EX-99.1 2 ex9912023q2earningspressre.htm EX-99.1 Document

FOR IMMEDIATE RELEASE

Ciena Reports Fiscal Second Quarter 2023 Financial Results

HANOVER, Md. - June 6, 2023 - Ciena® Corporation (NYSE: CIEN), a networking systems, services and software company, today announced unaudited financial results for its fiscal second quarter ended April 29, 2023.

Q2 Revenue: $1.13 billion

Q2 Net Income per Share: $0.38 GAAP; $0.74 adjusted (non-GAAP)

"We delivered outstanding results for the fiscal second quarter as we were able to ship more to customers with continued improvements in supply chain dynamics," said Gary Smith, president and CEO of Ciena. "We are confident in our ability to take market share given our backlog and strategic industry position with market-leading technologies and an expanding addressable market."

For fiscal second quarter 2023, Ciena reported revenue of $1.13 billion as compared to $949.2 million for the fiscal second quarter 2022.

Ciena's GAAP net income for the fiscal second quarter 2023 was $57.7 million, or $0.38 per diluted common share, which compares to a GAAP net income of $38.9 million, or $0.25 per diluted common share, for the fiscal second quarter 2022.

Ciena's adjusted (non-GAAP) net income for the fiscal second quarter 2023 was $110.4 million, or $0.74 per diluted common share, which compares to an adjusted (non-GAAP) net income of $76.4 million, or $0.50 per diluted common share, for the fiscal second quarter 2022.

Fiscal Second Quarter 2023 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 (unaudited)
Q2Q2Period Change
FY 2023FY 2022Y-T-Y*
Revenue$1,132.7 $949.2 19.3 %
Gross margin43.1 %42.3 %0.8 %
Operating expense$384.9 $343.4 12.1 %
Operating margin9.1 %6.2 %2.9 %
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Non-GAAP Results (unaudited)
Q2Q2Period Change
FY 2023FY 2022Y-T-Y*
Revenue$1,132.7 $949.2 19.3 %
Adj. gross margin43.7 %43.0 %0.7 %
Adj. operating expense$338.1 $301.1 12.3 %
Adj. operating margin13.8 %11.3 %2.5 %
Adj. EBITDA$180.6 $129.3 39.7 %
* Denotes % change, or in the case of margin, absolute change
Revenue by Segment (unaudited)
Q2 FY 2023Q2 FY 2022
Revenue%**Revenue%**
Networking Platforms
Converged Packet Optical$784.5 69.3 $625.3 65.8 
Routing and Switching130.4 11.5 109.2 11.5 
Total Networking Platforms914.9 80.8 734.5 77.3 
Platform Software and Services69.4 6.1 69.1 7.3 
Blue Planet Automation Software and Services20.6 1.8 16.9 1.8 
Global Services
Maintenance Support and Training73.2 6.5 74.0 7.8 
Installation and Deployment39.5 3.5 41.4 4.4 
Consulting and Network Design15.1 1.3 13.3 1.4 
Total Global Services127.8 11.3 128.7 13.6 
Total$1,132.7 100.0 $949.2 100.0 
** Denotes % of total revenue

Additional Performance Metrics for Fiscal Second Quarter 2023
Revenue by Geographic Region (unaudited)
Q2 FY 2023Q2 FY 2022
Revenue% **Revenue% **
Americas$794.4 70.1 $700.8 73.8 
Europe, Middle East and Africa173.4 15.3 145.1 15.3 
Asia Pacific164.9 14.6 103.3 10.9 
Total$1,132.7 100.0 $949.2 100.0 

** Denotes % of total revenue
One customer represented 10%-plus of revenue for a total of 10.9% of revenue
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Cash and investments totaled $1.34 billion
Cash flow from operations totaled $229.8 million
Average days' sales outstanding (DSOs) were 97
Accounts receivable, net balance was $1.04 billion
Unbilled contract assets, net balance was $180.0 million
Inventories totaled $1.10 billion, including:
Raw materials: $753.4 million
Work in process: $20.9 million
Finished goods: $308.0 million
Deferred cost of sales: $58.1 million
Reserve for excess and obsolescence: $(42.3) million
Product inventory turns were 2.0
Headcount totaled 8,385

Supplemental Materials and Live Web Broadcast of Unaudited Fiscal Second Quarter 2023 Results
Today, Tuesday, June 6, 2023, in conjunction with this announcement, Ciena has posted to the Quarterly Results page of the Investor Relations section of its website certain related supporting materials for its unaudited fiscal second quarter 2023 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 outstanding results for the fiscal second quarter as we were able to ship more to customers with continued improvements in supply chain dynamics, We are confident in our ability to take market share given our backlog and strategic industry position with market-leading technologies and an expanding addressable market."

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 our business and growth strategies; the impact of supply chain constraints or disruptions; the duration and severity of the COVID-19 pandemic and the impact of countermeasures taken to mitigate its spread 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 our 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; changes in foreign currency exchange rates; factors beyond our control such as natural disasters, climate change, acts of war or terrorism, geopolitical events, including but not limited to
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the ongoing conflict between Ukraine and Russia, and public health emergencies; changes in tax or trade regulations, including the imposition of tariffs, duties or efforts to withdraw from or materially modify international trade agreements; and the other risk factors disclosed in Ciena’s periodic reports filed with the Securities and Exchange Commission (SEC) including Ciena’s Annual Report on Form 10-K filed with the SEC on December 16, 2022 and included in its Quarterly Report on Form 10-Q for the second quarter of fiscal 2023 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.
 

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CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Quarter EndedSix Months Ended
 April 29,April 30,April 29,April 30,
 2023202220232022
Revenue:  
Products$935,330 $759,948 $1,813,045 $1,424,955 
Services197,325 189,279 376,131 368,715 
Total revenue1,132,655 949,227 2,189,176 1,793,670 
Cost of goods sold:  
Products541,883 452,057 1,042,220 824,622 
Services103,089 95,389 203,327 183,080 
Total cost of goods sold644,972 547,446 1,245,547 1,007,702 
Gross profit487,683 401,781 943,629 785,968 
Operating expenses:  
Research and development189,993 159,324 371,723 307,733 
Selling and marketing125,083 119,939 248,890 238,820 
General and administrative50,939 45,572 101,835 90,070 
Significant asset impairments and restructuring costs8,153 9,102 12,451 12,511 
Amortization of intangible assets9,845 8,920 17,286 17,838 
Acquisition and integration costs 857 495 3,415 563 
Total operating expenses384,870 343,352 755,600 667,535 
Income from operations102,813 58,429 188,029 118,433 
Interest and other income, net8,551 808 40,524 4,494 
Interest expense(23,889)(11,985)(39,759)(20,633)
Income before income taxes87,475 47,252 188,794 102,294 
Provision for income taxes29,821 8,330 54,899 17,549 
Net income$57,654 $38,922 $133,895 $84,745 
Net Income per Common Share
Basic net income per common share$0.39 $0.26 $0.90 $0.55 
Diluted net income per potential common share $0.38 $0.25 $0.89 $0.55 
Weighted average basic common shares outstanding149,616 152,197 149,351 153,179 
Weighted average dilutive potential common shares outstanding 1
150,147 153,344 149,852 154,580 

1 Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per potential common share includes the following number of shares underlying certain stock option and stock unit awards: (i) 0.5 million shares for both the second quarter and first six months of fiscal 2023; and (ii) 1.1 million and 1.4 million shares for the second quarter and first six months of fiscal 2022, respectively.

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CIENA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
April 29,
2023
October 29,
2022
ASSETS 
Current assets: 
Cash and cash equivalents$1,167,695 $994,352 
Short-term investments150,464 153,989 
Accounts receivable, net1,036,688 920,772 
Inventories1,098,092 946,730 
Prepaid expenses and other415,687 370,053 
Total current assets3,868,626 3,385,896 
Long-term investments25,237 35,385 
Equipment, building, furniture and fixtures, net278,344 267,779 
Operating lease right-of-use assets41,119 45,108 
Goodwill446,364 328,322 
Other intangible assets, net231,314 69,517 
Deferred tax asset, net795,051 824,008 
Other long-term assets89,583 113,617 
Total assets$5,775,638 $5,069,632 
LIABILITIES AND STOCKHOLDERS’ EQUITY 
Current liabilities: 
Accounts payable$444,769 $516,047 
Accrued liabilities and other short-term obligations380,969 360,782 
Deferred revenue202,818 137,899 
Operating lease liabilities17,443 18,925 
Current portion of long-term debt11,930 6,930 
Total current liabilities1,057,929 1,040,583 
Long-term deferred revenue67,807 62,336 
Other long-term obligations154,870 150,335 
Long-term operating lease liabilities39,979 42,392 
Long-term debt, net1,546,400 1,061,125 
Total liabilities$2,866,985 $2,356,771 
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; 149,498,465 and 148,412,943 shares issued and outstanding
1,495 1,484 
Additional paid-in capital6,445,247 6,390,252 
Accumulated other comprehensive loss(39,754)(46,645)
Accumulated deficit(3,498,335)(3,632,230)
Total stockholders’ equity2,908,653 2,712,861 
Total liabilities and stockholders’ equity$5,775,638 $5,069,632 
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CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
Six Months Ended
 April 29,April 30,
 20232022
Cash flows provided by (used in) operating activities: 
Net income$133,895 $84,745 
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 improvements45,903 46,030 
Share-based compensation expense62,372 50,970 
Amortization of intangible assets23,600 24,463 
Deferred taxes(2,134)(13,474)
Provision for inventory excess and obsolescence12,691 8,487 
Provision for warranty13,577 7,228 
Gain on cost method equity investment(26,455)(4,120)
Other11,331 (1,713)
Changes in assets and liabilities: 
Accounts receivable(116,914)104,455 
Inventories(162,143)(171,056)
Prepaid expenses and other(41,511)(36,673)
Operating lease right-of-use assets7,644 8,222 
Accounts payable, accruals and other obligations(55,754)(88,960)
Deferred revenue68,818 43,753 
Short and long-term operating lease liabilities(10,748)(10,216)
Net cash provided by (used in) operating activities(35,828)52,141 
Cash flows used in investing activities: 
Payments for equipment, furniture, fixtures and intellectual property(58,034)(45,249)
Purchases of investments(106,245)(461,553)
Proceeds from sales and maturities of investments123,251 90,005 
Settlement of foreign currency forward contracts, net(6,194)3,708 
Purchase of cost method equity investments— (8,000)
Acquisition of business, net of cash acquired(230,048)(62,043)
Net cash used in investing activities(277,270)(483,132)
Cash flows provided by financing activities: 
Proceeds from issuance of senior notes— 400,000 
Proceeds from issuance of term loan, net497,500 — 
Payment of long term debt(3,465)(3,465)
Payment of debt issuance costs(5,230)(5,145)
Payment of finance lease obligations(1,864)(1,635)
Shares repurchased for tax withholdings on vesting of stock unit awards(22,022)(35,004)
Repurchases of common stock - repurchase program— (332,794)
Proceeds from issuance of common stock14,656 15,185 
Net cash provided by financing activities479,575 37,142 
Effect of exchange rate changes on cash, cash equivalents and restricted cash6,867 (8,807)
Net increase (decrease) in cash, cash equivalents and restricted cash173,344 (402,656)
Cash, cash equivalents and restricted cash at beginning of period994,378 1,422,604 
Cash, cash equivalents and restricted cash at end of period$1,167,722 $1,019,948 
Supplemental disclosure of cash flow information 
Cash paid during the period for interest$37,514 $16,809 
Cash paid during the period for income taxes, net$24,218 $17,905 
Operating lease payments$11,689 $10,917 
Non-cash investing and financing activities
Purchase of equipment in accounts payable$4,618 $8,093 
Repurchase of common stock in accrued liabilities from repurchase program$— $5,000 
Operating right-of-use assets subject to lease liability $6,177 $3,589 
Gain on cost method equity investment$26,455 $4,120 
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APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Measurements
(in thousands, except per share data) (unaudited)
Quarter Ended
April 29,April 30,
20232022
Gross Profit Reconciliation (GAAP/non-GAAP)
GAAP gross profit$487,683 $401,781 
Share-based compensation-products1,155 1,058 
Share-based compensation-services2,659 1,943 
Amortization of intangible assets3,431 3,313 
Total adjustments related to gross profit7,245 6,314 
Adjusted (non-GAAP) gross profit$494,928 $408,095 
Adjusted (non-GAAP) gross profit percentage43.7 %43.0 %
Operating Expense Reconciliation (GAAP/non-GAAP)
GAAP operating expense$384,870 $343,352 
Share-based compensation-research and development10,731 8,309 
Share-based compensation-sales and marketing8,755 8,061 
Share-based compensation-general and administrative8,468 7,334 
Significant asset impairments and restructuring costs8,153 9,102 
Amortization of intangible assets9,845 8,920 
Acquisition and integration costs857 495 
Total adjustments related to operating expense46,809 42,221 
Adjusted (non-GAAP) operating expense$338,061 $301,131 
Income from Operations Reconciliation (GAAP/non-GAAP)
GAAP income from operations$102,813 $58,429 
Total adjustments related to gross profit7,245 6,314 
Total adjustments related to operating expense46,809 42,221 
Total adjustments related to income from operations54,054 48,535 
Adjusted (non-GAAP) income from operations$156,867 $106,964 
Adjusted (non-GAAP) operating margin percentage13.8 %11.3 %
Net Income Reconciliation (GAAP/non-GAAP)
GAAP net income$57,654 $38,922 
Exclude GAAP provision for income taxes29,821 8,330 
Income before income taxes87,475 47,252 
Total adjustments related to income from operations54,054 48,535 
Adjusted income before income taxes141,529 95,787 
Non-GAAP tax provision on adjusted income before income taxes31,136 19,349 
Adjusted (non-GAAP) net income$110,393 $76,438 
Weighted average basic common shares outstanding149,616152,197
Weighted average dilutive potential common shares outstanding 1
150,147153,344
Net Income per Common Share
GAAP diluted net income per potential common share$0.38 $0.25 
Adjusted (non-GAAP) diluted net income per potential common share$0.74 $0.50 

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1 Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share includes the following number of shares underlying certain stock option and stock unit awards: (i) 0.5 million for the second quarter of fiscal 2023; and (ii) 1.1 million for the second quarter of fiscal 2022.
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APPENDIX B - Calculation of EBITDA and Adjusted EBITDA (unaudited)
(in thousands) (unaudited)
Quarter Ended
April 29,April 30,
20232022
Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)
Net income (GAAP)$57,654 $38,922 
Add: Interest expense23,889 11,985 
Less: Interest and other income, net8,551 808 
Add: Provision for income taxes29,821 8,330 
Add: Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements23,695 22,377 
Add: Amortization of intangible assets13,275 12,233 
EBITDA$139,783 $93,039 
Add: Share-based compensation cost 31,768 26,673 
Add: Significant asset impairments and restructuring costs8,153 9,102 
Add: Acquisition and integration costs857 495 
Adjusted EBITDA$180,561 $129,309 
* * *
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.
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 including restructuring certain real estate facilities.
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  - primarily consist of financial, legal and accounting advisors' costs and employment-related costs related to Ciena's acquisitions in fiscal 2022 and fiscal 2023.
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 22.0% for the second fiscal quarter of 2023 and 20.2% for the second fiscal quarter of 2022. This rate may be subject to change in the future, including as a result of changes in tax policy or tax strategy.
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