Ciena® Corporation (NYSE: CIEN), a networking systems, services
and software company, today announced unaudited financial results
for its fiscal second quarter ended April 29, 2023.
- Q2 Revenue: $1.13 billion
- Q2 Net Income per Share: $0.38 GAAP; $0.74 adjusted
(non-GAAP)
"We delivered outstanding results for the fiscal second quarter
as we were able to ship more to customers with continued
improvements in supply chain dynamics," said Gary Smith, president
and CEO of Ciena. "We are confident in our ability to take market
share given our backlog and strategic industry position with
market-leading technologies and an expanding addressable
market."
For fiscal second quarter 2023, Ciena reported revenue of $1.13
billion as compared to $949.2 million for the fiscal second quarter
2022.
Ciena's GAAP net income for the fiscal second quarter 2023 was
$57.7 million, or $0.38 per diluted common share, which compares to
a GAAP net income of $38.9 million, or $0.25 per diluted common
share, for the fiscal second quarter 2022.
Ciena's adjusted (non-GAAP) net income for the fiscal second
quarter 2023 was $110.4 million, or $0.74 per diluted common share,
which compares to an adjusted (non-GAAP) net income of $76.4
million, or $0.50 per diluted common share, for the fiscal second
quarter 2022.
Fiscal Second 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)
Q2
Q2
Period Change
FY 2023
FY 2022
Y-T-Y*
Revenue
$
1,132.7
$
949.2
19.3
%
Gross margin
43.1
%
42.3
%
0.8
%
Operating expense
$
384.9
$
343.4
12.1
%
Operating margin
9.1
%
6.2
%
2.9
%
Non-GAAP Results
(unaudited)
Q2
Q2
Period Change
FY 2023
FY 2022
Y-T-Y*
Revenue
$
1,132.7
$
949.2
19.3
%
Adj. gross margin
43.7
%
43.0
%
0.7
%
Adj. operating expense
$
338.1
$
301.1
12.3
%
Adj. operating margin
13.8
%
11.3
%
2.5
%
Adj. EBITDA
$
180.6
$
129.3
39.7
%
* Denotes % change, or in the case of
margin, absolute change
Revenue by Segment (unaudited)
Q2 FY 2023
Q2 FY 2022
Revenue
%**
Revenue
%**
Networking Platforms
Converged Packet Optical
$
784.5
69.3
$
625.3
65.8
Routing and Switching
130.4
11.5
109.2
11.5
Total Networking Platforms
914.9
80.8
734.5
77.3
Platform Software and Services
69.4
6.1
69.1
7.3
Blue Planet Automation Software and
Services
20.6
1.8
16.9
1.8
Global Services
Maintenance Support and Training
73.2
6.5
74.0
7.8
Installation and Deployment
39.5
3.5
41.4
4.4
Consulting and Network Design
15.1
1.3
13.3
1.4
Total Global Services
127.8
11.3
128.7
13.6
Total
$
1,132.7
100.0
$
949.2
100.0
** Denotes % of total revenue
Additional Performance Metrics for Fiscal Second Quarter
2023
Revenue by Geographic Region
(unaudited)
Q2 FY 2023
Q2 FY 2022
Revenue
% **
Revenue
% **
Americas
$
794.4
70.1
$
700.8
73.8
Europe, Middle East and Africa
173.4
15.3
145.1
15.3
Asia Pacific
164.9
14.6
103.3
10.9
Total
$
1,132.7
100.0
$
949.2
100.0
** Denotes % of total revenue
- One customer represented 10%-plus of revenue for a total of
10.9% of revenue
- Cash and investments totaled $1.34 billion
- Cash flow from operations totaled $229.8 million
- Average days' sales outstanding (DSOs) were 97
- Accounts receivable, net balance was $1.04 billion
- Unbilled contract assets, net balance was $180.0 million
- Inventories totaled $1.10 billion, including:
- Raw materials: $753.4 million
- Work in process: $20.9 million
- Finished goods: $308.0 million
- Deferred cost of sales: $58.1 million
- Reserve for excess and obsolescence: $(42.3) million
- Product inventory turns were 2.0
- Headcount totaled 8,385
Supplemental Materials and Live Web Broadcast of Unaudited
Fiscal Second Quarter 2023 Results Today, Tuesday, June 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 second 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
outstanding results for the fiscal second quarter as we were able
to ship more to customers with continued improvements in supply
chain dynamics, We are confident in our ability to take market
share given our backlog and strategic industry position with
market-leading technologies and an expanding addressable
market."
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 16, 2022 and
included in its Quarterly Report on Form 10-Q for the second
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 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 @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
Six Months Ended
April 29,
2023
April 30,
2022
April 29,
2023
April 30,
2022
Revenue:
Products
$
935,330
$
759,948
$
1,813,045
$
1,424,955
Services
197,325
189,279
376,131
368,715
Total revenue
1,132,655
949,227
2,189,176
1,793,670
Cost of goods sold:
Products
541,883
452,057
1,042,220
824,622
Services
103,089
95,389
203,327
183,080
Total cost of goods sold
644,972
547,446
1,245,547
1,007,702
Gross profit
487,683
401,781
943,629
785,968
Operating expenses:
Research and development
189,993
159,324
371,723
307,733
Selling and marketing
125,083
119,939
248,890
238,820
General and administrative
50,939
45,572
101,835
90,070
Significant asset impairments and
restructuring costs
8,153
9,102
12,451
12,511
Amortization of intangible assets
9,845
8,920
17,286
17,838
Acquisition and integration costs
857
495
3,415
563
Total operating expenses
384,870
343,352
755,600
667,535
Income from operations
102,813
58,429
188,029
118,433
Interest and other income, net
8,551
808
40,524
4,494
Interest expense
(23,889
)
(11,985
)
(39,759
)
(20,633
)
Income before income taxes
87,475
47,252
188,794
102,294
Provision for income taxes
29,821
8,330
54,899
17,549
Net income
$
57,654
$
38,922
$
133,895
$
84,745
Net Income per Common Share
Basic net income per common share
$
0.39
$
0.26
$
0.90
$
0.55
Diluted net income per potential common
share
$
0.38
$
0.25
$
0.89
$
0.55
Weighted average basic common shares
outstanding
149,616
152,197
149,351
153,179
Weighted average dilutive potential common
shares outstanding 1
150,147
153,344
149,852
154,580
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)
0.5 million shares for both the second quarter and first six months
of fiscal 2023; and (ii) 1.1 million and 1.4 million shares for the
second quarter and first six months of fiscal 2022,
respectively.
CIENA CORPORATION CONDENSED
CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
(unaudited)
April 29, 2023
October 29, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
1,167,695
$
994,352
Short-term investments
150,464
153,989
Accounts receivable, net
1,036,688
920,772
Inventories
1,098,092
946,730
Prepaid expenses and other
415,687
370,053
Total current assets
3,868,626
3,385,896
Long-term investments
25,237
35,385
Equipment, building, furniture and
fixtures, net
278,344
267,779
Operating lease right-of-use assets
41,119
45,108
Goodwill
446,364
328,322
Other intangible assets, net
231,314
69,517
Deferred tax asset, net
795,051
824,008
Other long-term assets
89,583
113,617
Total assets
$
5,775,638
$
5,069,632
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
444,769
$
516,047
Accrued liabilities and other short-term
obligations
380,969
360,782
Deferred revenue
202,818
137,899
Operating lease liabilities
17,443
18,925
Current portion of long-term debt
11,930
6,930
Total current liabilities
1,057,929
1,040,583
Long-term deferred revenue
67,807
62,336
Other long-term obligations
154,870
150,335
Long-term operating lease liabilities
39,979
42,392
Long-term debt, net
1,546,400
1,061,125
Total liabilities
$
2,866,985
$
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;
149,498,465 and 148,412,943 shares issued and outstanding
1,495
1,484
Additional paid-in capital
6,445,247
6,390,252
Accumulated other comprehensive loss
(39,754
)
(46,645
)
Accumulated deficit
(3,498,335
)
(3,632,230
)
Total stockholders’ equity
2,908,653
2,712,861
Total liabilities and stockholders’ equity
$
5,775,638
$
5,069,632
CIENA CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
April 29,
2023
April 30,
2022
Cash flows provided by (used in) operating
activities:
Net income
$
133,895
$
84,745
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
45,903
46,030
Share-based compensation expense
62,372
50,970
Amortization of intangible assets
23,600
24,463
Deferred taxes
(2,134
)
(13,474
)
Provision for inventory excess and
obsolescence
12,691
8,487
Provision for warranty
13,577
7,228
Gain on cost method equity investment
(26,455
)
(4,120
)
Other
11,331
(1,713
)
Changes in assets and liabilities:
Accounts receivable
(116,914
)
104,455
Inventories
(162,143
)
(171,056
)
Prepaid expenses and other
(41,511
)
(36,673
)
Operating lease right-of-use assets
7,644
8,222
Accounts payable, accruals and other
obligations
(55,754
)
(88,960
)
Deferred revenue
68,818
43,753
Short and long-term operating lease
liabilities
(10,748
)
(10,216
)
Net cash provided by (used in) operating
activities
(35,828
)
52,141
Cash flows used in investing
activities:
Payments for equipment, furniture,
fixtures and intellectual property
(58,034
)
(45,249
)
Purchases of investments
(106,245
)
(461,553
)
Proceeds from sales and maturities of
investments
123,251
90,005
Settlement of foreign currency forward
contracts, net
(6,194
)
3,708
Purchase of cost method equity
investments
—
(8,000
)
Acquisition of business, net of cash
acquired
(230,048
)
(62,043
)
Net cash used in investing activities
(277,270
)
(483,132
)
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
(3,465
)
(3,465
)
Payment of debt issuance costs
(5,230
)
(5,145
)
Payment of finance lease obligations
(1,864
)
(1,635
)
Shares repurchased for tax withholdings on
vesting of stock unit awards
(22,022
)
(35,004
)
Repurchases of common stock - repurchase
program
—
(332,794
)
Proceeds from issuance of common stock
14,656
15,185
Net cash provided by financing
activities
479,575
37,142
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
6,867
(8,807
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
173,344
(402,656
)
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
$
1,167,722
$
1,019,948
Supplemental disclosure of cash flow
information
Cash paid during the period for
interest
$
37,514
$
16,809
Cash paid during the period for income
taxes, net
$
24,218
$
17,905
Operating lease payments
$
11,689
$
10,917
Non-cash investing and financing
activities
Purchase of equipment in accounts
payable
$
4,618
$
8,093
Repurchase of common stock in accrued
liabilities from repurchase program
$
—
$
5,000
Operating right-of-use assets subject to
lease liability
$
6,177
$
3,589
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
April 29,
2023
April 30,
2022
Gross Profit Reconciliation
(GAAP/non-GAAP)
GAAP gross profit
$
487,683
$
401,781
Share-based compensation-products
1,155
1,058
Share-based compensation-services
2,659
1,943
Amortization of intangible assets
3,431
3,313
Total adjustments related to gross
profit
7,245
6,314
Adjusted (non-GAAP) gross profit
$
494,928
$
408,095
Adjusted (non-GAAP) gross profit
percentage
43.7
%
43.0
%
Operating Expense Reconciliation
(GAAP/non-GAAP)
GAAP operating expense
$
384,870
$
343,352
Share-based compensation-research and
development
10,731
8,309
Share-based compensation-sales and
marketing
8,755
8,061
Share-based compensation-general and
administrative
8,468
7,334
Significant asset impairments and
restructuring costs
8,153
9,102
Amortization of intangible assets
9,845
8,920
Acquisition and integration costs
857
495
Total adjustments related to operating
expense
46,809
42,221
Adjusted (non-GAAP) operating expense
$
338,061
$
301,131
Income from Operations Reconciliation
(GAAP/non-GAAP)
GAAP income from operations
$
102,813
$
58,429
Total adjustments related to gross
profit
7,245
6,314
Total adjustments related to operating
expense
46,809
42,221
Total adjustments related to income from
operations
54,054
48,535
Adjusted (non-GAAP) income from
operations
$
156,867
$
106,964
Adjusted (non-GAAP) operating margin
percentage
13.8
%
11.3
%
Net Income Reconciliation
(GAAP/non-GAAP)
GAAP net income
$
57,654
$
38,922
Exclude GAAP provision for income
taxes
29,821
8,330
Income before income taxes
87,475
47,252
Total adjustments related to income from
operations
54,054
48,535
Adjusted income before income taxes
141,529
95,787
Non-GAAP tax provision on adjusted income
before income taxes
31,136
19,349
Adjusted (non-GAAP) net income
$
110,393
$
76,438
Weighted average basic common shares
outstanding
149,616
152,197
Weighted average dilutive potential common
shares outstanding 1
150,147
153,344
Net Income per Common Share
GAAP diluted net income per potential
common share
$
0.38
$
0.25
Adjusted (non-GAAP) diluted net income per
potential common share
$
0.74
$
0.50
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 second quarter of fiscal
2023; and (ii) 1.1 million for the second quarter of fiscal
2022.
APPENDIX B - Calculation of
EBITDA and Adjusted EBITDA (unaudited)
(in thousands)
(unaudited)
Quarter Ended
April 29,
2023
April 30,
2022
Earnings Before Interest, Tax,
Depreciation and Amortization (EBITDA)
Net income (GAAP)
$
57,654
$
38,922
Add: Interest expense
23,889
11,985
Less: Interest and other income, net
8,551
808
Add: Provision for income taxes
29,821
8,330
Add: Depreciation of equipment, building,
furniture and fixtures, and amortization of leasehold
improvements
23,695
22,377
Add: Amortization of intangible assets
13,275
12,233
EBITDA
$
139,783
$
93,039
Add: Share-based compensation cost
31,768
26,673
Add: Significant asset impairments and
restructuring costs
8,153
9,102
Add: Acquisition and integration costs
857
495
Adjusted EBITDA
$
180,561
$
129,309
* * *
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, and the redesign of
business processes including restructuring certain real estate
facilities.
- 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.
- 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 second fiscal
quarter of 2023 and 20.2% for the second 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230605005903/en/
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
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