Ciena Press Releases

Ciena Reports Fiscal First Quarter 2013 Financial Results

Increases revenue 9% year-over-year; Achieves 6% as-adjusted operating profit

HANOVER, Md. — 03/7/2013

Ciena®  Corporation (NASDAQ:  CIEN), the network specialist, today  announced unaudited financial results for its fiscal first quarter ended January 31, 2013.

For the fiscal first quarter 2013, Ciena reported revenue of $453.1 million.

On the basis of generally accepted accounting principles (GAAP), Ciena's net loss for the fiscal first quarter 2013  was $(47.3) million, or $(0.47) per common share, which compares to a GAAP net loss of $(47.7) million, or $(0.49) per common share, for the fiscal first quarter 2012.

Ciena's adjusted (non-GAAP) net income for the fiscal first quarter 2013 was $12.3 million, or $0.12 per common share, which compares to an adjusted (non-GAAP) net loss of $(16.5) million, or $(0.17) per common share, for the fiscal first quarter 2012.

“Our strong first quarter performance reflects a solid start to our fiscal year,” said Gary Smith, president and CEO of Ciena. “We have positioned Ciena to take advantage of the underlying market dynamics, which are increasingly aligned with our strategy and competitive strengths. We believe the combination of our technology and market share leadership as well as our strategic customer relationships will enable us to continue growing faster than the market.”

Fiscal First Quarter 2013 Performance Summary 

The tables below (in millions, except percentage data) provide comparisons of certain quarterly results to prior periods, including sequential quarterly and year-over-year changes. A reconciliation between the GAAP and adjusted (non-GAAP) measures contained in this release is included in Appendix A.

    GAAP Results
    Q1   Q4   Q1   Period Change
    FY 2013   FY 2012   FY 2012   Q-T-Q*   Y-T-Y*
Revenue   $ 453.1     $ 465.5     $ 416.7     (2.7 )%   8.7 %
Gross margin   43.2 %   41.3 %   40.3 %   1.9 %   2.9 %
Operating expense   $ 201.4     $ 214.1     $ 198.9     (5.9 )%   1.2 %
Operating margin   (1.2 )%   (4.7 )%   (7.5 )%   3.5 %   6.3 %
       
    Non-GAAP Results
    Q1   Q4   Q1   Period Change
    FY 2013   FY 2012   FY 2012   Q-T-Q*   Y-T-Y*
Revenue   $ 453.1     $ 465.5     $ 416.7     (2.7 )%   8.7 %
Adj. gross margin   44.6 %   42.7 %   41.9 %   1.9 %   2.7 %
Adj. operating expense   $ 176.6     $ 191.8     $ 175.4     (7.9 )%   0.7 %
Adj. operating margin   5.6 %   1.4 %   (0.2 )%   4.2 %   5.8 %
     
    Revenue by Segment
    Q1 FY 2013   Q4 FY 2012   Q1 FY 2012
    Revenue   %   Revenue   %   Revenue   %
Converged Packet Optical   $ 240.0     53.0     $ 238.1     51.1     $ 202.0     48.5
Packet Networking   45.8     10.1     47.3     10.2     21.5     5.2
Optical Transport   57.6     12.7     71.8     15.4     107.7     25.8
Software and Services   109.7     24.2     108.3     23.3     85.5     20.5
Total   $ 453.1     100.0     $ 465.5     100.0     $ 416.7     100.0

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

Additional Performance Metrics for Fiscal First Quarter 2013

  • Non-U.S. customers contributed 42% of total revenue 
  • Two customers accounted for greater than 10% of revenue and represented 26.4% of total revenue 
  • Cash and investments totaled $637.2 million
  • Cash flow used in operations totaled $(45.7) million   
  • Free cash flow totaled $(58.0) million   
  • Average days' sales outstanding (DSOs) were 78   
  • Accounts receivable balance was $394.8 million   
  • Inventories totaled $266.9 million, including: 
    • Raw materials: $46.2 million
    • Work in process: $7.1 million
    • Finished goods: $178.8 million
    • Deferred cost of sales: $77.1 million
    • Reserve for excess and obsolescence: $(42.3) million   
  • Product inventory turns were 2.9   
  • Headcount totaled 4,448

Business Outlook for Fiscal Second Quarter 2013

Statements relating to business outlook are forward-looking in nature and actual results may differ materially. These statements should be read in the context of the Notes to Investors below.

Ciena  expects  fiscal  second  quarter  2013  financial  performance  to  include: 

  • Revenue in the range of $465 to $495 million
  • Adjusted (non-GAAP) gross margin in the low 40s percent range
  • Adjusted (non-GAAP) operating expense in the low $190s million range

Live Web Broadcast of Unaudited Fiscal First Quarter 2013 Results 

Ciena will host a discussion of its unaudited fiscal first quarter 2013 results with investors and financial analysts today, Thursday, March 7, 2013 at 8:30 a.m. (Eastern). The live broadcast of the discussion will be available via Ciena's homepage at http://www.ciena.com/. An archived version of the discussion will be available shortly following the conclusion of the live broadcast on the Investor Relations page of Ciena's website at: www.ciena.com/investors.

CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
     
    Quarter Ended January 31,
    2012   2013
Revenue:        
Products   $ 333,673     $ 353,057  
Services   83,012     100,036  
Total revenue   416,685     453,093  
Cost of goods sold:        
Products   197,752     196,521  
Services   51,177     60,777  
Total cost of goods sold   248,929     257,298  
Gross profit   167,756     195,795  
Operating expenses:        
Research and development   89,664     89,125  
Selling and marketing   64,411     66,588  
General and administrative   29,664     28,208  
Amortization of intangible assets   13,471     12,453  
Restructuring costs   1,722     5,030  
Total operating expenses   198,932     201,404  
Loss from operations   (31,176 )   (5,609 )
Interest and other income (loss), net   (4,887 )   (137 )
Interest expense   (9,570 )   (10,732 )
Loss on extinguishment of debt       (28,630 )
Loss before income taxes   (45,633 )   (45,108 )
Provision for income taxes   2,020     2,216  
Net loss   $ (47,653 )   $ (47,324 )
Basic net loss per common share   $ (0.49 )   $ (0.47 )
Diluted net loss per potential common share   $ (0.49 )   $ (0.47 )
Weighted average basic common shares outstanding   98,066     101,204  
Weighted average dilutive potential common shares outstanding   98,066     101,204  
         
CIENA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
         
    October 31,   January 31,
    2012   2013
ASSETS        
Current assets:        
Cash and cash equivalents   $ 642,444     $ 552,267  
Short-term investments   50,057     84,918  
Accounts receivable, net   345,496     394,785  
Inventories   260,098     266,901  
Prepaid expenses and other   117,595     136,002  
Total current assets   1,415,690     1,434,873  
Equipment, furniture and fixtures, net   123,580     122,207  
Other intangible assets, net   257,137     239,300  
Other long-term assets   84,736     88,792  
Total assets   $ 1,881,143     $ 1,885,172  
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)        
Current liabilities:        
Accounts payable   $ 179,704     $ 182,671  
Accrued liabilities   209,540     214,918  
Deferred revenue   79,516     79,916  
Convertible notes payable   216,210     216,210  
Total current liabilities   684,970     693,715  
Long-term deferred revenue   27,560     28,562  
Other long-term obligations   31,779     32,785  
Long-term convertible notes payable   1,225,806     1,208,745  
Total liabilities   1,970,115     1,963,807  
Commitments and contingencies        
Stockholders’ equity (deficit):        
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; 100,601,792 and 101,518,915 shares issued and outstanding   1,006     1,015  
Additional paid-in capital   5,797,765     5,854,424  
Accumulated other comprehensive income (loss)   (3,354 )   (2,361 )
Accumulated deficit   (5,884,389 )   (5,931,713 )
Total stockholders’ equity (deficit)   (88,972 )   (78,635 )
Total liabilities and stockholders’ equity (deficit)   $ 1,881,143     $ 1,885,172  
     
CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
     
    Three Months Ended January 31,
    2012   2013
Cash flows from operating activities:        
Net loss   $ (47,653 )   $ (47,324 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:        
Loss on extinguishment of debt       28,630  
Change in fair value of embedded redemption feature   980     (310 )
Depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements   14,721     14,745  
Share-based compensation costs   8,888     8,320  
Amortization of intangible assets   19,415     17,838  
Provision for inventory excess and obsolescence   8,224     3,580  
Provision for warranty   7,706     4,029  
Other   2,605     2,951  
Changes in assets and liabilities:        
Accounts receivable   17,078     (49,540 )
Inventories   (26,799 )   (10,383 )
Prepaid expenses and other   14,500     (25,785 )
Accounts payable, accruals and other obligations   15,850     6,121  
Deferred revenue   (22,634 )   1,402  
Net cash provided by (used in) operating activities   12,881     (45,726 )
Cash flows used in investing activities:        
Payments for equipment, furniture, fixtures and intellectual property   (7,898 )   (12,243 )
Restricted cash   (866 )   627  
Purchase of available for sale securities       (84,918 )
Proceeds from maturities of available for sale securities       50,000  
Proceeds from sale of cost method investment   524      
Net cash used in investing activities   (8,240 )   (46,534 )
Cash flows from financing activities:        
Payment for debt and equity issuance costs       (3,237 )
Repayment of capital lease obligations       (676 )
Proceeds from issuance of common stock   5,669     5,820  
Net cash provided by financing activities   5,669     1,907  
Effect of exchange rate changes on cash and cash equivalents   (1,745 )   176  
Net increase (decrease) in cash and cash equivalents   10,310     (90,353 )
Cash and cash equivalents at beginning of period   541,896     642,444  
Cash and cash equivalents at end of period   $ 550,461     $ 552,267  
Supplemental disclosure of cash flow information        
Cash paid during the period for interest   $ 2,458     $ 4,739  
Cash paid during the period for income taxes, net   $ 2,823     $ 3,259  
Non-cash investing and financing activities        
Purchase of equipment in accounts payable   $ 7,409     $ 4,215  
Debt issuance costs in accrued liabilities   $     $ 194  
Fixed assets acquired under capital leases   $ 3,078     $ 646  
 
APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measurements
         
    Quarter Ended
    January 31,
    2012   2013
Gross Profit Reconciliation (GAAP/non-GAAP)        
GAAP gross profit   $ 167,756     $ 195,795  
Share-based compensation-products   485     561  
Share-based compensation-services   437     427  
Amortization of intangible assets   5,779     5,385  
Total adjustments related to gross profit   6,701     6,373  
Adjusted (non-GAAP) gross profit   $ 174,457     $ 202,168  
Adjusted (non-GAAP) gross profit percentage   41.9 %   44.6 %
         
Operating Expense Reconciliation (GAAP/non-GAAP)        
GAAP operating expense   $ 198,932     $ 201,404  
Share-based compensation-research and development   2,134     2,033  
Share-based compensation-sales and marketing   3,101     2,743  
Share-based compensation-general and administrative   2,797     2,556  
Acquisition and integration costs   264      
Amortization of intangible assets   13,471     12,453  
Restructuring costs   1,722     5,030  
Total adjustments related to operating expense   23,489     24,815  
Adjusted (non-GAAP) operating expense   $ 175,443     $ 176,589  
         
Income (Loss) from Operations Reconciliation (GAAP/non-GAAP)        
GAAP loss from operations   $ (31,176 )   $ (5,609 )
Total adjustments related to gross profit   6,701     6,373  
Total adjustments related to operating expense   23,489     24,815  
Adjusted (non-GAAP) income (loss) from operations   $ (986 )   25,579  
Adjusted (non-GAAP) operating margin percentage   (0.2 )%   5.6 %
         
Net Income (Loss) Reconciliation (GAAP/non-GAAP)        
GAAP net loss   $ (47,653 )   $ (47,324 )
Total adjustments related to gross profit   6,701     6,373  
Total adjustments related to operating expense   23,489     24,815  
Loss on extinguishment of debt       28,630  
Non-cash interest expense       100  
Change in fair value of embedded redemption feature   980     (310 )
Adjusted (non-GAAP) net income (loss)   $ (16,483 )   $ 12,284  
         
Weighted average basic common shares outstanding   98,066     101,204  
Weighted average dilutive potential common shares outstanding   98,066     120,817  
         
Net Income (Loss) per Common Share        
GAAP diluted net loss per common share   $ (0.49 )   $ (0.47 )
Adjusted (non-GAAP) diluted net income (loss) per common share   $ (0.17 )   $ 0.12  
                 

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 expense - a non-cash expense incurred in accordance with share-based compensation accounting guidance.
  • Amortization of intangible assets - a non-cash expense arising from the acquisition of intangible assets, principally developed technologies and customer-related intangibles, that Ciena is required to amortize over its expected useful life.
  • Acquisition and integration costs - reflects transaction expense, and consulting and third party service fees associated with the acquisition of the Nortel MEN Business and the integration of this business into Ciena's operations.
  • Restructuring costs - costs incurred as a result of restructuring activities (or in the case of recoveries, previous restructuring activities) taken to align resources with perceived market opportunities.
  • Loss on extinguishment of debt - a non-cash loss, recorded in connection with convertible note exchange transactions completed during the first quarter of fiscal 2013, reflecting the fair value of Ciena's 4.0% senior convertible notes due December 15, 2020 as compared to the retirement of a portion of Ciena's outstanding 4.0% senior convertible notes due March 15, 2015.
  • Non-cash interest expense -  a non-cash debt discount expense amortized as interest expense during the term of Ciena's 4.0% senior convertible notes due December 15, 2020 relating to the required separate accounting of the equity component of these convertible notes.
  • Change in fair value of embedded redemption feature - a non-cash unrealized gain or loss reflective of a mark to market fair value adjustment of an embedded derivative related to the redemption feature of Ciena's outstanding 4.0% senior convertible notes due March 15, 2015.

Notes to Investors

Forward-looking statements. This press release contains certain forward-looking statements that involve risks and uncertainties. These statements are based on current expectations, forecasts, assumptions and other information available to the Company as of the date hereof. Forward-looking statements include statements regarding Ciena's expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or similar words. Forward-looking statements in this release include: “Our strong first quarter performance reflects a solid start to our fiscal year,” "We have positioned Ciena to take advantage of the underlying market dynamics, which are increasingly aligned with our strategy and competitive strengths."; "We believe the combination of our technology and market share leadership as well as our strategic customer relationships will enable us to continue growing faster than the market.”

Ciena's actual results, performance or events may differ materially from these forward-looking statements made or implied due a number of risks and uncertainties relating to Ciena's business, including: the effect of broader economic and market conditions on our customers and their business; changes in network spending or network strategy by large communication service providers; 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; and the other risk factors disclosed in Ciena's Report on Form 10-K filed with the Securities and Exchange Commission on December 21, 2012. Ciena assumes no obligation to update any forward-looking information included in this press release. 

Non-GAAP Presentation of Quarterly Results. This release includes non-GAAP measures of Ciena's gross profit, operating expense, income (loss) from operations, net income (loss) and net income (loss) 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, Appendix A to this press release sets forth a complete GAAP to non-GAAP reconciliation of the non-GAAP measures contained in this release.

Press Contacts:
Nicole Anderson
Ciena Corporation
(877) 857 -7377
pr@ciena.com
Investor Contacts:
Gregg Lampf
Ciena Corporation
(877) 243 6273
ir@ciena.com
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