Ciena Reports Fiscal Fourth Quarter 2020 and Year-End Financial Results
HANOVER, Md. - December 10, 2020 - Ciena® Corporation (NYSE: CIEN), a networking systems, services and software company, today announced unaudited financial results for its fiscal fourth quarter and year ended October 31, 2020.
•Q4 Revenue:
$828.5 million
•Q4 Net Income per Share: $0.42 GAAP; $0.60 adjusted (non-GAAP), increasing 3.4% year over year
•Share Repurchases: Reinstituting share repurchase program with the intent to resume purchases in the first quarter of 2021
"Our fiscal fourth quarter and full-year 2020 performance reported today demonstrates that we have the innovation, diversification and global scale to perform well in a challenging environment," said Gary Smith, President and CEO, Ciena. "While we expect current market conditions to persist in the near-term, we are confident in strong secular demand dynamics and our ability to continue to outperform the market."
For the
fiscal fourth quarter 2020, Ciena reported revenue of $828.5 million as compared to $968.0 million for the fiscal fourth quarter 2019. For fiscal year 2020, Ciena reported revenue of $3.53 billion, as compared to $3.57 billion for fiscal year 2019.
Ciena's GAAP net income for the fiscal fourth quarter 2020 was $65.0 million or $0.42 per diluted common share, which compares to a GAAP net income of $80.3 million, or $0.51 per diluted common share, for the fiscal fourth quarter 2019. For fiscal year 2020, Ciena's GAAP net income was $361.3 million, or $2.32 per diluted common share, as compared to a GAAP net income of $253.4 million, or $1.61 per diluted common share for fiscal year 2019.
Ciena's adjusted (non-GAAP) net income for the fiscal fourth quarter 2020 was $94.5 million, or $0.60 per diluted common
share, which compares to an adjusted (non-GAAP) net income of $90.4 million, or $0.58 per diluted common share, for the fiscal fourth quarter 2019. For fiscal year 2020, Ciena's adjusted (non-GAAP) net income was $460.1 million, or $2.95 per diluted common share, as compared to an adjusted (non-GAAP) net income of $331.8 million, or $2.11 per diluted common share for fiscal year 2019.
Performance Summary for the Fiscal Fourth Quarter and the Year Ended October 31, 2020
The tables below (in millions, except percentage data) provide comparisons of certain quarterly and annual results to the prior year. Appendices A and B set forth reconciliations between the GAAP and adjusted (non-GAAP) measures contained in this release.
•No customer represented more than 10% of revenue for the fiscal quarter
•One 10%-plus customer represented a total of 10.6% of revenue for the fiscal year
•Cash and investments totaled $1.3 billion
•Cash flow from operations totaled $187.3 million and $493.7 million for the fiscal quarter and year, respectively
•Average days' sales outstanding (DSOs) were 88 and 82 for the fiscal quarter and year, respectively
•Accounts receivable, net balance was $719.4 million
3
•Unbilled
contract asset balance was $85.8 million
•Inventories totaled $344.4 million, including:
◦Raw materials: $119.5 million
◦Work in process: $13.7 million
◦Finished goods: $210.1 million
◦Deferred cost of sales: $40.7 million
◦Reserve for excess and obsolescence: $(39.6) million
•Product inventory turns were 4.0 and 4.6 for the fiscal quarter and year, respectively
•Headcount
totaled 7,032
Share Repurchase Program
After temporarily suspending repurchases of our common stock during fiscal 2020, we will be reinstituting this program in the first quarter of 2021 and are currently targeting repurchases in the range of $150 million during fiscal 2021. Ciena may purchase shares at management's discretion in the open market, in privately negotiated transactions, in transactions structured through investment banking institutions, or a combination of the foregoing. Ciena may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of its shares under this authorization. The amount and timing of repurchases are subject to a variety of factors including liquidity, cash flow, stock price, and general business and market conditions. The program may be modified, suspended or discontinued at any time. During fiscal year 2020, Ciena repurchased
approximately 1.9 million shares of its common stock at an average price of $39.81 per share for an aggregate purchase price of $74.5 million.
Supplemental Materials and Live Web Broadcast of Unaudited Fiscal Fourth Quarter 2020 Results
Today, Thursday, December 10, 2020, 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 fourth quarter and fiscal 2020 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, 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: "Our fiscal fourth quarter and full-year 2020 performance reported today demonstrates that we have the innovation, diversification and global scale to perform
4
well in a challenging environment." "While we expect current market conditions to persist in the near-term, we are confident in strong secular demand dynamics and our ability to continue to outperform the 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 duration and severity of the COVID-19 pandemic and the impact of countermeasures taken to mitigate its spread; the impact of COVID-19 on macroeconomic conditions, the level of economic activity, demand for our technology solutions, short- and long-term customer or end user needs and changes thereto, continuity of supply chain, logistics and 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 and the level of success
relating to efforts to optimize Ciena's operations; 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, including the COVID-19 pandemic; 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 Ciena's periodic reports filed with the Securities and Exchange Commission, including its Quarterly Report on Form 10-Q filed with the SEC on September 9, 2020 and its Annual Report on Form 10-K 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 for the relevant period, Appendix 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 clients 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.
5
CIENA
CORPORATION
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Significant asset impairments and restructuring costs
7,854
12,842
22,652
24,538
Total
operating expenses
310,866
326,494
1,165,927
1,195,300
Income from operations
93,483
93,202
486,964
346,766
Interest
and other income (loss), net
(249)
(1,183)
964
3,876
Interest expense
(7,395)
(9,136)
(31,321)
(37,452)
Loss
on extinguishment and modification of debt
—
—
(646)
—
Income before income taxes
85,839
82,883
455,961
313,190
Provision
for income taxes
20,798
2,552
94,670
59,756
Net income
$
65,041
$
80,331
$
361,291
$
253,434
Net
Income per Common Share
Basic net income per common share
$
0.42
$
0.52
$
2.34
$
1.63
Diluted
net income per potential common share
$
0.42
$
0.51
$
2.32
$
1.61
Weighted average basic common
shares outstanding
154,706
154,852
154,287
155,720
Weighted average diluted potential common shares outstanding(1)
156,563
156,612
155,955
157,612
(1)
Weighted average diluted potential common shares outstanding used in calculating GAAP diluted net income per potential common share for the fourth quarter of fiscal 2020 includes 1.9 million shares underlying certain stock option and stock unit awards.
Weighted average diluted potential common shares outstanding used in calculating GAAP diluted net income per potential common share for fiscal 2020 includes 1.7 million shares underlying certain stock option and stock unit awards.
Weighted average diluted potential common shares outstanding used in calculating GAAP diluted net income per potential common share for the fourth quarter of fiscal 2019 includes 1.8 million shares underlying certain stock option and stock unit awards.
Weighted average diluted potential common shares outstanding used in calculating GAAP diluted net income per
potential common share for fiscal 2019 includes 1.9 million shares underlying certain stock option and stock unit awards.
Total
adjustments related to income from operations
37,405
35,958
132,941
122,859
Loss on extinguishment and modification of debt
—
—
646
—
Unrealized
gain on equity investment
(2,681)
—
(2,681)
—
Adjusted income before income taxes
120,563
118,841
586,867
436,049
Non-GAAP
tax provision on adjusted income before income taxes
26,042
28,403
126,763
104,216
Adjusted (non-GAAP) net income
$
94,521
$
90,438
$
460,104
$
331,833
Weighted
average basic common shares outstanding
154,706
154,852
154,287
155,720
Weighted average diluted potential common shares outstanding(1)
156,563
156,612
155,955
157,612
Net
Income per Common Share
GAAP diluted net income per potential common share
$
0.42
$
0.51
$
2.32
$
1.61
Adjusted
(non-GAAP) diluted net income per potential common share
$
0.60
$
0.58
$
2.95
$
2.11
(1)
Weighted average diluted potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share for the fourth quarter of fiscal 2020 includes 1.9 million shares underlying certain stock option and stock unit awards.
Weighted average diluted potential common shares outstanding used in calculating adjusted (non-GAAP) diluted net income per potential common share for fiscal 2020 includes 1.7 million shares underlying certain stock option and stock unit awards.
Weighted average diluted potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share for the fourth quarter of fiscal 2019 includes 1.8 million shares underlying certain stock option and stock unit awards.
Weighted average diluted potential common
shares outstanding used in calculating adjusted (non-GAAP) diluted net income per potential common share for fiscal 2019 includes 1.9 million shares underlying certain stock option and stock unit awards.
10
APPENDIX
B - Calculation of EBITDA and Adjusted EBITDA (unaudited)
Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)
Net income (GAAP)
$
65,041
$
80,331
$
361,291
$
253,434
Add:
Interest expense
7,395
9,136
31,321
37,452
Less: Interest and other income (loss), net
(249)
(1,183)
964
3,876
Add:
Loss on extinguishment and modification of debt
—
—
(646)
—
Add: Provision for income taxes
20,798
2,552
94,670
59,756
Add:
Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements
23,538
22,505
93,908
87,576
Add: Amortization of intangible assets
9,584
8,525
38,619
35,136
EBITDA
$
126,605
$
124,232
$
619,491
$
469,478
Add:
Share-based compensation cost
16,920
15,290
67,758
59,736
Add: Significant asset impairments and restructuring costs
7,854
12,842
22,652
24,538
Add:
Acquisition and integration costs (recoveries)
3,127
(735)
4,031
3,370
Add: Legal settlement
—
—
—
137
Adjusted
EBITDA
$
154,506
$
151,629
$
713,932
$
557,259
* * *
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.
•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 (recoveries) - consist of expenses for financial, legal and accounting advisors, severance and other employee-related costs associated with our acquisitions of DonRiver and Centina, including costs and recoveries of acquisition consideration 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.
•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.
•Legal settlements - costs incurred as a result of settlements, during the first quarter of fiscal 2019.
•Unrealized gain 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 21.6% for fiscal 2020, and 23.9% for fiscal 2019. This rate may be subject to change in the future, including as a result of changes in tax policy or tax strategy.
11
Dates Referenced Herein and Documents Incorporated by Reference
