Ciena Corporation
Earnings Presentation
Period ended January 30, 2021
March 4, 2021
Forward-looking statements and non-GAAP measures
Information in this presentation and related comments of presenters contain a number of 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 Ciena's prospective financial results, return of capital plans, business strategies, expectations about its addressable markets and market share, and business outlook for future periods, as well as statements regarding Ciena's expectations, beliefs, intentions or strategies regarding the future. Often, these can be identified by forward-looking words such as "target" "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," "plan," "predict," "potential," "project, "continue," and "would" or similar words.
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 successfully our business and growth strategies; the duration and severity of the COVID-19 pandemic and its impact 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; supply chain disruptions and the level of success relating to efforts to optimize Ciena's operations; changes in foreign currency exchange rates affecting revenue and operating expense; factors beyond our control such as natural disasters, acts of war or terrorism, and public health emergencies, including the COVID-19 pandemic; the impact of the Tax Cuts and Jobs Act; changes in tax or trade regulations, including the imposition of tariffs, duties or efforts to withdraw from or materially modify international trade agreements; changes in estimates of prospective income tax rates and any adjustments to Ciena's provisional estimates whether related to further guidance, analysis or otherwise; 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 18, 2020 and Ciena's Quarterly Report on Form 10-Q for the first quarter of fiscal 2021 to be filed with the SEC.
All information, statements, and projections in this presentation and the related earnings call speak only as of the date of this presentation and related earnings call. Ciena assumes no obligation to update any forward-looking or other information included in this presentation or related earnings calls, whether as a result of new information, future events or otherwise.
In addition, this presentation includes historical, and may include prospective, non-GAAP measures of Ciena's gross margin, operating expense, operating profit, EBITDA, net income, and net income per share. These measures are not intended to be a substitute for financial information presented in accordance with GAAP. A reconciliation of non-
GAAP measures used in this presentation to Ciena's GAAP results for the relevant period can be found in the Appendix to this presentation. Additional information can also be found in our press release filed this morning and in our reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission.
COVID-19 response
• Prioritizing health of employees and following CDC guidance for employers
• The vast majority of our employees working remotely
• Instituted pandemic employee benefits
• Enhanced our corporate charitable matching program for employee donations and volunteering
Result: Our employees have excelled through their continued focus, strength and kindness
• Supply chain design and business continuity planning has enabled us to continue to support customers and minimize disruption
• Significant IT investment in digital platforms and virtual collaboration tools has enabled a seamless transition to remote working
Result: We are well positioned to manage through the current set of challenges presented by COVID-19
• We have a strong balance sheet and have demonstrated solid cash flow generation over time
• In light of our confidence around cash generation, we reinstated our share repurchase plan starting in the first quarter of 2021
Result: Our financial strength provides long-term resiliency and differentiated flexibility to support our business
Q1 FY 2021 key achievements
We are forcing the pace of innovation
▪ WaveLogic 5 Extreme (WL5e) added 14 customers bringing our total design wins to 79
▪ Blue Planet surpassed 200 total customers for our automation software and services portfolio
▪ Secured the first Private 5G network win for our Routing and Switching portfolio
We have a durable business and financial model
▪ Despite headwinds from COVID-19 our profitability has remained strong
• Adj. operating margin* was 14.6%
▪ Our balance sheet represents a competitive advantage
• Ended the quarter with over $1.3B in cash and investments
• Leverage remains below our target level
We are committed to our people and communities
• Launched Digital Inclusion
Commitment initiative with a goal to
provide opportunities for 100,000
underserved students in our global
communities
• Announced innovative programs with customers to promote our digital inclusion mission
• Supporting our employees through empowering programs, a focus on wellbeing and commitment to diversity, inclusion and belonging
In this challenging period we continued to force the pace of innovation and resilience while focusing on kindness to others
* A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation.
demonstrate
Market context
Several mega trends and the innovations that will enable them
IoT & ConnectedCloud
Data Center
ObjectsFiber Deep
(Cable/MSO)
Mobility & 5G
Market leadership
#1 GLOBALLY
◦ DATA CENTER INTERCONNECT
◦ DATA CENTER INTERCONNECT FOR ICP/CNPs
◦ PURPOSE-BUILT/COMPACT MODULAR DCI
◦ OPTICAL NETWORKING FOR ICP/CNPs
◦ OPTICAL NETWORK HARDWARE VENDOR SCORECARD
◦ OPTICAL EQUIPMENT VENDOR LEADERSHIP SP SURVEY
◦ SLTE WDM
#1 N. AMERICA
◦ TOTAL OPTICAL NETWORKING
◦ DATA CENTER INTERCONNECT
◦ TOTAL WDM
◦ LH WDM
◦ METRO WDM
◦ SLTE WDM
◦ ACCESS SWITCHING
#2 GLOBALLY
◦ TOTAL WDM
◦ ACCESS SWITCHING
#1 GLOBALLY
◦ PURPOSE-BUILT/COMPACT MODULAR DCI
◦ CLOUD & COLO
#1 N. AMERICA
◦ TOTAL OPTICAL NETWORKING
◦ PURPOSE-BUILT/COMPACT MODULAR DCI
◦ TOTAL WDM
◦ LH WDM
◦ METRO WDM
◦ SLTE WDM
#2 GLOBALLY
◦ TOTAL OPTICAL NETWORKING
◦ SLTE WDM
#1 GLOBALLY
◦ DATA CENTER INTERCONNECT
◦ DATA CENTER INTERCONNECT FOR ICPs
◦ PURPOSE-BUILT/COMPACT MODULAR DCI
#1 N. AMERICA
◦ TOTAL OPTICAL NETWORKING
◦ DATA CENTER INTERCONNECT
◦ PACKET OPTICAL
◦ TOTAL WDM
◦ LH WDM
◦ METRO WDM
#2 GLOBALLY
◦ TOTAL OPTICAL NETWORKING
◦ TOTAL WDM
◦ LH WDM
Optical Networks Report, 4Q20
Data Center Interconnect Market Share Report, 4Q20
Optical Network HW Vendor Scorecard, Jun 2020
Optical Equipment Vendor Leadership Global Service Provider Survey, Dec 2019
Service Provider Access Switching Report, 4Q20
Optical Transport Hardware Report, 4Q20
Transport Customer Markets Report, 3Q20
Transport Applications Report, 3Q20
Optical Transport Report, 4Q20
Ciena's Adaptive Network vision and portfolio
Our vision for a new network end-state
How it works
Our portfolio
Enabling the Adaptive Network™
SOFTWARE CONTROL AND AUTOMATION
Blue Planet® multi-domain orchestration, federated inventory, and service order management solutions support the broadest range of closed-loop automation use cases across multi-layer, multi-vendor networks.
Ciena's Manage, Control and Plan (MCP) domain controller provides intelligent, data-driven software-defined programmability to lifecycle operations of Ciena networks.
CIENA SERVICESANALYTICS AND INTELLIGENCE
Ciena and Blue Planet® Unified Assurance and Analytics: Open suite of software products that unifies multi-layer, multi-domain assurance, with AI-powered analytics to provide strategic insights to transform and simplify business, IT, and network operations.
MCP Advanced Apps: Applications designed to enhance operations and simplify user experience for optimization of multi-layer network performance, featuring Liquid Spectrum™ for increased optical network capacity and service availability, and Adaptive IP™ Apps for advanced real-time visualization and analysis of IP networks.
A consultative approach to build, operate, and continually improve customers' networks to accelerate their unique journey to the Adaptive Network.
PROGRAMMABLE INFRASTRUCTURE
Converged Packet-Optical Networking: Software-programmable platforms, featuring Ciena's award-winning WaveLogic™ Photonics with optional agnostic packet/OTN switching, designed to maximize scale, flexibility, and open networking. Optimizes network performance across applications from metro to submarine, and is the dominant portfolio used globally for Data Center Interconnect.
We bring experienced technical personnel, best practices, and processes-along with the most effective tools for handling network complexities to work alongside customers every step of the way.
Routing and Switching: Purpose-built routing, switching, and x86 VNF hosting platforms-using a common Service-Aware Operating System (SAOS)-provide the building blocks for low-touch, high-velocity IP, Segment Routing, Ethernet, MPLS, and 10G PON in access to metro networks.
Q1 FY 2021 results
Q1 FY 2021 key highlights
Achieving balanced growth
▪ Non-telco represented 39% of total revenue
• Direct web-scale increased 25% YoY, representing over 20% of total revenue
▪ EMEA revenue increased 20% YoY, representing nearly 21% of total revenue
▪ Blue Planet revenue increased 10% YoY, reaching over $16M
* 3/3/2020 to 3/2/2021, S&P Capital IQ
Driving the pace of innovation
▪ GAAP R&D investment was over 17% of total revenue
▪ 627 100G+ total customers, which includes 39 new wins on WaveLogic Ai and 14 new wins on WaveLogic 5 Extreme
▪ WL5e has now shipped to over 75 customers, all of whom are actively deploying the technology in their networks
Prioritizing long term shareholder value
▪ One year total shareholder return of 29%*
▪ Adjusted operating margin improved by 150bps YoY
▪ Repurchased approximately 252,000 shares as part of our equity repurchase program
Q1 FY 2021 comparisons (year-over-year)
Revenue
(in millions)
Adj. Operating Margin*
* A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation.
Adj. Gross
Margin*
Adj. EBITDA*
(in millions)
Adj. OpEx*
(in millions)
Adj. EPS*
Q1 FY 2021 comparative operating metrics
Cash and Investments
Cash Flow from (used in) Operations
Q1 FY 2021
Q1 FY 2020
$1.3B $1.0B
$(7)M $40M
DSO
93 80
Inventory TurnsGross LeverageNet Cash (Debt)
3.2
1.1x $531M
4.5
1.3x $(198)M
Revenue by segment
(Amounts in millions)
Q1 FY 2021 | Q1 FY 2020 | |||
Revenue | %** | Revenue | %** | |
Networking Platforms Converged Packet Optical Routing and Switching Total Networking Platforms | 512.3 64.3 576.6 | 67.7 8.5 76.2 | 591.5 67.5 659.0 | 71.0 8.1 79.1 |
Platform Software and Services | 49.9 | 6.6 | 51.9 | 6.2 |
Blue Planet Automation Software and Services | 16.9 | 2.2 | 15.5 | 1.9 |
Global Services Maintenance Support and Training Installation and Deployment Consulting and Network Design Total Global Services | 67.6 39.6 6.5 113.7 | 8.9 5.2 0.9 15.0 | 61.8 34.9 9.8 106.5 | 7.4 4.2 1.2 12.8 |
Total | $757.1 | 100.0 % | $832.9 | 100.0 % |
* A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. ** Denotes % of total revenue
Continued revenue strength derived from non-telco customers*
*represents 39.0% of total revenue in Q1 FY 2021
Revenue by geographic region
Delivering consistent financial performance
Source: Company filings
Industry Average: ACIA, ADTN, ADVA, CSCO, INFN1, JNPR and NOKIA Networks segment
a. INFN represents INFN+Coriant from the time the acquisition closed
Q1 FY 2021 appendix
Q1 FY 2021 | Q4 FY 2020 Q3 FY 2020 Q2 FY 2020 Q1 FY 2020 | |
GAAP gross profit | $357,891 | $404,349 $464,681 $413,326 $370,535 |
Share-based compensation-products Share-based compensation-services Amortization of intangible assets | 953 1,205 3,732 | 724 968 3,732 960 1,007 3,834 827 671 1,036 842 3,835 3,834 |
Total adjustments related to gross profit | 5,890 | 5,424 5,801 5,698 5,347 |
Adjusted (non-GAAP) gross profit | $363,781 | $409,773 $470,482 $419,024 $375,882 |
Adjusted (non-GAAP) gross profit percentage | 48.0 % | 49.5 % 48.2 % 46.9 % 45.1 % |
Operating Expense Reconciliation (Amounts in thousands)
Q1 FY 2021 | Q4 FY 2020 Q3 FY 2020 Q2 FY 2020 Q1 FY 2020 | |
GAAP operating expense | $282,096 | $310,866 $276,645 $285,838 $292,578 |
Share-based compensation-research and development Share-based compensation-sales and marketing Share-based compensation-general and administrative Amortization of intangible assets Significant asset impairments and restructuring costs Acquisition and integration costs (recoveries) | 4,794 5,816 6,358 5,910 5,867 307 | 4,030 5,137 4,286 5,180 4,822 5,264 5,982 6,515 3,811 3,849 4,613 5,527 5,853 4,472 |
5,940 5,975 5,851 5,840 5,839 7,8543,127 (2,329) 1,414 1,819 | ||
Total adjustments related to operating expense | 29,052 | 31,981 25,432 27,125 26,133 |
Adjusted (non-GAAP) operating expense | $253,044 | $278,885 $251,213 $258,713 $266,445 |
Income from Operations Reconciliation (Amounts in thousands)
Q1 FY 2021 | Q4 FY 2020 Q3 FY 2020 Q2 FY 2020 Q1 FY 2020 | |
GAAP income from operations | $75,795 | $93,483 $188,036 $127,488 $77,957 |
Total adjustments related to gross profit Total adjustments related to operating expense | 5,890 29,052 | 5,424 31,981 5,801 25,432 5,698 5,347 27,125 26,133 |
Total adjustments related to income from operations | 34,942 | 37,405 31,233 32,823 31,480 |
Adjusted (non-GAAP) income from operations | $110,737 | $130,888 $219,269 $160,311 $109,437 |
Adjusted (non-GAAP) operating margin percentage | 14.6 % | 15.8 % 22.4 % 17.9 % 13.1 % |
GAAP net income
Exclude GAAP provision for income taxes
Income before income taxes
Total adjustments related to income from operations
Unrealized gain on equity investment
Loss on extinguishment and modification of debt
Adjusted income before income taxes
Non-GAAP tax provision on adjusted income before income taxes
Adjusted (non-GAAP) net income
Weighted average basic common shares outstanding
Weighted average diluted potential common shares outstanding(1)
Q1 FY 2021 | Q4 FY 2020 Q3 FY 2020 Q2 FY 2020 Q1 FY 2020 | ||
GAAP diluted net income per potential common share Adjusted (non-GAAP) diluted net income per potential common share | $ 0.35 0.5 $ 2 | $ 0.42 $ 0.6 $ 0 $ | 0.91 $ 1.0 0.59 $ 0.40 0.7 0.5 6 $ 6 $ 2 |
1.
Weighted average diluted potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share for the first quarter of fiscal 2021 includes 1.4 million shares underlying certain stock option and stock unit awards.
Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)
Net income (GAAP)
Add: Interest expense
Less: Interest and other income (loss), net
Add: Loss on extinguishment and modification of debt
Add: Provision for income taxes
Add: Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements
Add: Amortization of intangible assets
EBITDA
Add: Share-based compensation cost
Add: Significant asset impairments and restructuring costs
Add: Acquisition and integration costs (recoveries)
Adjusted EBITDA
Q4 FY 2020
Q3 FY 2020
Q2 FY 2020
Q1 FY 2020
$65,041
$142,267
$91,655 $62,328
7,395
7,251
7,860 8,815
(249)
232 - 38,750 21,989 9,674
(2,665) 3,646
- 20,798 23,538 9,584
- 646
25,308 9,814
22,599 25,782
9,674 9,687
$126,605
$219,699
$159,761 $113,426
16,920 7,854 3,127
17,259 6,515
17,977 15,602
3,811 4,472
(2,329)
1,414 1,819
$133,763
$154,506
$241,144
$182,963
$135,319
Thank You
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Ciena Corporation published this content on 04 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 March 2021 13:18:03 UTC.