10-QPeriod: Q1 FY2018

CIENA CORP Quarterly Report for Q1 Ended Jan 31, 2018

Filed March 7, 2018For Securities:CIEN

Summary

Ciena Corporation's first quarter fiscal year 2018 filing reveals a mixed financial performance. While total revenue saw a 4.0% increase year-over-year to $646.1 million, driven significantly by growth in the Software and Software-Related Services segment, the company reported a substantial net loss of $473.4 million. This loss was primarily attributable to a provisional tax expense of $477.9 million related to the recently enacted Tax Cuts and Jobs Act, which included a remeasurement of deferred tax assets and a transition tax on foreign earnings. Despite the net loss, operating cash flow was positive at $35.7 million, indicating resilient operational performance. The company also highlighted strong growth in its Software and Software-Related Services segment, up 35.8%, suggesting a successful pivot towards higher-growth areas. Management reiterated its commitment to reinvesting foreign earnings, though the impact of the Tax Act remains a key factor to monitor. The company also announced a new $300 million stock repurchase program.

Financial Highlights

55 data points
Beta

Revenue

$646.13M

42.1% Gross Margin

Net Income

-$473.36M

-73.3% Net Margin

EPS (Diluted)

$-3.29

Total Assets

$3.47B

Cash & Equivalents

$648.87M

Free Cash Flow

$10.04M

Financial Statements
Beta
Revenue$646.13M
Cost of Revenue$374.37M
Gross Profit$271.76M
R&D Expenses$118.52M
Operating Expenses$255.03M
Operating Income$16.74M
Interest Expense$13.73M
Net Income-$473.36M
EPS (Basic)$-3.29
EPS (Diluted)$-3.29
Shares Outstanding (Basic)143.92M
Shares Outstanding (Diluted)143.92M

Key Highlights

  • 1Total revenue increased by 4.0% to $646.1 million compared to the prior year's quarter.
  • 2The Software and Software-Related Services segment showed significant growth, with revenue up 35.8% to $53.5 million.
  • 3The company reported a substantial net loss of $473.4 million for the quarter, heavily impacted by a $477.9 million provisional tax charge related to the Tax Cuts and Jobs Act.
  • 4Operating cash flow was positive at $35.7 million, demonstrating continued operational cash generation.
  • 5Gross profit as a percentage of revenue decreased slightly due to reduced product gross profit, although service gross profit improved.
  • 6Ciena announced a new stock repurchase program authorizing up to $300 million of common stock repurchases through fiscal year 2020.
  • 7The Networking Platforms segment, while still the largest revenue contributor, saw a modest 1.2% increase in revenue.

Frequently Asked Questions

The substantial net loss of $473.4 million was primarily driven by a provisional tax expense of $477.9 million recognized due to the enactment of the Tax Cuts and Jobs Act. This expense includes charges for the remeasurement of U.S. net deferred tax assets and a transition tax on accumulated foreign earnings.

The Software and Software-Related Services segment was a standout performer, with revenue increasing by 35.8%. The Global Services segment also saw growth of 4.8%. The largest segment, Networking Platforms, experienced a modest revenue increase of 1.2%, while the Packet Networking sub-segment within it saw a decline.

The company generated positive operating cash flow of $35.7 million. Ciena reported $986.8 million in total cash, cash equivalents, and investments as of January 31, 2018. Management expects these resources, along with its ABL Credit Facility, to be sufficient to meet working capital and capital expenditure needs for at least the next 12 months.

Ciena currently intends to reinvest its foreign earnings indefinitely. However, the company is studying the impact of the Tax Cuts and Jobs Act and the costs of repatriation. If they decide to repatriate, there would be a provisional deferred income tax liability related to foreign withholding taxes of approximately $22.0 million.