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false0000936395 0000936395 2019-10-03 2019-10-03


 
 
 

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): December 12, 2019
 
 
 
Ciena Corporation
(Exact name of registrant as specified in its charter)
 
 
 
  
Commission File Number: 001-36250



Delaware
(State or other jurisdiction of incorporation)
7035 Ridge Road, Hanover, MD
(Address of principal executive offices)
 

 

23-2725311
(IRS Employer Identification No.)
21076
(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
Common stock, $0.01 par value
CIEN
New York Stock Exchange

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 December 12, 2019, Ciena Corporation ("Ciena") issued a press release announcing its financial results for its fourth fiscal quarter ended October 31, 2019. 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 fourth fiscal quarter ended October 31, 2019.
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






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: December 12, 2019
By:
/s/ David M. Rothenstein
 
 
David M. Rothenstein
 
 
Senior Vice President, General Counsel and Secretary
Exhibit


FOR IMMEDIATE RELEASE
Ciena Reports Fiscal Fourth Quarter 2019 and Year-End Financial Results

HANOVER, Md. - December 12, 2019 - Ciena® Corporation (NYSE: CIEN), a networking systems, services and software company, today announced unaudited financial results for its fiscal fourth quarter and year ended October 31, 2019.

•
Q4 Revenue: $968.0 million, increasing 7.6% year over year

•
Q4 Net Income per Share: $0.51 GAAP; $0.58 adjusted (non-GAAP)

•
Share Repurchases: Repurchased approximately 1.0 million shares of common stock for an aggregate price of $38.2 million during the quarter

"Our outstanding Q4 financial performance rounded out an extraordinary year of industry-leading growth and profitability," said Gary Smith, President and CEO, Ciena. "Our innovation, diversification and scale uniquely position us to continue taking share while delivering improved operating margin and driving sustained EPS growth in 2020."

For the fiscal fourth quarter 2019, Ciena reported revenue of $968.0 million as compared to $899.4 million for the fiscal fourth quarter 2018. For fiscal year 2019, Ciena reported revenue of $3.57 billion, as compared to $3.09 billion for fiscal year 2018.

Ciena's GAAP net income for the fiscal fourth quarter 2019 was $80.3 million or $0.51 per diluted common share, which compares to a GAAP net income of $64.0 million, or $0.34 per diluted common share, for the fiscal fourth quarter 2018. For fiscal year 2019, Ciena's GAAP net income was $253.4 million, or $1.61 per diluted common share, as compared to a GAAP net loss of $(344.7) million, or $(2.49) per diluted common share for fiscal year 2018.

Ciena's adjusted (non-GAAP) net income for the fiscal fourth quarter 2019 was $90.4 million, or $0.58 per diluted common share, which compares to an adjusted (non-GAAP) net income of $81.0 million, or $0.53 per diluted common share, for the fiscal fourth quarter 2018. For fiscal year 2019, Ciena's adjusted (non-GAAP) net income was $331.8 million, or $2.11 per diluted common share, as compared to an adjusted (non-GAAP) net income of $210.6 million, or $1.39 per diluted common share for fiscal year 2018.

Performance Summary for the Fiscal Fourth Quarter and the Year Ended October 31, 2019
The tables below (in millions, except percentage data) provide comparisons of certain quarterly and annual 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)
 
 
Quarter Ended
 October 31,
 
Period Change
 
Year Ended
 October 31,
 
Period Change
 
 
2019
 
2018
 
Y-T-Y*
 
2019
 
2018
 
Y-T-Y*
Revenue
 
$
968.0

 
$
899.4

 
7.6
 %
 
$
3,572.1

 
$
3,094.3

 
15.4
%
Gross margin
 
43.4
%
 
44.3
%
 
(0.9
)%
 
43.2
%
 
42.5
%
 
0.7
%
Operating expense
 
$
326.5

 
$
302.2

 
8.0
 %
 
$
1,195.3

 
$
1,084.7

 
10.2
%
Operating margin
 
9.6
%
 
10.7
%
 
(1.1
)%
 
9.7
%
 
7.4
%
 
2.3
%
 
 
Non-GAAP Results (unaudited)
 
 
Quarter Ended
October 31,
 
Period Change
 
Year Ended
October 31,
 
Period Change
 
 
2019
 
2018
 
Y-T-Y*
 
2019
 
2018
 
Y-T-Y*
Revenue
 
$
968.0

 
$
899.4

 
7.6
 %
 
$
3,572.1

 
$
3,094.3

 
15.4
%
Adj. gross margin
 
43.8
%
 
44.7
%
 
(0.9
)%
 
43.7
%
 
43.0
%
 
0.7
%
Adj. operating expense
 
$
295.3

 
$
277.7

 
6.3
 %
 
$
1,091.8

 
$
993.6

 
9.9
%
Adj. operating margin
 
13.3
%
 
13.9
%
 
(0.6
)%
 
13.1
%
 
10.9
%
 
2.2
%

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

 
 
Revenue by Segment (unaudited)
 
 
Quarter Ended October 31,
 
 
2019
 
2018
 
 
Revenue
 
%**
 
Revenue
 
% **
Networking Platforms
 
 
 
 
 
 
 
 
Converged Packet Optical
 
$
665.8

 
68.8
 
$
646.4

 
71.9
Packet Networking
 
131.9

 
13.6
 
66.5

 
7.4
Total Networking Platforms
 
797.7

 
82.4
 
712.9

 
79.3
 
 
 
 
 
 
 
 
 
Platform Software and Services
 
41.2

 
4.3
 
56.6

 
6.3
 
 
 
 
 
 
 
 
 
Blue Planet Automation Software and Services
 
16.6

 
1.7
 
10.7

 
1.2
 
 
 
 
 
 
 
 
 
Global Services
 
 
 
 
 
 
 
 
Maintenance Support and Training
 
65.3

 
6.7
 
67.4

 
7.5
Installation and Deployment
 
36.5

 
3.8
 
39.3

 
4.4
Consulting and Network Design
 
10.7

 
1.1
 
12.5

 
1.3
Total Global Services
 
112.5

 
11.6
 
119.2

 
13.2
 
 
 
 
 
 
 
 
 
Total
 
$
968.0

 
100.0
 
$
899.4

 
100.0




 
 
Revenue by Segment (unaudited)
 
 
Year Ended October 31,
 
 
2019
 
2018
 
 
Revenue
 
%**
 
Revenue
 
% **
Networking Platforms
 
 
 
 
 
 
 
 
Converged Packet Optical
 
$
2,562.8

 
71.8
 
$
2,194.6

 
70.9
Packet Networking
 
348.5

 
9.8
 
283.5

 
9.2
Total Networking Platforms
 
2,911.3

 
81.6
 
2,478.1

 
80.1
 
 
 
 
 
 
 
 
 
Platform Software and Services
 
155.3

 
4.3
 
174.0

 
5.6
 
 
 
 
 
 
 
 
 
Blue Planet Automation Software and Services
 
54.6

 
1.5
 
26.7

 
0.9
 
 
 
 
 
 
 
 
 
Global Services
 
 
 
 
 
 
 
 
Maintenance Support and Training
 
261.3

 
7.3
 
245.1

 
7.9
Installation and Deployment
 
148.2

 
4.1
 
128.8

 
4.2
Consulting and Network Design
 
41.4

 
1.2
 
41.6

 
1.3
Total Global Services
 
450.9

 
12.6
 
415.5

 
13.4
 
 
 
 
 
 
 
 
 
Total
 
$
3,572.1

 
100.0
 
$
3,094.3

 
100.0

Additional Performance Metrics for Fiscal Fourth Quarter and Year Ended October 31, 2019

 
 
Revenue by Geographic Region (unaudited)
 
 
Quarter Ended October 31,
 
 
2019
 
2018
 
 
Revenue
 
% **
 
Revenue
 
% **
North America
 
$
672.7

 
69.5
 
$
555.3

 
61.7
Europe, Middle East and Africa
 
153.0

 
15.8
 
123.1

 
13.7
Caribbean and Latin America
 
43.0

 
4.4
 
53.0

 
5.9
Asia Pacific
 
99.3

 
10.3
 
168.0

 
18.7
Total
 
$
968.0

 
100.0
 
$
899.4

 
100.0

 
 
Revenue by Geographic Region (unaudited)
 
 
Year Ended October 31,
 
 
2019
 
2018
 
 
Revenue
 
% **
 
Revenue
 
% **
North America
 
$
2,351.3

 
65.8
 
$
1,886.4

 
61.0
Europe, Middle East and Africa
 
566.7

 
15.9
 
464.9

 
15.0
Caribbean and Latin America
 
152.6

 
4.3
 
140.2

 
4.5
Asia Pacific
 
501.5

 
14.0
 
602.8

 
19.5
Total
 
$
3,572.1

 
100.0
 
$
3,094.3

 
100.0
** Denotes % of total revenue
•One 10%-plus customer represented a total of 15.1% of revenue for the fiscal quarter
•Three 10%-plus customers represented a total of 34.1% of revenue for the fiscal year
•
Cash and investments totaled $1,024.0 million




•
Cash flow from operations totaled $240.0 million and $413.1 million for the fiscal quarter and year, respectively
•
Average days' sales outstanding (DSOs) were 75 and 82 for the fiscal quarter and year, respectively
•
Accounts receivable balance was $724.9 million
•
Unbilled contract asset balance was $84.0 million
•
Inventories totaled $345.0 million, including:
◦
Raw materials: $99.0 million
◦
Work in process: $13.7 million
◦
Finished goods: $226.6 million
◦
Deferred cost of sales: $53.0 million
◦
Reserve for excess and obsolescence: $(47.3) million
•
Product inventory turns were 5.4 and 5.0 for the fiscal quarter and year, respectively
•
Headcount totaled 6,383

Share Repurchase Program
During fiscal year 2019, Ciena repurchased approximately 3.8 million shares of its common stock at an average price of $39.10 per share for an aggregate purchase price of $150.1 million.

Ciena may purchase shares at management's discretion in the open market, in privately negotiated transactions, in transactions structured through investment banking institutions, or a combination of the foregoing. Ciena may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of its shares under this authorization. The amount and timing of repurchases are subject to a variety of factors including liquidity, cash flow, stock price, and general business and market conditions. The program may be modified, suspended or discontinued at any time.

Supplemental Materials and Live Web Broadcast of Unaudited Fiscal Fourth Quarter 2019 Results
Today, Thursday, December 12, 2019, 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 fourth quarter and fiscal 2019 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, 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: "Our outstanding Q4 financial performance rounded out an extraordinary year of industry-leading growth and profitability."; "Our innovation, diversification and scale uniquely position us to continue taking share while delivering improved operating margin and driving sustained EPS growth in 2020."

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; changes in network spending or network strategy by 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 disruptions and the level of success relating to efforts to optimize Ciena's operations; changes in foreign currency exchange rates affecting revenue and operating expense; the impact of the Tax Cuts and Jobs Act, changes in estimates of prospective income tax rates and any adjustments to Ciena's provisional estimates whether related to further guidance, analysis or otherwise, and the other risk factors disclosed in Ciena's periodic reports filed with the Securities and Exchange Commission, including its Quarterly Report on Form 10-Q filed with the SEC on September 11, 2019 and its Annual Report on Form 10-K 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 for the relevant period, Appendix 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 clients create the Adaptive Network™ in response to the constantly changing demands of their users. By delivering best-in-class networking technology through high-touch consultative relationships, we build the world’s most agile networks with automation, openness and scale. For updates on Ciena, follow us on Twitter @Ciena, LinkedIn, the Ciena Insights blog, or visit www.ciena.com.
 





CIENA CORPORATION
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

 
 
Quarter Ended October 31,
 
Year Ended October 31,
 
 
2019
 
2018
 
2019
 
2018
Revenue:
 
 
 
 
 
 
 
 
Products
 
$
820,007

 
$
743,867

 
$
2,983,815

 
$
2,565,460

Services
 
147,980

 
155,489

 
588,316

 
528,826

Total revenue
 
967,987

 
899,356

 
3,572,131

 
3,094,286

Cost of goods sold:
 
 
 
 
 
 
 
 
Products
 
469,945

 
421,583

 
1,716,358

 
1,507,157

Services
 
78,346

 
79,698

 
313,707

 
272,439

Total cost of goods sold
 
548,291

 
501,281

 
2,030,065

 
1,779,596

Gross profit
 
419,696

 
398,075

 
1,542,066

 
1,314,690

Operating expenses:
 
 
 
 
 
 
 
 
Research and development
 
141,657

 
134,983

 
548,139

 
491,564

Selling and marketing
 
117,201

 
112,791

 
423,046

 
394,060

General and administrative
 
50,307

 
44,539

 
174,399

 
160,133

Amortization of intangible assets
 
5,222

 
4,654

 
21,808

 
15,737

Acquisition and integration costs
 
(735
)
 
3,778

 
3,370

 
5,111

Significant asset impairments and restructuring costs
 
12,842

 
1,460

 
24,538

 
18,139

Total operating expenses
 
326,494

 
302,205

 
1,195,300

 
1,084,744

Income from operations
 
93,202

 
95,870

 
346,766

 
229,946

Interest and other income (loss), net
 
(1,183
)
 
(13,357
)
 
3,876

 
(12,029
)
Interest expense
 
(9,136
)
 
(14,873
)
 
(37,452
)
 
(55,249
)
Loss on extinguishment and modification of debt
 
—

 
(13,887
)
 
—

 
(13,887
)
Income before income taxes
 
82,883

 
53,753

 
313,190

 
148,781

Provision (benefit) for income taxes
 
2,552

 
(10,224
)
 
59,756

 
493,471

Net income (loss)
 
$
80,331

 
$
63,977

 
$
253,434

 
$
(344,690
)
 
 
 
 
 
 
 
 
 
Net Income (Loss) per Common Share
 
 
 
 
 
 
 
 
Basic net income (loss) per common share
 
$
0.52

 
$
0.45

 
$
1.63

 
$
(2.40
)
Diluted net income (loss) per potential common share1 
 
$
0.51

 
$
0.34

 
$
1.61

 
$
(2.49
)
 
 
 
 
 
 
 
 
 
Weighted average basic common shares outstanding
 
154,852

 
143,659

 
155,720

 
143,738

Weighted average diluted potential common shares outstanding 2
 
156,612

 
157,745

 
157,612

 
143,738

1. The calculation of GAAP diluted net income per common share for the fourth quarter of fiscal 2018 requires a) adding back interest expense of approximately $0.4 million associated with Ciena's "Original" 3.75% convertible senior notes, which were converted by holders thereof immediately prior to maturity during the fourth quarter of fiscal 2018 and approximately $2.8 million associated with Ciena's 4.0% convertible senior notes, which were converted at Ciena's election during the fourth quarter of fiscal 2018, and b) reducing net income by $12.9 million for a non-cash loss due to a mark to market fair value adjustment related to the outstanding conversion feature of Ciena's "New" 3.75% senior convertible notes, which were converted by holders thereof immediately prior to maturity during the fourth quarter of fiscal 2018, in order to derive the numerator for the diluted earnings per common share calculation. 




The calculation of GAAP diluted net loss per common share for fiscal 2018 requires an adjustment of $12.9 million for a non-cash loss due to a mark to market fair value adjustment related to the outstanding conversion feature of Ciena's "New" 3.75% senior convertible notes to the GAAP net loss in order to derive the numerator for the diluted earnings per common share calculation.
2. Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per common share for the fourth quarter of fiscal 2019 includes 1.8 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 common share for fiscal 2019 includes 1.9 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 common share for the fourth quarter of fiscal 2018 includes 2.0 million shares underlying certain stock option and stock unit awards, 0.7 million and 2.5 million shares underlying Ciena's "New" and "Original" 3.75% convertible senior notes, respectively, and 8.9 million shares underlying Ciena's 4.0% convertible senior notes.





CIENA CORPORATION
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

 
October 31,
 
2019
 
2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
904,045

 
$
745,423

 Short-term investments
109,940

 
148,981

Accounts receivable, net
724,854

 
786,502

Inventories
345,049

 
262,751

Prepaid expenses and other
297,914

 
198,945

Total current assets
2,381,802

 
2,142,602

Long-term investments
10,014

 
58,970

Equipment, building, furniture and fixtures, net
286,884

 
292,067

Goodwill
297,937

 
297,968

Other intangible assets, net
112,781

 
148,225

Deferred tax asset, net
714,942

 
745,039

Other long-term assets
88,986

 
71,652

Total assets
$
3,893,346

 
$
3,756,523

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
344,819

 
$
340,582

Accrued liabilities and other short-term obligations
382,740

 
340,075

Deferred revenue
111,381

 
111,134

Current portion of long-term debt
7,000

 
7,000

Debt conversion liability
—

 
164,212

Total current liabilities
845,940

 
963,003

Long-term deferred revenue
45,492

 
58,323

Other long-term obligations
148,747

 
119,413

Long-term debt, net
680,406

 
686,450

Total liabilities
$
1,720,585

 
$
1,827,189

 
 
 
 
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; 154,403,850 and 154,318,531 shares issued and outstanding
1,544

 
1,543

Additional paid-in capital
6,837,714

 
6,881,223

Accumulated other comprehensive loss
(22,084
)
 
(5,780
)
Accumulated deficit
(4,644,413
)
 
(4,947,652
)
Total stockholders’ equity
2,172,761

 
1,929,334

Total liabilities and stockholders’ equity
$
3,893,346

 
$
3,756,523






CIENA CORPORATION
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Year Ended October 31,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income (loss)
$
253,434

 
$
(344,690
)
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Loss on extinguishment of debt
—

 
10,039

Loss on fair value of debt conversion liability
—

 
12,070

Depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements
87,576

 
84,214

Share-based compensation costs
59,736

 
52,972

Amortization of intangible assets
35,136

 
25,806

Deferred taxes
19,865

 
463,631

Provision for doubtful accounts
6,740

 
2,700

Provision for inventory excess and obsolescence
28,085

 
30,615

Provision for warranty
23,105

 
20,992

Other
(910
)
 
21,685

Changes in assets and liabilities:
 
 
 
Accounts receivable
65,712

 
(168,357
)
Inventories
(112,941
)
 
(27,445
)
Prepaid expenses and other
(96,618
)
 
(21,425
)
Accounts payable, accruals and other obligations
27,740

 
85,798

Deferred revenue
16,480

 
(19,344
)
Net cash provided by operating activities
413,140

 
229,261

Cash flows used in investing activities:
 
 
 
Payments for equipment, furniture, fixtures and intellectual property
(62,579
)
 
(67,616
)
Purchase of available for sale securities
(158,074
)
 
(286,824
)
Proceeds from maturities of available for sale securities
248,748

 
410,109

Settlement of foreign currency forward contracts, net

(1,351
)
 
9,385

Purchase of equity investment
(2,667
)
 
(1,767
)
Acquisition of businesses, net of cash acquired
—

 
(82,670
)
Net cash provided by (used in) investing activities
24,077

 
(19,383
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of long-term debt, net
—

 
305,125

Payment of long-term debt
(7,000
)
 
(292,730
)
Payment for debt conversion liability
(111,268
)
 
—

Payment for make-whole provision upon conversion of long-term debt
—

 
(13,453
)
Payment of debt issuance costs
(1,191
)
 
(1,936
)
Payment of capital lease obligations
(3,319
)
 
(3,624
)
Shares repurchased for tax withholdings on vesting of restricted stock units
(29,059
)
 
(4,757
)
Repurchases of common stock - repurchase program
(150,076
)
 
(110,981
)
Proceeds from issuance of common stock
22,947

 
23,127

Net cash used in financing activities
(278,966
)
 
(99,229
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
476

 
(5,856
)
Net increase (decrease) in cash, cash equivalents and restricted cash
158,727

 
104,793

Cash, cash equivalents and restricted cash at beginning of fiscal year
745,434

 
640,641

Cash, cash equivalents and restricted cash at end of fiscal year
$
904,161

 
$
745,434

Supplemental disclosure of cash flow information
 
 
 
Cash paid during the fiscal year for interest
$
39,579

 
$
44,750

Cash paid during the fiscal year for income taxes, net
$
33,570

 
$
26,900

Non-cash investing and financing activities
 
 
 
Purchase of equipment in accounts payable
$
16,549

 
$
5,118

    Contingent consideration for acquisition of business
$
—

 
$
10,900

Conversion of 3.75% convertible senior notes, due October 15, 2018 (Original) into 3,038,208 shares of common stock
$
—

 
$
61,270

Conversion of 4.0% convertible senior notes, due December 15, 2020 into 9,197,943 shares of common stock, net
$
—

 
$
214,286

Conversion of debt conversion liability into 1,585,140 shares of common stock
$
52,944

 
$
—






APPENDIX A- Reconciliation of Adjusted (Non- GAAP) Measurements (unaudited)
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
Year Ended
 
 
October 31,
 
October 31,
 
 
2019
 
2018
 
2019
 
2018
Gross Profit Reconciliation (GAAP/non-GAAP)
 
 
 
 
 
 
 
 
GAAP gross profit
 
$
419,696

 
$
398,075

 
$
1,542,066

 
$
1,314,690

Share-based compensation-products
 
748

 
705

 
2,868

 
2,984

Share-based compensation-services
 
715

 
651

 
3,175

 
2,616

Amortization of intangible assets
 
3,303

 
2,957

 
13,327

 
10,069

Total adjustments related to gross profit
 
4,766

 
4,313

 
19,370

 
15,669

Adjusted (non-GAAP) gross profit
 
$
424,462

 
$
402,388

 
$
1,561,436

 
$
1,330,359

Adjusted (non-GAAP) gross profit percentage
 
43.8
%
 
44.7
%
 
43.7
%
 
43.0
%
 
 
 
 
 
 
 
 
 
Operating Expense Reconciliation (GAAP/non-GAAP)
 
 
 
 
 
 
 
 
GAAP operating expense
 
$
326,494

 
$
302,205

 
$
1,195,300

 
$
1,084,744

Share-based compensation-research and development
 
3,287

 
3,385

 
14,321

 
13,518

Share-based compensation-sales and marketing
 
4,151

 
3,741

 
16,474

 
14,246

Share-based compensation-general and administrative
 
6,425

 
5,588

 
22,841

 
19,709

Amortization of intangible assets
 
5,222

 
4,654

 
21,808

 
15,737

Acquisition and integration costs
 
(735
)
 
3,778

 
3,370

 
5,111

Significant asset impairments and restructuring costs
 
12,842

 
1,460

 
24,538

 
18,139

Legal settlements
 
—

 
1,929

 
137

 
4,682

Total adjustments related to operating expense
 
$
31,192

 
$
24,535

 
$
103,489

 
$
91,142

Adjusted (non-GAAP) operating expense
 
$
295,302

 
$
277,670

 
$
1,091,811

 
$
993,602

 
 
 
 
 
 
 
 
 
Income from Operations Reconciliation (GAAP/non-GAAP)
 
 
 
 
 
 
 
 
GAAP income from operations
 
$
93,202

 
$
95,870

 
$
346,766

 
$
229,946

Total adjustments related to gross profit
 
4,766

 
4,313

 
19,370

 
15,669

Total adjustments related to operating expense
 
31,192

 
24,535

 
103,489

 
91,142

Total adjustments related to income from operations
 
35,958

 
28,848

 
122,859

 
106,811

Adjusted (non-GAAP) income from operations
 
$
129,160

 
$
124,718

 
$
469,625

 
$
336,757

Adjusted (non-GAAP) operating margin percentage
 
13.3
%
 
13.9
%
 
13.1
%
 
10.9
%
 
 
 
 
 
 
 
 
 




APPENDIX A- Reconciliation of Adjusted (Non- GAAP) Measurements (unaudited)
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
Year Ended
 
 
October 31,
 
October 31,
 
 
2019
 
2018
 
2019
 
2018
Net Income (Loss) Reconciliation (GAAP/non-GAAP)
 
 
 
 
 
 
 
 
GAAP net income (loss)
 
$
80,331

 
$
63,977

 
$
253,434

 
$
(344,690
)
Exclude GAAP provision (benefit) for income taxes
 
2,552

 
(10,224
)
 
59,756

 
493,471

Income before income taxes
 
82,883

 
53,753

 
313,190

 
148,781

Total adjustments related to income from operations
 
35,958

 
28,848

 
122,859

 
106,811

Loss on extinguishment and modification of debt
 
—

 
13,887

 
—

 
13,887

Non-cash interest expense
 
—

 
727

 
—

 
2,579

Change in fair value of debt conversion liability
 
—

 
12,070

 
—

 
12,070

Adjusted income before income taxes
 
118,841

 
109,285

 
436,049

 
284,128

Non-GAAP tax provision on adjusted income before income taxes
 
28,403

 
28,272

 
104,216

 
73,504

Adjusted (non-GAAP) net income
 
$
90,438

 
$
81,013

 
$
331,833

 
$
210,624

 
 
 
 
 
 
 
 
 
Weighted average basic common shares outstanding
 
154,852

 
143,659

 
155,720

 
143,738

Weighted average dilutive potential common shares outstanding 1
 
156,612

 
157,745

 
157,612

 
158,884

 
 
 
 
 
 
 
 
 
Net Income (Loss) per Common Share
 
 
 
 
 
 
 
 
GAAP diluted net income (loss) per common share
 
$
0.51

 
$
0.34

 
$
1.61

 
$
(2.49
)
Adjusted (non-GAAP) diluted net income per common share 2
 
$
0.58

 
$
0.53

 
$
2.11

 
$
1.39

 
 
 
 
 
 
 
 
 
1. Weighted average dilutive potential common shares outstanding used in calculating adjusted (non-GAAP) diluted net income per common share for the fourth quarter of fiscal 2019 includes 1.8 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 common share for fiscal 2019 includes 1.9 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 common share for the fourth quarter of fiscal 2018 includes 2.0 million shares underlying certain stock option and stock unit awards, 0.7 million and 2.5 million shares underlying Ciena's "New" and "Original" 3.75% convertible senior notes, respectively, which were converted by holders thereof immediately prior to maturity during the fourth quarter of fiscal 2018, and 8.9 million shares underlying Ciena's 4.0% convertible senior notes, which were converted at Ciena's election during the fourth quarter of fiscal 2018.

Weighted average dilutive potential common shares outstanding used in calculating adjusted (non-GAAP) diluted net income per common share for fiscal 2018 includes 1.4 million shares underlying certain stock option and stock unit awards, 1.8 million and 2.9 million shares underlying Ciena's "New" and "Original" 3.75% convertible senior notes, respectively, and 9.1 million shares underlying Ciena's 4.0% convertible senior notes.
  
2. The calculation of adjusted (non-GAAP) diluted net income per common share for the fourth quarter of fiscal 2018 requires adding back interest expense of approximately $0.4 million associated with Ciena's "Original" 3.75% convertible senior notes and approximately $2.3 million associated with Ciena's 4.0% convertible senior notes to the adjusted (non-GAAP) net income in order to derive the numerator for the adjusted (non-GAAP) earnings per common share calculation.

The calculation of adjusted (non-GAAP) diluted net income per common share for fiscal 2018 requires adding back interest expense of approximately $1.8 million associated with Ciena's "Original" 3.75% convertible senior notes and approximately $8.7 million associated with Ciena's 4.0% convertible senior notes to the adjusted (non-GAAP) net income in order to derive the numerator for the adjusted (non-GAAP) earnings per common share calculation.





APPENDIX B- Calculation of EBITDA and Adjusted EBITDA (unaudited)
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
Year Ended
 
 
October 31,
 
October 31,
 
 
2019
 
2018
 
2019
 
2018
Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)
 
 
 
 
 
 
 
 
Net income (loss) (GAAP)
 
$
80,331

 
$
63,977

 
$
253,434

 
$
(344,690
)
Add: Interest expense
 
9,136

 
14,873

 
37,452

 
55,249

Less: Interest and other income (loss), net
 
(1,183
)
 
(13,357
)
 
3,876

 
(12,029
)
Add: Loss on extinguishment and modification of debt
 
—

 
(13,887
)
 
—

 
(13,887
)
Add: Provision (benefit) for income taxes
 
2,552

 
(10,224
)
 
59,756

 
493,471

Add: Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements
 
22,505

 
21,110

 
87,576

 
84,214

Add: Amortization of intangible assets
 
8,525

 
7,611

 
35,136

 
25,806

EBITDA
 
$
124,232

 
$
124,591

 
$
469,478

 
$
339,966

Add: Shared-based compensation cost
 
15,290

 
14,076

 
59,736

 
52,972

Add: Significant asset impairments and restructuring costs
 
12,842

 
1,460

 
24,538

 
18,139

Add: Acquisition and integration costs
 
(735
)
 
3,778

 
3,370

 
5,111

Add: Legal settlement
 
—

 
1,929

 
137

 
4,682

Adjusted EBITDA
 
$
151,629

 
$
145,834

 
$
557,259

 
$
420,870

* * *
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.
•
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 - consist of financial, legal and accounting advisors' costs and severance and other employment-related costs related to Ciena's acquisition of Packet Design and DonRiver. Ciena does not believe that these costs are reflective of its ongoing operating expense following its completion of these integration activities.
•
Significant asset impairments and restructuring costs - costs incurred as a result of restructuring activities taken to align resources with perceived market opportunities.
•
Legal settlements - costs incurred as a result of settlements, during the first quarter of fiscal 2019, the third quarter of fiscal 2018 and the fourth quarter of fiscal 2018.
•
Loss on extinguishment and modification of debt - reflects extinguishment of debt costs related to our conversion of Ciena's 4.0% convertible senior notes and debt modification expenses related to refinancing our then existing term loan, both of which occurred during the fourth quarter of fiscal 2018.
•
Non-cash interest expense - a non-cash debt discount expense amortized as interest expense during the term of Ciena's 4.0% senior convertible notes, which were converted during the fourth quarter of 2018, relating to the required separate accounting of the equity component of these convertible notes.
•
Change in fair value of debt conversion liability - a non-cash loss reflective of a mark to market fair value adjustment related to the outstanding conversion feature of Ciena's "New" 3.75% senior convertible notes.




•
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 23.9% for fiscal 2019, and 25.9% for fiscal 2018. This rate may be subject to change in the future, including as a result of changes in tax policy or tax strategy.


ex992q419earningspresent
Ciena Corporation Earnings Presentation Period ended October 31, 2019 December 12, 2019 Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary.

 
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 long-term financial targets, 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; 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 disruptions and the level of success relating to efforts to optimize Ciena's operations; changes in foreign currency exchange rates affecting revenue and operating expense; the impact of the Tax Cuts and Jobs Act; changes in tax or trade regulations, including the imposition of tariffs and duties; 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 to be filed with the SEC and Ciena’s Quarterly Report on Form 10-Q filed with the SEC on September 11, 2019. 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. Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 2

 
Fiscal 2019 results Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 3

 
We are taking market share and We are forcing the pace of innovation Our balance sheet is strong outperforming the competition with the Adaptive Network ▪ Annual revenue growth significantly ▪ Free cash flow resulted in $351M or ▪ WaveLogic roadmap extends beyond greater than the market at 15% 75% of adjusted operating income 400G and with multiple form factors ▪ Adjusted EPS growth of over 50% ▪ Ended the year with over $1B in cash ▪ Adaptive IP capabilities for Packet ▪ Expect to have gained at least 3% of and investments Networking to address fiber global market share ▪ Significant return of capital to densification (5G & Fiber Deep) ▪ Top 10 customers include service shareholders with $150M used to ▪ Blue Planet Automation Software providers, cable and web-scale repurchase shares during the year portfolio and closed-loop automation spanning across three different regions ▪ Ratings agency upgrades from Moody’s capability strengthened with recent and S&P acquisition of Centina * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 4

 
FY 2019 financial highlights FY’19 FY’18 Revenue $3.57B $3.09B Adjusted Gross Margin* 43.7% 43.0% $1,092M $994M Adjusted Operating Expense* 30.6% / total revenue 32.1% / total revenue Adjusted Operating Margin* 13.1% 10.9% Adjusted EBITDA* $557M $421M Adjusted EPS* $2.11 $1.39 * A reconciliation of these non-GAAP measures to our GAAP results is included in the press release for the relative period. Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 5

 
FY 2019 operating metrics FY’19 FY’18 Cash and Investments $1,024M $953M Cash Flow from Operations $413M $229M DSO 82 days 92 days Inventory Turns 5.0 5.7 Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 6

 
Long-term financial targets score card Long-term target¹ FY’19 Actual Revenue 15.5% Adjusted Operating Margin 13.1%* Adjusted EPS >50%* Free cash flow 75% 1 Projections or outlook with respect to future operating results are only as of December 13, 2018, the date presented on the related earnings call. Actual results may differ materially from these forward-looking statements. Ciena assumes no obligation to update this information, whether as a result of new information, future events or otherwise. * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 7

 
Our extraordinary fiscal 2019 performance was driven by a combination of strategic execution and favorable dynamics Continued strategic execution ▪ Favorable competitive dynamics ▪ Customer trust in Ciena and strong relationships ▪ Subscale vendors struggled financially and with innovation ▪ Web-scale providers pursue quality products and a strong ▪ Competing products were late to roadmap market ▪ Service providers seek strong, ▪ Larger competitors faced long-term partners competing investment priorities ▪ Tier 1 service provider wins at a higher ▪ Web-scale spending has outpaced the rate ▪ Diversification as a result of broad overall market based geographies, market verticals and customers All the above resulted in intensified share gains Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 8

 
Market context Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 9

 
Market leadership #1 GLOBALLY #1 GLOBALLY #1 GLOBALLY #1 GLOBALLY • DATA CENTER INTERCONNECT • OPTICAL EQUIPMENT VENDOR • PURPOSE-BUILT/COMPACT • DATA CENTER INTERCONNECT • DATA CENTER INTERCONNECT LEADERSHIP SP SURVEY MODULAR DCI • DATA CENTER INTERCONNECT for ICPs • OPTICAL NETWORK HARDWARE • CLOUD & COLO MARKET for ICPs • PURPOSE-BUILT/COMPACT VENDOR SCORECARD • SLTE WDM MARKET • PURPOSE-BUILT/COMPACT MODULAR DCI • CARRIER ETHERNET ACCESS MODULAR DCI • SLTE WDM MARKET DEVICES • DATA CENTER INTERCONNECT #1 N. AMERICA • PURPOSE-BUILT/COMPACT • TOTAL OPTICAL NETWORKING #1 N. AMERICA #1 N. AMERICA MODULAR DCI • LH WDM • TOTAL OPTICAL NETWORKING • TOTAL OPTICAL NETWORKING • SLTE WDM MARKET • METRO WDM • PACKET OPTICAL • LH WDM • LH WDM • METRO WDM • METRO WDM #1 N. AMERICA #2 GLOBALLY • TOTAL OPTICAL NETWORKING • TOTAL OPTICAL NETWORKING #2 GLOBALLY • CARRIER ETHERNET ACCESS • LH WDM #2 GLOBALLY • TOTAL OPTICAL NETWORKING DEVICES • METRO WDM • TOTAL OPTICAL NETWORKING • LH WDM • LH WDM • NEXT-GEN OPTICAL • METRO WDM • METRO WDM • PACKET OPTICAL • LH WDM #2 GLOBALLY • TOTAL OPTICAL NETWORKING • LH WDM • METRO WDM Optical Networks Report, 3Q19 Optical Networks Report, 3Q19 Optical Hardware Report, 3Q19 Optical Networks Report, 3Q19 Data Center Interconnect Market Share DCI Market Tracker, September 2019 Optical Customer Markets Report, 3Q19 Report, 3Q19 Ethernet Access Devices Tracker, September 2019 Optical Hardware Applications Report, 3Q19 Optical Network HW Vendor Scorecard, June 2019 Optical Equipment Vendor Leadership Global Service Provider Survey January 2019 Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 10

 
Several mega trends and the innovations that will enable them IoT & Cloud Data Center Connected Objects Fiber Deep (Cable/MSO) Mobility & 5G Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 11

 
Q4 fiscal 2019 results and competitive performance Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 12

 
Achieving balanced growth Driving the pace of innovation Delivering shareholder value ▪ Non-telco represented 39% of total ▪ TTM Adjusted R&D* investment was revenue $534M ▪ Direct web-scale contributed 20% of ▪ WaveLogic Ai has 146 total customers total revenue with 18 new wins in Q4 ▪ EMEA revenue up 24% YoY ▪ Waveserver has 155 customers with ▪ NA revenue up 21% YoY 13 new wins in Q4 * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 13

 
Q4 FY 2019 financial highlights Adjusted Operating Margin* * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 14

 
Q4 FY 2019 comparisons (year-over-year) Revenue Adj. Gross Margin* Adj. Operating Margin* (in millions) Q4 FY'18 Q4 FY'19 Q4 FY'18 Q4 FY'19 Q4 FY'18 Q4 FY'19 44.7% $968.0 43.8% 13.9% 13.3% $899.4 Adj. OpEx* Adj. EBITDA* Adj. EPS* (in millions) (in millions) Q4 FY'18 Q4 FY'19 Q4 FY'18 Q4 FY'19 Q4 FY'18 Q4 FY'19 $0.58 $295.3 $277.7 $151.6 $0.53 $145.8 Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. 15

 
Revenue by segment (Amounts in millions) 44.7% 44.7% 43.9% 43.8% Q4 FY 2019 Q4 FY 2018 1,000.0 42.2% 45.0% 900.0 40.0% Revenue %** Revenue %** 800.0 Networking Platforms 35.0% 700.0 Converged Packet Optical $665.8 68.8 $646.4 71.9 30.0% Packet Networking 600.0 131.9 13.6 66.5 7.4 25.0% Total Networking Platforms 500.0 797.7 82.4 712.9 79.3 20.0% Platform Software and Services 41.2 4.3 56.6 6.3 400.0 16.2% 13.9% Blue Planet Automation Software and 12.7% 13.3% 15.0% 300.0 Services 16.6 1.7 10.7 1.2 9.6% 10.0% Global Services 200.0 Maintenance Support and Training 65.3 6.7 67.4 7.5 100.0 5.0% Installation and Deployment 36.5 3.8 39.3 4.4 0.0 0.0% Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Consulting and Network Design 10.7 1.1 12.5 1.3 Total Global Services Networking Platforms Platform Software and Services 112.5 11.6 119.2 13.2 BP Automation Software and Services Global Services Total Adj. Operating Margin* Adj. Gross Margin* $968.0 100.0% $899.4 100.0% * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. ** Denotes % of total revenue Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 16

 
Continued strength derived from non-telco revenue* Q4 FY 2019 Direct Webscale Cable Gov't, R&E & Enterprise 45% 40% 7% 35% 11.1% Direct Webscale 8% 7% 11.1% 30% 8% 8% Cable 25% 7% 19.8% 8.5% 9% 7% 20% Gov't, R&E, 8.5% Enterprise 15% 27% 10% 21% 19.8% 17% 19% 5% *represents 39.4% of total revenue in Q4 FY’19 0% Q4 FY'18 Q1 FY'19 Q2 FY'19 Q3 FY'19 Q4 FY'19 Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 17

 
Revenue by geographic region Q4 FY 2019 North America EMEA CALA APAC $1,000.0 10.3% $900.0 14% 4.4% $800.0 19% 16% 4% 4.4% North America 15.8% 10.3% $700.0 6% 17% 5% 18% 4% 13% Europe, Middle East $600.0 14% 15.8% and Africa 17% Caribbean and Latin $500.0 America 69.5% millions) (In $400.0 Asia Pacific 69.5% $300.0 64% 62% 67% 62% $200.0 $100.0 $- Q4 FY'18 Q1 FY'19 Q2 FY'19 Q3 FY'19 Q4 FY'19 Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 18

 
Q4 FY 2019 balance sheet and operating metrics DSO Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 19

 
Returning value to shareholders through strong capital allocation priorities Adj. R&D* R&D % Rev $50.0 $600 17.0% $45.0 $40.0 16.5% $500 $35.0 16.0% $400 $30.0 15.5% $25.0 $300 15.0% $20.0 $200 $15.0 14.5% $10.0 $100 14.0% $5.0 $0 13.5% $0.0 FY'15 FY'16 FY'17 FY'18 FY'19 Q4 FY'18 Q1 FY'19 Q2 FY'19 Q3 FY'19 Q4 FY'19 * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 20

 
Delivering profitability and total shareholder return Adjusted EPS 1YR Stock Return* 31.4% CAGR 80.0% $2.11 60.0% 40.0% $1.39 $1.14 20.0% $0.93 0.0% -20.0% -40.0% FY'16 FY'17 FY'18 FY'19 Ciena Acacia Cisco Infinera ADVA Juniper Nokia ADTRAN Source: company disclosures and S&P Capital IQ *1 year represents 11/1/18-10/31/19 Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 21

 
Q4 fiscal 2019 appendix Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 22

 
Q4 FY 2019 Q3 FY 2019 Q2 FY 2019 Q1 FY 2019 Q4 FY 2018 GAAP gross profit $419,696 $424,352 $374,677 $323,341 $398,075 Share-based compensation-products 748 781 702 637 705 Share-based compensation-services 715 783 907 770 651 Amortization of intangible assets 3,303 3,303 3,303 3,418 2,957 Total adjustments related to gross profit 4,766 4,867 4,912 4,825 4,313 Adjusted (non-GAAP) gross profit $424,462 $429,219 $379,589 $328,166 $402,388 Adjusted (non-GAAP) gross margin 43.8% 44.7% 43.9% 42.2% 44.7% Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 23

 
Q4 FY 2019 Q3 FY 2019 Q2 FY 2019 Q1 FY 2019 Q4 FY 2018 GAAP operating expense $326,494 $299,051 $294,357 $275,398 $302,205 Share-based compensation-research and development 3,287 3,560 4,083 3,391 3,385 Share-based compensation-sales and marketing 4,151 4,192 4,346 3,785 3,741 Share-based compensation-general and administrative 6,425 5,813 5,491 5,112 5,588 Amortization of intangible assets 5,222 5,529 5,529 5,528 4,654 Significant asset impairments and restructuring costs 12,842 5,355 4,068 2,273 1,460 Acquisition and integration costs, excluding share-based compensation (735) 1,362 1,135 1,608 3,778 Legal settlement - - - 137 1,929 Total adjustments related to operating expense $31,192 25,811 $24,652 $21,834 $24,535 Adjusted (non-GAAP) operating expense $295,302 $273,240 $269,705 $253,564 $277,670 Q4 FY 2019 Q3 FY 2019 Q2 FY 2019 Q1 FY 2019 Q4 FY 2018 GAAP income from operations $93,202 $125,301 $80,320 $47,943 $95,870 Total adjustments related to gross profit 4,766 4,867 4,912 4,825 4,313 Total adjustments related to operating expense 31,192 25,811 24,652 21,834 24,535 Total adjustments related to income from operations 35,958 30,678 29,564 26,659 28,848 Adjusted (non-GAAP) income from operations $129,160 $155,979 $109,884 $74,602 $124,718 Adjusted (non-GAAP) operating margin 13.3% 16.2% 12.7% 9.6% 13.9% Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 24

 
Q4 FY 2019 Q3 FY 2019 Q2 FY 2019 Q1 FY 2019 Q4 FY 2018 GAAP net income $80,331 $86,749 $52,738 $33,616 $63,977 Exclude GAAP provision (benefit) for income taxes 2,552 30,198 17,867 9,139 (10,224) Income before income taxes 82,883 116,947 70,605 42,755 53,753 Total adjustments related to income from operations 35,958 30,678 29,564 26,659 28,848 Loss on extinguishment and modification of debt - - - - 13,887 Non-cash interest expense - - - - 727 Change in fair value of debt conversion liability - - - - 12,070 Adjusted income before income taxes 118,841 147,625 100,169 69,414 109,285 Non-GAAP tax provision on adjusted income before income taxes 28,403 35,282 23,940 16,590 28,272 Adjusted (non-GAAP) net income $90,438 $112,343 $76,229 $52,824 $81,013 Weighted average basic common shares outstanding 154,852 155,488 156,170 156,314 143,659 Weighted average dilutive potential common shares outstanding1 156,612 157,455 158,289 158,174 157,745 Q4 FY 2019 Q3 FY 2019 Q2 FY 2019 Q1 FY 2019 Q4 FY 2018 GAAP diluted net income per common share $ 0.51 $ 0.55 $ 0.33 $ 0.21 $ 0.34 Adjusted (Non-GAAP) diluted net income per common share $ 0.58 $ 0.71 $ 0.48 $ 0.33 $ 0.53 • 1. Weighted average dilutive potential common shares outstanding used in calculating adjusted (non-GAAP) diluted net income per common share for the fourth quarter of fiscal 2019 includes 1.8 million shares underlying certain stock options and stock unit awards. Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 25

 
Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) Q4 FY 2019 Q3 FY 2019 Q2 FY 2019 Q1 FY 2019 Q4 FY 2018 Net income (GAAP) $ 80,331 $ 86,749 $ 52,738 $ 33,616 $ 63,977 Add: Interest expense 9,136 9,404 9,471 9,441 14,873 Less: Interest and other income (loss), net (1,183) 1,050 (244) 4,253 (13,357) Add: Loss on extinguishment and modification of debt - - - - (13,887) Add: Provision (benefit) for income taxes 2,552 30,198 17,867 9,139 (10,224) Add: Depreciation of equipment, building, furniture and fixtures, and amortization 22,505 22,076 21,482 21,513 21,110 of leasehold improvements Add: Amortization of intangible assets 8,525 8,832 8,832 8,947 7,611 EBITDA $ 124,232 $ 156,209 $ 110,634 $ 78,403 $ 124,591 Add: Shared-based compensation cost 15,290 15,084 15,607 13,755 14,076 Add: Significant asset impairments and restructuring costs 12,842 5,355 4,068 2,273 1,460 Add: Acquisition and integration costs (735) 1,362 1,135 1,608 3,778 Add: Legal settlement - - - 137 1,929 Adjusted EBITDA $ 151,629 $ 178,010 $ 131,444 $ 96,176 $ 145,834 Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 26