UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): March 7, 2022
(Exact name of registrant as specified in its charter)
Commission File Number: 001-36250
(State or other jurisdiction of incorporation)
(Address of principal executive offices)
(IRS Employer Identification No.)
(Zip Code)
Registrant's telephone number, including area code: (410 ) 694-5700
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): | |||||||||||
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||||||||
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||||||||
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||||||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||||||||
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
ITEM 2.02 – RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On March 7, 2022, Ciena Corporation ("Ciena") issued a press release announcing its financial results for its first fiscal quarter ended January 29, 2022. The text of the press release is furnished as Exhibit 99.1 to this Report. As discussed in this press release, Ciena will be hosting an investor call to discuss its results of operations for its first fiscal quarter ended January 29, 2022.
In conjunction with the issuance of this press release, Ciena posted to the quarterly results page of the Investors section of www.ciena.com an accompanying investor presentation. The investor presentation is furnished as Exhibit 99.2 to this Report.
The information in Exhibits 99.1 and 99.2, as well as Item 2.02 of this Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement pursuant to the Securities Act of 1933, as amended. Investors are encouraged to review the “Investors” page of our website at www.ciena.com because, as with the other disclosure channels that we use, from time to time we may post material information exclusively on that site.
ITEM 9.01 – FINANCIAL STATEMENTS AND EXHIBITS
(d) | The following exhibits are being filed herewith: | |||||||||||||
Exhibit Number | Description of Document | |||||||||||||
Exhibit 99.1 | ||||||||||||||
Exhibit 99.2 | ||||||||||||||
Exhibit 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. | ||
Ciena Corporation | ||||||||
Date: March 7, 2022 | By: | /S/ David M. Rothenstein | ||||||
David M. Rothenstein | ||||||||
Senior Vice President, General Counsel and Secretary | ||||||||
FOR IMMEDIATE RELEASE
Ciena Reports Fiscal First Quarter 2022 Financial Results
HANOVER, Md. - March 7, 2022 - Ciena® Corporation (NYSE: CIEN), a networking systems, services and software company, today announced unaudited financial results for its fiscal first quarter ended January 29, 2022.
•Q1 Revenue: $844.4 million
•Q1 Net Income per Share: $0.29 GAAP; $0.47 adjusted (non-GAAP)
•Share Repurchases: Ciena entered into a $250 million accelerated share repurchase ("ASR") arrangement during the first quarter of fiscal 2022 under its new share repurchase program. The final settlement of the ASR was completed in the second quarter of fiscal 2022 with approximately 3.6 million shares repurchased.
“First quarter revenue grew more than 10% year-over-year and continued broad-based demand drove very strong orders growth in the quarter, providing us additional visibility for the fiscal year," said Gary Smith, president and CEO of Ciena. "We expect our strategic investments to drive a significant increase in supply chain capacity in the second half, and therefore remain confident in our ability to address demand and achieve the strong revenue growth we expect for the fiscal year.”
For the fiscal first quarter 2022, Ciena reported revenue of $844.4 million as compared to $757.1 million for the fiscal first quarter 2021.
Ciena's GAAP net income for the fiscal first quarter 2022 was $45.8 million, or $0.29 per diluted common share, which compares to a GAAP net income of $55.3 million, or $0.35 per diluted common share, for the fiscal first quarter 2021.
Ciena's adjusted (non-GAAP) net income for the fiscal first quarter 2022 was $72.6 million, or $0.47 per diluted common share, which compares to an adjusted (non-GAAP) net income of $81.3 million, or $0.52 per diluted common share, for the fiscal first quarter 2021.
Fiscal First 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.
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| GAAP Results | ||||||||||||||||||||
| Q1 | Q1 | Period Change | ||||||||||||||||||
| FY 2022 | FY 2021 | Y-T-Y* | ||||||||||||||||||
| Revenue | $ | 844.4 | $ | 757.1 | 11.5 | % | ||||||||||||||
| Gross margin | 45.5 | % | 47.3 | % | (1.8) | % | ||||||||||||||
| Operating expense | $ | 324.2 | $ | 282.1 | 14.9 | % | ||||||||||||||
| Operating margin | 7.1 | % | 10.0 | % | (2.9) | % | ||||||||||||||
| Non-GAAP Results | ||||||||||||||||||||
| Q1 | Q1 | Period Change | ||||||||||||||||||
| FY 2022 | FY 2021 | Y-T-Y* | ||||||||||||||||||
| Revenue | $ | 844.4 | $ | 757.1 | 11.5 | % | ||||||||||||||
| Adj. gross margin | 46.2 | % | 48.0 | % | (1.8) | % | ||||||||||||||
| Adj. operating expense | $ | 290.0 | $ | 253.0 | 14.6 | % | ||||||||||||||
| Adj. operating margin | 11.8 | % | 14.6 | % | (2.8) | % | ||||||||||||||
| Adj. EBITDA | $ | 123.7 | $ | 133.8 | (7.5) | % | ||||||||||||||
* Denotes % change, or in the case of margin, absolute change
| Revenue by Segment | ||||||||||||||||||||||||||
| Q1 FY 2022 | Q1 FY 2021 | |||||||||||||||||||||||||
| Revenue | %** | Revenue | %** | |||||||||||||||||||||||
| Networking Platforms | ||||||||||||||||||||||||||
| Converged Packet Optical | $ | 540.9 | 64.1 | $ | 512.3 | 67.7 | ||||||||||||||||||||
| Routing and Switching | 85.7 | 10.1 | 64.3 | 8.5 | ||||||||||||||||||||||
| Total Networking Platforms | 626.6 | 74.2 | 576.6 | 76.2 | ||||||||||||||||||||||
| Platform Software and Services | 72.9 | 8.6 | 49.9 | 6.6 | ||||||||||||||||||||||
| Blue Planet Automation Software and Services | 21.1 | 2.5 | 16.9 | 2.2 | ||||||||||||||||||||||
| Global Services | ||||||||||||||||||||||||||
| Maintenance Support and Training | 72.5 | 8.6 | 67.6 | 8.9 | ||||||||||||||||||||||
| Installation and Deployment | 40.4 | 4.8 | 39.6 | 5.2 | ||||||||||||||||||||||
| Consulting and Network Design | 10.9 | 1.3 | 6.5 | 0.9 | ||||||||||||||||||||||
| Total Global Services | 123.8 | 14.7 | 113.7 | 15.0 | ||||||||||||||||||||||
| Total | $ | 844.4 | 100.0 | $ | 757.1 | 100.0 | ||||||||||||||||||||
** Denotes % of total revenue
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Additional Performance Metrics for Fiscal First Quarter 2022
| Revenue by Geographic Region | ||||||||||||||||||||||||||
| Q1 FY 2022 | Q1 FY 2021 | |||||||||||||||||||||||||
| Revenue | % ** | Revenue | % ** | |||||||||||||||||||||||
| Americas | $ | 595.1 | 70.5 | $ | 496.6 | 65.6 | ||||||||||||||||||||
| Europe, Middle East and Africa | 150.8 | 17.8 | 155.4 | 20.5 | ||||||||||||||||||||||
| Asia Pacific | 98.5 | 11.7 | 105.1 | 13.9 | ||||||||||||||||||||||
| Total | $ | 844.4 | 100.0 | $ | 757.1 | 100.0 | ||||||||||||||||||||
** Denotes % of total revenue
•One 10%-plus customer represented a total of 13.1% of revenue
•Cash and investments totaled $1.7 billion
•Cash flow used in operations totaled $54.4 million
•Average days' sales outstanding (DSOs) were 97
•Accounts receivable, net balance was $795.2 million
•Unbilled contract asset, net balance was $117.0 million
•Inventories totaled $457.6 million, including:
◦Raw materials: $295.9 million
◦Work in process: $10.3 million
◦Finished goods: $149.9 million
◦Deferred cost of sales: $36.9 million
◦Reserve for excess and obsolescence: $(35.4) million
•Product inventory turns were 3.3
•Headcount totaled 7,419
Supplemental Materials and Live Web Broadcast of Unaudited Fiscal First Quarter 2022 Results
Today, Monday, March 7, 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 first 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:
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"First quarter revenue grew more than 10% year-over-year and continued broad-based demand drove very strong orders growth in the quarter, providing us additional visibility for the fiscal year" and "We expect our strategic investments to drive a significant increase in supply chain capacity in the second half, and therefore remain confident in our ability to address demand and achieve the strong revenue growth we expect for the fiscal 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 our business and growth strategies; 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; supply chain constraints or disruptions; changes in foreign currency exchange rates affecting revenue and operating expense; 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, 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; 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 first 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 @Ciena, LinkedIn, the Ciena Insights blog, or visit www.ciena.com.
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CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Quarter Ended | ||||||||||||||
| January 29, | January 30, | |||||||||||||
| 2022 | 2021 | |||||||||||||
| Revenue: | ||||||||||||||
| Products | $ | 665,007 | $ | 597,220 | ||||||||||
| Services | 179,436 | 159,910 | ||||||||||||
| Total revenue | 844,443 | 757,130 | ||||||||||||
| Cost of goods sold: | ||||||||||||||
| Products | 372,565 | 315,098 | ||||||||||||
| Services | 87,691 | 84,141 | ||||||||||||
| Total cost of goods sold | 460,256 | 399,239 | ||||||||||||
| Gross profit | 384,187 | 357,891 | ||||||||||||
| Operating expenses: | ||||||||||||||
| Research and development | 148,409 | 132,741 | ||||||||||||
| Selling and marketing | 118,881 | 97,278 | ||||||||||||
| General and administrative | 44,498 | 39,993 | ||||||||||||
| Significant asset impairments and restructuring costs | 3,409 | 5,867 | ||||||||||||
| Amortization of intangible assets | 8,918 | 5,910 | ||||||||||||
| Acquisition and integration costs | 68 | 307 | ||||||||||||
| Total operating expenses | 324,183 | 282,096 | ||||||||||||
| Income from operations | 60,004 | 75,795 | ||||||||||||
| Interest and other income (loss), net | 3,686 | (1,121) | ||||||||||||
| Interest expense | (8,648) | (7,360) | ||||||||||||
| Income before income taxes | 55,042 | 67,314 | ||||||||||||
| Provision for income taxes | 9,219 | 11,966 | ||||||||||||
| Net income | $ | 45,823 | $ | 55,348 | ||||||||||
| Net Income per Common Share | ||||||||||||||
| Basic net income per common share | $ | 0.30 | $ | 0.36 | ||||||||||
| Diluted net income per potential common share | $ | 0.29 | $ | 0.35 | ||||||||||
| Weighted average basic common shares outstanding | 154,151 | 155,174 | ||||||||||||
Weighted average dilutive potential common shares outstanding 1 | 155,807 | 156,583 | ||||||||||||
1 Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per potential common share for the first quarter of fiscal 2022 includes 1.7 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 quarter of fiscal 2021 includes 1.4 million shares underlying certain stock option and stock unit awards.
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CIENA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
| January 29, 2022 | October 30, 2021 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 1,118,636 | $ | 1,422,546 | |||||||
| Short-term investments | 460,368 | 181,483 | |||||||||
| Accounts receivable, net | 795,247 | 884,958 | |||||||||
| Inventories | 457,604 | 374,265 | |||||||||
| Prepaid expenses and other | 332,259 | 325,654 | |||||||||
| Total current assets | 3,164,114 | 3,188,906 | |||||||||
| Long-term investments | 88,640 | 70,038 | |||||||||
| Equipment, building, furniture and fixtures, net | 276,120 | 284,968 | |||||||||
| Operating lease right-of-use assets | 43,340 | 44,285 | |||||||||
| Goodwill | 322,822 | 311,645 | |||||||||
| Other intangible assets, net | 101,026 | 65,314 | |||||||||
| Deferred tax asset, net | 799,593 | 800,180 | |||||||||
| Other long-term assets | 104,707 | 99,891 | |||||||||
| Total assets | $ | 4,900,362 | $ | 4,865,227 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 310,107 | $ | 356,176 | |||||||
| Accrued liabilities and other short-term obligations | 299,408 | 409,285 | |||||||||
| Deferred revenue | 124,956 | 118,007 | |||||||||
| Operating lease liabilities | 18,927 | 18,632 | |||||||||
| Current portion of long-term debt | 6,930 | 6,930 | |||||||||
| Total current liabilities | 760,328 | 909,030 | |||||||||
| Long-term deferred revenue | 60,670 | 57,457 | |||||||||
| Other long-term obligations | 159,942 | 166,803 | |||||||||
| Long-term operating lease liabilities | 39,369 | 41,564 | |||||||||
| Long-term debt, net | 1,065,263 | 670,355 | |||||||||
| Total liabilities | $ | 2,085,572 | $ | 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; 152,990,723 and 154,858,981 shares issued and outstanding | 1,530 | 1,549 | |||||||||
| Additional paid-in capital | 6,567,474 | 6,803,162 | |||||||||
| Accumulated other comprehensive income (loss) | (14,905) | 439 | |||||||||
| Accumulated deficit | (3,739,309) | (3,785,132) | |||||||||
| Total stockholders’ equity | 2,814,790 | 3,020,018 | |||||||||
| Total liabilities and stockholders’ equity | $ | 4,900,362 | $ | 4,865,227 | |||||||
6
CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
| Three Months Ended | |||||||||||
| January 29, | January 30, | ||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows used in operating activities: | |||||||||||
| Net income | $ | 45,823 | $ | 55,348 | |||||||
| Adjustments to reconcile net income to net cash used in operating activities: | |||||||||||
| Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements | 23,653 | 23,188 | |||||||||
| Share-based compensation expense | 24,297 | 18,964 | |||||||||
| Amortization of intangible assets | 12,230 | 9,642 | |||||||||
| Deferred taxes | (766) | (905) | |||||||||
| Provision for inventory excess and obsolescence | 3,799 | 5,905 | |||||||||
| Provision for warranty | 2,817 | 3,239 | |||||||||
| Other | (8,615) | 4,277 | |||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable | 87,223 | 18,862 | |||||||||
| Inventories | (87,178) | (51,020) | |||||||||
| Prepaid expenses and other | (14,134) | (13,835) | |||||||||
| Operating lease right-of-use assets | 4,120 | 4,103 | |||||||||
| Accounts payable, accruals and other obligations | (152,981) | (112,170) | |||||||||
| Deferred revenue | 10,417 | 31,917 | |||||||||
| Short and long-term operating lease liabilities | (5,116) | (4,834) | |||||||||
| Net cash used in operating activities | (54,411) | (7,319) | |||||||||
| Cash flows used in investing activities: | |||||||||||
| Payments for equipment, furniture, fixtures and intellectual property | (25,804) | (20,868) | |||||||||
| Purchase of available for sale securities | (350,465) | (71,756) | |||||||||
| Proceeds from maturities of available for sale securities | 50,000 | 51,266 | |||||||||
| Settlement of foreign currency forward contracts, net | 1,346 | 2,357 | |||||||||
| Acquisition of business, net of cash acquired | (56,036) | — | |||||||||
| Proceeds from sale of equity investment | — | 4,678 | |||||||||
| Net cash used in investing activities | (380,959) | (34,323) | |||||||||
| Cash flows provided by (used in) financing activities: | |||||||||||
| Proceeds from issuance of senior notes | 400,000 | — | |||||||||
| Payment of long term debt | — | (1,732) | |||||||||
| Payment of debt issuance costs | (4,506) | — | |||||||||
| Payment of finance lease obligations | (771) | (702) | |||||||||
| Shares repurchased for tax withholdings on vesting of restricted stock units | (25,150) | (19,242) | |||||||||
| Repurchases of common stock - repurchase program | (250,000) | (12,406) | |||||||||
| Proceeds from issuance of common stock | 15,146 | 13,447 | |||||||||
| Net cash provided by (used in) financing activities | 134,719 | (20,635) | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (3,259) | 2,879 | |||||||||
| Net decrease in cash, cash equivalents and restricted cash | (303,910) | (59,398) | |||||||||
| 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 | $ | 1,118,694 | $ | 1,029,310 | |||||||
| Supplemental disclosure of cash flow information | |||||||||||
| Cash paid during the period for interest | $ | 7,670 | $ | 7,566 | |||||||
| Cash paid during the period for income taxes, net | $ | 6,112 | $ | 8,798 | |||||||
| Operating lease payments | $ | 5,480 | $ | 5,387 | |||||||
| Non-cash investing and financing activities | |||||||||||
| Purchase of equipment in accounts payable | $ | 2,972 | $ | 5,935 | |||||||
| Repurchase of common stock in accrued liabilities from repurchase program | $ | — | $ | 800 | |||||||
| Operating lease right-of-use assets subject to lease liability | $ | 3,376 | $ | 555 | |||||||
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| APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measures | ||||||||||||||
| (in thousands, except per share data) (unaudited) | ||||||||||||||
| Quarter Ended | ||||||||||||||
| January 29, | January 30, | |||||||||||||
| 2022 | 2021 | |||||||||||||
| Gross Profit Reconciliation (GAAP/non-GAAP) | ||||||||||||||
| GAAP gross profit | $ | 384,187 | $ | 357,891 | ||||||||||
| Share-based compensation-products | 900 | 953 | ||||||||||||
| Share-based compensation-services | 1,584 | 1,205 | ||||||||||||
| Amortization of intangible assets | 3,312 | 3,732 | ||||||||||||
| Total adjustments related to gross profit | 5,796 | 5,890 | ||||||||||||
| Adjusted (non-GAAP) gross profit | $ | 389,983 | $ | 363,781 | ||||||||||
| Adjusted (non-GAAP) gross profit percentage | 46.2 | % | 48.0 | % | ||||||||||
| Operating Expense Reconciliation (GAAP/non-GAAP) | ||||||||||||||
| GAAP operating expense | $ | 324,183 | $ | 282,096 | ||||||||||
| Share-based compensation-research and development | 6,830 | 4,794 | ||||||||||||
| Share-based compensation-sales and marketing | 7,060 | 5,816 | ||||||||||||
| Share-based compensation-general and administrative | 7,912 | 6,358 | ||||||||||||
| Significant asset impairments and restructuring costs | 3,409 | 5,867 | ||||||||||||
| Amortization of intangible assets | 8,918 | 5,910 | ||||||||||||
| Acquisition and integration costs | 68 | 307 | ||||||||||||
| Total adjustments related to operating expense | 34,197 | 29,052 | ||||||||||||
| Adjusted (non-GAAP) operating expense | $ | 289,986 | $ | 253,044 | ||||||||||
| Income from Operations Reconciliation (GAAP/non-GAAP) | ||||||||||||||
| GAAP income from operations | $ | 60,004 | $ | 75,795 | ||||||||||
| Total adjustments related to gross profit | 5,796 | 5,890 | ||||||||||||
| Total adjustments related to operating expense | 34,197 | 29,052 | ||||||||||||
| Total adjustments related to income from operations | 39,993 | 34,942 | ||||||||||||
| Adjusted (non-GAAP) income from operations | $ | 99,997 | $ | 110,737 | ||||||||||
| Adjusted (non-GAAP) operating margin percentage | 11.8 | % | 14.6 | % | ||||||||||
| Net Income Reconciliation (GAAP/non-GAAP) | ||||||||||||||
| GAAP net income | $ | 45,823 | $ | 55,348 | ||||||||||
| Exclude GAAP provision for income taxes | 9,219 | 11,966 | ||||||||||||
| Income before income taxes | 55,042 | 67,314 | ||||||||||||
| Total adjustments related to income from operations | 39,993 | 34,942 | ||||||||||||
| Unrealized gain on cost method equity investment | (4,120) | — | ||||||||||||
| Adjusted income before income taxes | 90,915 | 102,256 | ||||||||||||
| Non-GAAP tax provision on adjusted income before income taxes | 18,365 | 20,962 | ||||||||||||
| Adjusted (non-GAAP) net income | $ | 72,550 | $ | 81,294 | ||||||||||
| Weighted average basic common shares outstanding | 154,151 | 155,174 | ||||||||||||
Weighted average dilutive potential common shares outstanding 1 | 155,807 | 156,583 | ||||||||||||
| Net Income per Common Share | ||||||||||||||
| GAAP diluted net income per potential common share | $ | 0.29 | $ | 0.35 | ||||||||||
| Adjusted (non-GAAP) diluted net income per potential common share | $ | 0.47 | $ | 0.52 | ||||||||||
8
1 Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share for the first quarter of fiscal 2022 includes 1.7 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 first quarter of fiscal 2021 includes 1.4 million shares underlying certain stock option and stock unit awards.
9
| APPENDIX B - Calculation of EBITDA and Adjusted EBITDA (unaudited) | ||||||||||||||
| (in thousands) (unaudited) | ||||||||||||||
| Quarter Ended | ||||||||||||||
| January 29, | January 30, | |||||||||||||
| 2022 | 2021 | |||||||||||||
| Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) | ||||||||||||||
| Net income (GAAP) | $ | 45,823 | $ | 55,348 | ||||||||||
| Add: Interest expense | 8,648 | 7,360 | ||||||||||||
| Less: Interest and other income (loss), net | 3,686 | (1,121) | ||||||||||||
| Add: Provision for income taxes | 9,219 | 11,966 | ||||||||||||
| Add: Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements | 23,653 | 23,188 | ||||||||||||
| Add: Amortization of intangible assets | 12,230 | 9,642 | ||||||||||||
| EBITDA | $ | 95,887 | $ | 108,625 | ||||||||||
| Add: Share-based compensation cost | 24,297 | 18,964 | ||||||||||||
| Add: Significant asset impairments and restructuring costs | 3,409 | 5,867 | ||||||||||||
| Add: Acquisition and integration costs | 68 | 307 | ||||||||||||
| Adjusted EBITDA | $ | 123,661 | $ | 133,763 | ||||||||||
* * *
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.
•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 expense related to our acquisition of Vyatta during the first quarter of fiscal 2022. Acquisition and integration costs for the first 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.
•Unrealized gain on cost method 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 20.2% for the first fiscal quarter of 2022 and 20.5% for the first 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.
10
Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Ciena Corporation Period ended January 29, 2022 March 7, 2022 Earnings Presentation
2Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Forward-looking statements and non-GAAP measures Information in this presentation and related comments of presenters contain a number of forward-looking statements. 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 Ciena’s prospective financial results, return of capital plans, business strategies, expectations about its addressable markets and market share, and business outlook for future periods, as well as statements regarding Ciena’s expectations, beliefs, intentions or strategies regarding the future. Often, these can be identified by forward-looking words such as “target” “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” “plan,” “predict,” “potential,” “project, “continue,” and “would” or similar words. 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 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; supply chain constraints or disruptions; changes in foreign currency exchange rates affecting revenue and operating expense; 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; 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; 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 Ciena’s Quarterly Report on Form 10-Q for the first quarter of fiscal 2022 to be filed with the SEC. All information, statements, and projections in this presentation and the related earnings call speak only as of the date of this presentation and related earnings call. Ciena assumes no obligation to update any forward-looking or other information included in this presentation or related earnings calls, whether as a result of new information, future events or otherwise. In addition, this presentation includes historical, and may include prospective, non-GAAP measures of Ciena’s gross margin, operating expense, operating profit, EBITDA, net income, and net income per share. These measures are not intended to be a substitute for financial information presented in accordance with GAAP. A reconciliation of non- GAAP measures used in this presentation to Ciena’s GAAP results for the relevant period can be found in the Appendix to this presentation. Additional information can also be found in our press release filed this morning and in our reports on Form 10-Q filed with the Securities and Exchange Commission.
3Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Overview & recent achievements
4Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Ciena is an industry-leading global networking systems, services, and software company ….. Leading technology and innovation … with a strong track record of creating shareholder value Diversification and scale of business Leader in Optical markets and disruptor in emerging opportunities Demonstrated track record of financial performance Flexibility with strong balance sheet
5Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Recent key achievements • Delivering industry-leading coherent technology including 107GBd WaveLogic™ 5 Extreme (WL5e) and the widest range of interoperable and performance pluggables ▪ Blue Planet revenue has grown at a 3-year CAGR of 44% ▪ Growing revenue with MCP multi- layer visualization service across multi-vendor IP/Optical infrastructure We are driving the pace of innovation We are committed to our people and communities We have a durable business and financial model ▪ Despite the challenging environment, our profitability has remained strong with adjusted operating margin averaging in the mid-teens* ▪ Our balance sheet represents a competitive advantage • Ended the quarter with approximately $1.7B in cash and investments • Leverage remains below our target level after a successful $400M Senior Notes offering • Published ESG Investor Presentation and conducting stockholder outreach • Established our Sustainability Governance model which includes board oversight and strategic executive leadership • Communicated FY22 compensation goals that address climate, diversity & inclusion and community impact * Average over the last four quarters. A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation.
6Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Market context and our portfolio
7Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Six mega trends and the innovations that will enable them Fiber Deep (Cable/MSO) Cloud Data Center Mobility & 5G IoT & Connected Objects Living a Hybrid Life
8Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Technical and professional services that help customers build, operate, and optimize their networks Predictive analytics and machine learning based on both big data and small data Dynamic pool of virtual and physical network resources; instrumented, open, scalable, and secure Federated inventory, open domain control, and multi-layer orchestration Our vision for a new network end-state How it works
9Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Our market leadership Optical Transport Report, 4Q21 Optical Networking Report, 3Q21 Data Center Interconnect Market Share Report, 3Q21 Service Provider Switching & Routing Report, 3Q21 Optical Transport Hardware Report, 4Q21 Transport Customer Markets Report, 3Q21 Transport Applications Report, 3Q21 #1 Globally 5 of 9 markets #1 N. America 8 markets #1 Globally 4 of 7 markets #1 N. America 8 markets #1 Globally 3 of 8 markets #1 N. America 6 markets #2 Globally 4 of 9 markets #2 Globally 3 of 7 markets #2 Globally 5 of 8 markets
10Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Q1 FY 2022 results
11Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Q1 FY 2022 key highlights ▪ Non-telco represented 41% of total revenue • Direct web-scale increased 10% YoY and represents 20% of total revenue • MSO increased 68% YoY and represents 10% of total revenue ▪ Routing and Switching revenue increased 33% YoY, representing 10% of total revenue ▪ Platform Software and Services increased 46% YoY, representing 9% of total revenue ▪ GAAP R&D investment was approximately 18% of total revenue ▪ 719 100G+ total customers, which includes 12 new wins on WaveLogic Ai and 16 new wins on WaveLogic 5 Extreme ▪ Gaining business momentum with our purpose-built 5G x-haul routing portfolio ▪ New customer acquisition for routing platforms continues as we reached a milestone of 150+ total Adaptive IP customers during the quarter ▪ Total shareholder return five year CAGR of 22%1 ▪ As part of our $1 billion stock repurchase program, we repurchased approximately 2.7 million shares during the quarter through a $250 million Accelerated Share Repurchase (ASR) agreement2 1 Based on closing share price between 2/23/2017 to 2/22/2022 2 On February 11, 2022, Ciena received delivery of an additional 884,531 shares of common stock in settlement of the ASR Agreement, for a total delivery of approximately 3.6 million shares, Achieving balanced growth Prioritizing long term shareholder value Driving the pace of innovation
12Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Q1 FY 2022comparisons (year-over-year) * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. Revenue (in millions) Adj. Gross Margin* Adj. Operating Margin* Adj. OpEx* (in millions) Adj. EBITDA* (in millions) Adj. EPS*
13Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Q1 FY 2022 comparative operating metrics Q1 FY 2022 Q1 FY 2021 Cash and Investments $1.7B $1.3B Cash Used In Operations $(54)M $(7)M DSO 97 93 Inventory Turns 3.3 3.2 Gross Leverage 1.65x 1.10x Net Cash $523.3M $530.6M
14Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Q1 FY 2022 comparative financial highlights * A reconciliation of these non-GAAP measures to our GAAP results is included in the press release for the relative period. Q1 FY 2022 Q1 FY 2021 Revenue $844.4M $757.1M Adjusted Gross Margin* 46.2% 48.0% Adjusted Operating Expense* $290.0M $253.0M Adjusted Operating Margin* 11.8% 14.6% Adjusted EBITDA* $123.7M $133.8M Adjusted EPS* $0.47 $0.52
15Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Revenue by segment (Amounts in millions) Q1 FY 2022 Q1 FY 2021 Revenue %** Revenue %** Networking Platforms Converged Packet Optical 540.9 64.1 512.3 67.7 Routing and Switching 85.7 10.1 64.3 8.5 Total Networking Platforms 626.6 74.2 576.6 76.2 Platform Software and Services 72.9 8.6 49.9 6.6 Blue Planet Automation Software and Services 21.1 2.5 16.9 2.2 Global Services Maintenance Support and Training 72.5 8.6 67.6 8.9 Installation and Deployment 40.4 4.8 39.6 5.2 Consulting and Network Design 10.9 1.3 6.5 0.9 Total Global Services 123.8 14.7 113.7 15.0 Total $844.4 100.0 % $757.1 100.0 % * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. ** Denotes % of total revenue
16Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Continued revenue strength derived from non-telco customers
17Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Revenue by geographic region 11% 11% 12% 12% 14% 19% 19% 16% 18% 66% 70% 70% 72% 70% 20%
18Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Q1 FY 2022 appendix
19Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Q1 FY 2022 Q4 FY 2021 Q3 FY 2021 Q2 FY 2021 Q1 FY 2021 GAAP gross profit $384,187 $477,119 $474,550 $412,419 $357,891 Share-based compensation-products 900 920 1,037 498 953 Share-based compensation-services 1,584 1,240 1,315 1,421 1,205 Emergency Wage Subsidy - products 0 — (94) (4,189) — Emergency Wage Subsidy - services 0 — (47) (2,620) — Amortization of intangible assets 3,312 2,856 2,857 2,856 3,732 Total adjustments related to gross profit 5,796 5,016 5,068 (2,034) 5,890 Adjusted (non-GAAP) gross profit $389,983 $482,135 $479,618 $410,385 $363,781 Adjusted (non-GAAP) gross profit percentage 46.2 % 46.3 % 48.5 % 49.2 % 48.0 % Gross Profit Reconciliation (Amounts in thousands)
20Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Q1 FY 2022 Q4 FY 2021 Q3 FY 2021 Q2 FY 2021 Q1 FY 2021 GAAP operating expense $324,183 $339,710 $326,027 $278,790 $282,096 Share-based compensation-research and development 6,830 5,684 5,541 5,844 4,794 Share-based compensation-sales and marketing 7,060 6,192 6,534 6,610 5,816 Share-based compensation-general and administrative 7,912 7,466 8,237 6,743 6,358 Emergency Wage Subsidy-research and development — — (596) (28,923) — Emergency Wage Subsidy-sales and marketing — — (53) (2,551) — Emergency Wage Subsidy-general and administrative — — (46) (2,161) — Significant asset impairments and restructuring costs 3,409 5,700 9,789 8,209 5,867 Amortization of intangible assets 8,918 5,836 5,967 6,019 5,910 Acquisition and integration costs 68 1,712 259 294 307 Total adjustments related to operating expense 34,197 32,590 35,632 84 29,052 Adjusted (non-GAAP) operating expense $289,986 $307,120 $290,395 $278,706 $253,044 Q1 FY 2022 Q4 FY 2021 Q3 FY 2021 Q2 FY 2021 Q1 FY 2021 GAAP income from operations $60,004 $137,409 $148,523 $133,629 $75,795 Total adjustments related to gross profit 5,796 5,016 5,068 (2,034) 5,890 Total adjustments related to operating expense 34,197 32,590 35,632 84 29,052 Total adjustments related to income from operations 39,993 37,606 40,700 (1,950) 34,942 Adjusted (non-GAAP) income from operations $99,997 $175,015 $189,223 $131,679 $110,737 Adjusted (non-GAAP) operating margin percentage 11.8 % 16.8 % 19.1 % 15.8 % 14.6 % Operating Expense Reconciliation (Amounts in thousands) Income from Operations Reconciliation (Amounts in thousands)
21Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Q1 FY 2022 Q4 FY 2021 Q3 FY 2021 Q2 FY 2021 Q1 FY 2021 GAAP net income $45,823 $103,499 $238,232 $103,117 $55,348 Exclude GAAP provision (benefit) for income taxes 9,219 25,826 (96,690) 21,453 11,966 Income before income taxes 55,042 129,325 141,542 124,570 67,314 Total adjustments related to income from operations 39,993 37,606 40,700 (1,950) 34,942 Unrealized (gain) loss on cost method equity investment (4,120) — — 165 — Adjusted income before income taxes 90,915 166,931 182,242 122,785 102,256 Non-GAAP tax provision on adjusted income before income taxes 18,365 34,221 37,360 25,171 20,962 Adjusted (non-GAAP) net income $72,550 $132,710 $144,882 $97,614 $81,294 Weighted average basic common shares outstanding 154,151 155,232 155,271 155,331 155,174 Weighted average diluted potential common shares outstanding(1) 155,807 156,689 156,744 156,876 156,583 Q1 FY 2022 Q4 FY 2021 Q3 FY 2021 Q2 FY 2021 Q1 FY 2021 GAAP diluted net income per potential common share $ 0.29 $ 0.66 $ 1.52 $ 0.66 $ 0.35 Adjusted (non-GAAP) diluted net income per potential common share $ 0.47 $ 0.85 $ 0.92 $ 0.62 $ 0.52 1. Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share for the first quarter of fiscal 2022 includes 1.7 million shares underlying certain stock option and stock unit awards. Net Income Reconciliation (Amounts in thousands) Net Income per Common Share
22Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) Q1 FY 2022 Q4 FY 2021 Q3 FY 2021 Q2 FY 2021 Q1 FY 2021 Net income (GAAP) $45,823 $103,499 $238,232 $103,117 $55,348 Add: Interest expense 8,648 7,916 7,776 7,785 7,360 Less: Interest and other income (loss), net 3,686 (168) 795 (1,274) (1,121) Add: Provision (benefit) for income taxes 9,219 25,826 (96,690) 21,453 11,966 Add: Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements 23,653 24,315 24,623 24,107 23,188 Add: Amortization of intangible assets 12,230 8,692 8,824 8,875 9,642 EBITDA $95,887 $170,416 $181,970 $166,611 $108,625 Less: Canadian Emergency Wage Subsidy — — 836 40,444 — Add: Share-based compensation cost 24,297 21,366 22,471 21,535 18,964 Add: Significant asset impairments and restructuring costs 3,409 5,700 9,789 8,209 5,867 Add: Acquisition and integration costs 68 1,712 259 294 307 Adjusted EBITDA $123,661 $199,194 $213,653 $156,205 $133,763 Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) (Amounts in thousands)
Copyright © Ciena Corporation 2022. All rights reserved. Proprietary information. Thank You