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Form 8-K CIENA CORP For: Dec 10

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December 10, 2020 7:07 AM EST

FOR IMMEDIATE RELEASE
Ciena Reports Fiscal Fourth Quarter 2020 and Year-End Financial Results

HANOVER, Md. - December 10, 2020 - Ciena® Corporation (NYSE: CIEN), a networking systems, services and software company, today announced unaudited financial results for its fiscal fourth quarter and year ended October 31, 2020.

•Q4 Revenue: $828.5 million
•Q4 Net Income per Share: $0.42 GAAP; $0.60 adjusted (non-GAAP), increasing 3.4% year over year
•Share Repurchases: Reinstituting share repurchase program with the intent to resume purchases in the first quarter of 2021

"Our fiscal fourth quarter and full-year 2020 performance reported today demonstrates that we have the innovation, diversification and global scale to perform well in a challenging environment," said Gary Smith, President and CEO, Ciena. "While we expect current market conditions to persist in the near-term, we are confident in strong secular demand dynamics and our ability to continue to outperform the market."

For the fiscal fourth quarter 2020, Ciena reported revenue of $828.5 million as compared to $968.0 million for the fiscal fourth quarter 2019. For fiscal year 2020, Ciena reported revenue of $3.53 billion, as compared to $3.57 billion for fiscal year 2019.

Ciena's GAAP net income for the fiscal fourth quarter 2020 was $65.0 million or $0.42 per diluted common share, which compares to a GAAP net income of $80.3 million, or $0.51 per diluted common share, for the fiscal fourth quarter 2019. For fiscal year 2020, Ciena's GAAP net income was $361.3 million, or $2.32 per diluted common share, as compared to a GAAP net income of $253.4 million, or $1.61 per diluted common share for fiscal year 2019.

Ciena's adjusted (non-GAAP) net income for the fiscal fourth quarter 2020 was $94.5 million, or $0.60 per diluted common share, which compares to an adjusted (non-GAAP) net income of $90.4 million, or $0.58 per diluted common share, for the fiscal fourth quarter 2019. For fiscal year 2020, Ciena's adjusted (non-GAAP) net income was $460.1 million, or $2.95 per diluted common share, as compared to an adjusted (non-GAAP) net income of $331.8 million, or $2.11 per diluted common share for fiscal year 2019.

Performance Summary for the Fiscal Fourth Quarter and the Year Ended October 31, 2020
The tables below (in millions, except percentage data) provide comparisons of certain quarterly and annual results to the prior year. Appendices A and B set forth reconciliations between the GAAP and adjusted (non-GAAP) measures contained in this release.
1

GAAP Results (unaudited)
Quarter EndedPeriod ChangeYear EndedPeriod Change
October 31,November 2,October 31,November 2,
20202019Y-T-Y*20202019Y-T-Y*
Revenue$828.5 $968.0 (14.4)%$3,532.2 $3,572.1 (1.1)%
Gross margin48.8 %43.4 %5.4 %46.8 %43.2 %3.6 %
Operating expense$310.9 $326.5 (4.8)%$1,165.9 $1,195.3 (2.5)%
Operating margin11.3 %9.6 %1.7 %13.8 %9.7 %4.1 %
Non-GAAP Results (unaudited)
Quarter EndedPeriod ChangeYear EndedPeriod Change
October 31,November 2,October 31,November 2,
20202019Y-T-Y*20202019Y-T-Y*
Revenue$828.5 $968.0 (14.4)%$3,532.2 $3,572.1 (1.1)%
Adj. gross margin49.5 %43.8 %5.7 %47.4 %43.7 %3.7 %
Adj. operating expense$278.9 $295.3 (5.6)%$1,055.3 $1,091.8 (3.3)%
Adj. operating margin15.8 %13.3 %2.5 %17.6 %13.1 %4.5 %
Adj. EBITDA$154.5 $151.6 1.9 %$713.9 $557.3 28.1 %

* Denotes % change, or in the case of margin, absolute change
Revenue by Segment (unaudited)
Quarter Ended
October 31, 2020November 2, 2019
Revenue
%**
Revenue
% **
Networking Platforms
Converged Packet Optical
$579.3 69.9 $665.8 68.8 
Packet Networking
56.0 6.8 131.9 13.6 
Total Networking Platforms635.3 76.7 797.7 82.4 
Platform Software and Services
54.5 6.6 41.2 4.3 
Blue Planet Automation Software and Services20.9 2.5 16.6 1.7 
Global Services
Maintenance Support and Training
67.0 8.1 65.3 6.7 
Installation and Deployment
43.0 5.2 36.5 3.8 
Consulting and Network Design
7.8 0.9 10.7 1.1 
Total Global Services117.8 14.2 112.5 11.6 
Total$828.5 100.0 $968.0 100.0 
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Revenue by Segment (unaudited)
Year Ended
October 31, 2020November 2, 2019
Revenue
%**
Revenue
% **
Networking Platforms
Converged Packet Optical
$2,547.6 72.1 $2,562.8 71.8 
Packet Networking
267.5 7.6 348.5 9.8 
Total Networking Platforms2,815.1 79.7 2,911.3 81.6 
Platform Software and Services
197.8 5.6 155.3 4.3 
Blue Planet Automation Software and Services62.6 1.8 54.6 1.5 
Global Services
Maintenance Support and Training
269.4 7.6 261.3 7.3 
Installation and Deployment
152.0 4.3 148.2 4.1 
Consulting and Network Design
35.3 1.0 41.4 1.2 
Total Global Services456.7 12.9 450.9 12.6 
Total$3,532.2 100.0 $3,572.1 100.0 

Additional Performance Metrics for Fiscal Fourth Quarter and Year Ended October 31, 2020
Revenue by Geographic Region (unaudited)
Quarter Ended
October 31, 2020November 2, 2019
Revenue
% **
Revenue
% **
Americas$531.6 64.2 $715.7 73.9 
Europe, Middle East and Africa157.6 19.0 153.0 15.8 
Asia Pacific139.3 16.8 99.3 10.3 
Total$828.5 100.0 $968.0 100.0 
Revenue by Geographic Region (unaudited)
Year Ended
October 31, 2020November 2, 2019
Revenue
% **
Revenue
% **
Americas$2,469.3 69.9 $2,503.9 70.1 
Europe, Middle East and Africa591.5 16.8 566.7 15.9 
Asia Pacific471.4 13.3 501.5 14.0 
Total$3,532.2 100.0 $3,572.1 100.0 
** Denotes % of total revenue
•No customer represented more than 10% of revenue for the fiscal quarter
•One 10%-plus customer represented a total of 10.6% of revenue for the fiscal year
•Cash and investments totaled $1.3 billion
•Cash flow from operations totaled $187.3 million and $493.7 million for the fiscal quarter and year, respectively
•Average days' sales outstanding (DSOs) were 88 and 82 for the fiscal quarter and year, respectively
•Accounts receivable, net balance was $719.4 million
3

•Unbilled contract asset balance was $85.8 million
•Inventories totaled $344.4 million, including:
◦Raw materials: $119.5 million
◦Work in process: $13.7 million
◦Finished goods: $210.1 million
◦Deferred cost of sales: $40.7 million
◦Reserve for excess and obsolescence: $(39.6) million
•Product inventory turns were 4.0 and 4.6 for the fiscal quarter and year, respectively
•Headcount totaled 7,032

Share Repurchase Program
After temporarily suspending repurchases of our common stock during fiscal 2020, we will be reinstituting this program in the first quarter of 2021 and are currently targeting repurchases in the range of $150 million during fiscal 2021. Ciena may purchase shares at management's discretion in the open market, in privately negotiated transactions, in transactions structured through investment banking institutions, or a combination of the foregoing. Ciena may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of its shares under this authorization. The amount and timing of repurchases are subject to a variety of factors including liquidity, cash flow, stock price, and general business and market conditions. The program may be modified, suspended or discontinued at any time. During fiscal year 2020, Ciena repurchased approximately 1.9 million shares of its common stock at an average price of $39.81 per share for an aggregate purchase price of $74.5 million.

Supplemental Materials and Live Web Broadcast of Unaudited Fiscal Fourth Quarter 2020 Results
Today, Thursday, December 10, 2020, 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 fourth quarter and fiscal 2020 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, 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 fourth quarter and full-year 2020 performance reported today demonstrates that we have the innovation, diversification and global scale to perform
4

well in a challenging environment." "While we expect current market conditions to persist in the near-term, we are confident in strong secular demand dynamics and our ability to continue to outperform the 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 and their business; our ability to execute our business and growth strategies; the duration and severity of the COVID-19 pandemic and the impact of countermeasures taken to mitigate its spread; the impact of COVID-19 on macroeconomic conditions, the level of economic activity, demand for our technology solutions, short- and long-term customer or end user needs and changes thereto, continuity of supply chain, logistics and business operations, liquidity and financial results; changes in network spending or network strategy by 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, including its Quarterly Report on Form 10-Q filed with the SEC on September 9, 2020 and its Annual Report on Form 10-K 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 for the relevant period, Appendix 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 networking systems, services and software company. We provide solutions that help our clients create the Adaptive Network™ in response to the constantly changing demands of their users. By delivering best-in-class networking technology through high-touch consultative relationships, we build the world’s most agile networks with automation, openness and scale. For updates on Ciena, follow us on Twitter @Ciena, LinkedIn, the Ciena Insights blog, or visit www.ciena.com.
 

5

CIENA CORPORATION
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
 Quarter EndedYear Ended
October 31,November 2,October 31,November 2,
 2020201920202019
Revenue:  
Products$668,661 $820,007 $2,914,790 $2,983,815 
Services159,819 147,980 617,367 588,316 
Total revenue828,480 967,987 3,532,157 3,572,131 
Cost of goods sold: 
Products343,413 469,945 1,573,791 1,716,358 
Services80,718 78,346 305,475 313,707 
Total cost of goods sold424,131 548,291 1,879,266 2,030,065 
Gross profit404,349 419,696 1,652,891 1,542,066 
Operating expenses: 
Research and development137,237 141,657 529,888 548,139 
Selling and marketing113,382 117,201 416,425 423,046 
General and administrative43,415 50,307 169,548 174,399 
Amortization of intangible assets5,851 5,222 23,383 21,808 
Acquisition and integration costs (recoveries)3,127 (735)4,031 3,370 
Significant asset impairments and restructuring costs7,854 12,842 22,652 24,538 
Total operating expenses310,866 326,494 1,165,927 1,195,300 
Income from operations93,483 93,202 486,964 346,766 
Interest and other income (loss), net(249)(1,183)964 3,876 
Interest expense(7,395)(9,136)(31,321)(37,452)
Loss on extinguishment and modification of debt— — (646)— 
Income before income taxes85,839 82,883 455,961 313,190 
Provision for income taxes20,798 2,552 94,670 59,756 
Net income$65,041 $80,331 $361,291 $253,434 
Net Income per Common Share
Basic net income per common share$0.42 $0.52 $2.34 $1.63 
Diluted net income per potential common share$0.42 $0.51 $2.32 $1.61 
Weighted average basic common shares outstanding154,706 154,852 154,287 155,720 
Weighted average diluted potential common shares outstanding(1)
156,563 156,612 155,955 157,612 
(1) Weighted average diluted potential common shares outstanding used in calculating GAAP diluted net income per potential common share for the fourth quarter of fiscal 2020 includes 1.9 million shares underlying certain stock option and stock unit awards.
Weighted average diluted potential common shares outstanding used in calculating GAAP diluted net income per potential common share for fiscal 2020 includes 1.7 million shares underlying certain stock option and stock unit awards.
Weighted average diluted potential common shares outstanding used in calculating GAAP diluted net income per potential common share for the fourth quarter of fiscal 2019 includes 1.8 million shares underlying certain stock option and stock unit awards.
Weighted average diluted potential common shares outstanding used in calculating GAAP diluted net income per potential common share for fiscal 2019 includes 1.9 million shares underlying certain stock option and stock unit awards.
6

CIENA CORPORATION
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
 October 31,November 2,
 20202019
ASSETS  
Current assets:  
Cash and cash equivalents$1,088,624 $904,045 
 Short-term investments150,667 109,940 
Accounts receivable, net719,405 724,854 
Inventories344,379 345,049 
Prepaid expenses and other308,084 297,914 
Total current assets2,611,159 2,381,802 
Long-term investments82,226 10,014 
Equipment, building, furniture and fixtures, net272,377 286,884 
Operating lease right-of-use assets57,026 — 
Goodwill310,847 297,937 
Other intangible assets, net96,647 112,781 
Deferred tax asset, net647,805 714,942 
Other long-term assets102,830 88,986 
Total assets$4,180,917 $3,893,346 
LIABILITIES AND STOCKHOLDERS’ EQUITY 
Current liabilities: 
Accounts payable$291,904 $344,819 
Accrued liabilities and other short-term obligations334,132 382,740 
Deferred revenue108,700 111,381 
Operating lease liabilities19,035 — 
Current portion of long-term debt6,930 7,000 
Total current liabilities760,701 845,940 
Long-term deferred revenue49,663 45,492 
Other long-term obligations123,185 148,747 
Long-term operating lease liabilities61,415 — 
Long-term debt, net676,356 680,406 
Total liabilities$1,671,320 $1,720,585 
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; 154,563,005 and 154,403,850 shares issued and outstanding1,546 1,544 
Additional paid-in capital6,826,531 6,837,714 
Accumulated other comprehensive loss(35,358)(22,084)
Accumulated deficit(4,283,122)(4,644,413)
Total stockholders’ equity2,509,597 2,172,761 
Total liabilities and stockholders’ equity$4,180,917 $3,893,346 

7

CIENA CORPORATION
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 Year Ended
 October 31, 2020November 2, 2019
Cash flows from operating activities:  
Net income$361,291 $253,434 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements93,908 87,576 
Share-based compensation costs67,758 59,736 
Amortization of intangible assets38,619 35,136 
Deferred taxes64,339 19,865 
Provision for doubtful accounts8,855 6,740 
Provision for inventory excess and obsolescence24,701 28,085 
Provision for warranty22,417 23,105 
Other11,628 (910)
Changes in assets and liabilities:  
Accounts receivable(17,299)65,712 
Inventories(25,044)(112,941)
Prepaid expenses and other(38,998)(96,618)
Operating lease right-of-use assets16,787 — 
Accounts payable, accruals and other obligations(117,931)27,740 
Deferred revenue2,519 16,480 
Short and long-term operating lease liabilities(19,896)— 
Net cash provided by operating activities493,654 413,140 
Cash flows provided by (used in) investing activities: 
Payments for equipment, furniture, fixtures and intellectual property(82,667)(62,579)
Purchase of available for sale securities(223,196)(158,074)
Proceeds from maturities of available for sale securities110,390 248,748 
Settlement of foreign currency forward contracts, net3,531 (1,351)
Purchase of equity investment— (2,667)
Acquisition of businesses, net of cash acquired(28,300)— 
Net cash provided by (used in) investing activities(220,242)24,077 
Cash flows from financing activities: 
Payment of long-term debt(5,198)(7,000)
Payment for debt conversion liability— (111,268)
Payment of debt issuance costs(382)(1,191)
Payment of finance lease obligations(2,703)(3,319)
Shares repurchased for tax withholdings on vesting of restricted stock units(32,472)(29,059)
Repurchases of common stock - repurchase program(74,535)(150,076)
Proceeds from issuance of common stock28,068 22,947 
Net cash used in financing activities(87,222)(278,966)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(1,643)476 
Net increase in cash, cash equivalents and restricted cash184,547 158,727 
Cash, cash equivalents and restricted cash at beginning of fiscal year904,161 745,434 
Cash, cash equivalents and restricted cash at end of fiscal year$1,088,708 $904,161 
Supplemental disclosure of cash flow information 
Cash paid during the fiscal year for interest$32,837 $39,579 
Cash paid during the fiscal year for income taxes, net$53,076 $33,570 
Operating lease payments$22,089 $— 
Non-cash investing and financing activities  
Purchase of equipment in accounts payable$7,854 $16,549 
   Conversion of debt conversion liability into 1,585,140 shares of common stock$— $52,944 
 Operating lease right-of-use assets subject to lease liability$24,160 $— 
 Unrealized gain on equity investment$2,681 $— 

8

APPENDIX A - Reconciliation of Adjusted (Non-GAAP) Measurements (unaudited)
Quarter EndedYear Ended
October 31, 2020November 2, 2019October 31, 2020November 2, 2019
Gross Profit Reconciliation (GAAP/non-GAAP)
GAAP gross profit$404,349 $419,696 $1,652,891 $1,542,066 
Share-based compensation-products724 748 3,182 2,868 
Share-based compensation-services968 715 3,853 3,175 
Amortization of intangible assets3,732 3,303 15,235 13,327 
Total adjustments related to gross profit5,424 4,766 22,270 19,370 
Adjusted (non-GAAP) gross profit$409,773 $424,462 $1,675,161 $1,561,436 
Adjusted (non-GAAP) gross profit percentage49.5 %43.8 %47.4 %43.7 %
Operating Expense Reconciliation (GAAP/non-GAAP)
GAAP operating expense$310,866 $326,494 $1,165,927 $1,195,300 
Share-based compensation-research and development4,030 3,287 16,987 14,321 
Share-based compensation-sales and marketing5,137 4,151 20,194 16,474 
Share-based compensation-general and administrative5,982 6,425 23,424 22,841 
Amortization of intangible assets5,851 5,222 23,383 21,808 
Acquisition and integration costs (recoveries)3,127 (735)4,031 3,370 
Significant asset impairments and restructuring costs7,854 12,842 22,652 24,538 
Legal settlements— — — 137 
Total adjustments related to operating expense$31,981 $31,192 $110,671 $103,489 
Adjusted (non-GAAP) operating expense$278,885 $295,302 $1,055,256 $1,091,811 
Income from Operations Reconciliation (GAAP/non-GAAP)
GAAP income from operations$93,483 $93,202 $486,964 $346,766 
Total adjustments related to gross profit5,424 4,766 22,270 19,370 
Total adjustments related to operating expense31,981 31,192 110,671 103,489 
Total adjustments related to income from operations37,405 35,958 132,941 122,859 
Adjusted (non-GAAP) income from operations$130,888 $129,160 $619,905 $469,625 
Adjusted (non-GAAP) operating margin percentage15.8 %13.3 %17.6 %13.1 %
9

APPENDIX A - Reconciliation of Adjusted (Non-GAAP) Measurements (unaudited)
Quarter EndedYear Ended
October 31, 2020November 2, 2019October 31, 2020November 2, 2019
Net Income Reconciliation (GAAP/non-GAAP)
GAAP net income$65,041 $80,331 $361,291 $253,434 
Exclude GAAP provision for income taxes20,798 2,552 94,670 59,756 
Income before income taxes85,839 82,883 455,961 313,190 
Total adjustments related to income from operations37,405 35,958 132,941 122,859 
Loss on extinguishment and modification of debt— — 646 — 
Unrealized gain on equity investment(2,681)— (2,681)— 
Adjusted income before income taxes120,563 118,841 586,867 436,049 
Non-GAAP tax provision on adjusted income before income taxes26,042 28,403 126,763 104,216 
Adjusted (non-GAAP) net income$94,521 $90,438 $460,104 $331,833 
Weighted average basic common shares outstanding154,706 154,852 154,287 155,720 
Weighted average diluted potential common shares outstanding(1)
156,563 156,612 155,955 157,612 
Net Income per Common Share
GAAP diluted net income per potential common share$0.42 $0.51 $2.32 $1.61 
Adjusted (non-GAAP) diluted net income per potential common share$0.60 $0.58 $2.95 $2.11 
(1) Weighted average diluted potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share for the fourth quarter of fiscal 2020 includes 1.9 million shares underlying certain stock option and stock unit awards.
Weighted average diluted potential common shares outstanding used in calculating adjusted (non-GAAP) diluted net income per potential common share for fiscal 2020 includes 1.7 million shares underlying certain stock option and stock unit awards.
Weighted average diluted potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share for the fourth quarter of fiscal 2019 includes 1.8 million shares underlying certain stock option and stock unit awards.
Weighted average diluted potential common shares outstanding used in calculating adjusted (non-GAAP) diluted net income per potential common share for fiscal 2019 includes 1.9 million shares underlying certain stock option and stock unit awards.
10

APPENDIX B - Calculation of EBITDA and Adjusted EBITDA (unaudited)
Quarter EndedYear Ended
October 31, 2020November 2, 2019October 31, 2020November 2, 2019
Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)
Net income (GAAP)$65,041 $80,331 $361,291 $253,434 
Add: Interest expense7,395 9,136 31,321 37,452 
Less: Interest and other income (loss), net(249)(1,183)964 3,876 
Add: Loss on extinguishment and modification of debt— — (646)— 
Add: Provision for income taxes20,798 2,552 94,670 59,756 
Add: Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements23,538 22,505 93,908 87,576 
Add: Amortization of intangible assets9,584 8,525 38,619 35,136 
EBITDA$126,605 $124,232 $619,491 $469,478 
Add: Share-based compensation cost 16,920 15,290 67,758 59,736 
Add: Significant asset impairments and restructuring costs7,854 12,842 22,652 24,538 
Add: Acquisition and integration costs (recoveries)3,127 (735)4,031 3,370 
Add: Legal settlement— — — 137 
Adjusted EBITDA$154,506 $151,629 $713,932 $557,259 
* * *
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.
•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 (recoveries) - consist of expenses for financial, legal and accounting advisors, severance and other employee-related costs associated with our acquisitions of DonRiver and Centina, including costs and recoveries of acquisition consideration associated with a three-year earn-out arrangement related to the DonRiver acquisition in fiscal 2018. Ciena does not believe that these costs are reflective of its ongoing operating expense following its completion of these integration activities.
•Significant asset impairments and restructuring costs - costs incurred as a result of restructuring activities taken to align resources with perceived market opportunities and the redesign of business processes.
•Legal settlements - costs incurred as a result of settlements, during the first quarter of fiscal 2019.
•Unrealized gain on equity investment - reflects a change in the carrying value of a certain cost method equity investment.
•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 21.6% for fiscal 2020, and 23.9% for fiscal 2019. This rate may be subject to change in the future, including as a result of changes in tax policy or tax strategy.
11
Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Ciena Corporation Period ended October 31, 2020 December 10, 2020 Earnings Presentation

 
2Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Forward-looking statements and non-GAAP measures Information in this presentation and related comments of presenters contain a number of forward-looking statements. 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 our business and growth strategies; the duration and severity of the COVID-19 pandemic and the impact of countermeasures taken to mitigate its spread 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; and the other risk factors disclosed in Ciena’s periodic reports filed with the Securities and Exchange Commission (SEC) including Ciena’s Quarterly Report on Form 10-Q filed with the SEC on September 9, 2020 and Ciena’s Annual Report on Form 10-K 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 Form 10-Q filed with the Securities and Exchange Commission.

 
3Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. 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 • Tripled our corporate charitable matching program for employee donations and volunteering Result: Our employees have excelled through their continued focus, strength and kindness Safety and community Financial strengthBusiness continuity • Supply chain design and business continuity planning has allowed 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 solid cash flow generation • In light of our confidence around our cash generation, we will be reinstating 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 * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation.

 
4Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Fiscal 2020 results

 
5Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. FY 2020 key achievements ▪ WL5 Extreme became the first GA 800g product, and we have 65 customers ▪ Blue Planet added new customers and expanded relationships with existing customers ▪ Significant architectural win with a major webscale player ▪ Secured a series of awards including 7 deployments for our Adaptive IP solution We are forcing the pace of innovation with the Adaptive Network Our people promise and ecosystem engagementsOur balance sheet is strong ▪ Despite headwinds from COVID-19 our profitability and cash metrics remained strong • Adj. operating margin was 17.6% • Free cash flow resulted in $411M or 66.3% of adjusted operating income • Ended the year with over $1.3B in cash and investments • Leverage remains below our target level • Instituted a range of volunteering and charitable actions • Supported our employees through empowering programs and dedication to inclusion & diversity • Introduced a digital inclusion initiative aimed at increasing opportunities for underserved students • Implemented virtual capabilities across our ecosystem to engage and train including VR and AR technologies * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. Despite this challenging period we have continued to force the pace of innovation and demonstrate the resiliency in our financials and our people

 
6Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. FY 2020 comparative financial highlights Revenue Adjusted Gross Margin* Adjusted Operating Expense* Adjusted Operating Margin* FY 2020 Adjusted EBITDA* Adjusted EPS* FY 2019 $3.53B 47.4% $1.1B 29.9% / total revenue 17.6% $714M $2.95 $3.57B 43.7% $1.1B 30.6% / total revenue 13.1% $557M $2.11 * A reconciliation of these non-GAAP measures to our GAAP results is included in the press release for the relative period.

 
7Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. FY 2020 comparative operating metrics Cash and Investments Cash Flow from Operations DSO FY 2020 Inventory Turns FY 2019 $1.3B $494M 82 4.6 $1.0B $413M 82 5.0

 
8Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Market context

 
9Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. #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 ◦ LH WDM ◦ METRO WDM #2 GLOBALLY ◦ TOTAL OPTICAL NETWORKING ◦ NEXT-GEN OPTICAL ◦ PACKET OPTICAL ◦ LH WDM #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 ◦ SLTE NEW BUILD ◦ ACCESS SWITCHING & ETHERNET DEMARCATION #1 N. AMERICA ◦ TOTAL OPTICAL NETWORKING ◦ DATA CENTER INTERCONNECT ◦ LH WDM ◦ METRO WDM ◦ ACCESS SWITCHING & ETHERNET DEMARCATION #2 GLOBALLY ◦ TOTAL OPTICAL NETWORKING ◦ LH WDM ◦ METRO WDM #1 GLOBALLY ◦ PURPOSE-BUILT/COMPACT MODULAR DCI ◦ CLOUD & COLO ◦ SLTE WDM #1 N. AMERICA ◦ TOTAL OPTICAL NETWORKING ◦ PURPOSE-BUILT/COMPACT MODULAR DCI ◦ LH WDM ◦ METRO WDM #2 GLOBALLY ◦ TOTAL OPTICAL NETWORKING ◦ METRO WDM Market leadership Optical Transport Report, 2Q20Optical Networks Report, 2Q20Data Center Interconnect Market Share Report, 2Q20 Optical Network HW Vendor Scorecard, Jun 2020 Optical Equipment Vendor Leadership Global Service Provider Survey, Dec 2019 Access Switching & Ethernet Demarcation Report, 2Q20 Optical Transport Hardware Report, 2Q20 Transport Customer Markets Tracker, 2Q20 Transport Applications Tracker, 2Q20

 
10Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Several mega trends and the innovations that will enable them Fiber Deep (Cable/MSO) Cloud Data Center Mobility & 5G IoT & Connected Objects

 
11Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Q4 Fiscal 2020 results

 
12Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Q4 FY 2020 key highlights ▪ Non-telco represented 39% of total revenue ▪ Direct web-scale contributed 22% of total revenue ▪ APAC contributed 17% of total revenue ▪ Blue Planet was up 26% YoY Achieving balanced growth Delivering shareholder valueDriving the pace of innovation ▪ TTM Adjusted R&D* investment was $513M ▪ 579 100G+ total customers, which includes 28 new wins on WaveLogic Ai and 34 new wins on WaveLogic 5e in Q4 ▪ Shipped WL 5 Extreme to almost 57 customers, and the technology is live and carrying traffic in several networks ▪ YTD¹ total stockholder return of 5% ▪ Adjusted EPS* growth of 3% YoY ▪ Adjusted operating margin* improved by 250bps YoY ▪ Balance sheet strength: ▪ FCF was $166M ▪ Cashflow from operations was $187M * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. ¹ Source: Capital IQ 12/31/19-11/30/20 Despite this challenging period we have continued to force the pace of innovation and demonstrate the resiliency in our financials and our people

 
13Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Q4 FY 2020 financial highlights* * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. Revenue $828M Adjusted Gross Margin* 49.5% Adjusted Operating Expense* $279M $0.60Adjusted EPS* Adjusted EBITDA* $155M Adjusted Operating Margin* 15.8%

 
14Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Q4 FY 2020 comparisons (year-over-year) * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. $968.0 $828.5 Q4 FY 2019 Q4 FY 2020 Revenue (in millions) 43.8% 49.5% Q4 FY 2019 Q4 FY 2020 Adj. Gross Margin* 13.3% 15.8% Q4 FY 2019 Q4 FY 2020 Adj. Operating Margin* $295.3 $278.9 Q4 FY 2019 Q4 FY 2020 Adj. OpEx* (in millions) $151.6 $154.5 Q4 FY 2019 Q4 FY 2020 Adj. EBITDA* (in millions) $0.58 $0.60 Q4 FY 2019 Q4 FY 2020 Adj. EPS*

 
15Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Revenue by segment (Amounts in millions) Q4 FY 2020 Q4 FY 2019 Revenue %** Revenue %** Networking Platforms Converged Packet Optical 579.3 69.9 665.8 68.8 Packet Networking 56.0 6.8 131.9 13.6 Total Networking Platforms 635.3 76.7 797.7 82.4 Platform Software and Services 54.5 6.6 41.2 4.3 Blue Planet Automation Software and Services 20.9 2.5 16.6 1.7 Global Services Maintenance Support and Training 67.0 8.1 65.3 6.7 Installation and Deployment 43.0 5.2 36.5 3.8 Consulting and Network Design 7.8 0.9 10.7 1.1 Total Global Services 117.8 14.2 112.5 11.6 Total $828.5 100.0 % $968.0 100.0 % * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. ** Denotes % of total revenue 13.3% 13.1% 17.9% 22.4% 15.8% 43.8% 45.1% 46.9% 48.2% 49.5% Networking Platforms BP Automation Software and Services Platform Software and Services Global Services Adj. Operating Margin* Adj. Gross Margin* Q4 FY 2019 Q1 FY 2020 Q2 FY 2020 Q3 FY 2020 Q4 FY 2020 0.0 200.0 400.0 600.0 800.0 1,000.0 —% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% 55.0%

 
16Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Continued strength derived from non-telco revenue* *represents 39.1% of total revenue in Q4 FY 2020 Q4 FY 2020 21.6%5.2% 7.7% Direct Webscale Cable Gov't, R&E, Enterprise 20% 15% 24% 25% 22% 9% 9% 10% 9% 5% 11% 11% 9% 9% 8% Direct Webscale Cable Gov't, R&E, & Enterprise Q4 FY 2019 Q1 FY 2020 Q2 FY 2020 Q3 FY 2020 Q4 FY 2020 —% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

 
17Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Revenue by geographic region Q4 FY 2020 64.2% 19.0% 16.8% Americas Europe, Middle East and Africa Asia Pacific (in m ill io ns ) Americas Europe, Middle East and Africa Asia Pacific Q4 FY 2019 Q1 FY 2020 Q2 FY 2020 Q3 FY 2020 Q4 FY 2020 $0.0 $100.0 $200.0 $300.0 $400.0 $500.0 $600.0 $700.0 $800.0 $900.0 $1,000.0 10% 15% 11% 10% 17% 16% 16% 16% 17% 19% 74% 69% 73% 73% 64%

 
18Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Q4 FY 2020 balance sheet and operating metrics Cash and Investments $1.3B Cash Flow From Operations $187M Free Cash Flow $166M Inventory Turns 4.0 Leverage 1.1x Net Debt $569M

 
19Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Source: Company filings Industry Average: ACIA, ADTN, ADVA, CSCO, INFN1, JNPR and NOKIA Networks segment Delivering consistent financial performance 1. INFN represents INFN+Coriant from the time the acquisition closed Normalized Revenue Ciena Industry Avg 2016 2017 2018 2019 2020 0.8 1 1.2 1.4 Normalized Adjusted OM Ciena Industry Avg 2016 2017 2018 2019 2020 0 0.5 1 1.5 2

 
20Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Adj. EPS $0.93 $1.14 $1.39 $2.11 $2.95 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 $— $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 Delivering profitability and total shareholder return 33.5% CAGR YTD Total Share Return Ciena Adtran Infinera Acacia Nokia Cisco Juniper Adva (20)% (10)% —% 10% 20% 30% Source: company disclosures and S&P Capital IQ *YTD represents 12/31/19-11/30/20

 
21Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Q4 fiscal 2020 appendix

 
22Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Q4 FY 2020 Q3 FY 2020 Q2 FY 2020 Q1 FY 2020 Q4 FY 2019 GAAP gross profit $404,349 $464,681 $413,326 $370,535 $419,696 Share-based compensation-products 724 960 827 671 748 Share-based compensation-services 968 1,007 1,036 842 715 Amortization of intangible assets 3,732 3,834 3,835 3,834 3,303 Total adjustments related to gross profit 5,424 5,801 5,698 5,347 4,766 Adjusted (non-GAAP) gross profit $409,773 $470,482 $419,024 $375,882 $424,462 Adjusted (non-GAAP) gross profit percentage 49.5 % 48.2 % 46.9 % 45.1 % 43.8 % Gross Profit Reconciliation (Amounts in thousands)

 
23Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Q4 FY 2020 Q3 FY 2020 Q2 FY 2020 Q1 FY 2020 Q4 FY 2019 GAAP operating expense $310,866 $276,645 $285,838 $292,578 $326,494 Share-based compensation-research and development 4,030 4,286 4,822 3,849 3,287 Share-based compensation-sales and marketing 5,137 5,180 5,264 4,613 4,151 Share-based compensation-general and administrative 5,982 5,940 5,975 5,527 6,425 Amortization of intangible assets 5,851 5,840 5,839 5,853 5,222 Significant asset impairments and restructuring costs 7,854 6,515 3,811 4,472 12,842 Acquisition and integration costs (recoveries) 3,127 (2,329) 1,414 1,819 (735) Total adjustments related to operating expense 31,981 25,432 27,125 26,133 31,192 Adjusted (non-GAAP) operating expense $278,885 $251,213 $258,713 $266,445 $295,302 Q4 FY 2020 Q3 FY 2020 Q2 FY 2020 Q1 FY 2020 Q4 FY 2019 GAAP income from operations $93,483 $188,036 $127,488 $77,957 $93,202 Total adjustments related to gross profit 5,424 5,801 5,698 5,347 4,766 Total adjustments related to operating expense 31,981 25,432 27,125 26,133 31,192 Total adjustments related to income from operations 37,405 31,233 32,823 31,480 35,958 Adjusted (non-GAAP) income from operations $130,888 $219,269 $160,311 $109,437 $129,160 Adjusted (non-GAAP) operating margin percentage 15.8 % 22.4 % 17.9 % 13.1 % 13.3 % Operating Expense Reconciliation (Amounts in thousands) Income from Operations Reconciliation (Amounts in thousands)

 
24Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Q4 FY 2020 Q3 FY 2020 Q2 FY 2020 Q1 FY 2020 Q4 FY 2019 GAAP net income $65,041 $142,267 $91,655 $62,328 $80,331 Exclude GAAP provision for income taxes 20,798 38,750 25,308 9,814 2,552 Income before income taxes 85,839 181,017 116,963 72,142 82,883 Total adjustments related to income from operations 37,405 31,233 32,823 31,480 35,958 Unrealized gain on equity investment (2,681) — — — — Loss on extinguishment and modification of debt — — — 646 — Adjusted income before income taxes 120,563 212,250 149,786 104,268 118,841 Non-GAAP tax provision on adjusted income before income taxes 26,042 45,846 32,354 22,522 28,403 Adjusted (non-GAAP) net income $94,521 $166,404 $117,432 $81,746 $90,438 Weighted average basic common shares outstanding 154,706 154,184 153,858 154,334 154,852 Weighted average diluted potential common shares outstanding(1) 156,563 156,318 155,141 155,738 156,612 Q4 FY 2020 Q3 FY 2020 Q2 FY 2020 Q1 FY 2020 Q4 FY 2019 GAAP diluted net income per potential common share $ 0.42 $ 0.91 $ 0.59 $ 0.40 $ 0.51 Adjusted (non-GAAP) diluted net income per potential common share $ 0.60 $ 1.06 $ 0.76 $ 0.52 $ 0.58 1. Weighted average diluted potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share for the fourth quarter of fiscal 2020 includes 1.9 million shares underlying certain stock option and stock unit awards. Net Income Reconciliation (Amounts in thousands) Net Income per Common Share

 
25Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) Q4 FY 2020 Q3 FY 2020 Q2 FY 2020 Q1 FY 2020 Q4 FY 2019 Net income (GAAP) $65,041 $142,267 $91,655 $62,328 $80,331 Add: Interest expense 7,395 7,251 7,860 8,815 9,136 Less: Interest and other income (loss), net (249) 232 (2,665) 3,646 (1,183) Add: Loss on extinguishment and modification of debt — — — 646 — Add: Provision for income taxes 20,798 38,750 25,308 9,814 2,552 Add: Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements 23,538 21,989 22,599 25,782 22,505 Add: Amortization of intangible assets 9,584 9,674 9,674 9,687 8,525 EBITDA $126,605 $219,699 $159,761 $113,426 $124,232 Add: Share-based compensation cost 16,920 17,259 17,977 15,602 15,290 Add: Significant asset impairments and restructuring costs 7,854 6,515 3,811 4,472 12,842 Add: Acquisition and integration costs (recoveries) 3,127 (2,329) 1,414 1,819 (735) Adjusted EBITDA $154,506 $241,144 $182,963 $135,319 $151,629 Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) (Amounts in thousands)

 
Copyright © Ciena Corporation 2020. All rights reserved. Confidential & Proprietary. Thank You

 

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