10-QPeriod: Q1 FY2015

CIENA CORP Quarterly Report for Q1 Ended Jan 31, 2015

Filed March 12, 2015For Securities:CIEN

Summary

Ciena Corporation reported a net loss of $18.8 million for the quarter ended January 31, 2015, a widening from the $15.9 million loss in the same period of the prior year. Revenue saw a slight decrease of 0.9% to $529.2 million, impacted by unfavorable foreign currency exchange rates and a decline in the Optical Transport segment, though offset by growth in Converged Packet Optical and Software and Services. The company's gross margin improved to 43.5% from 42.3% year-over-year, driven by product cost reductions and lower warranty expenses, as well as improved service gross margins. However, operating expenses increased due to higher restructuring costs associated with a global workforce reduction of approximately 125 employees. Despite these challenges, Ciena maintained a strong liquidity position with over $598 million in cash and cash equivalents and short-term investments at the end of the quarter.

Financial Highlights

51 data points
Beta

Revenue

$529.16M

43.5% Gross Margin

Net Income

-$18.78M

-3.5% Net Margin

EPS (Diluted)

$-0.17

Total Assets

$2.06B

Cash & Equivalents

$598.72M

Free Cash Flow

$10.94M

Financial Statements
Beta
Revenue$529.16M
Cost of Revenue$298.87M
Gross Profit$230.29M
R&D Expenses$100.76M
Operating Expenses$226.13M
Operating Income$4.17M
Interest Expense$13.66M
Net Income-$18.78M
EPS (Basic)$-0.17
EPS (Diluted)$-0.17
Shares Outstanding (Basic)107.77M
Shares Outstanding (Diluted)107.77M

Key Highlights

  • 1Net loss widened to $18.8 million from $15.9 million year-over-year.
  • 2Total revenue slightly decreased by 0.9% to $529.2 million.
  • 3Gross margin improved to 43.5% from 42.3%, driven by cost reductions and improved service margins.
  • 4Operating expenses increased due to $8.1 million in restructuring costs related to a workforce reduction.
  • 5The Converged Packet Optical segment showed revenue growth, while the Optical Transport segment experienced a significant decline.
  • 6Cash from operations turned positive at $22.1 million for the quarter, compared to a use of cash in the prior year's comparable period.
  • 7The company maintained a strong liquidity position with $598.7 million in cash and cash equivalents.

Frequently Asked Questions

Revenue was relatively flat, decreasing by 0.9% to $529.2 million. While the Converged Packet Optical and Software & Services segments saw revenue growth, this was offset by a significant decline in the Optical Transport segment and a slight decrease in Packet Networking. Unfavorable foreign currency exchange rates also had a negative impact on reported revenue.

The increase in net loss was primarily driven by higher restructuring costs of $8.1 million related to a workforce reduction of approximately 125 employees, and increased interest and other expenses, partially offset by an improvement in gross profit.

Ciena maintained a strong liquidity position, with cash and cash equivalents and short-term investments totaling approximately $743.9 million as of January 31, 2015. The company believes these resources will be sufficient to meet its working capital needs and other liquidity requirements for at least the next 12 months.

The commercial arrangement with AT&T for its Domain 2.0 supplier program, entered into in Q4 FY2014, had an adverse impact on gross margin in that quarter (approximately 4.0%) and a lesser impact in Q1 FY2015 (less than 1.0%). The company expects this impact to subside for the remainder of fiscal 2015 and believes it can be offset by ongoing product cost reductions.