Slide 1: Ciena Corporation Earnings Presentation, Period ended October 31, 2019
Ciena Corporation Earnings Presentation Period ended October 31, 2019 December 12, 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: Fiscal 2019 results
Fiscal 2019 results Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 3
Slide 4: Market share gains, innovation and strong balance sheet
We are taking market share and We are forcing the pace of innovation Our balance sheet is strong outperforming the competition with the Adaptive Network ▪ Annual revenue growth significantly ▪ Free cash flow resulted in $351M or ▪ WaveLogic roadmap extends beyond greater than the market at 15% 75% o
Slide 5: FY 2019 financial highlights
FY 2019 financial highlights FY’19 FY’18 Revenue $3.57B $3.09B Adjusted Gross Margin* 43.7% 43.0% $1,092M $994M Adjusted Operating Expense* 30.6% / total revenue 32.1% / total revenue Adjusted Operating Margin* 13.1% 10.9% Adjusted EBITDA* $557M $421M Adjusted EPS* $2.11 $1.39 * A reconciliation of
Slide 6: FY 2019 operating metrics
FY 2019 operating metrics FY’19 FY’18 Cash and Investments $1,024M $953M Cash Flow from Operations $413M $229M DSO 82 days 92 days Inventory Turns 5.0 5.7 Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 6
Slide 7: Long-term financial targets score card
Long-term financial targets score card Long-term target¹ FY’19 Actual Revenue 15.5% Adjusted Operating Margin 13.1%* Adjusted EPS >50%* Free cash flow 75% 1 Projections or outlook with respect to future operating results are only as of December 13, 2018, the date presented on the related earnings ca
Slide 8: Fiscal 2019 performance driven by strategic execution and favorable dynamics
Our extraordinary fiscal 2019 performance was 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 struggled financially and with innovation ▪ Web-sca
Slide 9: Market context
Market context Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 9
Slide 10: Market leadership
Market leadership #1 GLOBALLY #1 GLOBALLY #1 GLOBALLY #1 GLOBALLY • DATA CENTER INTERCONNECT • OPTICAL EQUIPMENT VENDOR • PURPOSE-BUILT/COMPACT • DATA CENTER INTERCONNECT • DATA CENTER INTERCONNECT LEADERSHIP SP SURVEY MODULAR DCI • DATA CENTER INTERCONNECT for ICPs • OPTICAL NETWORK HARDWARE • CLOU
Slide 11: Several mega trends and the innovations that will enable them
Several mega trends and the innovations that will enable them IoT & Cloud Data Center Connected Objects Fiber Deep (Cable/MSO) Mobility & 5G Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 11
Slide 12: Q4 fiscal 2019 results and competitive performance
Q4 fiscal 2019 results and competitive performance Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 12
Slide 13: Balanced growth, innovation pace and shareholder value
Achieving balanced growth Driving the pace of innovation Delivering shareholder value ▪ Non-telco represented 39% of total ▪ TTM Adjusted R&D* investment was revenue $534M ▪ Direct web-scale contributed 20% of ▪ WaveLogic Ai has 146 total customers total revenue with 18 new wins in Q4 ▪ EMEA revenue
Slide 14: Q4 financial highlights: Adjusted Operating Margin
Q4 FY 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. 14
Slide 15: Q4 year-over-year comparisons
Q4 FY 2019 comparisons (year-over-year) Revenue Adj. Gross Margin* Adj. Operating Margin* (in millions) Q4 FY'18 Q4 FY'19 Q4 FY'18 Q4 FY'19 Q4 FY'18 Q4 FY'19 44.7% $968.0 43.8% 13.9% 13.3% $899.4 Adj. OpEx* Adj. EBITDA* Adj. EPS* (in millions) (in millions) Q4 FY'18 Q4 FY'19 Q4 FY'18 Q4 FY'19 Q4 FY'
Slide 16: Revenue by segment
Revenue by segment (Amounts in millions) 44.7% 44.7% 43.9% 43.8% Q4 FY 2019 Q4 FY 2018 1,000.0 42.2% 45.0% 900.0 40.0% Revenue %** Revenue %** 800.0 Networking Platforms 35.0% 700.0 Converged Packet Optical $665.8 68.8 $646.4 71.9 30.0% Packet Networking 600.0 131.9 13.6 66.5 7.4 25.0% Total Network
Slide 17: Continued strength derived from non-telco revenue
Continued strength derived from non-telco revenue* Q4 FY 2019 Direct Webscale Cable Gov't, R&E & Enterprise 45% 40% 7% 35% 11.1% Direct Webscale 8% 7% 11.1% 30% 8% 8% Cable 25% 7% 19.8% 8.5% 9% 7% 20% Gov't, R&E, 8.5% Enterprise 15% 27% 10% 21% 19.8% 17% 19% 5% *represents 39.4% of total revenue in
Slide 18: Revenue by geographic region
Revenue by geographic region Q4 FY 2019 North America EMEA CALA APAC $1,000.0 10.3% $900.0 14% 4.4% $800.0 19% 16% 4% 4.4% North America 15.8% 10.3% $700.0 6% 17% 5% 18% 4% 13% Europe, Middle East $600.0 14% 15.8% and Africa 17% Caribbean and Latin $500.0 America 69.5% millions) (In $400.0 Asia Paci
Slide 19: Balance sheet and operating metrics
Q4 FY 2019 balance sheet and operating metrics DSO Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 19
Slide 20: Returning value to shareholders through capital allocation priorities
Returning value to shareholders through strong capital allocation priorities Adj. R&D* R&D % Rev $50.0 $600 17.0% $45.0 $40.0 16.5% $500 $35.0 16.0% $400 $30.0 15.5% $25.0 $300 15.0% $20.0 $200 $15.0 14.5% $10.0 $100 14.0% $5.0 $0 13.5% $0.0 FY'15 FY'16 FY'17 FY'18 FY'19 Q4 FY'18 Q1 FY'19 Q2 FY'19 Q
Slide 21: Delivering profitability and total shareholder return
Delivering profitability and total shareholder return Adjusted EPS 1YR Stock Return* 31.4% CAGR 80.0% $2.11 60.0% 40.0% $1.39 $1.14 20.0% $0.93 0.0% -20.0% -40.0% FY'16 FY'17 FY'18 FY'19 Ciena Acacia Cisco Infinera ADVA Juniper Nokia ADTRAN Source: company disclosures and S&P Capital IQ *1 year repr
Slide 22: Q4 fiscal 2019 appendix
Q4 fiscal 2019 appendix Copyright © Ciena Corporation 2019. All rights reserved. Confidential & Proprietary. 22
Slide 23: Adjusted gross profit reconciliation
Q4 FY 2019 Q3 FY 2019 Q2 FY 2019 Q1 FY 2019 Q4 FY 2018 GAAP gross profit $419,696 $424,352 $374,677 $323,341 $398,075 Share-based compensation-products 748 781 702 637 705 Share-based compensation-services 715 783 907 770 651 Amortization of intangible assets 3,303 3,303 3,303 3,418 2,957 Total adju
Slide 24: Adjusted operating expense and income reconciliation
Q4 FY 2019 Q3 FY 2019 Q2 FY 2019 Q1 FY 2019 Q4 FY 2018 GAAP operating expense $326,494 $299,051 $294,357 $275,398 $302,205 Share-based compensation-research and development 3,287 3,560 4,083 3,391 3,385 Share-based compensation-sales and marketing 4,151 4,192 4,346 3,785 3,741 Share-based compensati
Slide 25: Adjusted net income reconciliation
Q4 FY 2019 Q3 FY 2019 Q2 FY 2019 Q1 FY 2019 Q4 FY 2018 GAAP net income $80,331 $86,749 $52,738 $33,616 $63,977 Exclude GAAP provision (benefit) for income taxes 2,552 30,198 17,867 9,139 (10,224) Income before income taxes 82,883 116,947 70,605 42,755 53,753 Total adjustments related to income from
Slide 26: EBITDA reconciliation
Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) Q4 FY 2019 Q3 FY 2019 Q2 FY 2019 Q1 FY 2019 Q4 FY 2018 Net income (GAAP) $ 80,331 $ 86,749 $ 52,738 $ 33,616 $ 63,977 Add: Interest expense 9,136 9,404 9,471 9,441 14,873 Less: Interest and other income (loss), net (1,183) 1,050 (