Ciena Reports Fiscal First Quarter 2007 Results
Company Delivers Twelfth Straight Quarter of Sequential Revenue Growth
Linthicum, MD — 03/01/2007Ciena® Corporation (NASDAQ: CIEN), the network specialist, today announced results for its fiscal first quarter 2007 ended January 31, 2007. Revenue for the first quarter totaled $165.1 million, representing a 3.2% sequential increase from fiscal fourth quarter revenue of $160.0 million, and an increase of 37.1% over the same period a year ago when the Company reported sales of $120.4 million.
On the basis of generally accepted accounting principles (GAAP), Ciena’s net income for the fiscal first quarter 2007 was $11.1 million, or net income of $0.12 per diluted share. This compares with a reported GAAP net loss of $6.3 million, or a net loss of $0.08 per share, for the same period a year ago.
“As bandwidth demands escalate across multiple traffic types, service provider and enterprise customers alike are increasingly looking for solutions that allow them to transition their networks toward powerful converged network architectures capable of delivering any service at any time,” said Gary Smith, Ciena’s president and CEO. “Ciena’s differentiated positioning as the transition specialist and our FlexSelect™ vision of next-generation networks are driving demand for our solutions worldwide, enabling us to deliver our twelfth sequential quarter of revenue growth.”
Non-GAAP Presentation of Quarterly Results
In evaluating the operating performance of its business, Ciena’s management excludes certain charges and credits that are required by GAAP. These items, which are identified in the table that follows (in thousands except per share data), 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 the Company’s control.
Quarter Ended Quarter Ended
January 31, 2006 January 31, 2007
Stock-based compensation-product $ 135 $ 221
Stock-based compensation-services 188 193
Stock-based compensation-research and
development 1,637 743
Stock-based compensation-sales and marketing 1,046 1,040
Stock-based compensation-general and
administrative 821 1,000
Amortization of intangible assets 6,295 6,295
Restructuring costs (recoveries) 2,015 (466)
Long-lived asset impairment (3) -
Recovery of doubtful accounts, net (2,604) (10)
Gain on lease settlement (6,020) -
Loss on equity investments, net 733 -
Gain on extinguishment of debt (6,690) -
Total adjustments $ (2,447) $ 9,016
GAAP net income (loss) $ (6,291) $ 11,056
Adjustment for items above (2,447) 9,016
Adjusted (non-GAAP) net (loss) income $ (8,738) $ 20,072
Weighted average basic common shares
outstanding 82,967 84,953
Weighted average dilutive potential
common shares outstanding 82,967 93,259
Adjusted (non-GAAP) net (loss) income
per share $ (0.11) $ 0.22
Please see Appendix A for additional information about this table.
Adjusting Ciena’s unaudited fiscal first quarter 2007 GAAP net income of $11.1 million for the items noted above would increase the Company’s adjusted (non-GAAP) net income in the quarter to $20.1 million, or an adjusted (non-GAAP) net income of $0.22 per adjusted diluted share. This compares with an adjusted (non-GAAP) net loss of $8.7 million, or an adjusted (non-GAAP) net loss of $0.11 per share, in the same year-ago period.
First Quarter 2007 Performance Highlights
• Achieved sequential quarterly revenue growth of 3.2% and year-over-year quarterly revenue growth of 37.1%.
• Delivered overall gross margin of 44.6% and product gross margin of 48.7%.
• Ended the fiscal first quarter 2007 with cash, cash equivalents and short- and long-term investments of $1.2 billion.
First Quarter 2007 Customer Highlights
• Verizon Business chose Ciena's CoreDirector® Multiservice Optical Switches to build a trans-Atlantic mesh network.
• Hargray Communications selected Ciena’s CN 4200™ FlexSelect Advanced Services Platform to converge its regional transport network and deliver quad-play and business services.
• Cox Communications deployed Ciena's CoreDirector Multiservice Optical Switches in the super headend of its San Diego network to interconnect two metro rings.
• Cogeco Cable became Ciena’s first cable network deployment in Canada with its use of the CN 4200 for its core infrastructure upgrade.
• USCarrier Telecom, LLC selected Ciena’s CN 4200 to support multiservice aggregation for metropolitan and regional transport services.
Business Outlook
“Furthering our efforts to provide customers with a unique formula for facilitating network transition, we recently announced Ethernet enhancements to our FlexSelect Architecture, including new products,” said Smith. “We’re excited about the new opportunities we’re targeting with these new features and platforms, which we expect to contribute to revenue growth this fiscal year, and we’re even more excited about the increasing alignment we see between Ciena’s comprehensive FlexSelect vision and the strategic direction in which our customers’ networks are headed.”
“During the last several years we’ve invested significantly to create a targeted solutions portfolio with the unified vision that Ethernet is the most efficient and economical foundation for next-generation, service-enabled networks,” said Smith. “Whether incorporated in new features on our traditional optical platforms or forming the foundation of a completely new product, our FlexSelect vision already is a driving force behind our revenue growth and will be a factor in what we expect to be a five to ten percent sequential increase in revenue from our fiscal first quarter to our fiscal second quarter.”
Live Web Broadcast of Fiscal First Quarter Results
Ciena will host a discussion of its fiscal first quarter results with investors and financial analysts today, Thursday, March 1, 2007 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: http://www.ciena.com/investors/investors.htm.
CIENA CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| ASSETS | ||||
| Current assets: | October 31, 2006 | January 31, 2007 | ||
| ------------- | ------------- | |||
| Cash and cash equivalents | $ 220,164 | $ 374,079 | ||
| Short-term investments | 628,393 | 496,628 | ||
| Accounts receivable, net | 107,172 | 139,422 | ||
| Inventories, net | 106,085 | 103,548 | ||
| Prepaid expenses and other | 36,372 | 46,400 | ||
| ------------- | ------------- | |||
| Total current assets | 1,098,186 | 1,160,077 | ||
| ============= | ============= | |||
| Long-term investments | 351,407 | 314,377 | ||
| Equipment, furniture and fixtures, net | 29,427 | 32,867 | ||
| Goodwill | 232,015 | 232,015 | ||
| Other intangible assets, net | 91,274 | 84,011 | ||
| Other long-term assets | 37,404 | 38,309 | ||
| ------------- | ------------- | |||
| Total assets | $ 1,839,713 | $ 1,861,656 | ||
| ============= | ============= | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
| Current liabilities: | ||||
| Accounts payable | $ 39,277 | $ 37,997 | ||
| Accrued liabilities | 79,282 | 90,065 | ||
| Restructuring liabilities | 8,914 | 7,621 | ||
| Unfavorable lease commitments | 8,512 | 7,614 | ||
| Income taxes payable | 5,981 | 6,298 | ||
| Deferred revenue | 19,637 | 20,015 | ||
| ------------- | ------------- | |||
| Total current liabilities | 161,603 | 169,610 | ||
| Long-term deferred revenue | 21,039 | 22,847 | ||
| Long-term restructuring liabilities | 26,720 | 24,579 | ||
| Long-term unfavorable lease commitments | 32,875 | 30,691 | ||
| Other long-term obligations | 1,678 | 1,582 | ||
| Convertible notes payable | 842,262 | 842,262 | ||
| ------------- | ------------- | |||
| Total liabilities | 1,086,087 | 1,091,571 | ||
| ------------- | ------------- | |||
| 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; 140,000,000 shares authorized; 84,891,656 and 85,054,714 shares issued and outstanding | 849 | 851 | ||
| Additional paid-in capital | 5,505,853 | 5,511,921 | ||
| Changes in unrealized gains on investments, net | (496) | (1,001) | ||
| Translation adjustment | (580) | (742) | ||
| Accumulated deficit | (4,752,000) | (4,740,944) | ||
| ------------- | ------------- | |||
| Total stockholders' equity | 753,626 | 770,085 | ||
| ------------- | ------------- | |||
| Total liabilities and stockholders' equity | $1,839,713 | $1,861,656 | ||
| ============= | ============= |
CIENA CORPORTAION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Quarter Ended January 31 | ||||
| ------------- | ------------- | |||
| 2006 | 2007 | |||
| ------------- | ------------- | |||
| Revenues: | ||||
| Products | $ 105,941 | $ 146,282 | ||
| Services | 14,489 | 18,819 | ||
| ------------- | ------------- | |||
| Total revenue | 120,430 | 165,101 | ||
| Costs: | ||||
| Products | 60,399 | 74,979 | ||
| Services | 9,576 | 16,494 | ||
| ------------- | ------------- | |||
| Total cots of goods sold | 69,975 | 91,473 | ||
| ------------- | ------------- | |||
| Gross profit | 50,455 | 73,628 | ||
| ------------- | ------------- | |||
| Operating expenses: | ||||
| Research and development | 29,462 | 29,853 | ||
| Selling and marketing | 26,572 | 24,875 | ||
| General and administrative | 9,896 | 10,301 | ||
| Amortization of intangible assets | 6,295 | 6,295 | ||
| Restructuring costs (recoveries) | 2,015 | (466) | ||
| Long-lived asset impariments | (3) | - | ||
| Recovery of doubtful accounts, net | (2,604) | (10) | ||
| Gain on lease settlement | (6,020) | - | ||
| ------------- | ------------- | |||
| Total operating expenses | 65,613 | 70,848 | ||
| ------------- | ------------- | |||
| Income (loss) from operations | (15,158) | 2,780 | ||
| Interest and other income, net | 9,262 | 14,845 | ||
| Interest expense | (6,053) | (6,148) | ||
| Loss on equity investments, net | (733) | - | ||
| Gain on extinguishment of debt | 6,690 | - | ||
| ------------- | ------------- | |||
| Income (loss) before income taxes | (5,992) | 11,477 | ||
| Provision for income taxes | 299 | 421 | ||
| ------------- | ------------- | |||
| Net income (loss) | (6,291) | 11,056 | ||
| ============= | ============= | |||
| Basic net income (loss) per common share | (0.08) | 0.13 | ||
| ============= | ============= | |||
| Diluted net income (loss) per common share | (0.08) | 0.12 | ||
| ============= | ============= | |||
| Weighted average basic common shares outstanding | 82,967 | 84,953 | ||
| ============= | ============= | |||
| Weighted average dilutive potential common shares outstanding | 82,967 | 93,259 | ||
| ============= | ============= | |||
CIENA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Three Months Ended January 31 | ||||
| ------------------------ | ||||
| 2006 | 2007 | |||
| ------------- | ------------- | |||
| Cash flows from operating activities: | ($6,291) | $ 11,056.00 | ||
| Net income (loss) | ||||
| Adjustments to reconcile net income (loss)to net cash used in operating activities: | ||||
| Early extinguishment of debt | (6,690) | - | ||
| Amortization of premium (discount) on marketable securities | 1,176 | (1,249) | ||
| Non-cash loss from equity investments | 733 | - | ||
| Depreciation and amortization of equipment, furniture and fixtures | 5,312 | 3,150 | ||
| Stock compensation | 4,183 | 3,289 | ||
| Amortization of intangibles | 7,263 | 7,263 | ||
| Provision for inventory excess and obsolescence | 3,000 | 4,763 | ||
| Provision for warranty and other contractual obligations | 2,470 | 4,791 | ||
| Other | 608 | 715 | ||
| Changes in assets and liabilities: | ||||
| Accounts receivable | (8,350) | (32,250) | ||
| Inventories | (18,046) | (2,226) | ||
| Prepaid expenses and other | 10,151 | (11,289) | ||
| Accounts payable and accrued liabilities | (30,813) | (1,810) | ||
| Income taxes payable | 61 | 317 | ||
| Deferred revenue and other obligations | 3,195 | 2,186 | ||
| ------------- | ------------- | |||
| Net cash used in operating activities | (32,038) | (11,294) | ||
| ------------- | ------------- | |||
| Cash flows from investing activities: | ||||
| Additions to equipment, furniture, fixtures and intellectual property | (4,375) | (6,590) | ||
| Restricted cash | 1,102 | (521) | ||
| Purchases of available for sale securities | (63,641) | (88,632) | ||
| Maturities of available for sale securities | 136,219 | 258,171 | ||
| ------------- | ------------- | |||
| Net cash provided by investing activities | 69,305 | 162,428 | ||
| Cash flows from financing activities: | ------------- | ------------- | ||
| Repayment of convertible notes payable | (98,772) | - | ||
| Proceeds from exercise of stock options | 2,117 | 2,781 | ||
| ------------- | ------------- | |||
| Net cash provided by (used in) financing activities | (96,655) | 2,781 | ||
| ------------- | ------------- | |||
| Net increase (decrease) in cash and cash equivalents | (59,388) | 153,915 | ||
| Cash and cash equivalents at beginning of period | 358,012 | 220,164 | ||
| ============= | ============= | |||
| Cash and cash equivalents at end of period | 298,624 | 374,079 | ||
Appendix A
The adjustments management makes in analyzing Ciena’s fiscal first quarter 2007 GAAP results are as follows:
• Stock-based compensation costs – A non-cash expense incurred in accordance with SFAS 123(R) using the modified prospective application transition
method.
• Amortization of intangible assets – a non-cash expense arising from acquisitions of intangible assets, principally developed technology, which Ciena is
required to amortize over its expected useful life.
• Restructuring costs (recoveries) – infrequent charges or recoveries incurred as the result of reducing the size of the Company’s operations to align its
resources with the reduced size of the telecommunications market as well as the result of targeting new segment opportunities within the overall market, which
the Company feels are not reflective of its ongoing operating costs.
• Long-lived asset impairment – infrequent charges, incurred as a result of excess equipment classified as held for sale which the Company feels are not
reflective of its ongoing operating costs.
• Recovery of doubtful accounts – an infrequent gain unrelated to normal operations resulting from the recovery of a previously assessed doubtful payment due
to a customer’s financial condition.
• Gain on lease settlement – an infrequent gain unrelated to normal operations resulting from termination of obligations under a lease for an unused facility.
• Loss on equity investments, net – an infrequent loss related to changes in the value of the Company’s equity investments which the Company feels is not
reflective of its ongoing operating costs.
• Gain on extinguishment of debt – an infrequent gain related to the early extinguishment of outstanding debt.
Ciena specializes in network transition. We provide the flexible platforms, intelligent software and professional services to build converged networks for enhanced services and applications. With a growing global presence, Ciena leverages its heritage of practical innovation to deliver maximum performance and economic value in communications networks worldwide. For more information, visit www.ciena.com.
This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties. These statements are based on information available to the Company as of the date hereof; and Ciena’s actual results could differ materially from those stated or implied, due to risks and uncertainties associated with its business, which include the risk factors disclosed in its Report on Form 10-K filed with the Securities and Exchange Commission on January 10, 2007. 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’re excited about the new opportunities we’re targeting with these new features and platforms, which we expect to contribute to revenue growth this fiscal year, and we’re even more excited about the increasing alignment we see between Ciena’s comprehensive FlexSelect vision and the strategic direction in which our customers’ networks are headed; during the last several years we’ve invested significantly to created a broad, yet targeted solutions portfolio with the unified vision that Ethernet is the most efficient and economical foundation for next-generation, service-enabled networks; whether incorporated in new features for our traditional optical platforms or the foundation of a completely new product, our FlexSelect vision already is a driving force behind our revenue growth and will be a factor in what we expect to be a five to seven percent sequential increase in revenue from our fiscal first quarter to our fiscal second quarter. Ciena assumes no obligation to update the information included in this press release, whether as a result of new information, future events or otherwise.
Nicole Anderson
Ciena Corporation
(877) 857 -7377
pr@ciena.com
Marie Downing
Ciena Corporation
(888) 243-6223
ir@ciena.com
