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 6, 2023
(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 6, 2023, Ciena Corporation ("Ciena") issued a press release announcing its financial results for its fiscal first quarter ended January 28, 2023. 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 fiscal first quarter ended January 28, 2023.
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
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 6, 2023 | By: | /s/ Sheela Kosaraju | ||||||
Sheela Kosaraju | ||||||||
Senior Vice President, General Counsel and Assistant Secretary | ||||||||
FOR IMMEDIATE RELEASE
Ciena Reports Fiscal First Quarter 2023 Financial Results
Revenue increased 25% year-over-year
HANOVER, Md. - March 6, 2023 - Ciena® Corporation (NYSE: CIEN), 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 | % | ||||||||||||||
1
| 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
2
•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
3
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 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 LinkedIn, Twitter, the Ciena Insights blog, or visit www.ciena.com.
4
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 | |||||||||
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 for the first quarter of fiscal 2023; and (ii) 1.7 million shares for the first quarter of fiscal 2022.
5
CIENA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
| January 28, 2023 | October 29, 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 | |||||||
6
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 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 | |||||||
7
| 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 | ||||||||||
8
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.
9
| 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.
10
Copyright © Ciena Corporation 2023. All rights reserved. Proprietary information. Ciena Corporation Period ended January 28, 2023 March 6, 2023 Earnings Presentation
2Copyright © Ciena Corporation 2023. 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 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 Ciena’s Quarterly Report on Form 10-Q 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 and Form 10K filed with the Securities and Exchange Commission.
3Copyright © Ciena Corporation 2023. All rights reserved. Proprietary information. Table of Contents 1 Overview & recent achievements 2 Market context and Ciena's portfolio 3 Fiscal first quarter 2023 financial performance 4 Appendix
4Copyright © Ciena Corporation 2023. All rights reserved. Proprietary information. Overview & recent achievements
5Copyright © Ciena Corporation 2023. 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
6Copyright © Ciena Corporation 2023. All rights reserved. Proprietary information. Recent key achievements ▪ Announced WaveLogic™ 6, our next generation of coherent optics and the industry's first to support up to 1.6Tbps single-carrier wavelengths ▪ Delivering industry-leading coherent technology with WaveLogic 5 Extreme (WL5e), the most widely deployed 800G solution, and WaveLogic 5 Nano interoperable performance pluggables ▪ Coherent Routing is now available on eight routing and switching platforms supporting 100-400Gig coherent DWDM over ELS, RLS, 6500 and 3rd party line systems ▪ Offering a fully integrated per port architecture for Broadband Access Solution encompassing Ciena, Benu, and Tibit products We are driving the pace of innovation We are committed to our people and communities We have a resilient business and financial model ▪ Our large backlog provides visibility as supply chain gradually improves ▪ In FY 2022, we repurchased approximately 8.4 million shares for $500 million as part of our $1 billion stock repurchase program and we committed to completing the program by FYE 2024 ▪ Our balance sheet remains a competitive advantage • Ended the fiscal quarter with approximately $1.2B in cash and investments ▪ Submitted new greenhouse gas reduction goals to the Science Based Target Initiative for approval to address the environmental impact of our operations and ensure that our technology innovation becomes an even greater enabler of our customers’ environmental ambitions ▪ Announced a partnership with three Atlanta area public schools to provide digital tools and resources to engage students in the Ciena Solutions Challenge, one of our digital inclusion initiatives
7Copyright © Ciena Corporation 2023. All rights reserved. Proprietary information. Market context and our portfolio
8Copyright © Ciena Corporation 2023. All rights reserved. Proprietary information. Six mega trends and the innovations that will enable them AI, Digital Transformation & Automation Cloud Data Center Mobility & 5G IoT and Connected Objects Virtual & Hybrid Lifestyles
9Copyright © Ciena Corporation 2023. 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
10Copyright © Ciena Corporation 2023. All rights reserved. Proprietary information. Our market leadership Optical Transport Report, 4Q22Optical Networking Report, 3Q22 Data Center Interconnect Market Share Report, 3Q22 Service Provider Switching & Routing Report, 3Q22 Transport Hardware and Markets Report, 4Q22 Transport Applications Report, 3Q22 #1 GLOBALLY ◦ DATA CENTER INTERCONNECT ◦ OPTICAL FOR INTERNET CONTENT PROVIDER CUSTOMERS #1 N. AMERICA ◦ DATA CENTER INTERCONNECT ◦ TOTAL OPTICAL NETWORKING ◦ OPTICAL PACKET #2 GLOBALLY ◦ TOTAL OPTICAL NETWORKING ◦ OPTICAL PACKET ◦ PURPOSE-BUILT/COMPACT MODULAR DCI ◦ OPTICAL FOR CABLE MSO CUSTOMERS #1 GLOBALLY ◦ DATA CENTER INTERCONNECT ◦ DATA CENTER INTERCONNECT FOR ICP/CNPs ◦ SLTE WDM ◦ ACCESS SWITCHING #1 N. AMERICA ◦ TOTAL OPTICAL NETWORKING ◦ DATA CENTER INTERCONNECT ◦ ACCESS SWITCHING #2 GLOBALLY ◦ TOTAL OPTICAL NETWORKING ◦ PURPOSE-BUILT/COMPACT MODULAR DCI #1 GLOBALLY ◦ PURPOSE-BUILT/COMPACT MODULAR DCI ◦ OPTICAL FOR CLOUD & COLO ◦ SLTE WDM #1 N. AMERICA ◦ TOTAL OPTICAL NETWORKING ◦ PURPOSE-BUILT/COMPACT MODULAR DCI ◦ OPTICAL FOR CLOUD & COLO ◦ PACKET ACCESS #2 GLOBALLY ◦ TOTAL OPTICAL NETWORKING ◦ OPTICAL FOR SERVICE PROVIDER ◦ OPTICAL FOR ENTERPRISE & GOVERNMENT ◦ PACKET ACCESS
11Copyright © Ciena Corporation 2023. All rights reserved. Proprietary information. Q1 FY 2023 results
12Copyright © Ciena Corporation 2023. All rights reserved. Proprietary information. Q1 FY 2023 key highlights ▪ Non-telco represented 40% of total revenue in fiscal Q1 2023 ▪ Routing and Switching revenue increased 39% YoY in fiscal Q1 2023, reflecting strong contribution from portfolio enhancements, including solutions that address the network edge ▪ APAC revenue increased 41% YoY and 23% QoQ driven by strength in India ▪ GAAP R&D investment was 17.2% of total revenue in fiscal Q1 2023 ▪ Customer traction continues with 400G+ technologies, with 8 new wins on WL5n and 13 new wins on WaveLogic 5 Extreme • Record quarter for WL5e shipments with more than 60,000 modems shipped to date ▪ Brought additional products to market to serve Next-Gen Broadband Access, Enterprise, and Mobility use cases via the weatherized 3985 and the temperature hardened 3984, both with 25Gig support ▪ Total shareholder return five-year CAGR of 16%1 ▪ Made strategic investments to expand our addressable market ▪ Completed the acquisition of Tibit Communications, Inc., a provider of passive optical network solutions ▪ Completed the acquisition of Benu Networks, Inc., a provider of broadband network gateway software ▪ Raised $500M in Incremental Term Loan for general corporate purposes that improves our cash liquidity position 1 Based on closing share price between 2/14//2018 to 2/14/2023 Achieving balanced growth Prioritizing long term shareholder value Driving the pace of innovation
13Copyright © Ciena Corporation 2023. All rights reserved. Proprietary information. Q1 FY 2023 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 2023 Q1 FY 2022 Revenue $1,056.5M $844.4M Adjusted Gross Margin* 43.7% 46.2% Adjusted Operating Expense* $329.3M $290.0M Adjusted Operating Margin* 12.6% 11.8% Adjusted EBITDA* $155.1M $123.7M Adjusted EPS* $0.64 $0.47
14Copyright © Ciena Corporation 2023. All rights reserved. Proprietary information. Q1 FY 2023 comparative operating metrics Q1 FY 2023 Q1 FY 2022 Cash and investments $1.16B $1.67B Cash used in operations $(266)M $(54)M DSO 103 97 Inventory Turns 1.7 3.3 Gross Leverage 3.05x 1.65x Net Cash $(471.3)M $523.3M
15Copyright © Ciena Corporation 2023. All rights reserved. Proprietary information. Revenue by segment (Amounts in millions) 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 * A reconciliation of these non-GAAP measures to GAAP results is included in the appendix to this presentation. ** Denotes % of total revenue
16Copyright © Ciena Corporation 2023. All rights reserved. Proprietary information. Continued revenue strength derived from non-telco customers
17Copyright © Ciena Corporation 2023. All rights reserved. Proprietary information. Revenue by geographic region 12% 11% 12% 18% 15% 14% 70% 74% 71% 74% 14% 15% 13% 15% 72%
18Copyright © Ciena Corporation 2023. All rights reserved. Proprietary information. Q1 FY 2023 appendix
19Copyright © Ciena Corporation 2023. All rights reserved. Proprietary information. Q1 FY 2023 Q4 FY 2022 Q3 FY 2022 Q2 FY 2022 Q1 FY 2022 GAAP gross profit $455,946 $433,597 $340,779 $401,781 $384,187 Share-based compensation-products 1,051 907 1,002 1,058 900 Share-based compensation-services 2,297 2,066 1,940 1,943 1,584 Amortization of intangible assets 2,883 2,005 3,140 3,313 3,312 Total adjustments related to gross profit 6,231 4,978 6,082 6,314 5,796 Adjusted (non-GAAP) gross profit $462,177 $438,575 $346,861 $408,095 $389,983 Adjusted (non-GAAP) gross profit percentage 43.7 % 45.2 % 40.0 % 43.0 % 46.2 % Gross Profit Reconciliation (Amounts in thousands)
20Copyright © Ciena Corporation 2023. All rights reserved. Proprietary information. Q1 FY 2023 Q4 FY 2022 Q3 FY 2022 Q2 FY 2022 Q1 FY 2022 GAAP operating expense $370,730 $356,329 $313,672 $343,352 $324,183 Share-based compensation-research and development 9,234 8,507 8,233 8,309 6,830 Share-based compensation-sales and marketing 8,424 8,084 8,075 8,061 7,060 Share-based compensation-general and administrative 9,468 7,610 7,579 7,334 7,912 Significant asset impairments and restructuring costs 4,298 13,621 7,692 9,102 3,409 Amortization of intangible assets 7,441 5,754 8,919 8,920 8,918 Acquisition and integration costs 2,558 — 35 495 68 Total adjustments related to operating expense 41,423 43,576 40,533 42,221 34,197 Adjusted (non-GAAP) operating expense $329,307 $312,753 $273,139 $301,131 $289,986 Q1 FY 2023 Q4 FY 2022 Q3 FY 2022 Q2 FY 2022 Q1 FY 2022 GAAP income from operations $85,216 $77,268 $27,107 $58,429 $60,004 Total adjustments related to gross profit 6,231 4,978 6,082 6,314 5,796 Total adjustments related to operating expense 41,423 43,576 40,533 42,221 34,197 Total adjustments related to income from operations 47,654 48,554 46,615 48,535 39,993 Adjusted (non-GAAP) income from operations $132,870 $125,822 $73,722 $106,964 $99,997 Adjusted (non-GAAP) operating margin percentage 12.6 % 13.0 % 8.5 % 11.3 % 11.8 % Operating Expense Reconciliation (Amounts in thousands) Income from Operations Reconciliation (Amounts in thousands)
21Copyright © Ciena Corporation 2023. All rights reserved. Proprietary information. Q1 FY 2023 Q4 FY 2022 Q3 FY 2022 Q2 FY 2022 Q1 FY 2022 GAAP net income $76,241 $57,645 $10,512 $38,922 $45,823 Exclude GAAP provision for income taxes 25,078 7,735 4,319 8,330 9,219 Income before income taxes 101,319 65,380 14,831 47,252 55,042 Total adjustments related to income from operations 47,654 48,554 46,615 48,535 39,993 Gain on cost method equity investment (26,455) — — — (4,120) Adjusted income before income taxes 122,518 113,934 61,446 95,787 90,915 Non-GAAP tax provision on adjusted income before income taxes 26,954 23,015 12,412 19,349 18,365 Adjusted (non-GAAP) net income $95,564 $90,919 $49,034 $76,438 $72,550 Weighted average basic common shares outstanding 149,081 148,548 149,862 152,197 154,151 Weighted average diluted potential common shares outstanding(1) 149,551 149,111 150,463 153,344 155,807 Q1 FY 2023 Q4 FY 2022 Q3 FY 2022 Q2 FY 2022 Q1 FY 2022 GAAP diluted net income per potential common share $ 0.51 $ 0.39 $ 0.07 $ 0.25 $ 0.29 Adjusted (non-GAAP) diluted net income per potential common share $ 0.64 $ 0.61 $ 0.33 $ 0.50 $ 0.47 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 2023 includes 0.5 million shares underlying certain stock option and stock unit awards. Net Income Reconciliation (Amounts in thousands) Net Income per Common Share
22Copyright © Ciena Corporation 2023. All rights reserved. Proprietary information. Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) Q1 FY 2023 Q4 FY 2022 Q3 FY 2022 Q2 FY 2022 Q1 FY 2022 Net income (GAAP) $76,241 $57,645 $10,512 $38,922 $45,823 Add: Interest expense 15,870 13,775 12,642 11,985 8,648 Less: Interest and other income, net 31,973 1,887 366 808 3,686 Add: Provision for income taxes 25,078 7,735 4,319 8,330 9,219 Add: Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements 22,208 27,642 22,250 22,377 23,653 Add: Amortization of intangible assets 10,325 7,759 12,059 12,233 12,230 EBITDA $117,749 $112,669 $61,416 $93,039 $95,887 Add: Share-based compensation cost 30,474 27,174 26,857 26,673 24,297 Add: Significant asset impairments and restructuring costs 4,298 13,621 7,692 9,102 3,409 Add: Acquisition and integration costs 2,558 — 35 495 68 Adjusted EBITDA $155,079 $153,464 $96,000 $129,309 $123,661 Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) (Amounts in thousands)