Revenue increased 23% year-over-year
Ciena® Corporation (NYSE: CIEN), a networking systems, services
and software company, today announced unaudited financial results
for its fiscal third quarter ended July 29, 2023.
- Q3 Revenue: $1.07 billion
- Q3 Net Income per Share: $0.20 GAAP; $0.59 adjusted
(non-GAAP)
- Share Repurchases: Repurchased approximately 1.4 million
shares of common stock for an aggregate price of $61.2 million
during the quarter.
"We delivered excellent results for the fiscal third quarter
with strength across all regions," said Gary Smith, president and
CEO of Ciena. "We are encouraged by increased customer activity
that, when combined with our elevated backlog, market leadership
and expanding addressable market, we believe will drive growth and
market share gains going forward."
For fiscal third quarter 2023, Ciena reported revenue of $1.07
billion as compared to $868.0 million for the fiscal third quarter
2022.
Ciena's GAAP net income for the fiscal third quarter 2023 was
$29.7 million, or $0.20 per diluted common share, which compares to
a GAAP net income of $10.5 million, or $0.07 per diluted common
share, for the fiscal third quarter 2022.
Ciena's adjusted (non-GAAP) net income for the fiscal third
quarter 2023 was $89.1 million, or $0.59 per diluted common share,
which compares to an adjusted (non-GAAP) net income of $49.0
million, or $0.33 per diluted common share, for the fiscal third
quarter 2022.
Fiscal Third 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)
Q3
Q3
Period Change
FY 2023
FY 2022
Y-T-Y*
Revenue
$
1,067.9
$
868.0
23.0
%
Gross margin
42.0
%
39.3
%
2.7
%
Operating expense
$
370.7
$
313.7
18.2
%
Operating margin
7.3
%
3.1
%
4.2
%
Non-GAAP Results
(unaudited)
Q3
Q3
Period Change
FY 2023
FY 2022
Y-T-Y*
Revenue
$
1,067.9
$
868.0
23.0
%
Adj. gross margin
42.7
%
40.0
%
2.7
%
Adj. operating expense
$
327.9
$
273.1
20.1
%
Adj. operating margin
12.0
%
8.5
%
3.5
%
Adj. EBITDA
$
151.3
$
96.0
57.6
%
* Denotes % change, or in the case of
margin, absolute change
Revenue by Segment
(unaudited)
Q3 FY 2023
Q3 FY 2022
Revenue
%**
Revenue
%**
Networking Platforms
Converged Packet Optical
$
719.0
67.3
$
563.9
65.0
Routing and Switching
127.6
11.9
100.7
11.6
Total Networking Platforms
846.6
79.2
664.6
76.6
Platform Software and Services
78.9
7.4
63.5
7.3
Blue Planet Automation Software and
Services
13.1
1.3
17.3
2.0
Global Services
Maintenance Support and Training
72.9
6.8
72.8
8.4
Installation and Deployment
46.8
4.4
38.7
4.4
Consulting and Network Design
9.6
0.9
11.1
1.3
Total Global Services
129.3
12.1
122.6
14.1
Total
$
1,067.9
100.0
$
868.0
100.0
** Denotes % of total revenue
Additional Performance Metrics for Fiscal Third Quarter
2023
Revenue by Geographic Region
(unaudited)
Q3 FY 2023
Q3 FY 2022
Revenue
% **
Revenue
% **
Americas
$
749.5
70.2
$
617.4
71.1
Europe, Middle East and Africa
152.8
14.3
124.2
14.3
Asia Pacific
165.6
15.5
126.4
14.6
Total
$
1,067.9
100.0
$
868.0
100.0
** Denotes % of total revenue
- One customer represented 10%-plus of revenue for a total of
11.7% of revenue
- Cash and investments totaled $1.28 billion
- Cash flow from operations totaled $8.7 million
- Average days' sales outstanding (DSOs) were 96
- Accounts receivable, net balance was $997.4 million
- Unbilled contract assets, net balance was $142.3 million
- Inventories totaled $1.19 billion, including:
- Raw materials: $772.0 million
- Work in process: $51.8 million
- Finished goods: $333.5 million
- Deferred cost of sales: $77.5 million
- Reserve for excess and obsolescence: $(42.3) million
- Product inventory turns were 1.7
- Headcount totaled 8,623
Supplemental Materials and Live Web Broadcast of Unaudited
Fiscal Third Quarter 2023 Results
Today, Thursday, August 31, 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 third 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
excellent results for the fiscal third quarter with strength across
all regions. We are encouraged by increased customer activity that,
when combined with our elevated backlog, market leadership and
expanding addressable market, we believe will drive growth and
market share gains going forward."
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 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 third 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 global leader in
networking systems, services, and software. We build the most
adaptive networks in the industry, enabling customers to anticipate
and meet ever-increasing digital demands. For three-plus decades,
Ciena has brought our humanity to our relentless pursuit of
innovation. Prioritizing collaborative relationships with our
customers, partners, and communities, we create flexible, open, and
sustainable networks that better serve all users—today and into the
future. For updates on Ciena, follow us on Twitter @Ciena,
LinkedIn, the Ciena Insights blog, or visit www.ciena.com.
CIENA CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per
share data)
(unaudited)
Quarter Ended
Nine Months Ended
July 29,
July 30,
July 29,
July 30,
2023
2022
2023
2022
Revenue:
Products
$
865,197
$
684,284
$
2,678,242
$
2,109,239
Services
202,689
183,697
578,820
552,412
Total revenue
1,067,886
867,981
3,257,062
2,661,651
Cost of goods sold:
Products
516,900
434,756
1,559,120
1,259,378
Services
102,045
92,446
305,372
275,526
Total cost of goods sold
618,945
527,202
1,864,492
1,534,904
Gross profit
448,941
340,779
1,392,570
1,126,747
Operating expenses:
Research and development
189,392
150,025
561,115
457,758
Selling and marketing
118,266
105,880
367,156
344,700
General and administrative
49,349
41,121
151,184
131,191
Significant asset impairments and
restructuring costs
4,174
7,692
16,625
20,203
Amortization of intangible assets
9,487
8,919
26,773
26,757
Acquisition and integration costs
59
35
3,474
598
Total operating expenses
370,727
313,672
1,126,327
981,207
Income from operations
78,214
27,107
266,243
145,540
Interest and other income, net
10,187
366
50,711
4,860
Interest expense
(24,060
)
(12,642
)
(63,819
)
(33,275
)
Income before income taxes
64,341
14,831
253,135
117,125
Provision for income taxes
34,608
4,319
89,507
21,868
Net income
$
29,733
$
10,512
$
163,628
$
95,257
Net Income per Common Share
Basic net income per common share
$
0.20
$
0.07
$
1.09
$
0.63
Diluted net income per potential common
share
$
0.20
$
0.07
$
1.09
$
0.62
Weighted average basic common shares
outstanding
149,690
149,862
149,472
152,083
Weighted average dilutive potential common
shares outstanding 1
149,977
150,463
149,867
153,209
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)
0.3 million and 0.4 million shares for the third quarter and first
nine months of fiscal 2023, respectively; and (ii) 0.6 million and
1.1 million shares for the third quarter and first nine months of
fiscal 2022, respectively.
CIENA CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except share
data)
(unaudited)
July 29, 2023
October 29, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
1,117,922
$
994,352
Short-term investments
141,843
153,989
Accounts receivable, net
997,373
920,772
Inventories
1,192,522
946,730
Prepaid expenses and other
361,692
370,053
Total current assets
3,811,352
3,385,896
Long-term investments
21,098
35,385
Equipment, building, furniture and
fixtures, net
287,455
267,779
Operating lease right-of-use assets
40,482
45,108
Goodwill
446,596
328,322
Other intangible assets, net
219,085
69,517
Deferred tax asset, net
792,299
824,008
Other long-term assets
104,847
113,617
Total assets
$
5,723,214
$
5,069,632
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
393,144
$
516,047
Accrued liabilities and other short-term
obligations
355,622
360,782
Deferred revenue
188,104
137,899
Operating lease liabilities
16,941
18,925
Current portion of long-term debt
11,930
6,930
Total current liabilities
965,741
1,040,583
Long-term deferred revenue
71,873
62,336
Other long-term obligations
156,893
150,335
Long-term operating lease liabilities
37,800
42,392
Long-term debt, net
1,543,900
1,061,125
Total liabilities
2,776,207
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; 148,772,513 and 148,412,943 shares
issued and outstanding
1,488
1,484
Additional paid-in capital
6,425,899
6,390,252
Accumulated other comprehensive loss
(11,778
)
(46,645
)
Accumulated deficit
(3,468,602
)
(3,632,230
)
Total stockholders’ equity
2,947,007
2,712,861
Total liabilities and stockholders’
equity
$
5,723,214
$
5,069,632
CIENA CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
July 29,
July 30,
2023
2022
Cash flows used in operating
activities:
Net income
$
163,628
$
95,257
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation of equipment, building,
furniture and fixtures, and amortization of leasehold
improvements
69,213
68,280
Share-based compensation expense
95,405
77,827
Amortization of intangible assets
36,274
36,521
Deferred taxes
(64,005
)
(19,824
)
Provision for inventory excess and
obsolescence
18,767
12,038
Provision for warranty
18,860
12,416
Gain on cost method equity investments,
net
(26,368
)
(4,120
)
Other
13,694
3,678
Changes in assets and liabilities:
Accounts receivable
(80,399
)
74,478
Inventories
(262,345
)
(464,664
)
Prepaid expenses and other
72,062
(39,805
)
Operating lease right-of-use assets
11,003
12,504
Accounts payable, accruals and other
obligations
(133,880
)
(37,587
)
Deferred revenue
57,547
34,949
Short and long-term operating lease
liabilities
(16,596
)
(15,197
)
Net cash used in operating activities
(27,140
)
(153,249
)
Cash flows used in investing
activities:
Payments for equipment, furniture,
fixtures and intellectual property
(83,422
)
(66,908
)
Purchases of investments
(119,240
)
(614,333
)
Proceeds from sales and maturities of
investments
150,646
460,000
Settlement of foreign currency forward
contracts, net
(3,272
)
4,450
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
(285,336
)
(286,834
)
Cash flows provided by (used in) financing
activities:
Proceeds from issuance of senior notes
—
400,000
Proceeds from issuance of term loan,
net
497,500
—
Payment of long term debt
(6,448
)
(3,465
)
Payment of debt issuance costs
(5,422
)
(5,159
)
Payment of finance lease obligations
(2,830
)
(2,555
)
Shares repurchased for tax withholdings on
vesting of stock unit awards
(29,794
)
(41,280
)
Repurchases of common stock - repurchase
program
(57,736
)
(487,792
)
Proceeds from issuance of common stock
31,276
30,224
Net cash provided by (used in) financing
activities
426,546
(110,027
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
9,501
(12,780
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
123,571
(562,890
)
Cash, cash equivalents and restricted cash
at beginning of period
994,378
1,422,604
Cash, cash equivalents and restricted cash
at end of period
$
1,117,949
$
859,714
Supplemental disclosure of cash flow
information
Cash paid during the period for
interest
$
56,709
$
24,823
Cash paid during the period for income
taxes, net
$
68,058
$
28,593
Operating lease payments
$
18,038
$
16,342
Non-cash investing and financing
activities
Purchase of equipment in accounts
payable
$
4,579
$
9,320
Repurchase of common stock in accrued
liabilities from repurchase program
$
3,500
$
5,000
Operating right-of-use assets subject to
lease liability
$
9,771
$
8,226
Gain on cost method equity investments,
net
$
26,368
$
4,120
APPENDIX A - Reconciliation of
Adjusted (Non- GAAP) Measurements
(in thousands, except per
share data) (unaudited)
Quarter Ended
July 29,
July 30,
2023
2022
Gross Profit Reconciliation
(GAAP/non-GAAP)
GAAP gross profit
$
448,941
$
340,779
Share-based compensation-products
1,118
1,002
Share-based compensation-services
2,687
1,940
Amortization of intangible assets
3,187
3,140
Total adjustments related to gross
profit
6,992
6,082
Adjusted (non-GAAP) gross profit
$
455,933
$
346,861
Adjusted (non-GAAP) gross profit
percentage
42.7
%
40.0
%
Operating Expense Reconciliation
(GAAP/non-GAAP)
GAAP operating expense
$
370,727
$
313,672
Share-based compensation-research and
development
10,954
8,233
Share-based compensation-sales and
marketing
8,770
8,075
Share-based compensation-general and
administrative
9,377
7,579
Significant asset impairments and
restructuring costs
4,174
7,692
Amortization of intangible assets
9,487
8,919
Acquisition and integration costs
59
35
Total adjustments related to operating
expense
42,821
40,533
Adjusted (non-GAAP) operating expense
$
327,906
$
273,139
Income from Operations Reconciliation
(GAAP/non-GAAP)
GAAP income from operations
$
78,214
$
27,107
Total adjustments related to gross
profit
6,992
6,082
Total adjustments related to operating
expense
42,821
40,533
Total adjustments related to income from
operations
49,813
46,615
Adjusted (non-GAAP) income from
operations
$
128,027
$
73,722
Adjusted (non-GAAP) operating margin
percentage
12.0
%
8.5
%
Net Income Reconciliation
(GAAP/non-GAAP)
GAAP net income
$
29,733
$
10,512
Exclude GAAP provision for income
taxes
34,608
4,319
Income before income taxes
64,341
14,831
Total adjustments related to income from
operations
49,813
46,615
Loss on cost method equity investment
87
—
Adjusted income before income taxes
114,241
61,446
Non-GAAP tax provision on adjusted income
before income taxes
25,133
12,412
Adjusted (non-GAAP) net income
$
89,108
$
49,034
Weighted average basic common shares
outstanding
149,690
149,862
Weighted average dilutive potential common
shares outstanding 1
149,977
150,463
Net Income per Common Share
GAAP diluted net income per potential
common share
$
0.20
$
0.07
Adjusted (non-GAAP) diluted net income per
potential common share
$
0.59
$
0.33
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) 0.3 million for the third quarter of fiscal
2023; and (ii) 0.6 million for the third quarter of fiscal
2022.
APPENDIX B - Calculation of
EBITDA and Adjusted EBITDA (unaudited)
(in thousands)
(unaudited)
Quarter Ended
July 29,
July 30,
2023
2022
Earnings Before Interest, Tax,
Depreciation and Amortization (EBITDA)
Net income (GAAP)
$
29,733
$
10,512
Add: Interest expense
24,060
12,642
Less: Interest and other income, net
10,187
366
Add: Provision for income taxes
34,608
4,319
Add: Depreciation of equipment, building,
furniture and fixtures, and amortization of leasehold
improvements
23,310
22,250
Add: Amortization of intangible assets
12,674
12,059
EBITDA
$
114,198
$
61,416
Add: Share-based compensation cost
32,906
26,857
Add: Significant asset impairments and
restructuring costs
4,174
7,692
Add: Acquisition and integration costs
59
35
Adjusted EBITDA
$
151,337
$
96,000
* * *
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.
- Loss on cost method equity investment - reflects changes in the
carrying value of a certain cost method equity investment due to
triggering events.
- 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 third fiscal
quarter of 2023 and 20.2% for the third 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230830958357/en/
Press Contact: Jamie Moody Ciena Corporation +1 (410) 694-5761
pr@ciena.com
Investor Contact: Gregg Lampf Ciena Corporation +1 (877)
243-6273 ir@ciena.com
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