Ciena® Corporation (NASDAQ:CIEN), the network specialist, today announced unaudited results for its fiscal first quarter ended January 31, 2009. The Company also detailed savings it expects from cost-reduction actions that have been and will be implemented.
Revenue for the fiscal first quarter 2009 totaled $167.4 million, representing a 7% sequential decrease from fiscal fourth quarter 2008 revenue of $179.7 million, and a decrease of 26% over the same period a year ago, when Ciena reported revenue of $227.4 million.
On the basis of generally accepted accounting principles (GAAP), Ciena’s net loss for the fiscal first quarter 2009 was $(24.8) million, or $(0.27) per common share. This compares to fiscal fourth quarter 2008 GAAP net loss of $(25.4) million, or $(0.28) per common share, and a reported GAAP net income of $28.8 million, or $0.28 per diluted common share, for the same period a year ago.
Ciena’s adjusted (non-GAAP) net loss for the fiscal first quarter 2009 was $(8.3) million, or $(0.09) per common share. This compares to fiscal fourth quarter 2008 adjusted (non-GAAP) net loss of $(9.2) million, or $(0.10) per common share, and adjusted (non-GAAP) net income of $49.6 million, or $0.47 per diluted common share for the fiscal first quarter 2008. A reconciliation between the GAAP and adjusted (non-GAAP) measures contained in this release is provided in the table in Appendix A.
“We are managing our business with the expectation that current macroeconomic realities will continue to pressure our customers’ spending levels,” said Gary Smith, Ciena’s CEO and president. “With operating expenses down sequentially 12% from our fiscal fourth quarter, this quarter’s results reflect the benefit of company-wide cost-control initiatives, and we continue to take steps to drive efficiencies and more tightly align our resources with market opportunities. At the same time, we are preserving our strategic capabilities and competitive advantage by prioritizing key product, technology and market initiatives.”
Headcount Reductions and Facility Closure
On Wednesday, March 4, Ciena took action to effect a headcount reduction of 200 employees, or 9% of its global workforce, with reductions occurring across every organization and geography. As part of this action, the Company will close its Acton, Massachusetts, research and development facility during the course of the next four months. Ongoing development work previously conducted at the Acton facility will be consolidated on a functional basis with related efforts already in progress at other Ciena locations.
“We expect that, over the next few quarters, the combination of the cost-reduction initiatives we implemented during our fiscal first quarter and the headcount- and facilities-related cost reductions we’ve announced today will reduce our adjusted (non-GAAP) quarterly operating expenses to approximately $80 million,” said Smith.
In addition to development activities in Acton and at its headquarters in Linthicum, Maryland, Ciena has development facilities in Alpharetta, Georgia; Kanata, Ontario; San Jose, California; Spokane, Washington; and Gurgaon, India. At the end of its fiscal first quarter, Ciena employed 2,238 people worldwide.
First Quarter 2009 Performance Summary
- Achieved $167.4 million in revenue.
- Continued to expand global footprint with non-US customers contributing 41% of total revenue in the quarter.
- Inclusive of a $6.5 million charge for excess and obsolete inventory, attained an overall GAAP gross margin of 43% with product gross margin of 45% and services gross margin of 31%.
- Reduced GAAP operating expenses by 12% sequentially, from $111.6 million in the fiscal fourth quarter 2008 to $98.6 million in the fiscal first quarter 2009.
- Lowered adjusted (non-GAAP) operating expenses by 12% sequentially, from $96.2 million in the fiscal fourth quarter 2008 to $84.4 million in the fiscal first quarter 2009.
- Ended the quarter with cash, cash equivalents and short- and long-term investments of $1.1 billion, using $0.9 million in cash for operations during the quarter.
First Quarter 2009 Customer and Product Summary
- In partnership with Caltech, delivered the industry’s first true 100G payload transmission over a single wavelength during the Supercomputing Conference 2008.
- RCN Metro Optical Networks deployed Ciena’s CN 4200® FlexSelect® Advanced Services Platform family to enable the delivery of assured, high-capacity transport services in managed optical networks. RCN Metro also joined Ciena’s BizConnect global partner program as a designated Managed Services Provider partner.
- GTS Energis enhanced its core optical backbone and metro networks with Ciena’s CoreStream® Agility Optical Transport System and CN 4200 FlexSelect Advanced Services Platform.
- Northwestern University deployed the CN 4200 RS FlexSelect Advanced Services Platform with reconfigurable optical add/drop multiplexer (ROADM) functionality to increase network capacity across the University’s campuses in support of research collaboration and resource sharing for its scientific and educational communities.
Business Outlook
“With the current macroeconomic and industry volatility, and as our customers continue to delay and more carefully scrutinize capital expenditures, our short-term visibility is extremely limited. As a result, we are not in a position to provide revenue guidance for the fiscal second quarter 2009,” said Smith. “In the near term we continue to manage the business with the objective of preserving both the strength of our balance sheet and our strategic capabilities, while working to achieve breakeven as-adjusted net income and cash-flow, and we believe our cost-reduction initiatives are an integral component of achieving this goal.”
“With our revised operating expense level, we’ve sized the business to roughly breakeven as-adjusted net income and cash flow if we achieve revenue and gross margin at approximately fiscal first quarter levels,” continued Smith. “We remain confident in the fundamental demand drivers of our target markets and focused on our long-term goal of emerging from this challenging period positioned to drive future revenue and EPS growth.”
Live Web Broadcast of Unaudited Fiscal First Quarter 2009 Results
Ciena will host a discussion of its unaudited fiscal first quarter 2009 results with investors and financial analysts today, Thursday, March 5, 2009 at 8:30 a.m. (Eastern). The live broadcast of the discussion will be available via Ciena’s homepage at www.ciena.com. An archived version of the discussion will be available shortly following the conclusion of the live broadcast on the Investor Relations page of Ciena’s website at: http://www.ciena.com/investors.
Note to Investors
Forward-looking statements. This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties. These statements are based on information available to the Company as of the date hereof; and Ciena's actual results could differ materially from those stated or implied, due to risks and uncertainties associated with its business, which include the risk factors disclosed in its Report on Form 10-K, which Ciena filed with the Securities and Exchange Commission on December 23, 2008. 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 expect that, over the next few quarters, the combination of the cost-reduction initiatives we implemented during our fiscal first quarter and the headcount- and facilities-related cost reductions we’ve announced today, will reduce our adjusted (non-GAAP) quarterly operating expenses to approximately $80 million; with the current macroeconomic and industry volatility, and as our customers continue to delay and more carefully scrutinize capital expenditures, our short-term visibility is extremely limited; as a result, we are not in a position to provide revenue guidance for the fiscal second quarter 2009; in the near term we continue to manage the business with the objective of preserving both the strength of our balance sheet and our strategic capabilities, while working to achieve breakeven as-adjusted net income and cash-flow, and we believe our cost-reduction initiatives are an integral component of achieving this goal; with our revised operating expense level, we’ve sized the business to roughly breakeven as-adjusted net income and cash flow if we achieve revenue and gross margin at approximately fiscal first quarter levels; and we remain confident in the fundamental demand drivers of our target markets and focused on our long-term goal of emerging from this challenging period positioned to drive future revenue and EPS growth. Ciena assumes no obligation to update the information included in this press release, whether as a result of new information, future events or otherwise.
Non-GAAP Presentation of Quarterly Results. This release includes non-GAAP measures of Ciena’s gross profit, operating expenses, income from operations, 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. For a complete GAAP to non-GAAP reconciliation of the non-GAAP measures contained in this release, see Appendix A.
About Ciena
Ciena specializes in practical network transition. We offer leading network infrastructure solutions, intelligent software and a comprehensive services practice to help our customers use their networks to fundamentally change the way they compete. With a growing global presence, Ciena leverages its heritage of practical innovation to deliver maximum performance and economic value in communications networks worldwide. For more information, visit www.ciena.com.
| CIENA CORPORATION | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| (in thousands, except per share data) | ||||||||
| (unaudited) | ||||||||
| Quarter Ended January 31, | ||||||||
| 2008 | 2009 | |||||||
| Revenues: | ||||||||
| Products | $ | 201,790 | $ | 139,717 | ||||
| Services | 25,626 | 27,683 | ||||||
| Total revenue | 227,416 | 167,400 | ||||||
| Costs: | ||||||||
| Products | 91,387 | 76,367 | ||||||
| Services | 19,460 | 19,190 | ||||||
| Total cost of goods sold | 110,847 | 95,557 | ||||||
| Gross profit | 116,569 | 71,843 | ||||||
| Operating expenses: | ||||||||
| Research and development | 35,444 | 46,700 | ||||||
| Selling and marketing | 33,608 | 33,819 | ||||||
| General and administrative | 22,628 | 11,585 | ||||||
| Amortization of intangible assets | 6,470 | 6,404 | ||||||
| Restructuring cost | - | 76 | ||||||
| Total operating expenses | 98,150 | 98,584 | ||||||
| Income (loss) from operations | 18,419 | (26,741 | ) | |||||
| Interest and other income, net | 19,082 | 4,660 | ||||||
| Interest expense | (7,358 | ) | (1,844 | ) | ||||
| Loss on cost method investments | - | (565 | ) | |||||
| Income (loss) before income taxes | 30,143 | (24,490 | ) | |||||
| Provision for income taxes | 1,336 | 341 | ||||||
| Net income (loss) | $ | 28,807 | $ | (24,831 | ) | |||
| Basic net income (loss) per common share | $ | 0.33 | $ | (0.27 | ) | |||
| Diluted net income (loss) per potential common share | $ | 0.28 | $ | (0.27 | ) | |||
| Weighted average basic common shares outstanding | 86,910 | 90,620 | ||||||
| Weighted average dilutive potential common shares outstanding | 109,009 | 90,620 | ||||||
| CIENA CORPORATION | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (in thousands, except share data) | ||||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| October 31, | January 31, | |||||||
| Current assets: | 2008 | 2009 | ||||||
| Cash and cash equivalents | $ | 550,669 | $ | 534,985 | ||||
| Short-term investments | 366,336 | 387,618 | ||||||
| Accounts receivable, net | 138,441 | 130,477 | ||||||
| Inventories | 93,452 | 91,283 | ||||||
| Prepaid expenses and other | 35,888 | 34,186 | ||||||
| Total current assets | 1,184,786 | 1,178,549 | ||||||
| Long-term investments | 156,171 | 146,446 | ||||||
| Equipment, furniture and fixtures, net | 59,967 | 59,390 | ||||||
| Goodwill | 455,673 | 455,673 | ||||||
| Other intangible assets, net | 92,249 | 84,194 | ||||||
| Other long-term assets | 75,748 | 76,299 | ||||||
| Total assets | $ | 2,024,594 | $ | 2,000,551 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 44,761 | $ | 50,194 | ||||
| Accrued liabilities | 96,143 | 86,219 | ||||||
| Restructuring liabilities | 1,668 | 611 | ||||||
| Income taxes payable | - | 1,162 | ||||||
| Deferred revenue | 36,767 | 35,578 | ||||||
| Total current liabilities | 179,339 | 173,764 | ||||||
| Long-term deferred revenue | 37,660 | 36,316 | ||||||
| Long-term restructuring liabilities | 2,557 | 2,403 | ||||||
| Other long-term obligations | 8,089 | 7,966 | ||||||
| Convertible notes payable | 798,000 | 798,000 | ||||||
| Total liabilities | 1,025,645 | 1,018,449 | ||||||
| Commitments and contingencies | ||||||||
| 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; 90,470,803 and 90,673,622 shares issued and outstanding | 905 | 907 | ||||||
| Additional paid-in capital | 5,629,498 | 5,638,048 | ||||||
| Accumulated other comprehensive loss | (1,275 | ) | (1,843 | ) | ||||
| Accumulated deficit | (4,630,179 | ) | (4,655,010 | ) | ||||
| Total stockholders' equity | 998,949 | 982,102 | ||||||
| Total liabilities and stockholders' equity | $ | 2,024,594 | $ | 2,000,551 | ||||
| CIENA CORPORATION | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended January 31, | ||||||||
| 2008 | 2009 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | 28,807 | $ | (24,831 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Amortization of discount on marketable securities | (1,296 | ) | (863 | ) | ||||
| Non-cash loss on cost method investments | - | 565 | ||||||
| Depreciation and amortization of leasehold improvements | 3,949 | 5,097 | ||||||
| Share-based compensation | 6,881 | 8,494 | ||||||
| Amortization of intangibles | 7,438 | 8,055 | ||||||
| Deferred tax provision | 471 | - | ||||||
| Provision for doubtful accounts | 25 | 42 | ||||||
| Provision for inventory excess and obsolescence | 5,794 | 6,548 | ||||||
| Provision for warranty | 2,914 | 2,541 | ||||||
| Other | 1,118 | 229 | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (40,586 | ) | 7,922 | |||||
| Inventories | (6,696 | ) | (4,379 | ) | ||||
| Prepaid expenses and other | 5,413 | (147 | ) | |||||
Accounts payable, accruals, and other obligations | 6,383 | (8,781 | ) | |||||
| Income taxes payable | (5,576 | ) | 1,162 | |||||
| Deferred revenue | (1,376 | ) | (2,533 | ) | ||||
| Net cash provided by (used in) operating activities | 13,663 | (879 | ) | |||||
| Cash flows from investing activities: | ||||||||
| Payments for equipment, furniture, fixtures and intellectual property | (6,666 | ) | (6,140 | ) | ||||
| Restricted cash | (263 | ) | (84 | ) | ||||
| Purchase of available for sale securities | - | (195,538 | ) | |||||
| Proceeds from maturities of available for sale securities | 564,376 | 186,853 | ||||||
| Net cash provided by (used in) investing activities | 557,447 | (14,909 | ) | |||||
| Cash flows from financing activities: | ||||||||
| Repayment of 3.75% convertible notes payable | (542,262 | ) | - | |||||
| Proceeds from issuance of common stock and warrants | 1,254 | 58 | ||||||
| Net cash provided by (used in) financing activities | (541,008 | ) | 58 | |||||
| Effect of exchange rate changes on cash and cash equivalents | 143 | 46 | ||||||
| Net increase (decrease) in cash and cash equivalents | 30,102 | (15,730 | ) | |||||
| Cash and cash equivalents at beginning of period | 892,061 | 550,669 | ||||||
| Cash and cash equivalents at end of period | $ | 922,306 | $ | 534,985 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid (refunded) during the period for: | ||||||||
| Interest expense | $ | 12,403 | $ | 2,188 | ||||
| Income taxes, net | $ | 557 | $ | (695 | ) | |||
| Non-cash investing and financing activities | ||||||||
| Cash paid during the period for: | ||||||||
| Purchase of equipment in accounts payable | $ | 1,355 | $ | 641 | ||||
| APPENDIX A - Reconciliation of Adjusted (Non-GAAP) Quarterly Measures | ||||||||||||
| Quarter Ended | ||||||||||||
| January 31, | October 31, | January 31, | ||||||||||
| 2008 | 2008 | 2009 | ||||||||||
| Gross Profit Reconciliation (GAAP/non-GAAP) | ||||||||||||
| GAAP gross profit | $ | 116,569 | $ | 81,131 | $ | 71,843 | ||||||
| Share-based compensation-product | 565 | 604 | 713 | |||||||||
| Share-based compensation-services | 246 | 370 | 397 | |||||||||
| Amortization of intangible assets | - | 683 | 683 | |||||||||
| Total adjustments related to gross profit | 811 | 1,657 | 1,793 | |||||||||
| Adjusted (non-GAAP) gross profit | $ | 117,380 | $ | 82,788 | $ | 73,636 | ||||||
| Adjusted (non-GAAP) gross profit percentage | 52 | % | 46 | % | 44 | % | ||||||
| Operating Expense Reconciliation (GAAP/non-GAAP) | ||||||||||||
GAAP operating expenses | $ | 98,150 | $ | 111,597 | $ | 98,584 | ||||||
| Stock compensation research and development | 1,177 | 1,603 | 2,566 | |||||||||
| Stock compensation sales and marketing | 2,464 | 2,512 | 2,703 | |||||||||
| Stock compensation general and administrative | 2,209 | 1,859 | 2,419 | |||||||||
| Amortization of intangible assets | 6,470 | 8,363 | 6,404 | |||||||||
| Litigation settlement | 7,700 | - | - | |||||||||
| Restructuring cost | - | 1,110 | 76 | |||||||||
Total adjustments related to operating expenses | 20,020 | 15,447 | 14,168 | |||||||||
Adjusted (non-GAAP) operating expenses | $ | 78,130 | $ | 96,150 | $ | 84,416 | ||||||
| Income (Loss) from Operations Reconciliation (GAAP/non-GAAP) | ||||||||||||
| GAAP income (loss) from operations | $ | 18,419 | $ | (30,466 | ) | $ | (26,741 | ) | ||||
| Total adjustments related to gross profit | 811 | 1,657 | 1,793 | |||||||||
Total adjustments related to operating expenses | 20,020 | 15,447 | 14,168 | |||||||||
| Adjusted (non-GAAP) income (loss) from operations | $ | 39,250 | $ | (13,362 | ) | $ | (10,780 | ) | ||||
| Adjusted (non-GAAP) operating margin percentage | 17 | % | (7 | %) | (6 | %) | ||||||
| Net Income (Loss) Reconciliation (GAAP/non-GAAP) | ||||||||||||
| GAAP net (loss) income | $ | 28,807 | $ | (25,396 | ) | $ | (24,831 | ) | ||||
| Total adjustments related to gross profit | 811 | 1,657 | 1,793 | |||||||||
Total adjustments related to operating expenses | 20,020 | 15,447 | 14,168 | |||||||||
| Realized gain on marketable debt investments, net | - | (13 | ) | - | ||||||||
| Loss on cost method investment | - | - | 565 | |||||||||
| Gain on early extinguishment of debt | - | (932 | ) | - | ||||||||
| Adjusted (non-GAAP) net income (loss) | $ | 49,638 | $ | (9,237 | ) | $ | (8,305 | ) | ||||
| Weighted average basic common shares outstanding | 86,910 | 90,413 | 90,620 | |||||||||
Weighted average basic common and dilutive potential common shares outstanding | 109,009 | 90,413 | 90,620 | |||||||||
Net Income (Loss) per Common Share (GAAP/non-GAAP) | ||||||||||||
GAAP diluted net income (loss) per common share1 | $ | 0.28 | $ | (0.28 | ) | $ | (0.27 | ) | ||||
Adjusted (non-GAAP) diluted net income (loss) per common share1 | $ | 0.47 | $ | (0.10 | ) | $ | (0.09 | ) | ||||
1 Note that calculating GAAP and adjusted (non-GAAP) diluted earnings per common share requires adding to net income interest expense of approximately $1.8 million (associated with Ciena's 0.25% and 0.875% convertible senior notes) in the fiscal first quarter 2008. |
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 cost – a non-cash expense incurred in accordance with SFAS 123(R).
- Amortization of intangible assets – a non-cash expense arising from acquisition of intangible assets, principally developed technology, which Ciena is required to amortize over its expected useful life.
- Litigation settlement – included in general and administrative expenses during fiscal first quarter 2008 is expense associated with a litigation settlement that Ciena believes is not reflective of its ongoing operating costs.
- Restructuring costs – infrequent costs incurred as the result of restructuring activities (or in the case of recoveries, previous restructuring activities) taken to align resources with perceived market opportunities that Ciena believes are not reflective of its ongoing operating costs.
- Realized gain on marketable debt investments – an infrequent gain related to Ciena’s investments in commercial paper issued by two structured investment vehicles (SIVs) exposed to market risks stemming from mortgage-related assets.
- Loss on cost method investment – Ciena recognized a $0.6 million loss in fiscal first quarter 2009.
- Gain on early extinguishment of debt – an infrequent gain related to the early extinguishment of outstanding debt.
Contacts:
Nicole Anderson
Ciena Corporation
410-694–5786
pr@ciena.com
or
Investor
Contact:
Marie Downing
Ciena Corporation
888-243-6223
ir@ciena.com
