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Press Release -- September 1st, 2022
Source: Ciena
Tags:

Ciena Reports Fiscal Third Quarter 2022 Financial Results

September 1, 2022 at 7:00 AM EDT

HANOVER, Md.–(BUSINESS WIRE)–Sep. 1, 2022– Ciena® Corporation (NASDAQ:CIEN, news, filings), a networking systems, services and software company, today announced unaudited financial results for its fiscal third quarter ended July 30, 2022.

  • Q3 Revenue: $868.0 million
  • Q3 Net Income per Share: $0.07 GAAP; $0.33 adjusted (non-GAAP)
  • Share Repurchases: Repurchased approximately 3.2 million shares of common stock for an aggregate price of $155.0 million during the quarter.

“Despite continued strong customer demand, our fiscal third quarter financial results were negatively impacted by late delivery and substantially lower-than-committed volume from a small number of suppliers for specific components that are essential for delivering finished goods to our customers,” said Gary Smith, president and CEO of Ciena. “While these dynamics will continue in our fiscal fourth quarter, we expect improvement as we move into fiscal 2023, providing us increased ability to service this unprecedented demand and continue to gain market share.”

For the fiscal third quarter 2022, Ciena reported revenue of $868.0 million as compared to $988.1 million for the fiscal third quarter 2021.

Ciena’s GAAP net income for the fiscal third quarter 2022 was $10.5 million, or $0.07 per diluted common share, which compares to a GAAP net income of $238.2 million, or $1.52 per diluted common share, for the fiscal third quarter 2021. Ciena’s GAAP net income for the fiscal third quarter of 2021 benefited from the recording $124.2 million tax benefit related to an internal transfer of non-U.S. intangible assets. 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 third quarter 2022 was $49.0 million, or $0.33 per diluted common share, which compares to an adjusted (non-GAAP) net income of $144.9 million, or $0.92 per diluted common share, for the fiscal third quarter 2021.

Fiscal Third Quarter 2022 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

Q3

Q3

Period Change

FY 2022

FY 2021

Y-T-Y*

Revenue

$

868.0

$

988.1

(12.2

)%

Gross margin

39.3

%

48.0

%

(8.7

)%

Operating expense

$

313.7

$

326.0

(3.8

)%

Operating margin

3.1

%

15.0

%

(11.9

)%

Non-GAAP Results

Q3

Q3

Period Change

FY 2022

FY 2021

Y-T-Y*

Revenue

$

868.0

$

988.1

(12.2

)%

Adj. gross margin

40.0

%

48.5

%

(8.5

)%

Adj. operating expense

$

273.1

$

290.4

(6.0

)%

Adj. operating margin

8.5

%

19.1

%

(10.6

)%

Adj. EBITDA

$

96.0

$

213.7

(55.1

)%

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

Revenue by Segment

Q3 FY 2022

Q3 FY 2021

Revenue

%**

Revenue

%**

Networking Platforms

Converged Packet Optical

$

563.9

65.0

$

712.9

72.1

Routing and Switching

100.7

11.6

69.7

7.1

Total Networking Platforms

664.6

76.6

782.6

79.2

Platform Software and Services

63.5

7.3

$

56.9

5.8

Blue Planet Automation Software and Services

17.3

2.0

16.6

1.7

Global Services

Maintenance Support and Training

72.8

8.4

74.0

7.5

Installation and Deployment

38.7

4.4

46.7

4.7

Consulting and Network Design

11.1

1.3

11.3

1.1

Total Global Services

122.6

14.1

132.0

13.3

Total

$

868.0

100.0

$

988.1

100.0

** Denotes % of total revenue

Additional Performance Metrics for Fiscal Third Quarter 2022

Revenue by Geographic Region

Q3 FY 2022

Q3 FY 2021

Revenue

% **

Revenue

% **

Americas

$

617.4

71.1

$

692.8

70.1

Europe, Middle East and Africa

124.2

14.3

189.2

19.2

Asia Pacific

126.4

14.6

106.1

10.7

Total

$

868.0

100.0

$

988.1

100.0

** Denotes % of total revenue

  • Two 10%-plus customers represented a total of 24.1% of revenue
  • Cash and investments totaled $1.3 billion
  • Cash flow used in operations totaled $205.4 million
  • Average days’ sales outstanding (DSOs) were 100
  • Accounts receivable, net balance was $802.5 million
  • Unbilled contract asset, net balance was $157.4 million
  • Inventories totaled $826.7 million, including:
    • Raw materials: $621.8 million
    • Work in process: $19.5 million
    • Finished goods: $187.0 million
    • Deferred cost of sales: $33.8 million
    • Reserve for excess and obsolescence: $(35.4) million
  • Product inventory turns were 2.1
  • Headcount totaled 8,013

Supplemental Materials and Live Web Broadcast of Unaudited Fiscal Third Quarter 2022 Results
Today, Thursday, September 1, 2022, 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 third quarter 2022 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: “Despite continued strong customer demand, our fiscal third quarter financial results were negatively impacted by late delivery and substantially lower-than-committed volume from a small number of suppliers for specific components that are essential for delivering finished goods to our customers. While these dynamics will continue in our fiscal fourth quarter, we expect improvement as we move into fiscal 2023, providing us increased ability to service this unprecedented demand and continue to gain market share.”

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 impact of supply chain constraints or disruptions; 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 our 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; changes in foreign currency exchange rates; factors beyond our control such as natural disasters, climate change, acts of war or terrorism, geopolitical events, including but not limited to the ongoing conflict between Ukraine and Russia, and public health emergencies; changes in tax or trade regulations, including the imposition of tariffs, duties or efforts to withdraw from or materially modify international trade agreements; and the other risk factors disclosed in Ciena’s periodic reports filed with the Securities and Exchange Commission (SEC) including Ciena’s Annual Report on Form 10-K filed with the SEC on December 17, 2021 and included in its Quarterly Report on Form 10-Q for the third quarter of fiscal 2022 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

Nine Months Ended

July 30

July 31

July 30

July 31

2022

2021

2022

2021

Revenue:

Products

$

684,284

$

804,414

$

2,109,239

$

2,071,677

Services

183,697

183,727

552,412

507,521

Total revenue

867,981

988,141

2,661,651

2,579,198

Cost of goods sold:

Products

434,756

420,236

1,259,378

1,074,935

Services

92,446

93,355

275,526

259,403

Total cost of goods sold

527,202

513,591

1,534,904

1,334,338

Gross profit

340,779

474,550

1,126,747

1,244,860

Operating expenses:

Research and development

150,025

146,225

457,758

389,212

Selling and marketing

105,880

114,924

344,700

322,589

General and administrative

41,121

48,863

131,191

132,491

Significant asset impairments and restructuring costs

7,692

9,789

20,203

23,865

Amortization of intangible assets

8,919

5,967

26,757

17,896

Acquisition and integration costs

35

259

598

860

Total operating expenses

313,672

326,027

981,207

886,913

Income from operations

27,107

148,523

145,540

357,947

Interest and other income (loss), net

366

795

4,860

(1,600

)

Interest expense

(12,642

)

(7,776

)

(33,275

)

(22,921

)

Income before income taxes

14,831

141,542

117,125

333,426

Provision (benefit) for income taxes

4,319

(96,690

)

21,868

(63,271

)

Net income

$

10,512

$

238,232

$

95,257

$

396,697

Net Income per Common Share

Basic net income per common share

$

0.07

$

1.53

$

0.63

$

2.55

Diluted net income per potential common share

$

0.07

$

1.52

$

0.62

$

2.53

Weighted average basic common shares outstanding

149,862

155,271

152,083

155,277

Weighted average dilutive potential common shares outstanding 1

150,463

156,744

153,209

156,742

1 Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per potential common share includes the following number of shares underlying certain stock option and stock unit awards: (i) 0.6 million and 1.1 million for the third quarter and first nine months of fiscal 2022, respectively; and (ii) 1.5 million shares for each of the third quarter and first nine months of fiscal 2021.

CIENA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

July 30,
2022

October 30,
2021

ASSETS

Current assets:

Cash and cash equivalents

$

859,687

$

1,422,546

Short-term investments

321,823

181,483

Accounts receivable, net

802,484

884,958

Inventories

826,673

374,265

Prepaid expenses and other

377,709

325,654

Total current assets

3,188,376

3,188,906

Long-term investments

77,723

70,038

Equipment, building, furniture and fixtures, net

281,690

284,968

Operating lease right-of-use assets

45,452

44,285

Goodwill

328,978

311,645

Other intangible assets, net

76,918

65,314

Deferred tax asset, net

797,924

800,180

Other long-term assets

103,721

99,891

Total assets

$

4,900,782

$

4,865,227

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

439,229

$

356,176

Accrued liabilities and other short-term obligations

301,589

409,285

Deferred revenue

147,808

118,007

Operating lease liabilities

19,786

18,632

Current portion of long-term debt

6,930

6,930

Total current liabilities

915,342

909,030

Long-term deferred revenue

61,845

57,457

Other long-term obligations

150,767

166,803

Long-term operating lease liabilities

42,639

41,564

Long-term debt, net

1,062,453

670,355

Total liabilities

$

2,233,046

$

1,845,209

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; 148,293,357 and 154,858,981 shares issued and outstanding

1,483

1,549

Additional paid-in capital

6,378,007

6,803,162

Accumulated other comprehensive income (loss)

(21,879

)

439

Accumulated deficit

(3,689,875

)

(3,785,132

)

Total stockholders’ equity

2,667,736

3,020,018

Total liabilities and stockholders’ equity

$

4,900,782

$

4,865,227

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)

Nine Months Ended

July 30

July 31

2022

2021

Cash flows provided by (used in) operating activities:

Net income

$

95,257

$

396,697

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

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

68,280

71,918

Share-based compensation expense

77,827

62,970

Amortization of intangible assets

36,521

27,341

Deferred taxes

(19,824

)

(139,543

)

Provision for inventory excess and obsolescence

12,038

13,460

Provision for warranty

12,416

12,726

Other

(442

)

6,350

Changes in assets and liabilities:

Accounts receivable

74,478

(163,149

)

Inventories

(464,664

)

(38,821

)

Prepaid expenses and other

(39,805

)

(17,272

)

Operating lease right-of-use assets

12,504

12,340

Accounts payable, accruals and other obligations

(37,587

)

31,388

Deferred revenue

34,949

24,969

Short and long-term operating lease liabilities

(15,197

)

(14,618

)

Net cash provided by (used in) operating activities

(153,249

)

286,756

Cash flows used in investing activities:

Payments for equipment, furniture, fixtures and intellectual property

(66,908

)

(67,290

)

Purchase of available-for-sale securities

(614,333

)

(132,895

)

Proceeds from maturities of available-for-sale securities

460,000

122,063

Settlement of foreign currency forward contracts, net

4,450

7,326

Acquisition of business, net of cash acquired

(62,043

)

Purchase of cost method equity investments

(8,000

)

Proceeds from sale of cost method equity investments

4,678

Net cash used in investing activities

(286,834

)

(66,118

)

Cash flows used in financing activities:

Proceeds from issuance of senior notes

400,000

Payment of long term debt

(3,465

)

(5,197

)

Payment of debt issuance costs

(5,159

)

Payment of finance lease obligations

(2,555

)

(2,243

)

Shares repurchased for tax withholdings on vesting of stock unit awards

(41,280

)

(36,484

)

Repurchases of common stock – repurchase program

(487,792

)

(64,555

)

Proceeds from issuance of common stock

30,224

28,289

Net cash used in financing activities

(110,027

)

(80,190

)

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

(12,780

)

1,344

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

(562,890

)

141,792

Cash, cash equivalents and restricted cash at beginning of period

1,422,604

1,088,708

Cash, cash equivalents and restricted cash at end of period

$

859,714

$

1,230,500

Supplemental disclosure of cash flow information

Cash paid during the period for interest

$

24,823

$

22,392

Cash paid during the period for income taxes, net

$

28,593

$

46,165

Operating lease payments

$

16,342

$

16,162

Non-cash investing and financing activities

Purchase of equipment in accounts payable

$

9,320

$

5,517

Repurchase of common stock in accrued liabilities from repurchase program

$

5,000

$

800

Operating right-of-use assets subject to lease liability

$

8,226

$

4,182

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

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

Quarter Ended

July 30

July 31

2022

2021

Gross Profit Reconciliation (GAAP/non-GAAP)

GAAP gross profit

$

340,779

$

474,550

Share-based compensation-products

1,002

1,037

Share-based compensation-services

1,940

1,315

Canadian Emergency Wage Subsidy-products

(94

)

Canadian Emergency Wage Subsidy-services

(47

)

Amortization of intangible assets

3,140

2,857

Total adjustments related to gross profit

6,082

5,068

Adjusted (non-GAAP) gross profit

$

346,861

$

479,618

Adjusted (non-GAAP) gross profit percentage

40.0

%

48.5

%

Operating Expense Reconciliation (GAAP/non-GAAP)

GAAP operating expense

$

313,672

$

326,027

Share-based compensation-research and development

8,233

5,541

Share-based compensation-sales and marketing

8,075

6,534

Share-based compensation-general and administrative

7,579

8,237

Canadian Emergency Wage Subsidy-research and development

(596

)

Canadian Emergency Wage Subsidy-sales and marketing

(53

)

Canadian Emergency Wage Subsidy-general and administrative

(46

)

Significant asset impairments and restructuring costs

7,692

9,789

Amortization of intangible assets

8,919

5,967

Acquisition and integration costs

35

259

Total adjustments related to operating expense

40,533

35,632

Adjusted (non-GAAP) operating expense

$

273,139

$

290,395

Income from Operations Reconciliation (GAAP/non-GAAP)

GAAP income from operations

$

27,107

$

148,523

Total adjustments related to gross profit

6,082

5,068

Total adjustments related to operating expense

40,533

35,632

Total adjustments related to income from operations

46,615

40,700

Adjusted (non-GAAP) income from operations

$

73,722

$

189,223

Adjusted (non-GAAP) operating margin percentage

8.5

%

19.1

%

Net Income Reconciliation (GAAP/non-GAAP)

GAAP net income

$

10,512

$

238,232

Exclude GAAP provision (benefit) for income taxes

4,319

(96,690

)

Income before income taxes

14,831

141,542

Total adjustments related to income from operations

46,615

40,700

Adjusted income before income taxes

61,446

182,242

Non-GAAP tax provision on adjusted income before income taxes

12,412

37,360

Adjusted (non-GAAP) net income

$

49,034

$

144,882

Weighted average basic common shares outstanding

149,862

155,271

Weighted average dilutive potential common shares outstanding 1

150,463

156,744

Net Income per Common Share

GAAP diluted net income per potential common share

$

0.07

$

1.52

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

$

0.33

$

0.92

Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share includes the following number of shares underlying certain stock option and stock unit awards: (i) 0.6 million for the third quarter of fiscal 2022, and (ii) 1.5 million for the third quarter of fiscal 2021

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

(in thousands) (unaudited)

Quarter Ended

July 30

July 31

2022

2021

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

Net income (GAAP)

$

10,512

$

238,232

Add: Interest expense

12,642

7,776

Less: Interest and other income, net

366

795

Add: Provision (benefit) for income taxes

4,319

(96,690

)

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

22,250

24,623

Add: Amortization of intangible assets

12,059

8,824

EBITDA

$

61,416

$

181,970

Less: Canadian Emergency Wage Subsidy

836

Add: Share-based compensation cost

26,857

22,471

Add: Significant asset impairments and restructuring costs

7,692

9,789

Add: Acquisition and integration costs

35

259

Adjusted EBITDA

$

96,000

$

213,653

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.
  • 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.
  • 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  includes financial, legal and accounting advisor expenses related to our acquisition of Xelic during the second quarter of fiscal 2022. Acquisition and integration costs for the third quarter of fiscal 2021 include costs of acquisition compensation associated with a three-year earn-out arrangement related to the DonRiver acquisition in fiscal 2018.
  • 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 20.2% for the third fiscal quarter of 2022 and 20.5% for the third fiscal quarter of 2021. This rate may be subject to change in the future, including as a result of changes in tax policy or tax strategy. Ciena’s GAAP tax provision for the third quarter of 2021 benefited from recording a $124.2 million tax benefit related to an internal transfer of non-U.S. intangible assets that was recognized as a result of the step-up in basis of such rights for tax purposes. The Non-GAAP tax provision for the periods presented do not include this tax benefit or the corresponding deferred tax asset.

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

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

Source: Ciena Corporation

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