Ciena Reports Fiscal Second Quarter 2021 Financial Results
HANOVER, Md. - June 3, 2021 - Ciena® Corporation (NYSE: CIEN), a networking systems, services and software company, today announced unaudited financial results for its fiscal second quarter ended May 1, 2021.
•Q2
Revenue: $833.9 million
•Q2 Net Income per Share: $0.66 GAAP; $0.62 adjusted (non-GAAP)
•Share Repurchases: Repurchased approximately 0.5 million shares of common stock for an aggregate price of $26.2 million during the quarter
“We delivered strong fiscal second quarter results as we continued to see encouraging signs in the market environment, including improvements in customer spending,” said Gary Smith, president and CEO of Ciena. “These dynamics, combined with our business and financial performance in the first half of the year, give us strong visibility and confidence in our
ability to achieve our financial targets as we move through the year.”
For the fiscal second quarter 2021, Ciena reported revenue of $833.9 million as compared to $894.1 million for the fiscal second quarter 2020.
Ciena's GAAP net income for the fiscal second quarter 2021 was $103.1 million, or $0.66 per diluted common share, which compares to a GAAP net income of $91.7 million, or $0.59 per diluted common share, for the fiscal second quarter 2020. Ciena's GAAP net income for the second quarter of 2021 benefited from recording $40.4 million in pre-tax amounts from the Canadian Emergency Wage Subsidy program. See APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measures for more information and a reconciliation of our adjusted (non-GAAP) net income which excludes the effect of these amounts.
Ciena's
adjusted (non-GAAP) net income for the fiscal second quarter 2021 was $97.6 million, or $0.62 per diluted common share, which compares to an adjusted (non-GAAP) net income of $117.4 million, or $0.76 per diluted common share, for the fiscal second quarter 2020.
Fiscal Second Quarter 2021 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.
1
GAAP Results
Q2
Q2
FY
2021
FY 2020
Y-T-Y*
Revenue
$
833.9
$
894.1
(6.7)
%
Gross margin
49.5
%
46.2
%
3.3
%
Operating
expense
$
278.8
$
285.8
(2.5)
%
Operating margin
16.0
%
14.3
%
1.7
%
Non-GAAP Results
Q2
Q2
FY
2021
FY 2020
Y-T-Y*
Revenue
$
833.9
$
894.1
(6.7)
%
Adj. gross margin
49.2
%
46.9
%
2.3
%
Adj.
operating expense
$
278.7
$
258.7
7.7
%
Adj. operating margin
15.8
%
17.9
%
(2.1)
%
Adj. EBITDA
$
156.2
$
183.0
(14.6)
%
* Denotes
% change, or in the case of margin, absolute change
Revenue by Segment
Q2 FY 2021
Q2 FY 2020
Revenue
%**
Revenue
%**
Networking
Platforms
Converged Packet Optical
$
573.7
68.8
$
654.3
73.2
Routing and Switching (1)
63.6
7.6
64.2
7.2
Total
Networking Platforms
637.3
76.4
718.5
80.4
Platform Software and Services
56.7
6.8
45.0
5.0
Blue
Planet Automation Software and Services
23.9
2.9
15.0
1.7
Global Services
Maintenance
Support and Training
70.4
8.4
71.5
8.0
Installation and Deployment
38.0
4.6
34.2
3.8
Consulting
and Network Design
7.6
0.9
9.9
1.1
Total Global Services
116.0
13.9
115.6
12.9
Total
$
833.9
100.0
$
894.1
100.0
** Denotes
% of total revenue
(1) Ciena renamed its former “Packet Networking” product line “Routing and Switching” effective as of the beginning of fiscal 2021. This change, affecting only the presentation of such information, was made on a prospective basis and does not impact comparability of previous financial results or the composition of this product category.
Additional Performance Metrics for Fiscal Second Quarter 2021
2
Revenue
by Geographic Region
Q2 FY 2021
Q2 FY 2020
Revenue
% **
Revenue
% **
Americas
$
587.5
70.4
$
650.4
72.7
Europe,
Middle East and Africa
155.0
18.6
141.4
15.8
Asia Pacific
91.4
11.0
102.3
11.5
Total
$
833.9
100.0
$
894.1
100.0
** Denotes
% of total revenue
•One 10%-plus customer represented a total of 15% of revenue
•Cash and investments totaled $1.4 billion
•Cash flow from operations totaled $225.0 million
•Average days' sales outstanding (DSOs) were 86
•Accounts receivable, net balance was $716.8 million
•Unbilled contract asset, net balance was $81.4 million
•Inventories totaled $401.2 million, including:
◦Raw
materials: $139.4 million
◦Work in process: $10.8 million
◦Finished goods: $234.2 million
◦Deferred cost of sales: $57.4 million
◦Reserve for excess and obsolescence: $(40.6) million
•Product inventory turns were 3.4
•Headcount totaled 7,077
Supplemental Materials and Live Web Broadcast of Unaudited Fiscal Second Quarter 2021 Results
Today, Thursday, June 3, 2021, in conjunction with this
announcement, Ciena has posted to the Quarterly Results page of the Investor Relations section of its website an accompanying investor presentation for its unaudited fiscal second quarter 2021 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 strong fiscal second quarter results as we continued to see encouraging
signs in the market environment, including improvements in customer spending,” and “These dynamics, combined with our business
3
and financial performance in the first half of the year, give us strong visibility and confidence in our ability to achieve our financial targets as we move through the year.”
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 successfully our business and growth strategies; the duration and severity of the COVID-19 pandemic and
its impact 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 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; supply chain disruptions; changes in foreign currency exchange rates affecting revenue and operating expense; factors beyond our control such as natural disasters, acts of war or terrorism, and public health emergencies; the impact of the Tax Cuts and Jobs Act; changes in tax or trade regulations, including the imposition of tariffs, duties or efforts to withdraw from or materially modify international trade agreements; changes in estimates
of prospective income tax rates and any adjustments to Ciena's provisional estimates whether related to further guidance, analysis or otherwise; and the other risk factors disclosed in its Annual Report on Form 10-K filed with the SEC on December 18, 2020 and included in its Quarterly Report on Form 10-Q for the second quarter of fiscal 2021 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.
Significant
asset impairments and restructuring costs
8,209
3,811
14,076
8,283
Acquisition and integration costs
294
1,414
601
3,233
Total
operating expenses
278,790
285,838
560,886
578,416
Income from operations
133,629
127,488
209,424
205,445
Interest
and other income (loss), net
(1,274)
(2,665)
(2,395)
981
Interest expense
(7,785)
(7,860)
(15,145)
(16,675)
Loss
on extinguishment and modification of debt
—
—
—
(646)
Income before income taxes
124,570
116,963
191,884
189,105
Provision
for income taxes
21,453
25,308
33,419
35,122
Net income
$
103,117
$
91,655
$
158,465
$
153,983
Net
Income per Common Share
Basic net income per common share
$
0.66
$
0.60
$
1.02
$
1.00
Diluted net income per potential common share
$
0.66
$
0.59
$
1.01
$
0.99
Weighted
average basic common shares outstanding
155,331
153,858
155,257
154,099
Weighted average dilutive potential common shares outstanding 1
156,876
155,141
156,734
155,443
1
Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per potential common share for the second quarter of fiscal 2021 includes 1.5 million shares underlying certain stock option and stock unit awards.
Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per potential common share for the first six months of fiscal 2021 includes 1.5 million shares underlying certain stock option and stock unit awards.
Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per potential common share for the second quarter of fiscal 2020 includes 1.3 million shares underlying certain stock option and stock unit awards.
Weighted average dilutive potential
common shares outstanding used in calculating GAAP diluted net income per potential common share for the first six months of fiscal 2020 includes 1.3 million shares underlying certain stock option and stock unit awards.
Adjusted (non-GAAP) diluted net income per potential common share
$
0.62
$
0.76
1
Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share for the second quarter of fiscal 2021 includes 1.5 million shares underlying certain stock option and stock unit awards.
Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share for the second quarter of fiscal 2020 includes 1.3 million shares underlying certain stock option and stock unit awards.
9
APPENDIX
B - Calculation of EBITDA and Adjusted EBITDA (unaudited)
Earnings
Before Interest, Tax, Depreciation and Amortization (EBITDA)
Net income (GAAP)
$
103,117
$
91,655
Add: Interest expense
7,785
7,860
Add: Interest and other loss, net
1,274
2,665
Add:
Provision for income taxes
21,453
25,308
Add: Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements
24,107
22,599
Add: Amortization of intangible assets
8,875
9,674
EBITDA
$
166,611
$
159,761
Less:
Canadian Emergency Wage Subsidy
40,444
—
Add: Share-based compensation cost
21,535
17,977
Add: Significant asset impairments and restructuring costs
8,209
3,811
Add: Acquisition and
integration costs
294
1,414
Adjusted EBITDA
$
156,205
$
182,963
* * *
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.
•Canadian Emergency Wage Subsidy - a program introduced by the Government of Canada to offset a portion of employee wages for a limited period in response to COVID-19 outbreak.
•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.
•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.
•Acquisition and integration costs - includes costs of acquisition compensation associated with a three-year earn-out arrangement related to the DonRiver acquisition in fiscal 2018. Ciena does not believe that these costs are reflective of its ongoing operating expense following its completion of these integration activities.
•Unrealized loss on equity investment - reflects a change in the carrying value of a certain cost method equity investment.
•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 20.5% for the second fiscal quarter of 2021 and 21.6% for the second fiscal quarter of 2020. This rate may be subject to change in the future, including as a result of changes in tax policy or tax strategy.
10
Dates Referenced Herein and Documents Incorporated by Reference