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Press Release -- December 12th, 2019
Source: Ciena
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Ciena Reports Fiscal Fourth Quarter 2019 and Year-End Financial Results

HANOVER, Md.--(BUSINESS WIRE)-- Ciena® Corporation (NASDAQ:CIEN, news, filings), a networking systems, services and software company, today announced unaudited financial results for its fiscal fourth quarter and year ended October 31, 2019.

  • Q4 Revenue : $968.0 million, increasing 7.6% year over year
  • Q4 Net Income per Share: $0.51 GAAP; $0.58 adjusted (non-GAAP)
  • Share Repurchases: Repurchased approximately 1.0 million shares of common stock for an aggregate price of $38.2 million during the quarter

"Our outstanding Q4 financial performance rounded out an extraordinary year of industry-leading growth and profitability," said Gary Smith, President and CEO, Ciena. "Our innovation, diversification and scale uniquely position us to continue taking share while delivering improved operating margin and driving sustained EPS growth in 2020."

For the fiscal fourth quarter 2019, Ciena reported revenue of $968.0 million as compared to $899.4 million for the fiscal fourth quarter 2018. For fiscal year 2019, Ciena reported revenue of $3.57 billion, as compared to $3.09 billion for fiscal year 2018.

Ciena's GAAP net income for the fiscal fourth quarter 2019 was $80.3 million or $0.51 per diluted common share, which compares to a GAAP net income of $64.0 million, or $0.34 per diluted common share, for the fiscal fourth quarter 2018. For fiscal year 2019, Ciena's GAAP net income was $253.4 million, or $1.61 per diluted common share, as compared to a GAAP net loss of $(344.7) million, or $(2.49) per diluted common share for fiscal year 2018.

Ciena's adjusted (non-GAAP) net income for the fiscal fourth quarter 2019 was $90.4 million, or $0.58 per diluted common share, which compares to an adjusted (non-GAAP) net income of $81.0 million, or $0.53 per diluted common share, for the fiscal fourth quarter 2018. For fiscal year 2019, Ciena's adjusted (non-GAAP) net income was $331.8 million, or $2.11 per diluted common share, as compared to an adjusted (non-GAAP) net income of $210.6 million, or $1.39 per diluted common share for fiscal year 2018.

Performance Summary for the Fiscal Fourth Quarter and the Year Ended October 31, 2019

The tables below (in millions, except percentage data) provide comparisons of certain quarterly and annual 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 (unaudited)
Quarter Ended

October 31,

Period

Change

Year Ended

October 31,

Period

Change

2019 2018 Y-T-Y* 2019 2018 Y-T-Y*
Revenue $ 968.0 $ 899.4 7.6 % $ 3,572.1 $ 3,094.3 15.4 %
Gross margin 43.4 % 44.3 % (0.9 )% 43.2 % 42.5 % 0.7 %
Operating expense $ 326.5 $ 302.2 8.0 % $ 1,195.3 $ 1,084.7 10.2 %
Operating margin 9.6 % 10.7 % (1.1 )% 9.7 % 7.4 % 2.3 %
Non-GAAP Results (unaudited)
Quarter Ended

October 31,

Period

Change

Year Ended

October 31,

Period

Change

2019 2018 Y-T-Y* 2019 2018 Y-T-Y*
Revenue $ 968.0 $ 899.4 7.6 % $ 3,572.1 $ 3,094.3 15.4 %
Adj. gross margin 43.8 % 44.7 % (0.9 )% 43.7 % 43.0 % 0.7 %
Adj. operating expense $ 295.3 $ 277.7 6.3 % $ 1,091.8 $ 993.6 9.9 %
Adj. operating margin 13.3 % 13.9 % (0.6 )% 13.1 % 10.9 % 2.2 %
* Denotes % change, or in the case of margin, absolute change
  • One 10%-plus customer represented a total of 15.1% of revenue for the fiscal quarter
  • Three 10%-plus customers represented a total of 34.1% of revenue for the fiscal year
  • Cash and investments totaled $1,024.0 million
  • Cash flow from operations totaled $240.0 million and $413.1 million for the fiscal quarter and year, respectively
  • Average days' sales outstanding (DSOs) were 75 and 82 for the fiscal quarter and year, respectively
  • Accounts receivable balance was $724.9 million
  • Unbilled contract asset balance was $84.0 million
  • Inventories totaled $345.0 million, including:
    • Raw materials: $99.0 million
    • Work in process: $13.7 million
    • Finished goods: $226.6 million
    • Deferred cost of sales: $53.0 million
    • Reserve for excess and obsolescence: $(47.3) million
  • Product inventory turns were 5.4 and 5.0 for the fiscal quarter and year, respectively
  • Headcount totaled 6,383

Share Repurchase Program

During fiscal year 2019, Ciena repurchased approximately 3.8 million shares of its common stock at an average price of $39.10 per share for an aggregate purchase price of $150.1 million.

Ciena may purchase shares at management's discretion in the open market, in privately negotiated transactions, in transactions structured through investment banking institutions, or a combination of the foregoing. Ciena may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of its shares under this authorization. The amount and timing of repurchases are subject to a variety of factors including liquidity, cash flow, stock price, and general business and market conditions. The program may be modified, suspended or discontinued at any time.

Supplemental Materials and Live Web Broadcast of Unaudited Fiscal Fourth Quarter 2019 Results

Today, Thursday, December 12, 2019, in conjunction with this announcement, Ciena has posted to the Quarterly Results page of the Investor Relations section of its website certain related supporting materials for its unaudited fiscal fourth quarter and fiscal 2019 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: "Our outstanding Q4 financial performance rounded out an extraordinary year of industry-leading growth and profitability."; "Our innovation, diversification and scale uniquely position us to continue taking share while delivering improved operating margin and driving sustained EPS growth in 2020."

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; 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; the impact of the Tax Cuts and Jobs Act, 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 Ciena's periodic reports filed with the Securities and Exchange Commission, including its Quarterly Report on Form 10-Q filed with the SEC on September 11, 2019 and its Annual Report on Form 10-K to be filed with the SEC. 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 for the relevant period, Appendix 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 (NYSE: CIEN) is a networking systems, services and software company. We provide solutions that help our clients 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
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Quarter Ended October 31, Year Ended October 31,
2019 2018 2019 2018
Revenue:
Products $ 820,007 $ 743,867 $ 2,983,815 $ 2,565,460
Services 147,980 155,489 588,316 528,826
Total revenue 967,987 899,356 3,572,131 3,094,286
Cost of goods sold:
Products 469,945 421,583 1,716,358 1,507,157
Services 78,346 79,698 313,707 272,439
Total cost of goods sold 548,291 501,281 2,030,065 1,779,596
Gross profit 419,696 398,075 1,542,066 1,314,690
Operating expenses:
Research and development 141,657 134,983 548,139 491,564
Selling and marketing 117,201 112,791 423,046 394,060
General and administrative 50,307 44,539 174,399 160,133
Amortization of intangible assets 5,222 4,654 21,808 15,737
Acquisition and integration costs (735 ) 3,778 3,370 5,111
Significant asset impairments and restructuring costs 12,842 1,460 24,538 18,139
Total operating expenses 326,494 302,205 1,195,300 1,084,744
Income from operations 93,202 95,870 346,766 229,946
Interest and other income (loss), net (1,183 ) (13,357 ) 3,876 (12,029 )
Interest expense (9,136 ) (14,873 ) (37,452 ) (55,249 )
Loss on extinguishment and modification of debt (13,887 ) (13,887 )
Income before income taxes 82,883 53,753 313,190 148,781
Provision (benefit) for income taxes 2,552 (10,224 ) 59,756 493,471
Net income (loss) $ 80,331 $ 63,977 $ 253,434 $ (344,690 )
Net Income (Loss) per Common Share
Basic net income (loss) per common share $ 0.52 $ 0.45 $ 1.63 $ (2.40 )
Diluted net income (loss) per potential common share1 $ 0.51 $ 0.34 $ 1.61 $ (2.49 )
Weighted average basic common shares outstanding 154,852 143,659 155,720 143,738
Weighted average diluted potential common shares outstanding 2 156,612 157,745 157,612 143,738
APPENDIX A- Reconciliation of Adjusted (Non- GAAP) Measurements (unaudited)
Quarter Ended Year Ended
October 31, October 31,
2019 2018 2019 2018
Gross Profit Reconciliation (GAAP/non-GAAP)
GAAP gross profit $ 419,696 $ 398,075 $ 1,542,066 $ 1,314,690
Share-based compensation-products 748 705 2,868 2,984
Share-based compensation-services 715 651 3,175 2,616
Amortization of intangible assets 3,303 2,957 13,327 10,069
Total adjustments related to gross profit 4,766 4,313 19,370 15,669
Adjusted (non-GAAP) gross profit $ 424,462 $ 402,388 $ 1,561,436 $ 1,330,359
Adjusted (non-GAAP) gross profit percentage 43.8 % 44.7 % 43.7 % 43.0 %
Operating Expense Reconciliation (GAAP/non-GAAP)
GAAP operating expense $ 326,494 $ 302,205 $ 1,195,300 $ 1,084,744
Share-based compensation-research and development 3,287 3,385 14,321 13,518
Share-based compensation-sales and marketing 4,151 3,741 16,474 14,246
Share-based compensation-general and administrative 6,425 5,588 22,841 19,709
Amortization of intangible assets 5,222 4,654 21,808 15,737
Acquisition and integration costs (735 ) 3,778 3,370 5,111
Significant asset impairments and restructuring costs 12,842 1,460 24,538 18,139
Legal settlements 1,929 137 4,682
Total adjustments related to operating expense $ 31,192 $ 24,535 $ 103,489 $ 91,142
Adjusted (non-GAAP) operating expense $ 295,302 $ 277,670 $ 1,091,811 $ 993,602
Income from Operations Reconciliation (GAAP/non-GAAP)
GAAP income from operations $ 93,202 $ 95,870 $ 346,766 $ 229,946
Total adjustments related to gross profit 4,766 4,313 19,370 15,669
Total adjustments related to operating expense 31,192 24,535 103,489 91,142
Total adjustments related to income from operations 35,958 28,848 122,859 106,811
Adjusted (non-GAAP) income from operations $ 129,160 $ 124,718 $ 469,625 $ 336,757
Adjusted (non-GAAP) operating margin percentage 13.3 % 13.9 % 13.1 % 10.9 %
Net Income (Loss) Reconciliation (GAAP/non-GAAP)
GAAP net income (loss) $ 80,331 $ 63,977 $ 253,434 $ (344,690 )
Exclude GAAP provision (benefit) for income taxes 2,552 (10,224 ) 59,756 493,471
Income before income taxes 82,883 53,753 313,190 148,781
Total adjustments related to income from operations 35,958 28,848 122,859 106,811
Loss on extinguishment and modification of debt 13,887 13,887
Non-cash interest expense 727 2,579
Change in fair value of debt conversion liability 12,070 12,070
Adjusted income before income taxes 118,841 109,285 436,049 284,128
Non-GAAP tax provision on adjusted income before income taxes 28,403 28,272 104,216 73,504
Adjusted (non-GAAP) net income $ 90,438 $ 81,013 $ 331,833 $ 210,624
Weighted average basic common shares outstanding 154,852 143,659 155,720 143,738
Weighted average dilutive potential common shares outstanding 1 156,612 157,745 157,612 158,884
Net Income (Loss) per Common Share
GAAP diluted net income (loss) per common share $ 0.51 $ 0.34 $ 1.61 $ (2.49 )
Adjusted (non-GAAP) diluted net income per common share 2 $ 0.58 $ 0.53 $ 2.11 $ 1.39
APPENDIX B- Calculation of EBITDA and Adjusted EBITDA (unaudited)
Quarter Ended Year Ended
October 31, October 31,
2019 2018 2019 2018
Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)
Net income (loss) (GAAP) $ 80,331 $ 63,977 $ 253,434 $ (344,690 )
Add: Interest expense 9,136 14,873 37,452 55,249
Less: Interest and other income (loss), net (1,183 ) (13,357 ) 3,876 (12,029 )
Add: Loss on extinguishment and modification of debt (13,887 ) (13,887 )
Add: Provision (benefit) for income taxes 2,552 (10,224 ) 59,756 493,471
Add: Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements 22,505 21,110 87,576 84,214
Add: Amortization of intangible assets 8,525 7,611 35,136 25,806
EBITDA $ 124,232 $ 124,591 $ 469,478 $ 339,966
Add: Shared-based compensation cost 15,290 14,076 59,736 52,972
Add: Significant asset impairments and restructuring costs 12,842 1,460 24,538 18,139
Add: Acquisition and integration costs (735 ) 3,778 3,370 5,111
Add: Legal settlement 1,929 137 4,682
Adjusted EBITDA $ 151,629 $ 145,834 $ 557,259 $ 420,870

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.
  • 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 Packet Design and DonRiver. Ciena does not believe that these costs are reflective of its ongoing operating expense following its completion of these integration activities.
  • Significant asset impairments and restructuring costs - costs incurred as a result of restructuring activities taken to align resources with perceived market opportunities.
  • Legal settlements - costs incurred as a result of settlements, during the first quarter of fiscal 2019, the third quarter of fiscal 2018 and the fourth quarter of fiscal 2018.
  • Loss on extinguishment and modification of debt - reflects extinguishment of debt costs related to our conversion of Ciena's 4.0% convertible senior notes and debt modification expenses related to refinancing our then existing term loan, both of which occurred during the fourth quarter of fiscal 2018.
  • Non-cash interest expense - a non-cash debt discount expense amortized as interest expense during the term of Ciena's 4.0% senior convertible notes, which were converted during the fourth quarter of 2018, relating to the required separate accounting of the equity component of these convertible notes.
  • Change in fair value of debt conversion liability - a non-cash loss reflective of a mark to market fair value adjustment related to the outstanding conversion feature of Ciena's "New" 3.75% senior convertible notes.
  • 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 23.9% for fiscal 2019, and 25.9% for fiscal 2018. 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/20191212005133/en/

Press Contact:
Nicole Anderson
Ciena Corporation
+1 (410) 694-5761
pr@ciena.com

Investor Contact:
Gregg Lampf
Ciena Corporation
+1 (410) 694-5700
ir@ciena.com

Source: Ciena Corporation

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