Winning Through Disruption In The Transport...

1 | © 2016 Infinera

Winning Through Disruption In The

Transport Market

Investor Overview

December 2016


This presentation contains "forward-looking" statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever

materialize or the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forward-looking

statements. All statements other than statements of historical fact could be deemed forward-looking, including, but not limited to, any

statements about future market performance and similar statements; any statements about historical results that may suggest trends for our

business; any statements of the plans, strategies, and objectives of management for future operations; any statements of expectation or belief

regarding future events, potential markets or market size, technology and product developments, or enforceability of our intellectual property

rights; and any statements of assumptions underlying any of the items mentioned.

These statements are based on estimates and information available to us at the time of this presentation and are not guarantees of future

performance. These risks and uncertainties include, but are not limited to, delays in the release of new products or updates to existing products;

the risks of competitive responses and shifts in the market; fluctuations in customer demand, changes in industry trends, and changes in the

macro economic market; the effect that changes in product pricing or mix, and/or increases in component costs could have on our gross margin;

our ability to respond to rapid technological changes; aggressive business tactics by our competitors; customer consolidation; our reliance on

single-source suppliers; our ability to protect our intellectual property; claims by others that we infringe their intellectual property; war,

terrorism, public health issues, natural disasters and other circumstances that could disrupt the supply, delivery or demand of I fi era’s produ ts; and other risks and uncertainties detailed in our SEC filings from time to time. More information on potential factors that may impact our

usi ess are set forth i I fi era’s Quarterl Report o For -Q for the fiscal quarter ended on September 24, 2016 as filed with the SEC on

November 1, 2016, as well as subsequent reports filed with or furnished to the SEC from time to time. Our SEC filings are available on our website

at www.infinera.com a d the “EC’s e site at www.sec.gov. Forward-looking statements are subject to change, and we may not inform you

when changes occur. We assume no obligation to, and do not currently intend to, update any such forward-looking statements.

Safe Harbor

http://www.infinera.com/

http://www.sec.gov/


Redefining what the network will be

• Unique technology innovation with PIC

• Best-in class systems with Automation,

Convergence and Scalability

Industry leading global service & support

Unmatched reliability

Right tools for right job

Focused on customer success

Infinera: A Differentiated Technology Company

Enabling An Infinite Pool of Intelligent Bandwidth

Cloud Xpress DTN-X

XTC Series

Photonic Integrated Circuit

(PIC)

XT-500

XTM/XTG Series

Cloud Xpress 2

FlexCoherent®

Electronics

XT-3600

XT-3300


Global Customer Base

Over 600 customers

spanning six continents

Three of the top four

Internet Content Providers

Six of the top seven

global cable operators

Leading North America and

Pan-European wholesale operators

17 Tier 1 operators globally


Infinera Differentiators

PIC-enabled Technology

• PIC enables scalable, intelligent

functions: SDN, integrated

switching, sliceable bandwidth

• High capacity applications: Long-

haul, Cloud/DCI, Metro Core

Infinera differentiates due to its technology, market expansion opportunities and vertically

integrated business model

Infinera PIC Fab

Vertical Integration

• Lower cost structure

than competition

• Control over innovation

destiny and supply chain

Portfolio of Purpose-built Products

• Cloud Xpress 2 for DC Interconnect

• XT-Series for Long-haul and Metro

• XTC-10/4 for Long-haul

• XTM Series & XTC-2 for Metro

Cloud Xpress 2 XTM Series XTC-Series XT-Series


Building Blocks

Markets

Our Strategy: How Infinera Wins

Deliver Differentiated

Next Gen Platforms in 2017

Increase Cadence of Optical Engine

Lead in Open: Open APIs,

Open Line System

Disaggregated & Integrated Solutions

Optimized per Customer

Balanced Portfolio – LH/SS/Metro/DCI

(ETE)

Grow Faster than the Overall

Optical Market

Help Customers Transition to Layer T and Win in Their Markets


Disruptive Technology Innovation:

The Infinera Way


The Infinera Approach Conventional Approach

ASICs and coherent

Intelligent software

Photonic integrated circuits Coherent optical engine

Vertically Integrated

Vertically Integrated

Technology Leadership Infinera Uniquely Delivers Massive Scale

Moore’s Law-like for Optical

I dustry s o ly large-scale photonic integrated circuit


A Quantum Leap In Optical Transport To Terabits

Bigger Multi-terabit super-channels

Multi-terabit wire-rate L1 encryption

Smaller O e of orld’s s allest ulti-terabit

subsystems

Lower power vs. competition

Better

Sliceable photonics, lower Total Cost of Ownership

Advanced coherent, improved capacity-reach performance

DSP PIC

Advanced electronics (DSP/ASIC): Next-gen FlexCoherent® processor

Cutting-edge photonics: Fourth-gen Photonic Integrated Circuit (PIC)

The next step function in optical with Infinite Capacity Engine

Infinera Infinite Capacity Engine

Industry’s First 2.4 Tb/s Transport Technology


La er T I o atio Tool o

Massive Scale Vertical IP Ownership

Infinite Pool of Bandwidth

Infinite Capacity Engine

Open & Programmable

Xceed Software Suite

Leading the Move to Open Systems

Flexible

Building Blocks for Optimized Networks

Integrated Switching

Disaggregated DWDM

Flex Grid Optical Switching


Market Expansion Opportunities


Explosion Of Bandwidth Hungry Applications And Devices

Infinera well-positioned to address bandwidth explosion

*Source: TeleGeography Global Bandwidth Forecast Q3 2016

Video

Cloud

Mobility

IoT

By the end of the decade*

Mobility 11.6B devices

Traffic >30 exabytes/month

Video 80% global internet usage = video

11x more mobile video traffic than 2015

Cloud Public cloud services: 19.4% CAGR from 2015

to $141B (2019)

Internet of Things

> 24B networked devices

42.5 Mb/s avg fixed broadband speed, 2x 2014


Generational Shift in Network Architecture

1990-2010

IP NGN

Layer 3 – 7

Layer 0 – 3

NMS

PSTN

Pre 1990s

Management

Forwarding

Control

mostly

software

mostly

hardware

Today

Layer T

Layer C Cloud Services

SDN

Layer T & Layer C

Intelligent Transport

Optics Become Dominant


0

25

50

75

100

125

150

175

2012 2013 2014 2015 2016 2017 2018 2019 2020

Tb/s

Layer T Traffic Patterns Changing

Private: 58% CAGR Mostly DC to DC

Internet: 21% CAGR Mostly user to content

Trans-Atlantic Bandwidth Mix

Source: Telegeography Q3-2016 Global Bandwidth Forecast Service

100G Services are Surging Source: Ovum Ethernet Services Forecast Report: 2015–20

100G: 75% CAGR

10G: 16% CAGR


Largest ICPs Poised to Achieve Significant Market Share

Source: Cloud arket share fro UB“ report, /9/ Is the “k the Li it for Cloud Co puti g

Top 4 Cloud & Content Providers: 77% market share by 2020

31% 35%48%

55%62%

68%74% 77%

0%

20%

40%

60%

80%

100%

$-

$20.0

$40.0

$60.0

$80.0

$100.0

2013 2014 2015 2016 2017 2018 2019 2020

IaaS + PaaS Estimated Revenue

Amazon Microsoft

Google IBM

Big 4 Combined Mkt Share%


The Infinera Unified End-to-End portfolio

XTM Series DTN-X Family: XTC Series

DTN-X Family: XT Series Cloud Xpress Family

XTC-10

XTC-4

XTC-2E

XTC-2 XTG Series TM-3000

TM-301 TM-102 EDU NID

CX CX 2 XT-500 XT-3300 XT-3600

DC INTERCONNECT

LONG-HAUL / SUBSEA METRO

INFINERA XCEED SOFTWARE SUITE AND DNA

INFINERA FLEXIBLE GRID OPEN LINE SYSTEM

Mobile

Front/Backhaul

Triple Play

Cable

Broadband

Business

Ethernet

Data Center


Long-haul Adding new tools to solve customer needs


Established Long-haul Leader

* Based on average of latest quarterly reports from Dell’Oro, O u , IH“, ACG, Cignal AI

Long Haul Market Leadership*

#1 in North America 3 of past 4 quarters

Q3-16: #2 North America, #5 Worldwide

XTC Series

XT-500

XT-3600

XT-3300

Technological Differentiation

Operational simplicity

Terabit-class PIC-enabled scalability

Power/space network efficiency

XT Series

DTN-X Family


Data Center Interconnect Capturing emerging cloud infrastructures


Cloud Architecture Drives Network Demands

sources: google.com, facebook.com

Search Query

930x Network Traffic

Cloud Data Center Network

1500 Miles

HTTP request


Cloud Xpress Cloud Xpress 2

The Infinera Cloud Xpress Family

500 Gb/s super-channel line

10/40/100 GbE clients

Hyperscale Density Simple Operation Low Power Automation Built-in Security Instant Bandwidth

1.2 Tb/s super-channel line in 1RU

100 GbE clients

16-QAM


The Metro Market A new market for Infinera as 100G Metro begins to ramp


1G to 100G Packet Optical

100G at Layer 1 and Layer 2 P-OTS

16 QAM applications with XT-3300 and 3600

Multi-service, access to core

Low power and latency, high density design

Metro Solutions From Core To Access

Cloud Xpress Family

XTC-2/2E

Building a differentiated portfolio from Core to Access

XTM/XTG Series

XT-3600

XT-3300


Metro: A Significant Market Expansion Opportunity

• Strong customer base and reputation in Metro Edge/Access

• Power efficient and purpose-built products

• Early technology leadership in Mobile Fronthaul

Differentiated Approach

• High capacity solutions for Metro Core upgrades to 100G

• Over time, lowers cost structure and enhances technology differentiation

Vertical Integration

• Long-haul customer base upgrading to 100G Metro

• Strong presence in Metro-heavy Cable vertical Customer Base

Infinera Current Metro Market Share: 3% Worldwide*

Significant opportunities to grow!

*A erage of latest proje tio s fro O u , IH“, Dell’Oro a d ACG


Differentiated Financial Opportunity


Gross Margin

Operating Expenses

A structure to deliver differentiated financials

Structured financial model

High scale integration Unique pricing

structures

Instant Bandwidth

Long-Haul

DCI

Metro

Fixed cost leverage

R&D = 20% of revenue

Success based S&M investment

G&A grows slower than revenue

Financial discipline


$438

$544

$668

$888 $865

38%

42%

44%

48% 48%

34%

39%

44%

49%

$0

$200

$400

$600

$800

$1.000

FY12 FY13 FY14 FY15 FY16 Consensus

$ (

Mil

lio

ns)

Revenue Gross Margin Operating Margin

-9%

1%

8%

13%

6%

Balance sheet as of the end of Q3-16; All gross margin and operating margin figures are non-GAAP

Differentiated Financial Results + A Recent Setback

Q3 16 Perfor a ce $185 million revenue

49.2% gross margin

3.6% operating margin

Q4 16 Outlook $165 to $185 million revenue

40% to 42% gross margin

(12)% to (8%) operating margin

$(0.16) to ($0.12) diluted EPS

Solid Balance Sheet $210M net cash (Cash less face

value of convertible debt)

10 consecutive quarters of positive Cash Flow from Ops

Last 4 quarters Cash Flow from Ops = $69 million


FY17 – Paving the Path to Profitable Growth

Revenue Growth Drivers

Current

Products

+ XT-3300

+ CX-2 + XTC-10/4 1.2 Tb/s + XT-3600

Entering 2018 with a new portfolio attacking a broad market

Margin Expansion

End of 2016 1H 2017

2H 2017

More Purpose-built

products Integration

drives lower costs

Fewer investment

deals

Improving Yields

Follow on IB licenses

Expansion of gross margin begins 2017; continues in 2018

Fixed cost leverage as

volumes grow

+ XTM 400G


The Future is Bright: I fi era’s Ulti ate Opportu it

• Top 3 DWDM

vendor worldwide

• Most profitable

optical transport

vendor worldwide

Long Haul/Subsea return to growth; DCI and Metro = high growth opportunities

Photonic integration and pricing strategies enable differentiated cost model

Balancing technology investments with disciplined expense management

Long Term Goals Intact

• Outgrow Market

• 50% Gross Margin

• 15% Operating Margin

Gross margin and operating margin targets are non-GAAP


Thank You www.infinera.com

http://www.infinera.com/


GAAP to Non-GAAP Reconciliation (In millions, except percentages and per share data)

(Unaudited)

Note: Amounts represent the midpoint of the expected range.

Q3'16 Q4'16

Actual Outlook

Reconciliation of Gross Margin:

U.S. GAAP 45.6% 37%

Stock-based compensation 0.8% 1%

Amortization of acquired intangible assets 2.8% 3%

Non-GAAP 49.2% 41%

Reconciliation of Operating Expenses:

U.S. GAAP 101$

Stock-based compensation (9)

Amortization of acquired intangible assets (2)

Non-GAAP 90$

Reconciliation of Operating Margin:

U.S. GAAP (5.9)% (20)%

Stock-based compensation 5.5% 6%

Amortization of acquired intangible assets 3.6% 4%

Acquisition-related costs 0.4%

Non-GAAP 3.6% (10)%

Net Income per Common Share:

U.S. GAAP (0.27)$

Stock-based compensation 0.08

Amortization of acquired intangible assets 0.04

Amortization of debt discount 0.02

Income tax effects (0.01)

Non-GAAP (0.14)$

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Winning Through Disruption In The Transport...

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