Ciena reports fiscal fourth quarter 2022 and year-end 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 fourth quarter ended october 29, 2022. q4 revenue: $971.0 million q4 net income per share: $0.39 gaap; $0.61 adjusted (non-gaap) share repurchases: repurchased approximately 154,200 shares of common stock for an aggregate price of $8.0 million during the quarter. "our strong fiscal fourth quarter financial results were better than expected as we benefited from some favorable supply chain developments in the second half of the quarter," said gary smith, president and ceo of ciena. "looking ahead, we expect to deliver outsized revenue growth in fiscal 2023 given our significant backlog and continued signs of gradual supply improvement. and, we remain confident that the durability of secular demand drivers and our strategic investments to expand our addressable market position us to deliver strong revenue growth over the next several years." for fiscal fourth quarter 2022, ciena reported revenue of $971.0 million as compared to $1.04 billion for the fiscal fourth quarter 2021. for fiscal year 2022, ciena reported revenue of $3.63 billion, as compared to $3.62 billion for fiscal year 2021. ciena's gaap net income for the fiscal fourth quarter 2022 was $57.6 million, or $0.39 per diluted common share, which compares to a gaap net income of $103.5 million, or $0.66 per diluted common share, for the fiscal fourth quarter 2021. for fiscal year 2022, ciena's gaap net income was $152.9 million, or $1.00 per diluted common share, as compared to gaap net income of $500.2 million, or $3.19 per diluted common share, for fiscal year 2021. ciena's adjusted (non-gaap) net income for the fiscal fourth quarter 2022 was $90.9 million, or $0.61 per diluted common share, which compares to an adjusted (non-gaap) net income of $132.7 million, or $0.85 per diluted common share, for the fiscal fourth quarter 2021. for fiscal year 2022, ciena's adjusted (non-gaap) net income was $288.9 million, or $1.90 per diluted common share, as compared to adjusted (non-gaap) net income of $456.5 million, or $2.91 per diluted common share, for fiscal year 2021. performance summary for fiscal fourth quarter and the year ended october 29, 2022 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) quarter ended period year ended period october 29, october 30, change october 29, october 30, change 2022 2021 y-t-y* 2022 2021 y-t-y* revenue $ 971.0 $ 1,041.5 (6.8 ) % $ 3,632.7 $ 3,620.7 0.3 % gross margin 44.7 % 45.8 % (1.1 ) % 43.0 % 47.6 % (4.6 ) % operating expense $ 356.3 $ 339.7 4.9 % $ 1,337.5 $ 1,226.6 9.0 % operating margin 8.0 % 13.2 % (5.2 ) % 6.1 % 13.7 % (7.6 ) % non-gaap results (unaudited) quarter ended period year ended period october 29, october 30, change october 29, october 30, change 2022 2021 y-t-y* 2022 2021 y-t-y* revenue $ 971.0 $ 1,041.5 (6.8 ) % $ 3,632.7 $ 3,620.7 0.3 % adj. gross margin 45.2 % 46.3 % (1.1 ) % 43.6 % 47.9 % (4.3 ) % adj. operating expense $ 312.8 $ 307.1 1.9 % $ 1,177.0 $ 1,129.3 4.2 % adj. operating margin 13.0 % 16.8 % (3.8 ) % 11.2 % 16.8 % (5.6 ) % adj. ebitda $ 153.5 $ 199.2 (22.9 ) % $ 502.4 $ 702.8 (28.5 ) % * denotes % change, or in the case of margin, absolute change revenue by segment (unaudited) quarter ended october 29, 2022 october 30, 2021 revenue %** revenue %** networking platforms converged packet optical $ 649.9 66.9 $ 754.6 72.5 routing and switching 102.8 10.6 74.2 7.1 total networking platforms 752.7 77.5 828.8 79.6 platform software and services 71.6 7.4 66.1 6.3 blue planet automation software and services 21.2 2.2 19.8 1.9 global services maintenance support and training 73.1 7.5 71.3 6.9 installation and deployment 36.9 3.8 47.2 4.5 consulting and network design 15.5 1.6 8.3 0.8 total global services 125.5 12.9 126.8 12.2 total $ 971.0 100.0 $ 1,041.5 100.0 revenue by segment (unaudited) year ended october 29, 2022 october 30, 2021 revenue %** revenue %** networking platforms converged packet optical $ 2,380.0 65.5 $ 2,553.5 70.5 routing and switching 398.4 11.0 271.8 7.5 total networking platforms 2,778.4 76.5 2,825.3 78.0 platform software and services 277.2 7.6 229.6 6.4 blue planet automation software and services 76.6 2.1 77.2 2.1 global services maintenance support and training 292.4 8.1 283.4 7.8 installation and deployment 157.4 4.3 171.5 4.7 consulting and network design 50.7 1.4 33.7 1.0 total global services 500.5 13.8 488.6 13.5 total $ 3,632.7 100.0 $ 3,620.7 100.0 ** denotes % of total revenue additional performance metrics for fiscal fourth quarter and year ended october 29, 2022 revenue by geographic region (unaudited) quarter ended october 29, 2022 october 30, 2021 revenue % ** revenue % ** americas $ 723.5 74.5 $ 748.7 71.9 europe, middle east and africa 135.1 13.9 170.8 16.4 asia pacific 112.4 11.6 122.0 11.7 total $ 971.0 100.0 $ 1,041.5 100.0 revenue by geographic region (unaudited) year ended october 29, 2022 october 30, 2021 revenue % ** revenue % ** americas $ 2,636.9 72.6 $ 2,525.6 69.8 europe, middle east and africa 555.2 15.3 670.5 18.5 asia pacific 440.6 12.1 424.6 11.7 total $ 3,632.7 100.0 $ 3,620.7 100.0 ** denotes % of total revenue two customers each represented 10%-plus of revenue for the fiscal fourth quarter and fiscal year 2022, combining for a total of 25.6% of revenue for the fiscal fourth quarter and 23.0% of revenue for the fiscal year 2022 cash and investments at the end of fiscal year 2022 totaled $1.2 billion cash flow used in operations totaled $14.5 million and $167.8 million for the fiscal fourth quarter and the fiscal year 2022, respectively average days' sales outstanding (dsos) were 100 and 107 for the fiscal fourth quarter and the fiscal year 2022, respectively accounts receivable, net balance was $920.8 million unbilled contract asset, net balance was $156.0 million inventories totaled $946.7 million, including: raw materials: $664.9 million work in process: $18.2 million finished goods: $258.6 million deferred cost of sales: $41.1 million reserve for excess and obsolescence: $(36.1) million raw materials: $664.9 million work in process: $18.2 million finished goods: $258.6 million deferred cost of sales: $41.1 million reserve for excess and obsolescence: $(36.1) million product inventory turns were 1.9 and 1.8 for the fiscal fourth quarter and the fiscal year 2022, respectively headcount totaled 8,079 at the end of fiscal year 2022 supplemental materials and live web broadcast of unaudited fiscal fourth quarter 2022 results today, thursday, december 08, 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 fourth quarter and fiscal year 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: "our strong fiscal fourth quarter financial results were better than expected as we benefited from some favorable supply chain developments in the second half of the quarter," said gary smith, president and ceo of ciena. "looking ahead, we expect to deliver outsized revenue growth in fiscal 2023 given our significant backlog and continued signs of gradual supply improvement. and, we remain confident that the durability of secular demand drivers and our strategic investments to expand our addressable market position us to deliver strong revenue growth over the next several years." 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 its quarterly report on form 10-q filed with the sec on september 7, 2022 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, 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 year ended october 29, october 30, october 29, october 30, 2022 2021 2022 2021 revenue: products $ 779,609 $ 860,925 $ 2,888,848 $ 2,932,602 services 191,401 180,561 743,813 688,082 total revenue 971,010 1,041,486 3,632,661 3,620,684 cost of goods sold: products 440,253 470,334 1,699,631 1,545,269 services 97,160 94,033 372,686 353,436 total cost of goods sold 537,413 564,367 2,072,317 1,898,705 gross profit 433,597 477,119 1,560,344 1,721,979 operating expenses: research and development 166,898 147,454 624,656 536,666 selling and marketing 121,865 129,625 466,565 452,214 general and administrative 48,191 49,383 179,382 181,874 significant asset impairments and restructuring costs 13,621 5,700 33,824 29,565 amortization of intangible assets 5,754 5,836 32,511 23,732 acquisition and integration costs — 1,712 598 2,572 total operating expenses 356,329 339,710 1,337,536 1,226,623 income from operations 77,268 137,409 222,808 495,356 interest and other income (loss), net 1,887 (168 ) 6,747 (1,768 ) interest expense (13,775 ) (7,916 ) (47,050 ) (30,837 ) income before income taxes 65,380 129,325 182,505 462,751 provision (benefit) for income taxes 7,735 25,826 29,603 (37,445 ) net income $ 57,645 $ 103,499 $ 152,902 $ 500,196 net income per common share basic net income per common share $ 0.39 $ 0.67 $ 1.01 $ 3.22 diluted net income per potential common share $ 0.39 $ 0.66 $ 1.00 $ 3.19 weighted average basic common shares outstanding 148,548 155,232 151,208 155,279 weighted average dilutive potential common shares outstanding 1 149,111 156,689 152,193 156,743 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 1.0 million for the fourth quarter of fiscal 2022 and fiscal 2022, respectively; and (ii) 1.5 million shares for each of the fourth quarter of fiscal 2021 and fiscal 2021. ciena corporation condensed consolidated balance sheets (in thousands, except share data) (unaudited) october 29, 2022 october 30, 2021 assets current assets: cash and cash equivalents $ 994,352 $ 1,422,546 short-term investments 153,989 181,483 accounts receivable, net 920,772 884,958 inventories 946,730 374,265 prepaid expenses and other 370,053 325,654 total current assets 3,385,896 3,188,906 long-term investments 35,385 70,038 equipment, building, furniture and fixtures, net 267,779 284,968 operating lease right-of-use assets 45,108 44,285 goodwill 328,322 311,645 other intangible assets, net 69,517 65,314 deferred tax asset, net 824,008 800,180 other long-term assets 113,617 99,891 total assets $ 5,069,632 $ 4,865,227 liabilities and stockholders’ equity current liabilities: accounts payable $ 516,047 $ 356,176 accrued liabilities and other short-term obligations 360,782 409,285 deferred revenue 137,899 118,007 operating lease liabilities 18,925 18,632 current portion of long-term debt 6,930 6,930 total current liabilities 1,040,583 909,030 long-term deferred revenue 62,336 57,457 other long-term obligations 150,335 166,803 long-term operating lease liabilities 42,392 41,564 long-term debt, net 1,061,125 670,355 total liabilities $ 2,356,771 $ 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; 148,412,943 and 154,858,981 shares issued and outstanding 1,484 1,549 additional paid-in capital 6,390,252 6,803,162 accumulated other comprehensive income (loss) (46,645 ) 439 accumulated deficit (3,632,230 ) (3,785,132 ) total stockholders’ equity 2,712,861 3,020,018 total liabilities and stockholders’ equity $ 5,069,632 $ 4,865,227 ciena corporation condensed consolidated statements of cash flows (in thousands) (unaudited) year ended october 29, october 30, 2022 2021 cash flows provided by (used in) operating activities: net income $ 152,902 $ 500,196 adjustments to reconcile net income to net cash provided by (used in) operating activities: depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements 95,922 96,233 share-based compensation expense 105,131 84,336 amortization of intangible assets 44,281 36,033 deferred taxes (27,502 ) (156,469 ) provision for inventory excess and obsolescence 16,184 17,850 provision for warranty 17,440 17,093 other — 14,525 changes in assets and liabilities: accounts receivable (47,069 ) (174,377 ) inventories (589,113 ) (47,567 ) prepaid expenses and other (58,996 ) (19,691 ) operating lease right-of-use assets 16,453 16,632 accounts payable, accruals and other obligations 100,327 162,134 deferred revenue 26,380 16,822 short and long-term operating lease liabilities (20,096 ) (22,104 ) net cash provided by (used in) operating activities (167,756 ) 541,646 cash flows used in investing activities: payments for equipment, furniture, fixtures and intellectual property (90,818 ) (79,550 ) purchase of available for sale securities (643,971 ) (172,778 ) proceeds from maturities of available for sale securities 698,642 152,253 settlement of foreign currency forward contracts, net 4,942 4,680 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 (101,248 ) (90,717 ) cash flows used in financing activities: proceeds from issuance of senior notes 400,000 — payment of long term debt (5,197 ) (6,929 ) payment of debt issuance costs (5,484 ) — payment of finance lease obligations (3,468 ) (3,004 ) shares repurchased for tax withholdings on vesting of stock unit awards (48,454 ) (44,071 ) repurchases of common stock - repurchase program (500,800 ) (91,288 ) proceeds from issuance of common stock 30,348 28,457 net cash used in financing activities (133,055 ) (116,835 ) effect of exchange rate changes on cash, cash equivalents and restricted cash (26,167 ) (198 ) net increase (decrease) in cash, cash equivalents and restricted cash (428,226 ) 333,896 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 $ 994,378 $ 1,422,604 supplemental disclosure of cash flow information cash paid during the period for interest $ 42,812 $ 29,864 cash paid during the period for income taxes, net $ 34,967 $ 73,127 operating lease payments $ 21,661 $ 24,058 non-cash investing and financing activities purchase of equipment in accounts payable $ 12,373 $ 10,138 repurchase of common stock in accrued liabilities from repurchase program $ — $ 800 operating right-of-use assets subject to lease liability $ 23,242 $ 4,356 unrealized gain on equity investment $ 4,120 $ — appendix a - reconciliation of adjusted (non- gaap) measurements (in thousands, except per share data) (unaudited) quarter ended year ended october 29, october 30, october 29, october 30, 2022 2021 2022 2021 gross profit reconciliation (gaap/non-gaap) gaap gross profit $ 433,597 $ 477,119 $ 1,560,344 $ 1,721,979 share-based compensation-products 907 920 3,867 3,408 share-based compensation-services 2,066 1,240 7,533 5,181 canadian emergency wage subsidy-products — — — (4,283 ) canadian emergency wage subsidy-services — — — (2,667 ) amortization of intangible assets 2,005 2,856 11,770 12,301 total adjustments related to gross profit 4,978 5,016 23,170 13,940 adjusted (non-gaap) gross profit $ 438,575 $ 482,135 $ 1,583,514 $ 1,735,919 adjusted (non-gaap) gross profit percentage 45.2 % 46.3 % 43.6 % 47.9 % operating expense reconciliation (gaap/non-gaap) gaap operating expense $ 356,329 $ 339,710 $ 1,337,536 $ 1,226,623 share-based compensation-research and development 8,507 5,684 31,879 21,863 share-based compensation-sales and marketing 8,084 6,192 31,280 25,152 share-based compensation-general and administrative 7,610 7,466 30,435 28,804 canadian emergency wage subsidy-research and development — — — (29,519 ) canadian emergency wage subsidy-sales and marketing — — — (2,604 ) canadian emergency wage subsidy-general and administrative — — — (2,207 ) significant asset impairments and restructuring costs 13,621 5,700 33,824 29,565 amortization of intangible assets 5,754 5,836 32,511 23,732 acquisition and integration costs — 1,712 598 2,572 total adjustments related to operating expense 43,576 32,590 160,527 97,358 adjusted (non-gaap) operating expense $ 312,753 $ 307,120 $ 1,177,009 $ 1,129,265 income from operations reconciliation (gaap/non-gaap) gaap income from operations $ 77,268 $ 137,409 $ 222,808 $ 495,356 total adjustments related to gross profit 4,978 5,016 23,170 13,940 total adjustments related to operating expense 43,576 32,590 160,527 97,358 total adjustments related to income from operations 48,554 37,606 183,697 111,298 adjusted (non-gaap) income from operations $ 125,822 $ 175,015 $ 406,505 $ 606,654 adjusted (non-gaap) operating margin percentage 13.0 % 16.8 % 11.2 % 16.8 % net income reconciliation (gaap/non-gaap) gaap net income $ 57,645 $ 103,499 $ 152,902 $ 500,196 exclude gaap provision (benefit) for income taxes 7,735 25,826 29,603 (37,445 ) income before income taxes 65,380 129,325 182,505 462,751 total adjustments related to income from operations 48,554 37,606 183,697 111,298 unrealized (gain) loss on cost method equity investment — — (4,120 ) 165 adjusted income before income taxes 113,934 166,931 362,082 574,214 non-gaap tax provision on adjusted income before income taxes 23,015 34,221 73,141 117,714 adjusted (non-gaap) net income $ 90,919 $ 132,710 $ 288,941 $ 456,500 weighted average basic common shares outstanding 148,548 155,232 151,208 155,279 weighted average dilutive potential common shares outstanding 1 149,111 156,689 152,193 156,743 net income per common share gaap diluted net income per potential common share $ 0.39 $ 0.66 $ 1.00 $ 3.19 adjusted (non-gaap) diluted net income per potential common share $ 0.61 $ 0.85 $ 1.90 $ 2.91 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 and 1.0 million for the fourth quarter of fiscal 2022 and fiscal 2022, respectively; and (ii) 1.5 million each for the fourth quarter of fiscal 2021 and fiscal 2021. appendix b - calculation of ebitda and adjusted ebitda (unaudited) (in thousands) (unaudited) quarter ended year ended october 29, october 30, october 29, october 30, 2022 2021 2022 2021 earnings before interest, tax, depreciation and amortization (ebitda) net income (gaap) $ 57,645 $ 103,499 $ 152,902 $ 500,196 add: interest expense 13,775 7,916 47,050 30,837 less: interest and other income (loss), net 1,887 (168 ) 6,747 (1,768 ) add: provision (benefit) for income taxes 7,735 25,826 29,603 (37,445 ) add: depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements 27,642 24,315 95,922 96,233 add: amortization of intangible assets 7,759 8,692 44,281 36,033 ebitda $ 112,669 $ 170,416 $ 363,011 $ 627,622 less: canadian emergency wage subsidy — — — 41,280 add: share-based compensation cost 27,174 21,366 104,994 84,336 add: significant asset impairments and restructuring costs 13,621 5,700 33,824 29,565 add: acquisition and integration costs — 1,712 598 2,572 adjusted ebitda $ 153,464 $ 199,194 $ 502,427 $ 702,815 * * * 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, the redesign of business processes and, in fiscal 2022, a $3.8 million impairment charge due to ciena's decision to suspend its business operations in russia in response to the conflict in ukraine. 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 activity in fiscal 2022. acquisition and integration costs for fiscal 2021 include costs of acquisition compensation associated with a three-year earn-out arrangement related to the donriver acquisition in fiscal 2018. unrealized (gain)loss on cost method 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 20.2% for fiscal quarter 2022 and 20.5% for fiscal quarter 2021. this rate may be subject to change in the future, including as a result of changes in tax policy or tax strategy.
