Market Overview

Ciena Reports Fiscal Third Quarter 2018 Financial Results

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Year-over-year revenue growth of 12% reflects strong execution and
another quarter of consistent performance

Ciena® Corporation
(NYSE:CIEN)

  • Q3 Revenue: $818.8 million, increasing 12.4% year over year
  • Q3 Net Income per Share: $0.34 GAAP; $0.48 adjusted (non-GAAP)
  • Share Repurchases: Repurchased approximately 1.4 million shares
    of common stock for an aggregate price of $35.6 million during the
    quarter

Ciena today announced
unaudited financial results for its fiscal third quarter ended July 31,
2018.

"The combination of continued execution against our strategy and robust,
broad-based customer demand resulted in outstanding fiscal third quarter
performance," said Gary B. Smith, president and CEO of Ciena. "With our
diversification, global scale and innovation leadership, we remain
confident in our business model and our ability to achieve our
three-year financial targets."

For the fiscal third quarter 2018, Ciena reported revenue of $818.8
million as compared to $728.7 million for the fiscal third quarter 2017.

Ciena's GAAP net income for the fiscal third quarter 2018 was $50.8
million, or $0.34 per diluted common share, which compares to a GAAP net
income of $60.0 million, or $0.39 per diluted common share, for the
fiscal third quarter 2017.

Ciena's adjusted (non-GAAP) net income for the fiscal third quarter 2018
was $74.3 million, or $0.48 per diluted common share, which compares to
an adjusted (non-GAAP) net income of $56.4 million, or $0.35 per diluted
common share, for the fiscal third quarter 2017.

Fiscal Third Quarter 2018 Performance Summary

The tables below (in millions, except percentage data) provide
comparisons of certain quarterly results to the prior year. Appendix A
and B set forth reconciliations between the GAAP and adjusted (non-GAAP)
measures contained in this release.

   
GAAP Results
Q3     Q3     Period Change
FY 2018 FY 2017 Y-T-Y*
Revenue $ 818.8 $ 728.7 12.4 %
Gross margin 42.9 % 45.0 % (2.1 )%
Operating expense $ 266.3 $ 246.1 8.2 %
Operating margin 10.4 % 11.3 % (0.9 )%
 
Non-GAAP Results
Q3 Q3 Period Change
FY 2018 FY 2017 Y-T-Y*
Revenue $ 818.8 $ 728.7 12.4 %
Adj. gross margin 43.4 % 45.5 % (2.1 )%
Adj. operating expense $ 241.0 $ 229.3 5.1 %
Adj. operating margin 14.0 % 14.1 % (0.1 )%
Adj. EBITDA $ 136.1 $ 122.8 10.8 %
 

* Denotes % change, or in the case of margin, absolute change

 
   
Revenue by Segment
Q3 FY 2018     Q3 FY 2017
Revenue     %** Revenue     %**
Networking Platforms
Converged Packet Optical $ 592.8 72.5 $ 510.2 70.0
Packet Networking   84.6 10.3   82.1 11.3
Total Networking Platforms 677.4 82.8 592.3 81.3
 
Software and Software-Related Services
Software Platforms 14.3 1.7 18.4 2.5
Software-Related Services   26.9 3.3   23.9 3.3
Total Software and Software-Related Services 41.2 5.0 42.3 5.8
 
Global Services
Maintenance Support and Training 60.9 7.4 57.9 7.9
Installation and Deployment 31.3 3.8 27.4 3.8
Consulting and Network Design   8.0 1.0   8.8 1.2
Total Global Services 100.2 12.2 94.1 12.9
       
Total $ 818.8 100.0 $ 728.7 100.0
 

Additional Performance Metrics for Fiscal Third Quarter 2018

   
Revenue by Geographic Region
Q3 FY 2018     Q3 FY 2017
Revenue     % ** Revenue     % **
North America $ 497.0 60.7 $ 465.2 63.8
Europe, Middle East and Africa 122.2 14.9 96.1 13.2
Caribbean and Latin America 27.5 3.4 51.7 7.1
Asia Pacific   172.1 21.0   115.7 15.9
Total $ 818.8 100.0 $ 728.7 100.0
 

** Denotes % of total revenue

 
  • U.S. customers contributed 57.3% of total revenue
  • Three customers accounted for greater than 10% of revenue and
    represented 33% of total revenue
  • Cash and investments totaled $984.6 million
  • Cash flow from operations totaled $88.1 million
  • Free cash flow totaled $69.7 million
  • Average days' sales outstanding (DSOs) were 80
  • Accounts receivable balance was $728.9 million
  • Inventories totaled $227.9 million, including:
    • Raw materials: $54.0 million
    • Work in process: $11.1 million
    • Finished goods: $173.4 million
    • Deferred cost of sales: $38.5 million
    • Reserve for excess and obsolescence: $(49.1) million
  • Product inventory turns were 7.0
  • Headcount totaled 5,889

Supplemental Materials and Live Web Broadcast of Unaudited Fiscal
Third Quarter 2018 Results

Today, Thursday, August 30, 2018, in conjunction with this announcement,
Ciena has posted to the Quarterly
Results
page of the Investor Relations section of its website
supporting materials for its unaudited fiscal third quarter 2018 results.

Ciena's management will also host a discussion today with investors and
financial analysts that will include the Company's fiscal third quarter
outlook. The live audio web broadcast beginning at 8:30 a.m. Eastern
will be accessible via www.ciena.com.
An archived replay of the live broadcast will be available shortly
following its conclusion on the Investor
Relations page
of Ciena's website.

Notes to Investors

Forward-Looking Statements. You are encouraged to
review the Investors section of our website, where we routinely post
press releases, SEC filings, recent news, financial results,
supplemental financial information, and other announcements. From time
to time we exclusively post material information to this website along
with other disclosure channels that we use. This press release contains
certain forward-looking statements that involve risks and uncertainties.
These statements are based on current expectations, forecasts,
assumptions and other information available to the Company as of the
date hereof. Forward-looking statements include statements regarding
Ciena's expectations, beliefs, intentions or strategies regarding the
future and can be identified by forward-looking words such as
"anticipate," "believe," "could," "estimate," "expect," "intend," "may,"
"should," "will," and "would" or similar words. Forward-looking
statements in this release include: "The combination of continued
execution against our strategy and robust, broad-based customer demand
resulted in outstanding fiscal third quarter performance."; "With our
diversification, global scale and innovation leadership, we remain
confident in our business model and our ability to achieve our
three-year financial targets."

Ciena's actual results, performance or events may differ materially from
these forward-looking statements made or implied due to a number of
risks and uncertainties relating to Ciena's business, including: the
effect of broader economic and market conditions on our customers and
their business; changes in network spending or network strategy by
customers; seasonality and the timing and size of customer orders,
including our ability to recognize revenue relating to such sales; the
level of competitive pressure we encounter; the product, customer and
geographic mix of sales within the period; supply chain disruptions and
the level of success relating to efforts to optimize Ciena's operations;
changes in foreign currency exchange rates affecting revenue and
operating expense; the impact of the Tax Cuts and Jobs Act, changes in
estimates of prospective income tax rates and any adjustments to Ciena's
provisional estimates whether related to further guidance, analysis or
otherwise, and the other risk factors disclosed in Ciena's periodic
reports filed with the Securities and Exchange Commission, including its
Quarterly Report on Form 10-Q filed with the SEC on June 6, 2018 and its
Annual Report on Form 10-K filed with the SEC on December 22, 2017.
Ciena assumes no obligation to update any forward-looking information
included in this press release.

Non-GAAP Presentation of Quarterly and Annual Results. This
release includes non-GAAP measures of Ciena's gross profit, operating
expense, income from operations, earnings before interest, tax,
depreciation and amortization (EBITDA), Adjusted EBITDA, and measures of
net income and net income per share. In evaluating the operating
performance of Ciena's business, management excludes certain charges and
credits that are required by GAAP. These items share one or more of the
following characteristics: they are unusual and Ciena does not expect
them to recur in the ordinary course of its business; they do not
involve the expenditure of cash; they are unrelated to the ongoing
operation of the business in the ordinary course; or their magnitude and
timing is largely outside of Ciena's control. Management believes that
the non-GAAP measures below provide management and investors useful
information and meaningful insight to the operating performance of the
business. The presentation of these non-GAAP financial measures should
be considered in addition to Ciena's GAAP results and these measures are
not intended to be a substitute for the financial information prepared
and presented in accordance with GAAP. Ciena's non-GAAP measures and the
related adjustments may differ from non-GAAP measures used by other
companies and should only be used to evaluate Ciena's results of
operations in conjunction with our corresponding GAAP results. To the
extent not previously disclosed in a prior Ciena financial results press
release, Appendix A and B to this press release set forth a complete
GAAP to non-GAAP reconciliation of the non-GAAP measures contained in
this release.

About Ciena. Ciena (NYSE:CIEN) is a networking
systems, services, and software company. We provide solutions that help
our clients create more adaptive networks in response to the constantly
changing demands of their users. By delivering best-in-class networking
technology through high-touch consultative relationships, we build the
world's most sophisticated networks with automation and scale. For
updates on Ciena, follow us on Twitter @Ciena,
LinkedIn, the Ciena
Insights blog
, or visit www.ciena.com.

 
CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 
    Quarter Ended July 31,     Nine Months Ended July 31,
2018     2017 2018     2017
Revenue:
Products $ 691,758 $ 610,742 $ 1,821,593 $ 1,702,365
Services   127,059     117,977     373,337     354,873  
Total revenue   818,817     728,719     2,194,930     2,057,238  
Cost of goods sold:
Products 399,886 341,197 1,085,574 955,303
Services   67,388     59,446     192,741     181,834  
Total cost of goods sold   467,274     400,643     1,278,315     1,137,137  
Gross profit   351,543     328,076     916,615     920,101  
Operating expenses:
Research and development 121,133 117,729 356,581 356,221
Selling and marketing 95,395 86,739 281,269 260,292
General and administrative 38,212 35,569 115,594 106,423
Significant asset impairments and restructuring costs 6,359 2,203 16,679 8,874
Amortization of intangible assets 3,837 3,837 11,083 29,368
Acquisition and integration costs   1,333         1,333      
Total operating expenses   266,269     246,077     782,539     761,178  
Income from operations 85,274 81,999 134,076 158,923
Interest and other income (loss), net (1,543 ) (848 ) 1,328 (3,396 )
Interest expense   (13,611 )   (13,415 )   (40,376 )   (41,926 )
Income before income taxes 70,120 67,736 95,028 113,601
Provision for income taxes 1   19,280     7,726     503,695     11,704  
Net income (loss) $ 50,840   $ 60,010   $ (408,667 ) $ 101,897  
 
Net Income(loss) per Common Share
Basic net income (loss) per common share $ 0.35   $ 0.42   $ (2.84 ) $ 0.72  
Diluted net income (loss) per potential common share 2 $ 0.34   $ 0.39   $ (2.84 ) $ 0.69  
 
Weighted average basic common shares outstanding   143,400     142,464     143,766     141,631  
Weighted average dilutive potential common shares outstanding 3   159,998     172,112     143,766     164,431  
 
1. The provision for income taxes for fiscal 2018 is primarily
related to the enactment of the Tax Cuts and Jobs Act. These amounts
are provisional and reflect management's current estimates and
current interpretations of the Tax Cuts and Jobs Act. These amounts
may require adjustment in future periods as additional guidance
under the Tax Cuts and Jobs Act becomes available and analysis of
its provisions is completed. As of July 31, 2018, Ciena has net
deferred tax assets of approximately $724.1 million, and
consequently, over the near term, Ciena's cash taxes will continue
to be primarily related to state taxes and tax expense of Ciena's
foreign subsidiaries, which amounts have not historically been
significant. Ciena's foreign and domestic income tax expense for the
third quarter of fiscal 2018 and 2017 expected to be paid using cash
was $8.8 million and $7.7 million, respectively. Ciena's foreign and
domestic income tax expense for the nine months ended July 31, 2018
and 2017 expected to be paid using cash was $11.8 million and $11.7
million, respectively.
 
2. The calculation of GAAP diluted net income per common share for
the third quarter of fiscal 2018 requires adding back interest
expense of approximately $0.5 million associated with Ciena's
"Original" 3.75% convertible senior notes, due October 15, 2018, and
approximately $2.6 million associated with Ciena's 4.0% convertible
senior notes, due December 15, 2020 to the GAAP net income in order
to derive the numerator for the diluted earnings per common share
calculation.
 
The calculation of GAAP diluted net income per common share for the
third quarter of fiscal 2017 requires adding back interest expense
of approximately $0.2 million associated with Ciena's 0.875%
convertible senior notes, which were paid at maturity during the
third quarter of fiscal 2017, approximately $3.6 million associated
with Ciena's "Original" 3.75% convertible senior notes, due October
15, 2018, and approximately $3.3 million associated with Ciena's
4.0% convertible senior notes, due December 15, 2020 to the GAAP net
income in order to derive the numerator for the diluted earnings per
common share calculation.
 
The calculation of GAAP diluted net income per common share for the
first nine months of fiscal 2017 requires adding back interest
expense of approximately $1.3 million associated with Ciena's 0.875%
convertible senior notes, which were paid at maturity during the
third quarter of fiscal 2017, and approximately $10.8 million
associated with Ciena's "Original" 3.75% convertible senior notes,
due October 15, 2018 to the GAAP net income in order to derive the
numerator for the diluted earnings per common share calculation.
 
3. Weighted average dilutive potential common shares outstanding
used in calculating GAAP diluted net income per common share for the
third quarter of fiscal 2018 includes 1.3 million shares underlying
certain stock options and restricted stock units, 3.0 million shares
underlying Ciena's "New" 3.75% convertible senior notes, due October
15, 2018, 3.0 million shares underlying Ciena's "Original" 3.75%
convertible senior notes, due October 15, 2018, and 9.2 million
shares underlying Ciena's 4.0% convertible senior notes, due
December 15, 2020.
 
Weighted average dilutive potential common shares outstanding used
in calculating GAAP diluted net income per common share for the
third quarter of fiscal 2017 includes 1.4 million shares underlying
certain stock options and restricted stock units, 1.7 million shares
underlying Ciena's 0.875% convertible senior notes, which were paid
at maturity during the third quarter of fiscal 2017, 17.4 million
shares underlying Ciena's "Original" 3.75% convertible senior notes,
due October 15, 2018, and 9.2 million shares underlying Ciena's 4.0%
convertible senior notes, due December 15, 2020.
 
Weighted average dilutive potential common shares outstanding used
in calculating GAAP diluted net income per common share for the
first nine months of fiscal 2017 includes 1.4 million shares
underlying certain stock options and restricted stock units, 4.0
million shares underlying Ciena's 0.875% convertible senior notes,
which were paid at maturity during the third quarter of fiscal 2017
and 17.4 million shares underlying Ciena's "Original" 3.75%
convertible senior notes, due October 15, 2018.
 
 
CIENA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
 
    July 31,
2018
    October 31,
2017
ASSETS
Current assets:
Cash and cash equivalents $ 726,214 $ 640,513
Short-term investments 228,940 279,133
Accounts receivable, net 728,940 622,183
Inventories 227,885 267,143
Prepaid expenses and other   192,497     197,339  
Total current assets 2,104,476 2,006,311
Long-term investments 29,465 49,783
Equipment, building, furniture and fixtures, net 295,863 308,465
Goodwill 287,551 267,458
Other intangible assets, net 108,302 100,997
Deferred tax asset, net 724,087 1,155,104
Other long-term assets   72,951     63,593  
Total assets $ 3,622,695   $ 3,951,711  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 312,611 $ 260,098
Accrued liabilities and other short-term obligations 297,988 322,934
Deferred revenue 104,170 102,418
Current portion of long-term debt   353,669     352,293  
Total current liabilities 1,068,438 1,037,743
Long-term deferred revenue 79,914 82,589
Other long-term obligations 108,884 111,349
Long-term debt, net   586,505     583,688  
Total liabilities $ 1,843,741   $ 1,815,369  
Stockholders' equity:
Preferred stock – par value $0.01; 20,000,000 shares authorized;
zero shares issued and outstanding

Common stock – par value $0.01; 290,000,000 shares authorized;
143,050,180 and 143,043,227 shares issued and outstanding

1,431 1,430
Additional paid-in capital 6,797,857 6,810,182
Accumulated other comprehensive income (loss) (8,705 ) (11,017 )
Accumulated deficit   (5,011,629 )   (4,664,253 )
Total stockholders' equity   1,778,954     2,136,342  
Total liabilities and stockholders' equity $ 3,622,695   $ 3,951,711  
 
 
CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
    Nine Months Ended July 31,
2018     2017
Cash flows provided by operating activities:
Net income (loss) $ (408,667 ) $ 101,897
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation of equipment, building, furniture and fixtures, and
amortization of leasehold improvements
63,104 55,873
Share-based compensation costs 38,896 36,843
Amortization of intangible assets 18,196 39,721
Deferred taxes 491,863
Provision for inventory excess and obsolescence 19,942 28,727
Provision for warranty 15,715 5,188
Other 18,164 21,076
Changes in assets and liabilities:
Accounts receivable (112,696 ) (80,652 )
Inventories 17,751 (93,896 )
Prepaid expenses and other (11,163 ) (26,450 )
Accounts payable, accruals and other obligations 14,840 (5,960 )
Deferred revenue   (4,710 )   13,978  
Net cash provided by operating activities   161,235     96,345  
Cash flows used in investing activities:
Payments for equipment, furniture, fixtures and intellectual property (50,386 ) (76,004 )
Purchase of available for sale securities (217,715 ) (189,802 )
Proceeds from maturities of available for sale securities 290,000 260,003
Settlement of foreign currency forward contracts, net 4,759 (1,619 )
Acquisition of business, net of cash acquired (40,412 )
Purchase of cost method investment   (1,433 )    
Net cash used in investing activities   (15,187 )   (7,422 )
Cash flows used in financing activities:
Payment of long term debt (3,000 ) (232,554 )
Payment for modification of term loans (93,625 )
Payment of capital lease obligations (2,811 ) (2,650 )
Repurchases of common stock-repurchase program (73,512 )
Proceeds from issuance of common stock   22,735     20,395  
Net cash used in financing activities (56,588 ) (308,434 )
Effect of exchange rate changes on cash and cash equivalents   (3,759 )   1,436  
Net increase (decrease) in cash and cash equivalents 85,701 (218,075 )
Cash and cash equivalents at beginning of period   640,513     777,615  
Cash and cash equivalents at end of period $ 726,214   $ 559,540  
Supplemental disclosure of cash flow information
Cash paid during the period for interest $ 31,561 $ 33,861
Cash paid during the period for income taxes, net $ 20,099 $ 26,793
Non-cash investing activities
Purchase of equipment in accounts payable $ 5,677 $ 6,012
Building subject to capital lease $ $ 50,370
Non-cash financing activities
Repurchase of common stock in accrued liabilities from repurchase
program
$ 1,275 $
 
 
APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly
Measures (unaudited)
       
Quarter Ended July 31,
2018 2017
Gross Profit Reconciliation (GAAP/non-GAAP)
GAAP gross profit $ 351,543     $ 328,076  
Share-based compensation-products 783 709
Share-based compensation-services 618 619
Amortization of intangible assets   2,534     2,417  
Total adjustments related to gross profit   3,935     3,745  
Adjusted (non-GAAP) gross profit $ 355,478   $ 331,821  
Adjusted (non-GAAP) gross profit percentage 43.4 % 45.5 %
 
Operating Expense Reconciliation (GAAP/non-GAAP)
GAAP operating expense $ 266,269   $ 246,077  
Share-based compensation-research and development 3,082 3,139
Share-based compensation-sales and marketing 3,417 3,242
Share-based compensation-general and administrative 4,538 4,321
Significant asset impairments and restructuring costs 6,359 2,203
Amortization of intangible assets 3,837 3,837
Acquisition and integration costs 1,333
Legal settlement   2,753      
Total adjustments related to operating expense   25,319     16,742  
Adjusted (non-GAAP) operating expense $ 240,950   $ 229,335  
 
Income from Operations Reconciliation (GAAP/non-GAAP)
GAAP income from operations $ 85,274   $ 81,999  
Total adjustments related to gross profit 3,935 3,745
Total adjustments related to operating expense   25,319     16,742  
Total adjustments related to income from operations   29,254     20,487  
Adjusted (non-GAAP) income from operations $ 114,528   $ 102,486  
Adjusted (non-GAAP) operating margin percentage 14.0 % 14.1 %
 
Net Income Reconciliation (GAAP/non-GAAP)
GAAP net income $ 50,840 $ 60,010
Exclude GAAP provision for income taxes   19,280     7,726  
Income before income taxes $ 70,120 $ 67,736
Total adjustments related to income from operations 29,254 20,487
Non-cash interest expense   793     535  
Adjusted income before income taxes $ 100,167 $ 88,758
Non-GAAP tax provision on adjusted income before income taxes   25,913     32,397  
Adjusted (non-GAAP) net income $ 74,254   $ 56,361  
 
Weighted average basic common shares outstanding   143,400     142,464  
Weighted average dilutive potential common shares outstanding 1   159,998     172,112  
 
Net Income per Common Share
GAAP diluted net income per common share $ 0.34 $ 0.39
Adjusted (non-GAAP) diluted net income per common share 2 $ 0.48 $ 0.35
 
1.   Weighted average dilutive potential common shares outstanding used
in calculating Adjusted (non-GAAP) diluted net income per common
share for the third quarter of fiscal 2018 includes 1.3 million
shares underlying certain stock options and restricted stock units,
3.0 million shares underlying Ciena's "New" 3.75% convertible senior
notes, due October 15, 2018, 3.0 million shares underlying Ciena's
"Original" 3.75% convertible senior notes, due October 15, 2018, and
9.2 million shares underlying Ciena's 4.0% convertible senior notes,
due December 15, 2020.
 
Weighted average dilutive potential common shares outstanding used
in calculating Adjusted (non-GAAP) diluted net income per common
share for the third quarter of fiscal 2017 includes 1.4 million
shares underlying certain stock options and restricted stock units,
1.7 million shares underlying Ciena's 0.875% convertible senior
notes, which were paid at maturity during the third quarter of
fiscal 2017, 17.4 million shares underlying Ciena's "Original" 3.75%
convertible senior notes, due October 15, 2018 and 9.2 million
shares underlying Ciena's 4.0% convertible senior notes, due
December 15, 2020.
 
2. The calculation of Adjusted (non-GAAP) diluted net income per common
share for the third quarter of fiscal 2018 requires adding back
interest expense of approximately $0.5 million associated with
Ciena's "Original" 3.75% convertible senior notes, due October 15,
2018 and approximately $2.1 million associated with Ciena's 4.0%
convertible senior notes, due December 15, 2020 to the Adjusted
(non-GAAP) net income in order to derive the numerator for the
Adjusted earnings per common share calculation.
 
The calculation of Adjusted (non-GAAP) diluted net income per common
share for the third quarter of fiscal 2017 requires adding back
interest expense of approximately $0.2 million associated with
Ciena's 0.875% convertible senior notes, which were paid at maturity
during the third quarter of fiscal 2017, approximately $2.2 million
associated with Ciena's "Original" 3.75% convertible senior notes,
due October 15, 2018 and approximately $1.8 million associated with
Ciena's 4.0% convertible senior notes, due December 15, 2020 to the
Adjusted (non-GAAP) net income in order to derive the numerator for
the Adjusted earnings per common share calculation.
 
 
APPENDIX B - Calculation of EBITDA and Adjusted EBITDA (unaudited)
 
    Quarter Ended July 31,
2018     2017
Earnings Before Interest, Tax, Depreciation and Amortization
(EBITDA)
Net income (GAAP) $ 50,840 $ 60,010
Add: Interest expense 13,611 13,415
Less: Interest and other income (loss), net (1,543 ) (848 )
Add: Provision for income taxes 19,280 7,726
Add: Depreciation of equipment, building, furniture and fixtures,
and amortization of leasehold improvements
21,704 20,325
Add: Amortization of intangible assets   6,371     6,254  
EBITDA $ 113,349   $ 108,578  
Add: Shared-based compensation cost 12,337 12,013
Add: Significant asset impairments and restructuring costs 6,359 2,203
Add: Acquisition and integration costs 1,333
Add: Legal settlement   2,753      
Adjusted EBITDA $ 136,131   $ 122,794  
 

The adjusted (non-GAAP) measures above and their reconciliation to
Ciena's GAAP results for the periods presented reflect adjustments
relating to the following items:

  • Share-based compensation - a non-cash expense incurred in
    accordance with share-based compensation accounting guidance.
  • Significant asset impairments and restructuring costs - costs
    incurred as a result of restructuring activities taken to align
    resources with perceived market opportunities.
  • Amortization of intangible assets - a non-cash expense arising
    from the acquisition of intangible assets, principally developed
    technologies and customer-related intangibles, that Ciena is required
    to amortize over its expected useful life.
  • Acquisition and integration costs - consist of
    financial, legal and accounting advisors' costs and severance and
    other employment-related costs related to Ciena's recent acquisition
    of Packet Design. Ciena does not believe that these costs are
    reflective of its ongoing operating expense following its completion
    of these integration activities.
  • Legal settlement - costs incurred as a result of a settlement
    associated with a commercial dispute with a former vendor.
  • Non-cash interest expense - a non-cash debt discount expense
    amortized as interest expense during the term of Ciena's 4.0% senior
    convertible notes due December 15, 2020 relating to the required
    separate accounting of the equity component of these convertible notes.
  • Non-GAAP tax provision - consists of current and deferred
    income tax expense commensurate with the level of adjusted income
    before income taxes and utilizes a current, blended U.S. and foreign
    statutory annual tax rate of 25.87% for the third fiscal quarter of
    2018, and 36.5% for the third fiscal quarter of 2017. This rate may be
    subject to change in the future, including as a result of changes in
    tax policy or tax strategy.

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