Ciena Reports Fiscal First Quarter 2013 Financial Results
Increases revenue 9% year-over-year; Achieves 6% as-adjusted operating profit
For the fiscal first quarter 2013,
On the basis of generally accepted accounting principles (GAAP),
“Our strong first quarter performance reflects a solid start to our fiscal year,” said
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 | ||||||||||||||||||
| Q1 | Q4 | Q1 | Period Change | |||||||||||||||
| FY 2013 | FY 2012 | FY 2012 | Q-T-Q* | Y-T-Y* | ||||||||||||||
| Revenue | $ | 453.1 | $ | 465.5 | $ | 416.7 | (2.7 | )% | 8.7 | % | ||||||||
| Gross margin | 43.2 | % | 41.3 | % | 40.3 | % | 1.9 | % | 2.9 | % | ||||||||
| Operating expense | $ | 201.4 | $ | 214.1 | $ | 198.9 | (5.9 | )% | 1.2 | % | ||||||||
| Operating margin | (1.2 | )% | (4.7 | )% | (7.5 | )% | 3.5 | % | 6.3 | % | ||||||||
| Non-GAAP Results | ||||||||||||||||||
| Q1 | Q4 | Q1 | Period Change | |||||||||||||||
| FY 2013 | FY 2012 | FY 2012 | Q-T-Q* | Y-T-Y* | ||||||||||||||
| Revenue | $ | 453.1 | $ | 465.5 | $ | 416.7 | (2.7 | )% | 8.7 | % | ||||||||
| Adj. gross margin | 44.6 | % | 42.7 | % | 41.9 | % | 1.9 | % | 2.7 | % | ||||||||
| Adj. operating expense | $ | 176.6 | $ | 191.8 | $ | 175.4 | (7.9 | )% | 0.7 | % | ||||||||
| Adj. operating margin | 5.6 | % | 1.4 | % | (0.2 | )% | 4.2 | % | 5.8 | % | ||||||||
| Revenue by Segment | ||||||||||||||||||||
| Q1 FY 2013 | Q4 FY 2012 | Q1 FY 2012 | ||||||||||||||||||
| Revenue | % | Revenue | % | Revenue | % | |||||||||||||||
| Converged Packet Optical | $ | 240.0 | 53.0 | $ | 238.1 | 51.1 | $ | 202.0 | 48.5 | |||||||||||
| Packet Networking | 45.8 | 10.1 | 47.3 | 10.2 | 21.5 | 5.2 | ||||||||||||||
| Optical Transport | 57.6 | 12.7 | 71.8 | 15.4 | 107.7 | 25.8 | ||||||||||||||
| Software and Services | 109.7 | 24.2 | 108.3 | 23.3 | 85.5 | 20.5 | ||||||||||||||
| Total | $ | 453.1 | 100.0 | $ | 465.5 | 100.0 | $ | 416.7 | 100.0 | |||||||||||
* Denotes % change, or in the case of margin, absolute change
Additional Performance Metrics for
- Non-U.S. customers contributed 42% of total revenue
- Two customers accounted for greater than 10% of revenue and represented 26.4% of total revenue
- Cash and investments totaled
$637.2 million - Cash flow used in operations totaled
$(45.7) million - Free cash flow totaled
$(58.0) million - Average days' sales outstanding (DSOs) were 78
- Accounts receivable balance was
$394.8 million - Inventories totaled
$266.9 million , including:- Raw materials:
$46.2 million - Work in process:
$7.1 million - Finished goods:
$178.8 million - Deferred cost of sales:
$77.1 million - Reserve for excess and obsolescence:
$(42.3) million
- Raw materials:
- Product inventory turns were 2.9
- Headcount totaled 4,448
Business Outlook for
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.
- Revenue in the range of
$465 to $495 million - Adjusted (non-GAAP) gross margin in the low 40s percent range
- Adjusted (non-GAAP) operating expense in the low $190s million range
Live Web Broadcast of
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
Non-GAAP Presentation of Quarterly Results. This release includes non-GAAP measures of
| CIENA CORPORATION | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| (in thousands, except per share data) | ||||||||
| (unaudited) | ||||||||
| Quarter Ended January 31, | ||||||||
| 2012 | 2013 | |||||||
| Revenue: | ||||||||
| Products | $ | 333,673 | $ | 353,057 | ||||
| Services | 83,012 | 100,036 | ||||||
| Total revenue | 416,685 | 453,093 | ||||||
| Cost of goods sold: | ||||||||
| Products | 197,752 | 196,521 | ||||||
| Services | 51,177 | 60,777 | ||||||
| Total cost of goods sold | 248,929 | 257,298 | ||||||
| Gross profit | 167,756 | 195,795 | ||||||
| Operating expenses: | ||||||||
| Research and development | 89,664 | 89,125 | ||||||
| Selling and marketing | 64,411 | 66,588 | ||||||
| General and administrative | 29,664 | 28,208 | ||||||
| Amortization of intangible assets | 13,471 | 12,453 | ||||||
| Restructuring costs | 1,722 | 5,030 | ||||||
| Total operating expenses | 198,932 | 201,404 | ||||||
| Loss from operations | (31,176 | ) | (5,609 | ) | ||||
| Interest and other income (loss), net | (4,887 | ) | (137 | ) | ||||
| Interest expense | (9,570 | ) | (10,732 | ) | ||||
| Loss on extinguishment of debt | — | (28,630 | ) | |||||
| Loss before income taxes | (45,633 | ) | (45,108 | ) | ||||
| Provision for income taxes | 2,020 | 2,216 | ||||||
| Net loss | $ | (47,653 | ) | $ | (47,324 | ) | ||
| Basic net loss per common share | $ | (0.49 | ) | $ | (0.47 | ) | ||
| Diluted net loss per potential common share | $ | (0.49 | ) | $ | (0.47 | ) | ||
| Weighted average basic common shares outstanding | 98,066 | 101,204 | ||||||
| Weighted average dilutive potential common shares outstanding | 98,066 | 101,204 | ||||||
| CIENA CORPORATION | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (in thousands, except share data) | ||||||||
| (unaudited) | ||||||||
| October 31, | January 31, | |||||||
| 2012 | 2013 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 642,444 | $ | 552,267 | ||||
| Short-term investments | 50,057 | 84,918 | ||||||
| Accounts receivable, net | 345,496 | 394,785 | ||||||
| Inventories | 260,098 | 266,901 | ||||||
| Prepaid expenses and other | 117,595 | 136,002 | ||||||
| Total current assets | 1,415,690 | 1,434,873 | ||||||
| Equipment, furniture and fixtures, net | 123,580 | 122,207 | ||||||
| Other intangible assets, net | 257,137 | 239,300 | ||||||
| Other long-term assets | 84,736 | 88,792 | ||||||
| Total assets | $ | 1,881,143 | $ | 1,885,172 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 179,704 | $ | 182,671 | ||||
| Accrued liabilities | 209,540 | 214,918 | ||||||
| Deferred revenue | 79,516 | 79,916 | ||||||
| Convertible notes payable | 216,210 | 216,210 | ||||||
| Total current liabilities | 684,970 | 693,715 | ||||||
| Long-term deferred revenue | 27,560 | 28,562 | ||||||
| Other long-term obligations | 31,779 | 32,785 | ||||||
| Long-term convertible notes payable | 1,225,806 | 1,208,745 | ||||||
| Total liabilities | 1,970,115 | 1,963,807 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity (deficit): | ||||||||
| 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; 100,601,792 and 101,518,915 shares issued and outstanding | 1,006 | 1,015 | ||||||
| Additional paid-in capital | 5,797,765 | 5,854,424 | ||||||
| Accumulated other comprehensive income (loss) | (3,354 | ) | (2,361 | ) | ||||
| Accumulated deficit | (5,884,389 | ) | (5,931,713 | ) | ||||
| Total stockholders’ equity (deficit) | (88,972 | ) | (78,635 | ) | ||||
| Total liabilities and stockholders’ equity (deficit) | $ | 1,881,143 | $ | 1,885,172 | ||||
| CIENA CORPORATION | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended January 31, | ||||||||
| 2012 | 2013 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (47,653 | ) | $ | (47,324 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Loss on extinguishment of debt | — | 28,630 | ||||||
| Change in fair value of embedded redemption feature | 980 | (310 | ) | |||||
| Depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements | 14,721 | 14,745 | ||||||
| Share-based compensation costs | 8,888 | 8,320 | ||||||
| Amortization of intangible assets | 19,415 | 17,838 | ||||||
| Provision for inventory excess and obsolescence | 8,224 | 3,580 | ||||||
| Provision for warranty | 7,706 | 4,029 | ||||||
| Other | 2,605 | 2,951 | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | 17,078 | (49,540 | ) | |||||
| Inventories | (26,799 | ) | (10,383 | ) | ||||
| Prepaid expenses and other | 14,500 | (25,785 | ) | |||||
| Accounts payable, accruals and other obligations | 15,850 | 6,121 | ||||||
| Deferred revenue | (22,634 | ) | 1,402 | |||||
| Net cash provided by (used in) operating activities | 12,881 | (45,726 | ) | |||||
| Cash flows used in investing activities: | ||||||||
| Payments for equipment, furniture, fixtures and intellectual property | (7,898 | ) | (12,243 | ) | ||||
| Restricted cash | (866 | ) | 627 | |||||
| Purchase of available for sale securities | — | (84,918 | ) | |||||
| Proceeds from maturities of available for sale securities | — | 50,000 | ||||||
| Proceeds from sale of cost method investment | 524 | — | ||||||
| Net cash used in investing activities | (8,240 | ) | (46,534 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Payment for debt and equity issuance costs | — | (3,237 | ) | |||||
| Repayment of capital lease obligations | — | (676 | ) | |||||
| Proceeds from issuance of common stock | 5,669 | 5,820 | ||||||
| Net cash provided by financing activities | 5,669 | 1,907 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | (1,745 | ) | 176 | |||||
| Net increase (decrease) in cash and cash equivalents | 10,310 | (90,353 | ) | |||||
| Cash and cash equivalents at beginning of period | 541,896 | 642,444 | ||||||
| Cash and cash equivalents at end of period | $ | 550,461 | $ | 552,267 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid during the period for interest | $ | 2,458 | $ | 4,739 | ||||
| Cash paid during the period for income taxes, net | $ | 2,823 | $ | 3,259 | ||||
| Non-cash investing and financing activities | ||||||||
| Purchase of equipment in accounts payable | $ | 7,409 | $ | 4,215 | ||||
| Debt issuance costs in accrued liabilities | $ | — | $ | 194 | ||||
| Fixed assets acquired under capital leases | $ | 3,078 | $ | 646 | ||||
| APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measurements | ||||||||
| Quarter Ended | ||||||||
| January 31, | ||||||||
| 2012 | 2013 | |||||||
| Gross Profit Reconciliation (GAAP/non-GAAP) | ||||||||
| GAAP gross profit | $ | 167,756 | $ | 195,795 | ||||
| Share-based compensation-products | 485 | 561 | ||||||
| Share-based compensation-services | 437 | 427 | ||||||
| Amortization of intangible assets | 5,779 | 5,385 | ||||||
| Total adjustments related to gross profit | 6,701 | 6,373 | ||||||
| Adjusted (non-GAAP) gross profit | $ | 174,457 | $ | 202,168 | ||||
| Adjusted (non-GAAP) gross profit percentage | 41.9 | % | 44.6 | % | ||||
| Operating Expense Reconciliation (GAAP/non-GAAP) | ||||||||
| GAAP operating expense | $ | 198,932 | $ | 201,404 | ||||
| Share-based compensation-research and development | 2,134 | 2,033 | ||||||
| Share-based compensation-sales and marketing | 3,101 | 2,743 | ||||||
| Share-based compensation-general and administrative | 2,797 | 2,556 | ||||||
| Acquisition and integration costs | 264 | — | ||||||
| Amortization of intangible assets | 13,471 | 12,453 | ||||||
| Restructuring costs | 1,722 | 5,030 | ||||||
| Total adjustments related to operating expense | 23,489 | 24,815 | ||||||
| Adjusted (non-GAAP) operating expense | $ | 175,443 | $ | 176,589 | ||||
| Income (Loss) from Operations Reconciliation (GAAP/non-GAAP) | ||||||||
| GAAP loss from operations | $ | (31,176 | ) | $ | (5,609 | ) | ||
| Total adjustments related to gross profit | 6,701 | 6,373 | ||||||
| Total adjustments related to operating expense | 23,489 | 24,815 | ||||||
| Adjusted (non-GAAP) income (loss) from operations | $ | (986 | ) | 25,579 | ||||
| Adjusted (non-GAAP) operating margin percentage | (0.2 | )% | 5.6 | % | ||||
| Net Income (Loss) Reconciliation (GAAP/non-GAAP) | ||||||||
| GAAP net loss | $ | (47,653 | ) | $ | (47,324 | ) | ||
| Total adjustments related to gross profit | 6,701 | 6,373 | ||||||
| Total adjustments related to operating expense | 23,489 | 24,815 | ||||||
| Loss on extinguishment of debt | — | 28,630 | ||||||
| Non-cash interest expense | — | 100 | ||||||
| Change in fair value of embedded redemption feature | 980 | (310 | ) | |||||
| Adjusted (non-GAAP) net income (loss) | $ | (16,483 | ) | $ | 12,284 | |||
| Weighted average basic common shares outstanding | 98,066 | 101,204 | ||||||
| Weighted average dilutive potential common shares outstanding | 98,066 | 120,817 | ||||||
| Net Income (Loss) per Common Share | ||||||||
| GAAP diluted net loss per common share | $ | (0.49 | ) | $ | (0.47 | ) | ||
| Adjusted (non-GAAP) diluted net income (loss) per common share | $ | (0.17 | ) | $ | 0.12 | |||
The adjusted (non-GAAP) measures above and their reconciliation to
- 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, 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.
- Loss on extinguishment of debt - a non-cash loss, recorded in connection with convertible note exchange transactions completed during the first quarter of fiscal 2013, reflecting the fair value of
Ciena's 4.0% senior convertible notes dueDecember 15, 2020 as compared to the retirement of a portion ofCiena's outstanding 4.0% senior convertible notes dueMarch 15, 2015 . - Non-cash interest expense - a non-cash debt discount expense amortized as interest expense during the term of
Ciena's 4.0% senior convertible notes dueDecember 15, 2020 relating to the required separate accounting of the equity component of these convertible notes. - 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 dueMarch 15, 2015 .
Source:
Press Contact:
Ciena Corporation
Nicole Anderson, 877-857–7377
pr@ciena.com
or
Investor Contact:
Ciena Corporation
Gregg Lampf, 877-243–6273
ir@ciena.com