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Ciena Reports Fiscal First Quarter 2021 Financial Results

Ciena® Corporation (NYSE: CIEN), a networking systems, services and software company, today announced unaudited financial results for its fiscal first quarter ended January 30, 2021.

  • Q1 Revenue: $757.1 million
  • Q1 Net Income per Share: $0.35 GAAP; $0.52 adjusted (non-GAAP)
  • Share Repurchases: Repurchased approximately 0.3 million shares of common stock for an aggregate price of $13.2 million during the quarter

"We delivered solid revenue and profitability in the first fiscal quarter in the face of continued challenging market conditions and a dynamic industry environment," said Gary Smith, president and CEO of Ciena. "Our strong market position has enabled us to start the year largely as expected, and we are leveraging our innovation leadership and competitive advantage to deliver on our long-term growth opportunities."

For the fiscal first quarter 2021, Ciena reported revenue of $757.1 million as compared to $832.9 million for the fiscal first quarter 2020.

Ciena's GAAP net income for the fiscal first quarter 2021 was $55.3 million, or $0.35 per diluted common share, which compares to a GAAP net income of $62.3 million, or $0.40 per diluted common share, for the fiscal first quarter 2020.

Ciena's adjusted (non-GAAP) net income for the fiscal first quarter 2021 was $81.3 million, or $0.52 per diluted common share, which compares to an adjusted (non-GAAP) net income of $81.7 million, or $0.52 per diluted common share, for the fiscal first quarter 2020.

Fiscal First 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.

GAAP Results

Q1

Q1

FY 2021

FY 2020

Y-T-Y*

Revenue

$

757.1

$

832.9

(9.1

)%

Gross margin

47.3

%

44.5

%

2.8

%

Operating expense

$

282.1

$

292.6

(3.6

)%

Operating margin

10.0

%

9.4

%

0.6

%

 

Non-GAAP Results

Q1

Q1

FY 2021

FY 2020

Y-T-Y*

Revenue

$

757.1

$

832.9

(9.1

)%

Adj. gross margin

48.0

%

45.1

%

2.9

%

Adj. operating expense

$

253.0

$

266.4

(5.0

)%

Adj. operating margin

14.6

%

13.1

%

1.5

%

Adj. EBITDA

$

133.8

$

135.3

(1.1

)%

 

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

Revenue by Segment

Q1 FY 2021

Q1 FY 2020

Revenue

%**

Revenue

%**

Networking Platforms

Converged Packet Optical

$

512.3

67.7

$

591.5

71.0

Routing and Switching (1)

64.3

8.5

67.5

8.1

Total Networking Platforms

576.6

76.2

659.0

79.1

Platform Software and Services

49.9

6.6

51.9

6.2

Blue Planet Automation Software and Services

16.9

2.2

15.5

1.9

Global Services

Maintenance Support and Training

67.6

8.9

61.8

7.4

Installation and Deployment

39.6

5.2

34.9

4.2

Consulting and Network Design

6.5

0.9

9.8

1.2

Total Global Services

113.7

15.0

106.5

12.8

Total

$

757.1

100.0

$

832.9

100.0

**

Denotes % of total revenue 

 

(1)

Ciena renamed its former “Packet Networking” product line as “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 First Quarter 2021

Revenue by Geographic Region

Q1 FY 2021

Q1 FY 2020

Revenue

% **

Revenue

% **

Americas

$

496.6

65.6

$

574.0

68.9

Europe, Middle East and Africa

155.4

20.5

130.0

15.6

Asia Pacific

105.1

13.9

128.9

15.5

Total

$

757.1

100.0

$

832.9

100.0

 

** Denotes % of total revenue

  • No customer represented more than 10% of revenue for the fiscal quarter
  • Cash and investments totaled $1.3 billion
  • Cash flow used in operations totaled $7.3 million
  • Average days' sales outstanding (DSOs) were 93
  • Accounts receivable, net balance was $700.0 million
  • Unbilled contract asset, net balance was $85.5 million
  • Inventories totaled $389.7 million, including:
    • Raw materials: $123.4 million
    • Work in process: $11.4 million
    • Finished goods: $257.0 million
    • Deferred cost of sales: $38.9 million
    • Reserve for excess and obsolescence: $(41.0) million
  • Product inventory turns were 3.2
  • Headcount totaled 7,042

Supplemental Materials and Live Web Broadcast of Unaudited Fiscal First Quarter 2021 Results

Today, Thursday, March 4, 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 first 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 solid revenue and profitability in the first fiscal quarter in the face of continued challenging market conditions and a dynamic industry environment," and "Our strong market position has enabled us to start the year largely as expected, and we are leveraging our innovation leadership and competitive advantage to deliver on our long-term growth opportunities."

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 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 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 first 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.

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

 

Quarter Ended

 

January 30,

February 1,

 

2021

2020

Revenue:

 

Products

 

$

597,220

$

687,215

Services

 

159,910

145,697

Total revenue

 

757,130

832,912

Cost of goods sold:

 

Products

 

315,098

389,013

Services

 

84,141

73,364

Total cost of goods sold

 

399,239

462,377

Gross profit

 

357,891

370,535

Operating expenses:

 

Research and development

 

132,741

130,900

Selling and marketing

 

97,278

107,066

General and administrative

 

39,993

42,468

Amortization of intangible assets

 

5,910

5,853

Significant asset impairments and restructuring costs

 

5,867

4,472

Acquisition and integration costs

 

307

1,819

Total operating expenses

 

282,096

292,578

Income from operations

 

75,795

77,957

Interest and other income (loss), net

 

(1,121

)

3,646

Interest expense

 

(7,360

)

(8,815

)

Loss on extinguishment and modification of debt

 

(646

)

Income before income taxes

 

67,314

72,142

Provision for income taxes

 

11,966

9,814

Net income

 

$

55,348

$

62,328

 

Net Income per Common Share

 

Basic net income per common share

 

$

0.36

$

0.40

Diluted net income per potential common share

 

$

0.35

$

0.40

 

Weighted average basic common shares outstanding

 

155,174

154,334

Weighted average dilutive potential common shares outstanding 1

 

156,583

155,738

1 Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per common share for the first quarter of fiscal 2021 includes 1.4 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 first quarter of fiscal 2020 includes 1.4 million shares underlying certain stock option and stock unit awards.

CIENA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

 

 

January 30,
2021

October 31,
2020

ASSETS

 

Current assets:

 

Cash and cash equivalents

 

$

1,029,237

$

1,088,624

Short-term investments

 

151,434

150,667

Accounts receivable, net

 

700,025

719,405

Inventories

 

389,733

344,379

Prepaid expenses and other

 

326,110

308,084

Total current assets

 

2,596,539

2,611,159

Long-term investments

 

102,364

82,226

Equipment, building, furniture and fixtures, net

 

281,228

272,377

Operating lease right-of-use assets

 

54,244

57,026

Goodwill

 

311,294

310,847

Other intangible assets, net

 

91,516

96,647

Deferred tax asset, net

 

647,232

647,805

Other long-term assets

 

102,480

102,830

Total assets

 

$

4,186,897

$

4,180,917

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

Current liabilities:

 

Accounts payable

 

$

247,241

$

291,904

Accrued liabilities and other short-term obligations

 

275,003

334,132

Deferred revenue

 

136,229

108,700

Operating lease liabilities

 

19,364

19,035

Current portion of long-term debt

 

6,930

6,930

Total current liabilities

 

684,767

760,701

Long-term deferred revenue

 

54,371

49,663

Other long-term obligations

 

128,764

123,185

Long-term operating lease liabilities

 

57,626

61,415

Long-term debt, net

 

674,856

676,356

Total liabilities

 

$

1,600,384

$

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; 155,187,945

and 154,563,005 shares issued and outstanding

 

1,552

1,546

Additional paid-in capital

 

6,826,488

6,826,531

Accumulated other comprehensive loss

 

(11,547

)

(35,358

)

Accumulated deficit

 

(4,229,980

)

(4,283,122

)

Total stockholders’ equity

 

2,586,513

2,509,597

Total liabilities and stockholders’ equity

 

$

4,186,897

$

4,180,917

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)

 

 

Three Months Ended

 

January 30,

February 1,

 

2021

2020

Cash flows provided by (used in) operating activities:

 

Net income

 

$

55,348

$

62,328

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements

 

23,188

25,782

Share-based compensation costs

 

18,964

15,602

Amortization of intangible assets

 

9,642

9,687

Deferred taxes

 

(905

)

10,788

Provision for inventory excess and obsolescence

 

5,905

6,699

Provision for warranty

 

3,239

7,898

Other

 

4,277

4,540

Changes in assets and liabilities:

 

Accounts receivable

 

18,862

64,938

Inventories

 

(51,020

)

(4,481

)

Prepaid expenses and other

 

(13,835

)

(29,792

)

Operating lease right-of-use assets

 

4,103

4,176

Accounts payable, accruals and other obligations

 

(112,170

)

(142,229

)

Deferred revenue

 

31,917

8,926

Short and long-term operating lease liabilities

 

(4,834

)

(5,098

)

Net cash provided by (used in) operating activities

 

(7,319

)

39,764

Cash flows used in investing activities:

 

Payments for equipment, furniture, fixtures and intellectual property

 

(20,868

)

(26,820

)

Purchase of available for sale securities

 

(71,756

)

(29,733

)

Proceeds from maturities of available for sale securities

 

51,266

30,000

Settlement of foreign currency forward contracts, net

 

2,357

(73

)

Acquisition of business, net of cash acquired

 

(28,300

)

Proceeds from sale of equity investment

 

4,678

Net cash used in investing activities

 

(34,323

)

(54,926

)

Cash flows used in financing activities:

 

Payment of long term debt

 

(1,732

)

Payment of debt issuance costs

 

(382

)

Payment of finance lease obligations

 

(702

)

(722

)

Shares repurchased for tax withholdings on vesting of restricted stock units

 

(19,242

)

(12,572

)

Repurchases of common stock - repurchase program

 

(12,406

)

(49,203

)

Proceeds from issuance of common stock

 

13,447

11,862

Net cash used in financing activities

 

(20,635

)

(51,017

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

2,879

(643

)

Net decrease in cash, cash equivalents and restricted cash

 

(59,398

)

(66,822

)

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

 

$

1,029,310

$

837,339

Supplemental disclosure of cash flow information

 

Cash paid during the period for interest

 

$

7,566

$

9,325

Cash paid during the period for income taxes, net

 

$

8,798

$

8,325

Operating lease payments

 

$

5,387

$

5,642

Non-cash investing and financing activities

 

Purchase of equipment in accounts payable

 

$

5,935

$

5,905

Repurchase of common stock in accrued liabilities from repurchase program

 

$

800

$

1,501

Operating lease right-of-use assets subject to lease liability

 

$

555

$

1,157

APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measures

(in thousands, except per share data) (unaudited)

Quarter Ended

January 30,

February 1,

2021

2020

Gross Profit Reconciliation (GAAP/non-GAAP)

GAAP gross profit

$

357,891

$

370,535

Share-based compensation-products

953

671

Share-based compensation-services

1,205

842

Amortization of intangible assets

3,732

3,834

Total adjustments related to gross profit

5,890

5,347

Adjusted (non-GAAP) gross profit

$

363,781

$

375,882

Adjusted (non-GAAP) gross profit percentage

48.0

%

45.1

%

Operating Expense Reconciliation (GAAP/non-GAAP)

GAAP operating expense

$

282,096

$

292,578

Share-based compensation-research and development

4,794

3,849

Share-based compensation-sales and marketing

5,816

4,613

Share-based compensation-general and administrative

6,358

5,527

Amortization of intangible assets

5,910

5,853

Significant asset impairments and restructuring costs

5,867

4,472

Acquisition and integration costs

307

1,819

Total adjustments related to operating expense

29,052

26,133

Adjusted (non-GAAP) operating expense

$

253,044

$

266,445

Income from Operations Reconciliation (GAAP/non-GAAP)

GAAP income from operations

$

75,795

$

77,957

Total adjustments related to gross profit

5,890

5,347

Total adjustments related to operating expense

29,052

26,133

Total adjustments related to income from operations

34,942

31,480

Adjusted (non-GAAP) income from operations

$

110,737

$

109,437

Adjusted (non-GAAP) operating margin percentage

14.6

%

13.1

%

Net Income Reconciliation (GAAP/non-GAAP)

GAAP net income

$

55,348

$

62,328

Exclude GAAP provision for income taxes

11,966

9,814

Income before income taxes

67,314

72,142

Total adjustments related to income from operations

34,942

31,480

Loss on extinguishment of debt

646

Adjusted income before income taxes

102,256

104,268

Non-GAAP tax provision on adjusted income before income taxes

20,962

22,522

Adjusted (non-GAAP) net income

$

81,294

$

81,746

Weighted average basic common shares outstanding

155,174

154,334

Weighted average dilutive potential common shares outstanding 1

156,583

155,738

Net Income per Common Share

GAAP diluted net income per common share

$

0.35

$

0.40

Adjusted (non-GAAP) diluted net income per common share

$

0.52

$

0.52

1 Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per common share for the first quarter of fiscal 2021 includes 1.4 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 first quarter of fiscal 2020 includes 1.4 million shares underlying certain stock option and restricted stock unit awards.

APPENDIX B - Calculation of EBITDA and Adjusted EBITDA (unaudited)

(in thousands) (unaudited)

Quarter Ended

January 30,

February 1,

2021

2020

Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)

Net income (GAAP)

$

55,348

$

62,328

Add: Interest expense

7,360

8,815

Less: Interest and other income (loss), net

(1,121

)

3,646

Add: Loss on extinguishment and modification of debt

646

Add: Provision for income taxes

11,966

9,814

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

23,188

25,782

Add: Amortization of intangible assets

9,642

9,687

EBITDA

$

108,625

$

113,426

Add: Share-based compensation cost

18,964

15,602

Add: Significant asset impairments and restructuring costs

5,867

4,472

Add: Acquisition and integration costs

307

1,819

Adjusted EBITDA

$

133,763

$

135,319

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.
  • 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 - consist of expenses for financial, legal and accounting advisors, severance and other employee-related costs associated with our acquisitions of DonRiver and Centina, including 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.
  • 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 first fiscal quarter of 2021 and 21.6% for the first 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.

Contacts:

Press Contact:
Jamie Moody
Ciena Corporation
+1 (214) 995-8035
pr@ciena.com

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