Ciena Press Releases

Ciena Reports Fiscal Third Quarter 2012 Financial Results

Increases revenue 9% year-over-year

LINTHICUM, Md. — 08/30/2012

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

For the fiscal third quarter 2012, Ciena reported revenue of $474.1 million.

On the basis of generally accepted accounting principles (GAAP), Ciena's net loss for the fiscal third quarter 2012 was $(29.8) million, or $(0.30) per common share, which compares to a GAAP net loss of $(31.5) million, or $(0.33) per common share, for the fiscal third quarter 2011.

Ciena's adjusted (non-GAAP) net loss for the fiscal third quarter 2012 was $(4.1) million, or $(0.04) per common share, which compares to an adjusted (non-GAAP) net income of $8.3 million, or $0.08 per common share, for the fiscal third quarter 2011.

“We continue to win in the market and take share as demonstrated by a solid operating performance in the third quarter,” said Gary Smith, president and CEO of Ciena. “We are experiencing the effects of ongoing macroeconomic challenges and slower than expected roll-outs of new design wins. However, our approach to the market is working, our OPn architecture vision is gaining traction with customers globally, and our view of the long-term opportunity is unchanged.”

Fiscal Third 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 Appendix A.

    GAAP Results
    Q3   Q2   Q3   Period Change
    FY 2012   FY 2012   FY 2011   Q-T-Q*   Y-T-Y*
Revenue   $ 474.1     $ 477.6     $ 435.3     (0.7 )%   8.9 %
Gross margin   38.2 %   38.3 %   42.5 %   (0.1 )%   (4.3 )%
Operating expense   $ 196.6     $ 194.4     $ 202.3     1.1 %   (2.8 )%
Operating margin   (3.2 )%   (2.4 )%   (4.0 )%   (0.8 )%   0.8 %
                               
    Non-GAAP Results
    Q3   Q2   Q3   Period Change
    FY 2012   FY 2012   FY 2011   Q-T-Q*   Y-T-Y*
Revenue   $ 474.1     $ 477.6     $ 435.3     (0.7 )%   8.9 %
Adj. gross margin   39.6 %   39.6 %   44.1 %   %   (4.5 )%
Adj. operating expense   $ 175.6     $ 172.9     $ 175.2     1.6 %   0.2 %
Adj. operating margin   2.5 %   3.4 %   3.8 %   (0.9 )%   (1.3 )%
                               
    Revenue by Segment
    Q3 FY 2012   Q2 FY 2012   Q3 FY 2011
    Revenue   %   Revenue   %   Revenue   %
Packet-Optical Transport   $ 298.5     63.0     $ 318.0     66.6     $ 266.6     61.2
Packet-Optical Switching   37.8     8.0     31.0     6.5     40.7     9.3
Carrier-Ethernet Solutions   31.3     6.6     30.6     6.4     40.5     9.3
Software and Services   106.5     22.4     98.0     20.5     87.5     20.2
Total   $ 474.1     100.0     $ 477.6     100.0     $ 435.3     100.0

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

Additional Performance Metrics for Fiscal Third Quarter 2012

  • Non-U.S. customers contributed 50% of total revenue
  • Cash and investments totaled $667.3 million
  • Cash flow from operations totaled $23.1 million
  • Free cash flow totaled $6.3 million
  • Average days' sales outstanding (DSOs) were 72
  • Accounts receivable balance was $379.1 million
  • Inventories totaled $245.0 million, including:
    • Raw materials: $38.0 million
    • Work in process: $12.6 million
    • Finished goods: $185.7 million
    • Deferred cost of sales: $46.1 million
    • Reserve for excess and obsolescence: $(37.4) million
  • Product inventory turns were 3.7
  • Headcount totaled 4,463

Business Outlook for Fiscal Fourth Quarter 2012

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 fourth quarter 2012 financial performance to include:

  • Revenue in the range of $455 to $480 million
  • Adjusted (non-GAAP) gross margin of approximately 40 percent
  • Adjusted (non-GAAP) operating expense in the low $180s million range

Live Web Broadcast of Unaudited Fiscal Third Quarter 2012 Results

Ciena will host a discussion of its unaudited fiscal third quarter 2012 results with investors and financial analysts today, Thursday, August 30, 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 July 31,   Nine Months Ended July 31,
    2011   2012   2011   2012
Revenue:                
Products   $ 350,030     $ 373,418     $ 1,038,483     $ 1,091,817  
Services   85,283     100,672     248,032     276,575  
Total revenue   435,313     474,090     1,286,515     1,368,392  
Cost of goods sold:                
Products   198,217     225,238     615,283     657,362  
Services   52,199     67,531     151,996     179,012  
Total cost of goods sold   250,416     292,769     767,279     836,374  
Gross profit   184,897     181,321     519,236     532,018  
Operating expenses:                
Research and development   93,216     88,315     288,630     268,378  
Selling and marketing   61,895     65,397     180,755     192,325  
General and administrative   28,172     27,870     98,966     84,350  
Acquisition and integration costs   4,822     6     39,748     (140 )
Amortization of intangible assets   13,673     12,714     56,131     39,152  
Restructuring costs   504     2,291     5,190     5,864  
Change in fair value of contingent consideration           (3,289 )    
Total operating expenses   202,282     196,593     666,131     589,929  
Loss from operations   (17,385 )   (15,272 )   (146,895 )   (57,911 )
Interest and other income (loss), net   (3,160 )   (2,458 )   7,334     (11,732 )
Interest expense   (9,470 )   (9,597 )   (28,426 )   (28,813 )
Loss before income taxes   (30,015 )   (27,327 )   (167,987 )   (98,456 )
Provision for income taxes   1,435     2,490     5,205     6,794  
Net loss   $ (31,450 )   $ (29,817 )   $ (173,192 )   $ (105,250 )
Basic net loss per common share   $ (0.33 )   $ (0.30 )   $ (1.82 )   $ (1.06 )
Diluted net loss per potential common share   $ (0.33 )   $ (0.30 )   $ (1.82 )   $ (1.06 )
Weighted average basic common shares outstanding   96,313     99,530     95,389     98,922  
Weighted average dilutive potential common shares outstanding   96,313     99,530     95,389     98,922  
                         
CIENA CORPORATION
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
         
    October 31,   July 31,
    2011   2012
ASSETS        
Current assets:        
Cash and cash equivalents   $ 541,896     $ 617,232  
Short-term investments       50,115  
Accounts receivable, net   417,509     379,092  
Inventories   230,076     245,043  
Prepaid expenses and other   143,357     119,039  
Total current assets   1,332,838     1,410,521  
Long-term investments   50,264      
Equipment, furniture and fixtures, net   122,558     118,568  
Other intangible assets, net   331,635     275,670  
Other long-term assets   114,123     110,502  
Total assets   $ 1,951,418     $ 1,915,261  
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable   $ 157,116     $ 205,662  
Accrued liabilities   197,004     199,970  
Deferred revenue   99,373     78,319  
Convertible notes payable       216,210  
Total current liabilities   453,493     700,161  
Long-term deferred revenue   24,425     23,408  
Other long-term obligations   17,263     26,052  
Long-term convertible notes payable   1,442,364     1,225,898  
Total liabilities   1,937,545     1,975,519  
Commitments and contingencies        
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; 97,440,436 and 100,192,289 shares issued and outstanding   974     1,002  
Additional paid-in capital   5,753,236     5,788,887  
Accumulated other comprehensive income (loss)   31     (4,529 )
Accumulated deficit   (5,740,368 )   (5,845,618 )
Total stockholders’ equity (deficit)   13,873     (60,258 )
Total liabilities and stockholders’ equity (deficit)   $ 1,951,418     $ 1,915,261  
                 
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
     
    Nine Months Ended July 31,
    2011   2012
Cash flows from operating activities:        
Net loss   $ (173,192 )   $ (105,250 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:        
Amortization of discount on marketable securities   (25 )   (39 )
Change in fair value of embedded redemption feature   (3,380 )   3,160  
Depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements   44,765     43,514  
Share-based compensation costs   27,919     23,656  
Amortization of intangible assets   76,567     55,965  
Deferred tax provision (benefit)       (148 )
Provision for inventory excess and obsolescence   11,461     19,071  
Provision for warranty   10,538     23,495  
Other   2,170     5,441  
Changes in assets and liabilities, net of effect of acquisition:        
Accounts receivable   (72,030 )   37,223  
Inventories   6,331     (34,038 )
Prepaid expenses and other   (4,462 )   10,890  
Accounts payable, accruals and other obligations   (81,388 )   35,632  
Deferred revenue   22,241     (22,071 )
Net cash provided by (used in) operating activities   (132,485 )   96,501  
Cash flows used in investing activities:        
Payments for equipment, furniture, fixtures and intellectual property   (41,138 )   (33,000 )
Restricted cash   (8,727 )   3,546  
Purchase of available for sale securities   (49,894 )    
Proceeds from sale of cost method investment       524  
Receipt of contingent consideration related to business acquisition   16,394      
Net cash used in investing activities   (83,365 )   (28,930 )
Cash flows from financing activities:        
Repayment of capital lease obligations       (1,231 )
Proceeds from issuance of common stock   13,183     12,022  
Net cash provided by financing activities   13,183     10,791  
Effect of exchange rate changes on cash and cash equivalents   312     (3,026 )
Net increase (decrease) in cash and cash equivalents   (202,667 )   78,362  
Cash and cash equivalents at beginning of period   688,687     541,896  
Cash and cash equivalents at end of period   $ 486,332     $ 617,232  
Supplemental disclosure of cash flow information        
Cash paid during the period for interest   $ 18,869     $ 18,978  
Cash paid during the period for income taxes, net   $ 1,781     $ 7,807  
Non-cash investing and financing activities        
Purchase of equipment in accounts payable   $ 5,186     $ 2,686  
Fixed assets acquired under capital leases   $ 1,268     $ 6,033  
                 
APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measurements
         
    Quarter Ended
    July 31,
    2011   2012
Gross Profit Reconciliation (GAAP/non-GAAP)        
GAAP gross profit   $ 184,897     $ 181,321  
Share-based compensation-products   579     564  
Share-based compensation-services   511     332  
Amortization of intangible assets   5,826     5,385  
Total adjustments related to gross profit   6,916     6,281  
Adjusted (non-GAAP) gross profit   $ 191,813     $ 187,602  
Adjusted (non-GAAP) gross profit percentage   44.1 %   39.6 %
         
Operating Expense Reconciliation (GAAP/non-GAAP)        
GAAP operating expense   $ 202,282     $ 196,593  
Share-based compensation-research and development   2,423     1,841  
Share-based compensation-sales and marketing   2,736     2,589  
Share-based compensation-general and administrative   2,882     1,547  
Acquisition and integration costs   4,822     6  
Amortization of intangible assets   13,673     12,714  
Restructuring costs   504     2,291  
Total adjustments related to operating expense   27,040     20,988  
Adjusted (non-GAAP) operating expense   $ 175,242     $ 175,605  
         
Income (Loss) from Operations Reconciliation (GAAP/non-GAAP)        
GAAP loss from operations   $ (17,385 )   $ (15,272 )
Total adjustments related to gross profit   6,916     6,281  
Total adjustments related to operating expense   27,040     20,988  
Adjusted (non-GAAP) income (loss) from operations   $ 16,571     11,997  
Adjusted (non-GAAP) operating margin percentage   3.8 %   2.5 %
         
Net Income (Loss) Reconciliation (GAAP/non-GAAP)        
GAAP net loss   $ (31,450 )   $ (29,817 )
Total adjustments related to gross profit   6,916     6,281  
Total adjustments related to operating expense   27,040     20,988  
Change in fair value of embedded redemption feature   5,780     (1,570 )
Adjusted (non-GAAP) net income (loss)   $ 8,286     $ (4,118 )
         
Weighted average basic common shares outstanding   96,313     99,530  
Weighted average dilutive potential common shares outstanding   104,146     99,530  
         
Net Income (Loss) per Common Share        
GAAP diluted net loss per common share   $ (0.33 )   $ (0.30 )
Adjusted (non-GAAP) diluted net income (loss) per common share   $ 0.08     $ (0.04 )

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.
  • 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.
  • 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.

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: “We continue to win in the market and take share as demonstrated by a solid operating performance in the third quarter.”; "We are experiencing the effects of ongoing macroeconomic challenges and slower than expected roll-outs of new design wins."; "However, our approach to the market is working, our OPn architecture vision is gaining traction with customers globally, and our view of the long-term opportunity is unchanged."; "Ciena expects fiscal fourth quarter 2012  financial performance to include: revenue in the range of $455 to $480 million, adjusted (non-GAAP) gross margin percentage of approximately 40 percent, adjusted (non-GAAP) operating expense in the low $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 Annual Report on Form 10-Q filed with the Securities and Exchange Commission on June 6, 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
Media inquiries

For media inquiries, please contact Jamie Moody at 877-857-7377 or email us.

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