Ciena Reports Fiscal Second Quarter 2013 Financial Results

  Ciena Reports Fiscal Second Quarter 2013 Financial Results

       Achieves record quarterly revenue by surpassing $500M milestone

Business Wire

HANOVER, Md. -- June 6, 2013

Ciena^® Corporation (NASDAQ: CIEN), the network specialist, today announced
unaudited financial results for its fiscal second quarter ended April30,
2013.

For the fiscal second quarter 2013, Ciena reported revenue of $507.7 million.

On the basis of generally accepted accounting principles (GAAP), Ciena's net
loss for the fiscal second quarter 2013 was $(27.1) million, or $(0.27) per
common share, which compares to a GAAP net loss of $(27.8) million, or $(0.28)
per common share, for the fiscal second quarter 2012.

Ciena's adjusted (non-GAAP) net income for the fiscal second quarter 2013 was
$2.2 million, or $0.02 per common share, which compares to an adjusted
(non-GAAP) net income of $3.7 million, or $0.04 per common share, for the
fiscal second quarter 2012.

“We have designed Ciena to take advantage of the fundamental shift in network
architecture driven by changing end-user demands, and our strong quarterly and
first half of 2013 performance are a direct result of that strategy. Our
unique ability to provide customers convergence, automation, openness and
software intelligence positions us to lead the industry in this shift,” said
Gary B. Smith, president and CEO of Ciena. “These dynamics are creating new
opportunities that we believe will enable us to continue making progress
toward our long-term financial goals.”

Fiscal Second Quarter 2013 Performance Summary

The tables below (in millions, except percentage data) provide comparisons of
certain quarterly results to prior periods, including sequential quarterly and
year-over-year changes. A reconciliation between the GAAP and adjusted
(non-GAAP) measures contained in this release is included in Appendix A.


                   GAAP Results
                    Q2          Q1          Q2          Period Change
                    FY 2013      FY 2013      FY 2012      Q-T-Q*   Y-T-Y*
Revenue             $ 507.7      $ 453.1      $ 477.6      12.1 %    6.3  %
Gross margin        41.3    %    43.2    %    38.3    %    (1.9 )%   3.0  %
Operating expense   $ 220.1      $ 201.4      $ 194.4      9.3  %    13.2 %
Operating margin    (2.1    )%   (1.2    )%   (2.4    )%   (0.9 )%   0.3  %
                                                                          

                        Non-GAAP Results
                         Q2         Q1         Q2         Period Change
                         FY 2013     FY 2013     FY 2012     Q-T-Q*   Y-T-Y*
Revenue                  $ 507.7     $ 453.1     $ 477.6     12.1 %    6.3  %
Adj. gross margin        42.5    %   44.6    %   39.6    %   (2.1 )%   2.9  %
Adj. operating expense   $ 197.4     $ 176.6     $ 172.9     11.8 %    14.2 %
Adj. operating margin    3.7     %   5.6     %   3.4     %   (1.9 )%   0.3  %
                                                                            

                Revenue by Segment
                 Q2 FY 2013           Q1 FY 2013           Q2 FY 2012
                 Revenue    %         Revenue    %         Revenue    %
Converged        $ 291.4     57.4      $ 240.0     53.0      $ 264.6     55.4
Packet Optical
Packet           57.1        11.2      45.8        10.1      29.9        6.3
Networking
Optical          57.4        11.3      57.6        12.7      84.4        17.7
Transport
Software and     101.8      20.1     109.7      24.2     98.7       20.6
Services
Total            $ 507.7    100.0    $ 453.1    100.0    $ 477.6    100.0
                                                                         

* Denotes % change, or in the case of margin, absolute change


Additional Performance Metrics for Fiscal Second Quarter 2013

  *Non-U.S. customers contributed 43% of total revenue
  *Two customers accounted for greater than 10% of revenue and represented
    31.3% of total revenue
  *Cash and investments totaled $456.5 million
  *Cash flow from operations totaled $44.9 million
  *Free cash flow totaled $35.6 million
  *Average days' sales outstanding (DSOs) were 75
  *Accounts receivable balance was $421.0 million
  *Inventories totaled $248.1 million, including:

       *Raw materials: $49.9 million
       *Work in process: $9.7 million
       *Finished goods: $145.1 million
       *Deferred cost of sales: $84.2 million
       *Reserve for excess and obsolescence: $(40.8) million

  *Product inventory turns were 3.9
  *Headcount totaled 4,546

Business Outlook for Fiscal Third Quarter 2013

Statements relating to business outlook are forward-looking in nature and
actual results may differ materially. These statements should be read in the
context of the Notes to Investors below.

Ciena expects fiscal third quarter 2013 financial performance to include:

  *Revenue in the range of $515 to $545 million
  *Adjusted (non-GAAP) gross margin in the low 40s percent range
  *Adjusted (non-GAAP) operating expense in the mid $190s million range

Live Web Broadcast of Unaudited Fiscal Second Quarter 2013 Results

Ciena will host a discussion of its unaudited fiscal second quarter 2013
results with investors and financial analysts today, Thursday, June 6, 2013 at
8:30 a.m. (Eastern). The live broadcast of the discussion will be available
via Ciena's homepage at http://www.ciena.com/. To accompany its live
broadcast, Ciena has posted to the Investor Relations page of its website at:
www.ciena.com/investors a presentation for investors that includes certain
highlighted information relating to this quarter and certain historical
results of operation. An archived transcript of the discussion will be
available shortly following the conclusion of the live broadcast on the
Investor Relations page of Ciena's website at: www.ciena.com/investors.

Notes to Investors

Forward-looking statements. 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 Ciena's business outlook
for the fiscal third quarter of 2013 as well as: “We have designed Ciena to
take advantage of the fundamental shift in network architecture driven by
changing end-user demands, and our strong quarterly and first half of 2013
performance are a direct result of that strategy."; "Our unique ability to
provide customers convergence, automation, openness and software intelligence
positions us to lead the industry in this shift.”; "These dynamics are
creating new opportunities that we believe will enable us to continue making
progress toward our long-term financial goals."

Ciena's actual results, performance or events may differ materially from these
forward-looking statements made or implied due 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; changes in
network spending or network strategy by large communication service providers;
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; and the other risk factors disclosed
in Ciena's Report on Form 10-Q filed with the Securities and Exchange
Commission on March 13, 2013. Ciena assumes no obligation to update any
forward-looking information included in this press release.

Non-GAAP Presentation of Quarterly Results. This release includes non-GAAP
measures of Ciena's gross profit, operating expense, income (loss) from
operations, net income (loss) and net income (loss) 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, Appendix A to this press release sets forth a complete GAAP to
non-GAAP reconciliation of the non-GAAP measures contained in this release.

AboutCiena

Ciena is the network specialist. We collaborate with customers worldwide to
unlock the strategic potential of their networks and fundamentally change the
way they perform and compete. Ciena leverages its deep expertise in packet and
optical networking and distributed software automation to deliver solutions in
alignment with OP^n, its approach for building open next-generation networks.
We enable a high-scale, programmable infrastructure that can be controlled and
adapted by network-level applications, and provide open interfaces to
coordinate computing, storage and network resources in a unified, virtualized
environment. Investors are encouraged to review the Investors section of our
website at www.ciena.com/investors, where we routinely post press releases,
SEC filings, recent news, financial results, other announcements and, from
time to time, exclusively post material information as with the other
disclosure channels that we use.


CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

                       Quarter Ended April 30,    Six Months Ended April 30,
                        2012         2013          2012          2013
Revenue:
Products                $ 384,726     $ 413,217     $  718,399     $ 766,274
Services                92,891       94,495       175,903       194,531   
Total revenue           477,617      507,712      894,302       960,805   
Cost of goods sold:
Products                234,372       239,441       432,124        435,962
Services                60,304       58,758       111,481       119,535   
Total cost of goods     294,676      298,199      543,605       555,497   
sold
Gross profit            182,941      209,513      350,697       405,308   
Operating expenses:
Research and            90,399        100,787       180,063        189,912
development
Selling and marketing   62,517        74,475        126,928        141,063
General and             26,670        30,883        56,334         59,091
administrative
Amortization of         12,967        12,439        26,438         24,892
intangible assets
Restructuring costs     1,851        1,509        3,573         6,539     
Total operating         194,404      220,093      393,336       421,497   
expenses
Loss from operations    (11,463   )   (10,580   )   (42,639    )   (16,189   )
Interest and other      (4,387    )   (2,716    )   (9,274     )   (2,853    )
income (loss), net
Interest expense        (9,646    )   (11,392   )   (19,216    )   (22,124   )
Loss on
extinguishment of       —            —            —             (28,630   )
debt
Loss before income      (25,496   )   (24,688   )   (71,129    )   (69,796   )
taxes
Provision for income    2,284        2,391        4,304         4,607     
taxes
Net loss                $ (27,780 )   $ (27,079 )   $  (75,433 )   $ (74,403 )
Basic net loss per      $ (0.28   )   $ (0.27   )   $  (0.77   )   $ (0.73   )
common share
Diluted net loss per
potential common        $ (0.28   )   $ (0.27   )   $  (0.77   )   $ (0.73   )
share
Weighted average
basic common shares     98,981       101,913      98,525        101,560   
outstanding
Weighted average
dilutive potential      98,981       101,913      98,525        101,560   
common shares
outstanding
                                                                             


CIENA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)

                                              October 31,     April 30,
                                               2012             2013
ASSETS
Current assets:
Cash and cash equivalents                      $ 642,444        $ 356,498
Short-term investments                           50,057           99,973
Accounts receivable, net                         345,496          421,014
Inventories                                      260,098          248,096
Prepaid expenses and other                      117,595        138,577    
Total current assets                             1,415,690        1,264,158
Equipment, furniture and fixtures, net           123,580          117,553
Other intangible assets, net                     257,137          221,476
Other long-term assets                          84,736         90,157     
Total assets                                   $ 1,881,143     $ 1,693,344  
LIABILITIES AND STOCKHOLDERS’ EQUITY
(DEFICIT)
Current liabilities:
Accounts payable                               $ 179,704        $ 198,820
Accrued liabilities                              209,540          222,783
Deferred revenue                                 79,516           98,603
Convertible notes payable                       216,210        —          
Total current liabilities                        684,970          520,206
Long-term deferred revenue                       27,560           28,272
Other long-term obligations                      31,779           32,989
Long-term convertible notes payable             1,225,806      1,209,814  
Total liabilities                              $ 1,970,115     $ 1,791,281  
Commitments and contingencies
Stockholders’ equity (deficit):
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; 100,601,792 and               1,006            1,020
102,035,119 shares issued and outstanding
Additional paid-in capital                       5,797,765        5,864,381
Accumulated other comprehensive income           (3,354     )     (4,546     )
(loss)
Accumulated deficit                             (5,884,389 )    (5,958,792 )
Total stockholders’ equity (deficit)            (88,972    )    (97,937    )
Total liabilities and stockholders’ equity     $ 1,881,143     $ 1,693,344  
(deficit)
                                                                             

                                                  
CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                                                    
                                                    Six Months Ended April 30,
                                                    2012          2013
Cash flows from operating activities:
Net loss                                            $  (75,433 )   $ (74,403 )
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Loss on extinguishment of debt                      —              28,630
Depreciation of equipment, furniture and
fixtures, and amortization of leasehold             29,079         28,857
improvements
Share-based compensation costs                      16,830         18,147
Amortization of intangible assets                   37,865         35,661
Provision for inventory excess and obsolescence     13,982         9,027
Provision for warranty                              16,615         11,060
Other                                               7,993          5,068
Changes in assets and liabilities:
Accounts receivable                                 19,107         (76,526   )
Inventories                                         (26,630    )   2,975
Prepaid expenses and other                          19,597         (33,969   )
Accounts payable, accruals and other obligations    8,315          24,805
Deferred revenue                                    6,036         19,799    
Net cash provided by (used in) operating            73,356        (869      )
activities
Cash flows used in investing activities:
Payments for equipment, furniture, fixtures and     (16,150    )   (21,496   )
intellectual property
Restricted cash                                     (17,202    )   1,679
Purchase of available for sale securities           —              (99,914   )
Proceeds from maturities of available for sale      —              50,000
securities
Proceeds from sale of cost method investment        524           —         
Net cash used in investing activities               (32,828    )   (69,731   )
Cash flows from financing activities:
Payment of long term debt                           —              (216,210  )
Payment for debt and equity issuance costs          —              (3,661    )
Payment of capital lease obligations                (699       )   (1,427    )
Proceeds from issuance of common stock              5,715         5,955     
Net cash provided by (used in) financing            5,016         (215,343  )
activities
Effect of exchange rate changes on cash and cash    (1,893     )   (3        )
equivalents
Net increase (decrease) in cash and cash            45,544         (285,943  )
equivalents
Cash and cash equivalents at beginning of period    541,896       642,444   
Cash and cash equivalents at end of period          $  585,547    $ 356,498 
Supplemental disclosure of cash flow information
Cash paid during the period for interest            $  16,520      $ 15,720
Cash paid during the period for income taxes, net   $  5,811       $ 5,136
Non-cash investing and financing activities
Purchase of equipment in accounts payable           $  4,004       $ 3,006
Fixed assets acquired under capital leases          $  4,427       $ 1,286
                                                                             


APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measurements
                                                                
                                                     Quarter Ended
                                                     April 30,
                                                     2012          2013
Gross Profit Reconciliation (GAAP/non-GAAP)
GAAP gross profit                                    $ 182,941    $ 209,513 
Share-based compensation-products                    460             686
Share-based compensation-services                    367             435
Amortization of intangible assets                    5,484         5,384   
Total adjustments related to gross profit            6,311         6,505   
Adjusted (non-GAAP) gross profit                     $ 189,252    $ 216,018 
Adjusted (non-GAAP) gross profit percentage          39.6      %     42.5    %
                                                                   
Operating Expense Reconciliation (GAAP/non-GAAP)
GAAP operating expense                               $ 194,404    $ 220,093 
Share-based compensation-research and development    2,092           2,204
Share-based compensation-sales and marketing         2,820           3,382
Share-based compensation-general and                 2,141           3,144
administrative
Acquisition and integration costs                    (410      )     —
Amortization of intangible assets                    12,967          12,439
Restructuring costs                                  1,851         1,509   
Total adjustments related to operating expense       21,461        22,678  
Adjusted (non-GAAP) operating expense                $ 172,943    $ 197,415 
                                                                   
Income (Loss) from Operations Reconciliation
(GAAP/non-GAAP)
GAAP loss from operations                            $ (11,463 )   $ (10,580 )
Total adjustments related to gross profit            6,311           6,505
Total adjustments related to operating expense       21,461        22,678  
Adjusted (non-GAAP) income from operations           $ 16,309     $ 18,603  
Adjusted (non-GAAP) operating margin percentage      3.4       %     3.7     %
                                                                   
Net Income (Loss) Reconciliation (GAAP/non-GAAP)
GAAP net loss                                        $ (27,780 )   $ (27,079 )
Total adjustments related to gross profit            6,311           6,505
Total adjustments related to operating expense       21,461          22,678
Non-cash interest expense                            —               247
Change in fair value of embedded redemption          3,750         (120    )
feature
Adjusted (non-GAAP) net income                       $ 3,742      $ 2,231   
                                                                   
Weighted average basic common shares outstanding     98,981        101,913 
Weighted average dilutive potential common shares    100,715       103,165 
outstanding
                                                                   
Net Income (Loss) per Common Share
GAAP diluted net loss per common share               $ (0.28   )   $ (0.27   )
Adjusted (non-GAAP) diluted net income per common    $ 0.04        $ 0.02
share
                                                                             

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 expense - a non-cash expense incurred in
    accordance with share-based compensation accounting guidance.
  *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 -reflects transaction expense, and
    consulting and third party service fees associated with the acquisition of
    the Nortel MEN Business and the integration of this business into Ciena's
    operations.
  *Restructuring costs - costs incurred as a result of restructuring
    activities (or in the case of recoveries, previous restructuring
    activities) taken to align resources with perceived market opportunities.
  *Non-cash interest expense - a non-cash debt discount expense amortized as
    interest expense during the term of Ciena's 4.0% senior convertible notes
    due December 15, 2020 relating to the required separate accounting of the
    equity component of these convertible notes.
  *Change in fair value of embedded redemption feature - a non-cash
    unrealized gain or loss reflective of a mark to market fair value
    adjustment of an embedded derivative related to the redemption feature of
    Ciena's outstanding 4.0% senior convertible notes due March 15, 2015.

Contact:

Press Contact:
Ciena Corporation
Nicole Anderson, 877-857-7377
pr@ciena.com
or
Investor Contact:
Ciena Corporation
Gregg Lampf, 877-243-6273
ir@ciena.com