Ciena Reports Fiscal First Quarter 2016 Financial Results
Delivers 8% adjusted operating margin and
For the fiscal first quarter 2016,
On the basis of generally accepted accounting principles (GAAP),
"We delivered strong first quarter business and financial performance, including 8% adjusted operating margin, highlighted by engagement with a more diverse set of customers," said
Fiscal First Quarter 2016 Performance Summary
The tables below (in millions, except percentage data) provide comparisons of certain quarterly results to prior periods, including sequential quarter and year-over-year changes. A reconciliation between the GAAP and adjusted (non-GAAP) measures contained in this release is included in Appendix A.
GAAP Results | ||||||||||||||||||
Q1 | Q4 | Q1 | Period Change | |||||||||||||||
FY 2016 | FY 2015 | FY 2015 | Q-T-Q* | Y-T-Y* | ||||||||||||||
Revenue | $ | 573.1 | $ | 692.0 | $ | 529.2 | (17.2 | )% | 8.3 | % | ||||||||
Gross margin | 43.9 | % | 43.8 | % | 43.5 | % | 0.1 | % | 0.4 | % | ||||||||
Operating expense | $ | 240.2 | $ | 293.6 | $ | 226.1 | (18.2 | )% | 6.2 | % | ||||||||
Operating margin | 2.0 | % | 1.4 | % | 0.8 | % | 0.6 | % | 1.2 | % | ||||||||
Non-GAAP Results | ||||||||||||||||||
Q1 | Q4 | Q1 | Period Change | |||||||||||||||
FY 2016 | FY 2015 | FY 2015 | Q-T-Q* | Y-T-Y* | ||||||||||||||
Revenue | $ | 573.1 | $ | 692.0 | $ | 529.2 | (17.2 | )% | 8.3 | % | ||||||||
Adj. gross margin | 44.7 | % | 44.9 | % | 44.1 | % | (0.2 | )% | 0.6 | % | ||||||||
Adj. operating expense | $ | 208.4 | $ | 220.5 | $ | 197.3 | (5.5 | )% | 5.6 | % | ||||||||
Adj. operating margin | 8.3 | % | 13.0 | % | 6.8 | % | (4.7 | )% | 1.5 | % | ||||||||
* Denotes % change, or in the case of margin, absolute change
Revenue by Segment | |||||||||||||||
Q1 FY 2016 | Q4 FY 2015 | Q1 FY 2015 | |||||||||||||
Revenue | % | Revenue | % | Revenue | % | ||||||||||
Networking Platforms | $ | 449.5 | 78.4 | $ | 564.7 | 81.6 | $ | 413.9 | 78.2 | ||||||
Software and Software-Related Services | 25.4 | 4.4 | 26.3 | 3.8 | 23.5 | 4.4 | |||||||||
Global Services | 98.2 | 17.2 | 101.0 | 14.6 | 91.8 | 17.4 | |||||||||
Total | $ | 573.1 | 100.0 | $ | 692.0 | 100.0 | $ | 529.2 | 100.0 | ||||||
Additional Performance Metrics for Fiscal First Quarter 2016
Revenue by Geographic Region | |||||||||||||||
Q1 FY 2016 | Q4 FY 2015 | Q1 FY 2015 | |||||||||||||
Revenue | % | Revenue | % | Revenue | % | ||||||||||
North America | $ | 392.7 | 68.5 | $ | 480.0 | 69.4 | $ | 331.5 | 62.6 | ||||||
Europe, Middle East and Africa | 80.7 | 14.1 | 94.0 | 13.6 | 111.0 | 21.0 | |||||||||
Caribbean and Latin America | 43.8 | 7.6 | 45.7 | 6.6 | 42.8 | 8.1 | |||||||||
Asia Pacific | 55.9 | 9.8 | 72.3 | 10.4 | 43.9 | 8.3 | |||||||||
Total | $ | 573.1 | 100.0 | $ | 692.0 | 100.0 | $ | 529.2 | 100.0 | ||||||
- U.S. customers contributed 63.7% of total revenue
- One customer accounted for greater than 10% of revenue and represented 22% of total revenue
- Cash and investments totaled
$995.4 million - Cash flow from operations totaled
$15.0 million - Average days' sales outstanding (DSOs) were 75
- Accounts receivable balance was
$480.4 million - Inventories totaled
$205.7 million , including:- Raw materials:
$51.9 million - Work in process:
$13.4 million - Finished goods:
$118.0 million - Deferred cost of sales:
$76.4 million - Reserve for excess and obsolescence:
$(54.0) million
- Raw materials:
- Product inventory turns were 5.1
- Headcount totaled 5,363
Business Outlook for Fiscal Second Quarter 2016
Statements relating to business outlook are forward-looking in nature and actual results may differ materially. These statements should be read in the context of the Notes to Investors below.
- Revenue in the range of
$615 to $645 million - Adjusted (non-GAAP) gross margin in the mid-40s percentage range
- Adjusted (non-GAAP) operating expense of approximately
$225 million
Live Web Broadcast of Unaudited Fiscal First Quarter 2016 Results
Notes to Investors
Forward-looking statements. 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
Non-GAAP Presentation of Quarterly Results. This release includes non-GAAP measures of
About Ciena.
CIENA CORPORATION | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
(in thousands, except per share data) | ||||||||
(unaudited) | ||||||||
Three Months Ended January 31, | ||||||||
2016 | 2015 | |||||||
Revenue: | ||||||||
Products | $ | 457,589 | $ | 422,315 | ||||
Services | 115,526 | 106,847 | ||||||
Total revenue | 573,115 | 529,162 | ||||||
Cost of goods sold: | ||||||||
Products | 260,482 | 236,548 | ||||||
Services | 61,183 | 62,319 | ||||||
Total cost of goods sold | 321,665 | 298,867 | ||||||
Gross profit | 251,450 | 230,295 | ||||||
Operating expenses: | ||||||||
Research and development | 108,046 | 100,761 | ||||||
Selling and marketing | 82,478 | 76,712 | ||||||
General and administrative | 31,142 | 29,553 | ||||||
Acquisition and integration costs | 1,299 | — | ||||||
Amortization of intangible assets | 16,862 | 11,019 | ||||||
Restructuring costs | 384 | 8,085 | ||||||
Total operating expenses | 240,211 | 226,130 | ||||||
Income from operations | 11,239 | 4,165 | ||||||
Interest and other income (loss), net | (8,776 | ) | (8,233 | ) | ||||
Interest expense | (12,710 | ) | (13,661 | ) | ||||
Loss before income taxes | (10,247 | ) | (17,729 | ) | ||||
Provision for income taxes | 1,299 | 1,050 | ||||||
Net loss | $ | (11,546 | ) | $ | (18,779 | ) | ||
Net Loss per Common Share | ||||||||
Basic net loss per common share | $ | (0.08 | ) | $ | (0.17 | ) | ||
Diluted net loss per potential common share | $ | (0.08 | ) | $ | (0.17 | ) | ||
Weighted average basic common shares outstanding | 136,675 | 107,773 | ||||||
Weighted average dilutive potential common shares outstanding | 136,675 | 107,773 | ||||||
CIENA CORPORATION | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(in thousands, except share data) | ||||||||
(unaudited) | ||||||||
January 31, 2016 |
October 31, 2015 |
|||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 660,321 | $ | 790,971 | ||||
Short-term investments | 210,010 | 135,107 | ||||||
Accounts receivable, net | 480,382 | 550,792 | ||||||
Inventories | 205,664 | 191,162 | ||||||
Prepaid expenses and other | 194,643 | 196,178 | ||||||
Total current assets | 1,751,020 | 1,864,210 | ||||||
Long-term investments | 125,060 | 95,105 | ||||||
Equipment, building, furniture and fixtures, net | 199,561 | 191,973 | ||||||
Goodwill | 256,434 | 256,434 | ||||||
Other intangible assets, net | 182,167 | 202,673 | ||||||
Other long-term assets | 75,073 | 84,656 | ||||||
Total assets | $ | 2,589,315 | $ | 2,695,051 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 183,852 | $ | 222,140 | ||||
Accrued liabilities | 262,213 | 316,283 | ||||||
Deferred revenue | 106,664 | 126,111 | ||||||
Current portion of long-term debt | 2,500 | 2,500 | ||||||
Total current liabilities | 555,229 | 667,034 | ||||||
Long-term deferred revenue | 67,027 | 62,962 | ||||||
Other long-term obligations | 81,716 | 72,540 | ||||||
Long-term debt, net | 1,258,316 | 1,271,639 | ||||||
Total liabilities | $ | 1,962,288 | $ | 2,074,175 | ||||
Commitments and contingencies | ||||||||
Stockholders’ equity (deficit): | ||||||||
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; 137,436,562 and 135,612,217 shares issued and outstanding | 1,374 | 1,356 | ||||||
Additional paid-in capital | 6,663,765 | 6,640,436 | ||||||
Accumulated other comprehensive loss | (27,776 | ) | (22,126 | ) | ||||
Accumulated deficit | (6,010,336 | ) | (5,998,790 | ) | ||||
Total stockholders’ equity (deficit) | 627,027 | 620,876 | ||||||
Total liabilities and stockholders’ equity (deficit) | $ | 2,589,315 | $ | 2,695,051 | ||||
CIENA CORPORATION | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(in thousands) | ||||||||
(unaudited) | ||||||||
Three Months Ended January 31, | ||||||||
2016 | 2015 | |||||||
Cash flows provided by operating activities: | ||||||||
Net loss | $ | (11,546 | ) | $ | (18,779 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements | 14,449 | 13,772 | ||||||
Share-based compensation costs | 14,477 | 10,807 | ||||||
Amortization of intangible assets | 20,506 | 13,219 | ||||||
Provision for inventory excess and obsolescence | 7,016 | 5,787 | ||||||
Provision for warranty | 4,971 | 2,293 | ||||||
Other | 11,087 | (10,598 | ) | |||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | 63,332 | (1,218 | ) | |||||
Inventories | (22,134 | ) | 7,097 | |||||
Prepaid expenses and other | 6,761 | (11,536 | ) | |||||
Accounts payable, accruals and other obligations | (80,014 | ) | 2,210 | |||||
Deferred revenue | (13,925 | ) | 9,084 | |||||
Net cash provided by operating activities | 14,980 | 22,138 | ||||||
Cash flows used in investing activities: | ||||||||
Payments for equipment, furniture, fixtures and intellectual property | (28,873 | ) | (11,194 | ) | ||||
Purchase of available for sale securities | (134,869 | ) | (50,085 | ) | ||||
Proceeds from maturities of available for sale securities | 30,000 | 40,000 | ||||||
Settlement of foreign currency forward contracts, net | (295 | ) | 9,314 | |||||
Net cash used in investing activities | (134,037 | ) | (11,965 | ) | ||||
Cash flows provided by (used in) financing activities: | ||||||||
Payment of long term debt | (14,639 | ) | (625 | ) | ||||
Payment for debt and equity issuance costs | (797 | ) | (60 | ) | ||||
Payment of capital lease obligations | (1,627 | ) | (2,993 | ) | ||||
Proceeds from issuance of common stock | 8,870 | 8,302 | ||||||
Net cash provided by (used in) financing activities | (8,193 | ) | 4,624 | |||||
Effect of exchange rate changes on cash and cash equivalents | (3,400 | ) | (2,794 | ) | ||||
Net increase (decrease) in cash and cash equivalents | (130,650 | ) | 12,003 | |||||
Cash and cash equivalents at beginning of period | 790,971 | 586,720 | ||||||
Cash and cash equivalents at end of period | $ | 660,321 | $ | 598,723 | ||||
Supplemental disclosure of cash flow information | ||||||||
Cash paid during the period for interest | $ | 9,556 | $ | 8,754 | ||||
Cash paid during the period for income taxes, net | $ | 3,702 | $ | 2,894 | ||||
Non-cash investing activities | ||||||||
Purchase of equipment in accounts payable | $ | 8,782 | $ | 3,270 | ||||
Debt issuance costs in accrued liabilities | $ | 190 | $ | 187 | ||||
Equipment acquired under capital lease | $ | 1,219 | $ | — | ||||
Construction in progress subject to build-to-suit lease | $ | 11,522 | $ | — | ||||
APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measurements | ||||||||
Three Months Ended January 31, | ||||||||
2016 | 2015 | |||||||
Gross Profit Reconciliation | ||||||||
GAAP gross profit | $ | 251,450 | $ | 230,295 | ||||
Share-based compensation-products | 571 | 487 | ||||||
Share-based compensation-services | 592 | 519 | ||||||
Amortization of intangible assets | 3,438 | 2,200 | ||||||
Total adjustments related to gross profit | 4,601 | 3,206 | ||||||
Adjusted (non-GAAP) gross profit | $ | 256,051 | $ | 233,501 | ||||
Adjusted (non-GAAP) gross profit percentage | 44.7 | % | 44.1 | % | ||||
Operating Expense Reconciliation | ||||||||
GAAP operating expense | $ | 240,211 | $ | 226,130 | ||||
Share-based compensation-research and development | 3,428 | 2,167 | ||||||
Share-based compensation-sales and marketing | 4,735 | 3,659 | ||||||
Share-based compensation-general and administrative | 5,129 | 3,919 | ||||||
Acquisition and integration costs | 1,299 | — | ||||||
Amortization of intangible assets | 16,862 | 11,019 | ||||||
Restructuring costs | 384 | 8,085 | ||||||
Total adjustments related to operating expense | 31,837 | 28,849 | ||||||
Adjusted (non-GAAP) operating expense | $ | 208,374 | $ | 197,281 | ||||
Income from Operations Reconciliation | ||||||||
GAAP income from operations | $ | 11,239 | $ | 4,165 | ||||
Total adjustments related to gross profit | 4,601 | 3,206 | ||||||
Total adjustments related to operating expense | 31,837 | 28,849 | ||||||
Adjusted (non-GAAP) income from operations | $ | 47,677 | $ | 36,220 | ||||
Adjusted (non-GAAP) operating margin percentage | 8.3 | % | 6.8 | % | ||||
Net Income Reconciliation | ||||||||
GAAP net loss | $ | (11,546 | ) | $ | (18,779 | ) | ||
Total adjustments related to gross profit | 4,601 | 3,206 | ||||||
Total adjustments related to operating expense | 31,837 | 28,849 | ||||||
Non-cash gain associated with the conversion of convertible notes | (106 | ) | — | |||||
Non-cash interest expense | 441 | 361 | ||||||
Adjusted (non-GAAP) net income | $ | 25,227 | $ | 13,637 | ||||
Weighted average basic common shares outstanding | 136,675 | 107,773 | ||||||
Weighted average dilutive potential common shares outstanding 1 | 151,408 | 121,896 | ||||||
Net Income per Common Share | ||||||||
GAAP diluted net loss per common share | $ | (0.08 | ) | $ | (0.17 | ) | ||
Adjusted (non-GAAP) diluted net income per common share 2 | $ | 0.18 | $ | 0.12 | ||||
1. Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per common share for the first quarter of fiscal 2016 includes 1.8 million shares underlying certain stock options and restricted stock units and 12.9 million shares underlying
Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per common share for the first quarter of fiscal 2015 includes 1.0 million shares underlying certain stock options and restricted stock units and 13.1 million shares underlying
2. The calculation of Adjusted (non-GAAP) diluted net income per common share for the first quarter of fiscal 2016 requires adding back interest expense of approximately
The calculation of Adjusted (non-GAAP) diluted net income per common share for the fiscal first quarter of 2015 requires adding back interest expense of approximately
The adjusted (non-GAAP) measures above and their reconciliation to
- Share-based compensation expense - a non-cash expense incurred in accordance with share-based compensation accounting guidance.
- Acquisition and integration costs - consist of expenses for financial, legal and accounting advisors, associated with our acquisitions of Cyan on
August 3, 2015 and TeraXion onFebruary 1, 2016 .Ciena does not believe that these costs are reflective of its ongoing operating expense following its completion of these integration activities. - 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. - Restructuring costs - costs incurred as a result of restructuring activities taken to align resources with perceived market opportunities.
- Non-cash gain associated with the conversion of convertible notes - an infrequent gain related to the repurchase and early extinguishment of a portion of
Ciena's 0.875% senior convertible notes dueJune 15, 2017 during the first quarter of fiscal 2016. - Non-cash interest expense - a non-cash debt discount expense amortized as interest expense during the term of
Ciena's 4.0% senior convertible notes dueDecember 15, 2020 relating to the required separate accounting of the equity component of these convertible notes.
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Source:
Press Contact:
Ciena Corporation
Nicole Anderson, 877-857–7377
pr@ciena.com
or
Investor Contact:
Ciena Corporation
Gregg Lampf, 877-243–6273
ir@ciena.com