Slide 1: Ciena Corporation Investor Presentation
Ciena Corporation Investor presentation Period ended October 31, 2018 Copyright © Ciena Corporation 2017. 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: Table of Contents
Table of Contents Long-Term Targets Copyright © Ciena Corporation 2017. All rights reserved. Confidential & Proprietary. 3
Slide 4: FY 2018 Highlights
FY 2018 Highlights Copyright © Ciena Corporation 2017. All rights reserved. Confidential & Proprietary. 4
Slide 5: FY 2018 highlights: market share, balance sheet, innovation
We are taking market share and outperforming the competition . Annual revenue growth greater than the market at 10% . Expect to have gained at least 2% of global market share . Continued to diversify revenue with strong YoY growth; APAC up 21%, Webscale up 139% and Subsea up 25% Our balance sheet is
Slide 6: FY 2018 Financial Highlights
FY 2018 Financial Highlights FY’18 FY’17 Revenue $3.09B $2.80B Adjusted 43.0% 45.1% Gross Margin Adjusted $994M $931M Operating Expense 32.1% / total revenue 33.2% / total revenue Adjusted 10.9% 11.9% Operating Margin Adjusted EPS $1.39 $1.14 * A reconciliation of these non-GAAP measures to our GAAP
Slide 7: FY 2018 Operating Metrics
FY 2018 Operating Metrics FY’18 FY’17 Cash and Investments $953M $1.0B Cash Flow from $229M $235M Operations DSO 92 days 80 days Inventory Turns 5.7 4.9 Copyright © Ciena Corporation 2017. All rights reserved. Confidential & Proprietary. 7
Slide 8: Q4'18 Financials
Q4’18 Financials Copyright © Ciena Corporation 2017. All rights reserved. Confidential & Proprietary. 8
Slide 9: Q4'18 Financial Highlights
Q4’18 Financial Highlights Revenue Adjusted Gross Margin Adjusted Operating Margin Adjusted EBITDA Cash Flow from Operations Adjusted EPS * A reconciliation of these non-GAAP measures to our GAAP results is included in the appendix to this presentation. Copyright © Ciena Corporation 2017. All rights
Slide 10: Q4'18 Performance Comparisons (year-over-year)
Q4’18 Performance Comparisons (year-over-year) Revenue Adj. Gross Margin* Adj. Operating Margin* Q4'18 Q4'17 Q4'18 Q4'17 Q4'18 Q4'17 $899.4 44.7% 44.2% 13.9% $744.4 11.9% Adj. EBITDA* Cash Flow from Operations Adj. EPS* Q4'18 Q4'17 Q4'18 Q4'17 Q4'18 Q4'17 $145.8 $0.53 $138.5 $109.7 $0.32 $68.0 * A r
Slide 11: Q4'18 Balance Sheet and Operating Metrics
Q4’18 Balance Sheet and Operating Metrics Cash and Investments $953.4 million Cash Flow from Operations $68.0 million DSO 79 days Inventory Turns 6.4 Copyright © Ciena Corporation 2017. All rights reserved. Confidential & Proprietary. 11
Slide 12: Revenue by Segment
Revenue by Segment (Amounts in millions) Q4 FY 2018 Q4 FY 2017 $1,000.0 50.0% 44.7% 43.4% 44.2% Revenue %** Revenue %** $900.0 42.6% 45.0% 40.7% Networking Platforms 40.0% $800.0 Converged Packet Optical $646.4 71.9 $506.4 68.0 $700.0 35.0% Packet Networking 66.5 7.4 92.5 12.5 Total Networking Platf
Slide 13: Revenue by Geographic Region
Revenue by Geographic Region Q4 2018 900 800 18.7% 21.0% 700 5.9% 20.8% 20.1% 13.7% 3.4% North America 600 17.1% 14.9% 3.4% 5.8% 5.4% 18.7% Europe, Middle East 500 16.7% 14.9% and Africa 15.1% 5.9% Caribbean and Latin 400 America 300 13.7% 61.7% Asia Pacific 61.7% 60.7% 59.2% 200 59.1% 62.4% 100 0 Q
Slide 14: Our Pedigree
Our Pedigree Copyright © Ciena Corporation 2017. All rights reserved. Confidential & Proprietary. 14
Slide 15: Successful execution of our strategy
Successful execution of our strategy APAC ~20% total revenue | India: $271M ~10% total revenue | India: ~$100M Diversification Webscale* ~35% total revenue ~15% total revenue Subsea Upgrade + New Build market Upgrade market only Purpose built solutions for individual Solutions Limited number of solu
Slide 16: Delivering consistent and differentiated financial performance
Delivering consistent and differentiated financial performance Normalized Revenue Normalized Adjusted OM 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 1 2,3 1 2,3 Ciena Industry Avg Ciena Industry Avg *Industry Average: ACIA, ADTN, ADVA
Slide 17: Delivering differentiated profitability and stock outperformance
Delivering differentiated profitability and stock outperformance 22.3% CAGR Adj. EPS* Total Shareholder Return FY18 $1.39 47.0% 38.0% $1.14 35.6% $0.93 20.7% 18.0% -18.5% -33.8% -34.8% FY2018 FY2017 FY2016 CIEN INFN ACIA ADTN CSCO JNPR NOK ADV *A reconciliation of these non-GAAP measures to our GAAP
Slide 18: Ciena is a market share leader in all target segments
Ciena is a market share leader in all target segments #1 GLOBALLY #1 GLOBALLY #1 GLOBALLY • DATA CENTER INTERCONNECT • OPTICAL EQUIPMENT VENDOR LEADERSHIP SP • DATA CENTER INTERCONNECT • DATA CENTER INTERCONNECT for ICPs SURVEY • DATA CENTER INTERCONNECT for ICPs • PURPOSE-BUILT/COMPACT MODULAR DCI
Slide 19: Market Context
Market Context Copyright © Ciena Corporation 2017. All rights reserved. Confidential & Proprietary. 19
Slide 20: Growth forecasts for our target markets by region
Growth forecasts for our target markets vary by geographic region NA EMEA China 7.4% 3.8% 4.1% 3.0% 3.1% 1.4% 1.7% (0.5%) 2018 Forecasted (2.8%) 2018 2019 ‘19-’21 2018 2019 ‘19-’21 Market Growth 2018 2019 ‘19-’21 2019 Forecasted Global Ex-China Market Growth 4.5% 2019-2021 CALA APAC Ex-China CAGR 3.
Slide 21: Several mega trends are affecting our business
Several mega trends are affecting our business All driven by an increased need for greater bandwidth and adaptive automation Cloud IoT & Mobility & 5G Connected Objects Fiber Data Center Densification Copyright © Ciena Corporation 2017. All rights reserved. Confidential & Proprietary. 21
Slide 22: Software Overview
Software Overview Copyright © Ciena Corporation 2017. All rights reserved. Confidential & Proprietary. 22
Slide 23: Why Automation Matters
Why Automation Matters of service provider are deploying or • SDN plan to deploy Multi-Layer Service & • NFV 60% Data/Transport SDN Software* network • 5G complexity • Cost control of service providers want automation and optimization across IP and optical Need for • Service agility domains* automat
Slide 24: Software and Software-related Services Operating Segment
Software and Software-related Services Operating Segment Platform Software and Services Blue Planet Automation Software and Services • Network management and domain control • Multi-domain service orchestration (MDSO) software • Inventory (BPI) • Related services, including software • Route Optimizat
Slide 25: Long-Term Targets
Long-Term Targets Copyright © Ciena Corporation 2017. All rights reserved. Confidential & Proprietary. 25
Slide 26: New long-term financial targets
New long-term financial targets* Execution of our strategy will drive top-line growth, profitability and cash generation *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 mater
Slide 27: Ciena performed well against its original three-year targets
Ciena performed well against its original three-year targets Ciena’s strategic drivers play a key role in our performance Optical Systems Attached Services Packet Networking (9.5%) Software and Related Services Copyright © Ciena Corporation 2017. All rights reserved. Confidential & Proprietary. 27
Slide 28: New long-term financial targets by segment
New 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
Slide 29: Balance Sheet & Capital Allocation
Balance Sheet & Capital Allocation Copyright © Ciena Corporation 2017. All rights reserved. Confidential & Proprietary. 29
Slide 30: Strengthening balance sheet
Strengthening balance sheet Leverage Trend Net Debt (Cash) Position (in millions) Convertible Debt Gross debt-to-Adj. EBITDA leverage* ratio Cash** Debt Net Debt $1,400 8.0x $1,700 Upgraded to 7.1x 7.2x 7.0x $1,451 $1,200 BB/Ba1 $1,500 $1,264 $1,254 $1,300 6.0x $1,198 $1,000 $1,143 $1,100 $1,021 $96
Slide 31: Continued strengthening balance sheet
Continued strengthening balance sheet Convertible Debt Net Cash / (Debt) Gross Debt-to-EBITDA leverage ratio Ratings agency upgrades Copyright © Ciena Corporation 2017. All rights reserved. Confidential & Proprietary. 31
Slide 32: Capital allocation priorities
Capital allocation priorities $ in millions 2018 Share Repurchases Convertible Debt & $40.0 Dilution $35.0 $30.0 $25.0 Share Repurchase $20.0 $15.0 $10.0 Business Expansion $5.0 $0.0 Q1 FY2018 Q2 FY2018 Q3 FY2018 Q4 FY2018 Copyright © Ciena Corporation 2017. All rights reserved. Confidential & Propr
Slide 33: Q4 Fiscal 2018 Appendix
Q4 Fiscal 2018 Appendix Copyright © Ciena Corporation 2017. All rights reserved. Confidential & Proprietary. 33
Slide 34: Adjusted gross profit reconciliation
Q4 FY 2018 Q3 FY 2018 Q2 FY 2018 Q1 FY 2018 Q4 FY 2017 GAAP gross profit $398,075 $351,543 $293,307 $271,765 $325,685 Share-based compensation-products 705 783 824 672 694 Share-based compensation-services 651 618 722 625 561 Amortization of intangible assets 2,957 2,534 2,289 2,289 2,332 Total adju
Slide 35: Adjusted operating expense and income reconciliation
Q4 FY 2018 Q3 FY 2018 Q2 FY 2018 Q1 FY 2018 Q4 FY 2017 GAAP operating expense $302,205 $266,269 $261,241 $255,029 $269,886 Share-based compensation-research and development 3,385 3,082 3,796 3,255 2,956 Share-based compensation-sales and marketing 3,741 3,417 3,760 3,328 3,218 Share-based compensati
Slide 36: Adjusted net income reconciliation
Q4 FY 2018 Q3 FY 2018 Q2 FY 2018 Q1 FY 2018 Q4 FY 2017 GAAP net income (loss) $63,977 $50,840 $13,856 ($473,363) $1,160,056 Exclude GAAP provision (benefit) for income taxes (10,224) 19,280 6,475 477,940 (1,117,531) Income before income taxes 53,753 70,120 20,331 4,577 42,525 Total adjustments relat
Slide 37: EBITDA reconciliation
Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) Q4 FY 2018 Q3 FY 2018 Q2 FY 2018 Q1 FY 2018 Q4 FY 2017 Net income (loss) (GAAP) $ 63,977 $ 50,840 $ 13,856 $ (473,363) $ 1,160,056 Add: Interest expense 14,873 13,611 13,031 13,734 13,926 Less: Interest and other income (loss), ne
Slide 38: • • • • • • • • • Copyright
• • • • • • • • • Copyright © Ciena Corporation 2017. All rights reserved. Confidential & Proprietary. 38
Slide 39: Copyright
Copyright © Ciena Corporation 2017. All rights reserved. Confidential & Proprietary. 39