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Press Release -- June 3rd, 2021
Source: Ciena
Tags:

Ciena Reports Fiscal Second Quarter 2021 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 second quarter ended May 1, 2021.

  • Q2 Revenue: $833.9 million
  • Q2 Net Income per Share: $0.66 GAAP; $0.62 adjusted (non-GAAP)
  • Share Repurchases: Repurchased approximately 0.5 million shares of common stock for an aggregate price of $26.2 million during the quarter

“We delivered strong fiscal second quarter results as we continued to see encouraging signs in the market environment, including improvements in customer spending,” said Gary Smith, president and CEO of Ciena. “These dynamics, combined with our business and financial performance in the first half of the year, give us strong visibility and confidence in our ability to achieve our financial targets as we move through the year.”

For the fiscal second quarter 2021, Ciena reported revenue of $833.9 million as compared to $894.1 million for the fiscal second quarter 2020.

Ciena's GAAP net income for the fiscal second quarter 2021 was $103.1 million, or $0.66 per diluted common share, which compares to a GAAP net income of $91.7 million, or $0.59 per diluted common share, for the fiscal second quarter 2020. Ciena's GAAP net income for the second quarter of 2021 benefited from recording $40.4 million in pre-tax amounts from the Canadian Emergency Wage Subsidy program. See APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measures for more information and a reconciliation of our adjusted (non-GAAP) net income which excludes the effect of these amounts.

Ciena's adjusted (non-GAAP) net income for the fiscal second quarter 2021 was $97.6 million, or $0.62 per diluted common share, which compares to an adjusted (non-GAAP) net income of $117.4 million, or $0.76 per diluted common share, for the fiscal second quarter 2020.

Fiscal Second Quarter 2021 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 2021

FY 2020

Y-T-Y*

Revenue

$

833.9

$

894.1

(6.7

)%

Gross margin

49.5

%

46.2

%

3.3

%

Operating expense

$

278.8

$

285.8

(2.5

)%

Operating margin

16.0

%

14.3

%

1.7

%

Non-GAAP Results

Q2

Q2

FY 2021

FY 2020

Y-T-Y*

Revenue

$

833.9

$

894.1

(6.7

)%

Adj. gross margin

49.2

%

46.9

%

2.3

%

Adj. operating expense

$

278.7

$

258.7

7.7

%

Adj. operating margin

15.8

%

17.9

%

(2.1

)%

Adj. EBITDA

$

156.2

$

183.0

(14.6

)%

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

Revenue by Segment

Q2 FY 2021

Q2 FY 2020

Revenue

%**

Revenue

%**

Networking Platforms

Converged Packet Optical

$

573.7

68.8

$

654.3

73.2

Routing and Switching (1)

63.6

7.6

64.2

7.2

Total Networking Platforms

637.3

76.4

718.5

80.4

Platform Software and Services

56.7

6.8

45.0

5.0

Blue Planet Automation Software and Services

23.9

2.9

15.0

1.7

Global Services

Maintenance Support and Training

70.4

8.4

71.5

8.0

Installation and Deployment

38.0

4.6

34.2

3.8

Consulting and Network Design

7.6

0.9

9.9

1.1

Total Global Services

116.0

13.9

115.6

12.9

Total

$

833.9

100.0

$

894.1

100.0

**

Denotes % of total revenue

(1)

Ciena renamed its former “Packet Networking” product line “Routing and Switching” effective as of the beginning of fiscal 2021. This change, affecting only the presentation of such information, was made on a prospective basis and does not impact comparability of previous financial results or the composition of this product category.

Additional Performance Metrics for Fiscal Second Quarter 2021

Revenue by Geographic Region

Q2 FY 2021

Q2 FY 2020

Revenue

% **

Revenue

% **

Americas

$

587.5

70.4

$

650.4

72.7

Europe, Middle East and Africa

155.0

18.6

141.4

15.8

Asia Pacific

91.4

11.0

102.3

11.5

Total

$

833.9

100.0

$

894.1

100.0

** Denotes % of total revenue

  • One 10%-plus customer represented a total of 15% of revenue
  • Cash and investments totaled $1.4 billion
  • Cash flow from operations totaled $225.0 million
  • Average days' sales outstanding (DSOs) were 86
  • Accounts receivable, net balance was $716.8 million
  • Unbilled contract asset, net balance was $81.4 million
  • Inventories totaled $401.2 million, including:
    • Raw materials: $139.4 million
    • Work in process: $10.8 million
    • Finished goods: $234.2 million
    • Deferred cost of sales: $57.4 million
    • Reserve for excess and obsolescence: $(40.6) million
  • Product inventory turns were 3.4
  • Headcount totaled 7,077

Supplemental Materials and Live Web Broadcast of Unaudited Fiscal Second Quarter 2021 Results

Today, Thursday, June 3, 2021, 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 2021 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, Securities and Exchange Commission ("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 delivered strong fiscal second quarter results as we continued to see encouraging signs in the market environment, including improvements in customer spending,” and “These dynamics, combined with our business and financial performance in the first half of the year, give us strong visibility and confidence in our ability to achieve our financial targets as we move through the year.”

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 successfully our business and growth strategies; the duration and severity of the COVID-19 pandemic and its impact 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; 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; 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 18, 2020 and included in its Quarterly Report on Form 10-Q for the second quarter of fiscal 2021 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, 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 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 @CienaLinkedIn, 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

Six Months Ended

May 1,

May 2,

May 1,

May 2,

2021

2020

2021

2020

Revenue:

Products

$

670,043

$

739,892

$

1,267,263

$

1,427,107

Services

163,884

154,161

323,794

299,858

Total revenue

833,927

894,053

1,591,057

1,726,965

Cost of goods sold:

Products

339,601

405,138

654,699

794,151

Services

81,907

75,589

166,048

148,953

Total cost of goods sold

421,508

480,727

820,747

943,104

Gross profit

412,419

413,326

770,310

783,861

Operating expenses:

Research and development

110,246

131,530

242,987

262,430

Selling and marketing

110,387

101,214

207,665

208,280

General and administrative

43,635

42,030

83,628

84,498

Amortization of intangible assets

6,019

5,839

11,929

11,692

Significant asset impairments and restructuring costs

8,209

3,811

14,076

8,283

Acquisition and integration costs

294

1,414

601

3,233

Total operating expenses

278,790

285,838

560,886

578,416

Income from operations

133,629

127,488

209,424

205,445

Interest and other income (loss), net

(1,274

)

(2,665

)

(2,395

)

981

Interest expense

(7,785

)

(7,860

)

(15,145

)

(16,675

)

Loss on extinguishment and modification of debt

(646

)

Income before income taxes

124,570

116,963

191,884

189,105

Provision for income taxes

21,453

25,308

33,419

35,122

Net income

$

103,117

$

91,655

$

158,465

$

153,983

Net Income per Common Share

Basic net income per common share

$

0.66

$

0.60

$

1.02

$

1.00

Diluted net income per potential common share

$

0.66

$

0.59

$

1.01

$

0.99

Weighted average basic common shares outstanding

155,331

153,858

155,257

154,099

Weighted average dilutive potential common shares outstanding 1

156,876

155,141

156,734

155,443

1 Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per potential common share for the second quarter of fiscal 2021 includes 1.5 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 potential common share for the first six months of fiscal 2021 includes 1.5 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 potential 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 potential common share for the first six months of fiscal 2020 includes 1.3 million shares underlying certain stock option and stock unit awards.

CIENA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

May 1,
2021

October 31,
2020

ASSETS

Current assets:

Cash and cash equivalents

$

1,202,974

$

1,088,624

Short-term investments

151,816

150,667

Accounts receivable, net

716,779

719,405

Inventories

401,233

344,379

Prepaid expenses and other

321,651

308,084

Total current assets

2,794,453

2,611,159

Long-term investments

91,715

82,226

Equipment, building, furniture and fixtures, net

298,329

272,377

Operating lease right-of-use assets

50,997

57,026

Goodwill

311,734

310,847

Other intangible assets, net

82,879

96,647

Deferred tax asset, net

653,922

647,805

Other long-term assets

103,984

102,830

Total assets

$

4,388,013

$

4,180,917

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

279,247

$

291,904

Accrued liabilities and other short-term obligations

330,060

334,132

Deferred revenue

147,075

108,700

Operating lease liabilities

19,364

19,035

Current portion of long-term debt

6,930

6,930

Total current liabilities

782,676

760,701

Long-term deferred revenue

57,224

49,663

Other long-term obligations

127,700

123,185

Long-term operating lease liabilities

53,795

61,415

Long-term debt, net

673,355

676,356

Total liabilities

$

1,694,750

$

1,671,320

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; 154,962,122 and 154,563,005 shares issued and outstanding

1,550

1,546

Additional paid-in capital

6,813,215

6,826,531

Accumulated other comprehensive gain (loss)

5,361

(35,358

)

Accumulated deficit

(4,126,863

)

(4,283,122

)

Total stockholders’ equity

2,693,263

2,509,597

Total liabilities and stockholders’ equity

$

4,388,013

$

4,180,917

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)

Six Months Ended

May 1,

May 2,

2021

2020

Cash flows provided by operating activities:

Net income

$

158,465

$

153,983

Adjustments to reconcile net income to net cash provided by operating activities:

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

47,295

48,381

Share-based compensation costs

40,499

33,579

Amortization of intangible assets

18,517

19,361

Deferred taxes

(9,606

)

25,420

Provision for inventory excess and obsolescence

10,402

12,640

Provision for warranty

7,937

13,793

Other

5,928

16,190

Changes in assets and liabilities:

Accounts receivable

(180

)

15,865

Inventories

(66,934

)

5,618

Prepaid expenses and other

(8,565

)

(54,839

)

Operating lease right-of-use assets

8,253

8,642

Accounts payable, accruals and other obligations

(30,108

)

(151,713

)

Deferred revenue

45,482

(5,679

)

Short and long-term operating lease liabilities

(9,726

)

(10,311

)

Net cash provided by operating activities

217,659

130,930

Cash flows used in investing activities:

Payments for equipment, furniture, fixtures and intellectual property

(51,651

)

(45,458

)

Purchase of available for sale securities

(102,429

)

(40,894

)

Proceeds from maturities of available for sale securities

91,810

60,000

Settlement of foreign currency forward contracts, net

9,414

(3,836

)

Acquisition of business, net of cash acquired

(28,300

)

Proceeds from sale of equity investment

4,678

Net cash used in investing activities

(48,178

)

(58,488

)

Cash flows used in financing activities:

Payment of long term debt

(3,465

)

(1,733

)

Payment of debt issuance costs

(382

)

Payment of finance lease obligations

(1,463

)

(1,381

)

Shares repurchased for tax withholdings on vesting of restricted stock units

(27,893

)

(18,200

)

Repurchases of common stock - repurchase program

(38,498

)

(74,535

)

Proceeds from issuance of common stock

13,480

12,290

Net cash used in financing activities

(57,839

)

(83,941

)

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

2,696

(4,876

)

Net increase (decrease) in cash, cash equivalents and restricted cash

114,338

(16,375

)

Cash, cash equivalents and restricted cash at beginning of period

1,088,708

904,161

Cash, cash equivalents and restricted cash at end of period

$

1,203,046

$

887,786

Supplemental disclosure of cash flow information

Cash paid during the period for interest

$

14,949

$

17,590

Cash paid during the period for income taxes, net

$

27,666

$

22,011

Operating lease payments

$

10,785

$

11,409

Non-cash investing and financing activities

Purchase of equipment in accounts payable

$

4,966

$

4,480

Repurchase of common stock in accrued liabilities from repurchase program

$

900

$

Operating lease right-of-use assets subject to lease liability

$

1,770

$

4,887

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

(in thousands, except per share data) (unaudited)

Quarter Ended

May 1,

May 2,

2021

2020

Gross Profit Reconciliation (GAAP/non-GAAP)

GAAP gross profit

$

412,419

$

413,326

Share-based compensation-products

498

827

Share-based compensation-services

1,421

1,036

Canadian Emergency Wage Subsidy-products

(4,189

)

Canadian Emergency Wage Subsidy-services

(2,620

)

Amortization of intangible assets

2,856

3,835

Total adjustments related to gross profit

(2,034

)

5,698

Adjusted (non-GAAP) gross profit

$

410,385

$

419,024

Adjusted (non-GAAP) gross profit percentage

49.2

%

46.9

%

Operating Expense Reconciliation (GAAP/non-GAAP)

GAAP operating expense

$

278,790

$

285,838

Share-based compensation-research and development

5,844

4,822

Share-based compensation-sales and marketing

6,610

5,264

Share-based compensation-general and administrative

6,743

5,975

Canadian Emergency Wage Subsidy-research and development

(28,923

)

Canadian Emergency Wage Subsidy-sales and marketing

(2,551

)

Canadian Emergency Wage Subsidy-general and administrative

(2,161

)

Amortization of intangible assets

6,019

5,839

Significant asset impairments and restructuring costs

8,209

3,811

Acquisition and integration costs

294

1,414

Total adjustments related to operating expense

84

27,125

Adjusted (non-GAAP) operating expense

$

278,706

$

258,713

Income from Operations Reconciliation (GAAP/non-GAAP)

GAAP income from operations

$

133,629

$

127,488

Total adjustments related to gross profit

(2,034

)

5,698

Total adjustments related to operating expense

84

27,125

Total adjustments related to income from operations

(1,950

)

32,823

Adjusted (non-GAAP) income from operations

$

131,679

$

160,311

Adjusted (non-GAAP) operating margin percentage

15.8

%

17.9

%

Net Income Reconciliation (GAAP/non-GAAP)

GAAP net income

$

103,117

$

91,655

Exclude GAAP provision for income taxes

21,453

25,308

Income before income taxes

124,570

116,963

Total adjustments related to income from operations

(1,950

)

32,823

Unrealized loss on equity investment

165

Adjusted income before income taxes

122,785

149,786

Non-GAAP tax provision on adjusted income before income taxes

25,171

32,354

Adjusted (non-GAAP) net income

$

97,614

$

117,432

Weighted average basic common shares outstanding

155,331

153,858

Weighted average dilutive potential common shares outstanding 1

156,876

155,141

Net Income per Common Share

GAAP diluted net income per common share

$

0.66

$

0.59

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

$

0.62

$

0.76

Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share for the second quarter of fiscal 2021 includes 1.5 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 potential common share for the second quarter of fiscal 2020 includes 1.3 million shares underlying certain stock option and stock unit awards.

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

(in thousands) (unaudited)

Quarter Ended

May 1,

May 2,

2021

2020

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

Net income (GAAP)

$

103,117

$

91,655

Add: Interest expense

7,785

7,860

Add: Interest and other loss, net

1,274

2,665

Add: Provision for income taxes

21,453

25,308

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

24,107

22,599

Add: Amortization of intangible assets

8,875

9,674

EBITDA

$

166,611

$

159,761

Less: Canadian Emergency Wage Subsidy

40,444

Add: Share-based compensation cost

21,535

17,977

Add: Significant asset impairments and restructuring costs

8,209

3,811

Add: Acquisition and integration costs

294

1,414

Adjusted EBITDA

$

156,205

$

182,963

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.
  • Canadian Emergency Wage Subsidy -a program introduced by the Government of Canada to offset a portion of employee wages for a limited period in response to COVID-19 outbreak.
  • 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 and the redesign of business processes.
  • Acquisition and integration costs-includes costs of acquisition compensation associated with a three-year earn-out arrangement related to the 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.
  • Unrealized loss on equity investment - reflects a change in the carrying value of a certain cost method equity investment.
  • 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 20.5% for the second fiscal quarter of 2021 and 21.6% for the second fiscal quarter of 2020. This rate may be subject to change in the future, including as a result of changes in tax policy or tax strategy.

Press Contact:
Jamie Moody
Ciena Corporation
+1 (214) 995-8035
pr@ciena.com

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

Source: Ciena Corporation

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