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press release

June 4, 2020, 7:01 a.m. EDT

Ciena Reports Fiscal Second Quarter 2020 Financial Results

Ciena [®] Corporation /zigman2/quotes/208745450/composite CIEN +0.21% , a networking systems, services and software company, today announced unaudited financial results for its fiscal second quarter ended May 2, 2020.

  • Q2 Revenue : $894.1 million, increasing 3.4% year over year

  • Q2 Net Income per Share: $0.59 GAAP; $0.76 adjusted (non-GAAP)

  • Share Repurchases: Prior to suspending repurchases during the quarter, we repurchased approximately 0.6 million shares of common stock for an aggregate price of $23.8 million during the quarter

"In this uncertain environment, we delivered industry leading financial performance during our second quarter, including strong revenue and outstanding profitability," said Gary Smith, President and CEO, Ciena. "Our strategy, centered around innovation, diversification and global scale, has resulted in a resilient business capable of navigating challenging times and delivering strong shareholder value over the long-term."

For the fiscal second quarter 2020, Ciena reported revenue of $894.1 million as compared to $865.0 million for the fiscal second quarter 2019.

Ciena's GAAP net income for the fiscal second quarter 2020 was $91.7 million, or $0.59 per diluted common share, which compares to a GAAP net income of $52.7 million, or $0.33 per diluted common share, for the fiscal second quarter 2019.

Ciena's adjusted (non-GAAP) net income for the fiscal second quarter 2020 was $117.4 million, or $0.76 per diluted common share, which compares to an adjusted (non-GAAP) net income of $76.2 million, or $0.48 per diluted common share, for the fiscal second quarter 2019.

Fiscal Second Quarter 2020 Performance Summary

The tables below (in millions, except percentage data) provide comparisons of certain quarterly results to the prior year. Appendices A and B set forth reconciliations between the GAAP and adjusted (non-GAAP) measures contained in this release.

  GAAP Results
  Q2   Q2    
  FY 2020   FY 2019   Y-T-Y*
Revenue $   894.1     $   865.0     3.4 %
Gross margin     46.2 %       43.3 %   2.9 %
Operating expense $   285.8     $   294.4     (2.9 )%
Operating margin     14.3 %       9.3 %   5.0 %
  Non-GAAP Results
  Q2   Q2    
  FY 2020   FY 2019   Y-T-Y*
Revenue $   894.1     $   865.0     3.4 %
Adj. gross margin     46.9 %       43.9 %   3.0 %
Adj. operating expense $   258.7     $   269.7     (4.1 )%
Adj. operating margin     17.9 %       12.7 %   5.2 %
Adj. EBITDA $   183.0     $   131.4     39.3 %

* Denotes % change, or in the case of margin, absolute change

    Revenue by Segment
    Q2 FY 2020   Q2 FY 2019
    Revenue   %**   Revenue   %**
Networking Platforms                
Converged Packet Optical   $ 654.3     73.2     $ 623.9     72.1  
Packet Networking   64.2     7.2     73.1     8.5  
Total Networking Platforms   718.5     80.4     697.0     80.6  
                 
Platform Software and Services   45.0     5.0     35.2     4.0  
                 
Blue Planet Automation Software and Services   15.0     1.7     12.5     1.4  
                 
Global Services                
Maintenance Support and Training   71.5     8.0     68.8     8.0  
Installation and Deployment   34.2     3.8     41.3     4.8  
Consulting and Network Design   9.9     1.1     10.2     1.2  
Total Global Services   115.6     12.9     120.3     14.0  
                 
Total   $ 894.1     100.0     $ 865.0     100.0  

** Denotes % of total revenue

Additional Performance Metrics for Fiscal Second Quarter 2020

    Revenue by Geographic Region
    Q2 FY 2020   Q2 FY 2019
    Revenue   % **   Revenue   % **
Americas   $ 650.4     72.7     $ 615.5     71.1  
Europe, Middle East and Africa   141.4     15.8     115.0     13.3  
Asia Pacific   102.3     11.5     134.5     15.6  
Total   $ 894.1     100.0     $ 865.0     100.0  

** Denotes % of total revenue

  • One 10%-plus customer represented a total of 12% of revenue

  • Cash and investments totaled $988.5 million

  • Cash flow from operations totaled $91.2 million

  • Average days' sales outstanding (DSOs) were 79

  • Accounts receivable balance was $694.0 million

  • Unbilled contract asset balance was $87.7 million

  • Inventories totaled $325.8 million, including:

  • Product inventory turns were 5.0

  • Headcount totaled 6,684

Supplemental Materials and Live Web Broadcast of Unaudited Fiscal Second Quarter 2020 Results

Today, Thursday, June 4, 2020, in conjunction with this announcement, Ciena has posted to the Quarterly Results page of the Investor Relations section of its website an accompanying investor presentation for its unaudited fiscal second quarter 2020 results.

Ciena's management will also host a discussion today with investors and financial analysts that will include the Company's outlook. The live audio web broadcast beginning at 8:30 a.m. Eastern will be accessible via www.ciena.com . An archived replay of the live broadcast will be available shortly following its conclusion on the Investor Relations page of Ciena's website.

Notes to Investors

Forward-Looking Statements. You are encouraged to review the Investors section of our website, where we routinely post press releases, SEC filings, recent news, financial results, supplemental financial information, and other announcements. From time to time we exclusively post material information to this website along with other disclosure channels that we use. This press release contains certain forward-looking statements that involve risks and uncertainties. These statements are based on current expectations, forecasts, assumptions and other information available to the Company as of the date hereof. Forward-looking statements include statements regarding Ciena's expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or similar words. Forward-looking statements in this release include: "In this uncertain environment, we delivered industry leading financial performance during our second quarter, including strong revenue and outstanding profitability. Our strategy, centered around innovation, diversification and global scale, has resulted in a resilient business capable of navigating challenging times and delivering strong shareholder value over the long-term.”

Ciena's actual results, performance or events may differ materially from these forward-looking statements made or implied due to a number of risks and uncertainties relating to Ciena's business, including: the effect of broader economic and market conditions on our customers and their business; our ability to execute our business and growth strategies; the duration and severity of the COVID-19 pandemic and the impact of countermeasures taken to mitigate its spread on macroeconomic conditions, economic activity, demand for our technology solutions, short- and long-term changes in customer or end user needs, continuity of supply chain, our business operations, liquidity and financial results; changes in network spending or network strategy by customers; seasonality and the timing and size of customer orders, including our ability to recognize revenue relating to such sales; the level of competitive pressure we encounter; the product, customer and geographic mix of sales within the period; supply chain disruptions and the level of success relating to efforts to optimize Ciena's operations; changes in foreign currency exchange rates affecting revenue and operating expense; factors beyond our control such as natural disasters, acts of war or terrorism, and public health emergencies, including the COVID-19 pandemic; the impact of the Tax Cuts and Jobs Act; changes in tax or trade regulations, including the imposition of tariffs, duties or efforts to withdraw from or materially modify international trade agreements; changes in estimates of prospective income tax rates and any adjustments to Ciena's provisional estimates whether related to further guidance, analysis or otherwise; and the other risk factors disclosed in its Annual Report on Form 10-K filed with the SEC on December 20, 2019 and included in its Quarterly Report on Form 10-Q for the current quarter. Ciena assumes no obligation to update any forward-looking information included in this press release.

Non-GAAP Presentation of Quarterly and Annual Results. This release includes non-GAAP measures of Ciena's gross profit, operating expense, income from operations, earnings before interest, tax, depreciation and amortization (EBITDA), Adjusted EBITDA, and measures of net income and net income per share. In evaluating the operating performance of Ciena's business, management excludes certain charges and credits that are required by GAAP. These items share one or more of the following characteristics: they are unusual and Ciena does not expect them to recur in the ordinary course of its business; they do not involve the expenditure of cash; they are unrelated to the ongoing operation of the business in the ordinary course; or their magnitude and timing is largely outside of Ciena's control. Management believes that the non-GAAP measures below provide management and investors useful information and meaningful insight to the operating performance of the business. The presentation of these non-GAAP financial measures should be considered in addition to Ciena's GAAP results and these measures are not intended to be a substitute for the financial information prepared and presented in accordance with GAAP. Ciena's non-GAAP measures and the related adjustments may differ from non-GAAP measures used by other companies and should only be used to evaluate Ciena's results of operations in conjunction with our corresponding GAAP results. To the extent not previously disclosed in a prior Ciena financial results press release, Appendices A and B to this press release set forth a complete GAAP to non-GAAP reconciliation of the non-GAAP measures contained in this release.

About Ciena. Ciena /zigman2/quotes/208745450/composite CIEN +0.21% is a networking systems, services and software company. We provide solutions that help our customers create the Adaptive Network™ in response to the constantly changing demands of their users. By delivering best-in-class networking technology through high-touch consultative relationships, we build the world’s most agile networks with automation, openness and scale. For updates on Ciena, follow us on Twitter @Ciena , LinkedIn , the Ciena Insights blog , or visit www.ciena.com .

CIENA CORPORATION
 
  Quarter Ended   Six Months Ended
  May 2,   May 4,   May 2,   May 4,
  2020   2019   2020   2019
Revenue:              
Products $ 739,892     $ 710,688     $ 1,427,107     $ 1,353,220  
Services 154,161     154,323     299,858     290,318  
Total revenue 894,053     865,011     1,726,965     1,643,538  
Cost of goods sold:              
Products 405,138     411,050     794,151     791,492  
Services 75,589     79,284     148,953     154,028  
Total cost of goods sold 480,727     490,334     943,104     945,520  
Gross profit 413,326     374,677     783,861     698,018  
Operating expenses:              
Research and development 131,530     137,969     262,430     266,602  
Selling and marketing 101,214     103,502     208,280     201,615  
General and administrative 42,030     42,154     84,498     81,397  
Amortization of intangible assets 5,839     5,529     11,692     11,057  
Significant asset impairments and restructuring costs 3,811     4,068     8,283     6,341  
Acquisition and integration costs 1,414     1,135     3,233     2,743  
Total operating expenses 285,838     294,357     578,416     569,755  
Income from operations 127,488     80,320     205,445     128,263  
Interest and other income (loss), net (2,665 )   (244 )   981     4,009  
Interest expense (7,860 )   (9,471 )   (16,675 )   (18,912 )
Loss on extinguishment and modification of debt         (646 )    
Income before income taxes 116,963     70,605     189,105     113,360  
Provision for income taxes 25,308 17,867 35,122 27,006
Net income $ 91,655     $ 52,738     $ 153,983     $ 86,354  
               
Net Income per Common Share              
Basic net income per common share $ 0.60     $ 0.34     $ 1.00     $ 0.55  
Diluted net income per potential common share $ 0.59     $ 0.33     $ 0.99     $ 0.55  
               
Weighted average basic common shares outstanding 153,858     156,170     154,099     156,244  
Weighted average dilutive potential common shares outstanding [1] 155,141     158,289     155,443     158,211  

1. Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per common share for the second quarter of fiscal 2020 includes 1.3 million shares underlying certain stock option and stock unit awards.

Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per common share for the first second quarter of fiscal 2019 includes 2.1 million shares underlying certain stock option and stock unit awards.

CIENA CORPORATION
 
  May 2,
2020
  November 2,
2019
ASSETS      
Current assets:      
Cash and cash equivalents $ 887,732     $ 904,045  
Short-term investments 100,742     109,940  
Accounts receivable, net 693,963     724,854  
Inventories 325,753     345,049  
Prepaid expenses and other 332,021     297,914  
Total current assets 2,340,211     2,381,802  
Long-term investments     10,014  
Equipment, building, furniture and fixtures, net 260,867     286,884  
Operating lease right-of-use assets 47,864      
Goodwill 310,269     297,937  
Other intangible assets, net 115,536     112,781  
Deferred tax asset, net 689,416     714,942  
Other long-term assets 92,599     88,986  
Total assets $ 3,856,762     $ 3,893,346  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 292,164     $ 344,819  
Accrued liabilities and other short-term obligations 288,773     382,740  
Deferred revenue 107,023     111,381  
Operating lease liabilities 18,096      
Current portion of long-term debt 6,930     7,000  
Total current liabilities 712,986     845,940  
Long-term deferred revenue 42,894     45,492  
Other long-term obligations 129,850     148,747  
Long-term operating lease liabilities 51,100      
Long-term debt, net 679,356     680,406  
Total liabilities $ 1,616,186     $ 1,720,585  
Stockholders’ equity:      
Preferred stock – par value $0.01; 20,000,000 shares authorized; zero shares issued and outstanding      
Common stock – par value $0.01; 290,000,000 shares authorized; 153,641,565
and 154,403,850 shares issued and outstanding
1,536     1,544  
Additional paid-in capital 6,790,856     6,837,714  
Accumulated other comprehensive loss (61,386 )   (22,084 )
Accumulated deficit (4,490,430 )   (4,644,413 )
Total stockholders’ equity 2,240,576     2,172,761  
Total liabilities and stockholders’ equity $ 3,856,762 $ 3,893,346
CIENA CORPORATION
 
  Six Months Ended
  May 2,   May 4,
  2020   2019
Cash flows provided by operating activities:      
Net income $ 153,983     $ 86,354  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements 48,381     42,995  
Share-based compensation costs 33,579     29,362  
Amortization of intangible assets 19,361     17,778  
Deferred taxes 25,420     18,293  
Provision for inventory excess and obsolescence 12,640     10,245  
Provision for warranty 13,793     9,276  
Other 16,190     (2,259 )
Changes in assets and liabilities:      
Accounts receivable 15,865     43,174  
Inventories 5,618     (109,554 )
Prepaid expenses and other (54,839 )   (33,241 )
Operating lease right-of-use assets 8,642      
Accounts payable, accruals and other obligations (151,713 )   (26,971 )
Deferred revenue (5,679 )   4,560  
Short and long-term operating lease liabilities (10,311 )    
Net cash provided by operating activities 130,930     90,012  
Cash flows provided by (used in) investing activities:      
Payments for equipment, furniture, fixtures and intellectual property (45,458 )   (35,289 )
Purchase of available for sale securities (40,894 )   (97,897 )
Proceeds from maturities of available for sale securities 60,000     90,000  
Proceeds from sales of available for sale securities     98,263  
Settlement of foreign currency forward contracts, net (3,836 )   (2,741 )
Acquisition of business, net of cash acquired (28,300 )    
Purchase of equity investment     (2,667 )
Net cash provided by (used in) investing activities (58,488 )   49,669  
Cash flows used in financing activities:      
Payment of long term debt (1,733 )   (3,500 )
Payment of debt issuance costs (382 )    
Payment of finance lease obligations (1,381 )   (1,679 )
Payment for debt conversion liability     (111,268 )
Shares repurchased for tax withholdings on vesting of restricted stock units (18,200 )   (15,865 )
Repurchases of common stock - repurchase program (74,535 )   (65,103 )
Proceeds from issuance of common stock 12,290     11,235  
Net cash used in financing activities (83,941 )   (186,180 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash (4,876 )   224  
Net decrease in cash, cash equivalents and restricted cash (16,375 )   (46,275 )
Cash, cash equivalents and restricted cash at beginning of period 904,161     745,423  
Cash, cash equivalents and restricted cash at end of period $ 887,786     $ 699,148  
Supplemental disclosure of cash flow information      
Cash paid during the period for interest $ 17,590     $ 19,978  
Cash paid during the period for income taxes, net $ 22,011     $ 9,258  
Operating lease payments $ 11,409     $  
Non-cash investing and financing activities      
Purchase of equipment in accounts payable $ 4,480     $ 2,793  
Repurchase of common stock in accrued liabilities from repurchase program $     $ 1,441  
Conversion of debt conversion liability into 1,585,140 shares of common stock $     $ 52,944  
Operating lease right-of-use assets subject to lease liability $ 4,887     $
APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measures (unaudited)
         
    Quarter Ended
    May 2,   May 4,
    2020   2019
Gross Profit Reconciliation (GAAP/non-GAAP)        
GAAP gross profit   $ 413,326     $ 374,677  
Share-based compensation-products   827     702  
Share-based compensation-services   1,036     907  
Amortization of intangible assets   3,835     3,303  
Total adjustments related to gross profit   5,698     4,912  
Adjusted (non-GAAP) gross profit   $ 419,024     $ 379,589  
Adjusted (non-GAAP) gross profit percentage   46.9 %   43.9 %
         
Operating Expense Reconciliation (GAAP/non-GAAP)        
GAAP operating expense   $ 285,838     $ 294,357  
Share-based compensation-research and development   4,822     4,083  
Share-based compensation-sales and marketing   5,264     4,346  
Share-based compensation-general and administrative   5,975     5,491  
Amortization of intangible assets   5,839     5,529  
Significant asset impairments and restructuring costs   3,811     4,068  
Acquisition and integration costs   1,414     1,135  
Total adjustments related to operating expense   27,125     24,652  
Adjusted (non-GAAP) operating expense   $ 258,713     $ 269,705  
         
Income from Operations Reconciliation (GAAP/non-GAAP)        
GAAP income from operations   $ 127,488     $ 80,320  
Total adjustments related to gross profit   5,698     4,912  
Total adjustments related to operating expense   27,125     24,652  
Total adjustments related to income from operations   32,823     29,564  
Adjusted (non-GAAP) income from operations   $ 160,311     $ 109,884  
Adjusted (non-GAAP) operating margin percentage   17.9 %   12.7 %
         
Net Income Reconciliation (GAAP/non-GAAP)        
GAAP net income   $ 91,655     $ 52,738  
Exclude GAAP provision for income taxes   25,308     17,867  
Income before income taxes   116,963     70,605  
Total adjustments related to income from operations   32,823     29,564  
Adjusted income before income taxes   149,786     100,169  
Non-GAAP tax provision on adjusted income before income taxes   32,354     23,940  
Adjusted (non-GAAP) net income   $ 117,432     $ 76,229  
         
Weighted average basic common shares outstanding   153,858   156,170
Weighted average dilutive potential common shares outstanding [1]   155,141   158,289
         
Net Income per Common Share        
GAAP diluted net income per common share   $ 0.59     $ 0.33  
Adjusted (non-GAAP) diluted net income per common share   $ 0.76     $ 0.48  
  1. Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per common share for the second quarter of fiscal 2020 includes 1.3 million shares underlying certain stock option and stock unit awards.

    Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per common share for the second quarter of fiscal 2019 includes 2.1 million shares underlying certain stock option and restricted stock unit awards.

APPENDIX B - Calculation of EBITDA and Adjusted EBITDA (unaudited)
         
    Quarter Ended
    May 2,   May 4,
    2020   2019
Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)        
Net income (GAAP)   $ 91,655     $ 52,738  
Add: Interest expense   7,860     9,471  
Less: Interest and other income, net   (2,665 )   (244 )
Add: Provision for income taxes   25,308     17,867  
Add: Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements   22,599     21,482  
Add: Amortization of intangible assets   9,674     8,832  
EBITDA   $ 159,761     $ 110,634  
Add: Share-based compensation cost   17,977     15,607  
Add: Significant asset impairments and restructuring costs   3,811     4,068  
Add: Acquisition and integration costs   1,414     1,135  
Adjusted EBITDA   $ 182,963     $ 131,444  

The adjusted (non-GAAP) measures above and their reconciliation to Ciena's GAAP results for the periods presented reflect adjustments relating to the following items:

  • Share-based compensation - a non-cash expense incurred in accordance with share-based compensation accounting guidance.

  • Amortization of intangible assets - a non-cash expense arising from the acquisition of intangible assets, principally developed technologies and customer-related intangibles, that Ciena is required to amortize over its expected useful life.

  • Significant asset impairments and restructuring costs - costs incurred as a result of restructuring activities taken to align resources with perceived market opportunities.

  • Acquisition and integration costs - consist of financial, legal and accounting advisors' costs and severance and other employment-related costs related to Ciena's acquisition of Centina in the first quarter of fiscal 2020 and costs associated with a three-year earn-out arrangement related to the deal consideration for Ciena's DonRiver acquisition in fiscal 2018. Ciena does not believe that these costs are reflective of its ongoing operating expense following its completion of these integration activities.

  • Non-GAAP tax provision - consists of current and deferred income tax expense commensurate with the level of adjusted income before income taxes and utilizes a current, blended U.S. and foreign statutory annual tax rate of 21.6% for the second fiscal quarter of 2020 and 23.9% for the second fiscal quarter of 2019. This rate may be subject to change in the future, including as a result of changes in tax policy or tax strategy.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20200604005152/en/

SOURCE: Ciena Corporation

Press:
Nicole Anderson
Ciena Corporation
+1 (410) 694-5761 
pr@ciena.com Investors:
Gregg Lampf
Ciena Corporation
+1 (410) 694-5700
ir@ciena.com

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/zigman2/quotes/208745450/composite
US : U.S.: NYSE
$ 60.68
+0.13 +0.21%
Volume: 954,773
Aug. 13, 2020 4:00p
P/E Ratio
29.53
Dividend Yield
N/A
Market Cap
$9.30 billion
Rev. per Employee
$536,617
loading...
/zigman2/quotes/208745450/composite
US : U.S.: NYSE
$ 60.68
+0.13 +0.21%
Volume: 954,773
Aug. 13, 2020 4:00p
P/E Ratio
29.53
Dividend Yield
N/A
Market Cap
$9.30 billion
Rev. per Employee
$536,617
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