EX-99.1 2 ex991-2022q3earningspressr.htm EX-99.1 Document

FOR IMMEDIATE RELEASE

Ciena Reports Fiscal Third Quarter 2022 Financial Results

HANOVER, Md. - September 1, 2022 - Ciena® Corporation (NYSE: CIEN), a networking systems, services and software company, today announced unaudited financial results for its fiscal third quarter ended July 30, 2022.

•Q3 Revenue: $868.0 million

•Q3 Net Income per Share: $0.07 GAAP; $0.33 adjusted (non-GAAP)

•Share Repurchases: Repurchased approximately 3.2 million shares of common stock for an aggregate price of $155.0 million during the quarter.

"Despite continued strong customer demand, our fiscal third quarter financial results were negatively impacted by late delivery and substantially lower-than-committed volume from a small number of suppliers for specific components that are essential for delivering finished goods to our customers," said Gary Smith, president and CEO of Ciena. "While these dynamics will continue in our fiscal fourth quarter, we expect improvement as we move into fiscal 2023, providing us increased ability to service this unprecedented demand and continue to gain market share.”

For the fiscal third quarter 2022, Ciena reported revenue of $868.0 million as compared to $988.1 million for the fiscal third quarter 2021.

Ciena's GAAP net income for the fiscal third quarter 2022 was $10.5 million, or $0.07 per diluted common share, which compares to a GAAP net income of $238.2 million, or $1.52 per diluted common share, for the fiscal third quarter 2021. Ciena's GAAP net income for the fiscal third quarter of 2021 benefited from the recording $124.2 million tax benefit related to an internal transfer of non-U.S. intangible assets. 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 third quarter 2022 was $49.0 million, or $0.33 per diluted common share, which compares to an adjusted (non-GAAP) net income of $144.9 million, or $0.92 per diluted common share, for the fiscal third quarter 2021.

Fiscal Third Quarter 2022 Performance Summary
The tables below (in millions, except percentage data) provide comparisons of certain quarterly results to the prior year. Appendices A and B set forth reconciliations between the GAAP and adjusted (non-GAAP) measures contained in this release.
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GAAP Results
Q3Q3Period Change
FY 2022FY 2021Y-T-Y*
Revenue$868.0 $988.1 (12.2)%
Gross margin39.3 %48.0 %(8.7)%
Operating expense$313.7 $326.0 (3.8)%
Operating margin3.1 %15.0 %(11.9)%
Non-GAAP Results
Q3Q3Period Change
FY 2022FY 2021Y-T-Y*
Revenue$868.0 $988.1 (12.2)%
Adj. gross margin40.0 %48.5 %(8.5)%
Adj. operating expense$273.1 $290.4 (6.0)%
Adj. operating margin8.5 %19.1 %(10.6)%
Adj. EBITDA$96.0 $213.7 (55.1)%
* Denotes % change, or in the case of margin, absolute change
Revenue by Segment
Q3 FY 2022Q3 FY 2021
Revenue%**Revenue%**
Networking Platforms
Converged Packet Optical$563.9 65.0 $712.9 72.1 
Routing and Switching100.7 11.6 69.7 7.1 
Total Networking Platforms664.6 76.6 782.6 79.2 
Platform Software and Services63.5 7.3 $56.9 5.8 
Blue Planet Automation Software and Services17.3 2.0 16.6 1.7 
Global Services
Maintenance Support and Training72.8 8.4 74.0 7.5 
Installation and Deployment38.7 4.4 46.7 4.7 
Consulting and Network Design11.1 1.3 11.3 1.1 
Total Global Services122.6 14.1 132.0 13.3 
Total$868.0 100.0 $988.1 100.0 
** Denotes % of total revenue




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Additional Performance Metrics for Fiscal Third Quarter 2022
Revenue by Geographic Region
Q3 FY 2022Q3 FY 2021
Revenue% **Revenue% **
Americas$617.4 71.1 $692.8 70.1 
Europe, Middle East and Africa124.2 14.3 189.2 19.2 
Asia Pacific126.4 14.6 106.1 10.7 
Total$868.0 100.0 $988.1 100.0 
** Denotes % of total revenue
•Two 10%-plus customers represented a total of 24.1% of revenue
•Cash and investments totaled $1.3 billion
•Cash flow used in operations totaled $205.4 million
•Average days' sales outstanding (DSOs) were 100
•Accounts receivable, net balance was $802.5 million
•Unbilled contract asset, net balance was $157.4 million
•Inventories totaled $826.7 million, including:
◦Raw materials: $621.8 million
◦Work in process: $19.5 million
◦Finished goods: $187.0 million
◦Deferred cost of sales: $33.8 million
◦Reserve for excess and obsolescence: $(35.4) million
•Product inventory turns were 2.1
•Headcount totaled 8,013

Supplemental Materials and Live Web Broadcast of Unaudited Fiscal Third Quarter 2022 Results
Today, Thursday, September 1, 2022, in conjunction with this announcement, Ciena has posted to the Quarterly Results page of the Investor Relations section of its website certain related supporting materials for its unaudited fiscal third quarter 2022 results.

Ciena's management will also host a discussion today with investors and financial analysts that will include the Company's outlook. The live audio web broadcast beginning at 8:30 a.m. Eastern will be accessible via www.ciena.com. An archived replay of the live broadcast will be available shortly following its conclusion on the Investor Relations page of Ciena's website.

Notes to Investors

Forward-Looking Statements. You are encouraged to review the Investors section of our website, where we routinely post press releases, Securities and Exchange Commission ("SEC") filings, recent news, financial results, supplemental financial information, and other announcements. From time to time we exclusively post material information to this website along with other disclosure channels that we use. This press release contains certain forward-looking statements that involve risks and uncertainties. These statements are based on current expectations, forecasts, assumptions and other information available to the Company as of the date hereof. Forward-looking statements include statements regarding Ciena's expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or similar words. Forward-looking statements in this release include:
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"Despite continued strong customer demand, our fiscal third quarter financial results were negatively impacted by late delivery and substantially lower-than-committed volume from a small number of suppliers for specific components that are essential for delivering finished goods to our customers. While these dynamics will continue in our fiscal fourth quarter, we expect improvement as we move into fiscal 2023, providing us increased ability to service this unprecedented demand and continue to gain market share.”

Ciena's actual results, performance or events may differ materially from these forward-looking statements made or implied due to a number of risks and uncertainties relating to Ciena's business, including: the effect of broader economic and market conditions on our customers and their business; our ability to execute our business and growth strategies; the impact of supply chain constraints or disruptions; the duration and severity of the COVID-19 pandemic and the impact of countermeasures taken to mitigate its spread on macroeconomic conditions, economic activity, demand for our technology solutions, short- and long-term changes in customer or end user needs, continuity of supply chain, our business operations, liquidity and financial results; changes in network spending or network strategy by our customers; seasonality and the timing and size of customer orders, including our ability to recognize revenue relating to such sales; the level of competitive pressure we encounter; the product, customer and geographic mix of sales within the period; changes in foreign currency exchange rates; factors beyond our control such as natural disasters, climate change, acts of war or terrorism, geopolitical events, including but not limited to the ongoing conflict between Ukraine and Russia, and public health emergencies; changes in tax or trade regulations, including the imposition of tariffs, duties or efforts to withdraw from or materially modify international trade agreements; and the other risk factors disclosed in Ciena’s periodic reports filed with the Securities and Exchange Commission (SEC) including Ciena’s Annual Report on Form 10-K filed with the SEC on December 17, 2021 and included in its Quarterly Report on Form 10-Q for the third quarter of fiscal 2022 to be filed with the SEC. Ciena assumes no obligation to update any forward-looking information included in this press release.

Non-GAAP Presentation of Quarterly and Annual Results. This release includes non-GAAP measures of Ciena's gross profit, operating expense, income from operations, earnings before interest, tax, depreciation and amortization (EBITDA), Adjusted EBITDA, and measures of net income and net income per share. In evaluating the operating performance of Ciena's business, management excludes certain charges and credits that are required by GAAP. These items share one or more of the following characteristics: they are unusual and Ciena does not expect them to recur in the ordinary course of its business; they do not involve the expenditure of cash; they are unrelated to the ongoing operation of the business in the ordinary course; or their magnitude and timing is largely outside of Ciena's control. Management believes that the non-GAAP measures below provide management and investors useful information and meaningful insight to the operating performance of the business. The presentation of these non-GAAP financial measures should be considered in addition to Ciena's GAAP results and these measures are not intended to be a substitute for the financial information prepared and presented in accordance with GAAP. Ciena's non-GAAP measures and the related adjustments may differ from non-GAAP measures used by other companies and should only be used to evaluate Ciena's results of operations in conjunction with our corresponding GAAP results. To the extent not previously disclosed in a prior Ciena financial results press release, Appendices A and B to this press release set forth a complete GAAP to non-GAAP reconciliation of the non-GAAP measures contained in this release.

About Ciena. Ciena (NYSE: CIEN) is a networking systems, services and software company. We provide solutions that help our customers create the Adaptive Network™ in response to the constantly changing demands of their users. By delivering best-in-class networking technology through high-touch consultative relationships, we build the world’s most agile networks with automation, openness and scale. For updates on Ciena, follow us on Twitter @Ciena, LinkedIn, the Ciena Insights blog, or visit www.ciena.com.
 

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CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Quarter EndedNine Months Ended
 July 30July 31July 30July 31
 2022202120222021
Revenue:  
Products$684,284 $804,414 $2,109,239 $2,071,677 
Services183,697 183,727 552,412 507,521 
Total revenue867,981 988,141 2,661,651 2,579,198 
Cost of goods sold:  
Products434,756 420,236 1,259,378 1,074,935 
Services92,446 93,355 275,526 259,403 
Total cost of goods sold527,202 513,591 1,534,904 1,334,338 
Gross profit340,779 474,550 1,126,747 1,244,860 
Operating expenses:  
Research and development150,025 146,225 457,758 389,212 
Selling and marketing105,880 114,924 344,700 322,589 
General and administrative41,121 48,863 131,191 132,491 
Significant asset impairments and restructuring costs7,692 9,789 20,203 23,865 
Amortization of intangible assets8,919 5,967 26,757 17,896 
Acquisition and integration costs 35 259 598 860 
Total operating expenses313,672 326,027 981,207 886,913 
Income from operations27,107 148,523 145,540 357,947 
Interest and other income (loss), net366 795 4,860 (1,600)
Interest expense(12,642)(7,776)(33,275)(22,921)
Income before income taxes14,831 141,542 117,125 333,426 
Provision (benefit) for income taxes4,319 (96,690)21,868 (63,271)
Net income$10,512 $238,232 $95,257 $396,697 
Net Income per Common Share
Basic net income per common share$0.07 $1.53 $0.63 $2.55 
Diluted net income per potential common share $0.07 $1.52 $0.62 $2.53 
Weighted average basic common shares outstanding149,862 155,271 152,083 155,277 
Weighted average dilutive potential common shares outstanding 1
150,463 156,744 153,209 156,742 

1 Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per potential common share includes the following number of shares underlying certain stock option and stock unit awards: (i) 0.6 million and 1.1 million for the third quarter and first nine months of fiscal 2022, respectively; and (ii) 1.5 million shares for each of the third quarter and first nine months of fiscal 2021.

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CIENA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
July 30,
2022		October 30,
2021
ASSETS 
Current assets: 
Cash and cash equivalents$859,687 $1,422,546 
Short-term investments321,823 181,483 
Accounts receivable, net802,484 884,958 
Inventories826,673 374,265 
Prepaid expenses and other377,709 325,654 
Total current assets3,188,376 3,188,906 
Long-term investments77,723 70,038 
Equipment, building, furniture and fixtures, net281,690 284,968 
Operating lease right-of-use assets45,452 44,285 
Goodwill328,978 311,645 
Other intangible assets, net76,918 65,314 
Deferred tax asset, net797,924 800,180 
Other long-term assets103,721 99,891 
Total assets$4,900,782 $4,865,227 
LIABILITIES AND STOCKHOLDERS’ EQUITY 
Current liabilities: 
Accounts payable$439,229 $356,176 
Accrued liabilities and other short-term obligations301,589 409,285 
Deferred revenue147,808 118,007 
Operating lease liabilities19,786 18,632 
Current portion of long-term debt6,930 6,930 
Total current liabilities915,342 909,030 
Long-term deferred revenue61,845 57,457 
Other long-term obligations150,767 166,803 
Long-term operating lease liabilities42,639 41,564 
Long-term debt, net1,062,453 670,355 
Total liabilities$2,233,046 $1,845,209 
Stockholders’ equity:
Preferred stock – par value $0.01; 20,000,000 shares authorized; zero shares issued and outstanding
— — 
Common stock – par value $0.01; 290,000,000 shares authorized; 148,293,357
and 154,858,981 shares issued and outstanding
1,483 1,549 
Additional paid-in capital6,378,007 6,803,162 
Accumulated other comprehensive income (loss)(21,879)439 
Accumulated deficit(3,689,875)(3,785,132)
Total stockholders’ equity2,667,736 3,020,018 
Total liabilities and stockholders’ equity$4,900,782 $4,865,227 
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CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
Nine Months Ended
 July 30July 31
 20222021
Cash flows provided by (used in) operating activities: 
Net income$95,257 $396,697 
Adjustments to reconcile net income to net cash provided by operating activities: 
Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements68,280 71,918 
Share-based compensation expense77,827 62,970 
Amortization of intangible assets36,521 27,341 
Deferred taxes(19,824)(139,543)
Provision for inventory excess and obsolescence12,038 13,460 
Provision for warranty12,416 12,726 
Other(442)6,350 
Changes in assets and liabilities: 
Accounts receivable74,478 (163,149)
Inventories(464,664)(38,821)
Prepaid expenses and other(39,805)(17,272)
Operating lease right-of-use assets12,504 12,340 
Accounts payable, accruals and other obligations(37,587)31,388 
Deferred revenue34,949 24,969 
Short and long-term operating lease liabilities(15,197)(14,618)
Net cash provided by (used in) operating activities(153,249)286,756 
Cash flows used in investing activities: 
Payments for equipment, furniture, fixtures and intellectual property(66,908)(67,290)
Purchase of available-for-sale securities(614,333)(132,895)
Proceeds from maturities of available-for-sale securities460,000 122,063 
Settlement of foreign currency forward contracts, net4,450 7,326 
Acquisition of business, net of cash acquired(62,043)— 
Purchase of cost method equity investments(8,000)— 
Proceeds from sale of cost method equity investments— 4,678 
Net cash used in investing activities(286,834)(66,118)
Cash flows used in financing activities: 
Proceeds from issuance of senior notes400,000 — 
Payment of long term debt(3,465)(5,197)
Payment of debt issuance costs(5,159)— 
Payment of finance lease obligations(2,555)(2,243)
Shares repurchased for tax withholdings on vesting of stock unit awards(41,280)(36,484)
Repurchases of common stock - repurchase program(487,792)(64,555)
Proceeds from issuance of common stock30,224 28,289 
Net cash used in financing activities(110,027)(80,190)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(12,780)1,344 
Net increase (decrease) in cash, cash equivalents and restricted cash(562,890)141,792 
Cash, cash equivalents and restricted cash at beginning of period1,422,604 1,088,708 
Cash, cash equivalents and restricted cash at end of period$859,714 $1,230,500 
Supplemental disclosure of cash flow information 
Cash paid during the period for interest$24,823 $22,392 
Cash paid during the period for income taxes, net$28,593 $46,165 
Operating lease payments$16,342 $16,162 
Non-cash investing and financing activities
Purchase of equipment in accounts payable$9,320 $5,517 
Repurchase of common stock in accrued liabilities from repurchase program$5,000 $800 
Operating right-of-use assets subject to lease liability $8,226 $4,182 
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APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measures
(in thousands, except per share data) (unaudited)
Quarter Ended
July 30July 31
20222021
Gross Profit Reconciliation (GAAP/non-GAAP)
GAAP gross profit$340,779 $474,550 
Share-based compensation-products1,002 1,037 
Share-based compensation-services1,940 1,315 
Canadian Emergency Wage Subsidy-products— (94)
Canadian Emergency Wage Subsidy-services— (47)
Amortization of intangible assets3,140 2,857 
Total adjustments related to gross profit6,082 5,068 
Adjusted (non-GAAP) gross profit$346,861 $479,618 
Adjusted (non-GAAP) gross profit percentage40.0 %48.5 %
Operating Expense Reconciliation (GAAP/non-GAAP)
GAAP operating expense$313,672 $326,027 
Share-based compensation-research and development8,233 5,541 
Share-based compensation-sales and marketing8,075 6,534 
Share-based compensation-general and administrative7,579 8,237 
Canadian Emergency Wage Subsidy-research and development— (596)
Canadian Emergency Wage Subsidy-sales and marketing— (53)
Canadian Emergency Wage Subsidy-general and administrative— (46)
Significant asset impairments and restructuring costs7,692 9,789 
Amortization of intangible assets8,919 5,967 
Acquisition and integration costs35 259 
Total adjustments related to operating expense40,533 35,632 
Adjusted (non-GAAP) operating expense$273,139 $290,395 
Income from Operations Reconciliation (GAAP/non-GAAP)
GAAP income from operations$27,107 $148,523 
Total adjustments related to gross profit6,082 5,068 
Total adjustments related to operating expense40,533 35,632 
Total adjustments related to income from operations46,615 40,700 
Adjusted (non-GAAP) income from operations$73,722 $189,223 
Adjusted (non-GAAP) operating margin percentage8.5 %19.1 %
Net Income Reconciliation (GAAP/non-GAAP)
GAAP net income$10,512 $238,232 
Exclude GAAP provision (benefit) for income taxes4,319 (96,690)
Income before income taxes14,831 141,542 
Total adjustments related to income from operations46,615 40,700 
Adjusted income before income taxes61,446 182,242 
Non-GAAP tax provision on adjusted income before income taxes12,412 37,360 
Adjusted (non-GAAP) net income$49,034 $144,882 
Weighted average basic common shares outstanding149,862155,271
Weighted average dilutive potential common shares outstanding 1
150,463156,744
Net Income per Common Share
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APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measures
(in thousands, except per share data) (unaudited)
Quarter Ended
July 30July 31
20222021
GAAP diluted net income per potential common share$0.07 $1.52 
Adjusted (non-GAAP) diluted net income per potential common share$0.33 $0.92 

1 Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share includes the following number of shares underlying certain stock option and stock unit awards: (i) 0.6 million for the third quarter of fiscal 2022, and (ii) 1.5 million for the third quarter of fiscal 2021


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APPENDIX B - Calculation of EBITDA and Adjusted EBITDA (unaudited)
(in thousands) (unaudited)
Quarter Ended
July 30July 31
20222021
Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)
Net income (GAAP)$10,512 $238,232 
Add: Interest expense12,642 7,776 
Less: Interest and other income, net366 795 
Add: Provision (benefit) for income taxes4,319 (96,690)
Add: Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements22,250 24,623 
Add: Amortization of intangible assets12,059 8,824 
EBITDA$61,416 $181,970 
Less: Canadian Emergency Wage Subsidy— 836 
Add: Share-based compensation cost 26,857 22,471 
Add: Significant asset impairments and restructuring costs7,692 9,789 
Add: Acquisition and integration costs35 259 
Adjusted EBITDA$96,000 $213,653 
* * *
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.
•Significant asset impairments and restructuring costs - costs incurred as a result of restructuring activities taken to align resources with perceived market opportunities and the redesign of business processes.
•Amortization of intangible assets - a non-cash expense arising from the acquisition of intangible assets, principally developed technologies and customer-related intangibles, that Ciena is required to amortize over its expected useful life.
•Acquisition and integration costs  - includes financial, legal and accounting advisor expenses related to our acquisition of Xelic during the second quarter of fiscal 2022. Acquisition and integration costs for the third quarter of fiscal 2021 include costs of acquisition compensation associated with a three-year earn-out arrangement related to the DonRiver acquisition in fiscal 2018.
•Non-GAAP tax provision - consists of current and deferred income tax expense commensurate with the level of adjusted income before income taxes and utilizes a current, blended U.S. and foreign statutory annual tax rate of 20.2% for the third fiscal quarter of 2022 and 20.5% for the third fiscal quarter of 2021. This rate may be subject to change in the future, including as a result of changes in tax policy or tax strategy. Ciena's GAAP tax provision for the third quarter of 2021 benefited from recording a $124.2 million tax benefit related to an internal transfer of non-U.S. intangible assets that was recognized as a result of the step-up in basis of such rights for tax purposes. The Non-GAAP tax provision for the periods presented do not include this tax benefit or the corresponding deferred tax asset.
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