions,
without management present, during most regular meetings of the Board. Directors are encouraged, but not
required, to attend our annual meetings of stockholders. All nine of our then-serving members of the Board
attended our 2023 Annual Meeting of Stockholders.
The Board had three standing committees as of the end of fiscal 2023: an Audit Committee, a
Compensation Committee and a Nominating and Governance Committee. Mr. Heard and Dr. Welch do not
currently serve on any committees of the Board. The following table presents our current Board and committee
composition (and assuming the election of the nominees for Class II directors who are standing for election at the
2024 Annual Meeting of Stockholders, this table also presents our Board and committee composition effective
upon the conclusion of our 2024 Annual meeting of Stockholders).
Name
Christine B. Bucklin
Gregory P. Dougherty
David W. Heard
Sharon E. Holt
Roop K. Lakkaraju
Paul J. Milbury
Amy H. Rice
George A. Riedel
David F. Welch, Ph.D.
Total Meetings in Fiscal 2023
_________________
C = Chair; M = Member
Audit Committee
Board
Audit
Compensation
Nominating
and
Governance
M
M
M
M
M
M
M
C
M
8
M
—
—
—
C
M
—
—
—
17
—
M
—
C
—
M
—
—
—
6
—
M
—
—
—
—
M
C
—
4
The Audit Committee reviews and monitors our financial statements, financial reporting process and our
external audits, including, among other things, our internal controls and audit functions, the results and scope of
the annual audit and other services provided by our independent registered public accounting firm as well as our
compliance with legal matters that have a significant impact on our financial statements. The Audit Committee
also consults and discusses with our management and our independent registered public accounting firm prior to
the presentation of financial statements to stockholders. The Audit Committee also promotes the Company’s
compliance with applicable law. The Audit Committee is responsible for establishing procedures for the receipt,
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retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, and
for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or
auditing matters. In addition, the Audit Committee is directly responsible for the appointment, retention,
compensation and oversight of the work of our independent registered public accounting firm, including
approving services and fee arrangements. The Audit Committee has oversight of the Company’s significant
financial risks and exposures, including related to cybersecurity matters. Any related party transactions are
subject to approval by the Audit Committee. A more detailed description of the Audit Committee’s functions can
be found in our Audit Committee charter. In addition, the Audit Committee meets in executive sessions, without
management present and with the independent registered public accounting firm, during most regular meetings
of the Audit Committee. A copy of the Audit Committee charter is available on our website at
investors.infinera.com/ by clicking on “Governance Documents” under the “Governance” heading.
The current members of the Audit Committee are Ms. Bucklin and Messrs. Lakkaraju and Milbury. Mr.
Milbury chaired the Audit Committee until May 18, 2023 when, upon the conclusion of our 2023 Annual Meeting,
Mr. Lakkaraju became chair of the Audit Committee and Mr. Milbury remained a member of the Audit Committee.
Each current member of the Audit Committee served the entirety of fiscal 2023. The Audit Committee met 17
times during fiscal 2023. Each member of the Audit Committee is independent for Audit Committee purposes
under the rules and regulations of the SEC and the applicable Nasdaq listing standards. In addition to qualifying
as independent under the Nasdaq rules, each member of the Audit Committee can read and understand
fundamental financial statements in accordance with Nasdaq Audit Committee requirements. The Board has
determined that Messrs. Lakkaraju and Milbury are each an “Audit Committee Financial Expert” as defined in
Item 407(d)(5)(ii) of Regulation S-K. The designation does not impose on Messrs. Lakkaraju and Milbury any
duties, obligations or liabilities that are greater than those generally imposed on them as members of the Audit
Committee and the Board.
Compensation Committee
The Compensation Committee has the responsibility, authority and oversight relating to the
development of our overall compensation strategy and compensation policies and programs. The Compensation
Committee establishes our compensation philosophy and policies, administers all of our compensation plans for
executive officers, and recommends the compensation for the non-employee directors of the Board. The
Compensation Committee seeks to assure that our compensation policies and practices promote stockholder
interests and support our compensation objectives and philosophy as described in more detail in the
"Compensation Discussion and Analysis" section under Item 11 in this report.
The Compensation Committee also oversees, reviews and administers all of our material employee
benefit plans, including our 401(k) plan, and reviews and approves various other compensation policies and
matters. The Compensation Committee assists the Board in its oversight of our strategies, initiatives and
programs relating to human capital management, including culture, talent acquisition, employee development,
retention, and diversity, equity and inclusion. The Compensation Committee may form and delegate authority to
one or more subcommittees as appropriate. A more detailed description of the Compensation Committee’s
functions can be found in our Compensation Committee charter. A copy of the Compensation Committee charter
is available on our website at investors.infinera.com/ by clicking on “Governance Documents” under the
“Governance” heading.
The current members of the Compensation Committee are Ms. Holt and Messrs. Dougherty and
Milbury. Ms. Holt chairs the Compensation Committee. Each current member of the Compensation Committee
served the entirety of fiscal 2023. The Compensation Committee met six times during fiscal 2023. Each member
of the Compensation Committee is a non-employee director, as defined in Rule 16b-3 promulgated under the
Exchange Act, an outside director, as defined pursuant to Section 162(m) (“Section 162(m)”) of the Internal
Revenue Code, as amended (the “Code”) and satisfies the director and compensation committee independence
requirements under the applicable Nasdaq listing standards.
Nominating and Governance Committee
The Nominating and Governance Committee is responsible for reviewing developments in corporate
governance practices, evaluating and making recommendations to the Board concerning corporate governance
matters, and recommending changes to the Company's corporate governance policies and practices. In addition,
the Nominating and Governance Committee is responsible for identifying, evaluating and making
recommendations of nominees to the Board and evaluating the performance of the Board and individual
directors, including those eligible for re-election at the annual meeting of stockholders. The Nominating and
Governance Committee also oversees an annual board evaluation process to determine whether the Board is
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functioning effectively. In addition, the Nominating and Governance Committee oversees our succession planning
process. A more detailed description of the Nominating and Governance Committee’s functions can be found in
our Nominating and Governance Committee charter. A copy of the Nominating and Governance Committee
charter is available on our website at investors.infinera.com/ by clicking on “Governance Documents” under the
“Governance” heading.
The current members of the Nominating and Governance Committee are Ms. Rice and Messrs.
Dougherty and Riedel. Mr. Riedel chairs the Nominating and Governance Committee. Each current member of
the Nominating and Governance Committee served the entirety of fiscal 2023 as a member of this committee.
The Nominating and Governance Committee met four times during fiscal 2023. Each member of the Nominating
and Governance Committee satisfies the independence requirements under the applicable Nasdaq listing
standards.
Non-Executive Equity Award Subcommittee
The guidelines for the size of new hire, promotional and annual retention equity awards for Section 16
Officers are periodically reviewed and approved by the Compensation Committee. The Compensation Committee
has delegated to the Non-Executive Equity Award Subcommittee (the “Subcommittee”) the authority to formally
approve new hire, promotional and retention equity awards to certain employees and consultants pursuant to
guidelines pre-approved from time to time by the Compensation Committee. The delegation to the Subcommittee
does not include the authority to grant equity awards to new employees who are or are reasonably expected to
become Section 16 Officers or to current Section 16 Officers. The delegation of authority to the Subcommittee is
not exclusive and the Board and Compensation Committee have retained the right to approve any equity awards
at their discretion. This Subcommittee is currently comprised solely of our CEO (who is also a Board member).
Compensation Committee Interlocks and Insider Participation
During fiscal 2023, Ms. Holt and Messrs. Dougherty and Milbury served on the Compensation
Committee. None of these individuals was an executive officer or employee of Infinera at any time during fiscal
2023, or at any other time. No member of the Compensation Committee had any relationship with Infinera during
fiscal 2023 requiring disclosure under Item 404 of Regulation S-K under the Exchange Act. None of our executive
officers has ever served as a member of the board or compensation committee of any other entity that has or has
had one or more executive officers serving as a member of the Board or Compensation Committee.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics which applies to all of our employees,
officers (including our principal executive officer, principal financial officer, and principal accounting officer or
controller, or persons performing similar functions), agents and representatives, including our independent
directors and consultants, who are not employees of Infinera, with regard to their Infinera-related activities. The
Code of Business Conduct and Ethics reflects our policy of dealing honestly and with integrity with everyone,
including our customers, employees, investors and suppliers. We require all employees to complete training on
our Code of Business Conduct and Ethics.
Our Code of Business Conduct and Ethics is just one element of the many practices and procedures we
utilize to support a diverse and inclusive culture that encourages helpful and honest communication both up and
down reporting relationship chains. Our executive leaders set the tone for this culture at the top and our ability to
maintain a positive and creative work environment depends on its success. Our annual Infinera Environmental,
Social and Governance Report describes some of the additional programs and practices we maintain to protect
our people and promote their productivity, health and well-being.
A copy of our Code of Business Conduct and Ethics is available on our website at
investors.infinera.com/ by clicking on “Governance Documents” under the “Governance” heading. You may also
obtain a copy of our Code of Business Conduct and Ethics without charge by writing to: Infinera Corporation, c/o
Corporate Secretary, 6373 San Ignacio Avenue, San Jose, California 95119. We intend to disclose future
amendments to certain provisions of our Code of Business Conduct and Ethics, or waivers of such provisions,
applicable to any principal executive officer, principal financial officer, principal accounting officer or controller, or
persons performing similar functions and our directors on our website identified above or on a Current Report on
Form 8-K if required by the applicable listing standards.
Delinquent Section 16(a) Reports
The members of the Board, our executive officers and persons who hold more than 10% of our
outstanding common stock are subject to the reporting requirements of Section 16(a) of the Exchange Act, which
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requires them to file reports with respect to their ownership of our common stock and certain transactions in our
common stock. Based solely upon (i) the copies of Section 16(a) reports that we received from such persons for
their fiscal 2023 transactions in our common stock and their common stock holdings and (ii) the written
representations received from one or more of such persons, including that no Form 5 is required, we believe that
all reporting requirements under Section 16(a) were met in a timely manner during fiscal 2023.
ITEM 11.
EXECUTIVE COMPENSATION
Director Compensation
Our compensation program for our non-employee directors is designed to attract and retain highly
qualified, independent directors to represent stockholders on the Board and to act in our stockholders' best
interests. Non-employee directors receive a mix of cash compensation and equity awards under this program.
Directors who are also employees of Infinera do not participate in our director compensation program, nor do
they receive any additional compensation for their service as directors. The Compensation Committee, which
consists solely of independent directors, has the primary responsibility for reviewing and recommending any
changes to our director compensation program, with compensation changes approved or ratified by the full
Board.
From time to time, the Compensation Committee engages Compensia, Inc. (“Compensia”), an
independent compensation consultant, to help the Compensation Committee review our director compensation
program by providing relevant market data regarding director compensation derived from the same peer group
used at the time for evaluating our executive compensation. During late fiscal 2022, the Compensation
Committee engaged Compensia to provide market data on director compensation. Compensia provided such
market data to the Compensation Committee for the peer group which the Compensation Committee had
approved in September 2022 for use in evaluating our executive compensation for fiscal 2023. The
Compensation Committee concluded that in light of our director compensation program generally aligning with
market competitive levels, no change in director compensation would be recommended at that time. As a result,
in fiscal 2023, no changes were made to our director compensation program.
Director Fees
During fiscal 2023, our cash compensation program for our non-employee directors was as follows:
Position
Non-Employee Director
Chair of the Board
Audit Committee Chair
Audit Committee Member
Compensation Committee Chair
Compensation Committee Member
Nominating and Governance Committee Chair
Nominating and Governance Committee Member
Annual
Retainer Fee
($)
50,000
70,000
30,000
12,500
20,000
10,000
11,000
6,000
We do not pay meeting fees for the Board or any of the committees of the Board. We pay the retainer
fees set forth above in quarterly installments. Retainer fees are paid in arrears. In addition, we have a policy of
reimbursing our non-employee directors for reasonable travel, lodging and other expenses incurred in connection
with their attendance at Board and committee meetings.
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Director Equity Awards
During fiscal 2023, our equity compensation program for our non-employee directors was as follows:
Annual Restricted Stock Unit (“RSU”)
Award
Prorated Annual RSU Award For
New Directors
On the date of each annual meeting of stockholders, each individual who
continues to serve as a non-employee director after that annual meeting
will automatically be granted an RSU award covering a number of
shares determined by dividing $200,000 by the closing price of the
Company’s common stock on the date of grant, with any resulting
fractional share rounded down to the nearest whole share (the “Annual
RSU Award”). The Annual RSU Award will vest as to 100% of the
underlying shares on the earlier of the date of the next annual meeting of
stockholders or the one-year anniversary of the date of grant provided
that the non-employee director remains a service provider of Infinera on
the applicable vesting date.
Each new non-employee director will be automatically granted an
annual RSU award covering a number of shares determined by first
prorating $200,000 for the number of months remaining until the next
scheduled annual meeting of stockholders and then dividing such
prorated dollar amount by the closing price of the Company’s common
stock on the date of grant, with any resulting fractional share rounded
down to the nearest whole share (the “Prorated Annual RSU Award”).
The Prorated Annual RSU Award will vest as to 100% of the underlying
shares on the earlier of the date of the next annual meeting of
stockholders or the one-year anniversary of the most recently held
annual meeting of stockholders, provided that the non-employee director
remains a service provider of Infinera on the applicable vesting date.
Effective March 27, 2024, new Annual RSU Awards and Prorated Annual RSU Awards granted to non-
employee directors will vest as to 100% of the underlying shares on the earlier of (i) the date of the next annual
meeting of stockholders, provided that it occurs at least 50 weeks after the prior annual stockholders meeting or
(ii) the one-year anniversary of the date of grant, provided that the non-employee director remains a service
provider of Infinera on the applicable vesting date.
Fiscal 2023 Director Compensation
The following table sets forth all of the compensation awarded to or earned by the non-employee
members of the Board in fiscal 2023. In addition, the table sets forth compensation awarded to or earned by
Dr. Welch for his services as an employee of Infinera; Dr. Welch does not receive compensation for his services
as a director. Compensation information for Dr. Welch is not disclosed in “Our Pay—Fiscal 2023 Compensation”
below because he is not a Named Executive Officer.
Name
Christine B. Bucklin
Gregory P. Dougherty
Sharon E. Holt
Roop K. Lakkaraju
Paul J. Milbury
Amy H. Rice(4)
George A. Riedel
David F. Welch, Ph.D.
Fees Earned
or Paid in Cash
($)(1)
62,500
66,000
70,000
73,413
79,087
—
131,000
—
Stock
Awards
($)(2)
199,996 (3)
199,996 (3)
199,996 (3)
199,996 (3)
199,996 (3)
—
199,996 (3)
738,000 (5)
All Other
Compensation
($)
—
—
—
—
—
—
—
205,704 (6)
Total
($)
262,496
265,996
269,996
273,409
279,083
—
330,996
943,704
_________________
(1)
For a description of the annual non-employee director retainer fees and retainer fees for committee chair positions and for
service as Chair of the Board, see the disclosure above under “Director Fees.”
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(2)
(3)
The amounts reported in this column represent the aggregate grant date fair value of the RSU awards granted in fiscal
2023 computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718,
“Compensation – Stock Compensation” (“ASC 718”). See Notes 2 and 14 of the notes to our consolidated financial
statements contained in this report for a discussion of all assumptions made by us in determining the ASC 718 values of
equity awards.
Reflects for each director the value of the Annual RSU Award awarded in connection with the 2023 Annual Meeting of
Stockholders, which value was determined by multiplying for each director 39,447 shares of Infinera common stock by
Infinera’s closing stock price of $5.07 per share on May 18, 2023, the date of grant.
(4) Ms. Rice has waived any participation in the compensation benefits available to the Company’s non-employee directors,
except for customary reimbursement of expenses.
(5)
(6)
Reflects the value of Dr. Welch’s equity awards granted as compensation in 2023 for his services as an employee of
Infinera.
Reflects Dr. Welch’s 2023 employee salary in the amount of $200,000, plus the total value of Company paid life insurance
premiums and 401(k) match in the amount of $5,704.
During fiscal 2023, Dr. Welch, our Chief Innovation Officer and employee member of the Board, did not
receive compensation for his services as a director. Dr. Welch’s base salary for fiscal 2023 was $200,000. Dr.
Welch was not eligible for an incentive target bonus opportunity during fiscal 2023. On March 9, 2023, Dr. Welch
was granted an RSU award covering 100,000 shares, which is scheduled to vest over a three-year period, with
one-third of the underlying shares vesting on April 5, 2024, and one-twelfth of the underlying shares vesting
quarterly thereafter, subject to his continued service to Infinera through each applicable vesting date. This RSU
award had an aggregate grant date fair market value of $738,000, computed in accordance with ASC 718. See
Notes 2 and 14 of the notes to our consolidated financial statements contained in this report for a discussion of
all assumptions made by us in determining the ASC 718 values of equity awards.
On March 4, 2020, Dr. Welch was granted a performance share award covering 650,000 shares (at
target level achievement). The award provided for a number of quantitative and qualitative performance
objectives related to the successful development of the Company's XR Optics program to be achieved over
different periods from fiscal 2020 through fiscal 2024. On March 24, 2023, the Compensation Committee
determined that the achievement of one of the performance metrics, which related to generating $50 million of
ICE-X-related revenues by the end of fiscal 2022, had not been achieved. As a result, 150,000 shares of
common stock underlying the award were forfeited on this date. On May 12, 2024, the Compensation Committee
determined that the achievement of another of the performance metrics, which related to generating $100 million
of ICE-X-related revenues by the end of fiscal 2023, had not been achieved. As a result, 150,000 shares of
common stock underlying the award were forfeited on this date.
Additional Information with Respect to Director Equity Awards
Name
Christine B. Bucklin
Gregory P. Dougherty
Sharon E. Holt
Roop K. Lakkaraju
Paul J. Milbury
Amy H. Rice(2)
George A. Riedel
David F. Welch, Ph.D.(3)
Number of Shares
Subject to
Outstanding Stock
Awards at
Fiscal Year-End
(#)(1)
39,447
39,447
39,447
52,403
39,447
—
39,447
500,001
_________________
(1)
Unvested time-based RSU awards, except as noted below with respect to Dr. Welch.
(2) Ms. Rice has waived any participation in the compensation benefits available to the Company’s non-employee directors,
except for customary reimbursement of expenses.
(3)
Comprised of 150,001 shares subject to unvested time-based RSUs and 350,000 shares subject to performance share
awards (at target level achievement), 150,000 of which had a performance goal that was not met as of completion of the
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applicable performance period ending at the end of fiscal 2023 and 200,000 of which had a performance goal based on
fiscal 2024 performance.
Compensation Discussion and Analysis
This Compensation Discussion and Analysis provides information related to the fiscal 2023
compensation program and related decisions for our NEOs identified below.
Our Named Executive Officers
For fiscal 2023, our NEOs were the following:
•
•
•
•
David W. Heard, our CEO;
Nancy L. Erba, our CFO;
David L. Teichmann, our Chief Legal Officer (“CLO”) and Corporate Secretary; and
Nicholas R. Walden, our Senior Vice President, Worldwide Sales.
Fiscal 2023 Executive Compensation Program Overview
At the beginning of fiscal 2023, when a majority of executive compensation decisions were made, the
Compensation Committee considered the performance of our company as we exited fiscal 2022 and the goals of
achieving profitable revenue growth and non-GAAP Operating Income growth despite a challenging
macroeconomic environment and the desire to return to a customary executive compensation framework as the
world normalized from the COVID-19 pandemic. The decisions made reflected our continuing commitment to a
strong pay-for-performance profile and supported accountability of our leadership team for our financial
performance.
As indicated below, a significant portion of our executive compensation program is designed to align the
compensation outcomes for our participating NEOs with performance against measurable objectives.
Executive Compensation Program Structure
Compensation Element
(CEO/Average NEO Allocation of Elements
in Target Total Direct Compensation)
Structure and Attributes
Base Salary
(11% CEO/23% NEOs)
• Competitively set
• Each NEO received a pay increase in FY’23
Target Annual
Incentive
(14% CEO/20% NEOs)
Long-Term Performance-
Based Stock Awards
(41% CEO/28% NEOs)
Long-Term Time-Based RSU Awards
(34% CEO/28% NEOs)
• Annual target bonuses are payable in cash
• 2023 Corporate Bonus Plan funding level determined by non-GAAP
Operating Income to emphasize achievement of profitable growth
• SVP, Worldwide Sales participates in the 2023 Corporate Bonus Plan
but also a separate incentive plan tied to achievement of financial targets
for bookings and non-GAAP product standard margin to emphasize
bookings growth and profitable growth for the Company.
• Based on non-GAAP gross margin, an objective performance metric
• Vesting occurs when performance objective has been certified as having
been achieved by the Compensation Committee for full fiscal year
during performance period and time-based vesting requirement is met
• CEO received performance-based shares valued at 41% of target total
direct compensation (55% of target long-term incentive ("LTI") value);
other NEOs received performance-based shares valued at 28% of target
total direct compensation (50% of target LTI value)
• Designed for long-term retention and to promote strong long-term
stockholder alignment
• RSUs vest over three years, with one-third vesting after one year and
then quarterly for the remaining two years
• CEO received RSUs valued at 34% and other NEOs received RSUs
valued at 28% of target total direct compensation
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Pay-for-Performance Outcome in Fiscal 2023
During fiscal 2023, we continued to make progress toward achievement of our longer-term strategic
goals despite a challenging macroeconomic environment. Under our fiscal 2023 executive compensation
program, and consistent with our compensation policy promoting strong pay and performance alignment:
•
•
•
•
Annual Corporate Bonus Plan incentives were earned between approximately 68.9% and 83.5% of
target for each NEO;
69.6% of the performance shares granted in 2021 became eligible to vest in 2024 based on
performance during 2023;
None of the performance shares granted in 2022 and 2023 became eligible to vest based on
performance during 2023 and remain outstanding and eligible to be earned based on the level of
achievement of the Company's longer-term strategic goals during the applicable performance period;
and
Realized compensation value for our CEO in fiscal 2023 was 41.2% of his target compensation (as
further discussed below).
Pay-for-Performance with Respect to Fiscal 2023 CEO Compensation
We emphasize performance-based compensation for all of our NEOs, including in particular our CEO.
The chart below displays the target total direct compensation (i.e., base salary, target cash incentive opportunity,
and equity awards at target) of our CEO versus our CEO’s actual realized compensation during the most recent
three fiscal years, as well as our stock price during that time period. Mr. Heard served as our CEO during fiscal
2021, 2022 and 2023. The target value of equity awards reflects the modeling value of such award based on an
$8.00 per share reference price, which is used during the compensation modeling process and which differs from
the value reported in the Summary Compensation Table provided further below. Actual realized compensation
includes the base salary and any cash annual incentive earned during the year plus the sum of any RSUs and
performance shares ("PSAs") that vested during the year, valued using the share price on the vesting date, which
differs from the values shown in the Pay Versus Performance table provided further below given the specific
requirements with respect to “compensation actually paid” under such table.
As described above, our CEO target total direct compensation emphasizes compensation that aligns
with investor interests, including an at-risk annual incentive opportunity and long-term vesting equity awards.
When the Company’s performance is strong, our compensation programs are designed to reward executives
with realized compensation that exceeds target through a combination of strong stockholder returns and
performance that exceeds the targets approved for our short- and long-term incentive plans. Realized
compensation for fiscal 2023 for our CEO was 41.2% of target. This reflected in part the depreciation in the value
of equity awards granted in prior years but that vested during fiscal 2023, as the closing share price of our
common stock decreased from $10.48 on December 31, 2020 (the start of the 3-year period detailed in the chart
above) to a closing price of $4.75 on December 29, 2023 (which was the last trading day of our fiscal 2023). The
forfeiture of the performance share awards granted in fiscal 2020 with a performance period ending in fiscal 2022
also contributed to the decline in the realized compensation for fiscal 2022 (see the section below titled
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“Performance Share Awards” for more information regarding these performance share awards). As a result of our
emphasis on pay-for-performance, the realized compensation of our CEO fell significantly below his target total
direct compensation in fiscal 2022 and fiscal 2023, but was slightly above target in fiscal 2021. In furtherance of
our pay-for-performance goals, 55% of Mr. Heard’s targeted equity awards in fiscal 2023 were also granted in the
form of performance share awards.
Governance of Executive Compensation
Our executive compensation program includes the following executive compensation governance
policies and practices:
Compensation At Risk
Compensation Recovery Policy
Our executive compensation program is designed so that a significant
portion of our NEO compensation is “at risk” based on corporate
performance, as well as equity-based to more closely align the interests
of our NEOs and stockholders.
We maintain a compensation recovery policy that applies to our
Section 16 Officers and certain other individuals and provides for
recovery of both cash and equity incentive compensation under
specified circumstances. Our policy is compliant with applicable
Nasdaq listing rules and SEC regulations.
Anti-Hedging Policy
Our Insider Trading Policy prohibits all employees, including our
NEOs, and Board members from hedging their Infinera common stock.
Anti-Pledging Policy
Our Insider Trading Policy prohibits our NEOs and Board members
from pledging Infinera common stock as collateral for a loan.
Fully Independent Compensation
Committee
Our executive compensation program is administered by the
Compensation Committee, which consists solely of independent
directors.
Stock Ownership Policy
Our Section 16 Officers and Board members are subject to minimum
stock ownership requirements.
“Double-trigger” Change of Control
Arrangements
Annual Compensation Risk Assessment
Our change of control agreements contain “double-trigger”
arrangements that require a termination of employment without cause or
a constructive termination of employment following a change of control
of Infinera before payments and benefits are triggered, unless otherwise
set forth in a specific equity award agreement.
The Compensation Committee annually conducts a compensation risk
assessment to determine whether our compensation arrangements, or
components thereof, create risks that are reasonably likely to have a
material adverse effect on Infinera.
Independent Compensation Consultant
Reporting Directly to Compensation
Committee
The Compensation Committee utilizes input from Compensia, an
independent compensation consultant that is retained directly by the
Compensation Committee and performed no services for Infinera during
fiscal 2023 other than services provided to the Compensation
Committee.
139
Overview of Our Executive Compensation Program Philosophy and Process
Compensation Objectives and Philosophy
Our executive compensation program is designed to attract, retain, and reward talented executive
officers and to motivate them to pursue our corporate objectives, while fostering the creation of long-term value
for our stockholders. To achieve this mission, we take a “pay-for-performance” approach that forms the
foundation for the design of our executive compensation program. The Compensation Committee also designs
the various components of our executive compensation program to support our company culture and
performance (i.e., increasing levels of accountability through the use of “at risk” pay for more senior level
employees), current business priorities and strategy and product development cycles, and takes into
consideration in its design the current market practices of our peer group. Further, certain elements of our
compensation program measure progress on similar metrics in the short and long term and contain rewards for
our executives that are earned when certain strategically important financial milestones are met and sustained.
We believe this program is in the best interests of and aligned with our stockholders and maximizes the incentive
for our employees and executive team to deliver stockholder value.
Advisory Vote on Fiscal 2023 Named Executive Officer Compensation—“Say-on-Pay” Vote
In 2023, stockholders were provided with the opportunity to cast an advisory (non-binding) vote on the
compensation of our NEOs (a “say-on-pay” proposal) for fiscal 2022. Our stockholders overwhelmingly approved
this say-on-pay proposal, with more than 98% of votes cast voting in favor of our executive compensation
program. Noting the results of this vote, the Compensation Committee considered this stockholder approval
when making compensation decisions for fiscal 2023 as well as fiscal 2024.
In light of the 2023 say-on-pay vote, the Compensation Committee maintained the consistent general
approach to our executive officer compensation program for fiscal 2023. This included a continued emphasis on
pay-for-performance through the use of performance shares that reward executive officers only if they deliver
value for our stockholders.
The Compensation Committee will continue to consider input from our stockholders as reflected in the
outcome of our annual say-on-pay vote when making executive compensation program decisions.
Compensation-Setting Process
Role and Authority of Compensation Committee. The Compensation Committee is responsible for our
executive compensation program and all related policies and practices. The Compensation Committee has the
responsibility to establish and approve the compensation of each of our executive officers, including our NEOs.
In addition, the Compensation Committee reviews and administers our equity and employee benefit plans and
programs, which are generally available to our employees, including our NEOs. The Compensation Committee
also has the authority to engage its own advisors to assist it in carrying out its responsibilities, and the
reasonable compensation for such advisor services is paid by Infinera.
Role of Compensation Consultant. During fiscal 2023, the Compensation Committee engaged the
services of Compensia, a national compensation consulting firm, as its independent compensation consultant to
provide advice on matters relating to the compensation of our executives and non-employee directors.
Compensia attended several of the Compensation Committee’s meetings during fiscal 2023 and provided the
Compensation Committee with an analysis of industry-sector competitive market data regarding NEO
compensation, information on compensation trends, peer group and general market data, as well as assistance
with the parameters used to determine the peer group, base salary, incentive plan design, equity compensation
and the structure of our executive compensation program. During fiscal 2023, Compensia also provided general
observations about our compensation programs and reviewed and provided input on this Compensation
Discussion and Analysis section.
Compensia reports directly to the Compensation Committee. During fiscal 2023, Compensia interacted
with management at the direction of the Compensation Committee but did not provide any other services for
Infinera or its management team. Compensia’s fees in fiscal year 2023 were paid by Infinera. The Compensation
Committee annually reviews the independence of its compensation consultant and during fiscal 2023 determined
that there were no conflicts of interest in connection with Compensia’s work.
Determination of CEO Compensation. Compensia provides market data and considerations for the
Compensation Committee regarding the amount and form of our CEO’s compensation. As part of this process,
the Compensation Committee considers input from the Board and feedback from the Chair of the Board, in
particular with respect to the performance of our CEO. After considering the feedback and recommendations
140
received, all decisions regarding our CEO’s compensation are made by the Compensation Committee, based on
its own judgment and after considering the interests of our stockholders, in executive sessions excluding our
CEO.
Determination of Non-CEO NEO Compensation. As a result of his close working relationship with each
of the other NEOs, our CEO is asked to provide his assessment of their performance to the Compensation
Committee, including considerations regarding retention and importance of their contributions to Infinera. Our
CEO is assisted by our Chief Human Resources Officer in making these assessments. Our CEO then presents
his performance assessment of the other NEOs and makes formal recommendations to the Compensation
Committee regarding adjustments to base salary, annual cash incentive award opportunities, and equity awards
for our NEOs (other than himself). While the Compensation Committee considers the recommendations of our
CEO in determining compensation for our other NEOs, ultimately its decisions are based on its own judgment
and the interests of our stockholders. None of our NEOs makes any recommendations regarding his or her own
compensation and none of our NEOs are present at meetings at the time their compensation is determined.
Executive Compensation Elements
We consider the following to constitute the key elements of our executive compensation programs. We
believe each is necessary to attract, retain and motivate our executive officers, on whom our success largely
depends.
Pay Element
Base Salary
Type
Fixed
Form/Purpose
We pay base salaries to attract, retain and motivate our executive
officers for their day-to-day contributions.
Annual Incentive
Compensation
Variable
We provide annual incentive cash compensation to link payments to the
achievement of our annual financial and/or operational objectives.(1)
Long-Term Incentive
Compensation
Variable
We provide long-term incentive compensation delivered in the form of
time-based and performance-based equity awards to more closely align
the interests of our executive officers with those of our stockholders
and provide significant motivational and retention value to our
executive officers.
________________
(1)
In response to impacts from the COVID-19 pandemic, we cancelled this program for the second half of fiscal 2020 and all
of fiscal 2021. In fiscal 2022, we fully reinstated an annual incentive cash compensation program for our CEO and CFO,
and for our other NEOs, we treated fiscal 2022 as a transition year with 50% of the target value of their annual incentive
compensation program issued in retention RSUs and 50% of the target value in cash. In 2023, the annual incentive cash
compensation program was fully reinstated for all of our NEOs, with our SVP, Worldwide Sales participating as to 25% of
his cash target value and also participating in a separate incentive compensation program as to 75% of his target value
that was tied to achievement of new financial targets for bookings and non-GAAP product standard margin.
In addition, we also provide employee benefits that are generally available to all our employees
including our NEOs, and certain severance and “double-trigger” change of control payments and benefits
pursuant to change of control severance agreements entered into with our NEOs or our Executive Severance
Policy in which NEOs participate, as described further below.
Allocation of Compensation Across Pay Elements
In determining how to allocate an NEO’s target total direct compensation opportunity among these
various elements, the Compensation Committee considers market-competitive practices for companies of a
similar size and with a comparable business focus. Individual retention considerations are also factored in the
Compensation Committee’s final determination of target total direct compensation. Equity awards, which for fiscal
2023 consisted of awards of time-based RSUs and performance shares, represented the largest component of
our NEOs’ target total direct compensation opportunity. This approach was designed to encourage sustained,
long-term performance and to ensure closer alignment of the interests of our NEOs with those of our
stockholders. Consistent with our “pay-for-performance” philosophy, a significant portion of our NEOs’ fiscal 2023
target total direct compensation opportunity was completely “at risk,” including 55% of Mr. Heard’s target total
direct compensation opportunity. We define “at risk” compensation as opportunities for which vesting eligibility or
141
payout is contingent upon achievement of specified performance conditions. In fiscal 2023, this included annual
target incentive compensation under the 2023 Corporate Bonus Plan and performance share awards, where the
value of performance shares is included in the charts below based on the grant date target value of shares
awarded.
The following charts show the target total direct compensation mix for fiscal 2023 for Mr. Heard and our
other NEOs, with the value of equity awards determined using grant date fair value.
Role of the Compensation Peer Group and Market Data
In making compensation decisions for our executive officers, the Compensation Committee reviews and
analyzes competitive market practices using data prepared by Compensia that is drawn from a group of peer
companies, as supplemented by data from the Radford Global Technology survey as not all peer companies
provide publicly available data for each role.
In September 2022, the Compensation Committee reviewed the peer group used for executive
compensation decision-making for purposes of fiscal 2023 compensation planning. The target selection criteria
for the peer group identified in September 2022 and used for fiscal 2023 compensation planning were:
•
•
Industry: companies in the communications equipment sector and Infinera’s direct competitors, as
well as other companies in broader technology sectors, with a focus on companies that overlap with
key elements of Infinera’s business;
Annual Revenue: $726 million to $2.9 billion;
• Market Capitalization: $312 million to $5 billion; and
•
Headquarters and Location: Companies that have headquarters in the U.S., with a preference for
Bay Area-headquartered companies.
Our peer group for fiscal 2023 compensation planning consisted of the following companies:
ADTRAN Holdings, Inc. [ADTN]
Advanced Energy Industries, Inc. [AEIS]
Calix, Inc. [CALX]
Ciena Corporation [CIEN]
Cirrus Logic, Inc. [CRUS]
Diodes Incorporated [DIOD]
Extreme Networks, Inc. [EXTR]
Lumentum Holdings Inc. [LITE]
MaxLinear, Inc. [MXL]
NETGEAR, Inc. [NTGR]
NetScout Systems, Inc. [NTCT]
OSI Systems, Inc. [OSIS]
Ribbon Communications Inc. [RBBN]
Synaptics Incorporated [SYNA]
ViaSat, Inc. [VSAT]
Viavi Solutions Inc. [VIAV]
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FY23 Pay Mix: CEOBase Salary11%Target Incentive14%Time-Based RSUs34%Performance Shares41%FY23 Pay Mix: Other NEO AverageBase Salary23%Target Incentive20%Time-Based RSUs28%Performance Shares28% Due to the limited data available from the peer group with respect to the roles of certain of our NEOs,
the Compensation Committee also reviewed market data prepared by Compensia that was derived from the
Radford Global Technology survey to supplement the available peer group data in determining the compensation
of Mr. Teichmann, our Chief Legal Officer and Mr. Walden, our Senior Vice President, Worldwide Sales. The
Compensation Committee reviewed data from the Radford Global Technology survey in the aggregate and did
not review data of any specific companies comprising such survey. In this discussion, where we refer to “market”
levels of pay and the “market data,” we are referring to the combined compensation peer group and survey data
described above that were then in effect and applicable to our NEOs.
Use of Market Data
For its fiscal 2023 compensation decisions, the Compensation Committee continued to maintain a
holistic and flexible approach in its use of market data. The Compensation Committee’s goal is generally to set all
elements of compensation to be competitive, using a balanced approach that does not use rigid percentiles to
target pay levels for each compensation element, but instead makes its compensation decisions based on a
variety of relevant factors, including those listed below. While the Compensation Committee continues to review
and reference market data, the data generally is used to inform the Compensation Committee of market
practices to ensure that our executive compensation program remains generally competitive with our peers. In
addition to the market data, several other factors are taken into account in setting the amount of each NEO’s
target total direct compensation opportunity. These factors include:
Recruitment, retention and
historical factors
The Compensation Committee reviews existing NEO compensation and
retention levels relative to estimated replacement cost with respect to the
scope, responsibilities and skills required of the particular position.
Lack of directly comparable data for
some of our key roles
Compensation data for some of our key positions are often not explicitly
reported by companies in our compensation peer group or survey data.
This results in limited sample sizes and/or inconclusive data that can be
misleading if targeting a specific percentile for market positioning.
Market positioning may be distorted by
the source of the data
Certain elements of compensation reported from one source can be
consistently higher or lower than the data collected from another, given
differences in methods and samples used by each source to collect
market data. Given this variability and volatility within the market data,
the Compensation Committee has determined that targeting pay levels at
specific percentiles of this data could result in outcomes that do not
align with the internal value and strategic importance of various roles at
Infinera.
Desire to account for other factors not
captured in the market data
As discussed below, the Compensation Committee also considers
several qualitative factors.
Relevant Qualitative Factors
In addition to our uses of competitive market data as described above, the Compensation Committee
considers a range of subjective and qualitative factors when making compensation decisions for our NEOs,
including:
•
•
•
•
•
The role the executive officer plays and the importance of such individual’s contributions to our
ability to execute on our business strategy and to achieve our strategic objectives;
Each executive officer’s tenure, skills and experience;
The responsibilities and particular nature of the functions performed or managed by the executive
officer;
Our CEO’s recommendations and his assessment of each executive officer’s performance (other
than his own performance), and with respect to the CEO’s performance, assessment and input by
the Board including feedback from the Chair of the Board;
The value of unvested equity awards held by each executive officer and in comparison to other
members of our executive management team and senior employees;
143
•
•
•
•
•
Internal pay equity across the executive management team;
The impact of our compensation decisions on key financial and other measures such as our equity
award “burn rate”;
Our overall performance as compared to internal plans and external benchmarks;
The potential impact on stockholder dilution of our compensation decisions relative to peers and
historical practices; and
Competitive labor market pressures and the likely cost, difficulty and impact on our business and
strategic objectives that would be encountered in recruiting a replacement for the role filled by each
of our NEOs.
The Compensation Committee does not assign relative weights or rankings to any of these factors and
does not solely use any quantitative formula, target percentile or multiple for establishing compensation among
the executive officers or in relation to the market data. Instead, the Compensation Committee relies upon its
members’ knowledge and judgment in assessing the various qualitative and quantitative inputs it receives
regarding each individual and makes compensation decisions accordingly.
Fiscal 2023 Compensation
Base Salaries
For fiscal 2023, the Compensation Committee reviewed the base salaries in March 2023 for each of our
NEOs. After considering market data provided by Compensia and taking into account each NEO’s respective
individual performance during this period, the Compensation Committee approved increases to the base salaries
for the NEOs as shown in the table below. The Compensation Committee did not consider these increases to be
material changes for any of the NEO’s base salaries.
The following table shows the annual base salary for each of our NEOs for fiscal 2022 and fiscal 2023.
Name
David W. Heard
Nancy L. Erba
David L. Teichmann
Nicholas R. Walden (2)
Fiscal 2022
Annual Base
Salary
($)
700,000
475,000
415,000
420,000
Fiscal 2023
Annual Base
Salary
($)(1)
758,000
500,000
445,000
430,000(2)
_________________
(1)
2023 annual base salary increases became effective as of July 1, 2023.
(2)
In August 2023, Mr. Walden relocated from the United States to the UK. Following such relocation, Mr. Walden received
his salary in Pound Sterling (“GBP”). The salary amount paid to Mr. Walden in GBP was determined by converting into
GBP his annual salary amount stated above in United States Dollars (“USD”) using the exchange rate of 1.286 USD to 1
GBP.
Annual Incentive Compensation
Target Bonus Opportunities. In March 2023, the Compensation Committee reviewed the target bonus
opportunities (which are expressed as a percentage of base salary) for fiscal 2023 for each of our NEOs, and
determined that the target bonus opportunity for our CEO, CFO and CLO would remain the same in fiscal 2023
as in fiscal 2022 and that the target bonus opportunity for our Senior Vice President, Worldwide Sales would be
increased as set forth in the table below for fiscal 2023. In considering the target bonus opportunities for our
NEOs, the Compensation Committee considered the competitive market data provided by Compensia and its
desire to provide appropriate competitive compensation to our NEOs given their critical leadership roles. In the
case of Mr. Walden, the Compensation Committee determined to increase his target bonus opportunity from 90%
to 100% of base salary. The Compensation Committee believed it would be appropriate to provide additional
incentive under his bonus opportunity to further emphasize achievement of the Company’s profitable growth, in
further alignment of pay versus performance for an important financial performance objective for the Company.
144
The following table shows the annual target bonus opportunities for each of our NEOs for fiscal 2022
and fiscal 2023. In addition, the Compensation Committee approved a variable cash compensation program for
Mr. Walden for fiscal 2023.
Name
David W. Heard
Nancy L. Erba
David L. Teichmann
Nicholas R. Walden(1)
Target Bonus Opportunity as a
Percentage of Base Salary
Fiscal 2022
Target Bonus
Fiscal 2023
Target Bonus
125%
90%
75%
90%
125%
90%
75%
100%
_________________
(1)
For fiscal 2023, Mr. Walden’s total target bonus of 100% of base salary was split with 25% of his target value tied to the
2023 Corporate Bonus Plan and 75% of his target value tied to achievement under the Walden 2023 Variable
Compensation Program. Please see below for information regarding the Walden 2023 Variable Compensation Program.
2023 Bonus Plan Design. In March 2023, the Compensation Committee approved a 2023 corporate
bonus plan (the “2023 Corporate Bonus Plan”) that was applicable to our NEOs. The Company’s non-GAAP
Operating Income achievement in fiscal 2023 was used to determine the plan’s funding level. The Compensation
Committee determined that this financial performance objective supported the Company’s objectives for
profitable growth. If the Company achieved the target level of non-GAAP Operating Income of $98.3 million for
fiscal 2023, the 2023 Corporate Bonus Plan would be funded at 100%. If the Company achieved the threshold
level of non-GAAP Operating Income of $78.6 million for fiscal 2023, the 2023 Corporate Bonus Plan would be
funded at 80%. There was no guaranteed minimum funding under the plan if the threshold is not met. If the
Company achieved above the target level of non-GAAP Operating Income of $98.3 million for fiscal 2023, then
50% of each additional dollar of non-GAAP Operating Income would be added to the bonus funding level.
Although the Compensation Committee did not set a maximum level of non-GAAP Operating Income under the
2023 Corporate Bonus Plan, it retains authority to increase, reduce or eliminate any bonus award, and to
increase, reduce or eliminate any amount allocated to the bonus pool. The Compensation Committee reserves
such discretion in order to take into consideration any other relevant factors in determining bonus payouts, such
as overall Company performance, functional performance, individual performance, financial considerations, or
any other internal or external factors that it deems appropriate. Based on such other factors, bonus payouts may
be adjusted up or down to pay out at a higher or lower level than otherwise would become payable based solely
on achievement of non-GAAP Operating Income.
For fiscal 2023, each of our NEOs participated in the 2023 Corporate Bonus Plan. Mr. Walden’s
participation in the 2023 Corporate Bonus Plan was limited to 25% of his total target bonus opportunity. With
respect to the remaining 75% of his total target bonus opportunity, Mr. Walden participated in a separate variable
compensation program, as discussed below under the “Walden 2023 Variable Compensation Program.”
2023 Bonus Plan Results. The Compensation Committee considered the Company’s actual
achievement level of non-GAAP Operating Income of $87.2 million, which otherwise would result in achievement
at the 88.7th percentile funding for the 2023 Corporate Bonus Plan. In determining funding as well as payout for
the NEOs, the Compensation Committee considered additional factors, including that the Company’s revenue for
fiscal 2023 was $1,614.1 million, which was below our expectations. Further, the Company’s bookings for fiscal
2023 were below our expectations. Given these additional factors relating to the Company’s overall performance
for the year, and notwithstanding the achievement level of non-GAAP Operating Income, the Compensation
Committee believed it appropriate to apply negative discretion for funding bonuses under the 2023 Corporate
Bonus Plan and resolved to approve funding at 83.5% of target. The Compensation Committee further
considered departmental function objectives and performance with respect to financial goals overall for the
Company and applied discretion to reduce Ms. Erba’s bonus amount to approximately 68.9% of her target. The
following table sets forth the payouts that will be paid to our NEOs during the second fiscal quarter of 2024 under
the 2023 Corporate Bonus Plan. For a reconciliation of GAAP to non-GAAP Operating Income for fiscal 2023
referenced above or elsewhere in this report, please see Appendix A.
145
Name
David W. Heard
Nancy L. Erba
David L. Teichmann
Nicholas R. Walden
Bonus
Amount
Earned
($)(1)
791,163
309,994
278,681
89,762
_________________
(1) Mr. Walden's bonus amount is stated in USD using the exchange rate of 1.286 USD to 1 GBP. Payout of his bonus will be
in GBP under our UK payroll.
The Compensation Committee also determined that the annual incentive compensation for our NEOs
under the 2023 Corporate Bonus Plan would be payable entirely in cash.
The Compensation Committee decided it was appropriate that the annual incentive compensation for
our NEOs with respect to fiscal 2023 would be fully at risk and payable in cash based on achievement of the
target goal given their ability to drive the Company’s financial performance. This completed the transition started
in fiscal 2022 of all of our NEOs back to a more customary executive compensation framework continuing to
emphasize closer alignment between the interests of our NEOs and those of our stockholders.
Walden 2023 Variable Compensation Program. In March 2023, the Compensation Committee approved
a fiscal 2023 variable compensation program for Mr. Walden (the “2023 Walden Variable Plan”). Under the 2023
Walden Variable Plan, 75% of Mr. Walden’s total target bonus opportunity for fiscal 2023 is tied to achievement of
financial targets for bookings and non-GAAP product standard margin (the “Walden Financial Goals”). With
respect to the Walden Financial Goals under the 2023 Walden Variable Plan, the achievement of the bookings
objective is weighted at 50% and the achievement of the non-GAAP product standard margin objective is
weighted at 50%. The Compensation Committee believed that these objectives, as well as Mr. Walden’s
participation in the 2023 Walden Variable Plan in addition to his participation in the 2023 Corporate Bonus Plan,
would be appropriate given Mr. Walden’s critical role leading the Company’s efforts in driving revenue, and for
focusing efforts on our profitable revenue growth by emphasizing bookings, which are closely correlated with
revenue balancing, and non-GAAP product standard margin, which is an important measure of the Company’s
business success.
Bookings
Minimum
Threshold
Bookings
Target
Bookings
Maximum
Non-GAAP
Product
Standard
Margin
Threshold
Non-GAAP
Product
Standard
Margin
Target
Non-GAAP
Product
Standard
Margin
Maximum
Amount
$1.7 billion
$1.9 billion
$2.1 billion
$660.1 million
$680.4 million
$707.5 million
Funding % of Target
35%
100%
200%
70%
100%
200%
Actual Results
$1.4 billion
$640.7 million
Achievement between the minimum threshold and the target level would be determined based on linear
interpolation. The maximum payout potential with respect to each of the bookings and non-GAAP product
standard margin objectives was set at 200%, with achievement between the target level and the maximum
payout potential determined based on linear interpolation.
We did not achieve the minimum threshold for the bookings or the non-GAAP product standard margin
objectives under the 2023 Walden Variable Plan. The CEO recommended that the Compensation Committee use
discretion to provide a partial payout with respect to the non-GAAP product standard margin achievement result
in recognition of the significant year-over-year improvement in non-GAAP product standard margin during fiscal
2023. After careful consideration of the contribution of the Company’s improvement in non-GAAP product
standard margin to the Company’s performance, the Compensation Committee approved the use of discretion to
approve a partial payout of $66,564 or 41.28% of the target payout, attributable solely to the non-GAAP product
standard margin objective. This payout amount was determined by applying linear interpolation between the
target and actual amount of non-GAAP product standard margin achieved. For a reconciliation of GAAP to non-
146
GAAP product standard margin for fiscal 2023 referenced above or elsewhere in this report, please see Appendix
A.
Fiscal 2024 Bonus Plan. In March 2024, the Compensation Committee approved a fiscal 2024 Bonus
Plan (the “2024 Corporate Bonus Plan”), which will be payable in cash. Mr. Walden will participate in the 2024
Corporate Bonus Plan as to 50% of his target incentive opportunity and will also participate in a separate
incentive compensation program as to 50% of his target value that is tied to achievement of new financial targets
for bookings and standard margin, measured on a non-GAAP basis. The Compensation Committee determined
to shift a greater percentage of Mr. Walden’s target incentive compensation to be allocated to his participation in
the 2024 Corporate Bonus Plan (as compared to the prior fiscal year) to further enhance alignment with the rest
of the executive team.
Long-Term Incentive Compensation
Our long-term incentive compensation opportunities are delivered in the form of equity awards. Under
the Company's 2016 Equity Incentive Plan (the "2016 Plan"), the Compensation Committee grants equity awards
to eligible employees, including our NEOs. All awards to our NEOs were made pursuant to the 2016 Plan. Annual
equity awards for NEOs are generally approved by the Compensation Committee during the first open trading
window of each new calendar year. The Compensation Committee actively monitors our annual aggregate equity
utilization as measured by our burn rate.
Equity Compensation Design. The Compensation Committee believes that it is in the best interests of
the Company and our stockholders to grant a combination of time-based and performance-based equity awards
to senior level employees, including our NEOs. It also believes that our performance-based equity awards foster
a “pay-for-performance” culture and multi-year vesting schedules create longer-term incentives that maintain
alignment of the interests of our NEOs with those of our stockholders. Our NEOs benefit from these equity
awards based on our sustained performance over time and the ability of our NEOs to create the results that drive
stockholder value.
In determining the appropriate mix of such equity awards, the Compensation Committee considered
how each equity vehicle supports our compensation strategy as follows:
Type of Award
Performance Share
Award ("PSA" or "PSU")
Restricted Stock Unit
Award ("RSU")
Description
Why It Is Used
•
•
•
•
Provides the opportunity to earn shares
of Infinera common stock upon the
achievement of pre-established
performance objectives.
If the threshold performance level is not
achieved, the entire portion of the award
tied to such performance objective is
forfeited.
Provides the opportunity to earn a
specified number of shares of Infinera
common stock subject to the
participant’s continued employment for
a specified period.
Typically has a three-year or four-year
vesting period to encourage a long-term
perspective and to encourage key
employees to remain at Infinera.
•
•
•
•
•
Supports pay-for-performance
philosophy.
Increases alignment with interests of
stockholders.
Supports retention and succession
planning.
Provides a direct incentive for future
performance.
Useful in recruiting new executives.
Target Award Size. In determining the size of these annual equity awards, the Compensation
Committee considered the factors described above in the sections entitled “Use of Market Data” and “Relevant
Qualitative Factors,” with particular attention to market data, internal equity considerations, the potential dilutive
impact of the equity awards, and the amount and value of unvested equity awards held by each of our NEOs. For
our CEO, the Compensation Committee also considered his tenure and performance in the role in determining
the size of his annual equity awards. The Compensation Committee believed a combination of time-based and
performance-based equity awards promote close alignment of the interests of our NEOs with those of our
stockholders.
For fiscal 2023, the Compensation Committee first determined the target value of long-term incentive
compensation for each executive. The number of RSUs and performance shares granted to each executive was
147
then determined based on an assumed stock price of $8.00 per share and assuming a 55% allocation of target
value into performance shares for Mr. Heard, our CEO, and a 50% allocation of target value into performance
shares for our other NEOs. Due to Mr. Heard’s significant responsibilities in leading the Company and executing
on our business strategy, the Compensation Committee believed it appropriate for the mix of Mr. Heard’s equity
awards to be more heavily weighted toward performance shares as compared to the other NEOs. The
Compensation Committee determined to utilize an $8.00 per share reference price in order to facilitate the equity
planning process, which was set after considering recent stock price history and volatility at a price per share that
was projected to be higher than the stock price per share at the date of grant. The actual grant date value for
these equity awards was below $8.00 per share, and as a result, the target value approved by the Compensation
Committee differs from the value of equity reported in the Summary Compensation Table set forth on page 155
below. The following table sets forth the fair market value of each award granted to our NEOs in March 2023 on
the basis of the $8.00 per share reference price used by the Compensation Committee and the actual grant date
per share value.
Grant
Date
Fair Value
of RSUs
($)(1)
2,311,875
867,150
Value of
Performance
Shares
Based on
$8.00 Per
Share
Reference
Price
($)
Grant Date
Fair Value of
Performance
Shares
($)(1)
RSUs
Granted
(#)
Value of
RSUs
Based on
$8.00 Per
Share
Reference
Price
($)
Performance
Shares
Granted
(#)
Grant
Date
David W. Heard
3/13/2023
412,500 3,300,000
2,825,625 337,500 2,700,000
Nancy L. Erba
3/9/2023
David L. Teichmann
3/9/2023
117,500
57,500
940,000
460,000
867,150 117,500 940,000
424,350
57,500 460,000
424,350
Nicholas R. Walden
3/9/2023
65,000
520,000
479,700
65,000 520,000
479,700
_________________
(1)
The fair market value of our common stock (based on the closing sale price) was $7.38 per share for awards granted on
March 9, 2023 and $6.85 per share for awards granted on March 13, 2023.
Fiscal 2023 Equity Awards. In March 2023, the Compensation Committee granted annual equity awards
for fiscal 2023 in the form of a time-based RSU award and a performance share award to each of our NEOs. The
following table sets forth the equity awards granted to our NEOs in March 2023.
Name
David W. Heard
Nancy L. Erba
David L. Teichmann
Nicholas R. Walden
Number of
Shares
Subject to 2023
RSU Awards(1)
337,500
117,500
57,500
65,000
Number of
Shares Subject
to 2023
Performance
Share Awards
(at Target)
412,500
117,500
57,500
65,000
________________
(1)
The RSU awards vest over a three-year period, with one-third of the underlying shares vesting on April 5, 2024, and one-
twelfth of the underlying shares vesting quarterly thereafter, in each case subject to the NEO’s continued service to the
Company through the applicable vesting date.
Performance Share Awards
Determining the Performance Goal. In determining the performance criteria for the 2023 performance
share awards (also referred to as "PSAs" or "PSUs") for our NEOs, the Compensation Committee considered the
importance of growing our margins. The Compensation Committee also considered that the performance share
awards should be designed to work in concert with grants made in previous years that will have overlapping
performance cycles with the awards granted in 2023. Fiscal 2021 awards were structured to encourage
executives to accelerate our profitable revenue growth combined with non-GAAP Operating Income growth.
Fiscal 2022 awards were structured to encourage executives to focus on profitability, to accelerate the
148
Company’s external pluggables sales and to accelerate cost savings from using the Company’s pluggables in our
products.
Performance Criteria. Accordingly, the Compensation Committee decided the fiscal 2023 performance
share awards would be subject to a performance goal relating to non-GAAP gross margin (the “2023 PSA”). The
performance period of the 2023 PSAs covers the three years of fiscal 2023 through fiscal 2025 (the “2023 PSA
Performance Period”) and the 2023 PSA requires achievement of a non-GAAP gross margin goal at a specified
level (the “2023 PSA Goal”) during the 2023 PSA Performance Period, as further explained below. We estimate
that the achievement of the 2023 PSA performance goals will be challenging but possible based on effective
execution of and focus on our long-term business model during the 2023 PSA Performance Period.
In establishing the performance goals for our NEOs under the 2023 PSA, the Compensation Committee
reflected that the prior awards included goals targeted at specific financial objectives that ultimately tie to
stockholder value, and that the 2023 awards should as well. The Compensation Committee believes the
overlapping, multiyear performance period design provides our NEOs with significant incentives to achieve
various objectives that are important for our long-term success.
Achievement and Vesting. If the non-GAAP gross margin is certified by the Compensation Committee to
be at a certain percentage level for the last year of the 2023 PSA Performance Period, fiscal 2025 (the “Minimum
Threshold”), then 50% of the target number of shares will become eligible shares. If the non-GAAP gross margin
is certified by the Compensation Committee to be at a higher specified percentage level for fiscal 2025 (the
“Target Threshold”), then 100% of the target number of shares will become eligible shares. If the non-GAAP
gross margin is certified by the Compensation Committee to be at a higher specified percentage level for fiscal
2025 (the “Maximum Threshold”), then 150% of the target number of shares will become eligible shares. If the
Minimum Threshold is not attained, then no shares will become eligible shares. If non-GAAP gross margin for
fiscal 2025 is certified by the Compensation Committee to be between the Minimum Threshold and the Target
Threshold, then the percentage of shares that become eligible shares will be determined by applying linear
interpolation between the Minimum Threshold and the Target Threshold. If non-GAAP gross margin for fiscal
2025 is certified by the Compensation Committee to be between the Target Threshold and the Maximum
Threshold, then the percentage of shares that become eligible shares will be determined by applying linear
interpolation between the Target Threshold and the Maximum Threshold. The number of shares that become
eligible shares may not exceed 150% of the target number of shares. Shares that become eligible for fiscal 2025
performance will vest upon the applicable certification date, subject to the NEO remaining a service provider
through the applicable vesting date. If non-GAAP gross margin is certified by the Compensation Committee to be
at the Target Threshold level or greater for the second year of the 2023 PSA Performance Period, for fiscal 2024
(“Early Achievement”), then 150% of the target shares will become eligible shares and 2/3 of such eligible shares
will vest on such certification date and the remaining 1/3 of eligible shares will vest on the last day of fiscal 2025,
subject to the NEO remaining a service provider through the applicable vesting date.
In the event a change in control occurs during the 2023 PSA Performance Period but after fiscal 2024,
the Compensation Committee will complete a certification for fiscal 2024 to the extent a certification has not yet
been completed, and no later than immediately prior to the change in control. In the event of a change in control
that occurs during the 2023 PSA Performance Period and none of the shares have become eligible shares, then
100% of the target shares will have their vesting accelerated as of immediately prior to the change in control,
provided that the NEO remains a service provider through the date of the change in control. In the event of a
change in control that occurs during the 2023 PSA Performance Period but shares have already become eligible
shares pursuant to Early Achievement, then 100% of the shares will become eligible shares and will have their
vesting accelerated as of immediately prior to the change in control, provided that the NEO remains a service
provider through the date of the change in control.
Outstanding Performance Share Awards Granted in Prior Fiscal Years. The following table provides
information regarding outstanding performance share awards granted prior to fiscal 2023 that were eligible to be
earned in fiscal 2023 by our NEOs based on the achievement of performance with respect to the objectives
underlying such performance share awards.
149
Total
Number of
Performance
Shares
Remaining
at Target
(#)
Target Number
of Shares that
Could Vest
for Fiscal 2023
Performance
Period
(#)
Maximum
Number of
Shares that
Could Vest
for Fiscal 2023
Performance
Period
(#)
258,000
346,666
60,000
92,500
50,000
55,000
55,000
258,000
346,666
60,000
92,500
50,000
55,000
55,000
64,000
64,000
258,000
346,666
60,000
92,500
50,000
55,000
55,000
64,000
Actual Number
of Shares
Vested for
Fiscal 2023
Performance
Period
(#)
179,567 (2)
0 (4)
41,760 (2)
0 (4)
34,800 (2)
0 (4)
38,279 (2)
0 (4)
Fiscal
Year
of Grant
2021 (1)
2022 (3)
2021 (1)
2022 (3)
2021 (1)
2022 (3)
2021 (1)
2022 (3)
Name
David W. Heard
Nancy L. Erba
David L. Teichmann
Nicholas R. Walden
_________________
(1)
In fiscal 2021, the Compensation Committee granted to the NEOs in the table above a performance share award (the
“2021 PSA”) with two sets of performance goals that could be earned during fiscal 2021 through fiscal 2023 (the “2021
PSA Performance Period”), with each set of goals covering one-half of the 2021 PSA (each such half, a tranche). The
goals applicable to the first tranche, included both an operating income goal, measured on a non-GAAP basis over a full
fiscal year during the performance period, and a revenue goal, measured over a full fiscal year during the performance
period. If for a fiscal year, the operating income goal for the first tranche was achieved at $50 million or greater and the
revenue goal was achieved at $1.66 billion or greater, then 100% of such tranche (half of the 2021 PSA) becomes eligible
to vest. Alternatively, if in fiscal 2023, the operating income goal is achieved at $50 million or greater and the revenue goal
is achieved at $1.56 billion or greater, then 50% of such tranche will become eligible to vest (and linear interpolation is
applied with respect to achievement of revenue between $1.56 and $1.66 billion). The second tranche required an
operating income goal, measured on a non-GAAP basis over a full fiscal year during the performance period, to be
achieved at $116 million or greater for 100% of such tranche (half of the 2021 PSA) to become eligible to vest
Alternatively, if in fiscal 2023, the operating income goal for the second tranche was achieved at $78 million or greater,
then 50% of such tranche will become eligible to vest (and linear interpolation is applied with respect to achievement of
operating income between $78 million and $116 million). For purposes of the 2021 PSA, non-GAAP Operating Income
was calculated by excluding from the Company’s GAAP operating income the following: acquisition-related deferred
revenue adjustment, stock-based compensation expense, amortization of acquired intangible assets, acquisition and
integration costs, restructuring and other related costs, inventory related charges, global distribution center transition
costs, warehouse fire loss (recovery) and litigation charges.
(2)
(3)
In May 2024, following approval by the Audit Committee of the Company’s fiscal 2023 non-GAAP Operating Income
achieved of $87.2 million, and revenue achieved of $1,614.1 million, the Compensation Committee certified that (i) based
on the achievement level of the goals for the first tranche of the 2021 PSA,77.06% of the shares subject to the 2021 PSA
became eligible to vest and 22.94% of the shares subject to the 2021 PSA were forfeited; and (ii) based on the level of
achievement of the goal for the second tranche of the 2021 PSA, 62.14% of the shares subject to the 2021 PSA became
eligible to vest and 37.86% of the shares subject to the 2021 PSA were forfeited. For a reconciliation of GAAP to non-
GAAP Operating Income for fiscal 2023 referenced above or elsewhere in this report, please see Appendix A.
In fiscal 2022, the Compensation Committee granted to the NEOs in the table above a performance share award (the
“2022 PSA”) that would be subject to two performance goals, each covering one-half of the fiscal 2022 PSA (each such
half, a tranche). The first tranche was subject to the requirement that a GAAP net income goal be achieved at a specified
level for a full fiscal year during a performance period covering fiscal 2023 through fiscal 2024. Upon achievement of the
performance during the performance period, 100% of the shares subject to the first tranche will become eligible to vest. If
the GAAP net income goal is not achieved at such specified level during the performance period, then none of the shares
subject to the first tranche would become eligible to vest. The second tranche of the 2022 PSAs was subject to a
requirement to achieve a specified level of gross profit dollars determined in accordance with GAAP generated by revenue
from external sales of our pluggables and by cost savings resulting from use of our pluggables in our products during the
performance period covering fiscal 2022 through fiscal 2024. If the total amount from these gross profit dollars meets a
threshold level during the relevant performance period, then 100% of the shares subject to the second tranche will
become eligible to vest. If the gross profit dollars meets a lower specified level or greater during the relevant performance
period, then 25% of the shares subject to the second tranche will become eligible to vest. If the gross profit dollar amount
does not meet this lower specified level during the relevant performance period, then none of the shares subject to the
second tranche would become eligible to vest. We estimate that the achievement of the goals under the 2022 PSAs would
be challenging but possible based on effective execution of and focus on our long-term business model during the
respective performance periods.
150
(4) We did not achieve the performance objectives for the 2022 PSA during fiscal 2023. As a result, as of the end of fiscal
2023, the target number of shares subject to the 2022 PSA remain eligible to be earned and vest during the applicable
performance periods.
Employee Benefits and Perquisites
Generally, our NEOs are only eligible to receive the same benefits as our U.S. salaried employees.
Upon relocation to the UK in 2023, Mr. Walden has received our standard UK benefits package applicable
generally to our other full-time employees based in the UK. Infinera and the Compensation Committee believe
this approach is reasonable and consistent with the overall compensation objectives to attract and retain
employees. For our NEOs based in the U.S., these benefits include medical, dental, vision and disability benefits,
a Section 401(k) plan, and other plans and programs, including the 2007 ESPP, made available on a broad basis
to other eligible employees. We provide a matching contribution of up to $2,500 under the Section 401(k) plan
that is applicable to all eligible participants, including our NEOs other than Mr. Walden following his relocation.
Mr. Walden’s benefits in the UK include similar benefits to the other NEOs except for the Section 401(k) plan. Mr.
Walden is eligible for a UK Pension plan similar to other UK employees plus other plans and programs, including
the 2007 ESPP, made available on a broad basis to other eligible employees based in the UK. Employee benefits
and perquisites are reviewed periodically to ensure that benefit levels remain competitive but are not included in
the Compensation Committee’s annual determination of the total compensation for each of our NEOs.
All exempt U.S. employees, at any U.S. work location, participate in our “As Needed” Flexible Time-Off
(“FTO”) Program providing flexible time off. Under this program, these employees may schedule FTO as they see
fit and as business necessity allows, although they must continue to meet all job expectations and remain
responsible for ensuring appropriate coverage for the time they will be out of the office. Under this program, FTO
does not accrue for these employees. The FTO Program is not available in the UK, and Mr. Walden receives the
standard UK vacation benefits.
From time to time, Infinera may provide other benefits based on the particular circumstances and any
business needs (for example, in order to recruit an individual to join the Company or retain key employees).
In 2023, Infinera agreed to pay up to $238,000 in relocation costs for Mr. Walden, SVP, Worldwide
Sales, in connection with his move to the UK on the basis of our belief that such relocation would strengthen
Infinera’s strategic focus on improving global sales coverage in key markets outside of North America. Please
see footnote 5 to the Summary Compensation Table set forth on page 155 below for the lower total amount of
relocation costs actually paid by Infinera in 2023.
Additional Information Regarding Our Compensation Practices
The estimated payments and benefits that would be received by each NEO in connection with a
qualifying termination of employment, as described immediately below, are presented in the section entitled
“Estimated Payments and Benefits upon Termination, Change of Control or Death/Disability” below.
Change of Control Payments and Benefits
The Compensation Committee considers maintaining a stable and effective management team to be
essential to protecting the best interests of Infinera and its stockholders. Accordingly, Infinera has entered into
Change of Control Agreements (the “COC Agreements”) with each of our NEOs to encourage their continued
attention, dedication and continuity with respect to their roles and responsibilities without the distraction that may
arise from the possibility or occurrence of a change of control of Infinera. The current terms of these COC
Agreements are included below.
An NEO will receive payments and benefits under the COC Agreement only if his or her employment is
terminated without “cause,” or by him or her as a result of a “constructive termination” (as more fully described in
the section entitled “Estimated Payments and Benefits upon Termination, Change of Control or Death/Disability”
below), beginning on the date three months prior to the first change of control to occur following the effective date
of the COC Agreement and ending on the date 18 months following a change of control of Infinera. The
Compensation Committee believes that this “double-trigger” structure provides an appropriate balance between
the corporate objectives described above and the potential compensation payable to each NEO upon a change
of control. The Compensation Committee also believes that should Infinera engage in any discussions or
negotiations relating to a change of control that the Board believes is in the best interests of our stockholders,
these COC Agreements will help to ensure that our NEOs remain focused on the consummation of such potential
transaction, without significant distraction or concern regarding their personal circumstances, such as continued
employment.
151
The following terms apply with respect to each of the NEOs if Infinera undergoes a change of control
and the NEO’s employment is terminated without cause or as a result of a constructive termination during the
Change of Control Period (that is, the period beginning three months prior to, and ending eighteen months after,
a change of control), subject to such individual entering into and not revoking a release of claims in our favor
within 60 days of the termination date:
•
•
•
•
100% of all outstanding equity awards will vest (awards based on the achievement of performance
criteria will vest as to 100% of the amount of the award assuming the performance criteria have
been achieved at target levels, unless otherwise provided in the agreement relating to such
performance-based award);
Our CEO will be paid a lump sum severance payment (less applicable tax withholdings) equal to two
times his annual base salary and our other NEOs will be paid a lump sum severance payment (less
applicable tax withholdings) equal to one and one-half times their annual base salary;
Our CEO will be paid a lump sum severance payment (less applicable tax withholdings) equal to two
times his annual target incentive bonus amount and our other NEOs will be paid a lump sum
severance payment (less applicable tax withholdings) equal to one and one-half times their annual
target incentive bonus amount; and
Our CEO will be reimbursed for premiums under COBRA for a period of up to 24 months and our
other NEOs will be reimbursed for premiums under COBRA for a period of up to 18 months.
Each COC Agreement will have an initial term of three years commencing on the effective date of such
COC Agreement. On the third anniversary of the effective date, such COC Agreement will renew automatically
for an additional, one-year term unless either party provides the other party with written notice of non-renewal at
least one year prior to the date of automatic renewal.
In addition, the award agreements of certain performance share awards granted to our NEOs specify
additional terms that apply to such awards in the event of our change in control. These additional terms are
described below on page 164 in the section titled “Estimated Payments and Benefits Upon Termination, Change
Of Control Or Death/Disability.”
Executive Severance Policy
In addition to the change of control-related payments and benefits discussed above, the Compensation
Committee has taken appropriate steps to provide competitive post-employment compensation arrangements
that promote the continued attention, dedication and continuity of the members of our senior management team,
including our NEOs, and enable us to continue to recruit talented senior executive officers. Accordingly, the
Compensation Committee has adopted an executive severance policy, under which the following severance
payments and benefits will become payable if the employment of one of our NEOs is terminated by us without
“cause” (as defined in the policy) subject to such individual entering into and not revoking a release of claims in
our favor:
•
•
Our CEO will be paid a lump sum severance payment equal to one and one-half times his annual
base salary, and our other NEOs will be paid a lump sum severance payment equal to their annual
base salary; and
Our CEO will be reimbursed for premiums under COBRA for a period of 18 months, and our other
NEOs will be reimbursed for premiums under COBRA for a period of 12 months.
If an NEO’s employment with Infinera is less than one year, the amount of severance payable to such
individual will be equal to the lesser of (x) the base salary paid to such individual during his or her period of
employment, or (y) the severance amount set forth above.
Acceleration of Equity Awards upon Death or Disability
In addition, all awards granted under our equity incentive plans permit accelerated vesting in the event
of termination of service due to an employee’s death or terminal illness (with exceptions in certain
circumstances). Because we do not have any policy with respect to severance payments or benefits in the event
of an employee’s death or disability other than certain disability and life insurance benefits generally available to
our employees, the Compensation Committee believes that in the event of an employee’s death or terminal
illness, it would be appropriate to provide the accelerated vesting of his or her RSU awards and performance
share awards at target.
152
Equity Award Subcommittee
The Compensation Committee has delegated to a subcommittee (the “Subcommittee”) the authority to
grant new hire, retention, promotion and consultant equity awards to non-executive employees pursuant to
certain pre-approved guidelines. At this time, the sole member of the Subcommittee is our CEO.
The Subcommittee generally approves the award by written consent on the second Monday of each
month to approve new hire, retention, promotion and consultant equity awards. Annual focal equity awards are
approved by the Compensation Committee. The delegation to the Subcommittee does not include the authority
to grant equity awards to new employees who are or are reasonably expected to become Section 16 Officers or
to current Section 16 Officers.
Compensation Recovery Policy
We maintain a compensation recovery policy that applies to our Section 16 Officers (which includes
each of our NEOs) and which complies with applicable Nasdaq listing rules and SEC regulations. Under the
policy, if we are required to prepare an accounting restatement due to the material noncompliance of the
Company with any financial reporting requirement under the securities laws, including any required accounting
restatement to correct an error in previously issued financial statements that is material to the previously issued
financial statements, or that would result in a material misstatement if the error were corrected in the current
period or left uncorrected in the current period (an “Accounting Restatement”), then the Compensation
Committee must determine the Excess Compensation, if any, that must be recovered.
This policy applies to certain types of incentive-based compensation received on or after October 2,
2023 during the covered period that have been received by a person after such person became an Executive
Officer and the person served as an Executive Officer at any time during the performance period to which the
incentive-based compensation applies. The “Excess Compensation” that is subject to recovery under the policy
is the amount of eligible incentive-based compensation that exceeds the amount of such incentive-based
compensation that otherwise would have been received had such incentive-based compensation been
determined based on the restated amounts. For the purposes of this policy, “incentive-based compensation”
means any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a
financial reporting measure. For the purposes of the policy, “financial reporting measures” are measures that are
determined and presented in accordance with the accounting principles used in preparing the Company’s
financial statements, and any measures that are derived wholly or in part from such measures, as well as stock
price and total shareholder return. Incentive-based compensation is “received” under the policy in the Company’s
fiscal period during which the financial reporting measure specified in the incentive-based compensation award is
attained, even if the payment, vesting, settlement or grant of such compensation occurs after the end of that
period. Under the policy, the applicable “covered period” means the three completed fiscal years immediately
preceding the earliest to occur of: (a) the date the Board, a committee of the Board, or one or more of the officers
of the Company authorized to take such action if Board action is not required, concludes, or reasonably should
have concluded, that the Company is required to prepare an Accounting Restatement; and (b) the date a court,
regulator, or other legally authorized body directs the Company to prepare an Accounting Restatement.
Stock Ownership Policy
The Board believes that it is important to link the interests of our NEOs to those of our stockholders. Our
Stock Ownership Policy requires our Section 16 Officers (which includes each of our NEOs) and directors to
accumulate and hold a minimum number of shares of Infinera common stock within three years of the later of
(i) the effective date of the policy or (ii) the date of appointment of the director or appointment/promotion of the
Section 16 Officer. As of April 30, 2024, each of our Section 16 Officers and directors has either satisfied these
ownership guidelines or had time remaining to do so. Our stock ownership requirements for our Section 16
Officers and directors are as follows:
Position
CEO
CFO
Other Section 16 Officers and employee directors
Ownership Requirement
4x annual base salary
2x annual base salary
1x annual base salary
Non-employee directors
4x annual cash retainer for annual Board service
Shares of Infinera common stock that count towards satisfaction of this policy include: (i) shares owned
outright by the Section 16 Officer or director or his or her immediate family members residing in the same
153
household and (ii) shares held in trust for the benefit of the Section 16 Officer or director or his or her family. The
value of a share of Infinera common stock is measured on the last trading day of the most recently completed
fiscal quarter as the greater of (i) the closing price on the date of calculation or (ii) the purchase price actually
paid by the person for such share of Infinera common stock. For the avoidance of doubt, the purchase price for
shares of Infinera common stock subject to RSU awards, performance share awards and other similar full value
awards is zero.
Anti-Hedging Policy
Under our Insider Trading Policy, we prohibit our employees, including our NEOs, and Board members
from hedging the risk associated with ownership of shares of Infinera common stock and other securities.
Anti-Pledging Policy
Under our Insider Trading Policy, we prohibit our NEOs and directors from pledging any Infinera
securities as collateral for a loan.
Tax and Accounting Treatment of Compensation
Prior to 2018, Section 162(m) of the Code generally limited the tax deductibility of compensation paid to
the CEO and each of the next three most highly compensated executive officers (excluding the CFO) that
exceeded $1 million in any taxable year unless the compensation over $1 million qualified as “performance-
based” within the meaning of Section 162(m).
The ability to rely on the “performance-based” compensation exception under Section 162(m) was
eliminated in 2017 and the $1 million limitation on deductibility generally was expanded to include any individuals
serving as the CEO or CFO during the tax year, the next three most highly compensated executive officers
during the tax year and any other individual who was considered a covered employee for any prior tax year
beginning after 2016. Thus, we generally will not be able to take a deduction for any compensation paid to our
NEOs in excess of $1 million unless the compensation qualifies for transition relief applicable to certain
arrangements in place on November 2, 2017. We cannot guarantee that any compensation payable to our NEOs
will qualify for the transition relief or that the compensation will ultimately be deductible. Although the
Compensation Committee has not adopted a formal policy regarding tax deductibility of compensation paid to our
CEO and other senior executive officers, the Compensation Committee intends to maintain an approach to
executive compensation that strongly links pay to performance.
We account for the equity compensation awarded to our executive officers and other employees under
ASC 718, which requires us to estimate and record an expense for each award of equity compensation over the
service period of the award. Accounting rules also require us to record cash compensation as an expense at the
time the obligation is incurred.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis
with management. Based on its review and discussions with management, the Compensation Committee has
recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement
and the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023.
Compensation Committee
Sharon E. Holt (Chair)
Gregory P. Dougherty
Paul J. Milbury
The information contained in this report shall not be deemed to be “soliciting material” or “filed” with the
SEC or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that Infinera specifically
requests that the information be treated as soliciting material or incorporates it by reference into a document filed
under the Securities Act of 1933, as amended (“Securities Act”), or the Exchange Act.
154
Executive Compensation Tables
The following tabular information and accompanying narratives and footnotes provide all of the
compensation awarded to, earned by, or paid to the individuals who served as our principal executive officer,
principal financial officer and our two other executive officers during fiscal 2023. As previously noted, we refer to
these executive officers as our NEOs.
Fiscal 2023 Summary Compensation Table
Name and Principal
Position
Year
Salary
($)(1)
Bonus
($)
Stock
Awards
($)(2)(3)
Non-Equity
Incentive Plan
Compensation
($)(4)
All
Other
Compensation
($)(5)
Total
($)
David W. Heard
Chief Executive
Officer
2023
729,000
2022
700,000
—
—
5,137,500
4,855,638
2021
700,000
200,000
3,702,300
Nancy L. Erba
Chief Financial Officer
David L. Teichmann
Chief Legal Officer
and Corporate
Secretary
Nicholas R. Walden
Senior Vice President,
Worldwide Sales
2023
487,500
2022
463,461
2021
439,615
2023
430,000
2022
409,231
2021
2023
2022
395,962
426,103 (6)
416,154
2021
400,577
—
—
—
—
—
—
—
—
—
1,734,300
1,604,875
1,273,419
848,700
1,099,244
1,062,474
959,400
1,154,395
1,009,953
_________________
(1)
Salary data is provided from payroll records based on the fiscal year.
791,163
700,000
—
309,994
342,000
—
278,681
124,500
5,985
6,663,648
5,062
6,260,700
4,665
4,606,965
5,985
2,537,779
5,985
2,416,322
5,986
1,719,020
10,350
1,567,731
10,350
1,643,325
—
11,530
1,469,965
156,326 (7)
250,425
412,082
183,217
1,725,045
4,665
1,825,639
34,665
1,857,277
(2)
(3)
(4)
(5)
(6)
(7)
The amounts reported in this column represent the aggregate grant date fair value of the listed equity awards, computed
in accordance with ASC 718. See Notes 2 and 14 of the notes to our consolidated financial statements contained in this
report for a discussion of all assumptions made by us in determining the ASC 718 values of equity awards.
For grants made in 2023, the stock awards reported in this column were in the amounts set forth in the “Fiscal 2023
Grants of Plan- Based Awards” table below. The fair market value of our common stock (based on the closing sale price)
was $7.38 per share for awards granted on March 9, 2023 and $6.85 per share for awards granted on March 13, 2023.
The grant date fair value of PSAs included in this column assumes a payout at the target performance level. For additional
information, including PSA awards at target and maximum performance on a per executive basis, refer to the “Fiscal 2023
Grants of Plan-Based Awards Table,” below.
Non-equity incentive plan compensation reported for the applicable year was based on performance in that year, but will
be paid during the second fiscal quarter of the following year. For additional information regarding the bonuses paid to our
NEOs, refer to “Fiscal 2023 Compensation—Annual Incentive Compensation” in the Compensation Discussion and
Analysis above.
The amounts in this column represent the payment of life insurance premiums and 401(k) match for each NEO, and for
Mr. Walden, the reimbursement of taxable relocation expenses in the amount of $178,999.
In August 2023, Mr. Walden relocated from the United States to the UK. Following such relocation, Mr. Walden received
his salary in GBP. The salary amount paid to Mr. Walden in GBP was determined by converting into GBP his annual salary
amount determined in USD using the exchange rate of 1.286 USD to 1 GBP. For purposes of calculating the total salary
paid to Mr. Walden in 2023, the portion of his 2023 salary paid in GBP was converted to USD using the same exchange
rate applied upon his relocation.
Represents (i) cash bonus in the amount of $66,564 as a result of Compensation Committee discretion applied under the
2023 Walden Variable Plan to recognize Company performance notwithstanding that the minimum threshold for a bonus
payout under the 2023 Walden Variable Plan was not achieved, plus (ii) the payout of $89,762 being the cash bonus
portion of Mr. Walden’s 2023 annual incentive bonus pursuant to the terms of our 2023 Corporate Bonus Plan. For
additional information on Mr. Walden’s fiscal 2023 bonus payout, please see the section entitled “Annual Incentive
Compensation–2023 Bonus Plan Results” in the Compensation Discussion and Analysis section above.
155
Fiscal 2023 Grants of Plan-Based Awards Table
The following table sets forth information regarding fiscal 2023 annual cash incentive compensation and equity awards granted to our NEOs during
fiscal 2023.
Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards(1)
Estimated Future Payouts
Under Equity
Incentive Plan Awards(2)
Name
David W. Heard
Nancy L. Erba
Grant
Date
Threshold
($)
3/13/2023 758,000
3/9/2023 360,000
David L. Teichmann
3/9/2023 267,000
Nicholas R. Walden
3/9/2023
3/9/2023
86,000 (7)
56,438 (7)
Target
($)
947,500 (4)
450,000 (4)
333,750 (4)
107,500 (4)
322,500 (4)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
— (5)
— (5)
— (5)
(5)
206,250
412,500
618,750
58,750
28,750
32,500
117,500
176,250
57,500
65,000
86,250
97,500
645,000
All Other
Stock
Awards:
Number
of Shares
of Stock or
Units
(#)
337,500 (6)
117,500 (6)
57,500 (6)
65,000 (6)
Grant Date
Fair Value
of Stock
and Option
Awards
($)(3)
5,137,500
1,734,300
848,700
959,400
_________________
(1)
Amounts listed in these columns do not represent amounts actually paid or that may be paid in the future. Rather, these amounts are the target award opportunities that were
established under the Company’s annual incentive compensation plan for 2023 as discussed in the section entitled “Fiscal 2023 Compensation—Annual Incentive
Compensation” in the Compensation Discussion and Analysis section above. Any payments that will be made to the NEOs with respect to these award opportunities during
the second fiscal quarter of 2024 for 2023 performance are listed in the “2023 Summary Compensation Table” above under the “Non-Equity Incentive Plan Compensation”
column for 2023.
(2)
(3)
(4)
(5)
(6)
Each performance share award was granted under the 2016 Plan. The performance shares vest based on the Company’s achievement of a non-GAAP gross margin goal
which can be earned during fiscal 2023 through fiscal 2025. For additional information regarding these performance share awards granted to our NEOs in fiscal 2023, please
see the section entitled “Fiscal 2023 Compensation—Performance Share Awards” in the Compensation Discussion and Analysis above.
Each RSU award was granted under the 2016 Plan. For RSUs, represents the aggregate grant date fair value of each equity award computed in accordance with ASC 718.
For performance shares, represents the aggregate grant date fair value of each equity award at the target payout level computed in accordance with ASC 718. See Notes 2
and 14 of the notes to our consolidated financial statements contained in this report for a discussion of all assumptions made by us in determining the ASC 718 values of
equity awards. The fair market value of our common stock (based on the closing sale price) was $7.38 per share for awards granted on March 9, 2023 and $6.85 per share
for awards granted on March 13, 2023.
Assuming target performance is achieved, our 2023 Corporate Bonus Plan is designed to pay cash bonuses at target.
There is no maximum under our 2023 Corporate Bonus Plan, provided that the Compensation Committee retains authority to increase, reduce or eliminate any bonus award
under such plan.
This RSU award is scheduled to vest over a three-year period, with one-third of the underlying shares vesting on April 5, 2024, and one-twelfth of the underlying shares
vesting quarterly thereafter, subject to each NEO’s continued service to Infinera through each applicable vesting date.
(7) Mr. Walden participated in our 2023 Corporate Bonus Plan with respect to 25% of his total target bonus and in the 2023 Walden Variable Plan with respect to 75% of his total
target bonus. For additional information on Mr. Walden’s fiscal 2023 variable compensation program, please see the section entitled “Fiscal 2023 Compensation – Walden
2023 Variable Compensation Program” in the Compensation Discussion and Analysis section above.
156
Fiscal 2023 Outstanding Equity Awards at Fiscal Year-End Table
The following table sets forth information regarding outstanding RSU awards and performance share
awards held by each of our NEOs as of December 30, 2023. The vesting conditions for each award are set forth
in the footnotes below the table.
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights
That Have Not
Vested
(#)
258,000 (3)
—
346,666 (5)
412,500 (7)
60,000 (3)
—
92,500 (5)
117,500 (7)
50,000 (3)
—
55,000 (5)
57,500 (7)
55,000 (3)
—
64,000 (5)
65,000 (7)
Equity
Incentive Plan
Awards:
Market or
Payout Value
or Unearned
Shares, Units
or Other
Rights
That Have Not
Vested
($)(1)
1,225,500
—
1,646,664
1,959,375
285,000
—
439,375
558,125
237,500
—
261,250
273,125
261,250
—
304,000
308,750
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(1)
136,168
457,406
—
1,603,125
47,500
183,075
—
558,125
39,587
108,856
—
273,125
43,543
126,668
—
308,750
Number of
Shares or
Units of Stock
That Have Not
Vested
(#)
28,667 (2)
96,296 (4)
—
337,500 (6)
10,000 (2)
38,542 (4)
—
117,500 (6)
8,334 (2)
22,917 (4)
—
57,500 (6)
9,167 (2)
26,667 (4)
—
65,000 (6)
Grant
Date
3/9/2021
3/5/2022
3/21/2022
3/13/2023
3/9/2021
3/1/2022
3/21/2022
3/9/2023
3/9/2021
3/1/2022
3/21/2022
3/9/2023
3/9/2021
3/1/2022
3/21/2022
3/9/2023
Name
David W. Heard
Nancy L. Erba
David L. Teichmann
Nicholas R. Walden
_________________
(1)
The market value of unvested and unearned stock awards is based on an assumed price of $4.75 per share, which was
the Nasdaq closing price per share of our common stock on December 29, 2023 (the last trading day of our 2023 fiscal
year end).
(2)
(3)
(4)
This RSU award is scheduled to vest over a three-year period, with one-third of the underlying shares vesting on April 5,
2022, and one-twelfth of the underlying shares vesting quarterly thereafter, subject to the NEO’s continued service to
Infinera through each applicable vesting date.
This performance share award can be earned during fiscal 2021 through fiscal 2023. The first half of the performance
shares (each half, a "tranche”) vests based on the Company’s achievement of both an operating income goal, measured
on a non-GAAP basis over a full fiscal year, and a revenue goal, measured on a GAAP basis over a full fiscal year. The
second tranche of the award vests based on the Company’s achievement of an operating income goal, measured on a
non-GAAP basis over a full fiscal year. For additional information regarding these performance share awards granted to
our NEOs in fiscal 2021, please see the section entitled “Fiscal 2023 Compensation—Performance Share Awards” in the
Compensation Discussion and Analysis above. With respect to achievement of the goals applicable to the first tranche of
the awards, the Compensation Committee certified on May 12, 2024, that 77.06% of the applicable shares vested on such
date. With respect to achievement of the goal applicable to the second tranche of the awards, the Compensation
Committee certified on May 12, 2024, that 62.14% of the applicable shares vested on such date. The shares that did not
vest were forfeited as of such certification date.
This RSU award is scheduled to vest over a three-year period, with one-third of the underlying shares vesting on March 5,
2023, and one-twelfth of the underlying shares vesting quarterly thereafter, subject to the NEO’s continued service to
Infinera through each applicable vesting date.
(5) One-half of the performance shares vest on the Company’s achievement of a GAAP net income goal which can be earned
during fiscal 2023 through fiscal 2024. The other half of the performance shares vest on the Company achieving a target
157
related to gross profit dollars determined in accordance with GAAP generated by revenue from external sales of our
pluggables and by cost savings resulting from use of our pluggables in our products which can be earned during fiscal
2022 through fiscal 2024. For additional information regarding these performance share awards granted to our NEOs in
fiscal 2023, please see the section entitled “Fiscal 2023 Compensation—Performance Share Awards” in the
Compensation Discussion and Analysis above. No performance shares subject to this award vested with respect to the
Company’s performance in fiscal 2023.
This RSU award is scheduled to vest over a three-year period, with one-third of the underlying shares vesting on April 5,
2024, and one-twelfth of the underlying shares vesting quarterly thereafter, subject to the NEO’s continued service to
Infinera through the applicable vesting date.
This performance share award can be earned during fiscal 2023 through fiscal 2025. The performance shares vest on the
Company’s achievement of a gross margin goal, measured on a non-GAAP basis over a full fiscal year. For additional
information regarding these performance share awards granted to our NEOs in fiscal 2023, please see the section entitled
“Fiscal 2023 Compensation—Performance Share Awards” in the Compensation Discussion and Analysis above. No
performance shares subject to this award vested with respect to the Company’s performance in fiscal 2023.
(6)
(7)
Fiscal 2023 Stock Vested Table
The following table sets forth the number of shares acquired and the value realized upon the vesting of
RSU awards and performance share awards during fiscal 2023 by each of our NEOs.
Name
David W. Heard
Nancy L. Erba
David L. Teichmann
Nicholas R. Walden
Number of Shares
Acquired on
Vesting
(#)
Value Realized
on Vesting
($)(1)
285,898
228,017
132,608
66,667
1,654,003
1,160,177
872,043
402,485
_________________
(1)
The value realized on the vesting date is based on the fair market value of our common stock on the vesting date and
does not necessarily reflect the proceeds actually received by the NEO.
2023 CEO Pay Ratio
We are providing the following information regarding the relationship of the annual total compensation of
our median employee to the annual total compensation of our CEO (in each case, the annual total compensation
was calculated in accordance with SEC rules applicable to the Summary Compensation Table above). The pay
ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of
Regulation S-K.
For 2023:
•
•
•
Our median employee’s annual total compensation (not including our CEO) was $134,941.
Our CEO’s annual total compensation, as reported on page 155 in the Summary Compensation
Table, was $6,663,648.
Based on this information, the ratio of the annual total compensation of our CEO to the annual total
compensation of our median employee is 49 to 1.
Pay Ratio Methodology. The SEC rules allow us to select a methodology for identifying our median
employee in a manner that is most appropriate based on our size, organizational structure and compensation
plans, policies and procedures.
For fiscal 2023, we calculated the pay ratio using the same median employee that we used to calculate
the pay ratio in fiscal 2022, as there has been no significant change in our employee population or compensation
arrangements during the fiscal year that we reasonably believe would result in a significant change to our pay
ratio disclosure. In fiscal 2022, we selected December 1, 2022, as the date on which to determine our median
employee, which is a date within the last three months of our 2022 fiscal year. As of that date, we had 3,264
employees, with 1,250 employees based in the United States and 2,014 employees located outside of the United
States. The pay ratio disclosure rules provide an exemption for companies to exclude non-U.S. employees from
the median employee calculation if non-U.S. employees in a particular jurisdiction account for five percent (5%)
158
or less of the company's total number of employees. We applied this de minimis exemption when identifying the
median employee by excluding 23 countries: 13 employees in Taiwan, 12 employees in Netherlands, 12
employees in France, 11 employees in Japan, 10 employees in United Arab Emirates, 10 employees in Spain, 9
employees in Kazakhstan, 8 employees in Saudi Arabia, 8 employees in Colombia, 7 employees in Thailand, 7
employees in Poland, 6 employees in Indonesia, 6 employees in Vietnam, 6 employee in Republic of Korea, 5
employees in Ireland, 5 employees in Egypt, 4 employees in Hungary, 4 employees in Belgium, 3 employees in
Denmark, 2 employees in Greece, 2 employees in Serbia, 1 employee in Norway and 1 employee in Israel.
After taking into account the de minimis exemption, 1,250 employees based in the United States and
1,862 employees located outside of the United States were considered for identifying the median employee.
For purposes of identifying the median employee from our employee population base, we considered
total cash compensation (base salary, including overtime, annual bonus and the sum of other bonuses, which
included retention bonuses), as compiled from our payroll records. We selected total cash compensation as this
information is readily available in each country. In addition, we measured compensation for purposes of
determining the median employee using the year-to-date period ended December 31, 2022, and annualized for
employees (other than any temporary or seasonal employees) who were employed on December 1, 2022, but
did not work for us for all of 2022. Compensation paid in foreign currencies was converted to U.S. dollars based
on exchange rates in effect on December 1, 2022.
The CEO pay ratio reported above is a reasonable estimate, calculated in a manner consistent with
SEC rules, based on the methodologies and assumptions described above. SEC rules for identifying the median
employee and determining the CEO pay ratio permit companies to employ a wide range of methodologies,
estimates, and assumptions. As a result, the CEO pay ratios reported by other companies, which may have
employed other permitted methodologies or assumptions, and which may have a significantly different workforce
structure from ours, might not be comparable to our CEO pay ratio.
159
Pay Versus Performance
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are
providing the following information regarding the relationship between executive compensation actually paid and certain financial performance of the
Company. For further information concerning our pay-for-performance philosophy and how we align executive compensation with the Company’s
performance, refer to “Our Pay–Compensation Discussion and Analysis,” above. Fair value amounts below are computed in accordance with ASC 718. See
Notes 2 and 14 of the notes to our consolidated financial statements contained in this report for a discussion of all assumptions made by us in determining the
ASC 718 values of equity awards.
Pay Versus Performance Table
Summary
Compensation
Table Total for
PEO
($)
Compensation
Actually Paid
to PEO
($)(2)
Summary
Compensation
Table Total for
Second PEO
($)
Compensation
Actually Paid
for Second
PEO
($)(2)
6,663,648
2,991,185
6,260,700
1,963,303
4,606,965
3,073,908
—
—
—
—
—
—
Year(1)
2023
2022
2021
2020
4,139,627
7,316,489
3,787,396
8,713,585
927,392
1,801,224
1,682,087
1,044,985
Value of Initial Fixed
$100
Investment Based on:
Average
Summary
Compensation
Table Total for
Non-PEO
NEOs
($)
1,943,518
1,961,762
Average
Compensation
Actually Paid
to Non-PEO
NEOs
($)(2)
Total
Stockholder
Return
(TSR)
($)(3)
968,440
227,172
61
87
123
141
Peer
Group
TSR
($)(4)
Net
Income
($)(in
thousands)
Non-GAAP
Operating
Income
($)(in
thousands)
91
82
112
110
(25,213)
(76,043)
(170,778)
87,225
68,988
29,586
(206,723)
(6,274)
_________________
(1)
The Principal Executive Officer (“PEO”) and Other NEOs for each applicable year are:
• 2023 - PEO: Mr. Heard. Other NEOs: Ms. Erba, and Messrs. Teichmann and Walden.
• 2022 - PEO: Mr. Heard. Other NEOs: Ms. Erba, and Messrs. Teichmann and Walden.
• 2021 - PEO: Mr. Heard. Other NEOs: Ms. Erba, and Messrs. Teichmann and Walden.
• 2020 - PEOs: Mr. Heard and Tom Fallon. Mr. Fallon transitioned from his position of Chief Executive Officer to Advisor as of November 23, 2020. Mr. Heard is referred to
as the first PEO and Mr. Fallon is referred to as the second PEO in the table above. Other NEOs: Ms. Erba, and Messrs. Teichmann and Walden, and Robert Jandro.
Mr. Jandro resigned from his position of SVP, Worldwide Sales as of January 3, 2020.
(2) SEC rules require certain adjustments be made to the “Summary Compensation Table” totals to determine “compensation actually paid” as reported in the “Pay Versus
Performance” table above. The following table details the applicable adjustments that were made to determine “compensation actually paid.”
160
FY2023
FY2022
FY2021
FY2020
PEO
($)
6,663,648
Average
Other NEO
($)
PEO
($)
1,943,518 6,260,700
Average
Other NEO
($)
1,961,762
PEO
($)
4,606,965
Average
Other NEO
($)
1,682,087
PEO
($)
4,139,627
Second
PEO
($)
3,787,396
Average
Other NEO
($)
927,392
5,137,500
1,180,800 (4,855,638) (1,286,171) (3,702,300) (1,115,282) (3,532,500) (3,239,500)
(596,452)
3,562,500
760,000 3,894,217
1,001,002
4,106,500
1,237,043
5,485,000
6,033,500
1,059,154
(1,824,514)
(405,864) (2,423,828) (1,058,559) (1,614,753)
(713,504) 1,520,786
2,439,280
680,099
—
—
—
—
—
—
—
—
—
(272,949)
(148,414)
(912,149)
(390,862)
(322,504)
(45,359)
(296,424)
(307,091)
(136,708)
—
—
—
—
—
—
—
—
(132,260)
Summary Compensation Table - Total
Compensation
(Deduct) Grant Date Fair Value of Stock Awards
and Option Awards Granted in Fiscal Year
(Increase) Fair Value at Fiscal Year End of
Outstanding and Unvested Stock Awards and
Option Awards Granted in Fiscal Year
(Increase/Deduct) Change in Fair Value of
Outstanding and Unvested Stock Awards and
Option Awards Granted in Prior Fiscal Years
(Increase) Fair Value at Vesting of Stock
Awards and Option Awards Granted in Fiscal
Year that Vested During Fiscal Year
(Increase/Deduct) Change in Fair Value as of
Vesting Date of Stock Awards and Option
Awards Granted in Prior Fiscal Years for which
Applicable Vesting Conditions were Satisfied
During Fiscal Year
(Deduct) Fair Value as of Prior Fiscal Year
End of Stock Awards and Option Awards
Granted in Prior Fiscal Years that Failed to
Meet Applicable Vesting Conditions During
Fiscal Year
Compensation Actually Paid
2,991,185
968,440
1,963,303
227,172
3,073,908
1,044,985
7,316,489
8,713,585
1,801,224
(3) Represents the Company’s common stock cumulative TSR on a fixed investment of $100 over the fiscal year starting from the market close on the last trading day of fiscal
2019 through the end of each applicable fiscal year in the table, assuming reinvestment of any dividends.
(4) Represents the cumulative TSR of the Nasdaq Telecommunications Index, the Company’s peer group for this Pay Versus Performance disclosure, on a fixed investment of
$100 over the fiscal year starting from the market close on the last trading day of fiscal 2019 through the end of each applicable fiscal year in the table. This is the same peer
group the Company uses for its disclosure under Item 201(e) of Regulation S-K.
List of Most Important Performance Measures
The four performance measures listed below represent an unranked list of the most important performance measures for fiscal 2023 the Company
used to align compensation to the Company’s financial performance. While these performance measures are the most important measures in fiscal 2023 the
Company used to align compensation and the Company’s financial performance, additional financial and other measures were also used to align pay and
performance, as further described in the section “Our Pay–Compensation Discussion and Analysis” above.
161
The most important performance measures are:
Key Performance Measures
Non-GAAP Operating Income
Revenue
Pay Versus Performance Relationship Disclosure
Non-GAAP Gross Margin
Bookings
The chart below provides a comparison between the compensation actually paid to each of our first and second PEO (Messrs. Heard and Fallon,
respectively) and our average compensation actually paid to our other NEOs against the Company TSR and the peer group TSR, which was the Nasdaq
Telecommunications Index. As demonstrated below, the trend in NEO compensation has largely been aligned to the trend in TSR.
162
The chart below illustrates the correlation between compensation actually paid to each of our first and
second PEO and average compensation actually paid to our other NEOs against the Company’s GAAP net
income for fiscal years 2020, 2021, 2022 and 2023. Although GAAP net income has increased from fiscal 2020
to fiscal 2023, compensation actually paid to our NEOs has decreased in large part because of the significant
emphasis the Company places on equity incentives, which are sensitive to stock price fluctuations.
The chart below illustrates the correlation between compensation actually paid to each of first and
second PEOs and average compensation actually paid to our other NEOs against the Company’s non-GAAP
Operating Income for fiscal years 2020, 2021, 2022 and 2023. Although non-GAAP Operating Income has
increased from fiscal 2020 to fiscal 2023, compensation actually paid to our NEOs has decreased in large part
because of the significant emphasis the Company places on equity incentives, which are sensitive to stock price
fluctuations.
163
Estimated Payment and Benefits Upon Termination, Change of Control or Death/Disability
Executive Severance Policy
As discussed above in more detail in the section entitled “Compensation Discussion and Analysis –
Additional Information Regarding Our Compensation Practices—Executive Severance Policy,” the Compensation
Committee has taken appropriate steps to provide competitive post-employment compensation arrangements
that promote the continued attention, dedication and continuity of the members of our senior management team,
including our NEOs, and enable us to continue to recruit talented senior executive officers. Infinera shall not pay
severance pursuant to this policy to the individuals subject to this policy in the event of (i) a change of control of
Infinera (as defined below), or (ii) if such individual is terminated for Cause (as defined below).
Death and Disability Benefits
Pursuant to the 2016 Plan, accelerated vesting of RSU awards and performance share awards is
provided in the event of the termination of service due to death (with exceptions in certain circumstances) or
permanent disability of an employee, including our NEOs, as discussed above in the section entitled
“Compensation Discussion and Analysis – Additional Information Regarding Our Compensation Practices—
Acceleration of Equity Awards upon Death or Disability.”
Change of Control Payments and Benefits
As discussed above in more detail in the section entitled “Compensation Discussion and Analysis –
Additional Information Regarding Our Compensation Practices—Change of Control Payments and Benefits,” we
entered into COC Agreements with each of our NEOs to encourage their continued attention, dedication and
continuity with respect to their roles and responsibilities without the distraction that may arise from the possibility
or occurrence of a change of control of Infinera.
164
For purposes of these benefits, the terms below generally have the following meanings:
Change of Control
Constructive Termination
Cause
(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of Infinera representing fifty percent (50%) or more of the total
voting power represented by Infinera’s then outstanding voting securities; (ii) the
consummation of the sale or disposition by Infinera of all or substantially all of Infinera’s
assets; (iii) the consummation of a merger or consolidation of Infinera with any other
corporation, other than a merger or consolidation which would result in the voting securities
of Infinera outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the surviving entity or
its parent) at least fifty percent (50%) of the total voting power represented by the voting
securities of Infinera or such surviving entity or its parent outstanding immediately after
such merger or consolidation; or (iv) a change in the composition of the Board occurring
within a two (2) year period, as a result of which less than a majority of the directors are
Incumbent Directors. “Incumbent Directors” means directors who either (A) are directors of
Infinera as of the date hereof, or (B) are elected, or nominated for election, to the Board
with the affirmative votes of at least a majority of the directors of Infinera at the time of such
election or nomination (but will not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to the election of directors to
Infinera).
The executive officer’s resignation as a result of, and within three (3) months following the
expiration of any company cure period (discussed below) following the occurrence of one or
more of the following: (i) a material reduction in the executive officer’s job, duties or
responsibilities in a manner that is substantially inconsistent with the position, duties or
responsibilities held by the executive officer immediately before such reduction; (ii) a
material reduction in the executive officer’s base salary (in other words, a reduction of more
than five percent of executive’s base salary within the twelve-month period following a
Change of Control); or (iii) a material change in the work location at which the executive
officer is required to perform services for Infinera (in other words, a requirement that the
executive officer relocate to a work location that is more than 50 miles from the executive’s
work location in effect as of the date immediately prior to a Change in Control). The
executive officer will not resign as the result of a Constructive Termination without first
providing Infinera with written notice of the acts or omissions constituting the grounds for
“Constructive Termination” within ninety (90) days of the initial existence of the grounds for
“Constructive Termination” and a cure period of thirty (30) days following the date of such
notice.
(i) The executive officer’s willful failure to substantially perform his or her duties and
responsibilities to Infinera or deliberate violation of a company policy; (ii) the executive
officer’s commission of any act of fraud, embezzlement, dishonesty or any other willful
misconduct that has caused or is reasonably expected to result in material injury to Infinera;
(iii) unauthorized use or disclosure by the executive officer of any proprietary information or
trade secrets of Infinera or any other party to whom the executive officer owes an obligation
of nondisclosure as a result of his or her relationship with Infinera; or (iv) the executive
officer’s willful breach of any of his or her obligations under any written agreement or
covenant with Infinera. The determination as to whether the executive officer is being
terminated for Cause will be made in good faith by Infinera and will be final and binding on
the executive officer.
Additionally, we granted performance share awards in 2023 to our NEOs, as described further above in
the section titled “Performance Share Awards” (referred to as the “2023 PSAs”), as well as performance share
awards in 2022 (referred to as the “2022 PSAs”) and 2021 (referred to as the “2021 PSAs”) to each of our NEOs.
The performance period for the 2023 PSAs continues through the end of fiscal 2025. The performance period for
the 2022 PSAs continues through the end of fiscal 2024. The performance period for the 2021 PSAs continued
through the end of fiscal 2023.
The 2023 PSAs, 2022 PSAs and 2021 PSAs provide that, in the event of our change in control (as
defined in the 2016 Plan, pursuant to which each of such awards were granted) that occurs during the
performance period applicable to the performance share award, such award will vest at the target level. Under
our 2016 Plan, change in control generally means (i) a person (or more than one person acting as a group)
acquires ownership of our shares resulting in their holding more than 50% of the total voting power of our shares
(with certain exceptions where a person or group of persons that already holds more than 50% of the total voting
power of our shares acquires additional shares, or where our stockholders after such transaction retain beneficial
165
ownership of 50% or more of the voting power of our shares in substantially the same proportions); (ii) a change
in our effective control that occurs when a majority of our Board members are replaced in a 12-month period by
directors whose appointment or election is not endorsed by a majority of our Board members before the date of
appointment or election; or (iii) a change in ownership of a substantial portion of our assets, which occurs when a
person (or group of persons acting as a group) acquires our assets having a gross fair market value of at least
50% of the total gross fair market value of all of our assets.
Fiscal 2023 Estimated Payments and Benefits Table
The amount of compensation and benefits payable to each of our NEOs (as of the last day of fiscal
2023 and assuming that no portion of the 2021 PSAs had vested or been forfeited) in the event of (a) a
termination of employment by Infinera, (b) a termination of employment without Cause or as a result of a
Constructive Termination in connection with a Change of Control transaction (as described above) within 3
months prior to, through 18 months after, a Change of Control, (c) a termination of employment due to death or
permanent disability, or (d) a Change in Control transaction (within the meaning of our 2016 Plan as described
above) has been estimated in the table below.
Name
Type of Benefit
David W. Heard
Cash Severance
Bonus
Vesting Acceleration(1)(2)(3)
Continued Coverage of
Employee Benefits
Termination
Under
Severance
Policy
($)
1,137,000
—
—
Termination
After a
Change
of Control
($)
Termination
Upon Death
or
Disability
($)
Upon
Change of
Control
($)
1,516,000
1,895,000
7,028,238
—
—
—
—
7,028,238
4,831,539
43,831
58,442
—
—
Total Benefits
1,180,831
10,497,680
7,028,238
4,831,539
Nancy L. Erba
Cash Severance
Bonus
Vesting Acceleration(1)(4)(5)
Continued Coverage of
Employee Benefits
Total Benefits
David L. Teichmann
Cash Severance
Bonus
Vesting Acceleration(1)(6)(7)
Continued Coverage of
Employee Benefits
Total Benefits
Nicholas R. Walden
Cash Severance
Bonus
Vesting Acceleration(1)(8)(9)
Continued Coverage of
Employee Benefits
500,000
—
—
16,772
516,772
445,000
—
—
24,446
469,446
430,000
—
—
750,000
675,000
—
—
—
—
2,071,200
2,071,200
1,282,500
25,158
—
—
3,521,358
2,071,200
1,282,500
667,500
500,625
—
—
—
—
1,193,442
1,193,442
771,875
36,669
—
—
2,398,236
1,193,442
771,875
645,000
645,000
—
—
—
—
1,352,962
1,352,962
874,000
3,700
5,549
—
—
Total Benefits
433,700
2,648,511
1,352,962
874,000
_________________
(1)
The value of accelerated vesting of equity awards is calculated by (i) multiplying the number of accelerated shares of
common stock underlying unvested, in-the-money equity awards by $4.75 per share, which was the Nasdaq closing price
per share of our common stock on December 29, 2023 (the last trading day of our 2023 fiscal year end).
(2)
The vesting of 1,479,629 shares of common stock would accelerate if Mr. Heard was terminated (a) without Cause or
(b) as a result of a Constructive Termination within 3 months prior to, through 18 months after, a Change of Control, or
upon death or permanent disability as of December 30, 2023. The 1,479,629 shares of common stock that accelerate in
166
(3)
(4)
(5)
(6)
(7)
(8)
(9)
these scenarios include, and are not in addition to, the 1,017,166 target number of unvested shares of common stock
subject to the 2021 PSAs, 2022 PSAs and 2023 PSAs.
1,017,166 shares of common stock, representing the target number of unvested shares subject to the 2021 PSAs, 2022
PSAs and 2023 PSAs, would vest upon a Change in Control, assuming such Change in Control occurs during the award’s
performance period.
The vesting of 436,042 shares of common stock would accelerate if Ms. Erba was terminated (a) without Cause or (b) as
a result of a Constructive Termination within 3 months prior to, through 18 months after, a Change of Control, or upon
death or permanent disability as of December 30, 2023. The 436,042 shares of common stock that accelerate in these
scenarios include, and are not in addition to, the 270,000 target number of unvested shares of common stock subject to
the 2021 PSAs, 2022 PSAs and 2023 PSAs.
270,000 shares of common stock, representing the target number of unvested shares subject to the 2021 PSAs, 2022
PSAs and 2023 PSAs, would vest upon a Change in Control, assuming such Change in Control occurs during the award’s
performance period.
The vesting of 251,251 shares of common stock would accelerate if Mr. Teichmann was terminated (a) without Cause or
(b) as a result of a Constructive Termination within 3 months prior to, through 18 months after, a Change of Control, or
upon death or permanent disability as of December 30, 2023. The 251,251 shares of common stock that accelerate in
these scenarios include, and are not in addition to, the 162,500 target number of unvested shares of common stock
subject to the 2021 PSAs, 2022 PSAs and 2023 PSAs.
162,500 shares of common stock, representing the target number of unvested shares subject to the 2021 PSAs, 2022
PSAs and 2023 PSAs, would vest upon a Change in Control, assuming such Change in Control occurs during the award’s
performance period.
The vesting of 284,834 shares of common stock would accelerate if Mr. Walden was terminated (a) without Cause or
(b) as a result of a Constructive Termination within 3 months prior to, through 18 months after, a Change of Control, or
upon death or permanent disability as of December 30, 2023. The 284,834 shares of common stock that accelerate in
these scenarios include, and are not in addition to, the 184,000 target number of unvested shares of common stock
subject to the 2021 PSAs, 2022 PSAs and 2023 PSAs.
184,000 shares of common stock, representing the target number of unvested shares subject to the 2021 PSAs, 2022
PSAs and 2023 PSAs, would vest upon a Change in Control, assuming such Change in Control occurs during the award’s
performance period.
Risk Assessment of Compensation Practices
At the request of the Compensation Committee, a review of the risks associated with our organization-
wide compensation policies and practices was conducted for fiscal 2023. This assessment covered topics
including: our compensation policies and practices; a review of each of the compensation vehicles that we
employ; the identification of any compensation design features that could encourage excessive risk taking; and
the controls, policies and plan features that mitigate our compensation risk.
Although all compensation programs were considered, particular attention was paid to incentive-based
plans and arrangements involving variable payouts, where an employee might be able to influence payout factors
and compensation plans and arrangements involving our executive team. The review found that, because our
incentive programs are based primarily on financial objectives important to Infinera, we avoid an over-emphasis
on shorter-term financial goals. In addition, the financial objectives used to determine the performance measures
for our incentive-based compensation plans and arrangements were found to be substantially derived from our
annual operating plan, which is approved by the Board.
In addition, the assessment considered our controls and other mitigating factors that serve to offset
elements of our compensation policies and practices that may introduce or encourage risk-taking. Those
elements include the Compensation Committee’s ability to use discretion to adjust payouts on most awards;
strong stock ownership requirements and a compensation recovery policy for our Section 16 Officers; the
existence of, and training related to, corporate standards of business conduct and ethics; effective internal
controls over financial reporting; and the participation by Mr. Walden in his variable compensation program,
which enables a level of independence in establishing the sales commission plan design and quotas for our
global sales team.
This risk assessment was presented to and reviewed by the Compensation Committee. The
Compensation Committee agreed with the result of the review, which concluded that the risks associated with our
compensation policies and practices were being effectively managed. We have determined that the risks
167
associated with our compensation policies and practices are not reasonably likely to result in a material adverse
effect on Infinera.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Equity compensation Plan Information
The following table provides information as of December 30, 2023 with respect to the shares of our
common stock that may be issued under our existing equity compensation plans
Plan Category
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights
Equity compensation plans approved by security holders
15,189,297 (1)
Equity compensation plans not approved by security holders
$
—
Total
15,189,297
________________
(1)
This amount includes the following:
Weighted
Average
Exercise
Price of
Outstanding
Options,
Warrants
and Rights
N/A
N/A
Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans (Excluding
Securities
Reflected in
First Column)
11,163,150 (2)
360,638
11,523,788
•
•
11,537,197 shares subject to RSUs granted under the 2016 Plan. Since these awards have no exercise price, they
are not included in the weighted average exercise price calculation in the second column; and
3,652,100 shares issuable pursuant to outstanding unvested performance share awards assuming target
performance under such awards. The number of shares, if any, to be issued pursuant to such outstanding awards
will be determined based on certain performance metrics, as discussed above in the section entitled “Fiscal 2023
Compensation—Long-Term Incentive Compensation” in the Compensation Discussion and Analysis. Since these
awards have no exercise price, they are not included in the weighted average exercise price calculation in the
second column.
(2)
This amount includes 1,098,245 shares of common stock available for future issuances under the 2007 ESPP.
Security Ownership of certain Beneficial Owners and Management
The following table sets forth certain information known to us regarding beneficial ownership of our
common stock as of April 30, 2024 by:
•
•
•
•
Each person known by us to be the beneficial owner of more than 5% of any class of our voting
securities;
Our NEOs;
Each of our directors; and
All current executive officers and directors as a group.
168
The information provided in this table is based on our records, information filed with the SEC and
information provided to Infinera, except where otherwise noted. To our knowledge and unless as otherwise
indicated, each stockholder possesses sole voting and investment power over the shares listed, except for
shares owned jointly with such person’s spouse. Percentage beneficially owned is based on 233,974,025 shares
of common stock outstanding on April 30, 2024. Unless otherwise indicated, the principal address of each of the
stockholders below is c/o Infinera Corporation, 6373 San Ignacio Avenue, San Jose, California 95119.
Name of Beneficial Owner
5% or More Stockholders
FMR LLC(2)
Oaktree Optical Holdings, L.P.(3)
The Vanguard Group(4)
Shapiro Capital Management LLC(5)
BlackRock, Inc.(6)
Brown Advisory Incorporated(7)
Named Executive Officers and Directors
David W. Heard
Nancy L. Erba
David L. Teichmann
Nicholas R. Walden
Christine B. Bucklin
Gregory P. Dougherty
Sharon E. Holt
Roop K. Lakkaraju
Paul J. Milbury
Amy H. Rice
George A. Riedel
David F. Welch, Ph.D.(8)
All Executive Officers and Directors as a
Group (12 Persons)
_________________
Common
Shares
Currently
Held
34,038,565
25,175,384
24,750,346
18,767,200
17,754,504
14,820,495
917,000
525,441
272,740
129,082
95,572
177,174
192,727
48,229
153,484
—
128,572
403,982
Common Shares
That May Be
Acquired
Within 60 Days of
April 30, 2024
—
—
—
—
—
—
19,259
7,708
4,583
5,333
39,447
39,447
39,447
39,447
39,447
—
39,447
8,333
Total
Beneficial
Ownership
Percent
Beneficially
Owned(1)
34,038,565
25,175,384
24,750,346
18,767,200
17,754,504
14,820,495
14.55 %
10.76 %
10.58 %
8.02 %
7.59 %
6.33 %
936,259
533,149
277,323
134,415
135,019
216,621
232,174
87,676
192,931
—
168,019
412,315
*
*
*
*
*
*
*
*
*
*
*
*
3,044,003
281,898
3,325,901
1.42 %
*
(1)
(2)
(3)
Less than 1% of the outstanding shares of common stock.
Includes shares represented by RSUs or other rights that are expected to vest within 60 days of April 30, 2024. These
shares are deemed to be outstanding for the purpose of computing the percentage ownership of the person holding the
RSUs but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
According to a Schedule 13G/A filed with the SEC on February 9, 2024 by FMR LLC (“FMR”), Abigail P. Johnson (FMR’s
Director, Chair and CEO) and Fidelity Growth Company Fund Commingled Pool (“Fidelity”). Such amendment states that
FMR is deemed to be the beneficial owner of 34,038,565 shares by virtue of its control over Fidelity, which is deemed to
be the beneficial owner of 15,290,064 shares. Such amendment further states that (a) FMR has sole voting power over
34,037,308 shares, shared voting power over zero shares, sole dispositive power over 34,038,565 shares, and shared
dispositive power over zero shares; and (b) Ms. Johnson has sole voting power over zero shares, shared voting power
over zero shares, sole dispositive power over 34,038,565 shares, and shared dispositive power over zero shares. The
address of FMR is 245 Summer Street, Boston, Massachusetts 02210.
According to Forms 4 filed on March 18, 2020 and March 23, 2020 and a Schedule 13D/A filed with the SEC on March 2,
2023 jointly, pursuant to a joint filing agreement, by (i) Oaktree Optical Holdings, L.P., a Delaware limited partnership
(“Optical”), whose principal business is to invest in securities; (ii) Oaktree Fund GP, LLC, a Delaware limited liability
company (“GP LLC”), whose principal business is to serve as and perform the functions of the general partner of certain
investment funds including Optical; (iii) Oaktree Fund GP I, L.P., a Delaware limited partnership (“GP I”), whose principal
169
business is (A) serve as, and perform the functions of, the general partner of certain investment funds or to serve as, and
perform the functions of, the managing member of the general partner of certain investment funds or (B) to act as the sole
stockholder of certain controlling entities of certain investment funds; (iv) Oaktree Capital I, L.P., a Delaware limited
partnership (“Capital I”), whose principal business is to serve as, and perform the functions of, the general partner of GP I;
(v) OCM Holdings I, LLC, a Delaware limited liability company (“Holdings I”), whose principal business is to serve as, and
perform the functions of, the general partner of Capital I and to hold limited partnership interests in Capital I; (vi) Oaktree
Holdings, LLC, a Delaware limited liability company (“Holdings”), whose principal business is to serve as, and perform the
functions of, the managing member of Holdings I; (vii) Oaktree Capital Group, LLC, a Delaware limited liability company
(“OCG”), whose principal business is to act as the holding company and controlling entity of each of the general partner
and investment adviser of certain investment funds and separately managed accounts; (viii) Oaktree Capital Group
Holdings GP, LLC, a Delaware limited liability company (“OCGH GP”); (ix) Brookfield Corporation, solely in its capacity as
the indirect owner of the Class A units of OCG (“Brookfield”); and (x) BAM Partners Trust, solely in its capacity as the sole
owner of Class B Limited Voting Shares of Brookfield (“BAM” and together with Optical, GP LLC, GP I, Capital I, Holdings
I, Holdings, OCG, OCGH GP and Brookfield, collectively, the “Reporting Persons”), whose principal business is to serve
as, and perform the functions of, the manager of OCG, each of the Reporting Persons may be deemed the beneficial
owner of, and to have sole voting power and sole dispositive power over, 25,175,384 shares. The principal business
address of each of the Reporting Persons is c/o Oaktree Capital Group Holdings GP, LLC, 333 South Grand Avenue, 28th
Floor, Los Angeles, California 90071.
According to a Schedule 13G/A filed with the SEC on February 13, 2024 by The Vanguard Group (“Vanguard”), Vanguard
is the beneficial owner of 24,750,346 shares and has sole voting power over zero shares, shared voting power over
365,147 shares, sole dispositive power over 24,209,540 shares and shared dispositive power over 540,806 shares. The
address of Vanguard is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355.
According to a Schedule 13G filed with the SEC on February 14, 2024 by Shapiro Capital Management LLC (“Shapiro”).
Shapiro is the beneficial owner of 18,767,200 shares and has sole voting power over 16,648,638 shares, shared voting
power over 2,118,562 shares, sole dispositive power over 18,767,200 shares and shared dispositive power over zero
shares. The address of Shapiro is 3060 Peachtree Road, Suite 1555 N.W., Atlanta, Georgia 30305.
According to a Schedule 13G/A filed with the SEC on January 26, 2024 by BlackRock, Inc. (“BlackRock”). BlackRock is
the beneficial owner of 17,754,504 shares and has sole voting power over 17,537,634 shares, shared voting power over
zero shares, sole dispositive power over 17,754,504 shares and shared dispositive power over zero shares. The address
of BlackRock is 50 Hudson Yards, New York, NY 10001.
According to a Schedule 13G/A filed with the SEC on February 9, 2024 jointly by Brown Advisory Incorporated, a Maryland
corporation whose principal business is as parent holding company or control person (“BAI”), Brown Investment Advisory
& Trust Company, a Maryland trust company, whose principal business is banking (“BIATC”), and Brown Advisory LLC, a
Maryland limited liability company whose principal business is as an investment advisor (“BALLC”). Such amendment
states that BAI is deemed to be the beneficial owner of 14,820,495 shares by virtue of its control over BIATC, which is
deemed to be the beneficial owner of 74,834 shares, and BALLC, which is deemed to be the beneficial owner of
14,745,661 shares. Such amendment further states that (a) BAI has sole voting power over 12,903,329 shares, shared
voting power over zero shares, sole dispositive power over zero shares, and shared dispositive power over 14,820,495
shares; (b) BIATC has sole voting power over 74,834 shares, shared voting power over zero shares, sole dispositive
power over zero shares, and shared dispositive power over 74,834 shares, and (c) BALLC has sole voting power over
12,828,495 shares, shared voting power over zero shares, sole dispositive power over zero shares, and shared
dispositive power over 14,745,661 shares. The address of BAI is 901 South Bond Street, Suite #400, Baltimore, Maryland
21231.
Shares held consist of (i) 401,482 shares held by The Welch Family Trust U/A DTD 4/3/1996 and (ii) 2,500 shares held by
Dr. Welch as trustee for his children. Dr. Welch disclaims beneficial ownership of the shares held in trust for his children.
(4)
(5)
(6)
(7)
(8)
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Certain Relationships and Related Party Transactions
We have adopted a formal policy that our executive officers, directors, and principal stockholders,
including their immediate family members and affiliates, are not permitted to enter into a related party transaction
with us without the prior consent of the Audit Committee, or other independent members of the Board in the case
it is inappropriate for the Audit Committee to review such transaction due to a conflict of interest. Any request for
us to enter into a transaction with an executive officer, director, principal stockholder, or any of such persons’
immediate family members or affiliates, in which the amount involved exceeds $120,000 must first be presented
to the Audit Committee for review, consideration and approval. All of our directors, executive officers and
employees are required to report to the Audit Committee any such related party transaction. In approving or
rejecting the proposed agreement, the Audit Committee shall consider the relevant facts and circumstances
available and deemed relevant to the Audit Committee, including, but not limited to the risks, costs and benefits
to us, the terms of the transaction, the availability of other sources for comparable services or products, and, if
applicable, the impact on a director’s independence. The Audit Committee shall approve only those agreements
170
that, in light of known circumstances, are, or are not inconsistent with, our best interests, as the Audit Committee
determines in the good faith exercise of its discretion.
For a description of compensation received by Dr. Welch, our founder and an employee member of our
Board, please see “How We Are Paid—Fiscal 2023 Director Compensation,” above.
We did not engage in any other related party transactions during fiscal 2023 within the meaning of the
applicable SEC rules.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
Independent Registered Public Accounting Firm’s Fees
The following table sets forth the aggregate fees for audit, audit-related, tax and other services provided
by Ernst & Young LLP for the fiscal years ended December 30, 2023 and December 31, 2022. All of the services
described in the following table were approved in conformity with the Audit Committee’s pre-approval processes
and procedures.
Audit Fees
Audit-Related Fees
Tax Fees
All Other Fees
Total Fees
Audit Fees
2023
6,545,000 $
75,000
70,000
2,000
6,692,000 $
2022
4,785,000
—
321,000
2,000
5,108,000
$
$
This category includes Ernst & Young LLP’s audit of our annual financial statements and internal control
over financial reporting, review of financial statements included in our Quarterly Reports on Form 10-Q, and
services that are typically provided by the independent registered public accounting firm in connection with
statutory and regulatory filings or engagements for those fiscal years. This category also includes statutory audits
required by non-U.S. jurisdictions, consultation and advice on new accounting pronouncements, and technical
advice on various accounting matters related to the consolidated financial statements or statutory financial
statements that are required to be filed by non-U.S. jurisdictions, comfort letters, and consents issued in
connection with SEC filings. Fiscal 2023 fees were higher than fiscal 2022 fees primarily due to the additional
audit procedures required in connection with Ernst & Young LLP’s audit of our consolidated financial statements
for the fiscal year ended December 31, 2022 and the material weaknesses in internal control over financial
reporting described in Part II, Item 9A, "Controls and Procedures" of this report.
Audit-Related Fees
This category consists of assurance and related services provided by Ernst & Young LLP that are
reasonably related to the performance of the audit or review of our financial statements and are not included in
the fees reported in the table above under “Audit Fees.”
Tax Fees
This category includes fees for tax compliance, tax advice, tax planning and transfer pricing.
All Other Fees
This category consists of any permitted services provided by Ernst & Young LLP that are not included in
the category descriptions under “Audit Fees,” “Audit-Related Fees” or “Tax Fees” in the table above, and
principally includes non-audit services, including permissible business and advisory consulting services.
Auditor Independence
In 2023, there were no other professional services provided by Ernst & Young LLP, other than those
listed above, that would have required our Audit Committee to consider their compatibility with maintaining the
independence of Ernst & Young LLP.
Pre-Approval Policies and Procedures
The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services rendered by
Ernst & Young LLP, our independent registered public accounting firm. The Audit Committee can pre-approve
specified services in defined categories of audit services, audit-related services and tax services up to specified
171
amounts, as part of the Audit Committee’s approval of the scope of the engagement of Ernst & Young LLP or on
an individual case-by-case basis before Ernst & Young LLP is engaged to provide a service. The Audit
Committee has determined that the rendering of the services other than audit services by Ernst & Young LLP is
compatible with maintaining the principal accountant’s independence.
172
PART IV
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) Consolidated Financial Statements
This Annual Report on Form 10-K contains the following financial statements which appear under Part
II, Item 8 of this Form 10-K on the pages noted below:
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statement of Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedule
Schedule II: Valuation and Qualifying Accounts
Deferred tax asset, valuation allowance
Beginning balance
Additions
Reductions
Ending balance
Allowance for credit losses
Beginning balance
Additions
Write-offs
Recoveries during the period
Ending balance
Page
71
76
77
78
79
80
82
Years Ended
December 30,
2023
December 31,
2022
December 25,
2021
(In thousands)
$
548,257 $
521,620 $
531,923
49,481
41,782
14,395
(20,740)
(15,145)
(24,698)
576,998 $
548,257 $
521,620
1,422 $
1,304 $
521
(473)
(594)
1,762
(1,279)
(365)
$
876 $
1,422 $
2,912
1,139
(2,430)
(317)
1,304
$
$
Schedules not listed above have been omitted because the information required to be set forth therein
is not applicable or is shown in the consolidated financial statements or notes thereto.
(a)(3) Exhibits.
See Index to Exhibits. The Exhibits listed in the accompanying Index to Exhibits are filed or incorporated
by reference as part of this Annual Report on Form 10-K.
ITEM 16.
FORM 10-K SUMMARY
None.
173
INDEX TO EXHIBITS
Exhibit No.
2.1
Description
Unit Purchase Agreement by and among Infinera Corporation, Coriant Investor LLC and Oaktree
Optical Holdings, L.P., dated July 23, 2018, incorporated by reference to Exhibit 2.1 of the
Registrant’s Current Report on Form 8-K/A (No. 001-33486), filed with the SEC on July 27, 2018.
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
10.1*
10.2*
10.3*
10.4*
10.5*
Amended and Restated Certificate of Incorporation, incorporated herein by reference to Exhibit
3.1 of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on
June 12, 2007.
Amended and Restated Bylaws, incorporated herein by reference to Exhibit 3.1 of the
Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on December 9,
2022.
Form of Common Stock Certificate, incorporated herein by reference to Exhibit 4.1 of the
Registrant’s Form S-1/A (No. 333-140876), filed with the SEC on April 27, 2007.
Base Indenture, dated as of September 11, 2018, by and between Infinera Corporation and U.S.
Bank National Association, incorporated herein by reference to Exhibit 4.1 of the Registrant’s
Current Report on Form 8-K (No. 001-33486), filed with the SEC on September 12, 2018.
First Supplemental Indenture, dated as of September 11, 2018, by and between Infinera
Corporation and U.S. Bank Trust Company, National Association (as successor in interest to
U.S. Bank National Association), incorporated herein by reference to Exhibit 4.2 of the
Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on September 12,
2018.
Form of 2.125% Convertible Senior Notes due 2024 (included in Exhibit 4.3 incorporated by
reference hereto).
Indenture, dated March 9, 2020, by and between Infinera Corporation and U.S. Bank Trust
Company, National Association (as successor in interest to U.S. Bank National Association),
incorporated herein by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K
(No. 001-33486), filed with the SEC on March 9, 2020
Form of 2.50% Convertible Senior Notes due 2027 (included in Exhibit 4.5 incorporated by
reference hereto)
Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities
Exchange Act of 1934, incorporated herein by reference to Exhibit 4.5 of the Registrant's Annual
Report on Form 10-K (No. 001-33486) filed with the SEC on March 4, 2020.
Form of Indenture, incorporated herein by reference to Exhibit 4.2 of the Registrant's Form S-3
Registration Statement (No. 333-244741) filed with the SEC on August 12, 2020.
Indenture, dated August 8, 2022, by and between Infinera Corporation and U.S. Bank Trust
Company, National Association, incorporated herein by reference to Exhibit 4.1 of the
Registrant’s Current Report on Form 8-K (No. 00133486) filed with the SEC on August 8, 2022.
Form of 3.75% Convertible Senior Notes due 2028 (included in Exhibit 4.9 incorporated by
reference hereto).
Form of Registration Rights Agreement, incorporated herein by reference to Exhibit 4.3 of the
Registrant’s Current Report on Form 8-K (No. 001-33486) filed with the SEC on June 16, 2023.
Form of Indemnification Agreement between Registrant and each of its directors and executive
officers, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Form S-1
(No. 333-140876), filed with the SEC on February 26, 2007.
2007 Equity Incentive Plan, incorporated herein by reference to Exhibit 10.3 of the Registrant’s
Annual Report on Form 10-K (No. 001-33486), filed with the SEC on February 18, 2015.
Infinera Corporation Amended and Restated 2007 Employee Stock Purchase Plan, incorporated
herein by reference to Exhibit 10.3 of the Registrant's Annual Report on Form 10-K (No.
001-33486) filed with the SEC on March 4, 2020.
Form of 2007 Employee Stock Purchase Plan Global Subscription Agreement, incorporated
herein by reference to Exhibit 10.4 of the Registrant's Annual Report on Form 10-K (No.
001-33486) filed with the SEC on March 4, 2020.
Bonus Plan, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report
on 8-K (No. 001-33486), filed with the SEC on February 14, 2011.
174
Exhibit No.
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
10.13*
10.14*
10.15
10.16
10.17
10.18*
10.19*
10.20*
10.21*
10.22*
10.23*
Description
Form of Section 16 Officer Notice of Grant of Restricted Stock Units under the 2007 Equity
Incentive Plan, incorporated herein by reference to Exhibit 10.7 of the Registrant’s Annual
Report on Form 10-K (No. 001-33486), filed with the SEC on February 18, 2015.
Form of Notice of Grant of Stock Option under the 2007 Equity Incentive Plan, incorporated
herein by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q
(No. 001-33486), filed with the SEC on May 5, 2010.
Form of Chief Executive Officer Amended and Restated Change of Control Severance
Agreement, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report
on Form 8-K (No. 001-33486), filed with the SEC on February 22, 2018.
Form of Section 16 Officer Amended and Restated Change of Control Severance Agreement,
incorporated herein by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K
(No. 001-33486), filed with the SEC on February 22, 2018.
Executive Severance Policy, incorporated herein by reference to Exhibit 10.19 of the Registrant’s
Annual Report on Form 10-K (No. 001-33486), filed with the SEC on February 18, 2015.
Infinera Corporation Amended and Restated 2016 Equity Incentive Plan, incorporated herein by
reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed
with the SEC on May 18, 2023.
Form of Notice of Grant of Restricted Stock Units under the Amended and Restated 2016 Equity
Incentive Plan.
Form of Notice of Grant of Restricted Stock Units for Directors under the Amended and Restated
2016 Equity Incentive Plan.
Form of Notice of Grant of Performance Shares under the Amended and Restated 2016 Equity
Incentive Plan.
Underwriting Agreement, dated as of September 6, 2018, by and between Infinera Corporation
and Morgan Stanley & Co. LLC, as manager of the underwriter named therein, incorporated
herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (No.
001-33486), filed with the SEC on September 12, 2018.
Form of Capped Call Confirmation, incorporated herein by reference to Exhibit 10.2 of the
Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on September 12,
2018.
First Amendment to Unit Purchase Agreement, dated as of March 4, 2019, by and among
Infinera Corporation, Coriant Investor LLC and Oaktree Optical Holdings, L.P., incorporated
herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (No.
001-33486), filed with the SEC on March 4, 2019.
Offer Letter between Infinera Corporation and David L. Teichmann dated March 18, 2019,
incorporated herein by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-
Q (No. 001-33486), filed with the SEC on August 8, 2019.
Offer Letter between Infinera Corporation and Nancy Erba dated July 8, 2019, incorporated
herein by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q (No.
001-33486), filed with the SEC on November 12, 2019.
Infinera Corporation 2019 Inducement Equity Incentive Plan, incorporated herein by reference to
Exhibit 4.1 of the Registrant’s Registration Statement on Form S-8 (No. 333-233150), filed with
the SEC on August 8, 2019.
Form of Notice of Grant of Restricted Stock Units (Inducement Plan), incorporated herein by
reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-8 (No.
333-233150), filed with the SEC on August 8, 2019.
Form of Notice of Grant of Performance Shares (Inducement Plan), incorporated herein by
reference to Exhibit 4.3 of the Registrant’s Registration Statement on Form S-8 (No.
333-233150), filed with the SEC on August 8, 2019.
Employment Agreement between Infinera Limited and Nicholas Walden dated May 31, 2023,
incorporated herein by reference to Exhibit 10.5 of the Registrant’s Quarterly Report on Form 10-
Q (No. 001-33486), filed with the SEC on August 9, 2023
175
Exhibit No.
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
19.1
21.1
23.1
24.1
31.1
31.2
32.1**
32.2**
Description
Purchase Agreement, dated March 4, 2020, by and between Infinera Corporation and Goldman
Sachs & Co. LLC, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current
Report on Form 8-K (No. 001-33486), filed with the SEC on March 9, 2020
Letter agreement, dated as of April 13, 2020, among Infinera Corporation, Oaktree Optical
Holdings, L.P. and certain other parties, incorporated herein by reference to Exhibit 10.1 of the
Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on April 14, 2020
Loan, Guaranty and Security Agreement, dated as of June 24, 2022, by and among Infinera
Corporation, the other obligors party thereto, the lenders party thereto, and Bank of America,
N.A. as agent, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current
Report on Form 8-K (No. 001-33486), filed with the SEC on June 27, 2022.
First Amendment to Loan, Guaranty and Security Agreement, dated as of August 2, 2022,
among Infinera Corporation, the other obligors party thereto, the lenders party thereto, and Bank
of America, N.A., as Administrative Agent, incorporated herein by reference to Exhibit 10.1 of the
Registrant’s Current Report on Form 8-K (No. 001-33486) filed with the SEC on August 3, 2022.
Purchase Agreement, dated August 3, 2022, by and between Infinera Corporation and Jefferies
LLC, incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form
8-K (No. 001-33486) filed with the SEC on August 8, 2022.
Form of Exchange and Subscription Agreement, incorporated herein by reference to Exhibit 10.1
of the Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on May 17,
2023.
Form of Repurchase Agreement, incorporated herein by reference to Exhibit 10.2 of the
Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on May 17, 2023.
Second Amendment to Loan, Guaranty and Security Agreement, dated as of May 16, 2023,
among Infinera Corporation, the other obligors party thereto, the lenders party thereto, and Bank
of America, N.A., as Administrative Agent, incorporated herein by reference to Exhibit 10.3 of the
Registrant’s Current Report on Form 8-K (No. 001-33486), filed with the SEC on May 17, 2023.
Insider Trading Policy and Guidelines with respect to Certain Transactions in Securities.
Subsidiaries.
Consent of Independent Registered Public Accounting Firm.
Power of Attorney (reference is made to the signature page hereto)
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
97.1
Compensation Recovery Policy.
XBRL Instance Document
101.INS
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
101.LAB
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104
101.DEF
Cover Page Interactive Data File (embedded within the Inline XBRL document)
*
Management contracts or compensation plans or arrangements in which directors or executive officers
are eligible to participate.
176
**
This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise
subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filings
under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the
date hereof and irrespective of any general incorporation language in any filings.
177
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Dated: May 17, 2024
Infinera Corporation
By:
/s/ NANCY ERBA
Nancy Erba
Chief Financial Officer
Principal Financial Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints David W. Heard and Nancy Erba, and each of them individually, his or her attorneys-in-
fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this
Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
178
Name and Signature
Title
Date
/s/ DAVID W. HEARD
David W. Heard
/s/ NANCY ERBA
Nancy Erba
/s/ MICHAEL FERNICOLA
Michael Fernicola
/s/ GEORGE RIEDEL
George Riedel
/s/ CHRISTINE BUCKLIN
Christine Bucklin
/s/ GREG P. DOUGHERTY
Greg P. Dougherty
/s/ SHARON HOLT
Sharon Holt
/s/ ROOP K. LAKKARAJU
Roop Lakkaraju
/s/ PAUL J. MILBURY
Paul J. Milbury
/s/ AMY RICE
Amy Rice
Chief Executive Officer, Principal
Executive Officer and Director
May 17, 2024
Chief Financial Officer, Principal
Financial Officer
May 17, 2024
Chief Accounting Officer and Principal
Accounting Officer
May 17, 2024
Chairman of the Board
May 17, 2024
Director
May 17, 2024
Director
May 17, 2024
Director
May 17, 2024
Director
May 17, 2024
Director
May 17, 2024
Director
May 17, 2024
/s/ DAVID F. WELCH, PH.D.
David F. Welch, Ph.D.
Co-founder, Chief Innovation Officer
and Director
May 17, 2024
179
APPENDIX A - UNAUDITED RECONCILIATIONS FROM GAAP TO NON-GAAP
Reconciliation of Product Standard Margin for the year ended December 30, 2023 (in thousands):
Revenue
Product
Cost of revenue
Cost of product - standard
Cost of product - other
Total cost of product
Total product standard margin
GAAP as reported
Warehouse fire
loss (recovery)
Non-GAAP as
adjusted
$
1,304,229 $
— $
1,304,229
661,578
149,267
810,845 $
642,651 $
(1,985)
—
(1,985) $
1,985 $
663,563
149,267
812,830
640,666
$
$
Reconciliation of Income (Loss) from Operations (in thousands):
Years Ended
December 30,
2023
December 31,
2022
December 25,
2021
GAAP as reported
$
(4,840) $
(60,157) $
(87,479)
Acquisition-related deferred revenue adjustment
Stock-based compensation
Amortization of acquired intangible assets
Acquisition and integration costs
Restructuring and other related costs
Inventory related charges
Global distribution center transition costs
Warehouse fire loss (recovery)
Litigation charges
Non-GAAP as adjusted
—
62,150
22,965
—
8,935
—
—
(1,985)
—
—
61,015
37,714
—
10,344
14,381
2,109
2,232
1,350
3,913
51,812
37,076
614
14,777
6,582
—
—
2,291
$
87,225 $
68,988 $
29,586
180