Slide 1: Ciena Corporation Q2 fiscal 2019 Investor Presentation
Ciena Corporation Q2 fiscal 2019 Investor Presentation Quarterly Period ended April 30, 2019 June 6, 2019 Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary.
Slide 2: Forward-looking statements and non-GAAP measures
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 dat
Slide 3: Achieving balanced growth, driving innovation, delivering shareholder value
Achieving balanced growth Driving the pace of innovation Delivering shareholder value • Non-telco represented ~34% of total • TTM adjusted R&D investment was revenue $508.8 million • Direct web-scale contributed over 18% • Announced WaveLogic 5 which is of total revenue expected to ship in systems a
Slide 4: Q2 fiscal 2019 financial highlights
Q2 fiscal 2019 financial highlights Adjusted Operating Margin* * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 4
Slide 5: Q2 fiscal 2019 comparisons (year-over-year)
Q2 fiscal 2019 comparisons (year-over-year) Revenue Adj. Gross Margin* Adj. Operating Margin* (in millions) Q2'18 Q2'19 Q2'18 Q2'19 Q2'18 Q2'19 12.7% $865.0 43.9% 40.7% $730.0 7.7% Adj. EBITDA* Adj. EPS* (in millions) Q2'18 Q2'19 Q2'18 Q2'19 $0.48 $131.4 $77.1 $0.23 Copyright © Ciena Corporation 201
Slide 6: Revenue by segment
Revenue by segment (Amounts in millions) Q2 FY 2019 Q2 FY 2018 Revenue %** Revenue %** $1,000.0 50.0% 44.7% Networking Platforms 43.4% 43.9% $900.0 42.2% 45.0% 40.7% Converged Packet Optical $623.9 72.1 $527.9 72.4 $800.0 40.0% Packet Networking 73.1 8.5 63.8 8.7 $700.0 35.0% Total Networking Platfo
Slide 7: Continued strength derived from non-telco revenue
Continued strength derived from non-telco revenue* Q2 FY 2019 Direct Webscale Cable Gov't, R&E & Enterprise 40% 35% 11% 8% 30% 10% 8% 8% 8.3% Direct Webscale 25% 6% 7% 7% Cable 7% 9% 20% 19.2% 6.5% Gov't, R&E, 15% Enterprise 21% 21% 10% 19% 18% 17% 5% 0% Q2 FY2018 Q3 FY2018 Q4 FY2018 Q1 FY2019 Q2 FY
Slide 8: Revenue by geographic region
Revenue by geographic region Q2 FY 2019 North America EMEA CALA APAC $900.0 $800.0 19% 16% 21% $700.0 6% 17% 5% North America 21% 15.6% 3% 4% 13% 4.6% $600.0 14% Europe, Middle East 3% 15% 17% and Africa $500.0 17% 13.3% Caribbean and Latin America $400.0 66.5% (Inmillions) Asia Pacific $300.0 62% 6
Slide 9: Q2 fiscal 2019 balance sheet and operating metrics
Q2 fiscal 2019 balance sheet and operating metrics DSO Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 9
Slide 10: Returning value to shareholders through strong capital allocation priorities
Returning value to shareholders through strong capital allocation priorities Adj. R&D R&D % Rev $50.0 $500.0 17% $45.0 $40.0 $480.0 16% $35.0 $460.0 15% $30.0 $440.0 14% $25.0 $20.0 $420.0 13% $15.0 $400.0 12% $10.0 $5.0 $380.0 11% $0.0 $360.0 10% Q1 Q2 Q3 Q4 Q1 Q2 2015 2016 2017 2018 FY18 FY18 FY18
Slide 11: Delivering consistent and differentiated financial performance
Delivering consistent and differentiated financial performance Normalized Revenue Normalized Adjusted OM Ciena Industry Avg1 Ciena Industry Avg1 1.60 3.00 2.50 1.40 2.00 1.20 1.50 1.00 1.00 0.50 0.80 0.00 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 *Industry Average: ACIA, ADTN, ADVA, CSCO, IN
Slide 12: Delivering profitability and total shareholder return
Delivering profitability and total shareholder return Adjusted EPS 1YR Stock Return* 22.3% CAGR 60% $1.39 40% $1.14 20% $0.93 0% -20% -40% -60% -80% FY2016 FY2017 FY2018 CIEN ACIA CISCO ADV ADTN JNPR NOK INFN Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 12
Slide 13: Business outlook and long-term targets
Business outlook and long-term targets Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 13
Slide 14: Fiscal 2019 performance driven by strategic execution and favorable dynamics
Our fiscal 2019 performance is driven by a combination of strategic execution and favorable dynamics Continued strategic execution • Favorable competitive dynamics • Customer trust in Ciena and strong relationships • Subscale vendors struggle financially and with innovation • Web-scale providers pur
Slide 15: Long-term financial targets
Long-term financial targets1 Execution of our strategy will drive top-line growth, profitability and cash generation 1 Projections or outlook with respect to future operating results are only as of December 13, 2018, the date presented on the related earnings call. Actual results may differ material
Slide 16: Long-term financial targets
Long-term financial targets* Optical Systems Attached Services Packet Networking Blue Planet *Projections or outlook with respect to future operating results are only as of December 13, 2018, the date presented on the related earnings call. Actual results may differ materially from these forward loo
Slide 17: Q2 fiscal 2019 appendix
Q2 fiscal 2019 appendix Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 17
Slide 18: Adjusted gross profit reconciliation
Q2 FY 2019 Q1 FY 2019 Q4 FY 2018 Q3 FY 2018 Q2 FY 2018 GAAP gross profit $374,677 $323,341 $398,075 $351,543 $293,307 Share-based compensation-products 702 637 705 783 824 Share-based compensation-services 907 770 651 618 722 Amortization of intangible assets 3,303 3,418 2,957 2,534 2,289 Total adju
Slide 19: Adjusted operating expense and income from operations reconciliation
Q2 FY 2019 Q1 FY 2019 Q4 FY 2018 Q3 FY 2018 Q2 FY 2018 GAAP operating expense $294,357 $275,398 $302,205 $266,269 $261,241 Share-based compensation-research and development 4,083 3,391 3,385 3,082 3,796 Share-based compensation-sales and marketing 4,346 3,785 3,741 3,417 3,760 Share-based compensati
Slide 20: Adjusted net income reconciliation
Q2 FY 2019 Q1 FY 2019 Q4 FY 2018 Q3 FY 2018 Q2 FY 2018 GAAP net income $52,738 $33,616 $63,977 $50,840 $13,856 Exclude GAAP provision (benefit) for income taxes 17,867 9,139 (10,224) 19,280 6,475 Income before income taxes 70,605 42,755 53,753 70,120 20,331 Total adjustments related to income from o
Slide 21: EBITDA reconciliation
Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) Q2 FY 2019 Q1 FY 2019 Q4 FY 2018 Q3 FY 2018 Q2 FY 2018 Net income (GAAP) $ 52,738 $ 33,616 $ 63,977 $ 50,840 $ 13,856 Add: Interest expense 9,471 9,441 14,873 13,611 13,031 Less: Interest and other income (loss), net (244) 4,253 (