Ciena reports fiscal third quarter 2022 financial results
Hanover, md.--(business wire)--ciena® corporation (nyse: cien), a networking systems, services and software company, today announced unaudited financial results for its fiscal third quarter ended july 30, 2022. q3 revenue: $868.0 million q3 net income per share: $0.07 gaap; $0.33 adjusted (non-gaap) share repurchases: repurchased approximately 3.2 million shares of common stock for an aggregate price of $155.0 million during the quarter. "despite continued strong customer demand, our fiscal third quarter financial results were negatively impacted by late delivery and substantially lower-than-committed volume from a small number of suppliers for specific components that are essential for delivering finished goods to our customers," said gary smith, president and ceo of ciena. "while these dynamics will continue in our fiscal fourth quarter, we expect improvement as we move into fiscal 2023, providing us increased ability to service this unprecedented demand and continue to gain market share.” for the fiscal third quarter 2022, ciena reported revenue of $868.0 million as compared to $988.1 million for the fiscal third quarter 2021. ciena's gaap net income for the fiscal third quarter 2022 was $10.5 million, or $0.07 per diluted common share, which compares to a gaap net income of $238.2 million, or $1.52 per diluted common share, for the fiscal third quarter 2021. ciena's gaap net income for the fiscal third quarter of 2021 benefited from the recording $124.2 million tax benefit related to an internal transfer of non-u.s. intangible assets. 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 third quarter 2022 was $49.0 million, or $0.33 per diluted common share, which compares to an adjusted (non-gaap) net income of $144.9 million, or $0.92 per diluted common share, for the fiscal third quarter 2021. fiscal third quarter 2022 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 q3 q3 period change fy 2022 fy 2021 y-t-y* revenue $ 868.0 $ 988.1 (12.2 )% gross margin 39.3 % 48.0 % (8.7 )% operating expense $ 313.7 $ 326.0 (3.8 )% operating margin 3.1 % 15.0 % (11.9 )% non-gaap results q3 q3 period change fy 2022 fy 2021 y-t-y* revenue $ 868.0 $ 988.1 (12.2 )% adj. gross margin 40.0 % 48.5 % (8.5 )% adj. operating expense $ 273.1 $ 290.4 (6.0 )% adj. operating margin 8.5 % 19.1 % (10.6 )% adj. ebitda $ 96.0 $ 213.7 (55.1 )% * denotes % change, or in the case of margin, absolute change revenue by segment q3 fy 2022 q3 fy 2021 revenue %** revenue %** networking platforms converged packet optical $ 563.9 65.0 $ 712.9 72.1 routing and switching 100.7 11.6 69.7 7.1 total networking platforms 664.6 76.6 782.6 79.2 platform software and services 63.5 7.3 $ 56.9 5.8 blue planet automation software and services 17.3 2.0 16.6 1.7 global services maintenance support and training 72.8 8.4 74.0 7.5 installation and deployment 38.7 4.4 46.7 4.7 consulting and network design 11.1 1.3 11.3 1.1 total global services 122.6 14.1 132.0 13.3 total $ 868.0 100.0 $ 988.1 100.0 ** denotes % of total revenue additional performance metrics for fiscal third quarter 2022 revenue by geographic region q3 fy 2022 q3 fy 2021 revenue % ** revenue % ** americas $ 617.4 71.1 $ 692.8 70.1 europe, middle east and africa 124.2 14.3 189.2 19.2 asia pacific 126.4 14.6 106.1 10.7 total $ 868.0 100.0 $ 988.1 100.0 ** denotes % of total revenue two 10%-plus customers represented a total of 24.1% of revenue cash and investments totaled $1.3 billion cash flow used in operations totaled $205.4 million average days' sales outstanding (dsos) were 100 accounts receivable, net balance was $802.5 million unbilled contract asset, net balance was $157.4 million inventories totaled $826.7 million, including: raw materials: $621.8 million work in process: $19.5 million finished goods: $187.0 million deferred cost of sales: $33.8 million reserve for excess and obsolescence: $(35.4) million raw materials: $621.8 million work in process: $19.5 million finished goods: $187.0 million deferred cost of sales: $33.8 million reserve for excess and obsolescence: $(35.4) million product inventory turns were 2.1 headcount totaled 8,013 supplemental materials and live web broadcast of unaudited fiscal third quarter 2022 results today, thursday, september 1, 2022, 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 2022 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: "despite continued strong customer demand, our fiscal third quarter financial results were negatively impacted by late delivery and substantially lower-than-committed volume from a small number of suppliers for specific components that are essential for delivering finished goods to our customers. while these dynamics will continue in our fiscal fourth quarter, we expect improvement as we move into fiscal 2023, providing us increased ability to service this unprecedented demand and continue to gain market share.” 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 17, 2021 and included in its quarterly report on form 10-q for the third quarter of fiscal 2022 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. ciena corporation condensed consolidated statements of operations (in thousands, except per share data) (unaudited) quarter ended nine months ended july 30 july 31 july 30 july 31 2022 2021 2022 2021 revenue: products $ 684,284 $ 804,414 $ 2,109,239 $ 2,071,677 services 183,697 183,727 552,412 507,521 total revenue 867,981 988,141 2,661,651 2,579,198 cost of goods sold: products 434,756 420,236 1,259,378 1,074,935 services 92,446 93,355 275,526 259,403 total cost of goods sold 527,202 513,591 1,534,904 1,334,338 gross profit 340,779 474,550 1,126,747 1,244,860 operating expenses: research and development 150,025 146,225 457,758 389,212 selling and marketing 105,880 114,924 344,700 322,589 general and administrative 41,121 48,863 131,191 132,491 significant asset impairments and restructuring costs 7,692 9,789 20,203 23,865 amortization of intangible assets 8,919 5,967 26,757 17,896 acquisition and integration costs 35 259 598 860 total operating expenses 313,672 326,027 981,207 886,913 income from operations 27,107 148,523 145,540 357,947 interest and other income (loss), net 366 795 4,860 (1,600 ) interest expense (12,642 ) (7,776 ) (33,275 ) (22,921 ) income before income taxes 14,831 141,542 117,125 333,426 provision (benefit) for income taxes 4,319 (96,690 ) 21,868 (63,271 ) net income $ 10,512 $ 238,232 $ 95,257 $ 396,697 net income per common share basic net income per common share $ 0.07 $ 1.53 $ 0.63 $ 2.55 diluted net income per potential common share $ 0.07 $ 1.52 $ 0.62 $ 2.53 weighted average basic common shares outstanding 149,862 155,271 152,083 155,277 weighted average dilutive potential common shares outstanding 1 150,463 156,744 153,209 156,742 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) 0.6 million and 1.1 million for the third quarter and first nine months of fiscal 2022, respectively; and (ii) 1.5 million shares for each of the third quarter and first nine months of fiscal 2021. ciena corporation condensed consolidated balance sheets (in thousands, except share data) (unaudited) july 30, 2022 october 30, 2021 assets current assets: cash and cash equivalents $ 859,687 $ 1,422,546 short-term investments 321,823 181,483 accounts receivable, net 802,484 884,958 inventories 826,673 374,265 prepaid expenses and other 377,709 325,654 total current assets 3,188,376 3,188,906 long-term investments 77,723 70,038 equipment, building, furniture and fixtures, net 281,690 284,968 operating lease right-of-use assets 45,452 44,285 goodwill 328,978 311,645 other intangible assets, net 76,918 65,314 deferred tax asset, net 797,924 800,180 other long-term assets 103,721 99,891 total assets $ 4,900,782 $ 4,865,227 liabilities and stockholders’ equity current liabilities: accounts payable $ 439,229 $ 356,176 accrued liabilities and other short-term obligations 301,589 409,285 deferred revenue 147,808 118,007 operating lease liabilities 19,786 18,632 current portion of long-term debt 6,930 6,930 total current liabilities 915,342 909,030 long-term deferred revenue 61,845 57,457 other long-term obligations 150,767 166,803 long-term operating lease liabilities 42,639 41,564 long-term debt, net 1,062,453 670,355 total liabilities $ 2,233,046 $ 1,845,209 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; 148,293,357 and 154,858,981 shares issued and outstanding 1,483 1,549 additional paid-in capital 6,378,007 6,803,162 accumulated other comprehensive income (loss) (21,879 ) 439 accumulated deficit (3,689,875 ) (3,785,132 ) total stockholders’ equity 2,667,736 3,020,018 total liabilities and stockholders’ equity $ 4,900,782 $ 4,865,227 ciena corporation condensed consolidated statements of cash flows (in thousands) (unaudited) nine months ended july 30 july 31 2022 2021 cash flows provided by (used in) operating activities: net income $ 95,257 $ 396,697 adjustments to reconcile net income to net cash provided by operating activities: depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements 68,280 71,918 share-based compensation expense 77,827 62,970 amortization of intangible assets 36,521 27,341 deferred taxes (19,824 ) (139,543 ) provision for inventory excess and obsolescence 12,038 13,460 provision for warranty 12,416 12,726 other (442 ) 6,350 changes in assets and liabilities: accounts receivable 74,478 (163,149 ) inventories (464,664 ) (38,821 ) prepaid expenses and other (39,805 ) (17,272 ) operating lease right-of-use assets 12,504 12,340 accounts payable, accruals and other obligations (37,587 ) 31,388 deferred revenue 34,949 24,969 short and long-term operating lease liabilities (15,197 ) (14,618 ) net cash provided by (used in) operating activities (153,249 ) 286,756 cash flows used in investing activities: payments for equipment, furniture, fixtures and intellectual property (66,908 ) (67,290 ) purchase of available-for-sale securities (614,333 ) (132,895 ) proceeds from maturities of available-for-sale securities 460,000 122,063 settlement of foreign currency forward contracts, net 4,450 7,326 acquisition of business, net of cash acquired (62,043 ) — purchase of cost method equity investments (8,000 ) — proceeds from sale of cost method equity investments — 4,678 net cash used in investing activities (286,834 ) (66,118 ) cash flows used in financing activities: proceeds from issuance of senior notes 400,000 — payment of long term debt (3,465 ) (5,197 ) payment of debt issuance costs (5,159 ) — payment of finance lease obligations (2,555 ) (2,243 ) shares repurchased for tax withholdings on vesting of stock unit awards (41,280 ) (36,484 ) repurchases of common stock - repurchase program (487,792 ) (64,555 ) proceeds from issuance of common stock 30,224 28,289 net cash used in financing activities (110,027 ) (80,190 ) effect of exchange rate changes on cash, cash equivalents and restricted cash (12,780 ) 1,344 net increase (decrease) in cash, cash equivalents and restricted cash (562,890 ) 141,792 cash, cash equivalents and restricted cash at beginning of period 1,422,604 1,088,708 cash, cash equivalents and restricted cash at end of period $ 859,714 $ 1,230,500 supplemental disclosure of cash flow information cash paid during the period for interest $ 24,823 $ 22,392 cash paid during the period for income taxes, net $ 28,593 $ 46,165 operating lease payments $ 16,342 $ 16,162 non-cash investing and financing activities purchase of equipment in accounts payable $ 9,320 $ 5,517 repurchase of common stock in accrued liabilities from repurchase program $ 5,000 $ 800 operating right-of-use assets subject to lease liability $ 8,226 $ 4,182 appendix a - reconciliation of adjusted (non- gaap) quarterly measures (in thousands, except per share data) (unaudited) quarter ended july 30 july 31 2022 2021 gross profit reconciliation (gaap/non-gaap) gaap gross profit $ 340,779 $ 474,550 share-based compensation-products 1,002 1,037 share-based compensation-services 1,940 1,315 canadian emergency wage subsidy-products — (94 ) canadian emergency wage subsidy-services — (47 ) amortization of intangible assets 3,140 2,857 total adjustments related to gross profit 6,082 5,068 adjusted (non-gaap) gross profit $ 346,861 $ 479,618 adjusted (non-gaap) gross profit percentage 40.0 % 48.5 % operating expense reconciliation (gaap/non-gaap) gaap operating expense $ 313,672 $ 326,027 share-based compensation-research and development 8,233 5,541 share-based compensation-sales and marketing 8,075 6,534 share-based compensation-general and administrative 7,579 8,237 canadian emergency wage subsidy-research and development — (596 ) canadian emergency wage subsidy-sales and marketing — (53 ) canadian emergency wage subsidy-general and administrative — (46 ) significant asset impairments and restructuring costs 7,692 9,789 amortization of intangible assets 8,919 5,967 acquisition and integration costs 35 259 total adjustments related to operating expense 40,533 35,632 adjusted (non-gaap) operating expense $ 273,139 $ 290,395 income from operations reconciliation (gaap/non-gaap) gaap income from operations $ 27,107 $ 148,523 total adjustments related to gross profit 6,082 5,068 total adjustments related to operating expense 40,533 35,632 total adjustments related to income from operations 46,615 40,700 adjusted (non-gaap) income from operations $ 73,722 $ 189,223 adjusted (non-gaap) operating margin percentage 8.5 % 19.1 % net income reconciliation (gaap/non-gaap) gaap net income $ 10,512 $ 238,232 exclude gaap provision (benefit) for income taxes 4,319 (96,690 ) income before income taxes 14,831 141,542 total adjustments related to income from operations 46,615 40,700 adjusted income before income taxes 61,446 182,242 non-gaap tax provision on adjusted income before income taxes 12,412 37,360 adjusted (non-gaap) net income $ 49,034 $ 144,882 weighted average basic common shares outstanding 149,862 155,271 weighted average dilutive potential common shares outstanding 1 150,463 156,744 net income per common share gaap diluted net income per potential common share $ 0.07 $ 1.52 adjusted (non-gaap) diluted net income per potential common share $ 0.33 $ 0.92 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) 0.6 million for the third quarter of fiscal 2022, and (ii) 1.5 million for the third quarter of fiscal 2021 appendix b - calculation of ebitda and adjusted ebitda (unaudited) (in thousands) (unaudited) quarter ended july 30 july 31 2022 2021 earnings before interest, tax, depreciation and amortization (ebitda) net income (gaap) $ 10,512 $ 238,232 add: interest expense 12,642 7,776 less: interest and other income, net 366 795 add: provision (benefit) for income taxes 4,319 (96,690 ) add: depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements 22,250 24,623 add: amortization of intangible assets 12,059 8,824 ebitda $ 61,416 $ 181,970 less: canadian emergency wage subsidy — 836 add: share-based compensation cost 26,857 22,471 add: significant asset impairments and restructuring costs 7,692 9,789 add: acquisition and integration costs 35 259 adjusted ebitda $ 96,000 $ 213,653 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. 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. 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 - includes financial, legal and accounting advisor expenses related to our acquisition of xelic during the second quarter of fiscal 2022. acquisition and integration costs for the third quarter of fiscal 2021 include costs of acquisition compensation associated with a three-year earn-out arrangement related to the donriver acquisition in fiscal 2018. 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 20.2% for the third fiscal quarter of 2022 and 20.5% for the third fiscal quarter of 2021. this rate may be subject to change in the future, including as a result of changes in tax policy or tax strategy. ciena's gaap tax provision for the third quarter of 2021 benefited from recording a $124.2 million tax benefit related to an internal transfer of non-u.s. intangible assets that was recognized as a result of the step-up in basis of such rights for tax purposes. the non-gaap tax provision for the periods presented do not include this tax benefit or the corresponding deferred tax asset.
