01—Abstract
Summary
Summary of the 10-Q filed September 5, 2018. Cited figures are marked; the original filing is the authoritative source.
Ciena Corporation reported solid revenue growth in the third quarter of fiscal year 2018, with total revenue increasing by 12.4% year-over-year to $818.8 milliona.
This growth was primarily driven by strong performance in the Networking Platforms segment, particularly within Converged Packet Optical products. The company also saw increased revenue from its Global Services segment. Despite revenue growth, the reported net income for the quarter was $50.8 millionb, a decrease from $60.0 million in the prior year's quarter, impacted by higher operating expenses, including increased selling and marketing costs, and a significant increase in the provision for income taxes.
The company also completed the acquisition of Packet Design, LLC, adding to its software capabilities. For the nine months ended July 31, 2018, Ciena reported a net loss of $408.7 millionc, largely due to a substantial provisional tax expense of $503.7 million related to the Tax Cuts and Jobs Act, including a $431.3 million charge for the remeasurement of deferred tax assets and a $45.6 million transition tax on foreign earnings. Excluding this tax impact, the operational performance would have been significantly different.
The company continues to diversify its customer base and expand its geographic reach, with notable revenue growth in EMEA and APAC regions. Ciena also repurchased $73.5 milliond of its common stock during the period.
02—Key points
Key Highlights
- Total revenue for Q3 FY2018 increased 12.4% to $818.8 million, driven by strong Networking Platforms growth.
- Networking Platforms revenue rose 14.4% to $677.5 million, with Converged Packet Optical products showing significant gains.
- Gross profit increased by 7.2% to $351.5 million, though gross margin as a percentage of revenue declined from 45.0% to 42.9%.
- Operating expenses increased by 8.2% to $266.3 million, with notable rises in Selling and Marketing and Significant asset impairments and restructuring costs.
- Net income for Q3 FY2018 decreased to $50.8 million from $60.0 million in Q3 FY2017.
- The company recorded a significant provisional tax expense of $503.7 million for the nine months ended July 31, 2018, primarily due to the Tax Cuts and Jobs Act.
- Ciena completed the acquisition of Packet Design, LLC for approximately $41 million in cash to bolster its software strategy.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2018, Ciena Corp kept $0.06.
- Revenue$818.8M100.0%
- Cost of revenue−$467.3M57.1%
- Gross profit$351.5M42.9%
- Operating costs−$266.3M32.5%
- Operating income$85.3M10.4%
- Interest, other & tax−$34.4M4.2%
- Net income$50.8M6.2%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2018filed September 5, 2018Financial Statements
Q3 FY2018 against Q3 FY2017
| Line item | Q3 FY2018Q3 FY2017 | Change |
|---|---|---|
| Revenue | $818.82M$728.72M | +12.4% |
| Cost of Revenue | $467.27M$400.64M | +16.6% |
| Gross Profit | $351.54M$328.08M | +7.2% |
| R&D Expenses | $121.13M$117.73M | +2.9% |
| Operating Expenses | $266.27M$246.08M | +8.2% |
| Operating Income | $85.27M$82.00M | +4.0% |
| Interest Expense | $13.61M$13.41M | +1.5% |
| Net Income | $50.84M$60.01M | −15.3% |
| EPS (Basic) | $0.35$0.42 | −16.7% |
| EPS (Diluted) | $0.34$0.39 | −12.8% |
| Shares Outstanding (Basic) | 143.40M142.46M | +0.7% |
| Shares Outstanding (Diluted) | 160.00M172.11M | −7.0% |
05—Questions
Frequently Asked Questions
What was the primary driver of revenue growth in the third quarter of fiscal 2018?
Revenue growth was primarily driven by the Networking Platforms segment, which saw a 14.4% increase to $677.5 million. Specifically, sales of Converged Packet Optical products, including the Waveserver stackable interconnect system and the 6500 Packet-Optical Platform, showed significant increases.
Why did net income decrease in the third quarter of fiscal 2018 despite revenue growth?
Despite a 12.4% increase in total revenue, net income for the quarter decreased from $60.0 million to $50.8 million. This was mainly due to a higher cost of goods sold (increasing by 16.6%) and increased operating expenses, particularly in selling and marketing, and significant asset impairments and restructuring costs. Additionally, the provision for income taxes more than doubled year-over-year.
What is the impact of the Tax Cuts and Jobs Act on Ciena's financial results?
The Tax Cuts and Jobs Act, enacted in December 2017, had a significant impact on Ciena's financial results. For the nine months ended July 31, 2018, the company recorded a provisional tax expense of $503.7 million. This includes a $431.3 million charge related to the remeasurement of U.S. net deferred tax assets at the lower statutory rate and a $45.6 million transition tax on accumulated historical foreign earnings.
Has Ciena made any recent acquisitions?
Yes, on July 2, 2018, Ciena acquired Packet Design, LLC, a provider of network performance management software, for approximately $41 million in cash. This acquisition is expected to enhance Ciena's Blue Planet software strategy.
06—Continue