Ciena Corporation (CIEN)

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CIENA (CIEN)

Q4 2011 Earnings Call

December 08, 2011 8:30 am ET

Executives

Thomas Mock - Senior Vice President of Corporate Marketing & Communications

Gregg M. Lampf - Assistant Vice President of Shareholder Relations

Gary B. Smith - Chief Executive Officer, President and Director

James E. Moylan - Chief Financial Officer and Senior Vice President of Finance

Analysts

Natarajan Subrahmanyan

Cobb H. Sadler - Catamount Strategic Advisors LLC

Kevin J. Dennean - Citigroup Inc, Research Division

Blair King - Avondale Partners, LLC, Research Division

Nikos Theodosopoulos - UBS Investment Bank, Research Division

Simon M. Leopold - Morgan Keegan & Company, Inc., Research Division

Nathan Johnsen - Pacific Crest Securities, Inc., Research Division

Brian T. Modoff - Deutsche Bank AG, Research Division

Rod B. Hall - JP Morgan Chase & Co, Research Division

Jeremy David - Morgan Stanley, Research Division

Jeffrey T. Kvaal - Barclays Capital, Research Division

Todd K. Koffman - Raymond James & Associates, Inc., Research Division

Eric A. Ghernati - BofA Merrill Lynch, Research Division

Mark Sue - RBC Capital Markets, LLC, Research Division

Presentation

Operator

Good day, everyone, and welcome to the Ciena Corporation Unaudited Fiscal Fourth Quarter 2011 and Year End Results Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Ciena's Vice President of Investor Relations, Gregg Lampf. Please go ahead.

Gregg M. Lampf

Thank you, Shannon. Good morning, and welcome to Ciena's fourth quarter and year end 2011 review. With me today is Gary Smith, CEO and President; and Jim Moylan, CFO. Tom Mock, Senior Vice President, Corporate Marketing and Communications, is here with us as well.

This morning's press release is available on National Business Wire and ciena.com. As was the case last quarter, we have included in the release much of the financial data that we typically would cover on the call. This allows us to abbreviate our prepared remarks so we can spend more time answering questions. We expect to use this format going forward.

In our prepared remarks, Gary will discuss management's view on the quarter and the year, as well as our business progress. Jim will offer some color on our results and provide guidance for Q1. We'll then open the call to questions from sell side analysts taking one question per person with follow-ups as time allows.

Before beginning our formal remarks, I wanted to announce that we will be hosting our second Investor Relations educational webcast next Thursday, December 15, at 12:30 p.m. Eastern. The topic will be OTN. Please visit the Investor Relations section of our website for more information.

Before turning the call over to Gary, I'll remind you that during this call, we will be making certain forward-looking statements. Such statements are based on current expectations, forecasts and assumptions regarding the company that include risks and uncertainties that could cause actual results to differ materially from the statements discussed today. These statements should be viewed in the context of the risk factors detailed in our most recent 10-Q filing. Our 10-K is required to be filed with the SEC by December 28, and we expect to file by that date. Ciena assumes no obligation to update the information discussed in this conference call whether as a result of new information, future events or otherwise.

Today's discussion includes certain adjusted or non-GAAP measures of Ciena's results of operations. A detailed reconciliation of these non-GAAP measures to our GAAP results is included in today's press release available on ciena.com. As a reminder, this call is being recorded and will be available for replay from the Investors section of our website. Gary?

Gary B. Smith

Thanks, Gregg, and good morning, everyone. We're very pleased to report a strong fourth quarter with which to close our fiscal 2011. At $455 million, revenue came in towards the upper end of our guidance range. We achieved a 3.5% as adjusted operating profit in Q4, our second consecutive profitable quarter. Order flow was also strong in Q4 which was our best ever, in fact, for orders.

We also continue to control the things that are in our control. And as a result of all these efforts, we achieved our significant, next significant milestone in Q4, that of positive cash flow from operations.

We also made additional progress for the full fiscal year, with all key business metrics moving in the right direction. Following the integration, we returned to as adjusted profitability for the year. And on a true like-for-like basis, Ciena revenue grew more than 10% in the second half of fiscal 2011 compared to the second half of 2010, which reflects our growing market share.

From a portfolio perspective, we integrated technologies across platforms and we implemented OneControl, our unified management system, to bring these platforms under a single management system. And our business became more global during 2011, with large international project deployments across many geographies. However, a consequence of this growth has been slightly elongated cycle times from order to revenue recognition.

All told, our team has achieved the milestones we laid out nearly 2 years ago despite a macroeconomic environment that remains uncertain and we consider the integration phase of our transformation to have been a success. Whilst we have a lot more work to do, we are closing the books on a solid year and look forward to 2012 with real excitement about the opportunities that lie ahead for our business.

The underpinning of the next phase of the company's evolution is a focus on targeted growth and improved operating leverage. Through a combination of growth initiatives, which I'll discuss in more detail in a moment, and the ongoing optimization of our supply chain and business systems, we have a roadmap to improve profitability we are beginning to execute against.

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