Ciena Press Releases

Ciena Reports Fiscal Fourth Quarter 2012 and Year-End Financial Results

Annual revenue grew 5%; cash balance increased by $100M for the year

HANOVER, Md. — 12/13/2012

Ciena® Corporation (NASDAQ: CIEN), the network specialist, today announced unaudited financial results for its fiscal fourth quarter and year ended October 31, 2012.

For the fiscal fourth quarter 2012, Ciena reported revenue of $465.5 million as compared to $455.5 million for the fiscal fourth quarter 2011. For fiscal year 2012, Ciena reported revenue of $1.8 billion, as compared to $1.7 billion for fiscal year 2011.

On the basis of generally accepted accounting principles (GAAP), Ciena's net loss for the fiscal fourth quarter 2012 was $(38.8) million, or $(0.39) per common share, which compares to a GAAP net loss of $(22.3) million, or $(0.23) per common share, for the fiscal fourth quarter 2011. For fiscal year 2012, Ciena had a GAAP net loss of $(144.0) million, or $(1.45) per common share, which compares to a GAAP net loss of $(195.5) million or $(2.04) per common share for fiscal year 2011.

Ciena's adjusted (non-GAAP) net loss for the fiscal fourth quarter 2012 was $(6.7) million, or $(0.07) per common share, which compares to an adjusted (non-GAAP) net income of $3.3 million, or $0.03 per common share, for the fiscal fourth quarter 2011. For fiscal year 2012, Ciena's adjusted (non-GAAP) net loss was $(23.5) million, or $(0.24) per common share, as compared to $(24.2) million, or $(0.25) per common share for fiscal year 2011.

“With five percent annual revenue growth and fourth quarter financial performance in line with our expectations, we continued to significantly outpace the market and take share in 2012 despite the challenging environment. That momentum resulted in record order flow and year-end backlog,” said Gary Smith, president and CEO of Ciena. “Customers require more network convergence with greater programmability to deliver more services, and we believe our portfolio is leading the transformation to next-generation intelligent networks.”

Fiscal Fourth Quarter 2012 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 Appendices A and B.

GAAP Results
    Q4   Q3   Q4   Period Change
    FY 2012   FY 2012   FY 2011   Q-T-Q*   Y-T-Y*
Revenue   $ 465.5   $ 474.1   $ 455.5   (1.8) %   2.2 %
Gross margin   41.3 %   38.2 %   41.7 %   3.1 %   (0.4) %
Operating expense   $ 214.1   $ 196.6   $ 206.2   8.9 %   3.8 %
Operating margin   (4.7) %   (3.2) %   (3.6) %   (1.5) %   (1.1) %
                               
       
    Non-GAAP Results
    Q4   Q3   Q4   Period Change
    FY 2012   FY 2012   FY 2011   Q-T-Q*   Y-T-Y*
Revenue   $ 465.5   $ 474.1   $ 455.5   (1.8) %   2.2 %
Adj. gross margin   42.7 %   39.6 %   43.2 %   3.1 %   (0.5) %
Adj. operating expense   $ 191.8   $ 175.6   $ 180.8   9.2 %   6.1 %
Adj. operating margin   1.4 %   2.5 %   3.5 %   (1.1) %   (2.1) %
                               
     
    Revenue by Segment
    Q4 FY 2012   Q3 FY 2012   Q4 FY 2011
    Revenue   %   Revenue   %   Revenue   %
Packet-Optical Transport   $ 289.4   62.2   $ 298.5   63.0   $ 296.2   65.1
Packet-Optical Switching   20.5   4.4   37.8   8.0   41.2   9.0
Carrier-Ethernet Solutions   47.9   10.3   31.3   6.6   28.8   6.3
Software and Services   107.7   23.1   106.5   22.4   89.3   19.6
Total   $ 465.5   100.0   $ 474.1   100.0   $ 455.5   100.0
                                         
 
* Denotes % change, or in the case of margin, absolute change

 Additional Performance Metrics for Fiscal Fourth Quarter 2012
  • Non-U.S. customers contributed 46% of total revenue
  • One 10%-plus customer represented a total of 11% of revenue
  • Cash and investments totaled $692.5 million
  • Cash flow from operations totaled $10.6 million
  • Average days' sales outstanding (DSOs) were 72
  • Accounts receivable balance was $345.5 million
  • Inventories totaled $260.1 million, including:
    • Raw materials: $39.7 million
    • Work in process: $10.7 million
    • Finished goods: $178.2 million
    • Deferred cost of sales: $71.5 million
    • Reserve for excess and obsolescence: $(40.0) million
  • Product inventory turns were 3.3
  • Headcount totaled 4,481

Business Outlook for Fiscal First 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 financial performance for fiscal first quarter 2013, a quarter in which we typically experience seasonal reductions in order volume and customer deployment activity, to include:

  • Revenue in the range of $435 to $460 million
  • Adjusted (non-GAAP) gross margin percentage in the low 40s range
  • Adjusted (non-GAAP) operating expense in the high $180s million range

Live Web Broadcast of Unaudited Fiscal Fourth Quarter 2012 Results

Ciena will host a discussion of its unaudited fiscal fourth quarter 2012 and year-end results with investors and financial analysts today, Thursday, December 13, 2012 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 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
         
    Quarter Ended
October 31,
  Year Ended
October 31,
    2011   2012   2011   2012
Revenue:                
Products   $ 368,049   $ 363,174   $ 1,406,532   $ 1,454,991
Services   87,406   102,357   335,438   378,932
Total revenue   455,455   465,531   1,741,970   1,833,923
Cost of goods sold:                
Products   210,686   211,443   825,969   868,805
Services   54,859   61,882   206,855   240,894
Total cost of goods sold   265,545   273,325   1,032,824   1,109,699
Gross profit   189,910   192,206   709,146   724,224
Operating expenses:                
Research and development   91,232   95,801   379,862   364,179
Selling and marketing   71,235   74,013   251,990   266,338
General and administrative   27,276   29,772   126,242   114,122
Acquisition and integration costs   2,340   20   42,088   (120)
Amortization of intangible assets   13,534   12,545   69,665   51,697
Restructuring costs   591   1,990   5,781   7,854
Change in fair value of contingent consideration       (3,289)  
Total operating expenses   206,208   214,141   872,339   804,070
Loss from operations   (16,298)   (21,935)   (163,193)   (79,846)
Interest and other income (loss), net   (1,312)   (3,468)   6,022     (15,200)
Interest expense   (9,500)   (10,840)   (37,926)   (39,653)
Gain on cost method investments   7,249     7,249  
Loss before income taxes   (19,861)   (36,243)   (187,848)   (134,699)
Provision for income taxes   2,468   2,528   7,673   9,322
Net loss   $ (22,329)   $ (38,771)   $ (195,521)   $ (144,021)
Basic net loss per common share   $ (0.23)   $ (0.39)   $ (2.04)   $ (1.45)
Diluted net loss per potential common share   $ (0.23)   $ (0.39)   $ (2.04)   $ (1.45)
Weighted average basic common shares outstanding   97,197   100,506   95,854   99,341
Weighted average dilutive potential common shares outstanding   97,197   100,506   95,854   99,341
     
CIENA CORPORATION
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
     
    October 31,
    2011   2012
ASSETS        
Current assets:        
Cash and cash equivalents   $ 541,896   $ 642,444
Short-term investments     50,057
Accounts receivable, net   417,509   345,496
Inventories   230,076   260,098
Prepaid expenses and other   143,357   117,595
Total current assets   1,332,838   1,415,690
Long-term investments   50,264  
Equipment, furniture and fixtures, net   122,558   123,580
Other intangible assets, net   331,635   257,137
Other long-term assets   114,123   84,736
Total assets   $ 1,951,418   $ 1,881,143
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable   $ 157,116   $ 179,704
Accrued liabilities   197,004   209,540
Deferred revenue   99,373   79,516
Convertible notes payable     216,210
Total current liabilities   453,493   684,970
Long-term deferred revenue   24,425   27,560
Other long-term obligations   17,263   31,779
Long term convertible notes payable   1,442,364   1,225,806
Total liabilities   1,937,545   1,970,115
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; 97,440,436 and 100,601,792 shares issued and outstanding   974   1,006
Additional paid-in capital   5,753,236   5,797,765
Accumulated other comprehensive income (loss)   31   (3,354)
Accumulated deficit   (5,740,368)   (5,884,389)
Total stockholders’ equity (deficit)   13,873   (88,972)
Total liabilities and stockholders’ equity (deficit)   $ 1,951,418   $ 1,881,143
     
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
     
  Year Ended October 31,
    2011   2012
Cash flows from operating activities:        
Net loss   $ (195,521)   $ (144,021)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:        
Gain on cost method investments   (7,249)    
Change in fair value of embedded redemption feature   (2,800)   6,600  
Depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements   60,154   59,099
Share-based compensation costs   37,930   32,394
Amortization of intangible assets   95,927   74,497
Provision for inventory excess and obsolescence   17,334   23,438
Provision for warranty   18,451   33,418
Other   5,541   7,122
Changes in assets and liabilities:        
Accounts receivable   (75,623)   70,366  
Inventories   14,209   (53,460)
Prepaid expenses and other   (18,302)   1,748
Accounts payable, accruals and other obligations   (59,285)   12,610
Deferred revenue   18,749   (16,722)
Net cash provided by (used in) operating activities   (90,485)   107,089
Cash flows used in investing activities:        
Payments for equipment, furniture, fixtures and intellectual property   (52,367)   (48,098)
Restricted cash   10,751   35,597
Purchase of available for sale securities   (49,892)  
Proceeds from sale of cost method investment   6,544   524
Receipt of contingent consideration related to business acquisition   16,394  
Net cash used in investing activities   (68,570)   (11,977)
Cash flows from financing activities:        
Repayment of capital lease obligations     (1,895)
Debt issuance costs     (2,331)
Proceeds from issuance of common stock   13,202   12,166
Net cash provided by financing activities   13,202   7,940
Effect of exchange rate changes on cash and cash equivalents   (938)   (2,504)
Net increase (decrease) in cash and cash equivalents   (146,791)   100,548
Cash and cash equivalents at beginning of period   688,687   541,896
Cash and cash equivalents at end of period   $ 541,896   $ 642,444
Supplemental disclosure of cash flow information        
Cash paid during the period for interest   $ 32,931   $ 33,511
Cash paid during the period for income taxes, net   $ 3,204   $ 9,603
Non-cash investing and financing activities        
Purchase of equipment in accounts payable   $ 6,431   $ 5,202
Debt issuance costs in accrued liabilities   $   $ 319
Fixed assets purchased under capital leases   $ 1,106   $ 6,736
 
APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measurements
         
    Quarter Ended
    October 31,
    2011   2012
Gross Profit Reconciliation (GAAP/non-GAAP)        
GAAP gross profit   $     189,910   $     192,206
Share-based compensation-products   611   647
Share-based compensation-services   365   326
Amortization of intangible assets   5,827   5,384
Total adjustments related to gross profit   6,803   6,357
Adjusted (non-GAAP) gross profit   $ 196,713   $ 198,563
Adjusted (non-GAAP) gross profit percentage   43.2 %   42.7 %
         
Operating Expense Reconciliation (GAAP/non-GAAP)        
GAAP operating expense   $     206,208   $     214,141
Share-based compensation-research and development   2,558   2,500
Share-based compensation-sales and marketing   3,312   3,048
Share-based compensation-general and administrative   3,117   2,205
Acquisition and integration costs   2,340   20
Amortization of intangible assets   13,534   12,545
Restructuring costs   591   1,990
Total adjustments related to operating expense   25,452   22,308
Adjusted (non-GAAP) operating expense   $ 180,756   $ 191,833
         
Income (Loss) from Operations Reconciliation (GAAP/non-GAAP)        
GAAP loss from operations   $     (16,298)   $     (21,935)
Total adjustments related to gross profit   6,803   6,357
Total adjustments related to operating expense   25,452   22,308
Adjusted (non-GAAP) income from operations   $ 15,957   6,730
Adjusted (non-GAAP) operating margin percentage   3.5 %   1.4 %
         
Net Income (Loss) Reconciliation (GAAP/non-GAAP)        
GAAP net loss   $     (22,329)   $     (38,771)
Total adjustments related to gross profit   6,803   6,357
Total adjustments related to operating expense   25,452   22,308
Gain on cost method investment   (7,249)  
Change in fair value of embedded redemption feature 580   3,440
Adjusted (non-GAAP) net income (loss)   $ 3,257   $ (6,666)
         
Weighted average basic common shares outstanding   97,197   100,506
Weighted average dilutive potential common shares outstanding   97,857   100,506
         
Net Income (Loss) per Common Share        
GAAP diluted net loss per common share   $ (0.23)   $ (0.39)
Adjusted (non-GAAP) diluted net income (loss) per common share   $ 0.03   $ (0.07)
                 
 
APPENDIX B - Reconciliation of Adjusted (Non- GAAP) Annual Measurements
         
    Year Ended
    October 31,
    2011   2012
Gross Profit Reconciliation (GAAP/non-GAAP)        
GAAP gross profit   $     709,146   $     724,224
Share-based compensation-products   2,269   2,156
Share-based compensation-services   1,881   1,462
Amortization of intangible assets   23,307   22,032  
Fair value adjustment of acquired inventory   5,735  
Total adjustments related to gross profit   33,192   25,650
Adjusted (non-GAAP) gross profit   $ 742,338   $ 749,874
Adjusted (non-GAAP) gross profit percentage   42.6 %   40.9 %
         
Operating Expense Reconciliation (GAAP/non-GAAP)        
GAAP operating expense   $     872,339   $     804,070
Share-based compensation-research and development   10,149   8,567
Share-based compensation-sales and marketing   12,182   11,558
Share-based compensation-general and administrative   11,140   8,691
Acquisition and integration costs   42,088   (120)
Amortization of intangible assets   69,665   51,697
Restructuring costs   5,781   7,854
Change in fair value of contingent consideration   (3,289)  
Settlement of patent litigation   500  
Total adjustments related to operating expense   148,216   88,247
Adjusted (non-GAAP) operating expense   $ 724,123   $ 715,823
         
Loss from Operations Reconciliation (GAAP/non-GAAP)        
GAAP loss from operations   $     (163,193)   $     (79,846)
Total adjustments related to gross profit   33,192   25,650
Total adjustments related to operating expense   148,216   88,247
Adjusted (non-GAAP) income from operations   $ 18,215   $ 34,051
Adjusted (non-GAAP) operating margin percentage   1.0 %   1.9 %
         
Loss Reconciliation (GAAP/non-GAAP)        
GAAP net loss   $     (195,521)   $     (144,021)
Total adjustments related to gross profit   33,192   25,650
Total adjustments related to operating expense   148,216   88,247
Gain on cost method investment   (7,249)  
Change in fair value of embedded redemption feature   (2,800)   6,600
Adjusted (non-GAAP) net loss   $ (24,162)   $ (23,524)
         
Weighted average basic common shares outstanding   95,854   99,341
Weighted average dilutive potential common shares outstanding   95,854   99,341
         
Net Loss per Common Share        
GAAP diluted net loss per common share   $ (2.04)   $ (1.45)
Adjusted (non-GAAP) diluted net income (loss) per common share   $ (0.25)   $ (0.24)

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 acquired from the MEN Business, that Ciena is required to amortize over its expected useful life.
  • Fair value adjustment of acquired inventory - an infrequent charge required by acquisition accounting rules resulting from the required revaluation of inventory acquired from the MEN Business to estimated fair value. This revaluation resulted in a net increase in inventory carrying value and an increase in cost of goods sold for the periods indicated.
  • 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 taken to align resources with perceived market opportunities.
  • Change in fair value of contingent consideration – a non-cash, unrealized gain during the periods identified related to Nortel's intent to exercise its early termination right relating to the Carling, Canada facility lease entered into as part of the acquisition of the MEN Business.
  • Settlement of patent litigation - included in general and administrative expense during our first quarter of fiscal 2011 is a $0.5 million patent litigation settlement.
  • Gain on cost method investments – a non-cash gain related to the sale of a privately held technology company in which Ciena held a minority equity investment, which gain Ciena does not believe is reflective of its ongoing operating costs.
  • 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.

About Ciena
Ciena is the network specialist. We collaborate with customers worldwide to unlock the strategic potential of their networks and fundamentally change the way they perform and compete. Ciena leverages its deep expertise in packet and optical networking and distributed software automation to deliver solutions in alignment with OPn, its approach for building open next-generation networks. We enable a high-scale, programmable infrastructure that can be controlled and adapted by network-level applications, and provide open interfaces to coordinate computing, storage and network resources in a unified, virtualized environment. We routinely post recent news, financial results and other important announcements and information about Ciena on our website. For more information, visit www.ciena.com

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: "With five percent annual revenue growth and fourth quarter financial performance in line with our expectations, we continued to significantly outpace the market and take share in 2012 despite the challenging environment"; "That momentum resulted in record order flow and year-end backlog"; "Customers require more network convergence with greater programmability to deliver more services, and we believe our portfolio is leading the transformation to next-generation intelligent networks"; "Ciena expects financial performance for fiscal first quarter 2013, a quarter in which we typically experience seasonal reductions in order volume and customer deployment activity, to include revenue in the range of $435 to $460 million, adjusted (non-GAAP) gross margin percentage in the low 40s range, adjusted (non-GAAP) operating expense in the high $180s million range."

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-Q filed with the Securities and Exchange Commission on September 5, 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, Appendixes A and B 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
Kindle