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Press Release -- March 6th, 2023
Source: Ciena
Tags:

Ciena Reports Fiscal First Quarter 2023 Financial Results

Revenue increased 25% year-over-year

HANOVER, Md.–(BUSINESS WIRE)–Mar. 6, 2023– 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 28, 2023.

  • Q1 Revenue: $1.06 billion
  • Q1 Net Income per Share: $0.51 GAAP; $0.64 adjusted (non-GAAP)

“We delivered record revenue in the first quarter, reflecting continued gradual improvement in the supply chain environment and strong customer demand for our market-leading technology,” said Gary Smith, president and CEO of Ciena. “With strong momentum across our business, supported by robust fundamental drivers and visibility provided by our backlog, we remain confident in our ability to continue to take market share.”

For fiscal first quarter 2023, Ciena reported revenue of $1.06 billion as compared to $844.4 million for the fiscal first quarter 2022.

Ciena’s GAAP net income for the fiscal first quarter 2023 was $76.2 million, or $0.51 per diluted common share, which compares to a GAAP net income of $45.8 million, or $0.29 per diluted common share, for the fiscal first quarter 2022.

Ciena’s adjusted (non-GAAP) net income for the fiscal first quarter 2023 was $95.6 million, or $0.64 per diluted common share, which compares to an adjusted (non-GAAP) net income of $72.6 million, or $0.47 per diluted common share, for the fiscal first quarter 2022.

Fiscal First Quarter 2023 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 (unaudited)

Q1

Q1

Period Change

FY 2023

FY 2022

Y-T-Y*

Revenue

$

1,056.5

$

844.4

25.1

%

Gross margin

43.2

%

45.5

%

(2.3

)%

Operating expense

$

370.7

$

324.2

14.3

%

Operating margin

8.1

%

7.1

%

1.0

%

Non-GAAP Results (unaudited)

Q1

Q1

Period Change

FY 2023

FY 2022

Y-T-Y*

Revenue

$

1,056.5

$

844.4

25.1

%

Adj. gross margin

43.7

%

46.2

%

(2.5

)%

Adj. operating expense

$

329.3

$

290.0

13.6

%

Adj. operating margin

12.6

%

11.8

%

0.8

%

Adj. EBITDA

$

155.1

$

123.7

25.4

%

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

Revenue by Segment (unaudited)

Q1 FY 2023

Q1 FY 2022

Revenue

%**

Revenue

%**

Networking Platforms

Converged Packet Optical

$

735.6

69.6

$

540.9

64.1

Routing and Switching

119.5

11.3

85.7

10.1

Total Networking Platforms

855.1

80.9

626.6

74.2

Platform Software and Services

73.4

6.9

72.9

8.6

Blue Planet Automation Software and Services

15.4

1.5

21.1

2.5

Global Services

Maintenance Support and Training

67.9

6.4

72.5

8.6

Installation and Deployment

34.6

3.3

40.4

4.8

Consulting and Network Design

10.1

1.0

10.9

1.3

Total Global Services

112.6

10.7

123.8

14.7

Total

$

1,056.5

100.0

$

844.4

100.0

** Denotes % of total revenue

Additional Performance Metrics for Fiscal First Quarter 2023

Revenue by Geographic Region (unaudited)

Q1 FY 2023

Q1 FY 2022

Revenue

% **

Revenue

% **

Americas

$

765.1

72.4

$

595.1

70.5

Europe, Middle East and Africa

152.8

14.5

150.8

17.8

Asia Pacific

138.6

13.1

98.5

11.7

Total

$

1,056.5

100.0

$

844.4

100.0

** Denotes % of total revenue

  • Two customers represented 10%-plus of revenue combining for a total of 25.7% of revenue
  • Cash and investments totaled $1.2 billion
  • Cash flow used in operations totaled $265.6 million
  • Average days’ sales outstanding (DSOs) were 103
  • Accounts receivable, net balance was $1.05 billion
  • Unbilled contract asset, net balance was $148.8 million
  • Inventories totaled $1.18 billion, including:
    • Raw materials: $846.6 million
    • Work in process: $18.4 million
    • Finished goods: $300.7 million
    • Deferred cost of sales: $51.3 million
    • Reserve for excess and obsolescence: $(38.9) million
  • Product inventory turns were 1.7
  • Headcount totaled 8,361

Supplemental Materials and Live Web Broadcast of Unaudited Fiscal First Quarter 2023 Results

Today, Monday, March 6, 2023, 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 first quarter 2023 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 record revenue in the first quarter, reflecting continued gradual improvement in the supply chain environment and strong customer demand for our market-leading technology”; “With strong momentum across our business, supported by robust fundamental drivers and visibility provided by our backlog, we remain confident in our ability to continue to take 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 its Annual Report on Form 10-K filed with the SEC on December 16, 2022 and included in its Quarterly Report on Form 10-Q for the first quarter of fiscal 2023 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 global leader in networking systems, services, and software. We build the most adaptive networks in the industry, enabling customers to anticipate and meet ever-increasing digital demands. For three-plus decades, Ciena has brought our humanity to our relentless pursuit of innovation. Prioritizing collaborative relationships with our customers, partners, and communities, we create flexible, open, and sustainable networks that better serve all users—today and into the future. For updates on Ciena, follow us on LinkedInTwitter, 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 28,

January 29,

2023

2022

Revenue:

Products

$

877,715

$

665,007

Services

178,806

179,436

Total revenue

1,056,521

844,443

Cost of goods sold:

Products

500,337

372,565

Services

100,238

87,691

Total cost of goods sold

600,575

460,256

Gross profit

455,946

384,187

Operating expenses:

Research and development

181,730

148,409

Selling and marketing

123,807

118,881

General and administrative

50,896

44,498

Significant asset impairments and restructuring costs

4,298

3,409

Amortization of intangible assets

7,441

8,918

Acquisition and integration costs

2,558

68

Total operating expenses

370,730

324,183

Income from operations

85,216

60,004

Interest and other income, net

31,973

3,686

Interest expense

(15,870

)

(8,648

)

Income before income taxes

101,319

55,042

Provision for income taxes

25,078

9,219

Net income

$

76,241

$

45,823

Net Income per Common Share

Basic net income per common share

$

0.51

$

0.30

Diluted net income per potential common share

$

0.51

$

0.29

Weighted average basic common shares outstanding

149,081

154,151

Weighted average dilutive potential common shares outstanding 1

149,551

155,807

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) 0.5 million for the first quarter of fiscal 2023; and (ii) 1.7 million shares for the first quarter of fiscal 2022.

CIENA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

January 28,

October 29,

2023

2022

ASSETS

Current assets:

Cash and cash equivalents

$

1,054,549

$

994,352

Short-term investments

100,424

153,989

Accounts receivable, net

1,054,917

920,772

Inventories

1,178,089

946,730

Prepaid expenses and other

374,590

370,053

Total current assets

3,762,569

3,385,896

Long-term investments

3,242

35,385

Equipment, building, furniture and fixtures, net

278,985

267,779

Operating lease right-of-use assets

48,438

45,108

Goodwill

446,548

328,322

Other intangible assets, net

244,648

69,517

Deferred tax asset, net

797,214

824,008

Other long-term assets

90,853

113,617

Total assets

$

5,672,497

$

5,069,632

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

478,486

$

516,047

Accrued liabilities and other short-term obligations

343,938

360,782

Deferred revenue

164,758

137,899

Operating lease liabilities

19,098

18,925

Current portion of long-term debt

11,930

6,930

Total current liabilities

1,018,210

1,040,583

Long-term deferred revenue

66,620

62,336

Other long-term obligations

156,572

150,335

Long-term operating lease liabilities

45,305

42,392

Long-term debt, net

1,547,495

1,061,125

Total liabilities

$

2,834,202

$

2,356,771

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; 149,157,588 and 148,412,943 shares issued and outstanding

1,492

1,484

Additional paid-in capital

6,422,091

6,390,252

Accumulated other comprehensive loss

(29,299

)

(46,645

)

Accumulated deficit

(3,555,989

)

(3,632,230

)

Total stockholders’ equity

2,838,295

2,712,861

Total liabilities and stockholders’ equity

$

5,672,497

$

5,069,632

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)

Three Months Ended

January 28,

January 29,

2023

2022

Cash flows used in operating activities:

Net income

$

76,241

$

45,823

Adjustments to reconcile net income to net cash used in operating activities:

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

22,208

23,653

Share-based compensation expense

30,512

24,297

Amortization of intangible assets

10,325

12,230

Deferred taxes

(7,247

)

(766

)

Provision for inventory excess and obsolescence

5,503

3,799

Provision for warranty

8,230

2,817

Gain on cost method equity investment

(26,455

)

(4,120

)

Other

7,325

(4,495

)

Changes in assets and liabilities:

Accounts receivable

(133,067

)

87,223

Inventories

(235,059

)

(87,178

)

Prepaid expenses and other

4,667

(14,134

)

Operating lease right-of-use assets

3,891

4,120

Accounts payable, accruals and other obligations

(56,979

)

(152,981

)

Deferred revenue

29,459

10,417

Short and long-term operating lease liabilities

(5,193

)

(5,116

)

Net cash provided by used in operating activities

(265,639

)

(54,411

)

Cash flows used in investing activities:

Payments for equipment, furniture, fixtures and intellectual property

(30,030

)

(25,804

)

Purchases of investments

(35,411

)

(350,465

)

Proceeds from sales and maturities of investments

123,249

50,000

Settlement of foreign currency forward contracts, net

(4,001

)

1,346

Acquisition of business, net of cash acquired

(230,048

)

(56,036

)

Net cash used in investing activities

(176,241

)

(380,959

)

Cash flows provided by financing activities:

Proceeds from issuance of senior notes

400,000

Proceeds from issuance of term loan, net

497,500

Payment of long term debt

(1,732

)

Payment of debt issuance costs

(3,996

)

(4,506

)

Payment of finance lease obligations

(913

)

(771

)

Shares repurchased for tax withholdings on vesting of stock unit awards

(12,980

)

(25,150

)

Repurchases of common stock – repurchase program

(250,000

)

Proceeds from issuance of common stock

14,315

15,146

Net cash provided by financing activities

492,194

134,719

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

9,884

(3,259

)

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

60,198

(303,910

)

Cash, cash equivalents and restricted cash at beginning of period

994,378

1,422,604

Cash, cash equivalents and restricted cash at end of period

$

1,054,576

$

1,118,694

Supplemental disclosure of cash flow information

Cash paid during the period for interest

$

10,536

$

7,670

Cash paid during the period for income taxes, net

$

8,383

$

6,112

Operating lease payments

$

5,638

$

5,480

Non-cash investing and financing activities

Purchase of equipment in accounts payable

$

7,354

$

2,972

Operating right-of-use assets subject to lease liability

$

6,045

$

3,376

Gain on cost method equity investment

$

26,455

$

4,120

APPENDIX A – Reconciliation of Adjusted (Non- GAAP) Measurements

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

Quarter Ended

January 28,

January 29,

2023

2022

Gross Profit Reconciliation (GAAP/non-GAAP)

GAAP gross profit

$

455,946

$

384,187

Share-based compensation-products

1,051

900

Share-based compensation-services

2,297

1,584

Amortization of intangible assets

2,883

3,312

Total adjustments related to gross profit

6,231

5,796

Adjusted (non-GAAP) gross profit

$

462,177

$

389,983

Adjusted (non-GAAP) gross profit percentage

43.7

%

46.2

%

Operating Expense Reconciliation (GAAP/non-GAAP)

GAAP operating expense

$

370,730

$

324,183

Share-based compensation-research and development

9,234

6,830

Share-based compensation-sales and marketing

8,424

7,060

Share-based compensation-general and administrative

9,468

7,912

Significant asset impairments and restructuring costs

4,298

3,409

Amortization of intangible assets

7,441

8,918

Acquisition and integration costs

2,558

68

Total adjustments related to operating expense

41,423

34,197

Adjusted (non-GAAP) operating expense

$

329,307

$

289,986

Income from Operations Reconciliation (GAAP/non-GAAP)

GAAP income from operations

$

85,216

$

60,004

Total adjustments related to gross profit

6,231

5,796

Total adjustments related to operating expense

41,423

34,197

Total adjustments related to income from operations

47,654

39,993

Adjusted (non-GAAP) income from operations

$

132,870

$

99,997

Adjusted (non-GAAP) operating margin percentage

12.6

%

11.8

%

Net Income Reconciliation (GAAP/non-GAAP)

GAAP net income

$

76,241

$

45,823

Exclude GAAP provision for income taxes

25,078

9,219

Income before income taxes

101,319

55,042

Total adjustments related to income from operations

47,654

39,993

Gain on cost method equity investment

(26,455

)

(4,120

)

Adjusted income before income taxes

122,518

90,915

Non-GAAP tax provision on adjusted income before income taxes

26,954

18,365

Adjusted (non-GAAP) net income

$

95,564

$

72,550

Weighted average basic common shares outstanding

149,081

154,151

Weighted average dilutive potential common shares outstanding 1

149,551

155,807

Net Income per Common Share

GAAP diluted net income per potential common share

$

0.51

$

0.29

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

$

0.64

$

0.47

1 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) 0.5 million for the first quarter of fiscal 2023; and (ii) 1.7 million for the first quarter of fiscal 2022.

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

(in thousands) (unaudited)

Quarter Ended

January 28,

January 29,

2023

2022

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

Net income (GAAP)

$

76,241

$

45,823

Add: Interest expense

15,870

8,648

Less: Interest and other income, net

31,973

3,686

Add: Provision for income taxes

25,078

9,219

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

22,208

23,653

Add: Amortization of intangible assets

10,325

12,230

EBITDA

$

117,749

$

95,887

Add: Share-based compensation cost

30,474

24,297

Add: Significant asset impairments and restructuring costs

4,298

3,409

Add: Acquisition and integration costs

2,558

68

Adjusted EBITDA

$

155,079

$

123,661

* * *

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.
  • Significant asset impairments and restructuring costs – costs incurred as a result of restructuring activities taken to align resources with perceived market opportunities, 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 – primarily consist of financial, legal and accounting advisors’ costs and employment-related costs related to Ciena’s acquisitions in fiscal 2022 and fiscal 2023.
  • Gain on cost method equity investment – reflects changes in the carrying value of certain cost method equity investments due to triggering events. During the first quarter of fiscal 2023, the acquisition of Tibit triggered the remeasurement of our previously held investment in Tibit to fair value, which resulted in recognizing a gain on our cost method equity investment of $26.5 million.
  • 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 22.0% for the first fiscal quarter of 2023 and 20.2% for the first fiscal quarter of 2022. 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 (410) 694-5761
pr@ciena.com

Investor Contact:
Gregg Lampf
Ciena Corporation
+1 (877) 243-6273
ir@ciena.com

Source: Ciena Corporation

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