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): June 3, 2021
(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 June 3 2021, Ciena Corporation ("Ciena") issued a press release announcing its financial results for its second fiscal quarter ended May 1, 2021. 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 second fiscal quarter ended May 1, 2021.
In conjunction with the issuance of this press release, Ciena posted to the quarterly results page of the Investors section of www.ciena.com an accompanying investor presentation. The investor presentation is furnished as Exhibit 99.2 to this Report.
The information in Exhibits 99.1 and 99.2, as well as Item 2.02 of this Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement pursuant to the Securities Act of 1933, as amended. Investors are encouraged to review the “Investors” page of our website at www.ciena.com because, as with the other disclosure channels that we use, from time to time we may post material information exclusively on that site.
ITEM 9.01 – FINANCIAL STATEMENTS AND EXHIBITS
(d) | The following exhibits are being filed herewith: | |||||||||||||
Exhibit Number | Description of Document | |||||||||||||
Exhibit 99.1 | ||||||||||||||
Exhibit 99.2 | ||||||||||||||
Exhibit 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. | ||
Ciena Corporation | ||||||||
Date: June 3, 2021 | By: | /S/ David M. Rothenstein | ||||||
David M. Rothenstein | ||||||||
Senior Vice President, General Counsel and Secretary | ||||||||
FOR IMMEDIATE RELEASE
Ciena Reports Fiscal Second Quarter 2021 Financial Results
HANOVER, Md. - June 3, 2021 - Ciena® Corporation (NYSE: CIEN), a networking systems, services and software company, today announced unaudited financial results for its fiscal second quarter ended May 1, 2021.
•Q2 Revenue: $833.9 million
•Q2 Net Income per Share: $0.66 GAAP; $0.62 adjusted (non-GAAP)
•Share Repurchases: Repurchased approximately 0.5 million shares of common stock for an aggregate price of $26.2 million during the quarter
“We delivered strong fiscal second quarter results as we continued to see encouraging signs in the market environment, including improvements in customer spending,” said Gary Smith, president and CEO of Ciena. “These dynamics, combined with our business and financial performance in the first half of the year, give us strong visibility and confidence in our ability to achieve our financial targets as we move through the year.”
For the fiscal second quarter 2021, Ciena reported revenue of $833.9 million as compared to $894.1 million for the fiscal second quarter 2020.
Ciena's GAAP net income for the fiscal second quarter 2021 was $103.1 million, or $0.66 per diluted common share, which compares to a GAAP net income of $91.7 million, or $0.59 per diluted common share, for the fiscal second quarter 2020. Ciena's GAAP net income for the second quarter of 2021 benefited from recording $40.4 million in pre-tax amounts from the Canadian Emergency Wage Subsidy program. See APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measures for more information and a reconciliation of our adjusted (non-GAAP) net income which excludes the effect of these amounts.
Ciena's adjusted (non-GAAP) net income for the fiscal second quarter 2021 was $97.6 million, or $0.62 per diluted common share, which compares to an adjusted (non-GAAP) net income of $117.4 million, or $0.76 per diluted common share, for the fiscal second quarter 2020.
Fiscal Second Quarter 2021 Performance Summary
The tables below (in millions, except percentage data) provide comparisons of certain quarterly results to the prior year. Appendices A and B set forth reconciliations between the GAAP and adjusted (non-GAAP) measures contained in this release.
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| GAAP Results | ||||||||||||||||||||
| Q2 | Q2 | |||||||||||||||||||
| FY 2021 | FY 2020 | Y-T-Y* | ||||||||||||||||||
| Revenue | $ | 833.9 | $ | 894.1 | (6.7) | % | ||||||||||||||
| Gross margin | 49.5 | % | 46.2 | % | 3.3 | % | ||||||||||||||
| Operating expense | $ | 278.8 | $ | 285.8 | (2.5) | % | ||||||||||||||
| Operating margin | 16.0 | % | 14.3 | % | 1.7 | % | ||||||||||||||
| Non-GAAP Results | ||||||||||||||||||||
| Q2 | Q2 | |||||||||||||||||||
| FY 2021 | FY 2020 | Y-T-Y* | ||||||||||||||||||
| Revenue | $ | 833.9 | $ | 894.1 | (6.7) | % | ||||||||||||||
| Adj. gross margin | 49.2 | % | 46.9 | % | 2.3 | % | ||||||||||||||
| Adj. operating expense | $ | 278.7 | $ | 258.7 | 7.7 | % | ||||||||||||||
| Adj. operating margin | 15.8 | % | 17.9 | % | (2.1) | % | ||||||||||||||
| Adj. EBITDA | $ | 156.2 | $ | 183.0 | (14.6) | % | ||||||||||||||
* Denotes % change, or in the case of margin, absolute change
| Revenue by Segment | ||||||||||||||||||||||||||
| Q2 FY 2021 | Q2 FY 2020 | |||||||||||||||||||||||||
| Revenue | %** | Revenue | %** | |||||||||||||||||||||||
| Networking Platforms | ||||||||||||||||||||||||||
| Converged Packet Optical | $ | 573.7 | 68.8 | $ | 654.3 | 73.2 | ||||||||||||||||||||
Routing and Switching (1) | 63.6 | 7.6 | 64.2 | 7.2 | ||||||||||||||||||||||
| Total Networking Platforms | 637.3 | 76.4 | 718.5 | 80.4 | ||||||||||||||||||||||
| Platform Software and Services | 56.7 | 6.8 | 45.0 | 5.0 | ||||||||||||||||||||||
| Blue Planet Automation Software and Services | 23.9 | 2.9 | 15.0 | 1.7 | ||||||||||||||||||||||
| Global Services | ||||||||||||||||||||||||||
| Maintenance Support and Training | 70.4 | 8.4 | 71.5 | 8.0 | ||||||||||||||||||||||
| Installation and Deployment | 38.0 | 4.6 | 34.2 | 3.8 | ||||||||||||||||||||||
| Consulting and Network Design | 7.6 | 0.9 | 9.9 | 1.1 | ||||||||||||||||||||||
| Total Global Services | 116.0 | 13.9 | 115.6 | 12.9 | ||||||||||||||||||||||
| Total | $ | 833.9 | 100.0 | $ | 894.1 | 100.0 | ||||||||||||||||||||
** Denotes % of total revenue
(1) Ciena renamed its former “Packet Networking” product line “Routing and Switching” effective as of the beginning of fiscal 2021. This change, affecting only the presentation of such information, was made on a prospective basis and does not impact comparability of previous financial results or the composition of this product category.
Additional Performance Metrics for Fiscal Second Quarter 2021
2
| Revenue by Geographic Region | ||||||||||||||||||||||||||
| Q2 FY 2021 | Q2 FY 2020 | |||||||||||||||||||||||||
| Revenue | % ** | Revenue | % ** | |||||||||||||||||||||||
| Americas | $ | 587.5 | 70.4 | $ | 650.4 | 72.7 | ||||||||||||||||||||
| Europe, Middle East and Africa | 155.0 | 18.6 | 141.4 | 15.8 | ||||||||||||||||||||||
| Asia Pacific | 91.4 | 11.0 | 102.3 | 11.5 | ||||||||||||||||||||||
| Total | $ | 833.9 | 100.0 | $ | 894.1 | 100.0 | ||||||||||||||||||||
** Denotes % of total revenue
•One 10%-plus customer represented a total of 15% of revenue
•Cash and investments totaled $1.4 billion
•Cash flow from operations totaled $225.0 million
•Average days' sales outstanding (DSOs) were 86
•Accounts receivable, net balance was $716.8 million
•Unbilled contract asset, net balance was $81.4 million
•Inventories totaled $401.2 million, including:
◦Raw materials: $139.4 million
◦Work in process: $10.8 million
◦Finished goods: $234.2 million
◦Deferred cost of sales: $57.4 million
◦Reserve for excess and obsolescence: $(40.6) million
•Product inventory turns were 3.4
•Headcount totaled 7,077
Supplemental Materials and Live Web Broadcast of Unaudited Fiscal Second Quarter 2021 Results
Today, Thursday, June 3, 2021, in conjunction with this announcement, Ciena has posted to the Quarterly Results page of the Investor Relations section of its website an accompanying investor presentation for its unaudited fiscal second quarter 2021 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 strong fiscal second quarter results as we continued to see encouraging signs in the market environment, including improvements in customer spending,” and “These dynamics, combined with our business
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and financial performance in the first half of the year, give us strong visibility and confidence in our ability to achieve our financial targets as we move through the year.”
Ciena's actual results, performance or events may differ materially from these forward-looking statements made or implied due to a number of risks and uncertainties relating to Ciena's business, including: the effect of broader economic and market conditions on our customers and their business; our ability to execute successfully our business and growth strategies; the duration and severity of the COVID-19 pandemic and its impact 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 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; changes in foreign currency exchange rates affecting revenue and operating expense; factors beyond our control such as natural disasters, acts of war or terrorism, and public health emergencies; the impact of the Tax Cuts and Jobs Act; changes in tax or trade regulations, including the imposition of tariffs, duties or efforts to withdraw from or materially modify international trade agreements; 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 its Annual Report on Form 10-K filed with the SEC on December 18, 2020 and included in its Quarterly Report on Form 10-Q for the second quarter of fiscal 2021 to be filed with the SEC. Ciena assumes no obligation to update any forward-looking information included in this press release.
Non-GAAP Presentation of Quarterly and Annual Results. This release includes non-GAAP measures of Ciena's gross profit, operating expense, income from operations, earnings before interest, tax, depreciation and amortization (EBITDA), Adjusted EBITDA, and measures of net income and net income per share. In evaluating the operating performance of Ciena's business, management excludes certain charges and credits that are required by GAAP. These items share one or more of the following characteristics: they are unusual and Ciena does not expect them to recur in the ordinary course of its business; they do not involve the expenditure of cash; they are unrelated to the ongoing operation of the business in the ordinary course; or their magnitude and timing is largely outside of Ciena's control. Management believes that the non-GAAP measures below provide management and investors useful information and meaningful insight to the operating performance of the business. The presentation of these non-GAAP financial measures should be considered in addition to Ciena's GAAP results and these measures are not intended to be a substitute for the financial information prepared and presented in accordance with GAAP. Ciena's non-GAAP measures and the related adjustments may differ from non-GAAP measures used by other companies and should only be used to evaluate Ciena's results of operations in conjunction with our corresponding GAAP results. To the extent not previously disclosed in a prior Ciena financial results press release, Appendices A and B to this press release set forth a complete GAAP to non-GAAP reconciliation of the non-GAAP measures contained in this release.
About Ciena. Ciena (NYSE: CIEN) is a networking systems, services and software company. We provide solutions that help our customers create the Adaptive Network™ in response to the constantly changing demands of their users. By delivering best-in-class networking technology through high-touch consultative relationships, we build the world’s most agile networks with automation, openness and scale. For updates on Ciena, follow us on Twitter @Ciena, LinkedIn, the Ciena Insights blog, or visit www.ciena.com.
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CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||
| May 1, | May 2, | May 1, | May 2, | ||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Products | $ | 670,043 | $ | 739,892 | $ | 1,267,263 | $ | 1,427,107 | |||||||||||||||
| Services | 163,884 | 154,161 | 323,794 | 299,858 | |||||||||||||||||||
| Total revenue | 833,927 | 894,053 | 1,591,057 | 1,726,965 | |||||||||||||||||||
| Cost of goods sold: | |||||||||||||||||||||||
| Products | 339,601 | 405,138 | 654,699 | 794,151 | |||||||||||||||||||
| Services | 81,907 | 75,589 | 166,048 | 148,953 | |||||||||||||||||||
| Total cost of goods sold | 421,508 | 480,727 | 820,747 | 943,104 | |||||||||||||||||||
| Gross profit | 412,419 | 413,326 | 770,310 | 783,861 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | 110,246 | 131,530 | 242,987 | 262,430 | |||||||||||||||||||
| Selling and marketing | 110,387 | 101,214 | 207,665 | 208,280 | |||||||||||||||||||
| General and administrative | 43,635 | 42,030 | 83,628 | 84,498 | |||||||||||||||||||
| Amortization of intangible assets | 6,019 | 5,839 | 11,929 | 11,692 | |||||||||||||||||||
| Significant asset impairments and restructuring costs | 8,209 | 3,811 | 14,076 | 8,283 | |||||||||||||||||||
| Acquisition and integration costs | 294 | 1,414 | 601 | 3,233 | |||||||||||||||||||
| Total operating expenses | 278,790 | 285,838 | 560,886 | 578,416 | |||||||||||||||||||
| Income from operations | 133,629 | 127,488 | 209,424 | 205,445 | |||||||||||||||||||
| Interest and other income (loss), net | (1,274) | (2,665) | (2,395) | 981 | |||||||||||||||||||
| Interest expense | (7,785) | (7,860) | (15,145) | (16,675) | |||||||||||||||||||
| Loss on extinguishment and modification of debt | — | — | — | (646) | |||||||||||||||||||
| Income before income taxes | 124,570 | 116,963 | 191,884 | 189,105 | |||||||||||||||||||
| Provision for income taxes | 21,453 | 25,308 | 33,419 | 35,122 | |||||||||||||||||||
| Net income | $ | 103,117 | $ | 91,655 | $ | 158,465 | $ | 153,983 | |||||||||||||||
| Net Income per Common Share | |||||||||||||||||||||||
| Basic net income per common share | $ | 0.66 | $ | 0.60 | $ | 1.02 | $ | 1.00 | |||||||||||||||
| Diluted net income per potential common share | $ | 0.66 | $ | 0.59 | $ | 1.01 | $ | 0.99 | |||||||||||||||
| Weighted average basic common shares outstanding | 155,331 | 153,858 | 155,257 | 154,099 | |||||||||||||||||||
Weighted average dilutive potential common shares outstanding 1 | 156,876 | 155,141 | 156,734 | 155,443 | |||||||||||||||||||
1 Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per potential common share for the second quarter of fiscal 2021 includes 1.5 million shares underlying certain stock option and stock unit awards.
Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per potential common share for the first six months of fiscal 2021 includes 1.5 million shares underlying certain stock option and stock unit awards.
Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per potential common share for the second quarter of fiscal 2020 includes 1.3 million shares underlying certain stock option and stock unit awards.
Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per potential common share for the first six months of fiscal 2020 includes 1.3 million shares underlying certain stock option and stock unit awards.
5
CIENA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
| May 1, 2021 | October 31, 2020 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 1,202,974 | $ | 1,088,624 | |||||||
| Short-term investments | 151,816 | 150,667 | |||||||||
| Accounts receivable, net | 716,779 | 719,405 | |||||||||
| Inventories | 401,233 | 344,379 | |||||||||
| Prepaid expenses and other | 321,651 | 308,084 | |||||||||
| Total current assets | 2,794,453 | 2,611,159 | |||||||||
| Long-term investments | 91,715 | 82,226 | |||||||||
| Equipment, building, furniture and fixtures, net | 298,329 | 272,377 | |||||||||
| Operating lease right-of-use assets | 50,997 | 57,026 | |||||||||
| Goodwill | 311,734 | 310,847 | |||||||||
| Other intangible assets, net | 82,879 | 96,647 | |||||||||
| Deferred tax asset, net | 653,922 | 647,805 | |||||||||
| Other long-term assets | 103,984 | 102,830 | |||||||||
| Total assets | $ | 4,388,013 | $ | 4,180,917 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 279,247 | $ | 291,904 | |||||||
| Accrued liabilities and other short-term obligations | 330,060 | 334,132 | |||||||||
| Deferred revenue | 147,075 | 108,700 | |||||||||
| Operating lease liabilities | 19,364 | 19,035 | |||||||||
| Current portion of long-term debt | 6,930 | 6,930 | |||||||||
| Total current liabilities | 782,676 | 760,701 | |||||||||
| Long-term deferred revenue | 57,224 | 49,663 | |||||||||
| Other long-term obligations | 127,700 | 123,185 | |||||||||
| Long-term operating lease liabilities | 53,795 | 61,415 | |||||||||
| Long-term debt, net | 673,355 | 676,356 | |||||||||
| Total liabilities | $ | 1,694,750 | $ | 1,671,320 | |||||||
| 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; 154,962,122 and 154,563,005 shares issued and outstanding | 1,550 | 1,546 | |||||||||
| Additional paid-in capital | 6,813,215 | 6,826,531 | |||||||||
| Accumulated other comprehensive gain (loss) | 5,361 | (35,358) | |||||||||
| Accumulated deficit | (4,126,863) | (4,283,122) | |||||||||
| Total stockholders’ equity | 2,693,263 | 2,509,597 | |||||||||
| Total liabilities and stockholders’ equity | $ | 4,388,013 | $ | 4,180,917 | |||||||
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CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
| Six Months Ended | |||||||||||
| May 1, | May 2, | ||||||||||
| 2021 | 2020 | ||||||||||
| Cash flows provided by operating activities: | |||||||||||
| Net income | $ | 158,465 | $ | 153,983 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements | 47,295 | 48,381 | |||||||||
| Share-based compensation costs | 40,499 | 33,579 | |||||||||
| Amortization of intangible assets | 18,517 | 19,361 | |||||||||
| Deferred taxes | (9,606) | 25,420 | |||||||||
| Provision for inventory excess and obsolescence | 10,402 | 12,640 | |||||||||
| Provision for warranty | 7,937 | 13,793 | |||||||||
| Other | 5,928 | 16,190 | |||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable | (180) | 15,865 | |||||||||
| Inventories | (66,934) | 5,618 | |||||||||
| Prepaid expenses and other | (8,565) | (54,839) | |||||||||
| Operating lease right-of-use assets | 8,253 | 8,642 | |||||||||
| Accounts payable, accruals and other obligations | (30,108) | (151,713) | |||||||||
| Deferred revenue | 45,482 | (5,679) | |||||||||
| Short and long-term operating lease liabilities | (9,726) | (10,311) | |||||||||
| Net cash provided by operating activities | 217,659 | 130,930 | |||||||||
| Cash flows used in investing activities: | |||||||||||
| Payments for equipment, furniture, fixtures and intellectual property | (51,651) | (45,458) | |||||||||
| Purchase of available for sale securities | (102,429) | (40,894) | |||||||||
| Proceeds from maturities of available for sale securities | 91,810 | 60,000 | |||||||||
| Settlement of foreign currency forward contracts, net | 9,414 | (3,836) | |||||||||
| Acquisition of business, net of cash acquired | — | (28,300) | |||||||||
| Proceeds from sale of equity investment | 4,678 | — | |||||||||
| Net cash used in investing activities | (48,178) | (58,488) | |||||||||
| Cash flows used in financing activities: | |||||||||||
| Payment of long term debt | (3,465) | (1,733) | |||||||||
| Payment of debt issuance costs | — | (382) | |||||||||
| Payment of finance lease obligations | (1,463) | (1,381) | |||||||||
| Shares repurchased for tax withholdings on vesting of restricted stock units | (27,893) | (18,200) | |||||||||
| Repurchases of common stock - repurchase program | (38,498) | (74,535) | |||||||||
| Proceeds from issuance of common stock | 13,480 | 12,290 | |||||||||
| Net cash used in financing activities | (57,839) | (83,941) | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 2,696 | (4,876) | |||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 114,338 | (16,375) | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 1,088,708 | 904,161 | |||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 1,203,046 | $ | 887,786 | |||||||
| Supplemental disclosure of cash flow information | |||||||||||
| Cash paid during the period for interest | $ | 14,949 | $ | 17,590 | |||||||
| Cash paid during the period for income taxes, net | $ | 27,666 | $ | 22,011 | |||||||
| Operating lease payments | $ | 10,785 | $ | 11,409 | |||||||
| Non-cash investing and financing activities | |||||||||||
| Purchase of equipment in accounts payable | $ | 4,966 | $ | 4,480 | |||||||
| Repurchase of common stock in accrued liabilities from repurchase program | $ | 900 | $ | — | |||||||
| Operating lease right-of-use assets subject to lease liability | $ | 1,770 | $ | 4,887 | |||||||
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| APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measures | ||||||||||||||
| (in thousands, except per share data) (unaudited) | ||||||||||||||
| Quarter Ended | ||||||||||||||
| May 1, | May 2, | |||||||||||||
| 2021 | 2020 | |||||||||||||
| Gross Profit Reconciliation (GAAP/non-GAAP) | ||||||||||||||
| GAAP gross profit | $ | 412,419 | $ | 413,326 | ||||||||||
| Share-based compensation-products | 498 | 827 | ||||||||||||
| Share-based compensation-services | 1,421 | 1,036 | ||||||||||||
| Canadian Emergency Wage Subsidy-products | (4,189) | — | ||||||||||||
| Canadian Emergency Wage Subsidy-services | (2,620) | — | ||||||||||||
| Amortization of intangible assets | 2,856 | 3,835 | ||||||||||||
| Total adjustments related to gross profit | (2,034) | 5,698 | ||||||||||||
| Adjusted (non-GAAP) gross profit | $ | 410,385 | $ | 419,024 | ||||||||||
| Adjusted (non-GAAP) gross profit percentage | 49.2 | % | 46.9 | % | ||||||||||
| Operating Expense Reconciliation (GAAP/non-GAAP) | ||||||||||||||
| GAAP operating expense | $ | 278,790 | $ | 285,838 | ||||||||||
| Share-based compensation-research and development | 5,844 | 4,822 | ||||||||||||
| Share-based compensation-sales and marketing | 6,610 | 5,264 | ||||||||||||
| Share-based compensation-general and administrative | 6,743 | 5,975 | ||||||||||||
| Canadian Emergency Wage Subsidy-research and development | (28,923) | — | ||||||||||||
| Canadian Emergency Wage Subsidy-sales and marketing | (2,551) | — | ||||||||||||
| Canadian Emergency Wage Subsidy-general and administrative | (2,161) | — | ||||||||||||
| Amortization of intangible assets | 6,019 | 5,839 | ||||||||||||
| Significant asset impairments and restructuring costs | 8,209 | 3,811 | ||||||||||||
| Acquisition and integration costs | 294 | 1,414 | ||||||||||||
| Total adjustments related to operating expense | 84 | 27,125 | ||||||||||||
| Adjusted (non-GAAP) operating expense | $ | 278,706 | $ | 258,713 | ||||||||||
| Income from Operations Reconciliation (GAAP/non-GAAP) | ||||||||||||||
| GAAP income from operations | $ | 133,629 | $ | 127,488 | ||||||||||
| Total adjustments related to gross profit | (2,034) | 5,698 | ||||||||||||
| Total adjustments related to operating expense | 84 | 27,125 | ||||||||||||
| Total adjustments related to income from operations | (1,950) | 32,823 | ||||||||||||
| Adjusted (non-GAAP) income from operations | $ | 131,679 | $ | 160,311 | ||||||||||
| Adjusted (non-GAAP) operating margin percentage | 15.8 | % | 17.9 | % | ||||||||||
| Net Income Reconciliation (GAAP/non-GAAP) | ||||||||||||||
| GAAP net income | $ | 103,117 | $ | 91,655 | ||||||||||
| Exclude GAAP provision for income taxes | 21,453 | 25,308 | ||||||||||||
| Income before income taxes | 124,570 | 116,963 | ||||||||||||
| Total adjustments related to income from operations | (1,950) | 32,823 | ||||||||||||
| Unrealized loss on equity investment | 165 | — | ||||||||||||
| Adjusted income before income taxes | 122,785 | 149,786 | ||||||||||||
| Non-GAAP tax provision on adjusted income before income taxes | 25,171 | 32,354 | ||||||||||||
| Adjusted (non-GAAP) net income | $ | 97,614 | $ | 117,432 | ||||||||||
| Weighted average basic common shares outstanding | 155,331 | 153,858 | ||||||||||||
Weighted average dilutive potential common shares outstanding 1 | 156,876 | 155,141 | ||||||||||||
8
| APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measures | ||||||||||||||
| (in thousands, except per share data) (unaudited) | ||||||||||||||
| Quarter Ended | ||||||||||||||
| May 1, | May 2, | |||||||||||||
| 2021 | 2020 | |||||||||||||
| Net Income per Common Share | ||||||||||||||
| GAAP diluted net income per common share | $ | 0.66 | $ | 0.59 | ||||||||||
| Adjusted (non-GAAP) diluted net income per potential common share | $ | 0.62 | $ | 0.76 | ||||||||||
1 Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share for the second quarter of fiscal 2021 includes 1.5 million shares underlying certain stock option and stock unit awards.
Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share for the second quarter of fiscal 2020 includes 1.3 million shares underlying certain stock option and stock unit awards.
9
| APPENDIX B - Calculation of EBITDA and Adjusted EBITDA (unaudited) | ||||||||||||||
| (in thousands) (unaudited) | ||||||||||||||
| Quarter Ended | ||||||||||||||
| May 1, | May 2, | |||||||||||||
| 2021 | 2020 | |||||||||||||
| Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) | ||||||||||||||
| Net income (GAAP) | $ | 103,117 | $ | 91,655 | ||||||||||
| Add: Interest expense | 7,785 | 7,860 | ||||||||||||
| Add: Interest and other loss, net | 1,274 | 2,665 | ||||||||||||
| Add: Provision for income taxes | 21,453 | 25,308 | ||||||||||||
| Add: Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements | 24,107 | 22,599 | ||||||||||||
| Add: Amortization of intangible assets | 8,875 | 9,674 | ||||||||||||
| EBITDA | $ | 166,611 | $ | 159,761 | ||||||||||
| Less: Canadian Emergency Wage Subsidy | 40,444 | — | ||||||||||||
| Add: Share-based compensation cost | 21,535 | 17,977 | ||||||||||||
| Add: Significant asset impairments and restructuring costs | 8,209 | 3,811 | ||||||||||||
| Add: Acquisition and integration costs | 294 | 1,414 | ||||||||||||
| Adjusted EBITDA | $ | 156,205 | $ | 182,963 | ||||||||||
* * *
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.
•Canadian Emergency Wage Subsidy - a program introduced by the Government of Canada to offset a portion of employee wages for a limited period in response to COVID-19 outbreak.
•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.
•Significant asset impairments and restructuring costs - costs incurred as a result of restructuring activities taken to align resources with perceived market opportunities and the redesign of business processes.
•Acquisition and integration costs - includes costs of acquisition compensation associated with a three-year earn-out arrangement related to the DonRiver acquisition in fiscal 2018. Ciena does not believe that these costs are reflective of its ongoing operating expense following its completion of these integration activities.
•Unrealized loss on equity investment - reflects a change in the carrying value of a certain cost method equity investment.
•Non-GAAP tax provision - consists of current and deferred income tax expense commensurate with the level of adjusted income before income taxes and utilizes a current, blended U.S. and foreign statutory annual tax rate of 20.5% for the second fiscal quarter of 2021 and 21.6% for the second fiscal quarter of 2020. 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 2021. All rights reserved. Proprietary information. Ciena Corporation Period ended May 1, 2021 June 3, 2021 Earnings Presentation
2Copyright © Ciena Corporation 2021. 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 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 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 successfully our business and growth strategies; the duration and severity of the COVID-19 pandemic and its impact on macroeconomic conditions, economic activity, demand for our technology solutions, short- and long-term changes in customer or end user needs, continuity of supply chain, our business operations, liquidity and financial results; changes in network spending or network strategy by our customers; seasonality and the timing and size of customer orders, including our ability to recognize revenue relating to such sales; the level of competitive pressure we encounter; the product, customer and geographic mix of sales within the period; supply chain 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; factors beyond our control such as natural disasters, acts of war or terrorism, and public health emergencies, including the COVID-19 pandemic; the impact of the Tax Cuts and Jobs Act; changes in tax or trade regulations, including the imposition of tariffs, duties or efforts to withdraw from or materially modify international trade agreements; 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 (SEC) including Ciena’s Annual Report on Form 10-K filed with the SEC on December 18, 2020 and Ciena’s Quarterly Report on Form 10-Q for the second quarter of fiscal 2021 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 Forms 10-K and 10-Q filed with the Securities and Exchange Commission.
3Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. COVID-19 response • Prioritizing health of employees and following CDC guidance for employers • The vast majority of our employees are working remotely • Instituted pandemic employee benefits • Enhanced our corporate charitable matching program for employee donations and volunteering Result: Our employees have excelled through their continued focus, strength and kindness Safety and community Financial strengthBusiness continuity • Supply chain design and business continuity planning has enabled us to continue to support customers and mitigate disruption • Significant IT investment in digital platforms and virtual collaboration tools has enabled a seamless transition to remote working Result: We are well positioned to manage through the current set of challenges presented by COVID-19 • We have a strong balance sheet and have demonstrated solid cash flow generation over time • In light of our confidence around cash generation, we reinstated our share repurchase plan starting in the first quarter of 2021 Result: Our financial strength provides long-term resiliency and differentiated flexibility to support our business As COVID-19 challenges vary around the world, we remain vigilant and committed to our customers and employees
4Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Q2 FY 2021 results
5Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Q2 FY 2021 key achievements • WaveLogic™ 5 Extreme (WL5e) added 16 new wins, bringing our total number of revenue customers to 95 • Blue Planet has roughly 200 total customers for our automation software and services portfolio ▪ Roughly a dozen wins in our Routing and Switching portfolio including global Tier 1 service providers, MSOs and enterprises We are driving the pace of innovation We are committed to our people and communities We have a durable business and financial model • Despite headwinds from COVID-19 our profitability has remained strong • Adj. operating margin* was 15.8% • Our balance sheet represents a competitive advantage • Ended the quarter with over $1.4B in cash and investments • Leverage remains below our target level • Launched Digital Inclusion Commitment initiative with a goal to provide opportunities for 100,000 underserved students in our global communities • Announced innovative programs with customers to promote our digital inclusion mission • Supporting our employees through empowering programs, a focus on well-being and commitment to diversity, inclusion and belonging * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. In this challenging period we continued to drive the pace of innovation and demonstrate resilience while focusing on kindness to others
6Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Market context
7Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Several mega trends and the innovations that will enable them Fiber Deep (Cable/MSO) Cloud Data Center Mobility & 5G IoT & Connected Objects Living a Hybrid Life
8Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. #1 GLOBALLY ◦ DATA CENTER INTERCONNECT ◦ INTERNET CONTENT PROVIDER CUSTOMERS ◦ PURPOSE-BUILT/COMPACT MODULAR DCI #1 N. AMERICA ◦ TOTAL OPTICAL NETWORKING ◦ DATA CENTER INTERCONNECT ◦ OPTICAL PACKET ◦ TOTAL WDM ◦ LH WDM ◦ METRO WDM #2 GLOBALLY ◦ TOTAL OPTICAL NETWORKING ◦ OPTICAL PACKET ◦ TOTAL WDM ◦ LH WDM ◦ METRO WDM ◦ CABLE MSO CUSTOMERS #1 GLOBALLY ◦ DATA CENTER INTERCONNECT ◦ DATA CENTER INTERCONNECT FOR ICP/CNPs ◦ PURPOSE-BUILT/COMPACT MODULAR DCI ◦ OPTICAL NETWORKING FOR ICP/CNPs ◦ OPTICAL NETWORK HARDWARE VENDOR SCORECARD ◦ OPTICAL EQUIPMENT VENDOR LEADERSHIP SP SURVEY ◦ SLTE WDM #1 N. AMERICA ◦ TOTAL OPTICAL NETWORKING ◦ DATA CENTER INTERCONNECT ◦ PURPOSE-BUILT/COMPACT MODULAR DCI ◦ TOTAL WDM ◦ LH WDM ◦ METRO WDM ◦ SLTE WDM ◦ ACCESS SWITCHING #2 GLOBALLY ◦ TOTAL OPTICAL NETWORKING ◦ TOTAL WDM ◦ LH WDM ◦ ACCESS SWITCHING #1 GLOBALLY ◦ PURPOSE-BUILT/COMPACT MODULAR DCI ◦ CLOUD & COLO #1 N. AMERICA ◦ TOTAL OPTICAL NETWORKING ◦ PURPOSE-BUILT/COMPACT MODULAR DCI ◦ TOTAL WDM ◦ LH WDM ◦ METRO WDM ◦ SLTE WDM #2 GLOBALLY ◦ TOTAL OPTICAL NETWORKING ◦ TOTAL WDM ◦ SLTE WDM Market leadership Optical Transport Report, 1Q21Optical Networking Report, 1Q21Data Center Interconnect Market Share Report, 1Q21 Optical Network HW Vendor Scorecard, Jun 2020 Optical Equipment Vendor Leadership Global Service Provider Survey, Dec 2019 Service Provider Routers & Switches Report, 1Q21 Optical Transport Hardware Report, 1Q21 Transport Customer Markets Report, 4Q20 Transport Applications Report, 4Q20
9Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Ciena’s Adaptive Network™ vision and portfolio
10Copyright © Ciena Corporation 2021. 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
11Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Our portfolio Enabling the Adaptive Network™ CIENA SERVICES A consultative approach to build, operate, and continually improve customers’ networks to accelerate their unique journey to the Adaptive Network. We bring experienced technical personnel, best practices, and processes—along with the most effective tools for handling network complexities to work alongside customers every step of the way. ANALYTICS AND INTELLIGENCE Ciena and Blue Planet® Unified Assurance and Analytics: Open suite of software products that unifies multi-layer, multi- domain assurance, with AI-powered analytics to provide strategic insights to transform and simplify business, IT, and network operations. MCP Advanced Apps: Applications designed to enhance operations and simplify user experience for optimization of multi-layer network performance, featuring Liquid Spectrum™ for increased optical network capacity and service availability, and Adaptive IP™ Apps for advanced real-time visualization and analysis of IP networks. PROGRAMMABLE INFRASTRUCTURE Converged Packet-Optical Networking: Software-programmable platforms, featuring Ciena’s award-winning WaveLogic™ Photonics with optional agnostic packet/OTN switching, designed to maximize scale, flexibility, and open networking. Optimizes network performance across applications from metro to submarine, and is the dominant portfolio used globally for Data Center Interconnect. Routing and Switching: Purpose-built routing, switching, and x86 VNF hosting platforms—using a common Service-Aware Operating System (SAOS)—provide the building blocks for low-touch, high-velocity IP, Segment Routing, Ethernet, MPLS, and 10G PON in access to metro networks. SOFTWARE CONTROL AND AUTOMATION Blue Planet® multi-domain orchestration, federated inventory, and service order management solutions support the broadest range of closed-loop automation use cases across multi-layer, multi-vendor networks. Ciena’s Manage, Control and Plan (MCP) domain controller provides intelligent, data-driven software-defined programmability to lifecycle operations of Ciena networks.
12Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Q2 FY 2021 results
13Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Q2 FY 2021 key highlights • Non-telco represented 43% of total revenue • Direct web-scale increased Works., representing 24% of total revenue • EMEA revenue increased 10% YoY, representing nearly 19% of total revenue • Blue Planet revenue increased 60% YoY, reaching $24M - a record Achieving balanced growth Prioritizing long term shareholder valueDriving the pace of innovation • GAAP R&D investment was approximately 13% of total revenue • 648 100G+ total customers, which includes 17 new wins on WaveLogic Ai and 16 new wins on WaveLogic 5 Extreme • WL5e has now shipped to 95 customers, all of whom are actively deploying the technology in their networks • Total shareholder return three year CAGR of 31%* • Adjusted gross margin improved by 230bps YoY • Repurchased approximately 483,500 shares as part of our equity repurchase program * 6/1/2018 to 5/31/2021, S&P Capital IQ
14Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Q2 FY 2021comparisons (year-over-year) * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. Revenue (in millions) Adj. Gross Margin* Adj. Operating Margin* Adj. OpEx* (in millions) Adj. EBITDA* (in millions) Adj. EPS*
15Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Q2 FY 2021 comparative operating metrics Cash and Investments Cash Flow from Operations DSO Q2 FY 2021 Inventory Turns Q2 FY 2020 $1.4B $225M 86 3.4 $988.5M $91M 79 5.0 Gross Leverage 1.1x 1.4x Net Cash (Debt) $696M $(235)M
16Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Q2 FY 2021 comparative financial highlights Revenue Adjusted Gross Margin* Adjusted Operating Expense* Adjusted Operating Margin* Q2 FY 2021 Adjusted EBITDA* Adjusted EPS* Q2 FY 2020 $833.9M 49.2% $278.7M 33.4% / total revenue 15.8% $156.2M $0.62 $894.1M 46.9% $258.7M 28.9% / total revenue 17.9% $183.0M $0.76 * A reconciliation of these non-GAAP measures to our GAAP results is included in the press release for the relative period.
17Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Revenue by segment (Amounts in millions) Q2 FY 2021 Q2 FY 2020 Revenue %** Revenue %** Networking Platforms Converged Packet Optical 573.7 68.8 654.3 73.2 Routing and Switching 63.6 7.6 64.2 7.2 Total Networking Platforms 637.3 76.4 718.5 80.4 Platform Software and Services 56.7 6.8 45.0 5.0 Blue Planet Automation Software and Services 23.9 2.9 15.0 1.7 Global Services Maintenance Support and Training 70.4 8.4 71.5 8.0 Installation and Deployment 38.0 4.6 34.2 3.8 Consulting and Network Design 7.6 0.9 9.9 1.1 Total Global Services 116.0 13.9 115.6 12.9 Total $833.9 100.0 % $894.1 100.0 % * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. ** Denotes % of total revenue
18Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Continued revenue strength derived from non-telco customers* *represents 43.0% of total revenue in Q2 FY 2021
19Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Revenue by geographic region 10% 17% 14% 11% 11% 17% 19% 20% 19% 73% 73% 64% 66% 70% 16%
20Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Source: Company filings Industry Average: ACIA, ADTN, ADVA, CSCO, INFN1, JNPR and NOKIA Networks segment Delivering consistent financial performance a. INFN represents INFN+Coriant from the time the acquisition closed
21Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Q2 FY 2021 appendix
22Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Q2 FY 2021 Q1 FY 2021 Q4 FY 2020 Q3 FY 2020 Q2 FY 2020 GAAP gross profit $412,419 $357,891 $404,349 $464,681 $413,326 Share-based compensation-products 498 953 724 960 827 Share-based compensation-services 1,421 1,205 968 1,007 1,036 Emergency Wage Subsidy - Product (4,189) — — — — Emergency Wage Subsidy - Services (2,620) — — — — Amortization of intangible assets 2,856 3,732 3,732 3,834 3,835 Total adjustments related to gross profit (2,034) 5,890 5,424 5,801 5,698 Adjusted (non-GAAP) gross profit $410,385 $363,781 $409,773 $470,482 $419,024 Adjusted (non-GAAP) gross profit percentage 49.2 % 48.0 % 49.5 % 48.2 % 46.9 % Gross Profit Reconciliation (Amounts in thousands)
23Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Q2 FY 2021 Q1 FY 2021 Q4 FY 2020 Q3 FY 2020 Q2 FY 2020 GAAP operating expense $278,790 $282,096 $310,866 $276,645 $285,838 Share-based compensation-research and development 5,844 4,794 4,030 4,286 4,822 Share-based compensation-sales and marketing 6,610 5,816 5,137 5,180 5,264 Share-based compensation-general and administrative 6,743 6,358 5,982 5,940 5,975 Emergency Wage Subsidy-research and development (28,923) — — — — Emergency Wage Subsidy-sales and marketing (2,551) — — — — Emergency Wage Subsidy-general and administrative (2,161) — — — — Amortization of intangible assets 6,019 5,910 5,851 5,840 5,839 Significant asset impairments and restructuring costs 8,209 5,867 7,854 6,515 3,811 Acquisition and integration costs (recoveries) 294 307 3,127 (2,329) 1,414 Total adjustments related to operating expense 84 29,052 31,981 25,432 27,125 Adjusted (non-GAAP) operating expense $278,706 $253,044 $278,885 $251,213 $258,713 Q2 FY 2021 Q1 FY 2021 Q4 FY 2020 Q3 FY 2020 Q2 FY 2020 GAAP income from operations $133,629 $75,795 $93,483 $188,036 $127,488 Total adjustments related to gross profit (2,034) 5,890 5,424 5,801 5,698 Total adjustments related to operating expense 84 29,052 31,981 25,432 27,125 Total adjustments related to income from operations (1,950) 34,942 37,405 31,233 32,823 Adjusted (non-GAAP) income from operations $131,679 $110,737 $130,888 $219,269 $160,311 Adjusted (non-GAAP) operating margin percentage 15.8 % 14.6 % 15.8 % 22.4 % 17.9 % Operating Expense Reconciliation (Amounts in thousands) Income from Operations Reconciliation (Amounts in thousands)
24Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Q2 FY 2021 Q1 FY 2021 Q4 FY 2020 Q3 FY 2020 Q2 FY 2020 GAAP net income $103,117 $55,348 $65,041 $142,267 $91,655 Exclude GAAP provision for income taxes 21,453 11,966 20,798 38,750 25,308 Income before income taxes 124,570 67,314 85,839 181,017 116,963 Total adjustments related to income from operations (1,950) 34,942 37,405 31,233 32,823 Unrealized (gain) loss on equity investment 165 — (2,681) — — Adjusted income before income taxes 122,785 102,256 120,563 212,250 149,786 Non-GAAP tax provision on adjusted income before income taxes 25,171 20,962 26,042 45,846 32,354 Adjusted (non-GAAP) net income $97,614 $81,294 $94,521 $166,404 $117,432 Weighted average basic common shares outstanding 155,331 155,174 154,706 154,184 153,858 Weighted average diluted potential common shares outstanding(1) 156,876 156,583 156,563 156,318 155,141 Q2 FY 2021 Q1 FY 2021 Q4 FY 2020 Q3 FY 2020 Q2 FY 2020 GAAP diluted net income per potential common share $ 0.66 $ 0.35 $ 0.42 $ 0.91 $ 0.59 Adjusted (non-GAAP) diluted net income per potential common share $ 0.62 $ 0.52 $ 0.60 $ 1.06 $ 0.76 1. Weighted average diluted potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share for the second quarter of fiscal 2021 includes 1.5 million shares underlying certain stock option and stock unit awards. Net Income Reconciliation (Amounts in thousands) Net Income per Common Share
25Copyright © Ciena Corporation 2021. All rights reserved. Proprietary information. Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) Q2 FY 2021 Q1 FY 2021 Q4 FY 2020 Q3 FY 2020 Q2 FY 2020 Net income (GAAP) $103,117 $55,348 $65,041 $142,267 $91,655 Add: Interest expense 7,785 7,360 7,395 7,251 7,860 Add: Interest and other (income) loss, net 1,274 1,121 249 (232) 2,665 Add: Provision for income taxes 21,453 11,966 20,798 38,750 25,308 Add: Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements 24,107 23,188 23,538 21,989 22,599 Add: Amortization of intangible assets 8,875 9,642 9,584 9,674 9,674 EBITDA $166,611 $108,625 $126,605 $219,699 $159,761 Less: Canadian Emergency Wage Subsidy 40,444 — — — — Add: Share-based compensation cost 21,535 18,964 16,920 17,259 17,977 Add: Significant asset impairments and restructuring costs 8,209 5,867 7,854 6,515 3,811 Add: Acquisition and integration costs (recoveries) 294 307 3,127 (2,329) 1,414 Adjusted EBITDA $156,205 $133,763 $154,506 $241,144 $182,963 Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) (Amounts in thousands)