Ciena Corporation (NYSE:CIEN) Q3 2024 Earnings Conference Call September 4, 2024 8:30 AM ET Company Participants Gregg Lampf - Vice President of Investor Relations Gary Smith - President and Chief Executive Officer Jim Moylan - Chief Financial Officer Scott McFeely - Executive Advisor Conference Call Participants Meta Marshall - Morgan Stanley Simon Leopold - Raymond James Samik Chatterjee - JPMorgan Amit Daryanani - Evercore Tim Long - Barclays George Notter - Jefferies Tal Liani - Bank of America David Vo ...

Ciena (CIEN) reported $942.31 million in revenue for the quarter ended July 2024, representing a year-overyear decline of 11.8%. EPS of $0.35 for the same period compares to $0.59 a year ago. The reported revenue represents a surprise of +1.44% over the Zacks Consensus Estimate of $928.91 million. With the consensus EPS estimate being $0.26, the EPS surprise was +34.62%. While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to determine the ...

Ciena (CIEN) came out with quarterly earnings of $0.35 per share, beating the Zacks Consensus Estimate of $0.26 per share. This compares to earnings of $0.59 per share a year ago. These figures are adjusted for nonrecurring items. This quarterly report represents an earnings surprise of 34.62%. A quarter ago, it was expected that this developer of high-speed networking technology would post earnings of $0.15 per share when it actually produced earnings of $0.27, delivering a surprise of 80%. Over the last f ...

Financial Performance - Ciena's Q3 FY24 revenue was $942.3 million, compared to $1,067.9 million in Q3 FY23[17] - The adjusted gross margin was 43.7% in Q3 FY24, up from 42.7% in Q3 FY23[17] - Adjusted operating expenses were $336.0 million in Q3 FY24, compared to $327.9 million in Q3 FY23[17] - Adjusted EBITDA was $98.5 million in Q3 FY24, down from $151.3 million in Q3 FY23[17] - Adjusted EPS was $0.35 in Q3 FY24, compared to $0.59 in Q3 FY23[17] Revenue Segmentation - Networking Platforms revenue was $699.5 million in Q3 FY24, representing 74.2% of total revenue, compared to $846.6 million (79.2%) in Q3 FY23[19] - Optical Networking contributed $606.8 million, or 64.4% of total revenue in Q3 FY24, versus $719.0 million (67.3%) in Q3 FY23[19] - Routing and Switching revenue was $92.7 million (9.8%) in Q3 FY24, compared to $127.6 million (11.9%) in Q3 FY23[19] - Global Services revenue totaled $133.8 million, accounting for 14.2% of total revenue in Q3 FY24, compared to $129.3 million (12.1%) in Q3 FY23[19] Market and Strategy - Non-telco customers accounted for approximately 46% of Ciena's total revenue in Q3 FY24[14, 20] - Ciena is targeting $250 million for FY2024 to complete the stock repurchase plan[14] - Ciena's addressable market expansion strategy targets a $15 billion expansion by 2027, with a CAGR of 36%[11]

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) Ciena reported a decline in Q3 2024 revenue and net income, with management emphasizing growing momentum with cloud providers and confidence in market share gains through innovation Q3 2024 Key Financial Metrics | Metric | Value ($) | | :--- | :--- | | Revenue | $942.3 million | | GAAP Net Income per Share | $0.10 | | Adjusted (non-GAAP) Net Income per Share | $0.35 | | Share Repurchases | $29.0 million (0.6 million shares) | - The CEO stated that **strong Q3 results** reflect **growing momentum** with cloud providers and a continued gradual recovery with service providers[1](index=1&type=chunk) - The company believes it is **well-positioned** to **gain market share** and deliver **profitable growth** due to its innovation in cloud and AI-capable infrastructures[1](index=1&type=chunk) Q3 Net Income Comparison (YoY) | Metric | Q3 FY2024 (million $) | Q3 FY2023 (million $) | | :--- | :--- | :--- | | GAAP Net Income | $14.2 | $29.7 | | Adjusted (non-GAAP) Net Income | $50.8 | $89.1 | [Performance Summary](index=1&type=section&id=Performance%20Summary) Ciena's Q3 2024 revenue declined 11.8% year-over-year, with improved gross margins but contracted operating margins, while Networking Platforms remained the largest segment despite a share decrease [Key Financial Metrics (GAAP vs. Non-GAAP)](index=1&type=section&id=Key%20Financial%20Metrics%20(GAAP%20vs.%20Non-GAAP)) Q3 2024 total revenue decreased by 11.8% to **$942.3 million**, with GAAP gross margin improving to **42.9%** but GAAP operating margin declining to **2.9%** year-over-year Q3 Performance Comparison (YoY) | Metric | Q3 FY2024 (GAAP) | Q3 FY2023 (GAAP) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $942.3 million | $1,067.9 million | (11.8)% | | Gross Margin | 42.9% | 42.0% | +0.9% | | Operating Expense | $377.2 million | $370.7 million | +1.7% | | Operating Margin | 2.9% | 7.3% | (4.4)% | | **Metric** | **Q3 FY2024 (Non-GAAP)** | **Q3 FY2023 (Non-GAAP)** | **Change (%)** | | Adj. Gross Margin | 43.7% | 42.7% | +1.0% | | Adj. Operating Expense | $336.0 million | $327.9 million | +2.5% | | Adj. Operating Margin | 8.0% | 12.0% | (4.0)% | | Adj. EBITDA | $98.5 million | $151.3 million | (34.9)% | [Revenue by Segment](index=2&type=section&id=Revenue%20by%20Segment) Total Networking Platforms revenue declined to **$699.5 million**, representing **74.2%** of total revenue, while Blue Planet Automation Software and Services nearly doubled its revenue to **$25.8 million** Q3 Revenue by Segment (in millions $) | Segment | Q3 FY2024 Revenue | % of Total | Q3 FY2023 Revenue | % of Total | | :--- | :--- | :--- | :--- | :--- | | **Networking Platforms** | | | | | | Optical Networking | $606.8 | 64.4% | $719.0 | 67.3% | | Routing and Switching | $92.7 | 9.8% | $127.6 | 11.9% | | *Total Networking Platforms* | *$699.5* | *74.2%* | *$846.6* | *79.2%* | | **Platform Software and Services** | $83.2 | 8.9% | $78.9 | 7.4% | | **Blue Planet Automation** | $25.8 | 2.7% | $13.1 | 1.3% | | **Global Services** | $133.8 | 14.2% | $129.3 | 12.1% | | **Total** | **$942.3** | **100.0%** | **$1,067.9** | **100.0%** | [Revenue by Geographic Region](index=2&type=section&id=Revenue%20by%20Geographic%20Region) Americas revenue decreased slightly to **$718.6 million** but increased its share to **76.3%**, while Asia Pacific revenue significantly declined to **$88.7 million** Q3 Revenue by Geographic Region (in millions $) | Region | Q3 FY2024 Revenue | % of Total | Q3 FY2023 Revenue | % of Total | | :--- | :--- | :--- | :--- | :--- | | Americas | $718.6 | 76.3% | $749.5 | 70.2% | | Europe, Middle East and Africa | $135.0 | 14.3% | $152.8 | 14.3% | | Asia Pacific | $88.7 | 9.4% | $165.6 | 15.5% | | **Total** | **$942.3** | **100.0%** | **$1,067.9** | **100.0%** | [Additional Performance Metrics & Company Information](index=2&type=section&id=Additional%20Performance%20Metrics%20%26%20Company%20Information) Ciena's Q3 performance metrics include **26.6%** revenue from two major customers, **$1.2 billion** in cash and investments, negative **$159.4 million** cash flow from operations, and **$937.4 million** in inventories - Two 10%-plus customers represented a total of **26.6% of revenue**[7](index=7&type=chunk) - Cash and investments totaled **$1.2 billion**, while cash flow used in operations was **$159.4 million**[7](index=7&type=chunk) - Inventories totaled **$937.4 million** with product inventory turns at **1.8**, and headcount was **8,781**[9](index=9&type=chunk) - The company warns that forward-looking statements are subject to risks and uncertainties, including broader economic conditions, supply chain constraints, and competitive pressures, as detailed in its SEC filings[11](index=11&type=chunk)[12](index=12&type=chunk) [Condensed Consolidated Financial Statements (GAAP)](index=5&type=section&id=Condensed%20Consolidated%20Financial%20Statements%20(GAAP)) The GAAP financial statements show a year-over-year decline in Q3 revenue and net income, stable total assets, decreased liabilities, and a significant shift to positive cash from operations for the nine-month period [Statements of Operations](index=5&type=section&id=Statements%20of%20Operations) Q3 2024 total revenue was **$942.3 million** with net income of **$14.2 million**, a decline from **$1.07 billion** revenue and **$29.7 million** net income in the prior year Q3 Statement of Operations Highlights (in thousands $) | Line Item | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | Total Revenue | $942,308 | $1,067,886 | | Gross Profit | $403,945 | $448,941 | | Income from Operations | $26,743 | $78,214 | | Net Income | $14,230 | $29,733 | | Diluted EPS | $0.10 | $0.20 | [Balance Sheets](index=6&type=section&id=Balance%20Sheets) As of July 27, 2024, total assets were **$5.58 billion**, with **$883.4 million** in cash and **$937.4 million** in inventories, while total liabilities decreased to **$2.68 billion** Condensed Balance Sheet Highlights (in thousands $) | Line Item | July 27, 2024 | October 28, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $883,365 | $1,010,618 | | Inventories, net | $937,399 | $1,050,838 | | Total Assets | $5,575,130 | $5,601,495 | | Total Liabilities | $2,684,258 | $2,753,134 | | Total Stockholders' Equity | $2,890,872 | $2,848,361 | [Statements of Cash Flows](index=7&type=section&id=Statements%20of%20Cash%20Flows) Net cash provided by operating activities for the nine months ended July 27, 2024, was **$165.2 million**, a significant improvement from the prior year, driven by working capital changes Nine-Month Cash Flow Summary (in thousands $) | Cash Flow Activity | Nine Months Ended July 27, 2024 | Nine Months Ended July 29, 2023 | | :--- | :--- | :--- | | Net cash from Operating Activities | $165,172 | $(27,140) | | Net cash used in Investing Activities | $(157,546) | $(285,336) | | Net cash from (used in) Financing Activities | $(136,382) | $426,546 | [Reconciliation of GAAP to Non-GAAP Measures](index=9&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) Ciena provides detailed reconciliations for non-GAAP metrics, with Q3 2024 adjusted gross profit at **$411.5 million** and adjusted net income at **$50.8 million**, after accounting for items like share-based compensation and amortization - The company **excludes certain items** to arrive at non-GAAP measures, such as share-based compensation, amortization of intangible assets, acquisition costs, and restructuring costs, believing this provides a **more meaningful insight** into operating performance[13](index=13&type=chunk)[24](index=24&type=chunk) [Net Income and EPS Reconciliation](index=9&type=section&id=Net%20Income%20and%20EPS%20Reconciliation) GAAP net income of **$14.2 million** was adjusted by **$48.8 million** in operational adjustments and a **$14.3 million** non-GAAP tax provision, yielding an adjusted net income of **$50.8 million** and adjusted diluted EPS of **$0.35** Q3 Net Income Reconciliation (in thousands $) | Line Item | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | GAAP net income | $14,230 | $29,733 | | Total adjustments to income from operations | $48,782 | $49,813 | | Non-GAAP tax provision | $(14,330) | $(25,133) | | **Adjusted (non-GAAP) net income** | **$50,807** | **$89,108** | Q3 Diluted EPS Reconciliation | Metric | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | GAAP diluted EPS | $0.10 | $0.20 | | Adjusted (non-GAAP) diluted EPS | $0.35 | $0.59 | [EBITDA and Adjusted EBITDA Calculation](index=11&type=section&id=EBITDA%20and%20Adjusted%20EBITDA%20Calculation) Starting from GAAP net income of **$14.2 million**, Q3 2024 EBITDA was **$59.7 million**, and after adding back non-cash expenses, Adjusted EBITDA reached **$98.5 million**, a decrease from the prior year Q3 EBITDA and Adjusted EBITDA Reconciliation (in thousands $) | Line Item | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | Net income (GAAP) | $14,230 | $29,733 | | Adjustments (Interest, Taxes, D&A) | $45,443 | $84,465 | | **EBITDA** | **$59,673** | **$114,198** | | Add: Share-based compensation | $37,472 | $32,906 | | Add: Restructuring & other costs | $1,361 | $4,233 | | **Adjusted EBITDA** | **$98,506** | **$151,337** |

Ciena Corporation (CIEN) is scheduled to report third-quarter fiscal 2024 results on Sept. 4. The Zacks Consensus Estimate for earnings is pegged at 26 cents per share, implying a 55.9% decrease from the year-ago level. For the fiscal third quarter, management expects revenues in the range of $880-$960 million. The consensus estimate for revenues is pegged at $927.5 million, indicating a decline of 13.2% from the prior-year level. CIEN has a trailing four-quarter earnings surprise of 35.5%, on average. Shar ...

Ciena Corporation (CIEN) and Arelion have achieved a milestone with the world's first 1.6 terabits-persecond (Tb/s) wavelength data transmission in a live network field trial. Utilizing Ciena's advanced WaveLogic 6 Extreme (WL6e), this achievement took place over Arelion's 470km route connecting its Ashburn, Virginia (Equinix) and Telxius' Virginia Beach cable landing station. This success has significantly boosted capacity between these key Points-of-Presence (PoPs) in Arelion's North American network. Are ...

Core Viewpoint - Analysts project that Ciena (CIEN) will report quarterly earnings of $0.26 per share, reflecting a year-over-year decline of 55.9%, with revenues expected to reach $927.49 million, down 13.2% from the same quarter last year [1]. Revenue Estimates - Revenue from Total Networking Platforms is estimated at $695.88 million, indicating a decline of 17.8% year-over-year [4]. - Revenue from Total Global Services is projected at $133.39 million, suggesting a year-over-year increase of 3.2% [4]. - Revenue from Software and Services (Platform + Blue Planet Automation) is expected to be $103.75 million, reflecting a growth of 12.8% from the prior year [5]. - Revenue from Platform Software and Services is estimated at $83.49 million, indicating a year-over-year increase of 5.8% [5]. - Revenue from Networking Platforms (Optical Networking) is projected at $583.63 million, showing a decline of 18.8% year-over-year [6]. - Revenue from Blue Planet Automation Software and Services is expected to reach $21.38 million, reflecting a significant increase of 63.2% year-over-year [6]. - Revenue from Products is estimated at $728.24 million, indicating a decline of 15.8% from the same quarter last year [6]. - Revenue from Services is projected at $192.95 million, reflecting a decrease of 4.8% year-over-year [7]. - Revenue from Global Services (Maintenance Support and Training) is expected to be $76.47 million, indicating a year-over-year increase of 4.9% [7]. - Revenue from Global Services (Installation and Deployment) is projected at $48.56 million, reflecting a growth of 3.8% from the prior year [8]. - Revenue from Global Services (Consulting and Network Design) is expected to reach $11.13 million, indicating a year-over-year increase of 15.9% [8]. Profit Estimates - Gross profit from Products is expected to be $304.49 million, down from $348.30 million reported in the same quarter last year [9]. Stock Performance - Over the past month, Ciena shares have recorded returns of 8.1%, outperforming the Zacks S&P 500 composite's 2.6% change [9].

Ciena Corporation's (CIEN) coherent routing solutions are deployed by Bhutan Telecom to handle growing traffic demands and enhance the customer experience, particularly as users transition to emerging technologies such as edge cloud applications. Bhutan Telecom provides telecommunications and Internet services in the Kingdom of Bhutan. It offers fixedline telephony, GSM mobile services under the B-Mobile brand, and Internet services through DrukNet. The company leads in mobile and Internet services and is t ...

However, the persistence of macroeconomic volatility is causing lower-than-expected order volumes from service providers, thereby affecting the company's performance. High customer concentration risk is another concern. A bulk of its revenues is concentrated among a few large global communications service providers. Given the competitive nature of the industry, the loss of any one of its key customers could severely impact the company's performance. Ciena Corporation (CIEN) recently tied up with Sodvin AS, ...