Business Wire | Sep 2, 2021 07:00AM EDT

Ciena Reports Fiscal Third Quarter 2021 Financial Results

Sep. 02, 2021

HANOVER, Md.--(BUSINESS WIRE)--Sep. 02, 2021--Ciena(r) Corporation (NYSE: CIEN), a networking systems, services and software company, today announced unaudited financial results for its fiscal third quarter ended July 31, 2021.

* Q3 Revenue: $988.1 million

* Q3 Net Income per Share: $1.52 GAAP; $0.92 adjusted (non-GAAP)

* Share Repurchases: Repurchased approximately 0.5 million shares of common stock for an aggregate price of $26.0 million during the quarter

"We delivered outstanding fiscal third quarter results that reflect continued momentum in our business as well as our differentiated position in the market," said Gary Smith, president and CEO of Ciena. "These results combined with a robust demand environment give us confidence that we will deliver our expected strong second half performance."

For the fiscal third quarter 2021, Ciena reported revenue of $988.1 million as compared to $976.7 million for the fiscal third quarter 2020.

Ciena's GAAP net income for the fiscal third quarter 2021 was $238.2 million, or $1.52 per diluted common share, which compares to a GAAP net income of $142.3 million, or $0.91 per diluted common share, for the fiscal third quarter 2020. Ciena's GAAP net income for the third quarter of 2021 benefited from the recording of a $124.2 million tax benefit related to an internal transfer of non-U.S. intangible assets. See APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measures for more information and a reconciliation of our adjusted (non-GAAP) net income which excludes the effect of these amounts.

Ciena's adjusted (non-GAAP) net income for the fiscal third quarter 2021 was $144.9 million, or $0.92 per diluted common share, which compares to an adjusted (non-GAAP) net income of $166.4 million, or $1.06 per diluted common share, for the fiscal third quarter 2020.

Fiscal Third Quarter 2021 Performance Summary

The tables below (in millions, except percentage data) provide comparisons of certain quarterly results to the prior year. Appendices A and B set forth reconciliations between the GAAP and adjusted (non-GAAP) measures contained in this release.

GAAP Results

Q3 Q3

FY 2021 FY 2020 Y-T-Y*

Revenue $ 988.1 $ 976.7 1.2 %

Gross margin 48.0 % 47.6 % 0.4 %

Operating expense $ 326.0 $ 276.6 17.9 %

Operating margin 15.0 % 19.3 % (4.3) %

Non-GAAP Results

Q3

Q3

FY 2021

FY 2020

Y-T-Y*

Revenue

$

988.1

$

976.7

1.2

%

Adj. gross margin

48.5

%

48.2

%

0.3

%

Adj. operating expense

$

290.4

$

251.2

15.6

%

Adj. operating margin

19.1

%

22.4

%

(3.3)

%

Adj. EBITDA

$

213.7

$

241.1

(11.4)

%

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

Non-GAAP Results

Q3 Q3

FY 2021 FY 2020 Y-T-Y*

Revenue $ 988.1 $ 976.7 1.2 %

Adj. gross margin 48.5 % 48.2 % 0.3 %

Adj. operating expense $ 290.4 $ 251.2 15.6 %

Adj. operating margin 19.1 % 22.4 % (3.3) %

Adj. EBITDA $ 213.7 $ 241.1 (11.4) %

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

Revenue by Segment

Q3 FY 2021 Q3 FY 2020

Revenue %** Revenue %**

Networking Platforms

Converged Packet Optical $ 712.9 72.1 $ 722.5 74.0

Routing and Switching ^(1) 69.7 7.1 79.8 8.1

Total Networking Platforms 782.6 79.2 802.3 82.1



Platform Software and Services 56.9 5.8 46.4 4.8



Blue Planet Automation Software and 16.6 1.7 11.3 1.1 Services



Global Services

Maintenance Support and Training 74.0 7.5 69.1 7.1

Installation and Deployment 46.7 4.7 39.8 4.1

Consulting and Network Design 11.3 1.1 7.8 0.8

Total Global Services 132.0 13.3 116.7 12.0



Total $ 988.1 100.0 $ 976.7 100.0

** Denotes % of total revenue

Ciena renamed its former "Packet Networking" product line "Routing and Switching" effective as of the beginning of fiscal 2021. This change,(1) affecting only the presentation of such information, was made on a prospective basis and does not impact comparability of previous financial results or the composition of this product category.

Additional Performance Metrics for Fiscal Third Quarter 2021

Revenue by Geographic Region

Q3 FY 2021 Q3 FY 2020

Revenue % ** Revenue % **

Americas $ 692.8 70.1 $ 713.3 73.0

Europe, Middle East and Africa 189.2 19.2 162.5 16.6

Asia Pacific 106.1 10.7 100.9 10.4

Total $ 988.1 100.0 $ 976.7 100.0

** Denotes % of total revenue

* Three 10%-plus customers represented a total of 37.5% of revenue * Cash and investments totaled $1.5 billion * Cash flow from operations totaled $69.1 million * Average days' sales outstanding (DSOs) were 89 * Accounts receivable, net balance was $878.2 million * Unbilled contract asset, net balance was $98.8 million * Inventories totaled $370.2 million, including: Raw materials: $139.3 million Work in process: $10.6 million Finished goods: $204.6 million Deferred cost of sales: $53.8 million Reserve for excess and obsolescence: $(38.1) million * Product inventory turns were 4.5 * Headcount totaled 7,251

Supplemental Materials and Live Web Broadcast of Unaudited Fiscal Third Quarter 2021 Results

Today, Thursday, September 2, 2021, in conjunction with this announcement, Ciena has posted to the Quarterly Results page of the Investor Relations section of its website an accompanying investor presentation for its unaudited fiscal third quarter 2021 results.

Ciena's management will also host a discussion today with investors and financial analysts that will include the Company's outlook. The live audio web broadcast beginning at 8:30 a.m. Eastern will be accessible via www.ciena.com. An archived replay of the live broadcast will be available shortly following its conclusion on the Investor Relations page of Ciena's website.

Notes to Investors

Forward-Looking Statements. You are encouraged to review the Investors section of our website, where we routinely post press releases, Securities and Exchange Commission ("SEC") filings, recent news, financial results, supplemental financial information, and other announcements. From time to time we exclusively post material information to this website along with other disclosure channels that we use. This press release contains certain forward-looking statements that involve risks and uncertainties. These statements are based on current expectations, forecasts, assumptions and other information available to the Company as of the date hereof. Forward-looking statements include statements regarding Ciena's expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or similar words. Forward-looking statements in this release include: "We delivered outstanding fiscal third quarter results that reflect continued momentum in our business as well as our differentiated position in the market" and "These results combined with a robust demand environment give us confidence that we will deliver our expected strong second half performance."

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 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; 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; 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 its Annual Report on Form 10-K filed with the SEC on December 18, 2020 and included in its Quarterly Report on Form 10-Q for the third quarter of fiscal 2021 to be filed with the SEC. Ciena assumes no obligation to update any forward-looking information included in this press release.

Non-GAAP Presentation of Quarterly and Annual Results. This release includes non-GAAP measures of Ciena's gross profit, operating expense, income from operations, earnings before interest, tax, depreciation and amortization (EBITDA), Adjusted EBITDA, and measures of net income and net income per share. In evaluating the operating performance of Ciena's business, management excludes certain charges and credits that are required by GAAP. These items share one or more of the following characteristics: they are unusual and Ciena does not expect them to recur in the ordinary course of its business; they do not involve the expenditure of cash; they are unrelated to the ongoing operation of the business in the ordinary course; or their magnitude and timing is largely outside of Ciena's control. Management believes that the non-GAAP measures below provide management and investors useful information and meaningful insight to the operating performance of the business. The presentation of these non-GAAP financial measures should be considered in addition to Ciena's GAAP results and these measures are not intended to be a substitute for the financial information prepared and presented in accordance with GAAP. Ciena's non-GAAP measures and the related adjustments may differ from non-GAAP measures used by other companies and should only be used to evaluate Ciena's results of operations in conjunction with our corresponding GAAP results. To the extent not previously disclosed in a prior Ciena financial results press release, Appendices A and B to this press release set forth a complete GAAP to non-GAAP reconciliation of the non-GAAP measures contained in this release.

About Ciena. Ciena (NYSE: CIEN) is a networking systems, services and software company. We provide solutions that help our customers create the Adaptive Network(tm) 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.

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

Quarter Ended Nine Months Ended

July 31, August 1, July 31, August 1,

2021 2020 2021 2020

Revenue:

Products $ 804,414 $ 819,022 $ 2,071,677 $ 2,246,129

Services 183,727 157,690 507,521 457,548

Total revenue 988,141 976,712 2,579,198 2,703,677

Cost of goods sold:

Products 420,236 436,227 1,074,935 1,230,378

Services 93,355 75,804 259,403 224,757

Total cost of goods 513,591 512,031 1,334,338 1,455,135 sold

Gross profit 474,550 464,681 1,244,860 1,248,542

Operating expenses:

Research and 146,225 130,221 389,212 392,651 development

Selling and marketing 114,924 94,763 322,589 303,043

General and 48,863 41,635 132,491 126,133 administrative

Significant assetimpairments and 9,789 6,515 23,865 14,798 restructuring costs

Amortization of 5,967 5,840 17,896 17,532 intangible assets

Acquisition andintegration costs 259 (2,329) 860 904 (recoveries)

Total operating 326,027 276,645 886,913 855,061 expenses

Income from 148,523 188,036 357,947 393,481 operations

Interest and other 795 232 (1,600) 1,213 income (loss), net

Interest expense (7,776) (7,251) (22,921) (23,926)

Loss onextinguishment and - - - (646) modification of debt

Income before income 141,542 181,017 333,426 370,122 taxes

Provision (benefit) (96,690) 38,750 (63,271) 73,872 for income taxes

Net income $ 238,232 $ 142,267 $ 396,697 $ 296,250



Net Income per Common Share

Basic net income per $ 1.53 $ 0.92 $ 2.55 $ 1.92 common share

Diluted net incomeper potential common $ 1.52 $ 0.91 $ 2.53 $ 1.90 share



Weighted averagebasic common shares 155,271 154,184 155,277 154,136 outstanding

Weighted averagedilutive potential 156,744 156,318 156,742 155,741 common sharesoutstanding^ 1

1 Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per potential common share for the third quarter of fiscal 2021 includes 1.5 million shares underlying certain stock option and stock unit awards.

Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per potential common share for the first nine months of fiscal 2021 includes 1.5 million shares underlying certain stock option and stock unit awards.

Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per potential common share for the third quarter of fiscal 2020 includes 2.1 million shares underlying certain stock option and stock unit awards.

Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per potential common share for the first nine months of fiscal 2020 includes 1.6 million shares underlying certain stock option and stock unit awards.

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

July 31, October 31, 2021 2020

ASSETS

Current assets:

Cash and cash equivalents $ 1,230,441 $ 1,088,624

Short-term investments 182,010 150,667

Accounts receivable, net 878,229 719,405

Inventories 370,170 344,379

Prepaid expenses and other 323,283 308,084

Total current assets 2,984,133 2,611,159

Long-term investments 60,888 82,226

Equipment, building, furniture and fixtures, net 288,937 272,377

Operating lease right-of-use assets 48,937 57,026

Goodwill 311,569 310,847

Other intangible assets, net 73,974 96,647

Deferred tax asset, net 784,702 647,805

Other long-term assets 102,728 102,830

Total assets $ 4,655,868 $ 4,180,917

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 301,606 $ 291,904

Accrued liabilities and other short-term 373,291 334,132 obligations

Deferred revenue 126,179 108,700

Operating lease liabilities 19,085 19,035

Current portion of long-term debt 6,930 6,930

Total current liabilities 827,091 760,701

Long-term deferred revenue 57,720 49,663

Other long-term obligations 123,731 123,185

Long-term operating lease liabilities 51,235 61,415

Long-term debt, net 671,855 676,356

Total liabilities $ 1,731,632 $ 1,671,320

Stockholders' equity:

Preferred stock - par value $0.01; 20,000,000shares authorized; zero shares issued and - - outstanding

Common stock - par value $0.01; 290,000,000shares authorized; 155,103,315 1,551 1,546

and 154,563,005 shares issued and outstanding

Additional paid-in capital 6,815,946 6,826,531

Accumulated other comprehensive loss (4,630) (35,358)

Accumulated deficit (3,888,631) (4,283,122)

Total stockholders' equity 2,924,236 2,509,597

Total liabilities and stockholders' equity $ 4,655,868 $ 4,180,917

CIENA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)

Nine Months Ended

July 31,

August 1,

2021

2020

Cash flows provided by operating activities:

Net income

$

396,697

$

296,250

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements

71,918

70,370

Share-based compensation costs

62,970

50,838

Amortization of intangible assets

27,341

29,035

Deferred taxes

(139,543)

57,636

Provision for inventory excess and obsolescence

13,460

20,176

Provision for warranty

12,726

19,172

Other

6,350

15,085

Changes in assets and liabilities:

Accounts receivable

(163,149)

(6,688)

Inventories

(38,821)

(39,568)

Prepaid expenses and other

(17,272)

(52,945)

Operating lease right-of-use assets

12,340

12,816

Accounts payable, accruals and other obligations

31,388

(131,647)

Deferred revenue

24,969

(19,039)

Short and long-term operating lease liabilities

(14,618)

(15,132)

Net cash provided by operating activities

286,756

306,359

Cash flows used in investing activities:

Payments for equipment, furniture, fixtures and intellectual property

(67,290)

(61,333)

Purchase of available for sale securities

(132,895)

(39,859)

Proceeds from maturities of available for sale securities

122,063

90,000

Settlement of foreign currency forward contracts, net

7,326

3,067

Acquisition of business, net of cash acquired

-

(28,300)

Proceeds from sale of equity investment

4,678

-

Net cash used in investing activities

(66,118)

(36,425)

Cash flows used in financing activities:

Payment of long term debt

(5,197)

(3,465)

Payment of debt issuance costs

-

(382)

Payment of finance lease obligations

(2,243)

(2,030)

Shares repurchased for tax withholdings on vesting of restricted stock units

(36,484)

(26,328)

Repurchases of common stock - repurchase program

(64,555)

(74,535)

Proceeds from issuance of common stock

28,289

27,986

Net cash used in financing activities

(80,190)

(78,754)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

1,344

(1,526)

Net increase in cash, cash equivalents and restricted cash

141,792

189,654

Cash, cash equivalents and restricted cash at beginning of period

1,088,708

904,161

Cash, cash equivalents and restricted cash at end of period

$

1,230,500

$

1,093,815

Supplemental disclosure of cash flow information

Cash paid during the period for interest

$

22,392

$

25,278

Cash paid during the period for income taxes, net

$

46,165

$

41,316

Operating lease payments

$

16,162

$

16,762

Non-cash investing and financing activities

Purchase of equipment in accounts payable

$

5,517

$

4,200

Repurchase of common stock in accrued liabilities from repurchase program

$

800

$

-

Operating lease right-of-use assets subject to lease liability

$

4,182

$

11,404

CIENA CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) (unaudited)

Nine Months Ended

July 31, August 1,

2021 2020

Cash flows provided by operating activities:

Net income $ 396,697 $ 296,250

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of equipment, building, furnitureand fixtures, and amortization of leasehold 71,918 70,370 improvements

Share-based compensation costs 62,970 50,838

Amortization of intangible assets 27,341 29,035

Deferred taxes (139,543) 57,636

Provision for inventory excess and obsolescence 13,460 20,176

Provision for warranty 12,726 19,172

Other 6,350 15,085

Changes in assets and liabilities:

Accounts receivable (163,149) (6,688)

Inventories (38,821) (39,568)

Prepaid expenses and other (17,272) (52,945)

Operating lease right-of-use assets 12,340 12,816

Accounts payable, accruals and other obligations 31,388 (131,647)

Deferred revenue 24,969 (19,039)

Short and long-term operating lease liabilities (14,618) (15,132)

Net cash provided by operating activities 286,756 306,359

Cash flows used in investing activities:

Payments for equipment, furniture, fixtures and (67,290) (61,333) intellectual property

Purchase of available for sale securities (132,895) (39,859)

Proceeds from maturities of available for sale 122,063 90,000 securities

Settlement of foreign currency forward contracts, 7,326 3,067 net

Acquisition of business, net of cash acquired - (28,300)

Proceeds from sale of equity investment 4,678 -

Net cash used in investing activities (66,118) (36,425)

Cash flows used in financing activities:

Payment of long term debt (5,197) (3,465)

Payment of debt issuance costs - (382)

Payment of finance lease obligations (2,243) (2,030)

Shares repurchased for tax withholdings on (36,484) (26,328) vesting of restricted stock units

Repurchases of common stock - repurchase program (64,555) (74,535)

Proceeds from issuance of common stock 28,289 27,986

Net cash used in financing activities (80,190) (78,754)

Effect of exchange rate changes on cash, cash 1,344 (1,526) equivalents and restricted cash

Net increase in cash, cash equivalents and 141,792 189,654 restricted cash

Cash, cash equivalents and restricted cash at 1,088,708 904,161 beginning of period

Cash, cash equivalents and restricted cash at end $ 1,230,500 $ 1,093,815 of period

Supplemental disclosure of cash flow information

Cash paid during the period for interest $ 22,392 $ 25,278

Cash paid during the period for income taxes, net $ 46,165 $ 41,316

Operating lease payments $ 16,162 $ 16,762

Non-cash investing and financing activities

Purchase of equipment in accounts payable $ 5,517 $ 4,200

Repurchase of common stock in accrued liabilities $ 800 $ - from repurchase program

Operating lease right-of-use assets subject to $ 4,182 $ 11,404 lease liability

APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measures

(in thousands, except per share data) (unaudited)

Quarter Ended

July 31,

August 1,

2021

2020

Gross Profit Reconciliation (GAAP/non-GAAP)

GAAP gross profit

$

474,550

$

464,681

Share-based compensation-products

1,037

960

Share-based compensation-services

1,315

1,007

Canadian Emergency Wage Subsidy-products

(94)

-

Canadian Emergency Wage Subsidy-services

(47)

-

Amortization of intangible assets

2,857

3,834

Total adjustments related to gross profit

5,068

5,801

Adjusted (non-GAAP) gross profit

$

479,618

$

470,482

Adjusted (non-GAAP) gross profit percentage

48.5

%

48.2

%

Operating Expense Reconciliation (GAAP/non-GAAP)

GAAP operating expense

$

326,027

$

276,645

Share-based compensation-research and development

5,541

4,286

Share-based compensation-sales and marketing

6,534

5,180

Share-based compensation-general and administrative

8,237

5,940

Canadian Emergency Wage Subsidy-research and development

(596)

-

Canadian Emergency Wage Subsidy-sales and marketing

(53)

-

Canadian Emergency Wage Subsidy-general and administrative

(46)

-

Significant asset impairments and restructuring costs

9,789

6,515

Amortization of intangible assets

5,967

5,840

Acquisition and integration costs (recoveries)

259

(2,329)

Total adjustments related to operating expense

35,632

25,432

Adjusted (non-GAAP) operating expense

$

290,395

$

251,213

Income from Operations Reconciliation (GAAP/non-GAAP)

GAAP income from operations

$

148,523

$

188,036

Total adjustments related to gross profit

5,068

5,801

Total adjustments related to operating expense

35,632

25,432

Total adjustments related to income from operations

40,700

31,233

Adjusted (non-GAAP) income from operations

$

189,223

$

219,269

Adjusted (non-GAAP) operating margin percentage

19.1

%

22.4

%

Net Income Reconciliation (GAAP/non-GAAP)

GAAP net income

$

238,232

$

142,267

Exclude GAAP provision (benefit) for income taxes

(96,690)

38,750

Income before income taxes

141,542

181,017

Total adjustments related to income from operations

40,700

31,233

Adjusted income before income taxes

182,242

212,250

Non-GAAP tax provision on adjusted income before income taxes

37,360

45,846

Adjusted (non-GAAP) net income

$

144,882

$

166,404

Weighted average basic common shares outstanding

155,271

154,184

Weighted average dilutive potential common shares outstanding 1

156,744

156,318

Net Income per Common Share

GAAP diluted net income per common share

$

1.52

$

0.91

Adjusted (non-GAAP) diluted net income per potential common share

$

0.92

$

1.06

1 Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share for the third quarter of fiscal 2021 includes 1.5 million shares underlying certain stock option and stock unit awards.

Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share for the third quarter of fiscal 2020 includes 2.1 million shares underlying certain stock option and stock unit awards.

APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measures

(in thousands, except per share data) (unaudited)



Quarter Ended

July 31, August 1,

2021 2020

Gross Profit Reconciliation (GAAP/non-GAAP)

GAAP gross profit $ 474,550 $ 464,681

Share-based compensation-products 1,037 960

Share-based compensation-services 1,315 1,007

Canadian Emergency Wage Subsidy-products (94) -

Canadian Emergency Wage Subsidy-services (47) -

Amortization of intangible assets 2,857 3,834

Total adjustments related to gross profit 5,068 5,801

Adjusted (non-GAAP) gross profit $ 479,618 $ 470,482

Adjusted (non-GAAP) gross profit percentage 48.5 % 48.2 %



Operating Expense Reconciliation (GAAP/non-GAAP)

GAAP operating expense $ 326,027 $ 276,645

Share-based compensation-research and development 5,541 4,286

Share-based compensation-sales and marketing 6,534 5,180

Share-based compensation-general and administrative 8,237 5,940

Canadian Emergency Wage Subsidy-research and (596) - development

Canadian Emergency Wage Subsidy-sales and marketing (53) -

Canadian Emergency Wage Subsidy-general and (46) - administrative

Significant asset impairments and restructuring 9,789 6,515 costs

Amortization of intangible assets 5,967 5,840

Acquisition and integration costs (recoveries) 259 (2,329)

Total adjustments related to operating expense 35,632 25,432

Adjusted (non-GAAP) operating expense $ 290,395 $ 251,213



Income from Operations Reconciliation (GAAP/ non-GAAP)

GAAP income from operations $ 148,523 $ 188,036

Total adjustments related to gross profit 5,068 5,801

Total adjustments related to operating expense 35,632 25,432

Total adjustments related to income from operations 40,700 31,233

Adjusted (non-GAAP) income from operations $ 189,223 $ 219,269

Adjusted (non-GAAP) operating margin percentage 19.1 % 22.4 %



Net Income Reconciliation (GAAP/non-GAAP)

GAAP net income $ 238,232 $ 142,267

Exclude GAAP provision (benefit) for income taxes (96,690) 38,750

Income before income taxes 141,542 181,017

Total adjustments related to income from operations 40,700 31,233

Adjusted income before income taxes 182,242 212,250

Non-GAAP tax provision on adjusted income before 37,360 45,846 income taxes

Adjusted (non-GAAP) net income $ 144,882 $ 166,404



Weighted average basic common shares outstanding 155,271 154,184

Weighted average dilutive potential common shares 156,744 156,318outstanding ^1



Net Income per Common Share

GAAP diluted net income per common share $ 1.52 $ 0.91

Adjusted (non-GAAP) diluted net income per potential $ 0.92 $ 1.06 common share

1 Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share for the third quarter of fiscal 2021 includes 1.5 million shares underlying certain stock option and stock unit awards.

Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per potential common share for the third quarter of fiscal 2020 includes 2.1 million shares underlying certain stock option and stock unit awards.

APPENDIX B - Calculation of EBITDA and Adjusted EBITDA (unaudited)

(in thousands) (unaudited)



Quarter Ended

July 31, August 1,

2021 2020

Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)

Net income (GAAP) $ 238,232 $ 142,267

Add: Interest expense 7,776 7,251

Less: Interest and other income, net 795 232

Add: Provision (benefit) for income taxes (96,690) 38,750

Add: Depreciation of equipment, building, furnitureand fixtures, and amortization of leasehold 24,623 21,989 improvements

Add: Amortization of intangible assets 8,824 9,674

EBITDA $ 181,970 $ 219,699

Less: Canadian Emergency Wage Subsidy 836 -

Add: Share-based compensation cost 22,471 17,259

Add: Significant asset impairments and 9,789 6,515 restructuring costs

Add: Acquisition and integration costs (recoveries) 259 (2,329)

Adjusted EBITDA $ 213,653 $ 241,144

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. * Canadian Emergency Wage Subsidy - a program introduced by the Government of Canada to offset a portion of employee wages for a limited period in response to COVID-19 outbreak. * 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. * 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) - includes costs and recoveries of acquisition consideration and compensation 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. * 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 20.5% for the third fiscal quarter of 2021 and 21.6% for the third fiscal quarter of 2020. This rate may be subject to change in the future, including as a result of changes in tax policy or tax strategy. Ciena's GAAP tax provision for the third quarter of 2021 benefited from recording a $124.2 million tax benefit related to an internal transfer of non-U.S. intangible assets that was recognized as a result of the step-up in basis of such rights for tax purposes. The Non-GAAP tax provision for the periods presented do not include this tax benefit or the corresponding deferred tax asset.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210902005349/en/

CONTACT: Press Contact: Jamie Moody Ciena Corporation +1 (214) 995-8035 pr@ciena.com Investor Contact: Gregg Lampf Ciena Corporation +1 (410) 694-5700 ir@ciena.com