Ciena Reports Fiscal Second Quarter 2013 Financial Results

Ciena Reports Fiscal Second Quarter 2013 Financial Results

Achieves record quarterly revenue by surpassing $500M milestone

HANOVER, Md.--(BUSINESS WIRE)-- Ciena® Corporation (NAS: CIEN) , the network specialist, today announced unaudited financial results for its fiscal second quarter ended April 30, 2013.


For the fiscal second quarter 2013, Ciena reported revenue of $507.7 million.

On the basis of generally accepted accounting principles (GAAP), Ciena's net loss for the fiscal second quarter 2013 was $(27.1) million, or $(0.27) per common share, which compares to a GAAP net loss of $(27.8) million, or $(0.28) per common share, for the fiscal second quarter 2012.

Ciena's adjusted (non-GAAP) net income for the fiscal second quarter 2013 was $2.2 million, or $0.02 per common share, which compares to an adjusted (non-GAAP) net income of $3.7 million, or $0.04 per common share, for the fiscal second quarter 2012.

"We have designed Ciena to take advantage of the fundamental shift in network architecture driven by changing end-user demands, and our strong quarterly and first half of 2013 performance are a direct result of that strategy. Our unique ability to provide customers convergence, automation, openness and software intelligence positions us to lead the industry in this shift," said Gary B. Smith, president and CEO of Ciena. "These dynamics are creating new opportunities that we believe will enable us to continue making progress toward our long-term financial goals."

Fiscal Second Quarter 2013 Performance Summary

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

Q2

Q1

Q2

Period Change

FY 2013

FY 2013

FY 2012

Q-T-Q*

Y-T-Y*

Revenue

$

507.7

$

453.1

$

477.6

12.1

%

6.3

%

Gross margin

41.3

%

43.2

%

38.3

%

(1.9

)%

3.0

%

Operating expense

$

220.1

$

201.4

$

194.4

9.3

%

13.2

%

Operating margin

(2.1

)%

(1.2

)%

(2.4

)%

(0.9

)%

0.3

%

Non-GAAP Results

Q2

Q1

Q2

Period Change

FY 2013

FY 2013

FY 2012

Q-T-Q*

Y-T-Y*

Revenue

$

507.7

$

453.1

$

477.6

12.1

%

6.3

%

Adj. gross margin

42.5

%

44.6

%

39.6

%

(2.1

)%

2.9

%

Adj. operating expense

$

197.4

$

176.6

$

172.9

11.8

%

14.2

%

Adj. operating margin

3.7

%

5.6

%

3.4

%

(1.9

)%

0.3

%

Revenue by Segment

Q2 FY 2013

Q1 FY 2013

Q2 FY 2012

Revenue

%

Revenue

%

Revenue

%

Converged Packet Optical

$

291.4

57.4

$

240.0

53.0

$

264.6

55.4

Packet Networking

57.1

11.2

45.8

10.1

29.9

6.3

Optical Transport

57.4

11.3

57.6

12.7

84.4

17.7

Software and Services

101.8

20.1

109.7

24.2

98.7

20.6

Total

$

507.7

100.0

$

453.1

100.0

$

477.6

100.0

* Denotes % change, or in the case of margin, absolute change

Additional Performance Metrics for Fiscal Second Quarter 2013

  • Non-U.S. customers contributed 43% of total revenue

  • Two customers accounted for greater than 10% of revenue and represented 31.3% of total revenue

  • Cash and investments totaled $456.5 million

  • Cash flow from operations totaled $44.9 million

  • Free cash flow totaled $35.6 million

  • Average days' sales outstanding (DSOs) were 75

  • Accounts receivable balance was $421.0 million

  • Inventories totaled $248.1 million, including:

    • Raw materials: $49.9 million

    • Work in process: $9.7 million

    • Finished goods: $145.1 million

    • Deferred cost of sales: $84.2 million

    • Reserve for excess and obsolescence: $(40.8) million

  • Product inventory turns were 3.9

  • Headcount totaled 4,546

Business Outlook for Fiscal Third Quarter 2013

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.

Ciena expects fiscal third quarter 2013 financial performance to include:

  • Revenue in the range of $515 to $545 million

  • Adjusted (non-GAAP) gross margin in the low 40s percent range

  • Adjusted (non-GAAP) operating expense in the mid $190s million range

Live Web Broadcast of Unaudited Fiscal Second Quarter 2013 Results

Ciena will host a discussion of its unaudited fiscal second quarter 2013 results with investors and financial analysts today, Thursday, June 6, 2013 at 8:30 a.m. (Eastern). The live broadcast of the discussion will be available via Ciena's homepage at http://www.ciena.com/. To accompany its live broadcast, Ciena has posted to the Investor Relations page of its website at: www.ciena.com/investors a presentation for investors that includes certain highlighted information relating to this quarter and certain historical results of operation. An archived transcript of the discussion will be available shortly following the conclusion of the live broadcast on the Investor Relations page of Ciena's website at: www.ciena.com/investors.

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 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 Ciena's business outlook for the fiscal third quarter of 2013 as well as: "We have designed Ciena to take advantage of the fundamental shift in network architecture driven by changing end-user demands, and our strong quarterly and first half of 2013 performance are a direct result of that strategy."; "Our unique ability to provide customers convergence, automation, openness and software intelligence positions us to lead the industry in this shift."; "These dynamics are creating new opportunities that we believe will enable us to continue making progress toward our long-term financial goals."

Ciena's actual results, performance or events may differ materially from these forward-looking statements made or implied due 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; changes in network spending or network strategy by large communication service providers; 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; and the other risk factors disclosed in Ciena's Report on Form 10-Q filed with the Securities and Exchange Commission on March 13, 2013. Ciena assumes no obligation to update any forward-looking information included in this press release.

Non-GAAP Presentation of Quarterly Results. This release includes non-GAAP measures of Ciena's gross profit, operating expense, income (loss) from operations, net income (loss) and net income (loss) 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, Appendix A to this press release sets forth a complete GAAP to non-GAAP reconciliation of the non-GAAP measures contained in this release.

About Ciena

Ciena is the network specialist. We collaborate with customers worldwide to unlock the strategic potential of their networks and fundamentally change the way they perform and compete. Ciena leverages its deep expertise in packet and optical networking and distributed software automation to deliver solutions in alignment with OPn, its approach for building open next-generation networks. We enable a high-scale, programmable infrastructure that can be controlled and adapted by network-level applications, and provide open interfaces to coordinate computing, storage and network resources in a unified, virtualized environment. Investors are encouraged to review the Investors section of our website at www.ciena.com/investors, where we routinely post press releases, SEC filings, recent news, financial results, other announcements and, from time to time, exclusively post material information as with the other disclosure channels that we use.

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

Quarter Ended April 30,

Six Months Ended April 30,

2012

2013

2012

2013

Revenue:

Products

$

384,726

$

413,217

$

718,399

$

766,274

Services

92,891

94,495

175,903

194,531

Total revenue

477,617

507,712

894,302

960,805

Cost of goods sold:

Products

234,372

239,441

432,124

435,962

Services

60,304

58,758

111,481

119,535

Total cost of goods sold

294,676

298,199

543,605

555,497

Gross profit

182,941

209,513

350,697

405,308

Operating expenses:

Research and development

90,399

100,787

180,063

189,912

Selling and marketing

62,517

74,475

126,928

141,063

General and administrative

26,670

30,883

56,334

59,091

Amortization of intangible assets

12,967

12,439

26,438

24,892

Restructuring costs

1,851

1,509

3,573

6,539

Total operating expenses

194,404

220,093

393,336

421,497

Loss from operations

(11,463

)

(10,580

)

(42,639

)

(16,189

)

Interest and other income (loss), net

(4,387

)

(2,716

)

(9,274

)

(2,853

)

Interest expense

(9,646

)

(11,392

)

(19,216

)

(22,124

)

Loss on extinguishment of debt

(28,630

)

Loss before income taxes

(25,496

)

(24,688

)

(71,129

)

(69,796

)

Provision for income taxes

2,284

2,391

4,304

4,607

Net loss

$

(27,780

)

$

(27,079

)

$

(75,433

)

$

(74,403

)

Basic net loss per common share

$

(0.28

)

$

(0.27

)

$

(0.77

)

$

(0.73

)

Diluted net loss per potential common share

$

(0.28

)

$

(0.27

)

$

(0.77

)

$

(0.73

)

Weighted average basic common shares outstanding

98,981

101,913

98,525

101,560

Weighted average dilutive potential common shares outstanding

98,981

101,913

98,525

101,560

CIENA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

October 31,

April 30,

2012

2013

ASSETS

Current assets:

Cash and cash equivalents

$

642,444

$

356,498

Short-term investments

50,057

99,973

Accounts receivable, net

345,496

421,014

Inventories

260,098

248,096

Prepaid expenses and other

117,595

138,577

Total current assets

1,415,690

1,264,158

Equipment, furniture and fixtures, net

123,580

117,553

Other intangible assets, net

257,137

221,476

Other long-term assets

84,736

90,157

Total assets

$

1,881,143

$

1,693,344

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:

Accounts payable

$

179,704

$

198,820

Accrued liabilities

209,540

222,783

Deferred revenue

79,516