Ciena Corporation Net Income surged on 42.6% and EBITDA Margin increased on 4.9 pp from 13.1% to 18.0%
12/10/2020 • About Ciena Corporation (
$CIEN) • By InTwits
Ciena Corporation reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Ciena Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.8%. At the same time it's in pair with industry average of 3.7%
- CAPEX is quite volatile: $155m in FY2020, $198m in FY2019, $99m in FY2018, $70m in FY2017, $67m in FY2016
- The company has highly profitable business model: ROIC is 15.5%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Ciena Corporation's Revenue decreased slightly on 1.1%. Revenue decline showed acceleration in FY20Q4 - it was 14.4% YoY. During the last 5 years Revenue growth topped in FY2019 at 15.4%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 4.9 pp from 13.1% to 18.0% in FY2020.
Gross Margin increased on 3.6 pp from 43.2% to 46.8% in FY2020. During the last 5 years Gross Margin bottomed in FY2018 at 42.5% and was growing since that time. SG&A as a % of Revenue showed almost no change in FY2020. SG&A as a % of Revenue declined at -0.50 pp per annum in the last 5 years.
Net Income margin increased on 3.1 pp from 7.1% to 10.2% in FY2020.
Investments (CAPEX, working capital and M&A)
In FY2020 Ciena Corporation had CAPEX/Revenue of 2.3%. Ciena Corporation showed small CAPEX/Revenue decline of 1.0 pp from 3.4% in FY2017 to 2.3% in FY2020. For the last three years the average CAPEX/Revenue was 2.1%. During the last 5 years CAPEX as a % of Revenue bottomed in FY2019 at 1.8%.
Return on investment
The company operates at good ROIC (15.5%) and ROE (15.4%). ROIC increased on 3.6 pp from 11.9% to 15.5% in FY2020. ROE increased on 3.1 pp from 12.4% to 15.4% in FY2020. ROIC grew at 1.9 pp per annum in the last 5 years.
Leverage (Debt)
Debt level is -0.4x Net Debt / EBITDA and 1.3x Debt / EBITDA. Debt increased on 9.6% while cash surged on 20.4%.
Ciena Corporation has no short term refinancing risk: cash is higher than short term debt (3,779.8%).
Valuation and dividends
Ciena Corporation's trades at EV/EBITDA 11.5x and P/E 20.9x.
Management team
Ciena Corporation's CEO is Gary B Smith. Gary B Smith has 19 years tenure with the company. Ciena Corporation's CFO James E Moylan Jr has spent 13 years with the company.
Financial and operational results
FY ended 10/31/2020
Ciena Corporation ($CIEN) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 2,601 | 2,802 | 3,094 | 3,572 | 3,532 | -1.1% |
| Gross Profit | 1,162 | 1,246 | 1,315 | 1,542 | 1,653 | 7.2% |
| SG&A | 483 | 499 | 554 | 597 | 586 | -1.9% |
| EBITDA | 298 | 338 | 340 | 469 | 637 | 35.7% |
| EBIT | 156 | 215 | 230 | | | |
| Interest expence | 57 | 56 | 55 | | | |
| Tax | 14 | -1,106 | 493 | | | |
| Net Income | 73 | 1,262 | -345 | 253 | 361 | 42.6% |
| Stock Based Compensation | 52 | 48 | 53 | | | |
Balance Sheet
|
|---|
| Cash | 778 | 641 | 745 | 904 | 1,089 | 20.4% |
| Accounts Receivable | 576 | 622 | 787 | | | |
| Inventory | 211 | 267 | 263 | | | |
| Accounts Payable | 236 | 260 | 341 | | | |
| Short Term Debt | 237 | 356 | 175 | 10 | 29 | 195.0% |
| Long Term Debt | 1,026 | 657 | 755 | 746 | 799 | 7.2% |
Cash flow
|
|---|
| Capex | 107 | 95 | 68 | 63 | 83 | 32.1% |
| Acquisitions | 32 | | 83 | | | |
Ratios
|
|---|
| Revenue growth | 6.3% | 7.7% | 10.4% | 15.4% | -1.1% | |
| EBITDA growth | 26.1% | 13.3% | 0.7% | 38.1% | 35.7% | |
|
|---|
| Gross Margin | 44.7% | 44.5% | 42.5% | 43.2% | 46.8% | 3.6% |
| EBITDA Margin | 11.5% | 12.1% | 11.0% | 13.1% | 18.0% | 4.9% |
| EBIT Margin | 6.0% | 7.7% | 7.4% | | |
| SG&A, % of revenue | 18.6% | 17.8% | 17.9% | 16.7% | 16.6% | -0.1% |
| SBC, % of revenue | 2.0% | 1.7% | 1.7% | | |
| Net Income Margin | 2.8% | 45.0% | -11.1% | 7.1% | 10.2% | 3.1% |
| CAPEX, % of revenue | 4.1% | 3.4% | 2.2% | 1.8% | 2.3% | 0.6% |
|
|---|
| ROIC | 7.9% | 8.3% | 7.6% | 11.9% | 15.5% | 3.6% |
| ROE | 10.5% | 87.0% | -17.0% | 12.4% | 15.4% | 3.1% |
| Net Debt/EBITDA | 1.6x | 1.1x | 0.5x | -0.3x | -0.4x | -0.1x |
| Interest coverage ratio (ICR) | 2.8x | 3.8x | 4.2x | | |
| Interest expence / Average debt | 4.5% | 4.9% | 5.7% | | | |
People
|
|---|
| Insider ownership | 1.6% | 1.6% | 1.6% | | | |
| Employees | 5,555 | 5,737 | 6,013 | | | |
| Revenue/Employee, th. $ | 468 | 488 | 515 | | | |
Ciena Corporation ($CIEN) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 833 | 894 | 977 | 828 | | 7.0% | 3.4% | 1.7% | -14.4% |
| EBITDA | 118 | 167 | 224 | 131 | | 50.4% | -2.8% | 43.4% | 5.2% |
| Net Income | 62 | 92 | 142 | 65 | | 85.4% | 73.8% | 64.0% | -19.0% |
Balance Sheet
|
|---|
| Cash | 837 | 888 | 1,094 | 1,089 | | 25.2% | 27.0% | 51.2% | 20.4% |
| Short Term Debt | 28 | 28 | 29 | 29 | | 168.6% | 175.8% | 197.1% | 195.0% |
| Long Term Debt | 798 | 790 | 792 | 799 | | 6.0% | 15.6% | 16.1% | 7.2% |
Ratios
|
|---|
| Gross Margin | 44.5% | 46.2% | 47.6% | 48.8% | | 3.0% | 2.9% | 3.4% | 5.4% |
| EBITDA Margin | 14.2% | 18.6% | 22.9% | 15.8% | | 4.1% | -1.2% | 6.7% | 2.9% |
| Net Income Margin | 7.5% | 10.3% | 14.6% | 7.9% | | 3.2% | 4.2% | 5.5% | -0.4% |
Peers in Communications Equipment
Below you can find Ciena Corporation benchmarking vs. other companies in Communications Equipment industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Resonant Inc. ($RESN) | - | 116.2% | -19.8% | 40.3% | 329.9% |
| Franklin Wireless Corp ($FKWL) | - | -18.8% | -38.1% | 21.3% | 105.9% |
| Ribbon Communications Inc. ($RBBN) | - | 30.6% | 75.2% | -2.6% | 49.8% |
| Inseego Corp. ($INSG) | - | -10.0% | -7.7% | 8.4% | 43.0% |
| Casa Systems, Inc. ($CASA) | - | 11.2% | -15.5% | -5.0% | 39.3% |
| |
|---|
| Median (35 companies) | 7.5% | 5.1% | 2.8% | 3.7% | 4.4% |
|---|
| Ciena Corporation ($CIEN) | - | 7.7% | 10.4% | 15.4% | -1.1% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| F5 Networks, Inc. ($FFIV) | 83.1% | 83.1% | 83.3% | 84.1% | 82.6% |
| Radware Ltd. ($RDWR) | 81.8% | 81.3% | 82.2% | 82.1% | 82.0% |
| Radcom Ltd. ($RDCM) | 69.6% | 71.8% | 74.0% | 70.0% | 71.4% |
| AudioCodes Ltd. ($AUDC) | 60.7% | 62.4% | 62.8% | 47.4% | 67.9% |
| Arista Networks, Inc. ($ANET) | 64.0% | 64.5% | 63.8% | 64.1% | 63.9% |
| |
|---|
| Median (33 companies) | 43.7% | 41.0% | 40.5% | 44.3% | 44.9% |
|---|
| Ciena Corporation ($CIEN) | 44.7% | 44.5% | 42.5% | 43.2% | 46.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| InterDigital, Inc. ($IDCC) | 73.6% | 67.3% | 41.9% | 37.5% | 39.5% |
| EchoStar Corporation ($SATS) | 40.3% | 38.1% | 37.4% | 36.4% | 35.0% |
| Arista Networks, Inc. ($ANET) | 23.3% | 29.8% | 14.0% | 35.7% | 33.1% |
| Motorola Solutions, Inc. ($MSI) | 22.2% | 25.5% | 22.0% | 26.7% | 25.9% |
| F5 Networks, Inc. ($FFIV) | 30.3% | 29.9% | 30.1% | 26.2% | 22.9% |
| |
|---|
| Median (32 companies) | 5.5% | 6.0% | 4.6% | 3.1% | 8.8% |
|---|
| Ciena Corporation ($CIEN) | 11.5% | 12.1% | 11.0% | 13.1% | 18.0% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Resonant Inc. ($RESN) | 132.5% | 124.8% | 245.2% | 109.7% | 22.3% |
| EchoStar Corporation ($SATS) | 39.9% | 30.9% | 26.5% | 22.2% | 21.7% |
| KVH Industries, Inc. ($KVHI) | 3.2% | 8.0% | 9.3% | 7.9% | 8.9% |
| Harmonic Inc. ($HLIT) | 3.7% | 3.2% | 1.7% | 2.6% | 8.5% |
| Applied Optoelectronics, Inc. ($AAOI) | 19.0% | 17.5% | 26.9% | 15.1% | 6.7% |
| |
|---|
| Median (32 companies) | 1.9% | 1.8% | 1.6% | 2.5% | 2.0% |
|---|
| Ciena Corporation ($CIEN) | 4.1% | 3.4% | 2.2% | 1.8% | 2.3% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Franklin Wireless Corp ($FKWL) | 12.2% | 4.7% | -14.9% | -13.0% | 37.5% |
| Motorola Solutions, Inc. ($MSI) | 26.4% | 39.5% | 35.3% | 34.0% | 26.4% |
| Arista Networks, Inc. ($ANET) | 25.7% | 33.9% | 14.5% | 33.3% | 23.5% |
| AudioCodes Ltd. ($AUDC) | 6.1% | 8.6% | 16.1% | -7.7% | 20.8% |
| F5 Networks, Inc. ($FFIV) | 43.1% | 46.9% | 47.9% | 34.1% | 16.5% |
| |
|---|
| Median (35 companies) | 2.2% | 2.1% | 0.3% | -1.6% | 1.9% |
|---|
| Ciena Corporation ($CIEN) | 7.9% | 8.3% | 7.6% | 11.9% | 15.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Inseego Corp. ($INSG) | - | - | 3.9x | 82.5x | 26.9x |
| CommScope Holding Company, Inc. ($COMM) | 4.3x | 4.6x | 4.4x | 27.0x | 10.5x |
| Harmonic Inc. ($HLIT) | - | - | 3.4x | 1.9x | 6.5x |
| Ribbon Communications Inc. ($RBBN) | -17.2x | - | - | - | 3.5x |
| Casa Systems, Inc. ($CASA) | -0.2x | 0.3x | 0.2x | 32.1x | 3.2x |
| |
|---|
| Median (24 companies) | -0.9x | -0.8x | -0.3x | -0.2x | -0.4x |
|---|
| Ciena Corporation ($CIEN) | 1.6x | 1.1x | 0.5x | -0.3x | -0.4x |
