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Press Release -- March 5th, 2020
Source: Ciena
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Ciena Reports Fiscal First Quarter 2020 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 first quarter ended January 31, 2020.

  • Q1 Revenue: $832.9 million, increasing 7.0% year over year
  • Q1 Net Income per Share: $0.40 GAAP; $0.52 adjusted (non-GAAP)
  • Share Repurchases: Repurchased approximately 1.3 million shares of common stock for an aggregate price of $50.7 million during the quarter

"We began fiscal 2020 with another quarter of outstanding financial performance, including 7% year-over-year revenue growth and robust operating results," said Gary Smith, President and CEO, Ciena. "We are well-positioned to continue gaining share by leveraging our financial strength, global scale, diversification and increasing technology leadership."

For the fiscal first quarter 2020, Ciena reported revenue of $832.9 million as compared to $778.5 million for the fiscal first quarter 2019.

Ciena's GAAP net income for the fiscal first quarter 2020 was $62.3 million, or $0.40 per diluted common share, which compares to a GAAP net income of $33.6 million, or $0.21 per diluted common share, for the fiscal first quarter 2019.

Ciena's adjusted (non-GAAP) net income for the fiscal first quarter 2020 was $81.7 million, or $0.52 per diluted common share, which compares to an adjusted (non-GAAP) net income of $52.8 million, or $0.33 per diluted common share, for the fiscal first quarter 2019.

Fiscal First 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

Q1

Q1

FY 2020

FY 2019

Y-T-Y*

Revenue

$

832.9

$

778.5

7.0

%

Gross margin

44.5

%

41.5

%

3.0

%

Operating expense

$

292.6

$

275.4

6.2

%

Operating margin

9.4

%

6.2

%

3.2

%

Non-GAAP Results

Q1

Q1

FY 2020

FY 2019

Y-T-Y*

Revenue

$

832.9

$

778.5

7.0

%

Adj. gross margin

45.1

%

42.2

%

2.9

%

Adj. operating expense

$

266.4

$

253.6

5.0

%

Adj. operating margin

13.1

%

9.6

%

3.5

%

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

Revenue by Segment

Q1 FY 2020

Q1 FY 2019

Revenue

%**

Revenue

%**

Networking Platforms

Converged Packet Optical

$

591.5

71.0

$

548.9

70.5

Packet Networking

67.5

8.1

71.6

9.2

Total Networking Platforms

659.0

79.1

620.5

79.7

Platform Software and Services

51.9

6.2

41.6

5.3

Blue Planet Automation Software and Services

15.5

1.9

15.0

1.9

Global Services

Maintenance Support and Training

61.8

7.4

61.3

8.0

Installation and Deployment

34.9

4.2

30.6

3.9

Consulting and Network Design

9.8

1.2

9.5

1.2

Total Global Services

106.5

12.8

101.4

13.1

Total

$

832.9

100.0

$

778.5

100.0

Additional Performance Metrics for Fiscal First Quarter 2020

Revenue by Geographic Region

Q1 FY 2020

Q1 FY 2019

Revenue

% **

Revenue

% **

Americas

$

574.0

68.9

$

516.4

66.3

Europe, Middle East and Africa

130.0

15.6

129.2

16.6

Asia Pacific

128.9

15.5

132.9

17.1

Total

$

832.9

100.0

$

778.5

100.0

** Denotes % of total revenue

  • Two 10%-plus customers represented a total of 24% of revenue
  • Cash and investments totaled $957.4 million
  • Cash flow from operations totaled $39.8 million
  • Average days' sales outstanding (DSOs) were 80
  • Accounts receivable balance was $655.1 million
  • Unbilled contract asset balance was $83.7 million
  • Inventories totaled $342.7 million, including:
    • Raw materials: $106.5 million
    • Work in process: $11.7 million
    • Finished goods: $219.9 million
    • Deferred cost of sales: $49.3 million
    • Reserve for excess and obsolescence: $(44.7) million
  • Product inventory turns were 4.5
  • Headcount totaled 6,588

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

Today, Thursday, March 5, 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 first 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: “We began fiscal 2020 with another quarter of outstanding financial performance, including 7% year-over-year revenue growth and robust operating results. We are well-positioned to continue gaining share by leveraging our financial strength, global scale, diversification and increasing technology leadership.”

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; factors beyond our control such as natural disasters, pandemics, or a widespread health epidemic, such as the outbreak of the 2019 novel coronavirus; the impact of the Tax Cuts and Jobs Act; changes in tax or trade regulations, including the imposition of tariffs and duties; 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 (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 CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

Quarter Ended January 31,

2020

2019

Revenue:

Products

$

687,215

$

642,532

Services

145,697

135,995

Total revenue

832,912

778,527

Cost of goods sold:

Products

389,013

380,442

Services

73,364

74,744

Total cost of goods sold

462,377

455,186

Gross profit

370,535

323,341

Operating expenses:

Research and development

130,900

128,633

Selling and marketing

107,066

98,113

General and administrative

42,468

39,243

Amortization of intangible assets

5,853

5,528

Significant asset impairments and restructuring costs

4,472

2,273

Acquisition and integration costs

1,819

1,608

Total operating expenses

292,578

275,398

Income from operations

77,957

47,943

Interest and other income, net

3,646

4,253

Interest expense

(8,815

)

(9,441

)

Loss on extinguishment and modification of debt

(646

)

Income before income taxes

72,142

42,755

Provision for income taxes

9,814

9,139

Net income

$

62,328

$

33,616

Net Income per Common Share

Basic net income per common share

$

0.40

$

0.22

Diluted net income per potential common share

$

0.40

$

0.21

Weighted average basic common shares outstanding

154,334

156,314

Weighted average dilutive potential common shares outstanding 1

155,738

158,174

1. Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per common share for the first quarter of fiscal 2020 includes 1.4 million shares underlying certain stock options and stock unit awards.

Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per common share for the first quarter of fiscal 2019 includes 1.9 million shares underlying certain stock options and stock unit awards.

CIENA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

January 31,
2020

October 31,
2019

ASSETS

Current assets:

Cash and cash equivalents

$

837,286

$

904,045

Short-term investments

110,067

109,940

Accounts receivable, net

655,105

724,854

Inventories

342,673

345,049

Prepaid expenses and other

321,313

297,914

Total current assets

2,266,444

2,381,802

Long-term investments

10,076

10,014

Equipment, building, furniture and fixtures, net

277,739

286,884

Operating lease right-of-use assets

50,148

Goodwill

310,913

297,937

Other intangible assets, net

125,640

112,781

Deferred tax asset, net

699,439

714,942

Other long-term assets

90,488

88,986

Total assets

$

3,830,887

$

3,893,346

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

311,748

$

344,819

Accrued liabilities and other short-term obligations

273,305

382,740

Deferred revenue

122,410

111,381

Operating lease liabilities

18,623

Current portion of long-term debt

7,000

7,000

Total current liabilities

733,086

845,940

Long-term deferred revenue

44,425

45,492

Other long-term obligations

125,607

148,747

Long-term operating lease liabilities

53,333

Long-term debt, net

680,786

680,406

Total liabilities

$

1,637,237

$

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; 153,946,833
and 154,403,850 shares issued and outstanding

1,539

1,544

Additional paid-in capital

6,801,907

6,837,714

Accumulated other comprehensive loss

(27,711

)

(22,084

)

Accumulated deficit

(4,582,085

)

(4,644,413

)

Total stockholders’ equity

2,193,650

2,172,761

Total liabilities and stockholders’ equity

$

3,830,887

$

3,893,346

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)

Three Months Ended January 31,

2020

2019

Cash flows provided by (used in) operating activities:

Net income

$

62,328

$

33,616

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements

25,782

21,513

Share-based compensation costs

15,602

13,755

Amortization of intangible assets

9,687

8,947

Deferred taxes

10,788

5,037

Provision for inventory excess and obsolescence

6,699

4,673

Provision for warranty

7,898

3,891

Other

4,540

3,356

Changes in assets and liabilities:

Accounts receivable

64,938

38,544

Inventories

(4,481

)

(67,555

)

Prepaid expenses and other

(29,792

)

1,133

Operating lease right-of-use assets

4,176

Accounts payable, accruals and other obligations

(142,229

)

(76,351

)

Deferred revenue

8,926

(4,664

)

Short and long-term operating lease liabilities

(5,098

)

Net cash provided by (used in) operating activities

39,764

(14,105

)

Cash flows provided by (used in) investing activities:

Payments for equipment, furniture, fixtures and intellectual property

(26,820

)

(15,345

)

Purchase of available for sale securities

(29,733

)

(68,516

)

Proceeds from maturities of available for sale securities

30,000

60,000

Proceeds from sales of available for sale securities

98,265

Settlement of foreign currency forward contracts, net

(73

)

(4,650

)

Acquisition of business, net of cash acquired

(28,300

)

Purchase of equity investment

(333

)

Net cash provided by (used in) investing activities

(54,926

)

69,421

Cash flows used in financing activities:

Payment of long term debt

(1,750

)

Payment of debt issuance costs

(382

)

Payment of finance lease obligations

(722

)

(758

)

Payment for debt conversion liability

(111,268

)

Shares repurchased for tax withholdings on vesting of restricted stock units

(12,572

)

(10,026

)

Repurchases of common stock - repurchase program

(49,203

)

(19,721

)

Proceeds from issuance of common stock

11,862

10,899

Net cash used in financing activities

(51,017

)

(132,624

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(643

)

695

Net decrease in cash, cash equivalents and restricted cash

(66,822

)

(76,613

)

Cash, cash equivalents and restricted cash at beginning of period

904,161

745,423

Cash, cash equivalents and restricted cash at end of period

$

837,339

$

668,810

Supplemental disclosure of cash flow information

Cash paid during the period for interest

$

9,325

$

10,007

Cash paid during the period for income taxes, net

$

8,325

$

3,402

Operating lease payments

$

5,642

$

Non-cash investing and financing activities

Purchase of equipment in accounts payable

$

5,905

$

5,471

Repurchase of common stock in accrued liabilities from repurchase program

$

1,501

$

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

$

1,157

$

APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measures (unaudited)

Quarter Ended January 31,

2020

2019

Gross Profit Reconciliation (GAAP/non-GAAP)

GAAP gross profit

$

370,535

$

323,341

Share-based compensation-products

671

637

Share-based compensation-services

842

770

Amortization of intangible assets

3,834

3,418

Total adjustments related to gross profit

5,347

4,825

Adjusted (non-GAAP) gross profit

$

375,882

$

328,166

Adjusted (non-GAAP) gross profit percentage

45.1

%

42.2

%

Operating Expense Reconciliation (GAAP/non-GAAP)

GAAP operating expense

$

292,578

$

275,398

Share-based compensation-research and development

3,849

3,391

Share-based compensation-sales and marketing

4,613

3,785

Share-based compensation-general and administrative

5,527

5,112

Amortization of intangible assets

5,853

5,528

Significant asset impairments and restructuring costs

4,472

2,273

Acquisition and integration costs

1,819

1,608

Legal settlement

137

Total adjustments related to operating expense

26,133

21,834

Adjusted (non-GAAP) operating expense

$

266,445

$

253,564

Income from Operations Reconciliation (GAAP/non-GAAP)

GAAP income from operations

$

77,957

$

47,943

Total adjustments related to gross profit

5,347

4,825

Total adjustments related to operating expense

26,133

21,834

Total adjustments related to income from operations

31,480

26,659

Adjusted (non-GAAP) income from operations

$

109,437

$

74,602

Adjusted (non-GAAP) operating margin percentage

13.1

%

9.6

%

Net Income Reconciliation (GAAP/non-GAAP)

GAAP net income

$

62,328

$

33,616

Exclude GAAP provision for income taxes

9,814

9,139

Income before income taxes

72,142

42,755

Total adjustments related to income from operations

31,480

26,659

Loss on extinguishment and modification of debt

646

Adjusted income before income taxes

104,268

69,414

Non-GAAP tax provision on adjusted income before income taxes

22,522

16,590

Adjusted (non-GAAP) net income

$

81,746

$

52,824

Weighted average basic common shares outstanding

154,334

156,314

Weighted average dilutive potential common shares outstanding 1

155,738

158,174

Net Income per Common Share

GAAP diluted net income per common share

$

0.40

$

0.21

Adjusted (non-GAAP) diluted net income per common share

$

0.52

$

0.33

 1.

Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per common share for the first quarter of fiscal 2020 includes 1.4 million shares underlying certain stock options 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 first quarter of fiscal 2019 includes 1.9 million shares underlying certain stock options and restricted stock unit awards.

APPENDIX B - Calculation of EBITDA and Adjusted EBITDA (unaudited)

Quarter Ended January 31,

2020

2019

Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)

Net income (GAAP)

$

62,328

$

33,616

Add: Interest expense

8,815

9,441

Less: Interest and other income, net

3,646

4,253

Add: Loss on extinguishment and modification of debt

646

Add: Provision for income taxes

9,814

9,139

Add: Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements

25,782

21,513

Add: Amortization of intangible assets

9,687

8,947

EBITDA

$

113,426

$

78,403

Add: Shared-based compensation cost

15,602

13,755

Add: Significant asset impairments and restructuring costs

4,472

2,273

Add: Acquisition and integration costs

1,819

1,608

Add: Legal settlement

137

Adjusted EBITDA

$

135,319

$

96,176

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 Packet Design and DonRiver in fiscal 2018, including costs associated with a three-year earn-out arrangement related to the DonRiver acquisition and Ciena's acquisition of Centina in the first quarter of fiscal 2020. Ciena does not believe that these costs are reflective of its ongoing operating expense following its completion of these integration activities.
  • Legal settlement - costs incurred as a result of a settlement, during the first quarter of fiscal 2019.
  • Loss on extinguishment and modification of debt - reflects extinguishment and modification of debt expenses related to refinancing of our Term Loan due September 28, 2025.
  • 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 first fiscal quarter of 2020 and 23.9% for the first 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.

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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