Exhibit 99.1
Ciena Reports Fiscal Second Quarter 2007 Results
Company Delivers 17.2% Sequential, 47.5% Year-over-Year Revenue
Growth
LINTHICUM, Md.--(BUSINESS WIRE)--May 31, 2007--Ciena(R)
Corporation (NASDAQ:CIEN), the network specialist, today announced
results for its fiscal second quarter ended April 30, 2007. Revenue
for the second quarter totaled $193.5 million, representing a 17.2%
sequential increase from fiscal first quarter revenue of $165.1
million, and an increase of 47.5% over the same period a year ago when
the Company reported sales of $131.2 million. For the six months ended
April 30, 2007, Ciena reported revenue of $358.6 million, representing
an increase of 42.5% over revenue of $251.6 million for the same
six-month year-ago period.
On the basis of generally accepted accounting principles (GAAP),
Ciena's net income for the fiscal second quarter 2007 was $13.0
million, or net income of $0.14 per diluted share. This compares with
a reported GAAP net loss of $1.9 million, or a net loss of $0.02 per
share, for the same period a year ago. For the six-month period ended
April 30, 2007, Ciena's reported GAAP net income was $24.1 million, or
net income of $0.26 per diluted share. This compares to a GAAP net
loss of $8.2 million, or a net loss of $0.10 per share, for the same
six-month year-ago period.
"Across all of our market segments, our customers' key operational
focus is making the cost-effective transition from multiple, disparate
networks to a converged, multi-purpose network infrastructure while
simultaneously managing escalating bandwidth and quality-of-service
requirements," said Gary Smith, Ciena president and CEO. "Several
years ago, Ciena embarked on a strategy designed to position us to
benefit from the network transition and convergence we're seeing
emerge today, and we believe our persistent execution of that
strategy, articulated in our FlexSelect(TM) Architecture and vision,
is what has enabled us to deliver better-than-market revenue growth."
Non-GAAP Presentation of Quarterly Results
In evaluating the operating performance of its business, Ciena's
management excludes certain charges and credits that are required by
GAAP. These items, which are identified in the table that follows (in
thousands, except per share data), 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 the Company's control.
Quarter Quarter
Ended Ended
April 30, April 30,
--------- ---------
2006 2007
--------- ---------
Stock-based compensation-product $375 $362
Stock-based compensation-services 205 285
Stock-based compensation-research and development 1,421 1,085
Stock-based compensation-sales and marketing 948 1,866
Stock-based compensation-general and
administrative 1,007 1,892
Amortization of intangible assets 6,295 6,295
Restructuring costs (recoveries) 3,014 (734)
Long-lived asset impairment (3) -
Recovery of doubtful accounts, net (247) -
Gain on lease settlement (5,628) -
Gain on extinguishment of debt (362) -
-------------------
Total adjustments $7,025 $11,051
========= =========
GAAP net income (loss) $(1,910) $13,010
Adjustment for items above 7,025 11,051
--------- ---------
Adjusted (non-GAAP) net income $5,115 $24,061
========= =========
Weighted average basic common shares outstanding 83,518 85,198
Weighted average dilutive potential common shares
outstanding 87,457 93,737
Adjusted (non-GAAP) net income per share $0.06 $0.26
Please see Appendix A for additional information about this table.
Adjusting Ciena's unaudited fiscal second quarter 2007 GAAP net
income of $13.0 million for the items noted above would increase the
Company's adjusted (non-GAAP) net income in the quarter to $24.1
million, or an adjusted (non-GAAP) net income of $0.26 per adjusted
diluted share. This compares with an adjusted (non-GAAP) net income of
$5.1 million, or an adjusted (non-GAAP) net income of $0.06 per
adjusted diluted share, in the same year-ago period.
Second Quarter 2007 Performance Highlights
-- Achieved sequential quarterly revenue growth of 17.2% and
year-over-year revenue growth of 47.5%.
-- Delivered overall gross margin of 42.3% and product gross
margin of 47.3%.
-- Achieved positive cash flow with cash generated from
operations in the quarter.
-- Ended the fiscal second quarter 2007 with cash, cash
equivalents and short- and long-term investments of $1.2
billion.
Second Quarter 2007 Customer Highlights
-- Star Telephone selected the CN 4200(TM) FlexSelect(TM)
Advanced Services Platform for its core network infrastructure
upgrade.
-- Dreamline Co., Ltd. chose the CN 4200 to support the delivery
of new Ethernet services for its growing base of leased-line
customers in South Korea.
-- RENATER, the national research and education network in
France, deployed the CN 4200 across the organization's new
metropolitan area network (MAN) in Paris.
Second Quarter 2007 Product Highlights
-- Announced FlexSelect(TM) for Ethernet, a comprehensive
Ethernet strategy designed to make Ethernet a carrier-class,
performance-grade convergence vehicle from the access network
to the core.
-- Introduced the 3000 Ethernet Access Series to provide access
over any media for carrier Ethernet service delivery.
-- Introduced the CN 5060(TM) Multiservice Carrier Ethernet
Platform, a next-generation Ethernet-optimized platform that
enables a cost-effective transition to converged Ethernet
switching in metro and edge aggregation networks.
-- Successfully completed interoperability testing and
qualification of the CN 4200 FlexSelect Advanced Services
Platform for both IBM's Geographically Dispersed Parallel
Sysplex(TM) (GDPS(R)) business continuity solution and Server
Time Protocol (STP), the new generation of technology for time
synchronization of System Z(TM) mainframe server environments.
Business Outlook
"Given the demand pipeline we see today, we expect to deliver
fiscal third quarter revenue growth of up to five percent from our
fiscal second quarter, and we are increasing our fiscal 2007 annual
growth expectations from between 27 to 30 percent growth to up to 36
percent growth," Smith said.
"In addition, the visibility we have into anticipated product mix
leads us to believe we will be able to achieve this growth while
delivering gross margin in a mid-40s range in our fiscal third
quarter," said Smith. "Successfully achieving our revenue and gross
margin goals would put us on track to achieve a significant milestone
of 10 percent income from operations on an as-adjusted basis as soon
as our fiscal third quarter 2007."
Live Web Broadcast of Fiscal Second Quarter Results
Ciena will host a discussion of its fiscal second quarter results
with investors and financial analysts today, Thursday, May 31, 2007 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/investors.htm.
NOTE TO INVESTORS
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-Q filed with the
Securities and Exchange Commission on March 2, 2007. 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:
Several years ago, Ciena embarked on a strategy designed to position
us to benefit from the network transition and convergence we're seeing
emerge today, and we believe our persistent execution of that
strategy, articulated in our FlexSelect(TM) Architecture and vision,
is what has enabled us to deliver better-than-market revenue growth;
given the demand pipeline we see today, we expect to deliver fiscal
third quarter revenue growth of up to five percent from our fiscal
second quarter, and we are increasing our annual growth expectations
from between 27 to 30 percent growth to up to 36 percent growth for
fiscal 2007; the visibility we have into anticipated product mix leads
us to believe we will be able to achieve this growth while delivering
gross margin in a mid-40s range in our fiscal third quarter; and
successfully achieving our revenue and gross margin goals would put us
on track to achieve a significant milestone of 10 percent income from
operations on an as-adjusted basis as soon as our fiscal third
quarter. Ciena assumes no obligation to update the information
included in this press release, whether as a result of new
information, future events or otherwise.
(Unaudited Condensed Consolidated Balance Sheets, Statement of
Operations and Cash Flows follow)
CIENA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
ASSETS
October 31, April 30,
----------- -----------
Current assets: 2006 2007
----------- -----------
Cash and cash equivalents $220,164 $470,306
Short-term investments 628,393 646,653
Accounts receivable, net 107,172 145,495
Inventories, net 106,085 118,790
Prepaid expenses and other 36,372 43,930
----------- -----------
Total current assets 1,098,186 1,425,174
Long-term investments 351,407 105,556
Equipment, furniture and fixtures, net 29,427 37,567
Goodwill 232,015 232,015
Other intangible assets, net 91,274 76,749
Other long-term assets 37,404 45,995
----------- -----------
Total assets $1,839,713 $1,923,056
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $39,277 $69,942
Accrued liabilities 79,282 84,476
Restructuring liabilities 8,914 7,065
Unfavorable lease commitments 8,512 7,653
Income taxes payable 5,981 6,479
Deferred revenue 19,637 36,097
Convertible notes payable - 542,262
----------- -----------
Total current liabilities 161,603 753,974
Long-term deferred revenue 21,039 24,071
Long-term restructuring liabilities 26,720 22,694
Long-term unfavorable lease commitments 32,785 28,596
Other long-term obligations 1,678 1,594
Long-term convertible notes payable 842,262 300,000
----------- -----------
Total liabilities 1,086,087 1,130,929
----------- -----------
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; 140,000,000
shares authorized; 84,891,656 and
85,342,240 shares issued and outstanding 849 853
Additional paid-in capital 5,505,853 5,520,902
Unrealized gains on investments, net (496) (232)
Translation adjustment (580) (1,462)
Accumulated deficit (4,752,000) (4,727,934)
----------- -----------
Total stockholders' equity 753,626 792,127
----------- -----------
Total liabilities and stockholders' equity $1,839,713 $1,923,056
=========== ===========
CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Quarter Ended Six Months Ended
April 30, April 30,
------------------- -------------------
2006 2007 2006 2007
--------- --------- --------- ---------
Revenues:
Products $117,208 $173,212 $223,149 $319,494
Services 13,967 20,315 28,456 39,134
--------- --------- --------- ---------
Total revenue 131,175 193,527 251,605 358,628
--------- --------- --------- ---------
Costs:
Products 58,957 91,319 119,356 166,298
Services 9,312 20,378 18,888 36,872
--------- --------- --------- ---------
Total cost of goods sold 68,269 111,697 138,244 203,170
--------- --------- --------- ---------
Gross profit 62,906 81,830 113,361 155,458
--------- --------- --------- ---------
Operating expenses:
Research and development 28,856 31,642 58,318 61,495
Selling and marketing 26,657 30,182 53,229 55,057
General and administrative 11,246 11,707 21,142 22,008
Amortization of intangible
assets 6,295 6,295 12,590 12,590
Restructuring costs
(recoveries) 3,014 (734) 5,029 (1,200)
Long-lived asset impairments (3) - (6) -
Recovery of doubtful
accounts, net (247) - (2,851) (10)
Gain on lease settlement (5,628) - (11,648) -
--------- --------- --------- ---------
Total operating expenses 70,190 79,092 135,803 149,940
--------- --------- --------- ---------
Income (loss) from operations (7,284) 2,738 (22,442) 5,518
Interest and other income, net 11,197 16,897 20,459 31,742
Interest expense (5,815) (6,148) (11,868) (12,296)
Loss on equity investments,
net - - (733) -
Gain on extinguishment of debt 362 - 7,052 -
--------- --------- --------- ---------
Income (loss) before income
taxes (1,540) 13,487 (7,532) 24,964
Provision for income taxes 370 477 669 898
--------- --------- --------- ---------
Net income (loss) $(1,910) $13,010 $(8,201) $24,066
========= ========= ========= =========
Basic net income (loss) per
common share $(0.02) $0.15 $(0.10) $0.28
========= ========= ========= =========
Diluted net income (loss) per
potential common share $(0.02) $0.14 $(0.10) $0.26
========= ========= ========= =========
Weighted average basic common
shares outstanding 83,518 85,198 83,251 85,076
========= ========= ========= =========
Weighted average dilutive
potential common shares
outstanding 83,518 93,737 83,251 93,491
========= ========= ========= =========
CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
April 30,
-------------------
2006 2007
--------- ---------
Cash flows from operating activities:
Net income (loss) $(8,201) $24,066
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Early extinguishment of debt (7,052) -
Amortization of premium on marketable securities 1,955 (3,052)
Non-cash loss from equity investments 733 -
Depreciation and amortization of leasehold
improvements 9,691 6,298
Stock compensation 8,118 8,937
Amortization of intangibles 14,525 14,525
Provision for inventory excess and obsolescence 4,376 6,385
Provision for warranty and other contractual
obligations 6,815 7,111
Other 1,280 872
Changes in assets and liabilities:
Accounts receivable (3,813) (38,323)
Inventories (34,119) (19,090)
Prepaid expenses and other 5,264 (12,173)
Accounts payable, accrued liabilities and
other obligations (60,318) 17,741
Income taxes payable (133) 498
Deferred revenue 15,312 19,492
--------- ---------
Net cash provided by (used in) operating
activities (45,567) 33,287
--------- ---------
Cash flows from investing activities:
Additions to equipment, furniture, fixtures and
intellectual property (8,531) (14,438)
Restricted cash 1,837 (5,549)
Purchases of available for sale securities (130,837) (213,219)
Maturities of available for sale securities 299,657 444,126
Minority equity investments, net - (181)
--------- ---------
Net cash provided by investing activities 162,126 210,739
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of 0.25% convertible
senior notes payable 300,000 -
Repurchase of 3.75% convertible notes payable (98,410) -
Debt issuance costs (7,652) -
Purchase of call spread option (28,457) -
Proceeds from exercise of stock options 16,171 6,116
--------- ---------
Net cash provided by financing activities 181,652 6,116
--------- ---------
Net increase in cash and cash equivalents 298,211 250,142
Cash and cash equivalents at beginning of period 358,012 220,164
--------- ---------
Cash and cash equivalents at end of period $656,223 $470,306
========= =========
Appendix A
The adjustments management makes in analyzing Ciena's fiscal
second quarter 2007 GAAP results are as follows:
-- Stock-based compensation costs - A non-cash expense incurred
in accordance with SFAS 123R using the modified prospective
application transition method.
-- Amortization of intangible assets - a non-cash expense arising
from acquisitions of intangible assets, principally developed
technology, which Ciena is required to amortize over its
expected useful life.
-- Restructuring costs (recoveries) - infrequent charges or
recoveries incurred as the result of reducing the size of the
Company's operations to align its resources with the reduced
size of the telecommunications market, as well as the result
of targeting new segment opportunities within the overall
market, which the Company feels are not reflective of its
ongoing operating costs.
-- Long-lived asset impairment - infrequent charges, incurred as
a result of excess equipment classified as held for sale which
the Company feels are not reflective of its ongoing operating
costs.
-- Recovery of doubtful accounts - an infrequent gain unrelated
to normal operations resulting from the recovery of a
previously assessed doubtful payment due to a customer's
financial condition.
-- Gain on lease settlement - an infrequent gain unrelated to
normal operations resulting from termination of obligations
under a lease for an unused facility.
-- Gain on extinguishment of debt - an infrequent gain related to
the early extinguishment of outstanding debt.
About Ciena
Ciena Corporation is the network specialist, focused on expanding
the possibilities for its customers' networks while reducing their
cost of ownership. The Company's systems, software and services target
and cure specific network pain points so that telcos, cable operators,
governments and enterprises can best exploit the new applications that
are driving their businesses forward. For more information, visit
www.ciena.com.
CONTACT: Ciena Corporation
Press Contact:
Nicole Anderson, 410-694-5786
pr@ciena.com
or
Investor Contact:
Jessica Towns, 888-243-6223
ir@ciena.com