Ciena Reports Fiscal Second Quarter 2024 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 second quarter ended April 27, 2024.

• Q2 Revenue: $910.8 million
• Q2 Net Income (Loss) per Share: $(0.12) GAAP; $0.27 adjusted (non-GAAP)
• Share Repurchases: Repurchased approximately 1.1 million shares of common stock for an aggregate price of $57.0 million during the quarter

"Our fiscal second quarter performance underscores the strength in our business amid a challenging near-term environment as service providers continue to work through existing inventory," said Gary Smith, president and CEO, Ciena. “With continued robust growth in bandwidth demand, we remain focused on extending our leadership in optical as a foundation for expanding our addressable market.”

For the fiscal second quarter 2024, Ciena reported revenue of $910.8 million as compared to $1.13 billion for the fiscal second quarter 2023.

Ciena's GAAP net loss for the fiscal second quarter 2024 was $(16.8) million, or $(0.12) per diluted common share, which compares to a GAAP net income of $57.7 million, or $0.38 per diluted common share, for the fiscal second quarter 2023.

Ciena's adjusted (non-GAAP) net income for the fiscal second quarter 2024 was $39.4 million, or $0.27 per diluted common share, which compares to an adjusted (non-GAAP) net income of $110.4 million, or $0.74 per diluted common share, for the fiscal second quarter 2023.

Fiscal Second Quarter 2024 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)
	Q2			Q2			Period Change
	FY 2024			FY 2023			Y-T-Y*
Revenue	$	910.8		$	1,132.7		(19.6	)%
Gross margin		42.7	%		43.1	%	(0.4	)%
Operating expense	$	392.6		$	384.9		2.0	%
Operating margin		(0.4	)%		9.1	%	(9.5	)%

	Non-GAAP Results (unaudited)
	Q2			Q2			Period Change
	FY 2024			FY 2023			Y-T-Y*
Revenue	$	910.8		$	1,132.7		(19.6	)%
Adj. gross margin		43.5	%		43.7	%	(0.2	)%
Adj. operating expense	$	333.9		$	338.1		(1.2	)%
Adj. operating margin		6.8	%		13.8	%	(7.0	)%
Adj. EBITDA	$	85.8		$	180.6		(52.5	)%
* Denotes % change, or in the case of margin, absolute change

	Revenue by Segment (unaudited)
	Q2 FY 2024			Q2 FY 2023
	Revenue		%**	Revenue		%**
Networking Platforms
Optical Networking	$	560.2	61.5	$	784.5	69.3
Routing and Switching		116.1	12.7		130.4	11.5
Total Networking Platforms		676.3	74.2		914.9	80.8
Platform Software and Services		85.4	9.4		69.4	6.1
Blue Planet Automation Software and Services		14.4	1.6		20.6	1.8
Global Services
Maintenance Support and Training		77.4	8.5		73.2	6.5
Installation and Deployment		43.8	4.8		39.5	3.5
Consulting and Network Design		13.5	1.5		15.1	1.3
Total Global Services		134.7	14.8		127.8	11.3
Total	$	910.8	100.0	$	1,132.7	100.0
** Denotes % of total revenue

Additional Performance Metrics for Fiscal Second Quarter 2024

	Revenue by Geographic Region (unaudited)
	Q2 FY 2024			Q2 FY 2023
	Revenue		% **	Revenue		% **
Americas	$	662.9	72.8	$	794.4	70.1
Europe, Middle East and Africa		155.8	17.1		173.4	15.3
Asia Pacific		92.1	10.1		164.9	14.6
Total	$	910.8	100.0	$	1,132.7	100.0
** Denotes % of total revenue

• One 10%-plus customer represented a total 13.8% of revenue
• Cash and investments totaled $1.42 billion
• Cash flow from operations totaled $58.5 million
• Average days' sales outstanding (DSOs) were 98
• Accounts receivable, net balance was $840.1 million
• Unbilled contract asset, net balance was $151.9 million
• Inventories totaled $1.02 billion, including:
  • Raw materials: $638.9 million
  • Work in process: $68.2 million
  • Finished goods: $331.3 million
  • Deferred cost of sales: $43.7 million
  • Reserve for excess and obsolescence: $(59.5) million
• Product inventory turns were 1.6
• Headcount totaled 8,627

Supplemental Materials and Live Web Broadcast of Unaudited Fiscal Second Quarter 2024 Results

Today, Thursday, June 6, 2024, 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 second quarter 2024 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 fiscal second quarter performance underscores the strength in our business amid a challenging near-term environment as service providers continue to work through existing inventory. With continued robust growth in bandwidth demand, we remain focused on extending our leadership in optical as a foundation for expanding our addressable market.”

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, their spending and their businesses and markets; our ability to execute our business and growth strategies; the impact of macroeconomic conditions and global supply chain constraints or disruptions including increased supply costs and lead times; the impact of the introduction of new technologies by us or our competitors; seasonality and the timing and size of customer orders, their delivery dates and 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 tensions or events, including but not limited to the ongoing conflicts between Ukraine and Russia, and Israel and Hamas, and public health emergencies or epidemics, including the COVID-19 pandemic; changes in tax or trade regulations, including the imposition of tariffs, duties or efforts to withdraw from or materially modify international trade agreements; cyberattacks, data breaches or other security incidents involving our enterprise network environment or our products; regulatory changes, litigation involving our intellectual property or government investigations; and the other risk factors disclosed in Ciena’s periodic reports filed with the Securities and Exchange Commission (SEC) including its Annual Report on Form 10-K filed with the SEC on December 15, 2023 and included in its Quarterly Report on Form 10-Q for the second quarter of fiscal 2024 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 LinkedIn, X, 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
	April 27,			April 29,			April 27,			April 29,
	2024			2023			2024			2023
Revenue:
Products	$	701,316		$	935,330		$	1,537,093		$	1,813,045
Services		209,510			197,325			411,442			376,131
Total revenue		910,826			1,132,655			1,948,535			2,189,176
Cost of goods sold:
Products		415,732			541,883			882,204			1,042,220
Services		106,433			103,089			210,708			203,327
Total cost of goods sold		522,165			644,972			1,092,912			1,245,547
Gross profit		388,661			487,683			855,623			943,629
Operating expenses:
Research and development		195,380			189,993			382,649			371,723
Selling and marketing		124,071			125,083			252,229			248,890
General and administrative		49,573			50,939			104,256			101,835
Significant asset impairments and restructuring costs		15,655			8,153			20,626			12,451
Amortization of intangible assets		7,947			9,845			15,199			17,286
Acquisition and integration costs		—			857			—			3,415
Total operating expenses		392,626			384,870			774,959			755,600
Income (loss) from operations		(3,965	)		102,813			80,664			188,029
Interest and other income, net		11,797			8,551			22,447			40,524
Interest expense		(23,861	)		(23,889	)		(47,637	)		(39,759	)
Income (loss) before income taxes		(16,029	)		87,475			55,474			188,794
Provision for income taxes		820			29,821			22,776			54,899
Net income (loss)	$	(16,849	)	$	57,654		$	32,698		$	133,895
Net Income (Loss) per Common Share
Basic net income (loss) per common share	$	(0.12	)	$	0.39		$	0.23		$	0.90
Diluted net income (loss) per potential common share	$	(0.12	)	$	0.38		$	0.22		$	0.89
Weighted average basic common shares outstanding		144,914			149,616			145,104			149,351
Weighted average dilutive potential common shares outstanding^1		144,914			150,147			146,059			149,852

^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) 1.0 million for the first six months of fiscal 2024, and (ii) 0.5 million for both the second quarter and first six months of fiscal 2023.

CIENA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
	April 27, 2024			October 28, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	1,091,289		$	1,010,618
Short-term investments		165,620			104,753
Accounts receivable, net		840,131			1,003,876
Inventories, net		1,022,615			1,050,838
Prepaid expenses and other		421,692			405,694
Total current assets		3,541,347			3,575,779
Long-term investments		165,960			134,278
Equipment, building, furniture and fixtures, net		274,353			280,147
Operating lease right-of-use assets		30,210			35,140
Goodwill		444,917			444,765
Other intangible assets, net		184,941			205,627
Deferred tax asset, net		821,879			809,306
Other long-term assets		151,196			116,453
Total assets	$	5,614,803		$	5,601,495
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	332,106		$	317,828
Accrued liabilities and other short-term obligations		355,258			431,419
Deferred revenue		196,989			154,419
Operating lease liabilities		16,138			16,655
Current portion of long-term debt		11,700			11,700
Total current liabilities		912,191			932,021
Long-term deferred revenue		80,365			74,041
Other long-term obligations		172,839			170,407
Long-term operating lease liabilities		28,513			33,259
Long-term debt, net		1,540,639			1,543,406
Total liabilities		2,734,547			2,753,134
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; 144,199,201 and 144,829,938 shares issued and outstanding		1,442			1,448
Additional paid-in capital		6,245,248			6,262,083
Accumulated other comprehensive loss		(21,729	)		(37,767	)
Accumulated deficit		(3,344,705	)		(3,377,403	)
Total stockholders’ equity		2,880,256			2,848,361
Total liabilities and stockholders’ equity	$	5,614,803		$	5,601,495

CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
	Six Months Ended
	April 27,			April 29,
	2024			2023
Cash flows provided by (used in) operating activities:
Net income	$	32,698		$	133,895
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		46,016			45,903
Share-based compensation expense		78,075			62,372
Amortization of intangible assets		20,726			23,600
Deferred taxes		(8,946	)		(2,134	)
Provision for inventory excess and obsolescence		23,152			12,691
Provision for warranty		8,629			13,577
Gain on equity investments, net		—			(26,455	)
Other		11,509			11,331
Changes in assets and liabilities:
Accounts receivable		155,107			(116,914	)
Inventories		5,346			(162,143	)
Prepaid expenses and other		(37,441	)		(41,511	)
Operating lease right-of-use assets		6,111			7,644
Accounts payable, accruals and other obligations		(56,064	)		(55,754	)
Deferred revenue		48,641			68,818
Short and long-term operating lease liabilities		(9,010	)		(10,748	)
Net cash provided by (used in) operating activities		324,549			(35,828	)
Cash flows used in investing activities:
Payments for equipment, furniture, fixtures and intellectual property		(33,500	)		(58,034	)
Purchases of investments		(171,131	)		(106,245	)
Proceeds from sales and maturities of investments		83,013			123,251
Settlement of foreign currency forward contracts, net		(828	)		(6,194	)
Purchase of equity investments		(16,256	)		—
Acquisition of business, net of cash acquired		—			(230,048	)
Net cash used in investing activities		(138,702	)		(277,270	)
Cash flows provided by (used in) financing activities:
Proceeds from issuance of term loan, net		—			497,500
Payment of long term debt		(2,925	)		(3,465	)
Payment of debt issuance costs		(2,554	)		(5,230	)
Payment of finance lease obligations		(1,989	)		(1,864	)
Shares repurchased for tax withholdings on vesting of stock unit awards		(22,428	)		(22,022	)
Repurchases of common stock - repurchase program, net		(94,817	)		—
Proceeds from issuance of common stock		16,876			14,656
Net cash provided by (used in) financing activities		(107,837	)		479,575
Effect of exchange rate changes on cash, cash equivalents and restricted cash		2,659			6,867
Net increase in cash, cash equivalents and restricted cash		80,669			173,344
Cash, cash equivalents and restricted cash at beginning of period		1,010,786			994,378
Cash, cash equivalents and restricted cash at end of period	$	1,091,455		$	1,167,722
Supplemental disclosure of cash flow information
Cash paid during the period for interest, net	$	45,782		$	37,514
Cash paid during the period for income taxes, net	$	29,193		$	24,218
Operating lease payments	$	9,964		$	11,689
Non-cash investing and financing activities
Purchase of equipment in accounts payable	$	6,365		$	4,618
Repurchase of common stock in accrued liabilities from repurchase program	$	3,859		$	—
Operating right-of-use assets subject to lease liability	$	3,639		$	6,177
Gain on equity investments, net	$	—		$	26,455

APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Measurements
(in thousands, except per share data) (unaudited)
	Quarter Ended
	April 27,			April 29,
	2024			2023
Gross Profit Reconciliation (GAAP/non-GAAP)
GAAP gross profit	$	388,661		$	487,683
Share-based compensation-products		1,760			1,155
Share-based compensation-services		3,344			2,659
Amortization of intangible assets		2,763			3,431
Total adjustments related to gross profit		7,867			7,245
Adjusted (non-GAAP) gross profit	$	396,528		$	494,928
Adjusted (non-GAAP) gross profit percentage		43.5	%		43.7	%
Operating Expense Reconciliation (GAAP/non-GAAP)
GAAP operating expense	$	392,626		$	384,870
Share-based compensation-research and development		14,066			10,731
Share-based compensation-sales and marketing		11,166			8,755
Share-based compensation-general and administrative		9,875			8,468
Significant asset impairments and restructuring costs		15,655			8,153
Amortization of intangible assets		7,947			9,845
Acquisition and integration costs		—			857
Total adjustments related to operating expense		58,709			46,809
Adjusted (non-GAAP) operating expense	$	333,917		$	338,061
Income (Loss) from Operations Reconciliation (GAAP/non-GAAP)
GAAP income (loss) from operations	$	(3,965	)	$	102,813
Total adjustments related to gross profit		7,867			7,245
Total adjustments related to operating expense		58,709			46,809
Total adjustments related to income (loss) from operations		66,576			54,054
Adjusted (non-GAAP) income from operations	$	62,611		$	156,867
Adjusted (non-GAAP) operating margin percentage		6.8	%		13.8	%
Net Income (Loss) Reconciliation (GAAP/non-GAAP)
GAAP net income (loss)	$	(16,849	)	$	57,654
Exclude GAAP provision for income taxes		820			29,821
Income (loss) before income taxes		(16,029	)		87,475
Total adjustments related to income from operations		66,576			54,054
Adjusted income before income taxes		50,547			141,529
Non-GAAP tax provision on adjusted income before income taxes		11,120			31,136
Adjusted (non-GAAP) net income	$	39,427		$	110,393
Weighted average basic common shares outstanding		144,914			149,616
Weighted average dilutive potential common shares outstanding ^1		146,268			150,147
Net Income (Loss) per Common Share
GAAP diluted net income (loss) per potential common share	$	(0.12	)	$	0.38
Adjusted (non-GAAP) diluted net income per potential common share	$	0.27		$	0.74

^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) 1.4 million and 1.0 million for the second quarter and first six months of fiscal 2024, respectively; and (ii) 0.5 million for both the second quarter and first six months of fiscal 2023.

APPENDIX B - Calculation of EBITDA and Adjusted EBITDA
(in thousands) (unaudited)
	Quarter Ended
	April 27,			April 29,
	2024			2023
Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)
Net income (loss) (GAAP)	$	(16,849	)	$	57,654
Add: Interest expense		23,861			23,889
Less: Interest and other income, net		11,797			8,551
Add: Provision for income taxes		820			29,821
Add: Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements		23,208			23,695
Add: Amortization of intangible assets		10,710			13,275
EBITDA	$	29,953		$	139,783
Add: Share-based compensation expense		40,211			31,768
Add: Significant asset impairments and restructuring costs		15,655			8,153
Add: Acquisition and integration costs		—			857
Adjusted EBITDA	$	85,819		$	180,561

* * *

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, the redesign of business processes and 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 an 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 2023.
• 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 both the fiscal second quarter 2024 and the fiscal second quarter 2023. This rate may be subject to change in the future, including as a result of changes in tax policy or tax strategy.