UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~August 1, 2020~~July 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36250

Ciena Corporation

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

7035 Ridge Road, Hanover, MD

(Address of principal executive offices)

23-2725311

(~~IRS~~I.R.S. Employer Identification No.)

21076

(Zip Code)

(410) 694-5700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading ~~Symbol~~Symbol(s)	Name of each exchange on which registered
Common Stock, ~~$0.01~~ par value $0.01 per share	CIEN	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as determined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:


Class						Outstanding at September ~~4, 2020~~3, 2021
~~common stock,~~Common Stock, par value $0.01 ~~par value~~per share						~~154,319,547~~154,929,206

CIENA CORPORATION

INDEX

FORM 10-Q


			PAGE NUMBER
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)			3
Condensed Consolidated Statements of Operations for the Quarters and Nine Months Ended July 31, 2021 and August 1,, 2020 ~~and~~ ~~August~~3 ~~, 2019~~			3
Condensed Consolidated Statements of Comprehensive Income for the Quarters and Nine Months Ended A ~~ugust~~July 31, 2021 and August 1,, 2020 ~~and~~ ~~August 3, 2019~~			4
Condensed Consolidated Balance Sheets at ~~August 1~~,July 31, 2021 and October 31, 2020 ~~and November 2, 2019~~			5
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended July 31, 2021 and August 1,, 2020 ~~and~~ ~~August 3, 2019~~			6
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended July 31, 2021 and August 1,, 2020 ~~and~~ ~~August 3, 2019~~			7
Notes to Condensed Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2826
Item 3. Quantitative and Qualitative Disclosures About Market Risk			4640
Item 4. Controls and Procedures			4640
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			4741
Item 1A. Risk Factors			4741
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			5543
Item 3. Defaults Upon Senior Securities			5543
Item 4. Mine Safety Disclosures			5543
Item 5. Other Information			5644
Item 6. Exhibits			5745
Signatures			5846

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)


		Quarter Ended						Nine Months Ended							Quarter Ended				Nine Months Ended
		August 1,		August 3,		August 1,		August 3,			July 31,		August 1,		July 31,		August 1,
		2020		2019		2020		2019			2021		2020		2021		2020
Revenue:	Revenue:									Revenue:
Products	Products	$	819,022	$	810,588	$	2,246,129	$	2,163,808	Products	$	804,414	$	819,022	$	2,071,677	$	2,246,129
Services	Services	157,690		150,018		457,548		440,336		Services	183,727		157,690		507,521		457,548
Total revenue	Total revenue	976,712		960,606		2,703,677		2,604,144		Total revenue	988,141		976,712		2,579,198		2,703,677
Cost of goods sold:	Cost of goods sold:									Cost of goods sold:
Products	Products	436,227		454,921		1,230,378		1,246,413		Products	420,236		436,227		1,074,935		1,230,378
Services	Services	75,804		81,333		224,757		235,361		Services	93,355		75,804		259,403		224,757
Total cost of goods sold	Total cost of goods sold	512,031		536,254		1,455,135		1,481,774		Total cost of goods sold	513,591		512,031		1,334,338		1,455,135
Gross profit	Gross profit	464,681		424,352		1,248,542		1,122,370		Gross profit	474,550		464,681		1,244,860		1,248,542
Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	130,221		139,880		392,651		406,482		Research and development	146,225		130,221		389,212		392,651
Selling and marketing	Selling and marketing	94,763		104,230		303,043		305,845		Selling and marketing	114,924		94,763		322,589		303,043
General and administrative	General and administrative	41,635		42,695		126,133		124,092		General and administrative	48,863		41,635		132,491		126,133
Significant asset impairments and restructuring costs										Significant asset impairments and restructuring costs	9,789		6,515		23,865		14,798
Amortization of intangible assets	Amortization of intangible assets	5,840		5,529		17,532		16,586		Amortization of intangible assets	5,967		5,840		17,896		17,532
Significant asset impairments and restructuring costs		6,515		5,355		14,798		11,696
Acquisition and integration costs (recoveries)	Acquisition and integration costs (recoveries)	(2,329)		1,362		904		4,105		Acquisition and integration costs (recoveries)	259		(2,329)		860		904

Total operating expenses	Total operating expenses	276,645		299,051		855,061		868,806		Total operating expenses	326,027		276,645		886,913		855,061
Income from operations	Income from operations	188,036		125,301		393,481		253,564		Income from operations	148,523		188,036		357,947		393,481
Interest and other income, net		232		1,050		1,213		5,059
Interest and other income (loss), net										Interest and other income (loss), net	795		232		(1,600)		1,213
Interest expense	Interest expense	(7,251)		(9,404)		(23,926)		(28,316)		Interest expense	(7,776)		(7,251)		(22,921)		(23,926)
Loss on extinguishment and modification of debt	Loss on extinguishment and modification of debt	0		0		(646)		0		Loss on extinguishment and modification of debt	—		—		—		(646)
Income before income taxes	Income before income taxes	181,017		116,947		370,122		230,307		Income before income taxes	141,542		181,017		333,426		370,122
Provision for income taxes		38,750		30,198		73,872		57,204
Provision (benefit) for income taxes										Provision (benefit) for income taxes	(96,690)		38,750		(63,271)		73,872
Net income	Net income	$	142,267	$	86,749	$	296,250	$	173,103	Net income	$	238,232	$	142,267	$	396,697	$	296,250
Basic net income per common share	Basic net income per common share	$	0.92	$	0.56	$	1.92	$	1.11	Basic net income per common share	$	1.53	$	0.92	$	2.55	$	1.92
Diluted net income per potential common share	Diluted net income per potential common share	$	0.91	$	0.55	$	1.90	$	1.10	Diluted net income per potential common share	$	1.52	$	0.91	$	2.53	$	1.90
Weighted average basic common shares outstanding	Weighted average basic common shares outstanding	154,184		155,488		154,136		156,013		Weighted average basic common shares outstanding	155,271		154,184		155,277		154,136
Weighted average dilutive potential common shares outstanding	Weighted average dilutive potential common shares outstanding	156,318		157,455		155,741		157,949		Weighted average dilutive potential common shares outstanding	156,744		156,318		156,742		155,741

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME GAIN (LOSS)

(in thousands)

(unaudited)


		Quarter Ended						Nine Months Ended							Quarter Ended				Nine Months Ended
		August 1,		August 3,		August 1,		August 3,			July 31,		August 1,		July 31,		August 1,
		2020		2019		2020		2019			2021		2020		2021		2020
Net income	Net income	$	142,267	$	86,749	$	296,250	$	173,103	Net income	$	238,232	$	142,267	$	396,697	$	296,250
Change in unrealized gain (loss) on available-for-sale securities, net of tax	Change in unrealized gain (loss) on available-for-sale securities, net of tax	(241)		168		69		581		Change in unrealized gain (loss) on available-for-sale securities, net of tax	(21)		(241)		(28)		69
Change in unrealized gain (loss) on foreign currency forward contracts, net of tax	Change in unrealized gain (loss) on foreign currency forward contracts, net of tax	6,245		2,047		(1,773)		2,751		Change in unrealized gain (loss) on foreign currency forward contracts, net of tax	(4,766)		6,245		5,667		(1,773)
Change in unrealized gain (loss) on forward starting interest rate swaps, net of tax	Change in unrealized gain (loss) on forward starting interest rate swaps, net of tax	24		(8,716)		(10,080)		(19,413)		Change in unrealized gain (loss) on forward starting interest rate swaps, net of tax	1,620		24		5,650		(10,080)
Change in cumulative translation adjustments	Change in cumulative translation adjustments	15,169		1,943		(6,321)		(1,903)		Change in cumulative translation adjustments	(6,823)		15,169		19,439		(6,321)
Other comprehensive gain (loss)	Other comprehensive gain (loss)	21,197		(4,558)		(18,105)		(17,984)		Other comprehensive gain (loss)	(9,990)		21,197		30,728		(18,105)
Total comprehensive income	Total comprehensive income	$	163,464	$	82,191	$	278,145	$	155,119	Total comprehensive income	$	228,242	$	163,464	$	427,425	$	278,145

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

CIENA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)


		August 1, 2020		November 2, 2019			July 31, 2021		October 31, 2020
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,093,749	$	904,045	Cash and cash equivalents	$	1,230,441	$	1,088,624
Short-term investments	Short-term investments	70,404		109,940		Short-term investments	182,010		150,667
Accounts receivable, net of allowance for doubtful accounts of $11.8 million and $20.1 million as of August 1, 2020 and November 2, 2019, respectively.		715,195		724,854
Accounts receivable, net of allowance for credit losses of $9.9 million and $10.6 million as of July 31, 2021 and October 31, 2020, respectively.						Accounts receivable, net of allowance for credit losses of $9.9 million and $10.6 million as of July 31, 2021 and October 31, 2020, respectively.	878,229		719,405
Inventories, net	Inventories, net	363,600		345,049		Inventories, net	370,170		344,379
Prepaid expenses and other	Prepaid expenses and other	324,935		297,914		Prepaid expenses and other	323,283		308,084
Total current assets	Total current assets	2,567,883		2,381,802		Total current assets	2,984,133		2,611,159
Long-term investments	Long-term investments	0		10,014		Long-term investments	60,888		82,226
Equipment, building, furniture and fixtures, net	Equipment, building, furniture and fixtures, net	266,996		286,884		Equipment, building, furniture and fixtures, net	288,937		272,377
Operating right-of-use assets	Operating right-of-use assets	48,573		—		Operating right-of-use assets	48,937		57,026
Goodwill	Goodwill	310,772		297,937		Goodwill	311,569		310,847
Other intangible assets, net	Other intangible assets, net	106,182		112,781		Other intangible assets, net	73,974		96,647
Deferred tax asset, net	Deferred tax asset, net	655,320		714,942		Deferred tax asset, net	784,702		647,805
Other long-term assets	Other long-term assets	99,462		88,986		Other long-term assets	102,728		102,830
Total assets	Total assets	$	4,055,188	$	3,893,346	Total assets	$	4,655,868	$	4,180,917
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	297,163	$	344,819	Accounts payable	$	301,606	$	291,904
Accrued liabilities and other short-term obligations	Accrued liabilities and other short-term obligations	301,030		382,740		Accrued liabilities and other short-term obligations	373,291		334,132
Deferred revenue	Deferred revenue	95,951		111,381		Deferred revenue	126,179		108,700
Operating lease liabilities	Operating lease liabilities	19,417		—		Operating lease liabilities	19,085		19,035
Current portion of long-term debt	Current portion of long-term debt	6,930		7,000		Current portion of long-term debt	6,930		6,930
Total current liabilities	Total current liabilities	720,491		845,940		Total current liabilities	827,091		760,701
Long-term deferred revenue	Long-term deferred revenue	40,919		45,492		Long-term deferred revenue	57,720		49,663
Other long-term obligations	Other long-term obligations	134,914		148,747		Other long-term obligations	123,731		123,185
Long-term operating lease liabilities	Long-term operating lease liabilities	52,141		—		Long-term operating lease liabilities	51,235		61,415
Long-term debt, net	Long-term debt, net	677,856		680,406		Long-term debt, net	671,855		676,356
Total liabilities	Total liabilities	$	1,626,321	$	1,720,585	Total liabilities	$	1,731,632	$	1,671,320
Commitments and contingencies (Note 21)	Commitments and contingencies (Note 21)					Commitments and contingencies (Note 21)	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock – par value $0.01; 20,000,000 shares authorized; 0 shares issued and outstanding		0		0
Common stock – par value $0.01; 290,000,000 shares authorized; 154,318,197 and 154,403,850 shares issued and outstanding		1,543		1,544
Preferred stock – par value $0.01; 20,000,000 shares authorized; zero shares issued and outstanding						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; 155,103,315 and 154,563,005 shares issued and outstanding						Common stock – par value $0.01; 290,000,000 shares authorized; 155,103,315 and 154,563,005 shares issued and outstanding	1,551		1,546
Additional paid-in capital	Additional paid-in capital	6,815,676		6,837,714		Additional paid-in capital	6,815,946		6,826,531
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(40,189)		(22,084)		Accumulated other comprehensive loss	(4,630)		(35,358)
Accumulated deficit	Accumulated deficit	(4,348,163)		(4,644,413)		Accumulated deficit	(3,888,631)		(4,283,122)
Total stockholders’ equity	Total stockholders’ equity	2,428,867		2,172,761		Total stockholders’ equity	2,924,236		2,509,597
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	4,055,188	$	3,893,346	Total liabilities and stockholders’ equity	$	4,655,868	$	4,180,917

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)


		Nine Months Ended							Nine Months Ended
		August 1,		August 3,			July 31,		August 1,
		2020		2019			2021		2020
Cash flows provided by operating activities:	Cash flows provided by operating activities:					Cash flows provided by operating activities:
Net income	Net income	$	296,250	$	173,103	Net income	$	396,697	$	296,250
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements	Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements	70,370		65,071		Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements	71,918		70,370
Share-based compensation costs	Share-based compensation costs	50,838		44,446		Share-based compensation costs	62,970		50,838
Amortization of intangible assets	Amortization of intangible assets	29,035		26,610		Amortization of intangible assets	27,341		29,035
Deferred taxes	Deferred taxes	57,636		35,949		Deferred taxes	(139,543)		57,636
Provision for inventory excess and obsolescence	Provision for inventory excess and obsolescence	20,176		18,833		Provision for inventory excess and obsolescence	13,460		20,176
Provision for warranty	Provision for warranty	19,172		15,933		Provision for warranty	12,726		19,172
Other	Other	15,085		743		Other	6,350		15,085
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable	Accounts receivable	(6,688)		(2,517)		Accounts receivable	(163,149)		(6,688)
Inventories	Inventories	(39,568)		(115,427)		Inventories	(38,821)		(39,568)
Prepaid expenses and other	Prepaid expenses and other	(52,945)		(85,039)		Prepaid expenses and other	(17,272)		(52,945)
Operating lease right-of-use assets	Operating lease right-of-use assets	12,816		—		Operating lease right-of-use assets	12,340		12,816
Accounts payable, accruals and other obligations	Accounts payable, accruals and other obligations	(131,647)		(9,005)		Accounts payable, accruals and other obligations	31,388		(131,647)
Deferred revenue	Deferred revenue	(19,039)		4,427		Deferred revenue	24,969		(19,039)
Short and long-term operating lease liabilities		(15,132)		—
Short- and long-term operating lease liabilities						Short- and long-term operating lease liabilities	(14,618)		(15,132)
Net cash provided by operating activities	Net cash provided by operating activities	306,359		173,127		Net cash provided by operating activities	286,756		306,359
Cash flows provided by (used in) investing activities:
Cash flows used in investing activities:						Cash flows used in investing activities:
Payments for equipment, furniture, fixtures and intellectual property	Payments for equipment, furniture, fixtures and intellectual property	(61,333)		(49,063)		Payments for equipment, furniture, fixtures and intellectual property	(67,290)		(61,333)

Purchase of available for sale securities		(39,859)		(127,601)
Proceeds from maturities of available for sale securities		90,000		120,000
Proceeds from sales of available for sale securities		0		98,263
Purchase of available-for-sale securities						Purchase of available-for-sale securities	(132,895)		(39,859)
Proceeds from maturities of available-for-sale securities						Proceeds from maturities of available-for-sale securities	122,063		90,000

Settlement of foreign currency forward contracts, net	Settlement of foreign currency forward contracts, net	3,067		(3,155)		Settlement of foreign currency forward contracts, net	7,326		3,067
Acquisition of business, net of cash acquired	Acquisition of business, net of cash acquired	(28,300)		0		Acquisition of business, net of cash acquired	—		(28,300)
Purchase of equity investment		0		(2,667)
Proceeds from sale of equity investment						Proceeds from sale of equity investment	4,678		—

Net cash provided by (used in) investing activities		(36,425)		35,777
Net cash used in investing activities						Net cash used in investing activities	(66,118)		(36,425)
Cash flows used in financing activities:	Cash flows used in financing activities:					Cash flows used in financing activities:

Payment of long-term debt	Payment of long-term debt	(3,465)		(5,250)		Payment of long-term debt	(5,197)		(3,465)

Payment of debt issuance costs	Payment of debt issuance costs	(382)		0		Payment of debt issuance costs	—		(382)
Payment of finance lease obligations	Payment of finance lease obligations	(2,030)		(2,599)		Payment of finance lease obligations	(2,243)		(2,030)

Payment for debt conversion liability		0		(111,268)

Shares repurchased for tax withholdings on vesting of stock unit awards	Shares repurchased for tax withholdings on vesting of stock unit awards	(26,328)		(23,234)		Shares repurchased for tax withholdings on vesting of stock unit awards	(36,484)		(26,328)
Repurchases of common stock - repurchase program	Repurchases of common stock - repurchase program	(74,535)		(110,484)		Repurchases of common stock - repurchase program	(64,555)		(74,535)
Proceeds from issuance of common stock	Proceeds from issuance of common stock	27,986		22,895		Proceeds from issuance of common stock	28,289		27,986
Net cash used in financing activities	Net cash used in financing activities	(78,754)		(229,940)		Net cash used in financing activities	(80,190)		(78,754)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,526)		392		Effect of exchange rate changes on cash, cash equivalents and restricted cash	1,344		(1,526)
Net increase (decrease) in cash, cash equivalents and restricted cash		189,654		(20,644)
Net increase in cash, cash equivalents and restricted cash						Net increase in cash, cash equivalents and restricted cash	141,792		189,654
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	904,161		745,434		Cash, cash equivalents and restricted cash at beginning of period	1,088,708		904,161
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	1,093,815	$	724,790	Cash, cash equivalents and restricted cash at end of period	$	1,230,500	$	1,093,815
Supplemental disclosure of cash flow information	Supplemental disclosure of cash flow information					Supplemental disclosure of cash flow information
Cash paid during the period for interest	Cash paid during the period for interest	$	25,278	$	29,921	Cash paid during the period for interest	$	22,392	$	25,278
Cash paid during the period for income taxes, net	Cash paid during the period for income taxes, net	$	41,316	$	21,573	Cash paid during the period for income taxes, net	$	46,165	$	41,316
Operating lease payments	Operating lease payments	$	16,762	$	0	Operating lease payments	$	16,162	$	16,762
Non-cash investing and financing activities	Non-cash investing and financing activities					Non-cash investing and financing activities
Purchase of equipment in accounts payable	Purchase of equipment in accounts payable	$	4,200	$	4,328	Purchase of equipment in accounts payable	$	5,517	$	4,200

Repurchase of common stock in accrued liabilities from repurchase program	Repurchase of common stock in accrued liabilities from repurchase program	$	0	$	1,441	Repurchase of common stock in accrued liabilities from repurchase program	$	800	$	—
Conversion of debt conversion liability into 1,585,140 shares of common stock		$	0	$	52,944

Operating lease right-of-use assets subject to lease liability	Operating lease right-of-use assets subject to lease liability	$	11,404	$	0	Operating lease right-of-use assets subject to lease liability	$	4,182	$	11,404

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)


		Common Stock Shares	Par Value		Additional Paid-in-Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity			Common Stock Shares	Par Value		Additional Paid-in-Capital		Accumulated Other Comprehensive Gain (Loss)		Accumulated Deficit		Total Stockholders’ Equity
Balance at November 2, 2019		154,403,850	$	1,544	$	6,837,714	$	(22,084)	$	(4,644,413)	$	2,172,761
Balance at October 31, 2020													Balance at October 31, 2020	154,563,005	$	1,546	$	6,826,531	$	(35,358)	$	(4,283,122)	$	2,509,597

Net income	Net income	—	—		—		—		296,250		296,250		Net income	—	—		—		—		396,697		396,697
Other comprehensive loss		—	—		—		(18,105)		—		(18,105)
Other comprehensive income													Other comprehensive income	—	—		—		30,728		—		30,728
Repurchase of common stock - repurchase program	Repurchase of common stock - repurchase program	(1,872,446)	(19)		(74,516)		—		—		(74,535)		Repurchase of common stock - repurchase program	(1,203,439)	(12)		(65,343)		—		—		(65,355)
Issuance of shares from employee equity plans	Issuance of shares from employee equity plans	2,392,414	24		27,962		—		—		27,986		Issuance of shares from employee equity plans	2,430,224	24		28,265		—		—		28,289
Share-based compensation expense	Share-based compensation expense	—	—		50,838		—		—		50,838		Share-based compensation expense	—	—		62,970		—		—		62,970
Shares repurchased for tax withholdings on vesting of stock unit awards	Shares repurchased for tax withholdings on vesting of stock unit awards	(605,621)	(6)		(26,322)		—		—		(26,328)		Shares repurchased for tax withholdings on vesting of stock unit awards	(686,475)	(7)		(36,477)		—		—		(36,484)
Balance at August 1, 2020		154,318,197	$	1,543	$	6,815,676	$	(40,189)	$	(4,348,163)	$	2,428,867
Effect of adoption of new accounting standard (Note 2)													Effect of adoption of new accounting standard (Note 2)	—	—		—		—		(2,206)		(2,206)
Balance at July 31, 2021													Balance at July 31, 2021	155,103,315	$	1,551	$	6,815,946	$	(4,630)	$	(3,888,631)	$	2,924,236


		Common Stock Shares	Par Value		Additional Paid-in-Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity			Common Stock Shares	Par Value		Additional Paid-in-Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
Balance at November 3, 2018		154,318,531	$	1,543	$	6,881,223	$	(5,780)	$	(4,947,652)	$	1,929,334
Effect of adoption of new accounting standards		—	—		0		—		49,805		49,805
Balance at November 2, 2019													Balance at November 2, 2019	154,403,850	$	1,544	$	6,837,714	$	(22,084)	$	(4,644,413)	$	2,172,761
Net income	Net income	—	—		—		—		173,103		173,103		Net income	—	—		—		—		296,250		296,250
Other comprehensive loss	Other comprehensive loss	—	—		—		(17,984)		—		(17,984)		Other comprehensive loss	—	—		—		(18,105)		—		(18,105)
Repurchase of common stock - repurchase program	Repurchase of common stock - repurchase program	(2,881,564)	(29)		(111,896)		—		—		(111,925)		Repurchase of common stock - repurchase program	(1,872,446)	(19)		(74,516)		—		—		(74,535)
Issuance of shares from employee equity plans	Issuance of shares from employee equity plans	2,717,534	27		22,868		—		—		22,895		Issuance of shares from employee equity plans	2,392,414	24		27,962		—		—		27,986
Share-based compensation expense	Share-based compensation expense	—	—		44,446		—		—		44,446		Share-based compensation expense	—	—		50,838		—		—		50,838
Settlement of debt conversion liability		1,585,140	16		52,928		—		—		52,944
Shares repurchased for tax withholdings on vesting of stock unit awards	Shares repurchased for tax withholdings on vesting of stock unit awards	(626,629)	(6)		(23,228)		—		—		(23,234)		Shares repurchased for tax withholdings on vesting of stock unit awards	(605,621)	(6)		(26,322)		—		—		(26,328)
Balance at August 3, 2019		155,113,012	$	1,551	$	6,866,341	$	(23,764)	$	(4,724,744)	$	2,119,384

Balance at August 1, 2020													Balance at August 1, 2020	154,318,197	$	1,543	$	6,815,676	$	(40,189)	$	(4,348,163)	$	2,428,867

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

CIENA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(1) INTERIM FINANCIAL STATEMENTS

The interim financial statements included herein for Ciena Corporation and its wholly owned subsidiaries (“Ciena”) have been prepared by Ciena, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires Ciena to make judgments, assumptions, and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. The inputs into certain of Ciena’s judgments, assumptions, and estimates ~~reflected~~reflect, among other things, the information available to Ciena regarding the economic implications of the COVID-19 pandemic, and expectations as to its impact on Ciena’s business. ~~The actual~~Among other things, these estimates form the basis for judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results ~~that Ciena experiences~~ may differ materially from ~~such inputs into~~these estimates under different assumptions or conditions. To the extent that there are material differences between Ciena’s ~~critical~~estimates and ~~significant accounting estimates. As~~actual results, Ciena’s consolidated financial statements will be affected. In addition, because the duration and severity of ~~the~~ COVID-19 pandemic are ~~unclear,~~uncertain, certain of ~~such~~these estimates could require further judgment or modification and therefore carry a higher degree of variability and ~~volatility as compared to prior periods.~~volatility. As events continue to evolve, Ciena’s estimates may change materially in future periods.

In the opinion of management, the financial statements included in this report reflect all normal recurring adjustments that Ciena considers necessary for the fair statement of the results of operations of Ciena for the interim periods covered and of the financial position of Ciena at the date of the interim balance sheets. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations. The Condensed Consolidated Balance Sheet as of ~~November 2, 2019~~October 31, 2020 was derived from audited financial statements, but does not include all disclosures required by GAAP. However, Ciena believes that the disclosures are adequate to understand the information presented herein. The operating results for interim periods are not necessarily indicative of the operating results for the entire year. These financial statements should be read in conjunction with Ciena’s audited consolidated financial statements and the notes thereto included in Ciena’s annual report on Form 10-K for fiscal ~~2019~~2020 (the ~~“2019~~“2020 Annual Report”).

Ciena has a 52 or 53-week fiscal year, with quarters ending on the Saturday nearest to the last day of January, April, July and October, respectively, of each year. Fiscal ~~2020~~2021 and ~~2019~~2020 are 52-week fiscal years. Effective the second quarter of fiscal 2020, Ciena changed the presentation of reporting for its financial statements and notes thereto to reflect the actual dates on which fiscal years and quarterly periods ended. Because these dates can change from period to period, for consistency purposes, Ciena previously presented such information indicating that its quarters ended on January 31, April 30, July 31 and October 31. This change, affecting only the presentation of such information, was made on a prospective basis and it does not impact comparability of previous financial results. References to prior reported periods have been changed to reflect the actual period end dates of August 1, 2020, August 3, 2019, November 2, 2019 and November 3, 2018 for periods reported herein.

(2) SIGNIFICANT ACCOUNTING POLICIES

Except for the changes in certain policies described below, there have been no material changes to Ciena’s significant accounting policies, compared to the accounting policies described in Note 1, Ciena Corporation and Significant Accounting Policies and Estimates, in Notes to Consolidated Financial Statements in Item 8 of Part II of the ~~2019~~2020 Annual Report.

Newly Issued Accounting Standards - Effective

~~Leases~~

In ~~February~~June 2016, the Financial Accounting Standards Board ~~(“FASB”~~(the ”FASB”) issued Accounting Standards ~~Codification (“ASC”) 842, Leases~~, which requires an entity to recognize assets and liabilities on the balance sheet for the rights and obligations created by leased assets and to provide additional disclosures. Effective November 3, 2019, Ciena adopted ASC 842 which requires right-of-use ("ROU") assets and lease liabilities to be recorded on the balance sheet for leases. The guidance specifies that at the inception of a contract, an entity must determine whether the contract is or contains a lease. The contract is or contains a lease if the contract conveys the right to control the use of the property, plant, or equipment for a designated term in exchange for consideration. Ciena’s evaluation of its contracts followed the assessment of whether there was a right to obtain substantially all of the economic benefits from the use and the right to direct the use of the identified asset in the contract. Operating leases are included in the Operating right-of-use assets (“Operating ROU assets”), Operating lease liabilities and Long-term operating lease liabilities in the Condensed Consolidated Balance Sheets. Finance leases are included in Equipment,

building, furniture and fixtures, net (“Finance ROU assets”), Accrued liabilities and other short-term obligations and Other long-term obligations are included in the Condensed Consolidated Balance Sheets.

Ciena adopted the guidance on a modified retrospective basis as of November 3, 2019, such that related amounts in prior periods have not been restated. Ciena has operating and finance leases that primarily relate to real property. As a practical expedient for disclosure, Ciena has elected the “package of practical expedients” and, as a result, did not reassess existing lease identifications, lease classifications or initial direct costs. As a practical expedient, Ciena has elected not to capitalize leases with a term of 12 months or less without a purchase option that it is likely to exercise. Also as a practical expedient, Ciena has elected not to separate lease and non-lease components of operating and finance leases. Lease components are payment items directly attributable to the use of the underlying asset, while non-lease components are explicit elements of a contract not directly related to the use of the underlying asset, including pass-through operating expenses like common area maintenance and utilities.

Operating ROU assets and lease liabilities and Finance ROU assets and lease liabilities are recognized on the Condensed Consolidated Balance Sheets at the present value of the future lease payments over the life of the lease term. Ciena uses discount rates based on incremental borrowing rates, on a collateralized basis, for the respective underlying assets, for terms similar to the respective leases when implicit rates for leases are not determinable. Operating lease costs are included as rent expense in the Condensed Consolidated Statements of Operations. Fixed base payments on operating leases paid directly to the lessor are recorded as lease expense on a straight-line basis. Related variable payments based on usage, changes in an index, or market rate are expensed as incurred. Finance ROU assets are generally amortized on a straight-line basis over the lease term with the interest expense on the lease liability recorded using the interest method. The amortization and interest expense are recorded separately in the Condensed Consolidated Statements of Operations.

Upon adoption, Ciena recorded Operating ROU assets of $53.3 million and lease liabilities of $76.0 million related to its operating leases. As of November 2, 2019, the restructuring reserve liability for vacated office space of $11.1 million was included in Accrued liabilities and other short-term obligations and Other long-term obligations on the Condensed Consolidated Balance Sheet under prior accounting guidance. Upon adoption of the updated guidance, the existing lease reserve liability was reclassified as a reduction to the Operating ROU assets. ROU assets will be tested for impairment when circumstances indicate that the carrying values may not be recoverable. The adoption of this guidance did not require a cumulative effect adjustment or have an impact on the Condensed Consolidated Statements of Income or Condensed Consolidated Statements of Cash Flows.

~~Opening Balance Adjustments~~

~~The following table summarizes the cumulative effect of the changes made to Ciena’s Condensed Consolidated Balance Sheet in connection with the adoption of ASC 842 (in thousands):~~

Balance at
November 2, 2019 New Lease Accounting Standard Adjusted Balance at November 3, 2019
ASSETS:
Operating right-of-use assets $ — $ 53,334 (1) $ 53,334
Total assets $ 3,893,346 $ 53,334 $ 3,946,680
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Accrued liabilities and other short-term obligations $ 382,740 $ (1,484) (2) $ 381,256
Short-term lease liabilities $ — 20,498 (3) $ 20,498
Other long-term obligations $ 148,747 (21,244) (4) $ 127,503
Long-term operating lease liabilities $ — 55,564 (5) $ 55,564
Total liabilities and stockholders’ equity $ 3,893,346 $ 53,334 $ 3,946,680

⁽¹⁾Represents $76.0 million of operating leases recognized as Operating ROU assets upon adoption of ASC 842, less $5.4 million of deferred rent, $6.2 million of tenant improvement allowances, $1.5 million of short-term restructuring reserve liability and $9.6 million of long-term restructuring reserve liability all recognized as a reduction to ROU assets.

⁽²⁾~~Represents $1.5 million of short-term restructuring reserve liability recognized as a reduction to Operating ROU assets.~~

⁽³⁾~~Represents $20.5 million of lease liabilities for operating leases.~~

⁽⁴⁾~~Represents $9.6 million of long-term restructuring reserve liability, $5.4 million of deferred rent, and $6.2 million of tenant improvement allowances recognized as a reduction to ROU assets.~~

⁽⁵⁾~~Represents $55.6 million of lease liabilities for operating leases.~~

~~See Note 15 for additional information.~~

~~Fair Value Measurement~~

~~In August 2018, the FASB issued Accounting Standards~~ Update ~~(“ASU”)~~ No. ~~2018-13~~2016-13 (“ASU ~~2018-13”),~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework~~ which modifies the disclosure requirements on fair value measurements. Ciena adopted ASU 2018-13 beginning the first quarter of fiscal year 2020. Adoption of ASU 2018-13 did not have a material effect on Ciena’s financial position or results of operations.

~~Newly Issued Accounting Standards - Not Yet Effective~~

~~In June 2016, the FASB issued ASU No. 2016-13 (“ASU~~ 2016-13”), Financial Instruments - Credit Losses, which requires measurement and recognition of expected credit losses for financial assets held based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Ciena adopted ASU 2016-13 on a modified retrospective basis in the first quarter of fiscal year 2021 through a cumulative-effect adjustment at the beginning of the period of adoption and did not restate prior periods. The standard primarily impacts the value of Ciena’s accounts receivable, net and contract assets, net. Adoption of ASU 2016-13 did not have a material effect on Ciena’s financial position or results of operations.

Ciena’s significant accounting policies updated as a result of adopting this standard are as follows:

Allowance for Credit Losses for Accounts Receivable and Contract Assets

Ciena estimates its allowances for credit losses using relevant available information from internal and external sources, related to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. When assessing for credit losses, Ciena determines collectability by pooling assets with similar characteristics. The allowances for credit losses are each measured on a collective basis when similar risk characteristics exist. The allowances for credit losses are each measured by multiplying the exposure probability of default (the

probability the asset will default within a given time frame) by the loss given default rate (the percentage of the asset not expected to be collected due to default) based on the pool of assets.

Probability of default rates are published by third-party credit rating agencies. Adjustments to Ciena’s exposure probability may take into account a number of factors, including, but not limited to, various customer-specific factors, the potential sovereign risk of the geographic locations in which the customer is operating and macroeconomic conditions. These factors are updated regularly or when facts and circumstances indicate that an update is deemed necessary.

Newly Issued Accounting Standards - Not Yet Effective

In March 2020, the FASB issued ASU No. 2020-04 (“ASU 2020-04”), Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides temporary optional guidance on contract modifications and hedging accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”) to alternative reference rates. In January 2021, the FASB issued ASU 2021-01, which refines the scope of Topic 848 and clarifies some of its guidance as part of the FASB’s monitoring of global reference rate activities. The new guidance was effective upon issuance, and Ciena is allowed to elect to apply the amendments prospectively through December 31, 2022. Ciena is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU No. 2019-12 (“ASU 2019-12”), Income Taxes (ASC 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740. The amendments also improve consistent application of and simplify GAAP for other areas of ASC 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for Ciena beginning in the first quarter of fiscal ~~2021,~~year 2022, and early adoption is permitted. Most amendments within this standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. Ciena is currently evaluating the impact of this ~~ASU~~accounting standard update on its ~~Consolidated Financial Statements~~consolidated financial statements and related disclosures.

(3)REVENUE

Disaggregation of Revenue

Ciena’s disaggregated revenue represents similar groups that depict the nature, amount, and timing of revenue and cash flows for Ciena’s various offerings. The sales cycle, contractual obligations, customer requirements, and go-to-market strategies may differ for each of its product ~~categories,~~lines, resulting in different economic risk profiles for each ~~category.~~line. Effective as of the beginning of fiscal 2021, Ciena renamed its “Packet Networking” product line to “Routing and Switching.” This change, affecting only the presentation of such information, was made on a prospective basis and does not impact comparability of previous financial results. References to prior reported “Packet Networking” product line have been changed herein to “Routing and Switching.”

The tables below set forth Ciena’s disaggregated revenue for the respective ~~period~~periods (in thousands):

Quarter Ended August 1, 2020
Networking Platforms Platform Software and Services Blue Planet Automation Software and Services Global Services Total
Product lines:
Converged Packet Optical $ 722,512 $ 0 $ 0 $ 0 $ 722,512
Packet Networking 79,756 0 0 0 79,756
Platform Software and Services 0 46,422 0 0 46,422
Blue Planet Automation Software and Services 0 0 11,297 0 11,297
Maintenance Support and Training 0 0 0 69,099 69,099
Installation and Deployment 0 0 0 39,798 39,798
Consulting and Network Design 0 0 0 7,828 7,828
Total revenue by product line $ 802,268 $ 46,422 $ 11,297 $ 116,725 $ 976,712
Timing of revenue recognition:
Products and services at a point in time $ 802,268 $ 15,838 $ 410 $ 3,300 $ 821,816
Services transferred over time 0 30,584 10,887 113,425 154,896
Total revenue by timing of revenue recognition $ 802,268 $ 46,422 $ 11,297 $ 116,725 $ 976,712


	Quarter Ended July 31, 2021
	Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total
Product lines:
Converged Packet Optical	$	712,906	$	—	$	—	$	—	$	712,906
Routing and Switching	69,698		—		—		—		69,698
Platform Software and Services	—		56,945		—		—		56,945
Blue Planet Automation Software and Services	—		—		16,607		—		16,607
Maintenance Support and Training	—		—		—		74,006		74,006
Installation and Deployment	—		—		—		46,653		46,653
Consulting and Network Design	—		—		—		11,326		11,326
Total revenue by product line	$	782,604	$	56,945	$	16,607	$	131,985	$	988,141

Timing of revenue recognition:
Products and services at a point in time	$	782,604	$	17,928	$	4,558	$	6,508	$	811,598
Services transferred over time	—		39,017		12,049		125,477		176,543
Total revenue by timing of revenue recognition	$	782,604	$	56,945	$	16,607	$	131,985	$	988,141


	Quarter Ended August 1, 2020
	Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total
Product lines:
Converged Packet Optical	$	722,512	$	—	$	—	$	—	$	722,512
Routing and Switching	79,756		—		—		—		79,756
Platform Software and Services	—		46,422		—		—		46,422
Blue Planet Automation Software and Services	—		—		11,297		—		11,297
Maintenance Support and Training	—		—		—		69,099		69,099
Installation and Deployment	—		—		—		39,798		39,798
Consulting and Network Design	—		—		—		7,828		7,828
Total revenue by product line	$	802,268	$	46,422	$	11,297	$	116,725	$	976,712

Timing of revenue recognition:
Products and services at a point in time	$	802,268	$	15,838	$	410	$	3,300	$	821,816
Services transferred over time	—		30,584		10,887		113,425		154,896
Total revenue by timing of revenue recognition	$	802,268	$	46,422	$	11,297	$	116,725	$	976,712

Quarter Ended August 3, 2019
Networking Platforms Platform Software and Services Blue Planet Automation Software and Services Global Services Total
Product lines:
Converged Packet Optical $ 724,245 $ 0 $ 0 $ 0 $ 724,245
Packet Networking 71,823 0 0 0 71,823
Platform Software and Services 0 37,312 0 0 37,312
Blue Planet Automation Software and Services 0 0 10,530 0 10,530
Maintenance Support and Training 0 0 0 65,936 65,936
Installation and Deployment 0 0 0 39,802 39,802
Consulting and Network Design 0 0 0 10,958 10,958
Total revenue by product line $ 796,068 $ 37,312 $ 10,530 $ 116,696 $ 960,606
Timing of revenue recognition:
Products and services at a point in time $ 796,068 $ 12,657 $ 1,941 $ 4,804 $ 815,470
Services transferred over time 0 24,655 8,589 111,892 145,136
Total revenue by timing of revenue recognition $ 796,068 $ 37,312 $ 10,530 $ 116,696 $ 960,606

Nine Months Ended August 1, 2020
Networking Platforms Platform Software and Services Blue Planet Automation Software and Services Global Services Total
Product lines:
Converged Packet Optical 1,968,355 $ 0 $ 0 $ 0 $ 1,968,355
Packet Networking 211,432 0 0 0 211,432
Platform Software and Services 0 143,295 0 0 143,295
Blue Planet Automation Software and Services 0 0 41,779 0 41,779
Maintenance Support and Training 0 0 0 202,370 202,370
Installation and Deployment 0 0 0 108,994 108,994
Consulting and Network Design 0 0 0 27,452 27,452
Total revenue by product line $ 2,179,787 $ 143,295 $ 41,779 $ 338,816 $ 2,703,677
Timing of revenue recognition:
Products and services at a point in time $ 2,179,787 $ 45,930 $ 8,891 $ 12,174 $ 2,246,782
Services transferred over time 0 97,365 32,888 326,642 456,895
Total revenue by timing of revenue recognition $ 2,179,787 $ 143,295 $ 41,779 $ 338,816 $ 2,703,677


		Nine Months Ended August 3, 2019																			Nine Months Ended July 31, 2021
		Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total			Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total
Product lines:	Product lines:											Product lines:
Converged Packet Optical	Converged Packet Optical	$	1,897,080	$	0	$	0	$	0	$	1,897,080	Converged Packet Optical	$	1,798,888	$	—	$	—	$	—	$	1,798,888
Packet Networking		216,529		0		0		0		216,529
Routing and Switching												Routing and Switching	197,632		—		—		—		197,632
Platform Software and Services	Platform Software and Services	0		114,139		0		0		114,139		Platform Software and Services	—		163,472		—		—		163,472
Blue Planet Automation Software and Services	Blue Planet Automation Software and Services	0		0		37,977		0		37,977		Blue Planet Automation Software and Services	—		—		57,499		—		57,499
Maintenance Support and Training	Maintenance Support and Training	0		0		0		196,002		196,002		Maintenance Support and Training	—		—		—		212,054		212,054
Installation and Deployment	Installation and Deployment	0		0		0		111,746		111,746		Installation and Deployment	—		—		—		124,263		124,263
Consulting and Network Design	Consulting and Network Design	0		0		0		30,671		30,671		Consulting and Network Design	—		—		—		25,390		25,390
Total revenue by product line	Total revenue by product line	$	2,113,609	$	114,139	$	37,977	$	338,419	$	2,604,144	Total revenue by product line	$	1,996,520	$	163,472	$	57,499	$	361,707	$	2,579,198

Timing of revenue recognition:	Timing of revenue recognition:											Timing of revenue recognition:
Products and services at a point in time	Products and services at a point in time	$	2,113,609	$	39,801	$	11,216	$	13,945	$	2,178,571	Products and services at a point in time	$	1,996,520	$	54,756	$	20,497	$	9,776	$	2,081,549
Services transferred over time	Services transferred over time	0		74,338		26,761		324,474		425,573		Services transferred over time	—		108,716		37,002		351,931		497,649
Total revenue by timing of revenue recognition	Total revenue by timing of revenue recognition	$	2,113,609	$	114,139	$	37,977	$	338,419	$	2,604,144	Total revenue by timing of revenue recognition	$	1,996,520	$	163,472	$	57,499	$	361,707	$	2,579,198

Effective the beginning of fiscal 2020, Ciena’s Global Sales and Marketing organization combined its previous North America and Caribbean and Latin America (“CALA”) regions into a new “Americas” sales region. Accordingly,


	Nine Months Ended August 1, 2020
	Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total
Product lines:
Converged Packet Optical	$	1,968,355	$	—	$	—	$	—	$	1,968,355
Routing Switching	211,432		—		—		—		211,432
Platform Software and Services	—		143,295		—		—		143,295
Blue Planet Automation Software and Services	—		—		41,779		—		41,779
Maintenance Support and Training	—		—		—		202,370		202,370
Installation and Deployment	—		—		—		108,994		108,994
Consulting and Network Design	—		—		—		27,452		27,452
Total revenue by product line	$	2,179,787	$	143,295	$	41,779	$	338,816	$	2,703,677

Timing of revenue recognition:
Products and services at a point in time	$	2,179,787	$	45,930	$	8,891	$	12,174	$	2,246,782
Services transferred over time	—		97,365		32,888		326,642		456,895
Total revenue by timing of revenue recognition	$	2,179,787	$	143,295	$	41,779	$	338,816	$	2,703,677

Ciena ~~reflects~~reports its sales geographically ~~around~~using the following markets: (i) Americas; (ii) Europe, Middle East and Africa (“EMEA”); and (iii) Asia Pacific, Japan and India (“APAC”). Americas includes activities in North America and South America. Within each geographic area, Ciena maintains specific teams or personnel that focus on a particular region, country, customer or market vertical. These teams include sales management, account salespersons and sales engineers, as well as services professionals and commercial management personnel. The following table reflects Ciena’s geographic distribution of revenue based principally on the relevant location for Ciena’s delivery of products and performance of services.

For the periods below, Ciena’s geographic distribution of revenue was as follows (in thousands):

Quarter Ended Nine Months Ended
August 1, August 3, August 1, August 3,
2020 2019 2020 2019
Geographic distribution:
Americas $ 713,340 $ 656,261 $ 1,937,725 1,788,234
EMEA 162,465 169,532 433,861 413,715
APAC 100,907 134,813 332,091 402,195
Total revenue by geographic distribution $ 976,712 $ 960,606 $ 2,703,677 $ 2,604,144


	Quarter Ended				Nine Months Ended
	July 31,		August 1,		July 31,		August 1,
	2021		2020		2021		2020
Geographic distribution:
Americas	$	692,853	$	713,340	$	1,776,939	$	1,937,725
EMEA	189,180		162,465		499,652		433,861
APAC	106,108		100,907		302,607		332,091
Total revenue by geographic distribution	$	988,141	$	976,712	$	2,579,198	$	2,703,677

Ciena’s revenue includes $623.9 million and $647.0 million of United States revenue for the third quarter of fiscal 2021 and 2020, respectively. For the nine months ended July 31, 2021 and August 1, 2020, United States revenue was $1.6 billion and $1.8 billion, respectively. No other country accounted for 10% or more of total revenue for the periods presented above.

For the periods below, the only customers that accounted for at least 10% of Ciena’s revenue were as follows (in thousands):


	Quarter Ended				Nine Months Ended
	July 31,		August 1,		July 31,		August 1,
	2021		2020		2021		2020
Verizon	$	131,892	n/a		n/a		$	272,200
Web-scale provider	119,728		n/a		n/a		n/a
AT&T	119,199		114,963		313,140		304,645
Total	$	370,819	$	114,963	$	313,140	$	576,845


n/a			Denotes revenue representing less than 10% of total revenue for the period

The Web-scale provider noted in the above table purchased products from each of Ciena’s operating segments excluding Blue Planet® Automation Software and Services. The other customers identified above purchased products and services from each of Ciena’s operating segments.

•Networking Platforms revenue reflects sales of Ciena’s Converged Packet Optical and ~~Packet Networking~~Routing and Switching product lines.

◦Converged Packet Optical - includes the 6500 Packet-Optical Platform, ~~5430 Reconfigurable Switching System,~~the Waveserver^® stackable interconnect system, ~~(“Waveserver”),~~ the 6500 Reconfigurable Line System (RLS) and the 5400 family of ~~CoreDirector~~^® ~~Multiservice Optical Switches and the Optical Transport Network (OTN) configuration for the 5410 Reconfigurable Switching System.~~Packet-Optical Platforms. This product line also includes sales of the Z-Series Packet-Optical Platform.

◦~~Packet Networking~~Routing and Switching - includes the 3000 family of service delivery switches and service aggregation switches and the 5000 family of service aggregation switches. This product line also includes the 8700 Packetwave Platform, the Ethernet packet configuration for the 5410 Service Aggregation Switch, and the 6500 Packet Transport System (PTS), which combines packet switching, control plane operation, and integrated optics.

The Networking Platforms segment also includes sales of operating system software and enhanced software features embedded in each of the product lines above. Revenue from this segment is included in product revenue on the Condensed Consolidated Statements of Operations. Operating system software and enhanced software features

embedded in Ciena hardware are each considered distinct performance obligations for which the revenue is generally recognized upfront at a point in time upon transfer of control.

•Platform Software and Services provides analytics, data, and planning tools to assist customers in managing Ciena’s Networking Platforms products in their networks. Ciena’s platform software includes its Manage, Control and Plan (MCP) domain controller solution and its OneControl Unified Management System, ~~ON-Center~~^® ~~Network~~as well as planning tools and ~~Service Management Suite, Ethernet Services Manager, Optical Suite Release and Planet Operate.~~a number of legacy software solutions that support Ciena’s installed base of network solutions. Platform software-related services revenue includes sales of subscription, installation, support, and consulting services related to Ciena’s software platforms, operating system software and enhanced software features embedded in each of the Networking Platforms product lines above. Revenue from the software portion of this segment is included in product revenue on the Condensed Consolidated Statements of Operations. Revenue from services portions of this segment is included in services revenue on the Condensed Consolidated Statements of Operations.

•Blue Planet^® Automation Software and Services is a comprehensive, micro-services, standards-based open software suite, together with related services, that ~~allows~~enables customers to ~~use enhanced knowledge about their~~implement large-scale software and IT-led operations support system (OSS) transformations by transforming legacy networks ~~to drive adaptive optimization~~into “service ready” networks, accelerating the creation, delivery and lifecycle management of ~~their services and operations.~~new, cloud-based services. Ciena’s Blue Planet Automation Platform includes multi-domain service orchestration (MDSO), ~~network function virtualization (NFV),~~inventory management ~~and orchestration (NFV MANO), analytics, network health predictor (NHP)~~(BPI), route optimization and ~~assurance~~analysis (ROA), ~~inventory management,~~network function virtualization orchestration (NFVO), and unified assurance and analytics (UAA) ~~and Ciena’s SDN Multilayer Controller and virtual wide area network (V-WAN) application.~~. Services revenue includes sales of subscription, installation, support, consulting and design services related to Ciena’s Blue Planet Automation Platform. Revenue from the software portion of this segment is included in product revenue on the Condensed Consolidated Statements of Operations. Revenue from services portions of this segment is included in services revenue on the Condensed Consolidated Statements of Operations.

Ciena’s software platform revenue typically reflects ~~sales of~~ either perpetual or term-based software licenses, and these sales are considered a distinct performance ~~obligation~~obligations where revenue is generally recognized upfront at a point in time upon transfer of control. Revenue from software subscription and support ~~are~~is recognized ratably over the period during which the services are performed. Revenue from professional services for solution customization, software and solution support services, consulting and design, and build-operate-transfer services relating to Ciena’s software offerings ~~are~~is recognized over time with Ciena applying the input method to determine the amount of revenue to be recognized in a given period.

•Global Services revenue reflects sales of a broad range of Ciena’s services for maintenance support and training, installation and deployment, and consulting and network design activities. Revenue from this segment is included in services revenue on the Condensed Consolidated Statements of Operations.

Ciena’s Global Services are considered a distinct performance obligation where revenue is generally recognized over time. Revenue from maintenance support is recognized ratably over the period during which the services are performed. Revenue from installation and deployment services and consulting and network design services ~~are~~is recognized over time with Ciena applying the input method to determine the amount of revenue to be recognized in a given period. Revenue from training services is generally recognized at a point in time upon completion of the service.

Contract Balances

The following table provides information about receivables, contract assets and contract liabilities (deferred revenue) from contracts with customers (in thousands):

Balance at August 1, 2020 Balance at November 2, 2019
Accounts receivable, net $ 715,195 $ 724,854
Contract assets for unbilled accounts receivable $ 97,373 $ 84,046
Deferred revenue $ 136,870 $ 156,873


	Balance at July 31, 2021		Balance at October 31, 2020
Accounts receivable, net	$	878,229	$	719,405
Contract assets for unbilled accounts receivable, net	$	98,812	$	85,843
Deferred revenue	$	183,899	$	158,363

~~Our~~Ciena’s contract assets represent unbilled accounts receivable, net where transfer of a product or service has occurred but invoicing is conditional upon completion of future performance obligations. These amounts are primarily related to installation and deployment and professional services arrangements where transfer of control has occurred, but Ciena has not yet invoiced the customer. Contract assets are included in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets. See Note 11 below.

Contract liabilities consist of deferred revenue and represent advanced payments against non-cancelable customer orders received prior to revenue recognition. Ciena recognized approximately ~~$91.8~~$94.7 million and ~~$77.4~~$91.8 million of revenue during the first nine months of fiscal 2021 and 2020, ~~and 2019~~respectively, that was included in the deferred revenue balance atas of October 31, 2020 and November 2, 2019, ~~and November 3, 2018,~~ respectively. Revenue recognized due to changes in transaction price from performance obligations satisfied or partially satisfied in previous periods was immaterial during the nine months ended July 31, 2021 and August 1, ~~2020 and August 3, 2019.~~2020.

Capitalized Contract Acquisition Costs

Capitalized contract acquisition costs consist of deferred sales commissions, and were ~~$13.0~~$20.4 million and ~~$15.7~~$15.3 million as of ~~August 1,~~July 31, 2021 and October 31, 2020, ~~and November 2, 2019, respectively, and~~respectively. Capitalized contract acquisition costs were included in ~~other current assets~~prepaid expenses and other and other long-term assets. The amortization expense associated with these costs was ~~$16.2~~$16.8 million and ~~$12.5~~$16.2 million during the first nine months of fiscal ~~2020~~2021 and ~~2019,~~2020, respectively, and was included in sales and marketing expense.

Remaining Performance Obligations

Remaining Performance Obligations (“RPO”) are comprised of non-cancelable customer purchase orders for products and services that are awaiting transfer of control for revenue recognition under the applicable contract terms. As of ~~August 1, 2020,~~July 31, 2021, the aggregate amount of RPO was ~~$970.6 million.~~$1.4 billion. As of ~~August 1, 2020,~~July 31, 2021, Ciena expects approximately ~~82%~~85% of the RPO to be recognized as revenue within the next twelve months.

(4) ~~BUSINESS COMBINATIONS~~CANADIAN EMERGENCY WAGE SUBSIDY

~~Centina Systems, Inc. Acquisition~~In April 2020, the Canadian government introduced the Canada Emergency Wage Subsidy (“CEWS”) to help employers offset a portion of their employee wages for a limited period in response to the COVID-19 outbreak, retroactive to March 15, 2020. The CEWS program has been extended through October 23, 2021. The subsidy covers employers of all sizes and across all sectors.

~~On November 2, 2019,~~ Ciena ~~acquired Centina Systems, Inc. (“Centina”),~~accounts for proceeds from government grants as a ~~provider~~reduction of ~~service~~expense when there is reasonable assurance ~~analytics~~that Ciena has met the required conditions associated with the grant and ~~network performance management solutions, for approximately $34.0 million~~that grant proceeds will be received. Grant benefits are recorded to the particular line item of the Condensed Consolidated Statement of Operations to which the grant activity relates. Amounts from the CEWS program positively impacted our operating expense and measures of profit in ~~cash. This transaction has been accounted for as~~ the ~~acquisition~~third quarter of ~~a business.~~

~~During the first~~fiscal 2021 and nine months ended July 31, 2021. For the third quarter of fiscal 2021, Ciena recorded CEWS benefits of CAD$1.1 million ($0.8 million), net of certain fees. For the nine months ended July 31, 2021, Ciena recorded a CAD$52.2 million ($41.3 million) benefit, net of certain fees, related to CEWS for claim periods beginning March 15, 2020, ~~Ciena incurred approximately $0.8~~including CAD$43.9 million ($35.2 million) related to employee wages during fiscal 2020. As of ~~acquisition-related costs associated with~~July 31, 2021, amounts receivable from this ~~transaction. These costs primarily reflect fees associated with financial, legal and accounting advisors.~~subsidy were CAD$1.5 million ($1.2 million).

The following table summarizes CEWS for the ~~final purchase price allocation related to the acquisition based on the estimated fair value of the acquired assets and assumed liabilities~~periods indicated (in thousands):


	~~Amount~~
~~Cash and cash equivalents~~	$	~~5,718~~
~~Accounts receivable~~	~~610~~
~~Prepaid expenses and other~~	~~536~~
~~Equipment, furniture and fixtures~~	17
~~Goodwill~~	~~13,055~~
~~Customer relationships and contracts~~	~~400~~
~~Developed technology~~	~~22,200~~
~~Accounts payable~~	~~(47)~~
~~Accrued liabilities~~	~~(286)~~
~~Deferred revenue~~	~~(1,493)~~
~~Deferred tax liability~~	~~(6,692)~~
~~Total purchase consideration~~	$	~~34,018~~

~~Customer relationships and contracts represent agreements with existing Centina customers and have an estimated useful life of two years.~~

Developed technology represents purchased technology that has reached technological feasibility and for which Centina had substantially completed development as of the date of acquisition. Fair value was determined using future discounted cash flows related to the projected income stream of the developed technology for a discrete projection period. Cash flows were discounted to their present value as of the closing date. Developed technology is amortized on a straight-line basis over its estimated useful life of five years.

The goodwill generated from the acquisition of Centina is primarily related to expected synergies. The total goodwill amount was recorded in the Blue Planet Automation Software and Services segment. The goodwill is not deductible for income tax purposes.

~~Pro forma disclosures have not been included due to immateriality.~~


	Quarter Ended				Nine Months Ended
	July 31,		August 1,		July 31,		August 1,
	2021		2020		2021		2020
Product	$	94	$	—	$	4,283	$	—
Service	47		—		2,667		—
CEWS benefit in cost of goods sold	141		—		6,950		—
Research and development	596		—		29,519		—
Sales and marketing	53		—		2,604		—
General and administrative	46		—		2,207		—
CEWS benefit in operating expense	695		—		34,330		—
Total CEWS benefit	$	836	$	—	$	41,280	$	—

(5) RESTRUCTURING COSTS

Ciena has undertaken a number of restructuring activities intended to reduce expense and to ensure better ~~align~~alignment of its workforce and costs with market opportunities, product development and business strategies. The following table sets forth the restructuring activity and balance of the restructuring liability accounts, which are included in Accrued liabilities and other short-term obligations on Ciena’s Condensed Consolidated Balance Sheets, for the nine months ended ~~August 1, 2020~~July 31, 2021 (in thousands):


		Workforce reduction			Consolidation of excess facilities and other restructuring activities			Total			Workforce reduction			Other restructuring activities			Total
Balance at November 2, 2019		$	3,983		$	11,160		$	15,143
Balance at October 31, 2020										Balance at October 31, 2020	$	2,915		$	—		$	2,915
Charges	Charges	5,015		⁽¹⁾	9,783		⁽²⁾	14,798		Charges	5,306		(1)	18,558		(2)	23,864
Adjustments related to ASC 842		0			(11,160)		⁽³⁾	(11,160)

Cash payments	Cash payments	(7,335)			(9,783)			(17,118)		Cash payments	(7,051)			(18,558)			(25,609)
Balance at August 1, 2020		$	1,663		$	0		$	1,663
Balance at July 31, 2021										Balance at July 31, 2021	$	1,170		$	—		$	1,170
Current restructuring liabilities	Current restructuring liabilities	$	1,663		$	0		$	1,663	Current restructuring liabilities	$	1,170		$	—		$	1,170

⁽¹⁾Reflects a global workforce reduction of 79120 employees during the nine months ended ~~August 1, 2020~~July 31, 2021 as part of a business optimization strategy to improve gross margin, constrain operating expense and redesign certain business processes.

¹⁴

(2) Primarily represents ~~costs and imputed interest expense related to restructured facilities and~~ the redesign of certain business ~~processes.~~

⁽³⁾~~Represents restructuring reserve liability recognized as a reduction~~processes associated with Ciena’s supply chain and distribution structure reorganization, and costs related to ~~Operating ROU assets, net in relation to adoption of ASC 842. See Notes 2 and~~ 15 ~~for further discussion.~~restructured facilities.

The following table sets forth the restructuring activity and balance of the restructuring liability accounts, which are included in Accrued liabilities and other short-term obligations on Ciena’s Condensed Consolidated Balance Sheets for the nine months ended August ~~3, 2019~~1, 2020 (in thousands):


		Workforce reduction			Consolidation of excess facilities			Total			Workforce reduction			Other restructuring activities			Total
Balance at November 3, 2018		$	2,108		$	1,739		$	3,847
Balance at November 2, 2019										Balance at November 2, 2019	$	3,983		$	11,160		$	15,143
Charges	Charges	10,309		⁽¹⁾	1,387		⁽²⁾	11,696		Charges	5,015		(1)	9,783		(2)	14,798

Adjustments related to ASC 842										Adjustments related to ASC 842	—			(11,160)		(3)	(11,160)
Cash payments										Cash payments	(7,335)			(9,783)			(17,118)
Balance at August 1, 2020										Balance at August 1, 2020	$	1,663		$	—		$	1,663
Current restructuring liabilities										Current restructuring liabilities	$	1,663		$	—		$	1,663

Cash payments		(10,021)			(1,631)			(11,652)
Balance at August 3, 2019		$	2,396		$	1,495		$	3,891
Current restructuring liabilities		$	2,396		$	348		$	2,744
Non-current restructuring liabilities		$	0		$	1,147		$	1,147

⁽¹⁾Reflects a global workforce reduction of approximately ~~225~~79 employees during the nine months ended August ~~3, 2019~~1, 2020 as part of a business optimization strategy to improve gross margin, constrain operating expense and redesign certain business processes.

⁽²⁾~~Reflects unfavorable lease commitments~~Primarily represents variable costs and imputed interest expense related to restructured facilities.

(3) Represents restructuring reserve liability recognized as a reduction to Operating right-of-use (“ROU”) assets, net in ~~connection with a portion~~relation to adoption of ~~the facilities for certain locations in the United States and India where Ciena has vacated unused space.~~ASC 842.

(6) INTEREST AND OTHER INCOME (LOSS), NET

The components of interest and other income (loss), net, are as follows (in thousands):


		Quarter Ended						Nine Months Ended							Quarter Ended				Nine Months Ended
		August 1,		August 3,		August 1,		August 3,			July 31,		August 1,		July 31,		August 1,
		2020		2019		2020		2019			2021		2020		2021		2020
Interest income	Interest income	$	849	$	3,475	$	6,262	$	10,866	Interest income	$	465	$	849	$	1,553	$	6,262

Gains (losses) on non-hedge designated foreign currency forward contracts	Gains (losses) on non-hedge designated foreign currency forward contracts	1,282		119		3,005		(757)		Gains (losses) on non-hedge designated foreign currency forward contracts	(4,414)		1,282		5,295		3,005
Foreign currency exchange losses		(2,537)		(2,373)		(7,376)		(4,585)
Foreign currency exchange gains (losses)										Foreign currency exchange gains (losses)	4,959		(2,537)		(8,534)		(7,376)

Other	Other	638		(171)		(678)		(465)		Other	(215)		638		86		(678)
Interest and other income, net		$	232	$	1,050	$	1,213	$	5,059
Interest and other income (loss), net										Interest and other income (loss), net	$	795	$	232	$	(1,600)	$	1,213

Ciena Corporation, as the U.S. parent entity, uses the U.S. Dollar as its functional currency; however, some of its foreign branch offices and subsidiaries use local currencies as their functional currencies. Ciena recorded ~~$7.4~~$8.5 million and ~~$4.6~~$7.4 million in foreign currency exchange rate losses during the first nine months of fiscal ~~2020~~2021 and ~~2019,~~2020, respectively, as a result of monetary assets and liabilities that were transacted in a currency other than ~~the entity’s~~Ciena’s functional ~~currency, and the~~currency. The related remeasurement adjustments were recorded in interest and other income (loss), net, on the Condensed Consolidated Statements of Operations. From time to time, Ciena uses foreign currency forwards to hedge this type of balance sheet exposure. ~~See Note 13 for further discussion.~~ These forwards are not designated as hedges for accounting purposes, and any net gain or loss associated with these derivatives is reported in interest and other income (loss), net, on the Condensed Consolidated Statements of Operations. During the first nine months of fiscal 2021 and 2020, respectively, Ciena recorded gains of ~~$3.0~~$5.3 million ~~from non-hedge designated foreign currency forward contracts. During the first nine months of fiscal 2019, Ciena recorded losses of $0.8~~and $3.0 million from non-hedge designated foreign currency forward contracts.

(7) INCOME TAXES

On December 2, 2019, the U.S. Department of the Treasury released final regulations and proposed regulations under Section 59A of the Internal Revenue Code, the Base Erosion and Anti-Abuse Tax (“BEAT”). BEAT, which requires certain U.S. corporations to pay a minimum tax associated with deductible payments to non-U.S. related parties, was enacted as part of the Tax Cuts and Jobs Act (the “Tax Act”). Also, on December 2, 2019, the U.S. Department of the Treasury released final regulations that provide additional guidance with respect to the foreign tax credit regime under the Tax Act.

The effective tax rate for the ~~third~~ quarter and nine months ended ~~August 1, 2020~~July 31, 2021 was lower than the effective tax rate for the ~~third~~ quarter and nine months ended August ~~3, 2019,~~1, 2020, primarily due to ~~reduced BEAT and~~ the ~~effect of the final regulations released on December 2, 2019.~~tax benefit associated with recording a deferred tax asset.

~~Our~~

To accommodate the requirements of a global business, Ciena has begun reorganizing its global supply chain and distribution structure, which includes a legal entity reorganization and related system upgrade. During the quarter, Ciena completed an internal transfer of certain of its non-U.S. intangible assets, which created amortizable tax basis resulting in the discrete recognition of a $124.2 million deferred tax asset with a corresponding tax benefit. The impact of this transfer is reflected in Ciena’s effective tax rate for the quarter and nine months ended July 31, 2021, which had a significant, one-time impact on its net income for these periods.

Ciena’s future income tax provisions and deferred tax balances may be affected by the amount of pre-tax income, the jurisdictions where it is earned, the existence and ~~utilizability of~~ability to utilize tax attributes and changes in tax ~~laws.~~laws and business reorganizations. Ciena continues to monitor these items and will adopt strategies to address their impact as appropriate.

(8) SHORT-TERM AND LONG-TERM INVESTMENTS

As of the dates indicated, investments are comprised of the following (in thousands):


		August 1, 2020															July 31, 2021
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. government obligations:	U.S. government obligations:									U.S. government obligations:
Included in short-term investments	Included in short-term investments	$	70,093	$	311	$	0	$	70,404	Included in short-term investments	$	181,966	$	44	$	—	$	182,010
Included in long-term investments										Included in long-term investments	60,887		7		(6)		60,888
											$	242,853	$	51	$	(6)	$	242,898
		$	70,093	$	311	$	0	$	70,404


		November 2, 2019															October 31, 2020
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. government obligations:	U.S. government obligations:									U.S. government obligations:
Included in short-term investments	Included in short-term investments	$	109,715	$	225	$	0	$	109,940	Included in short-term investments	$	150,559	$	109	$	(1)	$	150,667
Included in long-term investments	Included in long-term investments	10,017		0		(3)		10,014		Included in long-term investments	82,252		—		(26)		82,226
		$	119,732	$	225	$	(3)	$	119,954		$	232,811	$	109	$	(27)	$	232,893

The following table summarizes the final legal maturities of debt investments at ~~August 1, 2020~~July 31, 2021 (in thousands):

Amortized
Cost Estimated
Fair Value
Less than one year $ 70,093 $ 70,404


	Amortized Cost		Estimated Fair Value
Less than one year	$	181,966	$	182,010
Due in 1-2 years	60,887		60,888
	$	242,853	$	242,898

(9) FAIR VALUE MEASUREMENTS

As of the date indicated, the following table summarizes the assets and liabilities that are recorded at fair value on a recurring basis (in thousands):

August 1, 2020
Level 1 Level 2 Level 3 Total
Assets:
Money market funds $ 899,212 $ 0 $ 0 $ 899,212
Bond mutual fund 50,309 0 0 50,309
Deferred compensation plan assets 7,830 0 0 7,830
U.S. government obligations 0 70,404 0 70,404
Foreign currency forward contracts 0 467 0 467
Total assets measured at fair value $ 957,351 $ 70,871 $ 0 $ 1,028,222
Liabilities:
Foreign currency forward contracts $ 0 $ 1,273 $ 0 $ 1,273
Forward starting interest rate swaps 0 31,932 0 31,932
Total liabilities measured at fair value $ 0 $ 33,205 $ 0 $ 33,205

November 2, 2019
Level 1 Level 2 Level 3 Total
Assets:
Money market funds $ 759,114 $ 0 $ 0 $ 759,114
Deferred compensation plan assets 4,974 0 0 4,974
U.S. government obligations 0 119,954 0 119,954
Foreign currency forward contracts 0 1,570 0 1,570
Total assets measured at fair value $ 764,088 $ 121,524 $ 0 $ 885,612
Liabilities:
Foreign currency forward contracts $ 0 $ 35 $ 0 $ 35
Forward starting interest rate swaps 0 21,093 0 21,093
Contingent consideration 0 0 3,705 3,705
Total liabilities measured at fair value $ 0 $ 21,128 $ 3,705 $ 24,833

1716


	July 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	909,976	$	—	$	—	$	909,976
Bond mutual fund	75,398		—		—		75,398
Time deposits	30,029		—		—		30,029
Deferred compensation plan assets	12,380		—		—		12,380
U.S. government obligations	—		242,898		—		242,898

Foreign currency forward contracts	—		8,598		—		8,598

Total assets measured at fair value	$	1,027,783	$	251,496	$	—	$	1,279,279

Liabilities:
Foreign currency forward contracts	$	—	$	3,709	$	—	$	3,709
Forward starting interest rate swaps	—		20,682		—		20,682

Total liabilities measured at fair value	$	—	$	24,391	$	—	$	24,391


	October 31, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	889,293	$	—	$	—	$	889,293
Bond mutual fund	50,361		—		—		50,361
Deferred compensation plan assets	8,213		—		—		8,213
U.S. government obligations	—		232,893		—		232,893

Foreign currency forward contracts	—		82		—		82

Total assets measured at fair value	$	947,867	$	232,975	$	—	$	1,180,842

Liabilities:
Foreign currency forward contracts	$	—	$	681	$	—	$	681

Forward starting interest rate swaps	—		28,513		—		28,513

Total liabilities measured at fair value	$	—	$	29,194	$	—	$	29,194

As of the date indicated, the assets and liabilities above are presented on Ciena’s Condensed Consolidated Balance Sheets as follows (in thousands):


		August 1, 2020															July 31, 2021
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Cash equivalents	Cash equivalents	$	949,521	$	0	$	0	$	949,521	Cash equivalents	$	1,015,403	$	—	$	—	$	1,015,403
Short-term investments	Short-term investments	0		70,404		0		70,404		Short-term investments	—		182,010		—		182,010
Prepaid expenses and other	Prepaid expenses and other	0		467		0		467		Prepaid expenses and other	—		8,598		—		8,598

Long-term investments										Long-term investments	—		60,888		—		60,888
Other long-term assets	Other long-term assets	7,830		0		0		7,830		Other long-term assets	12,380		—		—		12,380
Total assets measured at fair value	Total assets measured at fair value	$	957,351	$	70,871	$	0	$	1,028,222	Total assets measured at fair value	$	1,027,783	$	251,496	$	—	$	1,279,279

Liabilities:	Liabilities:									Liabilities:
Accrued liabilities and other short-term obligations	Accrued liabilities and other short-term obligations	0		1,273		0		1,273		Accrued liabilities and other short-term obligations	$	—	$	3,709	$	—	$	3,709
Other long-term obligations	Other long-term obligations	0		31,932		0		31,932		Other long-term obligations	—		20,682		—		20,682
Total liabilities measured at fair value	Total liabilities measured at fair value	$	0	$	33,205	$	0	$	33,205	Total liabilities measured at fair value	$	—	$	24,391	$	—	$	24,391

November 2, 2019
Level 1 Level 2 Level 3 Total
Assets:
Cash equivalents $ 759,114 $ 0 $ 0 $ 759,114
Short-term investments 0 109,940 0 109,940
Prepaid expenses and other 0 1,570 0 1,570
Long-term investments 0 10,014 0 10,014
Other long-term assets 4,974 0 0 4,974
Total assets measured at fair value $ 764,088 $ 121,524 $ 0 $ 885,612
Liabilities:
Accrued liabilities and other short-term obligations $ 0 $ 35 $ 0 $ 35
Other long-term obligations 0 21,093 3,705 24,798
Total liabilities measured at fair value $ 0 $ 21,128 $ 3,705 $ 24,833


	October 31, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	939,654	$	—	$	—	$	939,654
Short-term investments	—		150,667		—		150,667
Prepaid expenses and other	—		82		—		82

Other long-term assets	8,213		82,226		—		90,439
Total assets measured at fair value	$	947,867	$	232,975	$	—	$	1,180,842

Liabilities:
Accrued liabilities and other short-term obligations	$	—	$	681	$	—	$	681

Other long-term obligations	—		28,513		—		28,513
Total liabilities measured at fair value	$	—	$	29,194	$	—	$	29,194

Ciena did not have any transfers between Level 1 and Level 2 fair value measurements during the periods presented.

As of August 1, 2020, none of Ciena’s existing liabilities were classified as Level 3. As of November 2, 2019, Ciena’s Level 3 liability included $3.7 million in accrued liabilities and other short-term obligations. This reflected a contingent consideration element of a three-year payout arrangement associated with Ciena’s purchase of DonRiver Holdings, LLC (“DonRiver”) in the fourth quarter of fiscal 2018.

(10) INVENTORIES

As of the dates indicated, inventories are comprised of the following (in thousands):

August 1,
2020 November 2,
2019
Raw materials $ 133,642 $ 99,041
Work-in-process 12,615 13,657
Finished goods 215,323 226,622
Deferred cost of goods sold 45,050 53,051
Gross inventories 406,630 392,371
Provision for excess and obsolescence (43,030) (47,322)
Inventories, net $ 363,600 $ 345,049


	July 31, 2021		October 31, 2020
Raw materials	$	139,338	$	119,481
Work-in-process	10,556		13,738
Finished goods	204,580		210,050
Deferred cost of goods sold	53,826		40,747
Gross inventories	408,300		384,016
Provision for excess and obsolescence	(38,130)		(39,637)
Inventories, net	$	370,170	$	344,379

Ciena writes down its inventory for estimated obsolescence or unmarketable inventory by an amount equal to the difference between the cost of inventory and the estimated net realizable value based on assumptions about future demand, which are affected by changes in Ciena’s strategic direction, discontinuance of a product or introduction of newer versions of products, declines in the sales of or forecasted demand for certain products, and general market conditions. During the first nine months of fiscal ~~2020,~~2021, Ciena recorded a provision for excess and obsolescence of ~~$20.2~~$13.5 million, primarily related to a decrease in the forecasted demand for certain Networking Platforms products. Deductions from the provision for excess and obsolete inventory relate primarily to disposal activities.

(11) PREPAID EXPENSES AND OTHER

As of the dates indicated, prepaid expenses and other are comprised of the following (in thousands):

August 1,
2020 November 2,
2019
Contract assets for unbilled accounts receivable $ 97,373 $ 84,046
Prepaid VAT and other taxes 80,672 84,706
Prepaid expenses 69,832 48,680
Product demonstration equipment, net 44,803 38,900
Other non-trade receivables 22,102 28,136
Capitalized contract acquisition costs 9,015 11,677
Deferred deployment expense 671 125
Derivative assets 467 1,570
Restricted cash 0 74
$ 324,935 $ 297,914


	July 31, 2021		October 31, 2020
Contract assets for unbilled accounts receivable, net	$	98,812	$	85,843
Prepaid expenses	75,287		70,647
Prepaid VAT and other taxes	70,735		72,838
Product demonstration equipment, net	35,411		44,793
Other non-trade receivables	17,808		21,981
Capitalized contract acquisition costs	15,067		11,296
Derivative assets	8,598		82
CEWS receivable	1,229		—
Deferred deployment expense	336		604
	$	323,283	$	308,084

Depreciation of product demonstration equipment was $7.6 million during the first nine months of fiscal 2021 and $6.5 million during the first nine months of fiscal ~~2020 and 2019.~~2020.

For further discussion on contract assets and capitalized contract acquisition costs, see Note 3 above.

(12) OTHER BALANCE SHEET DETAILS

As of the dates indicated, accrued liabilities and other short-term obligations are comprised of the following (in thousands):

August 1,
2020 November 2,
2019
Compensation, payroll related tax and benefits⁽¹⁾
$ 94,156 $ 182,363
Warranty 52,166 48,498
Vacation 26,136 22,290
Foreign currency forward contracts 1,273 35
Contingent consideration 0 4,372
Contingent compensation 3,960 0
Finance lease obligations 2,765 2,764
Interest payable 741 1,007
Other 119,833 121,411
$ 301,030 $ 382,740

⁽¹⁾ ~~Reduction is primarily due to the timing of bonus payments to employees under Ciena’s annual cash incentive compensation plan.~~


	July 31, 2021		October 31, 2020
Compensation, payroll related tax and benefits	$	142,713	$	135,462
Warranty	48,139		49,868
Income taxes payable	36,526		6,348
Vacation	30,986		26,945



Finance lease obligations	3,395		2,836

Other	111,532		112,673
	$	373,291	$	334,132

The following table summarizes the activity in Ciena’s accrued warranty for the ~~fiscal~~ periods indicated (in thousands):


		Beginning Balance		Current Period Provisions	Settlements	Ending Balance			Beginning Balance		Current Period Provisions	Settlements	Ending Balance
Nine Months Ended August 3, 2019		$	44,740	15,933	(13,993)	$	46,680
Nine Months Ended August 1, 2020	Nine Months Ended August 1, 2020	$	48,498	19,172	(15,504)	$	52,166	Nine Months Ended August 1, 2020	$	48,498	19,172	(15,504)	$	52,166
Nine Months Ended July 31, 2021								Nine Months Ended July 31, 2021	$	49,868	12,726	(14,455)	$	48,139

As of the dates indicated, deferred revenue is comprised of the following (in thousands):


	July 31, 2021		October 31, 2020
Products	$	13,380	$	17,534
Services	170,519		140,829
	183,899		158,363
Less current portion	(126,179)		(108,700)
Long-term deferred revenue	$	57,720	$	49,663

(13) DERIVATIVE INSTRUMENTS

Foreign Currency Derivatives

Ciena conducts business globally in numerous currencies, and thus is exposed to adverse foreign currency exchange rate changes. To limit this exposure, Ciena enters into foreign currency contracts. Ciena does not enter into such contracts for speculative purposes.

As of ~~August 1,~~July 31, 2021 and October 31, 2020, ~~and November 2, 2019,~~ Ciena had forward contracts to hedge its foreign exchange exposure in order to reduce ~~the~~ variability ~~in its Canadian Dollar- and Indian Rupee-denominated expense, which~~ principally ~~relates~~related to research and development activities. The notional amount of these contracts was approximately ~~$146.6~~$219.1 million and ~~$197.4~~$254.9 million as of ~~August 1,~~July 31, 2021 and October 31, 2020, ~~and November 2, 2019,~~ respectively. These foreign exchange contracts have maturities of 24 months or less and have been designated as cash flow hedges.

As of ~~August 1,~~July 31, 2021 and October 31, 2020, ~~and November 2, 2019,~~ Ciena had forward contracts to hedge its foreign exchange exposure in order to reduce the variability in various currencies of certain balance sheet items. The notional amount of these contracts was approximately ~~$205.1~~$241.8 million and ~~$206.0~~$212.0 million as of ~~August 1,~~July 31, 2021 and October 31, 2020, ~~and November 2, 2019,~~ respectively. These foreign exchange contracts have maturities of 12 months or less and have not been designated as hedges for accounting purposes.

Interest Rate Derivatives

Ciena is exposed to floating rates of LIBOR interest on its term loan borrowings (see Note 16 below) and has hedged such risk by entering into floating to fixed interest rate swap arrangements (“interest rate swaps”). The interest rate swaps fix the LIBOR rate for $350.0 million of the ~~New~~ 2025 Term Loan (as defined in Note 16 below) at 2.957% through September 2023. The total notional amount of interest rate swaps in effect was $350.0 million as of ~~August 1, 2020~~July 31, 2021 and ~~November 2, 2019.~~October 31, 2020.

Ciena expects the variable rate payments to be received under the terms of the interest rate swaps to offset exactly the forecasted variable rate payments on the equivalent notional amounts of the term loan. These derivative contracts have been designated as cash flow hedges.

Other information regarding Ciena’s derivatives is immaterial for separate financial statement presentation. See Note 6 and Note 9 above.

(14) ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table summarizes the changes in accumulated balances of other comprehensive income (“AOCI”), net of tax, for the nine months ended ~~August 1, 2020:~~July 31, 2021 (in thousands):


		Unrealized Gain/(Loss) on												Cumulative			Unrealized Gain (Loss) on						Cumulative
		Available-for-sale Securities		Foreign Currency Forward Contracts		Forward Starting Interest Rate Swaps		Foreign Currency Translation Adjustment		Total			Available-for-sale Securities		Foreign Currency Forward Contracts		Forward Starting Interest Rate Swaps		Foreign Currency Translation Adjustment		Total
Balance at November 2, 2019		$	152	$	925	$	(13,686)	$	(9,475)	$	(22,084)
Balance at October 31, 2020												Balance at October 31, 2020	$	45	$	(219)	$	(21,535)	$	(13,649)	$	(35,358)
Other comprehensive gain (loss) before reclassifications	Other comprehensive gain (loss) before reclassifications	69		(4,515)		(12,507)		(6,321)		(23,274)		Other comprehensive gain (loss) before reclassifications	(28)		13,574		(1,399)		19,439		31,586
Amounts reclassified from AOCI	Amounts reclassified from AOCI	0		2,742		2,427		0		5,169		Amounts reclassified from AOCI	—		(7,907)		7,049		—		(858)
Balance at August 1, 2020		$	221	$	(848)	$	(23,766)	$	(15,796)	$	(40,189)
Balance at July 31, 2021												Balance at July 31, 2021	$	17	$	5,448	$	(15,885)	$	5,790	$	(4,630)

The following table summarizes the changes in AOCI, net of tax, for the nine months ended August ~~3, 2019:~~1, 2020 (in thousands):

Unrealized Gain/(Loss) on Cumulative
Available-for-sale Securities Foreign Currency Forward Contracts Forward Starting Interest Rate Swaps Foreign Currency
Translation Adjustment Total
Balance at November 3, 2018 $ (425) $ (3,060) $ 6,417 $ (8,712) $ (5,780)
Other comprehensive income (loss) before reclassifications 581 (349) (18,370) (1,903) (20,041)
Amounts reclassified from AOCI 0 3,100 (1,043) 0 2,057
Balance at August 3, 2019 $ 156 $ (309) $ (12,996) $ (10,615) $ (23,764)


	Unrealized Gain (Loss) on						Cumulative
	Available-for-sale Securities		Foreign Currency Forward Contracts		Forward Starting Interest Rate Swaps		Foreign Currency Translation Adjustment		Total
Balance at November 2, 2019	$	152	$	925	$	(13,686)	$	(9,475)	$	(22,084)
Other comprehensive loss before reclassifications	69		(4,515)		(12,507)		(6,321)		(23,274)
Amounts reclassified from AOCI	—		2,742		2,427		—		5,169
Balance at August 1, 2020	$	221	$	(848)	$	(23,766)	$	(15,796)	$	(40,189)

All amounts reclassified from AOCI related to settlement (gains) losses on foreign currency forward contracts designated as cash flow hedges impacted research and development expense on the Condensed Consolidated Statements of Operations. All

amounts reclassified from AOCI related to settlement (gains) losses on forward starting interest rate swaps designated as cash flow hedges impacted interest and other income (loss), net, on the Condensed Consolidated Statements of Operations.

(15) LEASES

Ciena leases over ~~1.4~~1.3 million square feet of facilities ~~globally related to the ongoing operations of its business segments and related functions.~~globally. Ciena’s principal executive offices are located in Hanover, Maryland. Ciena’s largest facilities are research and development centers located in Ottawa, Canada and Gurgaon, India. Ciena also has engineering and/or service delivery facilities located in San Jose, California; Alpharetta, Georgia; Quebec, Canada; ~~Austin, Texas;~~ and Pune and Bangalore, India. In addition, Ciena leases various smaller offices in regions throughout the world to support sales and services operations. Office facilities are leased under various non-cancelable operating or finance leases. Ciena's current leases have remaining terms that vary up to 1311 years. Certain leases provide for options to extend up to 10ten years and/or options to terminate within ~~eight~~five years.

~~As discussed in Note 2, the restructuring reserve liability related to Ciena’s subleased space and vacated space for which subleases are being pursued was~~ ~~$11.1 million~~ ~~as of~~ ~~November 2, 2019. Upon Ciena’s adoption of ASC 842 on~~ ~~November 3, 2019~~, the existing Accrued liabilities and other short-term obligations and Other long-term obligations were reclassified as a reduction of the Operating ROU assets recorded in accordance with the updated guidance.

Leases included in the Condensed Consolidated Balance Sheets were as ~~follows:~~follows (in thousands):


	~~Classification~~	~~As of August 1, 2020~~
~~Operating leases:~~
~~Operating ROU Assets~~	~~Operating right-of-use assets~~	$	~~48,573~~
~~Operating lease liabilities~~	~~Operating lease liabilities and Long-term operating lease liabilities~~	~~71,558~~
~~Finance leases:~~
~~Buildings, gross~~	~~Equipment, building, furniture and fixtures, net~~	$	~~70,289~~
~~Less: accumulated depreciation~~	~~Equipment, building, furniture and fixtures, net~~	~~(16,592)~~
~~Buildings, net~~		$	~~53,697~~
~~Finance lease liabilities~~	~~Accrued liabilities and other short-term obligations and other long-term obligations~~	$	~~64,608~~


	Classification	As of July 31, 2021		As of October 31, 2020
Operating leases:
Operating ROU assets	Operating right-of-use assets	$	48,937	$	57,026
Operating lease liabilities	Operating lease liabilities and Long-term operating lease liabilities	70,320		80,450
Finance leases:
Buildings, gross	Equipment, building, furniture and fixtures, net	$	75,616	$	70,791
Less: accumulated depreciation	Equipment, building, furniture and fixtures, net	(22,664)		(17,837)
Buildings, net		$	52,952	$	52,954
Finance lease liabilities	Accrued liabilities and other short-term obligations and other long-term obligations	$	66,530	$	64,401

ROU assets that involve subleased or vacant space aggregate ~~$8.1~~to $4.3 million as of ~~August 1, 2020.~~July 31, 2021. These assets may become impaired if tenants are unable to service their obligations under the sublease, and/or if the estimates as to occupancy are not realized, either of which may be more likely as COVID-19 impacts evolve.

The components of lease expense included in the Condensed Consolidated Statement of Operations were as ~~follows:~~follows (in thousands):


									Quarter Ended				Nine Months Ended
			Quarter Ended		Nine Months Ended				July 31,		August 1,		July 31,		August 1,
		Classification	August 1, 2020					Classification	2021		2020		2021		2020
Operating lease costs	Operating lease costs	Operating expense	$	4,234	$	13,435	Operating lease costs	Operating expense	$	4,085	$	4,234	$	12,516	$	13,435
Finance lease cost:	Finance lease cost:						Finance lease cost:
Amortization of finance ROU asset	Amortization of finance ROU asset	Operating expense	1,097		3,330		Amortization of finance ROU asset	Operating expense	1,224		1,097		3,580		3,330
Interest on finance lease liabilities	Interest on finance lease liabilities	Interest expense	1,162		3,574		Interest on finance lease liabilities	Interest expense	1,243		1,162		3,671		3,574
Total finance lease cost	Total finance lease cost		2,259		6,904		Total finance lease cost		2,467		2,259		7,251		6,904
Non-capitalized lease cost	Non-capitalized lease cost	Operating expense	883		2,211		Non-capitalized lease cost	Operating expense	216		883		842		2,211
Variable lease cost⁽¹⁾	Variable lease cost⁽¹⁾	Operating expense	1,265		3,900		Variable lease cost(1)	Operating expense	1,393		1,265		4,444		3,900

Net lease cost⁽²⁾	Net lease cost⁽²⁾		$	8,641	$	26,450	Net lease cost(2)		$	8,161	$	8,641	$	25,053	$	26,450

⁽¹⁾Variable lease costs include expenses relating to insurance, taxes, maintenance and other costs required by the applicable operating lease. Variable lease costs are determined by whether they are to be included in base rent and if amounts are based on a consumer price index.

⁽²⁾Excludes other operating expense of $2.3 million and $2.2 million for the third quarter of fiscal 2021 and 2020, respectively and $7.2 million and $8.7 million for the ~~quarter and~~ nine months ended July 31, 2021 and August 1, 2020, respectively, related to amortization of leasehold improvements.

Future minimum lease payments and the present value of minimum lease payments related to operating and finance leases as of ~~August 1, 2020~~July 31, 2021 were as ~~follows:~~follows (in thousands):


		Operating Leases		Finance Leases		Total			Operating Leases		Finance Leases		Total
Remaining fiscal 2020		$	5,423	$	7,392	$	12,815
2021		20,382		7,572		27,954
Remaining fiscal 2021								Remaining fiscal 2021	$	5,472	$	8,146	$	13,618
2022	2022	15,692		7,902		23,594		2022	19,862		8,500		28,362
2023	2023	12,332		7,901		20,233		2023	16,087		8,500		24,587
2024	2024	9,927		8,013		17,940		2024	13,768		8,620		22,388
2025								2025	9,437		8,706		18,143
Thereafter	Thereafter	13,193		59,712		72,905		Thereafter	10,272		55,532		65,804
Total lease payments	Total lease payments	76,949		98,492		175,441		Total lease payments	74,898		98,004		172,902
Less: Imputed interest	Less: Imputed interest	(5,391)		(33,884)		(39,275)		Less: Imputed interest	(4,578)		(31,474)		(36,052)
Present value of lease liabilities	Present value of lease liabilities	71,558		64,608		136,166		Present value of lease liabilities	70,320		66,530		136,850
Less: Current portion of present value of minimum lease payments	Less: Current portion of present value of minimum lease payments	(19,417)		(2,765)		(22,182)		Less: Current portion of present value of minimum lease payments	(19,085)		(3,395)		(22,480)
Long-term portion of present value of minimum lease payments	Long-term portion of present value of minimum lease payments	$	52,141	$	61,843	$	113,984	Long-term portion of present value of minimum lease payments	$	51,235	$	63,135	$	114,370

~~As of August 1, 2020, the~~The weighted average remaining lease terms and weighted average discount rates for operating and finance leases were as follows:



~~Weighted-average remaining lease term in years:~~
~~Operating leases~~	~~4.60~~
~~Finance leases~~	~~11.97~~
~~Weighted-average discount rates:~~
~~Operating leases~~	~~3.03~~	%
~~Finance leases~~	~~7.56~~	%

~~As of November 2, 2019, minimum aggregate rentals under operating leases were as follows:~~

2020 2021 2022 2023 2024 Thereafter Total
Operating leases⁽¹⁾
$ 28,776 $ 24,184 $ 16,767 $ 13,393 $ 10,632 $ 26,110 $ 119,862

⁽¹⁾~~The amount for operating lease commitments above include estimated variable expenses relating to insurance, taxes, maintenance and other costs required by the applicable operating lease.~~


	As of July 31, 2021		As of October 31, 2020
Weighted-average remaining lease term in years:
Operating leases	4.35		4.87
Finance leases	10.97		11.71
Weighted-average discount rates:
Operating leases	2.75	%	2.82	%
Finance leases	7.56	%	7.56	%

(16) SHORT-TERM AND LONG-TERM DEBT

~~New~~ 2025 Term Loan

On January 23, 2020, Ciena entered into a Refinancing Amendment to Credit Agreement pursuant to which Ciena refinanced the entire outstanding amount of its then existing senior secured term loan ~~with an outstanding aggregate principal amount of $693.0 million as of January 23, 2020 and maturing on September 28, 2025 (the “Old 2025 Term Loan”)~~ and incurred a new senior secured term loan in an aggregate principal amount of $693.0 million and maturing on September 28, 2025 (the ~~“New 2025~~“2025 Term Loan”).

The net carrying ~~values~~value of Ciena’s term ~~loans were~~loan was comprised of the following for the ~~fiscal~~ periods indicated (in thousands):

August 1, 2020 November 2, 2019
Principal Balance Unamortized Discount Deferred Debt Issuance Costs Net Carrying Value Net Carrying Value
New 2025 Term Loan $ 689,535 $ (1,659) $ (3,090) $ 684,786 $ 0
Old 2025 Term Loan $ 0 $ 0 $ 0 $ 0 $ 687,406


	July 31, 2021								October 31, 2020
	Principal Balance		Unamortized Discount		Deferred Debt Issuance Costs		Net Carrying Value		Net Carrying Value
2025 Term Loan	$	682,605	$	(1,332)	$	(2,488)	$	678,785	$	683,286

Deferred debt issuance costs that were deducted from the carrying amounts of the term ~~loans~~loan totaled ~~$3.1~~$2.5 million as of July 31, 2021 and $2.9 million at ~~August 1, 2020 and $3.6 million at November 2, 2019.~~October 31, 2020. Deferred debt issuance costs are amortized using the straight-line method, which approximates the effect of the effective interest rate, through the maturity of the term ~~loans.~~loan. The amortization of deferred debt issuance costs for ~~these~~this term ~~loans~~loan is included in interest expense, and was $0.5 million during the first nine months of each of fiscal ~~2020~~2021 and fiscal ~~2019.~~2020. The carrying value of the term ~~loans~~loan listed above is also net of any unamortized debt discounts.

As of ~~August 1, 2020,~~July 31, 2021, the estimated fair value of the ~~New~~ 2025 Term Loan was ~~$685.2~~$680.9 million. Ciena’s term loan is categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its term loan using a market approach based on observable inputs, such as current market transactions involving comparable securities.

(17) EARNINGS PER SHARE CALCULATION

The following ~~tables~~table presents the calculation of basic and diluted net income per share (in thousands, except per share amounts) ~~reconcile basic~~:


	Quarter Ended				Nine Months Ended
	July 31,		August 1,		July 31,		August 1,
	2021		2020		2021		2020
Net income	$	238,232	$	142,267	$	396,697	$	296,250
Basic weighted average shares outstanding	155,271		154,184		155,277		154,136
Effect of dilutive potential common shares	1,473		2,134		1,465		1,605
Diluted weighted average shares	156,744		156,318		156,742		155,741
Basic EPS	$	1.53	$	0.92	$	2.55	$	1.92
Diluted EPS	$	1.52	$	0.91	$	2.53	$	1.90
Antidilutive employee share-based awards, excluded	131		13		99		316

Basic net income per common share (“Basic EPS”) ~~and diluted net income per potential common share (“Diluted EPS”). Basic EPS~~ is computed using the weighted average number of common shares outstanding. Diluted ~~EPS~~net income per potential common share (“Diluted EPS”) is computed using the weighted average number of the following, in each case, to the extent the effect is not anti-dilutive: (i) common shares outstanding; (ii) shares issuable upon vesting of stock unit awards; and (iii) shares issuable under Ciena’s employee stock purchase plan and upon exercise of outstanding stock options, using the treasury stock method.

Quarter Ended Nine Months Ended
August 1, August 3, August 1, August 3,
Numerator 2020 2019 2020 2019
Net income used to calculate Basic and Diluted EPS $ 142,267 $ 86,749 $ 296,250 $ 173,103

Quarter Ended Nine Months Ended
August 1, August 3, August 1, August 3,
Denominator 2020 2019 2020 2019
Basic weighted average shares outstanding 154,184 155,488 154,136 156,013
Add: Shares underlying outstanding stock options and stock unit awards and issuable under employee stock purchase plan 2,134 1,967 1,605 1,936
Dilutive weighted average shares outstanding 156,318 157,455 155,741 157,949

Quarter Ended Nine Months Ended
August 1, August 3, August 1, August 3,
EPS 2020 2019 2020 2019
Basic EPS $ 0.92 $ 0.56 $ 1.92 $ 1.11
Diluted EPS $ 0.91 $ 0.55 $ 1.90 $ 1.10

~~The following table summarizes the weighted average shares excluded from the calculation of the denominator for Diluted EPS due to their anti-dilutive effect for the periods indicated (in thousands):~~

Quarter Ended Nine Months Ended
August 1, August 3, August 1, August 3,
2020 2019 2020 2019
Shares underlying stock options and stock unit awards 13 253 316 256
Total shares excluded due to anti-dilutive effect 13 253 316 256

(18) STOCKHOLDERS’ EQUITY

Stock Repurchase Program

On December 13, 2018, Ciena announced that its Board of Directors authorized a program to repurchase up to $500 million of Ciena’s common stock. ~~The program may be modified, suspended, or discontinued at any time. Due to the continued uncertainty surrounding the duration and severity~~After temporarily suspending repurchases of ~~potential macroeconomic impacts of COVID-19, Ciena considered it prudent to temporarily suspend purchases of its~~Ciena’s common stock ~~under~~during fiscal 2020, Ciena reinstituted its stock repurchase program ~~effective as~~in the first quarter of ~~March 17, 2020.~~2021. The ~~reinstatement of the program and the~~ amount and timing of repurchases are subject to a variety of factors including liquidity, cash flow, stock price and general business and market conditions. The program may be modified, suspended, or discontinued at any time.

The following table summarizes activity of the stock repurchase program, reported based on trade date:

Shares Repurchased Weighted-Average Price per Share Amount Repurchased (in thousands)
Cumulative balance at November 2, 2019 3,838,466 $ 39.10 $ 150,076
Repurchase of common stock under the stock repurchase program 1,872,446 39.81 74,535
Cumulative balance at August 1, 2020 5,710,912 $ 39.33 $ 224,611


	Shares Repurchased	Weighted-Average Price per Share		Amount Repurchased (in thousands)
Cumulative balance at October 31, 2020	5,710,912	$	39.33	$	224,611
Repurchase of common stock under the stock repurchase program	1,203,439	54.31		65,356
Cumulative balance at July 31, 2021	6,914,351	$	41.94	$	289,967

The purchase price for the shares of Ciena’s stock repurchased is reflected as a reduction of common stock and additional paid-in capital.

Stock Repurchases Related to Stock Unit Award Tax Withholdings

Ciena repurchases shares of common stock to satisfy employee tax withholding obligations due on vesting of stock unit awards. The purchase price of ~~$26.3~~$36.5 million for the shares of Ciena’s stock repurchased during the first nine months of fiscal ~~2020~~2021 is reflected as a reduction to stockholders’ equity. Ciena is required to allocate the purchase price of the repurchased shares as a reduction of common stock and additional paid-in capital.

(19) SHARE-BASED COMPENSATION EXPENSE

AtAmended and Restated ESPP

Ciena makes shares of its common stock available for purchase under its Amended and Restated Ciena Corporation Employee Stock Purchase Plan (the “ESPP”). Under the ESPP, eligible employees may enroll in a twelve-month offer period that begins in December and June of each year. Each offer period includes 2 six-month purchase periods. Employees may purchase a limited number of shares of Ciena common stock at 85% of the fair market value on either the day immediately preceding the offer date or the purchase date, whichever is lower. The ESPP is considered compensatory for purposes of share-based compensation expense. On January 29, 2021, Ciena’s ~~2020 Annual Meeting~~Board of ~~Stockholders on April 2, 2020, Ciena’s stockholders approved~~Directors adopted an amendment ~~to Ciena's 2017 Omnibus Incentive Plan (the “2017 Plan”)~~and restatement of the ESPP to increase the number of shares available for issuance thereunder by ~~12.2~~8.7 million ~~shares,~~and eliminate the evergreen mechanism thereunder, which became effective ~~as of such date. As of August~~upon its approval by Ciena’s stockholders on April 1, ~~2020,~~2021. Unless earlier terminated, the ~~total number of shares authorized for issuance under the 2017 Plan is 21.1 million and approximately 14.8 million shares remained available for issuance thereunder.~~ESPP will terminate on April 1, 2031.

The following table summarizes share-based compensation expense for the periods indicated (in thousands):


		Quarter Ended						Nine Months Ended							Quarter Ended				Nine Months Ended
		August 1,		August 3,		August 1,		August 3,			July 31,		August 1,		July 31,		August 1,
		2020		2019		2020		2019			2021		2020		2021		2020
Product costs		$	960	$	781	$	2,458	$	2,120
Service costs		1,007		783		2,885		2,460
Product										Product	$	1,037	$	960	$	2,488	$	2,458
Service										Service	1,315		1,007		3,941		2,885
Share-based compensation expense included in cost of goods sold	Share-based compensation expense included in cost of goods sold	1,967		1,564		5,343		4,580		Share-based compensation expense included in cost of goods sold	2,352		1,967		6,429		5,343
Research and development	Research and development	4,286		3,560		12,957		11,034		Research and development	5,541		4,286		16,179		12,957
Sales and marketing	Sales and marketing	5,180		4,192		15,057		12,323		Sales and marketing	6,534		5,180		18,960		15,057
General and administrative	General and administrative	5,940		5,813		17,442		16,416		General and administrative	8,237		5,940		21,338		17,442

Share-based compensation expense included in operating expense	Share-based compensation expense included in operating expense	15,406		13,565		45,456		39,773		Share-based compensation expense included in operating expense	20,312		15,406		56,477		45,456
Share-based compensation expense capitalized in inventory, net	Share-based compensation expense capitalized in inventory, net	(114)		(45)		39		93		Share-based compensation expense capitalized in inventory, net	(193)		(114)		64		39
Total share-based compensation	Total share-based compensation	$	17,259	$	15,084	$	50,838	$	44,446	Total share-based compensation	$	22,471	$	17,259	$	62,970	$	50,838

As of ~~August 1, 2020,~~July 31, 2021, total unrecognized share-based compensation expense was approximately ~~$125.6~~$160.6 million, which relates to unvested stock unit awards and is expected to be recognized over a weighted-average period of ~~1.54~~1.58 years.

(20) SEGMENTS AND ENTITY-WIDE DISCLOSURES

Segment Reporting

Ciena has the following operating segments for reporting purposes: (i) Networking Platforms; (ii) Platform Software and Services; (iii) Blue Planet Automation Software and Services; and (iv) Global Services. During fiscal 2019, Ciena separated its previous Software and Software-Related Services segment into 2 stand-alone operating segments. Because Ciena previously disclosed its Platform Software and Services and Blue Planet Automation Software and Services as distinct product lines in its presentation of segment revenue for Software and Software-Related Services, there is no significant change to the presentation of segment revenues as a result of this separation. Comparative periods have been retrospectively adjusted to disclose segment profit for Platform Software and Services and Blue Planet Automation Software and Services. See Note 3 to Ciena’s Condensed Consolidated Financial Statements.

Ciena's long-lived assets, including equipment, building, furniture and fixtures, ROU assets, finite-lived intangible assets and maintenance spares, are not reviewed by Ciena's chief operating decision maker for purposes of evaluating performance and allocating resources. As of ~~August 1, 2020,~~July 31, 2021, equipment, building, furniture and fixtures, net, totaled ~~$267.0~~$288.9 million, and operating ROU assets totaled ~~$48.6~~$48.9 million both of which support asset groups within Ciena’s 4 operating segments and unallocated selling and general and administrative activities. As of ~~August 1, 2020,~~July 31, 2021, finite-lived intangible assets, goodwill and maintenance spares are assigned to asset groups within the following segments (in thousands):


		August 1, 2020
		Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total			Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total

Other intangible assets, net	Other intangible assets, net	$	13,230	$	0	$	92,952	$	0	$	106,182	Other intangible assets, net	$	9,865	$	—	$	64,109	$	—	$	73,974
Goodwill	Goodwill	$	65,532	$	156,191	$	89,049	$	0	$	310,772	Goodwill	$	66,329	$	156,191	$	89,049	$	—	$	311,569
Maintenance spares, net	Maintenance spares, net	$	0	$	0	$	0	$	62,491	$	62,491	Maintenance spares, net	$	—	$	—	$	—	$	61,048	$	61,048

~~Segment Revenue~~

~~The table below sets forth Ciena’s segment revenue for the respective periods (in thousands):~~

Quarter Ended Nine Months Ended
August 1, August 3, August 1, August 3,
2020 2019 2020 2019
Revenue:
Networking Platforms
Converged Packet Optical $ 722,512 $ 724,245 $ 1,968,355 $ 1,897,080
Packet Networking 79,756 71,823 211,432 216,529
Total Networking Platforms 802,268 796,068 2,179,787 2,113,609
Platform Software and Services 46,422 37,312 143,295 114,139
Blue Planet Automation Software and Services 11,297 10,530 41,779 37,977
Global Services
Maintenance Support and Training 69,099 65,936 202,370 196,002
Installation and Deployment 39,798 39,802 108,994 111,746
Consulting and Network Design 7,828 10,958 27,452 30,671
Total Global Services 116,725 116,696 338,816 338,419
Consolidated revenue $ 976,712 $ 960,606 $ 2,703,677 $ 2,604,144

Segment Profit (Loss)

Segment profit (loss) is determined based on internal performance measures used by Ciena’s chief executive officer to assess the performance of each operating segment in a given period. In connection with that assessment, the chief executive

officer excludes the following items: selling and marketing costs; general and administrative costs; ~~amortization of intangible assets;~~ significant asset impairments and restructuring costs; amortization of intangible assets; acquisition and integration costs (recoveries); interest and other income (loss), net; interest expense; loss on extinguishment and modification of debt and provision (benefit) for income taxes.

The table below sets forth Ciena’s segment profit (loss) and the reconciliation to consolidated net income ~~during~~for the ~~respective~~ periods indicated (in thousands):


		Quarter Ended						Nine Months Ended							Quarter Ended				Nine Months Ended
		August 1,		August 3,		August 1,		August 3,			July 31,		August 1,		July 31,		August 1,
		2020		2019		2020		2019			2021		2020		2021		2020
Segment profit (loss):	Segment profit (loss):									Segment profit (loss):
Networking Platforms	Networking Platforms	$	262,801	$	230,610	$	642,057	$	542,391	Networking Platforms	$	244,535	$	262,801	$	612,378	$	642,057
Platform Software and Services	Platform Software and Services	24,299		14,251		74,918		47,192		Platform Software and Services	31,526		24,299		95,692		74,918
Blue Planet Automation Software and Services	Blue Planet Automation Software and Services	(5,316)		(8,222)		(12,828)		(16,210)		Blue Planet Automation Software and Services	(3,243)		(5,316)		11		(12,828)
Global Services	Global Services	52,676		47,833		151,744		142,515		Global Services	55,507		52,676		147,567		151,744
Total segment profit	Total segment profit	334,460		284,472		855,891		715,888		Total segment profit	328,325		334,460		855,648		855,891
Less: Non-performance operating expenses	Less: Non-performance operating expenses									Less: Non-performance operating expenses
Selling and marketing	Selling and marketing	94,763		104,230		303,043		305,845		Selling and marketing	114,924		94,763		322,589		303,043
General and administrative	General and administrative	41,635		42,695		126,133		124,092		General and administrative	48,863		41,635		132,491		126,133
Significant asset impairments and restructuring costs										Significant asset impairments and restructuring costs	9,789		6,515		23,865		14,798
Amortization of intangible assets	Amortization of intangible assets	5,840		5,529		17,532		16,586		Amortization of intangible assets	5,967		5,840		17,896		17,532
Significant asset impairments and restructuring costs		6,515		5,355		14,798		11,696
Acquisition and integration costs (recoveries)	Acquisition and integration costs (recoveries)	(2,329)		1,362		904		4,105		Acquisition and integration costs (recoveries)	259		(2,329)		860		904

Add: Other non-performance financial items	Add: Other non-performance financial items									Add: Other non-performance financial items
Interest expense and other income, net		(7,019)		(8,354)		(22,713)		(23,257)
Interest expense and other income (loss), net										Interest expense and other income (loss), net	(6,981)		(7,019)		(24,521)		(22,713)
Loss on extinguishment and modification of debt	Loss on extinguishment and modification of debt	0		0		(646)		0		Loss on extinguishment and modification of debt	—		—		—		(646)
Less: Provision for income taxes		38,750		30,198		73,872		57,204
Less: Provision (benefit) for income taxes										Less: Provision (benefit) for income taxes	(96,690)		38,750		(63,271)		73,872
Consolidated net income	Consolidated net income	$	142,267	$	86,749	$	296,250	$	173,103	Consolidated net income	$	238,232	$	142,267	$	396,697	$	296,250

Entity-Wide Reporting

Ciena’s operating segments each engage in business across 3 geographic regions: Americas; EMEA; and APAC. Americas include activities in North America and South America (previously, CALA). The following table reflects Ciena’s geographic distribution of revenue principally based on the relevant location for Ciena’s delivery of products and performance of services. For the periods below, Ciena’s geographic distribution of revenue was as follows (in thousands):

Quarter Ended Nine Months Ended
August 1, August 3, August 1, August 3,
2020 2019 2020 2019
Americas 713,340 656,261 1,937,725 1,788,234
EMEA 162,465 169,532 433,861 413,715
APAC 100,907 134,813 332,091 402,195
Total $ 976,712 $ 960,606 $ 2,703,677 $ 2,604,144

Ciena’s revenue includes $647.0 million and $592.2 million of United States revenue for the third quarter of fiscal 2020 and 2019, respectively. For the nine months ended August 1, 2020 and August 3, 2019, United States revenue was $1.8 billion and $1.6 billion, respectively. No other country accounted for 10% or more of total revenue for the periods presented above.

The following table reflects Ciena’s geographic distribution of equipment, building, furniture and fixtures, net, and operating ROU assets, with any country accounting for at least 10% of total equipment, building, furniture and fixtures, net, and operating ROU assets specifically identified. Equipment, building, furniture and fixtures, net, and operating ROU assets

attributable to geographic regions outside of the U.S. and Canada are reflected as “Other International.” For the periods below, Ciena’s geographic distribution of equipment, building, furniture and fixtures, net, and operating ROU assets was as follows (in thousands):

August 1,
2020 November 2,
2019
Canada $ 209,679 $ 211,901
United States 62,748 58,119
Other International 43,142 16,864
Total $ 315,569 $ 286,884

~~For the periods below, the only customers that accounted for at least 10% of Ciena’s revenue were as follows (in thousands):~~

Quarter Ended Nine Months Ended
August 1, August 3, August 1, August 3,
2020 2019 2020 2019
AT&T $ 114,963 n/a $ 304,645 $ 297,049
Verizon n/a 118,875 272,200 314,000
Web-scale provider n/a 123,253 n/a 298,106
Total $ 114,963 $ 242,128 $ 576,845 $ 909,155


~~n/a~~			~~Denotes revenue representing less than 10% of total revenue for the period~~

The Web-scale provider noted above contributed greater than 10% of total revenue for the first time in fiscal 2019 and purchased products from each of Ciena’s operating segments excluding Blue Planet Automation Software and Services. The other customers identified above purchased products and services from each of Ciena’s operating segments.


	July 31, 2021		October 31, 2020
Canada	$	242,495	$	214,188
United States	54,050		65,321
Other International	41,329		49,894
Total	$	337,874	$	329,403

(21) COMMITMENTS AND CONTINGENCIES

Canadian Grant

During fiscal 2018, Ciena entered into agreements related to the Evolution of Networking Services through a Corridor in Quebec and Ontario for Research and Innovation (“ENCQOR”) project with the Canadian federal government, the government of the province of Ontario and the government of the province of Quebec to develop a 5G technology corridor between Quebec and Ontario to promote research and development, small business enterprises and entrepreneurs in Canada. Under these agreements, Ciena can receive up to an aggregate CAD$57.6 million (approximately ~~$42.9~~$46.2 million) in reimbursement from the 3 Canadian government entities for eligible costs over a period commencing on February 20, 2017 and ending on March 31,

2022. Ciena anticipates receiving recurring disbursements over this period. Amounts received under the agreements are subject to recoupment in the event that Ciena fails to achieve certain minimum investment, employment and project milestones. As of ~~August 1, 2020,~~July 31, 2021, Ciena has recorded CAD$~~37.0~~48.6 million (approximately ~~$27.6~~$39.0 million) in cumulative benefits as a reduction in research and development expense of which CAD$~~8.1~~8.0 million ($~~6.0~~6.3 million) was recorded in the first nine months of fiscal ~~2020.~~2021. As of ~~August 1, 2020,~~July 31, 2021, amounts receivable from this grant were CAD$~~7.0~~5.8 million ($~~5.2~~4.7 million).

Tax Contingencies

Ciena is subject to various tax liabilities arising in the ordinary course of business. Ciena does not expect that the ultimate settlement of these tax liabilities will have a material effect on its results of operations, financial position or cash flows.

Litigation

Ciena is subject to various legal proceedings, claims and other matters arising in the ordinary course of business, including those that relate to employment, commercial, tax and other regulatory matters. Ciena is also subject to intellectual property related claims, including claims against third parties that may involve contractual indemnification obligations on the part of Ciena. Ciena does not expect that the ultimate costs to resolve such matters will have a material effect on its results of operations, financial position or cash flows.

(22) SUBSEQUENT EVENTS

Stock Repurchase Program

From the end of the third quarter of fiscal 2021 through September 3, 2021, Ciena repurchased an additional 176,815 shares of its common stock, for an aggregate purchase price of $10.0 million at an average price of $56.57 per share, inclusive of repurchases pending settlement. As of September 3, 2021, Ciena has repurchased an aggregate of 7,091,166 shares and has an aggregate of $200.0 million of authorized funds remaining under its stock repurchase program.

Vyatta Routing and Switching Technology Acquisition

On August 31, 2021, Ciena entered into a definitive agreement with AT&T to acquire its Vyatta virtual routing and switching technology. The acquisition reflects Ciena’s continued investment in its Routing and Switching solutions roadmap and resources. Ciena plans to integrate the engineering personnel to be hired through this transaction into its Routing and Switching research and development (R&D) organization.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

This report contains statements that discuss future events or expectations, projections of results of operations or financial condition, changes in the markets for our products and services, trends in our business, business prospects and strategies and other “forward-looking” information. Forward-looking statements may appear throughout this report, including in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.” In some cases, you can identify “forward-looking statements” by words like “may,” “will,” “can,” “should,” “could,” “expects,” “future,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential,” “projects,” “targets,” or “continue” or the negative of those words and other comparable words. ~~These~~You should be aware that the forward-looking statements may relate to, among other things: our competitive landscape; market conditions and growth opportunities; factors impacting our industry and markets; factors impacting the businesses of our customers and their network architectures; adoption of next-generation network technology and software programmability and automation of networks; our strategy, including our research and development, supply chain and go-to-market initiatives; efforts to increase application of our solutionscontained in customer networks and to increase the reach of our business into new or growing customer and geographic markets; our backlog and seasonality in our business; expectations for our financial results, revenue, gross margin, operating expense and key operating measures in future periods; the adequacy of our sources of liquidity to satisfy our working capital needs, capital expenditures, and other liquidity requirements; business initiatives including information technology (IT) transitions or initiatives; the impact of the Tax Cuts and Jobs Act and changes in our effective tax rates; market risks associated with financial instruments and foreign currency exchange rates; and future responses to and effects of the COVID-19 pandemicthis report are based on our ~~business, operations, liquidity~~current views and ~~financial results. These statements~~assumptions, and are subject to known and unknown risks, uncertainties and other factors ~~and~~that may cause actual events or results ~~may~~to differ ~~materially due to factors such as:~~

•~~our ability to execute our business and growth strategies;~~

•~~fluctuations in our revenue, gross margin and operating results and our financial results generally;~~

•the loss of our customers, including the loss of a single large customer, a significant reduction in one or more customers’ spending, or a material change in their networking or procurement strategies;

•the duration and severity of the COVID-19 pandemic and the impact of countermeasures taken to mitigate its spread on macroeconomic conditions, economic activity, demand for our technology solutions, short- and long-term changes in customer or end user needs, continuity of supply chain, our ability to attract and retain personnel, our business operations, liquidity and financial results;

•~~the competitive environment in which we operate;~~

•~~market acceptance of products and services currently under development and delays in product or software development;~~

•~~lengthy sales cycles and onerous contract terms with communications service providers, Web-scale providers and other large customers;~~

•~~product performance or security problems and undetected errors;~~

•~~our ability to continue to diversify our customer base beyond our traditional customers and to broaden the application for our solutions in communications networks;~~

•~~the level of growth in network traffic and bandwidth consumption and the corresponding level of investment in network infrastructures by network operators;~~

•~~the international scale of our operations;~~

•~~fluctuations in currency exchange rates;~~

•~~our ability to forecast accurately demand for our products for purposes of inventory purchase practices;~~

•~~the impact of pricing pressure and price compression that we regularly encounter in our markets;~~

•~~our ability to enforce our intellectual property rights, and costs we may incur in connection with any disputes over intellectual property rights;~~

•~~the continued availability, on commercially reasonable terms, of software and other technology under third-party licenses;~~

•~~the potential failure to maintain the security of confidential, proprietary or otherwise sensitive business information or systems or to protect against cyber attacks;~~

•~~the performance of our third-party contract manufacturers;~~

•~~changes or disruption in components or supplies provided by third parties, including sole and limited source suppliers;~~

•~~our ability to manage effectively our relationships with third-party service partners and distributors;~~

•~~unanticipated risks and additional obligations in connection with our resale of complementary products or technology of other companies;~~

•~~our ability to grow and to maintain our new distribution relationships under which we will make available certain technology as a component;~~

•~~our exposure to the credit risks of our customers and our ability to collect receivables;~~

•~~modification or disruption of our internal business processes and information systems;~~

•~~the effect of our outstanding indebtedness on our liquidity and business;~~

•~~fluctuations in our stock price and our ability to access the capital markets to raise capital;~~

•~~unanticipated expenses or disruptions to our operations caused by facilities transitions or restructuring activities;~~

•~~our ability to attract and retain experienced and qualified personnel;~~

•~~disruptions to our operations caused by strategic acquisitions and investments or the inability to achieve the expected benefits and synergies of newly-acquired businesses;~~

•~~our ability to commercialize and to grow our software business and address networking strategies including software-defined networking and network function virtualization;~~

•changes in, and the impact of, government regulations, including with respect to: the communications industry generally; the business of our customers; the use, import or export of products; and the environment, potential climate change, and other social initiatives;

•the impact of the Tax Cuts and Jobs Act, future legislation or executive action in the U.S. relating to tax policy, changes in tax regulations and related accounting, and changes in our effective tax rates;

•future legislation or executive action in the U.S. or foreign countries relating to trade regulations, including the imposition of tariffs and duties or efforts to withdraw from or materially modify international trade agreements;

•~~factors beyond our control such as natural disasters, acts of war or terrorism, and public health emergencies, including the COVID-19 pandemic;~~

•~~the write-down of goodwill, long-lived assets, or our deferred tax assets;~~

•~~our ability to maintain effective internal controls over financial reporting and liabilities that result from the inability to comply with corporate governance requirements; and~~

•~~adverse results in litigation matters.~~materially.

~~These are only some of the factors that may affect the forward-looking statements contained in this report.~~ For a discussion identifying ~~additional~~some of the important factors that could cause actual results to vary materially from those anticipated in the forward-looking statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in this report. For a more complete understanding of the risks associated with an investment in our securities, you should review these factors and the rest of this report in combination with the more detailed description of our business and management’s discussion and analysis of financial condition and risk factors described in our annual report onForm 10-K for fiscal ~~2019,~~2020, which we filed with the SEC on December ~~20, 2019 (the “2019~~18, 2020 (our “2020 Annual Report”). However, we operate in a very competitive and rapidly changing environment and new risks and uncertainties emerge, are identified or become apparent from time to time. We cannot predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this ~~report. You should be aware that the forward-looking statements contained in this~~ report, ~~are based on our current views~~ and ~~assumptions. We~~we undertake no obligation to revise or to update any forward-looking statements made in this report to reflect events or circumstances after the date hereof or to reflect new information or the

occurrence of unanticipated events, except as required by law. The forward-looking statements in this report are intended to be subject to protection afforded by the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Unless the context requires otherwise, references in this report to “Ciena,” the “Company,” “we,” “us” and “our” refer to Ciena Corporation and its consolidated subsidiaries.

Overview

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our Condensed Consolidated Financial Statements and the accompanying notes thereto included in Item 1 of Part I of this report and our 2020 Annual Report.

We are a networking systems, services and software company, providing solutions that enable a wide range of network operators to deploy and manage next-generation networks that deliver services to businesses and consumers. We provide hardware, software and services that ~~support~~enable the transport, routing, switching, aggregation, service delivery and management of video, data and voice traffic on communications networks. Our solutions are used by communications service providers, cable and multiservice operators, Web-scale providers, submarine network operators, governments, enterprises, research and education institutions and other emerging network operators.

~~Our solutions~~ include ~~our portfolio of~~ Networking Platforms, including our Converged Packet Optical and ~~Packet Networking products, that~~Routing and Switching portfolios, which can be applied from the network core to ~~end user~~end-user access points, and ~~that~~which allow network operators to scale capacity, increase transmission speeds, allocate traffic and adapt dynamically to changing end-user service demands. WeTo complement these solutions, we offer Platform Software, ~~that~~which provides management, ~~and~~ domain control ~~of our hardware solutions~~ and ~~automates~~specialized applications that automate network lifecycle operations, including provisioning equipment and ~~services. Through our Blue Planet~~^® ~~Automation Software, we enable network providers to use~~services, network data, analytics and policy-based assurance to achieve closed loop automation across multi-vendor and multi-domain network ~~environments, streamlining key~~environments. Through our Blue Planet® Software suite, we enable customers to transform their business and operations support systems through software-based automation of their network ~~processes.~~and IT infrastructures. To complement our hardware and software products, we offer a broad range of services that help our customers build, operate and improve their networks and associated operational ~~environments.~~

~~We refer to our complete portfolio vision as the Adaptive Network™. The Adaptive Network emphasizes a programmable~~environments, including network ~~infrastructure, software control~~optimization and automation capabilities, and network analytics and intelligence. By transforming network infrastructures into a dynamic, programmable environment driven by automation and analytics, network operators can realize greater business agility, dynamically adapt to changing end user service demands and rapidly introduce new revenue-generating services. They can also gain valuable real-time network insights, allowing them to optimize network operation and maximize the return on their network infrastructure investment.migration offerings.

Impact of the COVID-19 Pandemic

COVID-19 was declared a pandemic in March 2020 and continues to have a significant impact on the global economy, the industries and customers we serve and our operations. In response to the COVID-19 pandemic, we have prioritized the safety of our employees and business partners, while continuing to support the needs of our customers and communities during this unprecedented period.

~~Employees.~~ We have implemented travel bans and restrictions, temporarily closed offices, and have required that the vast majority of our employees globally work from home on a regular basis. Given our long-standing practice of flexible working arrangements, our distributed workforce is accustomed to the digital platforms and virtual collaboration tools we use to maintain productivity and to remain in contact with one another and our business partners. For the small number of employees who need to be in offices, laboratory environments or at business partner sites to perform their roles, we are taking appropriate precautions to protect their health and safety. We have adopted new employee benefits and wellbeing initiatives to support our employees, including initiatives for those who are now working remotely. We also continue to hire and on-board new employees while operating primarily in a remote environment. We are proud of the way in which our employees have continued to productively execute on our innovation roadmap and operating goals, including achieving the commercial availability of our fifth-generation WaveLogic coherent modem technology. However, sustained limitations on the ability of our research and development employees to work in our facilities, including in Canada, India and the United States, as a result of restrictions imposed by governments, or us, could make it more difficult for them to collaborate as effectively, particularly in the development of new solutions.

~~Business & Operations~~. We have implemented business continuity plans designed to minimize potential business disruption from the COVID-19 pandemic and to protect our supply chain and customer fulfillment and support operations.

Demand for Products & Services. ~~During the second quarter of fiscal 2020, we experienced higher than typical orders~~The demand environment for our products and services remains dynamic and continues to be impacted by the effects of the COVID-19 pandemic. For example, we experienced a constrained spending environment during the second half of fiscal 2020 and the first quarter of fiscal 2021 that adversely impacted our revenue during that period. During the second and third quarters of fiscal 2021, we experienced significantly stronger order volumes for our products and services, particularly among a concentrated set of larger customers with ~~whom~~which we ~~had~~have existing positions as a supplier. ~~At that time, we believed that~~This improved demand environment and growth in order volumes contributed to our increased revenue in the third quarter of fiscal 2021 compared to the second quarter of fiscal 2021. We believe some portion of these orders ~~likely reflected~~reflects certain short-term customer purchasing behaviors, ~~based on customer-specific considerations~~including network operators addressing capacity and network requirements following a period of constrained spending in the face of the pandemic, including: customer concerns about future continued availability of supply; implementation of customer business continuity actions; our desire for increased visibility into expected demand; customer consumption of their existing inventory or spare equipment; additional network capacity requirements;previous quarters, and possible acceleration of ~~capital spending; and, possibly, increased bandwidth demands being placed on networks~~future orders due to the ~~pandemic. During the third quarter~~implementation of ~~fiscal 2020, our order volumes declined significantly from the previous quarter, particularly within our communications service provider and cable operator customers, in the face~~security of continued economic uncertainty stemming from COVID-19. With respect to these customer segments in particular, we believe that this greater capital expenditure restraint stems from the deferral or re-prioritization of certain new network initiatives and continued uncertainty associated with the impact of the pandemic and economic uncertainty upon their enterprise business segments. As a result, our quarterly order volumes were meaningfully below revenue during the third quarter of fiscal 2020, challenging our visibility and the outlooksupply strategies amidst global supply constraints for our orders and revenue in future periods. In the near-term, we expect this more cautious spending environment to continue into the fourth quarter of fiscal 2020 and, likely, periods thereafter in fiscal 2021. We expect these conditions to continue to adversely affect our order volumes and to adversely impact revenue in the short term, with revenue for our fourth fiscal quarter expected to decline meaningfully on a sequential and year-over-year basis.semiconductor components. Over the longer term, we continue to believe that the ~~unique and~~ increased demands placed on network infrastructures as a result of ~~the~~the COVID-19 pandemic, and the related increase in remote working worldwide, have accelerated certain trends, including cloud network adoption, networking resilience and flexibility, and enhanced network automation. ~~We believe that we are well positioned competitively to capitalize on the opportunities that we expect to be presented by these dynamics.~~

~~Supply Chain~~. We rely on third-party manufacturing operations in Mexico, Thailand, the United States and Canada. We also rely on a global component supply network involving many vendors and countries throughout the world. During the second quarter of fiscal 2020, some of our component suppliers – particularly those with facilities in China and Malaysia – experienced challenges related to COVID-19 that resulted in temporary closures or reductions of supply capacity. Although in many cases we were able to overcome these conditions through execution of our

mitigation planning, supply chain disruptions negatively impacted our revenue for the second quarter of fiscal 2020. During the third quarter of fiscal 2020, we took a number of steps, some of which remain ongoing, including multi-sourcing and pre-ordering components and finished goods inventory, in an effort to reduce the impact of the adverse supply chain conditions that we experienced. As a result of these actions, and generally improved conditions with our suppliers or the geographies in which they operate, supply chain related challenges to our operations abated in the third quarter of fiscal 2020 and were not material to revenue. However, there can be no assurance that supply chain disruptions related to COVID-19 will not continue, or worsen, in the future.

Services and Customer Fulfillment. We ~~have experienced~~continue to experience some disruption in our ability to provide installation, professional and fulfillment services to customers due to site readiness and access limitations, limited customer availability, project delays or re-prioritization by customers, and travel bans or restrictions on movement or ~~gatherings, which adversely impacted revenue, particularly in the second quarter of fiscal 2020. These conditions~~gatherings. We have also ~~made it more challenging to execute~~experienced some disruption and ~~adversely impacted the timing of customer plans to operationalize newer projects~~delays in our supply chain operations and ~~recent customer design wins, primarily in international markets.~~logistics, including shipping delays and higher transport costs. We expect these conditions to persist in the ~~short-term,~~short term and, as a result, to continue to adversely ~~impacting~~impact our revenue and results of operations. We continue to take steps and work with customers to ensure their business needs are supported, while protecting the health and safety of our employees, customers and business partners. However, should restrictions or disruptions of transportation persist or worsen, such as through reduced availability of air transport, port closures, or increased border controls or closures, our business, operations and ability to meet customer demand could be materially adversely affected.

Sales & Marketing. The competitive nature of our business depends on our ability to conduct sales and marketing activities with our customers. For instance, in the past few years, our ability to be first to market with leading networking solutions, and to conduct sales and marketing activities around these new technology offerings, has had a significant impact on our revenue and growth. In the first half of fiscal 2020, we were the first to market with 800 gigabit technology with our fifth-generation WaveLogic^® ~~coherent modem technology.~~ Restrictions on travel due to COVID-19 and limitations on interactions with customers, such as field and lab trials, have continued to negatively ~~impacted~~impact our ability to carry out certain sales and marketing activities, including our ability to secure new customers, to qualify and sell new products, and to grow sales with customers. This is particularly the case where we do not have longer-standing supply relationships, such as within international markets and for our Blue Planet Automation Software & Services segment and our Packet Networking product line.

~~Market Conditions.~~ ~~As a result of continued economic uncertainty stemming from the pandemic, during the third quarter of fiscal 2020 we experienced a significant reduction~~Delays in our order volumes, as compared to our revenue, and a reduction in our short-term outlook for our orders and revenue. We believe that ongoing concerns relating to the pandemic, and its impact on the enterprise business segments of our communications service provider and cable operator customers continue to adversely impact the velocity of business in general, with a particular impact on customer willingness and ability to initiate new network projects. For example, our service provider customers rely in part upon the sale of services to consumers and enterprises, including those in the retail, entertainment, and travel industries, which have been acutely impacted by the negative economic effects of the COVID-19 pandemic. Similarly, certain of our Web-scale customers have business models that heavily rely upon advertising revenue from enterprises, including those in industries acutely affected by the COVID-19 pandemic. We believe customers are exercising greater restraint in networking projects, including data centers, and are also more carefully prioritizing where and when to add network capacity. Delays in operationalizing new network projects that we anticipated occurring on their original timelines ~~have also~~continue to adversely ~~affected~~affect our ~~expectations for revenue in the future.~~revenue. Conversely, our recent gross margin performance has benefited from these dynamics, with a larger percentage of our revenue comprised of existing business, as compared to new design wins and early in life projects, which tend to have lower margins. As a result of these dynamics, we expect the growth rates in our addressable markets to slow and the overall market growth to be flat to down in 2020 as compared to 2019, which we expect to adversely impact our revenue in the near term. We expect these market dynamics, including constrained customer spending and the decreased velocity of new business execution, to persist through the fourth quarter of fiscal 2020 and, likely, periods thereafter in fiscal 2021.

~~Liquidity & Balance Sheet.~~Canada Emergency Wage Subsidy (“CEWS”). AsIn April 2020, the government of Canada introduced the ~~end~~CEWS program to help employers offset a portion of their employee wages for a limited period in response to the COVID-19 outbreak, retroactive to March 15, 2020. Amounts from the CEWS program positively impacted our operating expense and measures of profit in the quarter and nine months ended July 31, 2021. For the third quarter of fiscal ~~2020,~~2021, we had $1.2 billion in cash and short-term investments. We believe our strong liquidity and balance sheet position is an important competitive differentiator at this time. It enables us to continue to invest in innovation, ensure a strong inventory position to support customers and provide for working capital needs. We regularly evaluate our liquidity position, debt obligations, and anticipated cash needs to fund our operating or investment plans, and may consider capital raising and other market opportunities that may be available to us. In lightrecorded CEWS benefits of the uncertainty surrounding the duration and severity of potential macroeconomic impacts of COVID-19, on March 17, 2020 we temporarily suspended purchases of our common stock under our stock repurchase program and have reallocated our investments principally to U.S. government-backed funds.

~~Community~~. Our global workforce has undertaken a range of volunteering and charitable actions to support our neighbors, communities and front-line health care workers during this challenging time. We have enhanced by three times our

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~~corporate charitable matching~~CAD$1.1 million ($0.8 million), net of certain fees. For the nine months ended July 31, 2021, we recorded CEWS benefits of CAD$52.2 million ($41.3 million), net of certain fees, related to claim periods beginning March 15, 2020, including CAD$43.9 million ($35.2 million) related to employee wages from fiscal 2020. The CEWS program ~~for employee donations~~is of a limited duration. We do not anticipate a similar proportionate impact on our financial results in future periods and ~~volunteering, and our employees have volunteered their time~~may not receive any benefits from the CEWS program in ~~important ways during this crisis. For example, we have donated personal protective equipment and have been 3-D printing and designing face shields and components for health care workers.~~the future.

The COVID-19 pandemic and ~~resulting~~ countermeasures taken to contain its spread have caused economic and financial disruptions globally. We continue to monitor the situation and actively assess further implications to our business, supply chain, fulfillment operations and customer demand. However, the COVID-19 situation remains ~~dynamic,~~dynamic. Variants continue to emerge and the duration and severity of ~~its~~the impact of COVID-19 on our business and results of operations in future periods remains uncertain. If the COVID-19 pandemic or its adverse effects become more severe or prevalent or are prolonged in the locations where we, our customers, suppliers or manufacturers conduct business, or we experience more pronounced disruptions in our business or operations, or in economic activity and demand for our products and services generally, our business and results of operations in future periods could be materially adversely affected.

~~Investment~~Supply Chain Constraints

Due to increased demand across a range of industries, the global supply market for certain raw materials and components, including in ~~Adaptive Network Offerings~~particular the semiconductor components used in most of our products, has experienced significant strain in recent periods. These conditions, which worsened during our third quarter of fiscal 2021, have been exacerbated in part by the COVID-19 pandemic. As a result, we have experienced ongoing component shortages, longer lead times and ~~5G Innovation~~

Weincreased cost of components. In turn, these conditions have ~~continued~~impacted the lead times for our products, and could adversely impact our ability to ~~use~~meet customer demand where we cannot timely secure supply of these components. In response, we have implemented mitigation strategies and increased our ~~significant research~~purchases of inventory for certain components. In some cases, we have incurred higher costs to secure available inventory, or have extended our purchase commitments or placed non-cancellable orders with suppliers, which introduces inventory risk if our forecasts and ~~development investment capacity~~assumptions are inaccurate. Despite our attempts to ~~push~~mitigate the ~~pace~~impact on our business, these constrained supply conditions are expected to adversely impact our costs of ~~innovation~~goods sold, including our ability to continue to reduce the cost to produce our products in a manner consistent with prior periods. In addition, some of our suppliers have indicated that, as a result of current constraints, they intend to cease manufacturing of certain components used in our ~~markets~~products. These dynamics and ~~provide offerings that promote~~ our ~~Adaptive Network vision~~resulting mitigating actions may result in increased materials costs or use of cash, and could adversely impact our growth, gross margin and results of operations. We believe these supply chain challenges and their adverse impact on our business will persist at least through the first half of fiscal 2022. See “Risk Factors” in Item 1A of Part II of this report and Item 1A of Part I of our 2020 Annual Report for further ~~advances~~discussion of risks related to our supply chain.

Supply Chain and Distribution Structure; Recognition of Deferred Tax Asset in ~~programmable hardware, analytics,~~Third Quarter of Fiscal 2021

To better accommodate the requirements of a global business, we are implementing a plan to reorganize our global supply chain and ~~control~~distribution structure more substantially, which includes a legal entity reorganization and ~~automation. In~~related system upgrade. We completed the first phase of this plan in the third quarter of fiscal ~~2020,~~2021 and expect to continue to implement the plan during the remainder of fiscal 2021. As part of this reorganization, we completed an internal transfer of certain of our ~~fifth-generation WaveLogic coherent modem technology,~~non-U.S. intangible assets, which created amortizable tax basis resulting in the discrete recognition of a $124.2 million deferred tax asset with a corresponding tax benefit. The impact of this transfer is ~~capable of delivering 800 gigabits of capacity per second over~~reflected in our effective tax rate for the quarter and nine months ended July 31, 2021, which had a ~~single wavelength, became widely commercially available~~significant, one-time impact on our ~~Converged Packet Optical platforms.~~

In February 2020, we also announced the future addition of several new routing platforms to support the demands of mobile xHaul (fronthaul, midhaul and backhaul) transport, which we expect to make available in the second half of calendar 2020. Designed to enable mobile network operators to migrate from 4G to 5G networks,net income for these routers leverage our Adaptive Network vision and Blue Planet Automation Software to deliver end-to-end IP-based services in a more simplified and modular manner than traditional router-based IP network designs. In addition, we enhanced our Blue Planet Intelligent Automation software portfolio for 5G automation applications, including vendor-agnostic network slicing features and dynamic planning capabilities that are intended to better enable mobile network operators to deliver 5G mobile services.

~~Available Information.~~ Our quarterly reports on Form 10-Q, annual reports on Form 10-K, current reports on Form 8-K, and any amendments thereto filed or furnished with the SEC are available through the SEC’s website at www.sec.gov and are available free of charge on our website as soon as reasonably practicable after we file or furnish these documents. We routinely post the reports above, recent news and announcements, financial results and other information about Ciena that is important to investors in the “Investors” section of our website at www.ciena.com. Information on our website is not deemed to be incorporated by reference into this report. Investors are encouraged to review the “Investors” section of our website because, as with the other disclosure channels that we use, from time to time we may post material information on that site that is not otherwise disseminated by us.

periods.

For additional information onregarding our business, industry, market opportunity, competitive landscape, and strategy, see our ~~2019~~2020 Annual ~~Report.~~Report, including the discussion in that report of the impact of the COVID-19 pandemic on our business, supply chain, and market conditions.

Consolidated Results of Operations

Operating Segments

Our results of operations are presented based on the following operating segments: (i) Networking Platforms; (ii) Platform Software and Services; (iii) Blue Planet Automation Software and Services; and (iv) Global Services. Effective as of the beginning of fiscal 2021, we renamed our “Packet Networking” product line “Routing and Switching.” This change was made on a prospective basis and does not impact comparability of previous financial results or the composition of this product line. References to our “Packet Networking” product line in prior periods have been changed to “Routing and Switching” in this report. See Note 203 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

~~Quarter ended August 1, 2020 compared to the quarter ended August 3, 2019~~Revenue

Currency Fluctuations

~~Revenue~~

~~During the third quarter of fiscal 2020, approximately 14.9%~~Approximately 16.3% and 17.3% of our revenue was non-U.S. Dollar-denominated during the third quarter and first nine months of fiscal 2021, respectively, primarily including sales in Euros, Canadian Dollars and Brazilian ~~Reais, British Pounds, and Indian Rupees.~~Reais. During the third quarter of fiscal ~~2020,~~2021, as compared to the third quarter of fiscal ~~2019,~~2020, and during the first nine months of fiscal 2021, as compared to the first nine months of fiscal 2020, the U.S. Dollar ~~generally strengthened~~fluctuated against these currencies. Consequently, our revenue for the third quarter and first nine months of fiscal 2021 reported in U.S. Dollars was ~~reduced slightly~~adversely impacted by approximately ~~$7.5~~$9.8 million, or ~~0.8%~~1.0%, ~~as compared to the third quarter of fiscal 2019.~~ and $18.5 million, or 0.7%, respectively.

Operating Segment Revenue

The table below sets forth the changes in our operating segment revenue for the periods indicated (in thousands, except percentage data):


		Quarter Ended																Quarter Ended								Nine Months Ended
		August 1, 2020		%*	August 3, 2019		%*	Increase (decrease)		%**		July 31, 2021			August 1, 2020			%*		July 31, 2021			August 1, 2020			%*
Revenue:	Revenue:										Revenue:
Networking Platforms	Networking Platforms										Networking Platforms
Converged Packet Optical	Converged Packet Optical	$	722,512	74.0	$	724,245	75.4	$	(1,733)	(0.2)	Converged Packet Optical	$	712,906		$	722,512		(1.3)	%	$	1,798,888		$	1,968,355		(8.6)	%
Packet Networking		79,756		8.1	71,823		7.5	7,933		11.0
%**											%**	72.1		%	74.0		%			69.7		%	72.8		%
Routing and Switching											Routing and Switching	69,698			79,756			(12.6)	%	197,632			211,432			(6.5)	%
%**											%**	7.1		%	8.1		%			7.7		%	7.8		%
Total Networking Platforms	Total Networking Platforms	802,268		82.1	796,068		82.9	6,200		0.8	Total Networking Platforms	782,604			802,268			(2.5)	%	1,996,520			2,179,787			(8.4)	%
%**											%**	79.2		%	82.1		%			77.4		%	80.6		%

Platform Software and Services	Platform Software and Services	46,422		4.8	37,312		3.9	9,110		24.4	Platform Software and Services	56,945			46,422			22.7	%	163,472			143,295			14.1	%
%**											%**	5.8		%	4.8		%			6.4		%	5.3		%

Blue Planet Automation Software and Services	Blue Planet Automation Software and Services	11,297		1.1	10,530		1.1	767		7.3	Blue Planet Automation Software and Services	16,607			11,297			47.0	%	57,499			41,779			37.6	%
%**											%**	1.7		%	1.1		%			2.2		%	1.6		%

Global Services	Global Services										Global Services
Maintenance Support and Training	Maintenance Support and Training	69,099		7.1	65,936		6.9	3,163		4.8	Maintenance Support and Training	74,006			69,099			7.1	%	212,054			202,370			4.8	%
%**											%**	7.5		%	7.1		%			8.2		%	7.5		%
Installation and Deployment	Installation and Deployment	39,798		4.1	39,802		4.1	(4)		—	Installation and Deployment	46,653			39,798			17.2	%	124,263			108,994			14.0	%
%**											%**	4.7		%	4.1		%			4.8		%	4.0		%
Consulting and Network Design	Consulting and Network Design	7,828		0.8	10,958		1.1	(3,130)		(28.6)	Consulting and Network Design	11,326			7,828			44.7	%	25,390			27,452			(7.5)	%
%**											%**	1.1		%	0.8		%			1.0		%	1.0		%
Total Global Services	Total Global Services	116,725		12.0	116,696		12.1	29		—	Total Global Services	131,985			116,725			13.1	%	361,707			338,816			6.8	%
%**											%**	13.3		%	12.0		%			14.0		%	12.5		%

Consolidated revenue	Consolidated revenue	$	976,712	100.0	$	960,606	100.0	$	16,106	1.7	Consolidated revenue	$	988,141		$	976,712		1.2	%	$	2,579,198		$	2,703,677		(4.6)	%

_____________________________

* Denotes % ~~of total revenue~~change from 2020 to 2021

** Denotes % ~~change from 2019 to 2020~~of Total Revenue

Quarter ended July 31, 2021 as compared to the quarter ended August 1, 2020

•Networking Platforms segment revenue ~~increased,~~decreased by $19.7 million, reflecting a product line sales ~~increase~~decreases of ~~$7.9~~$10.1 million of our ~~Packet Networking~~Routing and Switching products ~~partially offset by a product line sales decrease of $1.7~~and $9.6 million of our Converged Packet Optical products.

◦~~Packet Networking~~Routing and Switching sales ~~increased,~~decreased, primarily reflecting a sales ~~increases~~decrease of ~~$18.1~~$9.0 million of our 3000 and 5000 families of service delivery and aggregation switches to enterprise customers and cable and multiservice operators, and communications service providers. These sales increases were partially offset by a sales decrease of $9.9 million of our 6500 Packet Transport System (PTS) to communications service providers.operators.

◦Converged Packet Optical sales decreased, primarily reflecting a sales ~~decreases~~decrease of ~~$34.5~~$35.8 million of our ~~6500 Packet-Optical Platform~~Waveserver® products to ~~communications service providers and~~ Web-scale providers. This sales decrease was partially offset by a sales ~~increase~~increases of ~~$32.6~~$14.0 million of our ~~Waveserver~~6500 Reconfigurable Line System (RLS) products to communications service providers and cable and multiservice operators and $8.0 million of our 6500 Packet-Optical Platform primarily to communications service providers and Web-scale providers.

•Platform Software and Services segment revenue increased by $10.5 million, reflecting sales increases of ~~$5.0 million related to services and $4.1~~$9.4 million in software ~~sales.~~services and $1.1 million in sales of software platforms.

•Blue Planet Automation Software and Services segment revenue increased by $5.3 million, reflecting ~~an increase~~sales increases of ~~$2.7~~$4.0 million in ~~software services, partially offset by a decrease of $1.9 million~~sales of software ~~platforms. Our entrance into the software automation market is~~platforms and $1.3 million in ~~the early stages and, as such, revenue from our Blue Planet Automation Software platform has not been significant to date.~~related services.

•Global Services segment revenue ~~slightly~~ increased by $15.3 million, reflecting sales increases of $6.9 million of our installation and deployment services, $4.9 million of our maintenance support and training services and $3.5 million of our consulting and network design services.

Nine months ended July 31, 2021 as compared to the nine months ended August 1, 2020

•Networking Platforms segment revenue decreased by $183.3 million, reflecting product line sales decreases of $169.5 million of our Converged Packet Optical products and $13.8 million of our Routing and Switching products.

◦Converged Packet Optical sales decreased, primarily reflecting decreases of $181.9 million of our 6500 Packet-Optical Platform and $42.1 million of our 5430 Reconfigurable Switching Systems, each primarily to communications service providers. These sales decreases, related to the demand environment conditions described above, were partially offset by sales increases of $31.3 million of our 6500 RLS products and $27.4 million of our Waveserver® products, each of which primarily benefited from increased sales to communications service providers.

◦Routing and Switching sales decreased, primarily reflecting sales decreases of $15.7 million of our 3000 and 5000 families of service delivery and aggregation switches, primarily to cable and multiservice operators, and $7.1 million of our 6500 Packet Transport System (PTS) to communications service providers. These decreases were offset by a sales increase of ~~$3.2~~$9.0 million of our platform independent software to a communications service provider.

•Platform Software and Services segment revenue increased by $20.2 million, reflecting an increase of $24.2 million in software services, offset by a decrease of $4.0 million in sales of software platforms.

•Blue Planet Automation Software and Servicessegment revenue increased by $15.7 million, reflecting increases of $12.8 million in sales of software platforms and $2.9 million in related services.

•Global Services segment revenue increased by $22.9 million, primarily reflecting sales increases of $15.3 million of our installation and deployment services and $9.7 million of our maintenance support and training, partially offset by a sales decrease of ~~$3.1~~$2.1 million of our consulting and network design ~~services, in part due to impacts of COVID-19 as described above.~~services.

Revenue by Geographic Region

Our operating segments engage in business and operations across three geographic regions: Americas; ~~EMEA;~~Europe, Middle East and ~~APAC. As discussed in Note 3, effective the beginning of fiscal 2020, our Global Sales~~Africa (“EMEA”); and ~~Marketing organization combined our previous North America~~Asia Pacific, Japan and ~~CALA regions into a new Americas sales region.~~India (“APAC”). The decrease in our EMEA region for the quarter ended August 1, 2020 was primarily driven by decreased sales in the United Kingdom. The decrease in our APAC region for the third quarter of fiscal 2020 was primarily driven by decreased sales in India and Japan. The following table reflects our

geographic distribution of ~~revenue principally based on the relevant location for~~ our ~~delivery of products and performance of services. Our~~ revenue ~~when considered by geographic distribution,~~ can fluctuate significantly from period to period, and the timing of revenue recognition for large network projects, particularly outside of the United States, can result in large variations in geographic revenue results in any particular period. The increase in our EMEA region revenue for the quarter and nine months ended July 31, 2021 was primarily driven by increased sales in France and The Netherlands. The increase in our APAC region revenue for the quarter ended July 31, 2021 was primarily driven by increased sales in India. The decrease in our APAC region revenue for the nine months ended July 31, 2021 was primarily driven by decreased sales in Singapore and Japan, partially offset by increased sales in India. The decrease in our Americas region revenue for the quarter and nine months ended July 31, 2021 was primarily driven by decreased sales in the United States, partially offset by increased sales in Canada.

The following table ~~below~~reflects our geographic distribution of revenue, principally based on the relevant location for our delivery of products and performance of services. The table sets forth the changes in geographic distribution of revenue for the periods indicated (in thousands, except percentage data):

Quarter Ended
August 1, 2020 %* August 3, 2019 %* Increase (decrease) %**
Americas $ 713,340 73.0 $ 656,261 68.3 $ 57,079 8.7
EMEA 162,465 16.6 169,532 17.6 (7,067) (4.2)
APAC 100,907 10.4 134,813 14.1 (33,906) (25.2)
Total $ 976,712 100.0 $ 960,606 100.0 $ 16,106 1.7


	Quarter Ended								Nine Months Ended
	July 31, 2021			August 1, 2020			%*		July 31, 2021			August 1, 2020			%*
Americas	$	692,853		$	713,340		(2.9)	%	$	1,776,939		$	1,937,725		(8.3)	%
%**	70.1		%	73.0		%			68.9		%	71.7		%
EMEA	189,180			162,465			16.4	%	499,652			433,861			15.2	%
%**	19.2		%	16.6		%			19.4		%	16.0		%
APAC	106,108			100,907			5.2	%	302,607			332,091			(8.9)	%
%**	10.7		%	10.4		%			11.7		%	12.3		%
Total	$	988,141		$	976,712		1.2	%	$	2,579,198		$	2,703,677		(4.6)	%

* Denotes % ~~of total revenue~~change from 2020 to 2021

** Denotes % ~~change from 2019~~of Total Revenue

Quarter ended July 31, 2021 as compared to the quarter ended August 1, 2020

•Americas revenue ~~increased,~~decreasedby$20.5 million, primarily reflecting a sales ~~increases~~decrease of ~~$45.6~~$34.8 million within our Networking Platforms segment, ~~$5.1~~partially offset by sales increases of $5.9 million within our Global Services segment, $5.4 million within our Platform Software and Services segment, and ~~$6.4~~$3.0 million inwithin our ~~Global~~Blue Planet Automation Software and Services segment. The ~~increase~~decrease within our Networking Platforms segment primarily reflects a product line sales ~~increase~~decrease of ~~$40.2~~$28.4 million of our Converged Packet Optical products, primarily related to a sales ~~increases~~decrease of ~~$31.0~~$55.8 million of our ~~Waveserver~~Waveserver® products ~~and $9.6 million of our 6500 Packet-Optical Platform. Our Waveserver sales increase primarily reflects increased sales~~ to Web-scale ~~customers and communications service providers. Our 6500 Packet-Optical Platform sales increase primarily reflects increased sales to cable and multiservice~~ providers.

•EMEA revenue ~~decreased,~~increased by $26.7 million, primarily reflecting sales increases of $14.3 million within our Networking Platforms segment, $7.9 million within our Global Services segment, $2.3 million within our Platform Software and Services segment, and $2.2 million within our Blue Planet Automation Software and Services segment. These sales increases were primarily due to increased sales to Web-scale providers in the Netherlands.

•APAC revenue increased by $5.2 million,primarily reflecting sales increases of $2.8 million within our Platform Software and Services segment, $1.4 million within our Global Services segment, and $1.0 million within our Networking Platforms segment.

Nine months ended July 31, 2021 as compared to the nine months ended August 1, 2020

•Americas revenue decreased by $160.8 million,primarily reflecting a sales decrease of $184.1 million within our Networking Platforms segment, which was partially offset by sales increases of $10.1 million within our Blue Planet Automation Software and Services segment, $7.8 million within our Global Services segment and $5.4 million within our Platform Software and Services segment. Our Networking Platforms segment revenue decrease reflects product line sales decreases of ~~$5.9~~$169.7 million of Converged Packet Optical products and $14.4 million of Routing and Switching products. Our Converged Packet Optical revenue decrease primarily reflects sales decreases of $134.9 million of our 6500 Packet-Optical Platform and $33.3 million of our Waveserver® products, partially offset by a sales increase of $28.4 million of our 6500 RLS products. Our 6500 Packet-Optical Platform revenue decrease primarily reflects decreased sales to communications service providers.

•EMEA revenue increased by $65.8 million,reflecting increases of $35.3 million within our Networking Platforms segment, $15.4 million within our Global Services segment, $7.6 million within our Platform Software and Services segment and $7.4 million within our Blue Planet Automation Software and Services segment. These sales increases were primarily due to increased sales to Web-scale providers in the Netherlands and communications service providers in France.

•APAC revenue decreased by $29.5 million,primarily reflecting decreases of $34.5 million within our Networking Platforms segment and ~~$3.7~~$1.8 million within our ~~Global Services segment, partially offset by an increase of $2.3 million in our Platform~~Blue Planet Automation Software and Services segment. ~~The revenue decrease within our Networking Platforms segment reflects a product line sales decrease of $9.7 million of Converged Packet Optical products, primarily related to sales~~These decreases ~~of $8.2 million of our 6500 Packet-Optical Platform and $1.3 million of our Waveserver products.~~

•~~APAC revenue~~ ~~decreased,primarily reflecting decreases of $33.5 million within our Networking Platforms segment and $2.7 million of our Global Services segment,~~were partially offset by a sales increase of ~~$1.8~~$7.2 million within our Platform Software and Services segment. Our Networking Platforms segment revenue decrease primarily reflects a decrease of ~~$35.9~~$45.8 million in sales of our 6500 Packet-Optical Platform ~~primarily~~ to communications service providers in ~~India and~~ Japan, partially offset by an increase of ~~$2.9~~$14.4 million in sales of our ~~Waveserver~~Waveserver® products, primarily to ~~Web-scale providers.~~communications service providers and submarine network operators.

Cost of Goods Sold and Gross Profit

~~Product~~

The component elements that comprise our product cost of goods ~~sold consists primarily of amounts paid to third-party contract manufacturers, component~~and services costs employee-related costs and overhead, shipping and logistics costs associated with manufacturing-related operations, warranty and other contractual obligations, royalties, license fees, amortization of intangible assets, cost of excess and obsolete inventory and, when applicable, estimated losses on committed customer contracts.

~~Services cost~~ of goods sold ~~consists primarily~~are set forth in the “Management’s Discussion and Analysis of ~~direct~~Financial Condition and ~~third-party costs associated with~~Results of Operations” section of our ~~provision~~2020 Annual Report. There are a number of services including installation, deployment, maintenance support, consulting and training activities, and, when applicable, estimated losses on committed customer contracts. The majority of these costs relate to personnel, including employee and third-party contractor-related costs.

~~Our~~important factors or conditions that can adversely affect or cause our gross profit as a percentage of product or service revenue, or “gross margin,” ~~can~~to fluctuate ~~due to a number of factors, particularly when viewed~~ on a quarterly basis. ~~Our gross margin can fluctuate~~These are similarly described in detail in the “Management’s Discussion and ~~be adversely impacted depending on~~Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of our revenue concentration within a particular segment, product line, geography, or customer, including our success in selling software in a particular period. Our gross margin remains highly dependent on our continued ability to drive product cost reductions relative to the price erosion that we regularly encounter in our markets. Moreover, we are often required to compete with aggressive pricing and commercial terms, and, to secure business with new and existing customers, we may agree to pricing or other unfavorable commercial terms that adversely affect our gross margin. Success in taking share and winning new business can result in additional pressure on gross margin from these pricing dynamics and the early stages of these network deployments. Early stages of new network builds also often include an increased concentration of lower margin “common” equipment, photonics

sales and installation services, with the intent to improve margin as we sell channel cards and maintenance services to customers adding capacity or services to their networks. Gross margin can be impacted by technology-based price compression and the introduction or substitution of new platforms with improved price for performance as compared to existing solutions that carry higher margins. Gross margin can also be impacted by changes in expense for excess and obsolete inventory and warranty obligations.2020 Annual Report.

~~Service gross margin can be affected by~~For the ~~mix~~third quarter of ~~customers~~fiscal 2021, and ~~services, particularly~~first nine months of fiscal 2021, we recorded CEWS benefits of $0.1 million, net of certain fees, and $7.0 million, net of certain fees, respectively, related to the ~~mix between deployment and maintenance services, geographic mix and~~particular line item within cost of goods sold in our Condensed Consolidated Statement of Operations to which the ~~timing and extent~~activity relates. For further information relating to our receipt of ~~any investments~~amounts under the CEWS program, see Note 4 to our Condensed Consolidated Financial Statements included in ~~internal resources to support~~Item 1 of Part I of this ~~business.~~

report. The tables below set forth the changes in revenue, cost of goods sold and gross profit for the periods indicated (in thousands, except percentage data):

Quarter Ended
August 1, 2020 %* August 3, 2019 %* Increase (decrease) %**
Total revenue $ 976,712 100.0 $ 960,606 100.0 $ 16,106 1.7
Total cost of goods sold 512,031 52.4 536,254 55.8 (24,223) (4.5)
Gross profit $ 464,681 47.6 $ 424,352 44.2 $ 40,329 9.5


	Quarter Ended								Nine Months Ended
	July 31, 2021			August 1, 2020			%*		July 31, 2021			August 1, 2020			%*
Total revenue	$	988,141		$	976,712		1.2	%	$	2,579,198		$	2,703,677		(4.6)	%
Total cost of goods sold	513,591			512,031			0.3	%	1,334,338			1,455,135			(8.3)	%

Gross profit	$	474,550		$	464,681		2.1	%	$	1,244,860		$	1,248,542		(0.3)	%
%**	48.0		%	47.6		%			48.3		%	46.2		%

* Denotes % ~~of total revenue~~change from 2020 to 2021

** Denotes % of Total Revenue


	Quarter Ended								Nine Months Ended
	July 31, 2021			August 1, 2020			%*		July 31, 2021			August 1, 2020			%*
Product revenue	$	804,414		$	819,022		(1.8)	%	$	2,071,677		$	2,246,129		(7.8)	%
Product cost of goods sold	420,236			436,227			(3.7)	%	1,074,935			1,230,378			(12.6)	%

Product gross profit	$	384,178		$	382,795		0.4	%	$	996,742		$	1,015,751		(1.9)	%
%**	47.8		%	46.7		%			48.1		%	45.2		%

* Denotes % change from ~~2019~~2020 to ~~2020~~2021

Quarter Ended
August 1, 2020 %* August 3, 2019 %* Increase (decrease) %**
Product revenue $ 819,022 100.0 $ 810,588 100.0 $ 8,434 1.0
Product cost of goods sold 436,227 53.3 454,921 56.1 (18,694) (4.1)
Product gross profit $ 382,795 46.7 $ 355,667 43.9 $ 27,128 7.6
** Denotes % of Product Revenue


	Quarter Ended								Nine Months Ended
	July 31, 2021			August 1, 2020			%*		July 31, 2021			August 1, 2020			%*
Service revenue	$	183,727		$	157,690		16.5	%	$	507,521		$	457,548		10.9	%
Service cost of goods sold	93,355			75,804			23.2	%	259,403			224,757			15.4	%

Service gross profit	$	90,372		$	81,886		10.4	%	$	248,118		$	232,791		6.6	%
% **	49.2		%	51.9		%			48.9		%	50.9		%

* Denotes % ~~of product revenue~~change from 2020 to 2021

** Denotes % ~~change from 2019 to 2020~~

Quarter Ended
August 1, 2020 %* August 3, 2019 %* Increase (decrease) %**
Service revenue $ 157,690 100.0 $ 150,018 100.0 $ 7,672 5.1
Service cost of goods sold 75,804 48.1 81,333 54.2 (5,529) (6.8)
Service gross profit $ 81,886 51.9 $ 68,685 45.8 $ 13,201 19.2

* Denotes % of ~~services revenue~~

** Denotes % change from 2019 to 2020Service Revenue

Quarter ended July 31, 2021 as compared to the quarter ended August 1, 2020

•Gross profit increased by $9.9 million. Gross profit as a percentage of total revenue (“gross margin”) increased ~~as our~~by 40 basis points. Our gross margin benefited ~~significantly~~slightly from a favorable mix of customers and ~~product lines that we believe to be a short-term effect due to COVID-19 related factors, and, to a lesser extent, continued improvement in our service margin.~~products. Due to the impact of COVID-19 and related restrictions on sales and marketing activities described in “Overview” above, ~~during the second and third quarters of fiscal 2020,~~we continue to see a higher proportion of our revenue ~~consisted~~consisting of sales of existing technology offerings deployed in the networks of existing customers, as compared to sales to new customers, early stage network deployments for recent design wins, or the introduction of new platforms, which tend to carry lower margins. We expect our gross margins to reduce from these elevated short-term levels as ~~some~~the adverse impact of the ~~pandemic’s impacts~~pandemic on new business ~~lessen~~lessens and our overall

revenue resumes a more typical composition of revenue from existing and new business. ~~A key part~~Moreover, consistent with the discussion in “Overview” above, we expect the current market shortage for semiconductor components and constrained supply environment to continue during our fourth quarter of fiscal 2021 and at least through the first half of fiscal 2022. These conditions, and our ~~ongoing strategy is~~attempts to ~~leverage~~mitigate their impact on our ~~technology leadership, displace competitors~~business, are expected to adversely impact our costs of goods sold on products and capture additional market share. These efforts to expand our customer base or market share have in prior periods adversely affected our gross margin as a result of the more aggressive pricing, commercial concessions and other unfavorable terms often required to be successful within these competitive dynamics. Our mix of revenues from such new wins or early stage deployments can adversely

~~impact gross margins in a particular period. The longer term intent of this strategy is~~ability to continue to ~~improve~~reduce the cost to produce our ~~margins over time, as we sell channel cards adding capacity or services to networks, maintenance services, and other higher margin products.~~products consistent with prior periods.

•Gross profit on products increased by $1.4 million. Gross profit on products as a percentage of product revenue (“product gross margin”) increased by 110 basis points, primarily due to a favorable mix of ~~customers~~customer and ~~product lines, as described above,~~products and ~~continued~~ product cost reductions, partially offset by market-based price compression we encountered during the period.

•Gross profit on services increased by $8.5 million. Gross profit as a percentage of services revenue ~~increased,~~(“services gross margin”) decreased by 270 basis points, primarily due to a higher ~~concentration of revenue from maintenance service contracts~~provisions associated with ~~relatively low incremental costs, and fewer early stage network deployment activities~~our annual cash incentive compensation plan.

Nine months ended July 31, 2021 as compared to the nine months ended August 1, 2020

•Gross profit decreased by $3.7 million, largely due to lower revenues. Gross margin increased by 210 basis points, as our gross margin benefited significantly from product cost reductions and a $7.0 million benefit from the ~~impact~~CEWS program, partially offset by market-based price compression we encountered during the period and a reduction in our services gross margin.

•Gross profit on products decreased by $19.0 million.Product gross margin increased by 290 basis points, primarily due to product cost reductions, a favorable mix of ~~COVID-19.~~customers and product lines as described above and a $4.3 million benefit from the CEWS program, partially offset by market-based price compression we encountered during the period.

•Gross profit on services increased by $15.3 million. Services gross margin decreased by 200 basis points, primarily due to lower installation and deployment margins. The lower margins on installation and deployment services were primarily due to certain customer site readiness delays that caused cost inefficiencies and higher provisions associated with our annual cash incentive compensation plan. These lower margins were partially offset by a $2.7 million benefit from the CEWS program.

Operating Expense

~~Operating expense consists of the component elements described below.~~Currency Fluctuations

•~~Research~~Approximately 51.6% and ~~development expense~~ primarily consists of salaries and related employee expense (including share-based compensation expense), prototype costs relating to design, development, product testing, depreciation expense, and third-party consulting costs.

•~~Selling and marketing expense~~ primarily consists of salaries, commissions and related employee expense (including share-based compensation expense) and sales and marketing support expense, including travel, demonstration units, trade show expense, and third-party consulting costs.

•~~General and administrative expense~~ ~~primarily consists of salaries and related employee expense (including share-based compensation expense) and costs for third-party consulting and other services.~~

•~~Amortization of intangible assets~~ ~~primarily reflects the amortization of both purchased technology and the value of customer relationships derived from our acquisitions.~~

•~~Significant asset impairments and restructuring costs~~ primarily reflect actions we have taken to improve the alignment of our workforce, facilities and operating costs with perceived market opportunities, business strategies, changes in market and business conditions, the redesign of certain business processes and significant impairments of assets.

•~~Acquisition and integration costs (recoveries)~~ consist of expenses for financial, legal and accounting advisors, severance and other employee-related costs associated with our acquisitions of DonRiver and Centina, including costs and recoveries of acquisition consideration associated with a three-year earn-out arrangement related to the DonRiver acquisition.

~~During the third quarter of fiscal 2020, approximately 50.5%~~48.9% of our operating expense was non-U.S. Dollar-denominated during the third quarter and first nine months of fiscal 2021, respectively, including expenses in Canadian Dollars, Indian Rupees and British Pounds. During the third quarter of fiscal ~~2020~~2021, as compared to the third quarter of fiscal ~~2019,~~2020, and the first nine months of fiscal 2021, as compared to the first nine months of fiscal 2020, the U.S. Dollar ~~generally strengthened~~fluctuated against these currencies. Consequently, our operating expense reported in U.S. Dollars ~~was reduced~~ slightly increased by approximately ~~$3.6~~$8.3 million, or 2.0%, and $13.1 million, or 1.3%, ~~as compared to~~respectively.

CEWS Program Benefits

In the third quarter of fiscal ~~2019, due~~2021, and the first nine months of fiscal 2021, we recorded CEWS benefits of $0.7 million, net of certain fees and $34.3 million, net of certain fees, respectively, related to the ~~strengthening U.S. Dollar, net~~particular line item within operating expense in our Condensed Consolidated Statement of ~~hedging.~~Operations to which the activity relates. For further information relating to our receipt of amounts under the CEWS program, see Note 4 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

The component elements that comprise each of our operating expense categories in the table below are set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our 2020 Annual Report. The table below sets forth the changes in operating expense for the periods indicated (in thousands, except percentage data):

Quarter Ended
August 1, 2020 %* August 3, 2019 %* Increase (decrease) %**
Research and development $ 130,221 13.3 $ 139,880 14.6 $ (9,659) (6.9)
Selling and marketing 94,763 9.7 104,230 10.9 (9,467) (9.1)
General and administrative 41,635 4.3 42,695 4.4 (1,060) (2.5)
Amortization of intangible assets 5,840 0.6 5,529 0.6 311 5.6
Significant asset impairments and restructuring costs 6,515 0.7 5,355 0.6 1,160 21.7
Acquisition and integration costs (recoveries) (2,329) (0.2) 1,362 0.1 (3,691) (271.0)
Total operating expenses $ 276,645 28.4 $ 299,051 31.2 $ (22,406) (7.5)

3633

* Denotes % of total revenue


	Quarter Ended								Nine Months Ended
	July 31, 2021			August 1, 2020			%*		July 31, 2021			August 1, 2020			%*
Research and development	$	146,225		$	130,221		12.3	%	$	389,212		$	392,651		(0.9)	%
%**	14.8		%	13.3		%			15.1		%	14.5		%
Selling and marketing	114,924			94,763			21.3	%	322,589			303,043			6.4	%
%**	11.6		%	9.7		%			12.5		%	11.2		%
General and administrative	48,863			41,635			17.4	%	132,491			126,133			5.0	%
%**	4.9		%	4.3		%			5.1		%	4.7		%
Significant asset impairments and restructuring costs	9,789			6,515			50.3	%	23,865			14,798			61.3	%
%**	1.0		%	0.7		%			0.9		%	0.5		%
Amortization of intangible assets	5,967			5,840			2.2	%	17,896			17,532			2.1	%
%**	0.6		%	0.6		%			0.7		%	0.6		%
Acquisition and integration costs (recoveries)	259			(2,329)			(111.1)	%	860			904			(4.9)	%
%**	—		%	(0.2)		%			—		%	—		%
Total operating expenses	$	326,027		$	276,645		17.9	%	$	886,913		$	855,061		3.7	%
%**	33.0		%	28.4		%			34.4		%	31.5		%

** Denotes % change from ~~2019~~2020 to 2021

** Denotes % of Total Revenue

Quarter ended July 31, 2021 as compared to the quarter ended August 1, 2020

•Research and development expensewas adversely affected by ~~benefited from $2.2~~$4.8 million as a result of foreign exchange rates, primarily due to fluctuations in the U.S. Dollar in relation to the Canadian Dollar.Including the effect of foreign exchange rates, net of hedging, research and development expense increased by $16.0 million. This primarily reflects an increase in employee headcount and related compensation costs, and higher provisions associated with our annual cash incentive compensation plan, partially offset by a decrease in professional services.

•Selling and marketing expense was adversely affected by $2.8 million as a result of foreign exchange rates, primarily due to fluctuations in the U.S. Dollar in relation to the Euro and Canadian Dollar. Including the effect of foreign exchange rates, sales and marketing expenses increased by $20.2 million. This increase primarily reflects an increase in employee related compensation costs due to higher commission expense and higher provisions associated with our annual cash incentive compensation plan.

•General and administrative expense increased by $7.2 million, primarily as a result of higher provisions associated with our annual cash incentive compensation plan, partially offset by decreased bad debt expense.

•Significant asset impairments and restructuring costs reflects actions we have taken to redesign certain business processes and better align our global workforce and facilities as part of a business optimization strategy to improve gross margin and constrain operating expense.

•Amortization of intangible assets remained relatively unchanged.

•Acquisition and integration costs (recoveries) primarilyreflects reduced acquisition compensation and recoveries of acquisition consideration associated with a three-year earn-out arrangement in the third quarter of fiscal 2020 related to the acquisition of DonRiver Holdings, LLC (“Don River”) in fiscal 2018.

Nine months ended July 31, 2021 as compared to the nine months ended August 1, 2020

•Research and development expense was adversely affected by $5.3 million as a result of foreign exchange rates, net of hedging, primarily due to ~~a stronger~~fluctuations in the U.S. Dollar in relation to the Canadian ~~Dollar and Indian Rupee.~~Dollar. Including the effect of foreign exchange rates, net of hedging, research and development ~~expense~~ expensesdecreased by ~~$9.7~~$3.4 million. This decrease primarily reflects $29.5 million received from the CEWS program and decreases in ~~employee and compensation costs, facility and information technology costs, and travel and entertainment costs due to COVID-19,~~professional services, partially offset by ~~increases in professional services and technology and related costs.~~higher provisions associated with our annual cash incentive compensation plan.

•Selling and marketing expense ~~benefited~~was adversely affected by $6.4 million as a result of foreign exchange rates, primarily due to fluctuations in the U.S. Dollar in relation to the Euro, Canadian Dollar and Australian Dollar. Including the

effect of foreign exchange rates, sales and marketing expenseincreased by $19.5 million. This increase primarily reflects an increase in compensation costs, partially offset by decreases in travel and entertainment costs due to restrictions on travel as a result of COVID-19, and $2.6 million received from ~~$1.0~~the CEWS program.

•General and administrative expense was adversely affected by $1.5 million as a result of foreign exchange rates, primarily due to a ~~stronger~~weaker U.S. Dollar in relation to the ~~Brazilian Reais, Indian Rupee,~~Euro and the Canadian Dollar. Including the effect of foreign exchange rates, ~~sales~~general and ~~marketing~~administrative expenses ~~decreased~~increased by ~~$9.5~~$6.4 million. This ~~decrease~~increase primarily reflects ~~decreases in travel~~higher provisions associated with our annual cash incentive compensation plan and ~~entertainment costs due to restrictions on travel and limitations on our interactions with customers as a result of COVID-19.~~

•~~General and administrative expense~~ ~~decreased by $1.1 million. This decrease primaril~~y ~~reflects a decrease in employee and compensation costs,~~legal fees, partially offset by ~~an increase in~~reduced bad debt expense.

•~~Amortization of intangible assets~~ ~~slightlyincreased due to additional intangibles acquired in connection with our acquisition of Centina in the first quarter of fiscal 2020.~~

•Significant asset impairments and restructuring costs~~reflect~~ reflects actions we have taken to redesign certain business processes and better align our global workforce ~~reductions~~and facilities as part of a business optimization strategy to improve gross margin and constrain operating ~~expense, and redesign certain business processes.~~expense.

•Amortization of intangible assets remained relatively unchanged.

•Acquisition and integration costs (recoveries) primarily ~~reflect~~reflects reduced acquisition compensation and recoveries of acquisition consideration associated with a three-year earn-out arrangement in the third quarter of fiscal 2020 related to the acquisition of DonRiver ~~acquisition.~~in fiscal 2018, and other fees related to the acquisition of Centina Systems, Inc. in the first quarter of fiscal 2020.

Other Items

The table below sets forth the changes in other items for the periods indicated (in thousands, except percentage data):

Quarter Ended
August 1, 2020 %* August 3, 2019 %* Increase (decrease) %**
Interest and other income, net $ 232 0.0 $ 1,050 0.1 $ (818) (77.9)
Interest expense $ 7,251 0.7 $ 9,404 1.0 $ (2,153) (22.9)
Provision for income taxes $ 38,750 4.0 $ 30,198 3.1 $ 8,552 28.3


	Quarter Ended								Nine Months Ended
	July 31, 2021			August 1, 2020			%*		July 31, 2021			August 1, 2020			%*
Interest and other income (loss), net	$	795		$	232		242.7	%	$	(1,600)		$	1,213		(231.9)	%
%**	0.1		%	—		%			(0.1)		%	—		%
Interest expense	$	7,776		$	7,251		7.2	%	$	22,921		$	23,926		(4.2)	%
%**	0.8		%	0.7		%			0.9		%	0.9		%
Loss on extinguishment and modification of debt	$	—		$	—		—	%	$	—		$	646		(100.0)	%
%**	—		%	—		%			—		%	—		%
Provision (benefit) for income taxes	$	(96,690)		$	38,750		(349.5)	%	$	(63,271)		$	73,872		(185.6)	%
%**	(9.8)		%	4.0		%			(2.5)		%	2.7		%

* Denotes % ~~of total revenue~~change from 2020 to 2021

** Denotes % ~~change from 2019~~of Total Revenue

Quarter ended July 31, 2021 as compared to the quarter ended August 1, 2020

•Interest and other income (loss), net primarily reflects lower interest income due to reduced interest rates on our investments, partially offset by the impact of foreign exchange rates on assets and liabilities denominated in a currency other than the relevant functional currency, net of hedging activity.remained relatively unchanged.

•Interest expense ~~decreased,primarily due to a reduction of LIBOR rates impacting our New 2025 Term Loan.~~remained relatively unchanged.

•Provision (benefit) for income taxes ~~increased,~~decreased by $135.4 million, primarily due to ~~higher earnings for~~the $124.2 million tax benefit associated with recording a deferred tax asset in the third quarter of fiscal ~~2020.~~2021. The effective tax rate for the third quarter of ~~fiscal 2020~~2021 was lower as compared to the third quarter of fiscal ~~2019,~~2020, primarily due to ~~reduced BEAT.~~

the tax benefit associated with recording a deferred tax asset. For further discussion, see Note 7 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

Nine months ended ~~August 1, 2020~~July 31, 2021 as compared to the nine months ended August ~~3, 2019~~

~~Revenue~~

During the first nine months of fiscal 2020, approximately 15.8% of our revenue was non-U.S. Dollar-denominated, including sales in Euros, Canadian Dollars, Japanese Yen, Brazilian Reais, British Pounds, Indian Rupees and United Arab Emirates Dirham. During the first nine months of fiscal 2020, as compared to the first nine months of fiscal 2019, the U.S. Dollar generally strengthened against these currencies. Consequently, our revenue reported in U.S. Dollars was reduced by approximately $13.5 million or 0.5%. The table below sets forth the changes in our operating segment revenue for the periods indicated (in thousands, except percentage data):

Nine Months Ended
August 1, 2020 %* August 3, 2019 %* Increase (decrease) %**
Revenue:
Networking Platforms
Converged Packet Optical $ 1,968,355 72.8 $ 1,897,080 72.8 71,275 3.8
Packet Networking 211,432 7.8 216,529 8.3 (5,097) (2.4)
Total Networking Platforms 2,179,787 80.6 2,113,609 81.1 66,178 3.1
Platform Software and Services 143,295 5.3 114,139 4.4 29,156 25.5
Blue Planet Automation Software and Services 41,779 1.6 37,977 1.5 3,802 10.0
Global Services
Maintenance Support and Training 202,370 7.5 196,002 7.5 6,368 3.2
Installation and Deployment 108,994 4.0 111,746 4.3 (2,752) (2.5)
Consulting and Network Design 27,452 1.0 30,671 1.2 (3,219) (10.5)
Total Global Services 338,816 12.5 338,419 13.0 397 0.1
Consolidated revenue $ 2,703,677 100.0 $ 2,604,144 100.0 $ 99,533 3.8

~~_____________________________~~

* Denotes % of total revenue

** Denotes % change from 2019 to 2020

•~~Networking Platforms segment revenue~~ increased, primarily reflecting a product line sales increase of $71.3 million of our Converged Packet Optical products, partially offset by a product line sales decrease of $5.1 million of our Packet Networking products.

◦Converged Packet Optical sales increased, reflecting an increase of $39.4 million of our Waveserver products, which benefited from increased sales to cable and multiservice operators and communications service providers, partially offset by decreased sales to Web-scale providers, and a $24.5 million sales increase of our 5430 Reconfigurable Switching Systems to communications service providers.

◦~~Packet Networking sales decreased, primarily reflecting a sales decrease of $35.5 million of our 6500 Packet Transport System (PTS) to communications service providers.~~ ~~These sales decreases were partially offset by a sales increase of $32.4 million of~~ ~~our 3000 and 5000 families of service delivery and aggregation switches to enterprise customers and cable and multiservice operators.~~

•~~Platform Software and Services segment revenue~~ ~~increased, reflecting increases of $18.9 million in software sales and $10.3 million primarily related to services to communications service providers.~~

•~~Blue Planet Automation Software and Servicessegment revenue~~ increased, reflecting an increase of $6.5 million in software services, partially offset by a decrease in software sales of $2.7 million. Our entrance into the software automation market is in the early stages and, as such, revenue from our Blue Planet Automation Software platform has not been significant to date.

•~~Global Services segment revenue~~ ~~slightly~~increased, primarily reflecting a sales increase of $6.4 million of our maintenance support and training partially offset by sales decreases of $3.2 million of our consulting and network design services and $2.8 million of our installation and deployment services.

The following table reflects our geographic distribution of revenue principally based on the relevant location for our delivery of products and performance of services. Our revenue, particularly when considered by geographic distribution, can fluctuate significantly, and the timing of revenue recognition for large network projects, particularly outside of Americas, can result in large variations in geographic revenue results in any particular quarter. The increase in our EMEA region for the nine months ended August 1, 2020 ~~was primarily driven by increased sales in the Netherlands, the United Arab Emirates and France,~~

partially offset by decreased sales in the United Kingdom. The decrease in our APAC region for the nine months ended August 1, 2020 was primarily driven by decreased sales in India, Japan and South Korea, partially offset by increased sales in Singapore. The table below sets forth the changes in geographic distribution of revenue for the periods indicated (in thousands, except percentage data):

Nine Months Ended
August 1, 2020 %* August 3, 2019 %* Increase (decrease) %**
Americas $ 1,937,725 71.7 $ 1,788,234 68.7 $ 149,491 8.4
EMEA 433,861 16.0 413,715 15.9 20,146 4.9
APAC 332,091 12.3 402,195 15.4 (70,104) (17.4)
Total $ 2,703,677 100.0 $ 2,604,144 100.0 $ 99,533 3.8

* Denotes % of total revenue

** Denotes % change from 2019 to 2020

•~~Americas revenue~~ ~~increased,~~primarily reflecting sales increases of $114.3 million within our Networking Platforms segment, $22.0 million within our Platform Software and Services segment and $16.9 million within our Global Services segment. These sales increases were partially offset by a sales decrease of $3.8 million within our Blue Planet Automation Software and Services segment. Our Networking Platforms segment revenue increase reflects a product line sales increase of $123.4 million of Converged Packet Optical products, partially offset by a decrease of $9.1 million of Packet Networking products. Our Converged Packet Optical revenue increase primarily reflects sales increases of $81.8 million of our 6500 Packet-Optical Platform, $20.5 million of our Waveserver products and $16.9 million of our 5430 Reconfigurable Switching Systems. Our 6500 Packet-Optical Platform revenue increase primarily reflects increased sales to cable and multiservice operators, government customers and communications service providers. Our Waveserver sales increase reflects increased sales to cable and multiservice operators and communications service providers, partially offset by a decrease in sales to Web-scale providers. Our 5430 Reconfigurable Switching Systems sales increase primarily reflect increased sales to communications service providers.

•~~EMEA revenue~~ ~~increased,primarily~~reflecting increases of $25.2 million within our Networking Platforms segment and $2.9 million within our Platform Software and Services segment, partially offset by a decrease of $8.9 million within our Global Services segment. Our Networking Platforms segment revenue increase reflects a product line sales increase of $20.5 million of Converged Packet Optical products, primarily related to sales increases of $9.5 million of our 6500 Packet-Optical Platform to Web-scale providers and communications service providers, $7.9 million of our 5430 Reconfigurable Switching Systems to communications service providers and $4.7 million of our Waveserver products to communications service providers.

•~~APAC revenue~~ ~~decreased,~~primarily reflecting decreases of $73.4 million within our Networking Platforms segment and $7.6 million of our Global Services segment. These decreases were partially offset by sales increases of $6.7 million within our Blue Planet Automation Software and Services segment and $4.2 million within our Platform Software and Services segment. Our Networking Platforms segment revenue decrease primarily reflects a decrease of $87.2 million in sales of our 6500 Packet-Optical Platform to communications service providers in India and Japan, partially offset by an increase of $14.2 million in sales of our Waveserver products primarily to Web-scale providers.

~~Cost of Goods Sold and Gross Profit~~

~~The tables below set forth the changes in revenue, cost of goods sold and gross profit for the periods indicated (in thousands, except percentage data):~~

Nine Months Ended
August 1, 2020 %* August 3, 2019 %* Increase (decrease) %**
Total revenue $ 2,703,677 100.0 $ 2,604,144 100.0 $ 99,533 3.8
Total cost of goods sold 1,455,135 53.8 1,481,774 56.9 (26,639) (1.8)
Gross profit $ 1,248,542 46.2 $ 1,122,370 43.1 $ 126,172 11.2

* Denotes % of total revenue

** Denotes % change from 2019 to 2020

Nine Months Ended
August 1, 2020 %* August 3, 2019 %* Increase (decrease) %**
Product revenue $ 2,246,129 100.0 $ 2,163,808 100.0 $ 82,321 3.8
Product cost of goods sold 1,230,378 54.8 1,246,413 57.6 (16,035) (1.3)
Product gross profit $ 1,015,751 45.2 $ 917,395 42.4 $ 98,356 10.7

* Denotes % of product revenue

** Denotes % change from 2019 to 2020

Nine Months Ended
August 1, 2020 %* August 3, 2019 %* Increase (decrease) %**
Service revenue $ 457,548 100.0 $ 440,336 100.0 $ 17,212 3.9
Service cost of goods sold 224,757 49.1 235,361 53.5 (10,604) (4.5)
Service gross profit $ 232,791 50.9 $ 204,975 46.5 $ 27,816 13.6

* Denotes % of services revenue

** Denotes % change from 2019 to 2020

•~~Gross profit as a percentage of revenue~~ increased, as our gross margin benefited significantly from a favorable mix of customers and product lines that we believe to be a short-term effect due to COVID-19 related factors, and, to a lesser extent, continued improvement in our service margin. Due to the impact of COVID-19 and related restrictions on sales and marketing activities described in “Overview” above, during the second and third quarters of fiscal 2020, a higher proportion of our revenue consisted of sales of existing technology offerings deployed in the networks of existing customers, as compared to sales to new customers, early stage network deployments for recent design wins, or the introduction of new platforms.

•~~Gross profit on products as a percentage of product revenue~~ ~~increased~~, ~~primarily due to a favorable mix of customers and product lines as described above, and product cost reductions, partially offset by market-based price compression we encountered during the period.~~

•~~Gross profit on services as a percentage of services revenue~~ increased, due to a higher concentration of revenue from maintenance service contracts with relatively low incremental costs, and fewer early stage network deployment activities due to the impact of COVID-19.

~~Operating Expense~~

During the first nine months of fiscal 2020, approximately 50.7% of our operating expense was non-U.S. Dollar-denominated, including Canadian Dollars, Indian Rupees, British Pounds, and Euros. Consequently, our operating expense reported in U.S. Dollars was reduced by approximately $7.3 million, or 0.9%, during the first nine months of fiscal 2020 as compared to the first nine months of fiscal 2019, due to the strengthening U.S. Dollar, net of hedging. The table below sets forth the changes in operating expense for the periods indicated (in thousands, except percentage data):

Nine Months Ended
August 1, 2020 %* August 3, 2019 %* Increase (decrease) %**
Research and development $ 392,651 14.5 $ 406,482 15.6 $ (13,831) (3.4)
Selling and marketing 303,043 11.2 305,845 11.7 (2,802) (0.9)
General and administrative 126,133 4.7 124,092 4.8 2,041 1.6
Amortization of intangible assets 17,532 0.6 16,586 0.6 946 5.7
Significant asset impairments and restructuring costs 14,798 0.5 11,696 0.4 3,102 26.5
Acquisition and integration costs (recoveries) 904 — 4,105 0.2 (3,201) (78.0)
Total operating expenses $ 855,061 31.5 $ 868,806 33.3 $ (13,745) (1.6)

* Denotes % of total revenue

** Denotes % change from 2019 to 2020

•~~Research and development expense~~ benefited from $2.9 million as a result of foreign exchange rates, net of hedging, primarily due to a stronger U.S. Dollar in relation to the Canadian Dollar and Indian Rupee. Including the effect of foreign exchange rates, net of hedging, research and development expensesdecreased by $13.8 million. This decrease primarily reflects decreases in employee and compensation costs, facility and information technology costs, professional services, and travel and entertainment costs as a result of COVID-19, partially offset by an increase of technology and related costs.

•~~Selling and marketing expense~~ benefited from $3.2 million as a result of foreign exchange rates, primarily due to a stronger U.S. Dollar in relation to the Euro, Brazilian Reais, Canadian Dollar and Australian Dollar. Including the effect of foreign exchange rates, net of hedging, sales and marketing expensedecreased by $2.8 million. This decrease primarily reflects decreases in travel and entertainment costs due to restrictions on travel as a result of COVID-19 partially offset an increase in employee and compensation costs.

•~~General and administrative expense~~ benefited from $1.2 million as a result of foreign exchange rates, primarily due to a stronger U.S. Dollar in relation to the Indian Rupee and Brazilian Reais. Including the effect of foreign exchange rates, general and administrative expenses~~increased by$2.0 million. This increase primarily reflects an increase in bad debt expense, partially offset by decreases in employee and compensation costs and travel and entertainment costs.~~

•~~Amortization of intangible assets~~ ~~increased due to additional intangibles acquired in connection with our acquisition of Centina in the first quarter of fiscal 2020.~~

•~~Significant asset impairments and restructuring costs~~ ~~reflect global workforce reductions as part of a business optimization strategy to improve gross margin, constrain operating expense, and redesign certain business processes.~~

•~~Acquisition and integration costs (recoveries)~~ reflect employment-related costs and recoveries of acquisition consideration associated with a three-year earn-out arrangement related to the DonRiver acquisition and, legal, employee-related and other costs related to our acquisition of Centina in the first quarter of fiscal 2020.

~~Other items~~

~~The table below sets forth the changes in other items for the periods indicated (in thousands, except percentage data):~~

Nine Months Ended
August 1, 2020 %* August 3, 2019 %* Increase (decrease) %**
Interest and other income, net $ 1,213 — $ 5,059 0.2 $ (3,846) (76.0)
Interest expense $ 23,926 0.9 $ 28,316 1.1 $ (4,390) (15.5)
Loss on extinguishment and modification of debt $ 646 — $ — — $ 646 100.0
Provision for income taxes $ 73,872 2.7 $ 57,204 2.2 $ 16,668 29.1

* Denotes % of total revenue

** Denotes % change from 2019 to 2020

•Interest and other income (loss), netdecreased by $2.8 million, primarily ~~reflects~~reflecting lower interest income due to reduced interest rates on our investments partially offset by the impact of foreign exchange rates on assets and liabilities denominated in a currency other than the relevant functional currency, net of hedging activity.

•Interest expense decreased by $1.0 million, primarily due to a reduction of LIBOR rates impacting our new senior secured term loan, entered into on January 23, 2020, in an aggregate principal amount of $693.0 million and maturing on September 28, 2025 (the “2025 Term ~~Loan.~~Loan”).

•Loss on extinguishment and modification of debt reflects the refinance of our ~~Old 2025 Term Loan into our New~~ 2025 Term Loan in the first quarter of fiscal 2020.

•Provision for income taxes ~~increased,~~decreased by $137.1 million, primarily due to ~~higher earnings~~the $124.2 million tax benefit associated with recording a deferred tax asset for the first nine months of fiscal ~~2020.~~2021. The effective tax rate for the first nine months of fiscal ~~2020~~2021 was lower as compared to the first nine months of fiscal ~~2019,~~2020, primarily due to ~~reduced BEAT and~~ the ~~effect~~tax benefit associated with recording a deferred tax asset. For further discussion, see Note 7 to our Condensed Consolidated Financial Statements included in Item 1 of ~~the final regulations released on December 2, 2019.~~Part I of this report.

Segment Profit (Loss)

The table below sets forth the changes in our segment profit (loss) for the respective periods (in thousands, except percentage data):


		Quarter Ended										Quarter Ended						Nine Months Ended
		August 1, 2020		August 3, 2019		Increase (decrease)		%*		July 31, 2021		August 1, 2020		%*		July 31, 2021		August 1, 2020		%*
Segment profit (loss):	Segment profit (loss):								Segment profit (loss):
Networking Platforms	Networking Platforms	$	262,801	$	230,610	$	32,191	14.0	Networking Platforms	$	244,535	$	262,801	(7.0)	%	$	612,378	$	642,057	(4.6)	%
Platform Software and Services	Platform Software and Services	$	24,299	$	14,251	$	10,048	70.5	Platform Software and Services	$	31,526	$	24,299	29.7	%	$	95,692	$	74,918	27.7	%
Blue Planet Automation Software and Services	Blue Planet Automation Software and Services	$	(5,316)	$	(8,222)	$	2,906	(35.3)	Blue Planet Automation Software and Services	$	(3,243)	$	(5,316)	39.0	%	$	11	$	(12,828)	100.1	%
Global Services	Global Services	$	52,676	$	47,833	$	4,843	10.1	Global Services	$	55,507	$	52,676	5.4	%	$	147,567	$	151,744	(2.8)	%

* Denotes % change from ~~2019~~2020 to 2021

Segment profit (loss) includes CEWS benefits of $0.7 million in the third quarter of fiscal 2021 and $36.5 million in the first nine months of fiscal 2021, net of certain fees. For further discussion of benefits from the CEWS program, see Note 4 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

Quarter ended July 31, 2021 as compared to the quarter ended August 1, 2020

•Networking Platforms segment profit ~~increased,~~decreased by $18.3 million, primarily due to ~~higher gross margin and higher~~lower sales volume as described above and ~~lower~~higher research and development ~~costs.~~costs, partially offset by improved gross margin.

•Platform Software and Services segment profit increased by $7.2 million, primarily due to higher sales volume, partially offset by higher research and development costs.

•Blue Planet Automation Software and Servicessegment loss decreased by $2.1 million, primarily due to higher sales volume and higher gross margin on software platform sales, partially offset by lower gross margin on software-related services.

•Global Services segment profit increased by $2.8 million, primarily due higher sales volume, partially offset by reduced gross margin, as described above.

Nine months ended July 31, 2021 as compared to the nine months ended August 1, 2020

•Networking Platforms segment profit decreased by $29.7 million, primarily due to lower sales volume as described above, partially offset by a CEWS benefit of $30.4 million and improved gross margin.

•Platform Software and Services segment profit increased by $20.8 million, primarily due to higher sales volume, a CEWS benefit of $2.6 million, and improved gross margin as described above.

•Blue Planet Automation Software and Services segment ~~loss~~profit ~~decreased,~~increased by $12.8 million, primarily due to ~~improved gross margin,~~ higher sales volume, higher gross margin on software platform sales, and a CEWS benefit of $1.2 million, partially offset by lower ~~research and development costs.~~gross margin on software-related services.

•Global Services segment profit ~~increased,~~decreased by $4.2 million, primarily due to ~~improved gross margin, as described above.~~

Nine Months Ended
August 1, 2020 August 3, 2019 Increase (decrease) %*
Segment profit:
Networking Platforms $ 642,057 $ 542,391 $ 99,666 18.4
Platform Software and Services $ 74,918 $ 47,192 $ 27,726 58.8
Blue Planet Automation Software and Services $ (12,828) $ (16,210) $ 3,382 (20.9)
Global Services $ 151,744 $ 142,515 $ 9,229 6.5

* Denotes % change from 2019 to 2020

•~~Networking Platforms segment profit~~ ~~increased, primarily due to higher sales volume and higher~~reduced gross margin as described above, ~~and lower research and development costs.~~

•~~Platform Software and Services segment profit~~ ~~increased, primarily due to higher sales volume, as described above, and lower research and development costs, partially offset by reduced gross margin on software-related services.~~

•~~Blue Planet Automation Software and Servicessegment loss~~ ~~decreased, primarily due to higher gross margin on software-related services and higher sales volume,~~ partially offset by higher ~~research~~sales volume and ~~development costs and lower gross margin on product sales.~~a CEWS benefit of $2.3 million.

•~~Global Services segment profit~~ ~~increased, primarily due to improved gross margin as described above.~~

4236

Liquidity and Capital Resources

Overview. For the nine months ended ~~August 1, 2020,~~July 31, 2021, we generated ~~$306.4~~$286.8 million of cash in operating activities, which included $40.1 million of cash from ~~operating activities, as our~~a CEWS benefit. Our net income (adjusted for non-cash charges) of ~~$558.6~~$451.9 million exceeded our working capital requirements of ~~$252.2~~$165.1 million. For additional details, ~~on our cash provided by operating activities,~~ see ~~the discussion below entitled~~ “Cash Provided By Operating ~~Activities.”~~Activities” below. For further information relating to our receipt of amounts under the CEWS program, see Note 4 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

Cash, cash equivalents and investments increased by ~~$140.2~~$151.8 million during the first nine months of fiscal ~~2020. In addition to the~~2021. The cash from ~~operating activities mentioned~~operations above ~~proceeds from the issuance of equity under our employee stock purchase plans provided $28.0 million in cash during the nine months ended August 1, 2020. Partially offsetting the increase in cash were~~was partially offset by the following items: (i) cash used to fund our investing activities for capital expenditures totaling ~~$61.3~~$67.3 million; (ii) ~~cash used for the acquisition of Centina of $28.3 million; (iii)~~ cash used for stock repurchases under our stock repurchase program of ~~$74.5~~$64.6 million; and ~~(iv)~~(iii) stock repurchases on vesting of our stock unit awards to employees relating to tax withholding of ~~$26.3~~$36.5 million. Proceeds from the issuance of equity under our employee stock purchase plan provided $28.3 million in cash during the nine months ended July 31, 2021.

August 1,
2020 November 2,
2019 Increase
(decrease)
Cash and cash equivalents $ 1,093,749 $ 904,045 $ 189,704
Short-term investments in marketable debt securities 70,404 109,940 (39,536)
Long-term investments in marketable debt securities — 10,014 (10,014)
Total cash and cash equivalents and investments in marketable debt securities $ 1,164,153 $ 1,023,999 $ 140,154
The following table sets forth changes in our cash and cash equivalents and investments in marketable debt securities for the respective periods (in thousands):


	July 31, 2021		October 31, 2020		Increase (decrease)
Cash and cash equivalents	$	1,230,441	$	1,088,624	$	141,817
Short-term investments in marketable debt securities	182,010		150,667		31,343
Long-term investments in marketable debt securities	60,888		82,226		(21,338)
Total cash and cash equivalents and investments in marketable debt securities	$	1,473,339	$	1,321,517	$	151,822

Principal Sources of Liquidity. Our principal sources of liquidity on hand include our cash, cash equivalents and investments, which as of ~~August 1, 2020~~July 31, 2021 totaled ~~$1,164.2 million,~~$1.5 billion, as well as the senior secured asset-backed revolving credit facility to which we and certain of our subsidiaries are parties (the “ABL Credit Facility”). The ABL Credit Facility provides for a total commitment of ~~$300~~$300.0 million with a maturity date of October 28, 2024. We principally use the ABL Credit Facility to support the issuance of letters of credit that arise in the ordinary course of our business and thereby to reduce our use of cash required to collateralize these instruments. As of ~~August 1, 2020,~~July 31, 2021, letters of credit totaling ~~$78.6~~$84.6 million were collateralized by our ABL Credit Facility. There were no borrowings outstanding under the ABL Credit Facility as of ~~August 1, 2020.~~July 31, 2021.

Foreign Liquidity. ~~The amount of cash,~~Cash, cash equivalents, and short-term investments held by our foreign subsidiaries was ~~$96.4~~$254.9 million as of ~~August 1, 2020.~~July 31, 2021. We intend to reinvest ~~indefinitely~~ our foreign ~~earnings.~~earnings indefinitely. If we were to repatriate the accumulated historical foreign earnings, the estimated amount of unrecognized deferred income tax liability related to foreign withholding taxes would be approximately ~~$28.0~~$26.0 million.

Stock Repurchase Authorization. On December 13, 2018, we announced that the Board of Directors authorized a program to repurchase up to ~~$500~~$500.0 million of ~~its~~our common stock, which replaced in its entirety the previous stock repurchase program authorized in fiscal 2018. In light of the uncertainty surrounding the duration and severity of potential macroeconomic impacts of COVID-19, on March 17, 2020, westock. After temporarily ~~suspended purchases~~suspending repurchases of our common stock ~~under this program.~~ during fiscal 2020, we reinstituted our stock repurchase program in the first quarter of 2021. We repurchased ~~$74.5~~$65.4 million under this program during the first nine months of fiscal ~~2020,~~2021, and had ~~$275.4~~$210.0 million remaining under the current authorization as of ~~August 1, 2020.~~July 31, 2021. The ~~reinstatement of the program and~~ amount and timing of repurchases are subject to a variety of factors including liquidity, cash flow, stock price and general business and market conditions. The program may be reinstated, modified, suspended, or discontinued at any time.

Liquidity Position. Based on past performance and current expectations, we believe that cash from operations, cash, cash equivalents, investments, and other sources of liquidity, including our ABL Credit Facility, will satisfy our working capital needs, capital expenditures, and other liquidity requirements associated with our operations through at least the next 12 months. We regularly evaluate our liquidity position, debt obligations, and anticipated cash needs to fund our operating or investment plans, and will continue to consider capital raising and other market opportunities that may be available to us. We regularly evaluate alternatives to manage our capital structure and market opportunities to enhance our liquidity and provide further operational and strategic flexibility. While the COVID-19 pandemic has not materially impacted our liquidity and capital resources to date, it has led to disruptions and volatility in capital markets and credit markets. The duration and severity of any further economic or market impact of the COVID-19 pandemic remains uncertain and there can be no assurance that it will not have an adverse effect on our liquidity and capital resources, including our ability to access capital markets, in the future.

Cash Provided By Operating Activities

The following sections set forth the components of our ~~$306.4~~$286.8 million of cash provided by operating activities during the first nine months of fiscal ~~2020:~~

2021:

Net income (adjusted for non-cash charges)

The following table sets forth our net income (adjusted for non-cash charges) during the period (in thousands):


	Nine Months Ended
	~~August 1, 2020~~July 31, 2021
Net income	$	~~296,250~~396,697
Adjustments for non-cash charges:


Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements	~~70,370~~71,918
Share-based compensation costs	~~50,838~~62,970
Amortization of intangible assets	~~29,035~~
~~Deferred taxes~~	~~57,636~~27,341
Provision for inventory excess and obsolescence	~~20,176~~13,460
Provision for warranty	~~19,172~~12,726
Deferred taxes	(139,543)
Other	~~15,085~~6,350
Net income (adjusted for non-cash charges)	$	~~558,562~~451,919

Working Capital

We used ~~$252.2~~$165.1 million of cash for working capital during the period. The following table sets forth the major components of the cash used in working capital (in thousands):


	Nine Months Ended
	~~August 1, 2020~~July 31, 2021
Cash used in accounts receivable	$	~~(6,688)~~(163,149)
Cash used in inventories	~~(39,568)~~(38,821)
Cash used in prepaid expenses and other	~~(52,945)~~(17,272)
Cash ~~used in~~provided by accounts payable, accruals and other obligations	~~(131,647)~~31,388
Cash ~~used in~~provided by deferred revenue	~~(19,039)~~24,969
Cash used in operating lease assets and liabilities, net	~~(2,316)~~(2,278)
Total cash used for working capital	$	~~(252,203)~~(165,163)

As compared to the end of fiscal ~~2019:~~2020:

•The ~~$6.7~~$163.1 million of cash used byin accounts receivable during the first nine months of fiscal ~~2020~~2021 reflects increased sales volume ~~partially offset by increased cash collections;~~at the end of the third quarter of fiscal 2021;

•The ~~$39.6~~$38.8 million of cash used in inventories during the first nine months of fiscal ~~2020~~2021 primarily reflects increases in ~~finished goods to meet customer delivery schedules and~~raw materials inventory related to ~~some of~~ the ~~actions that~~steps we ~~took during the second and third quarters of fiscal 2020~~are taking to mitigate the ~~risk~~impact of ~~adverse~~current supply chain ~~impact on our business~~constraints and ~~operations due to COVID-19 related disruptions;~~the global market shortage of semiconductor parts described in “Overview” above;

•The ~~$52.9~~$17.3 million of cash used in prepaid expense and other during the first nine months of fiscal ~~2020~~2021 primarily reflects increases in ~~upfront future discounts paid to customers~~contract assets and ~~higher non-customer receivables;~~increases in foreign currency forward contracts;

•The ~~$131.6~~$31.4 million of cash ~~used in~~provided by accounts payable, accruals and other obligations during the first nine months of fiscal ~~2020~~2021 primarily reflects ~~the timing of payments for bonuses to employees~~higher provisions under our annual cash incentive compensation plan, and ~~inventory purchases;~~increased income taxes payable;

•The ~~$19.0~~$25.0 million of cash ~~used in~~provided by deferred revenue during the first nine months of fiscal ~~2020~~2021 represents ~~a decrease~~an increase in advanced payments received from customers prior to revenue recognition; and

•The $2.3 million of cash used in operating lease assets and liabilities, net, during the first nine months of fiscal ~~2020~~2021 represents cash paid for operating ~~leases.~~lease payments in excess of operating lease costs. For more details, see Note 15 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

Our days sales outstanding (“DSOs”) for the first nine months of fiscal ~~2020~~2021 were 81102 days, and our inventory turns for the first nine months of fiscal ~~2020~~2021 were ~~4.5.~~3.9. The calculation of DSOs includes accounts receivables, net and contract assets for unbilled receivables, net included in prepaid expenses and other.

Cash Paid for Interest

The following table sets forth the cash paid for interest during the period (in thousands):


	Nine Months Ended
	~~August 1, 2020~~July 31, 2021
~~Term Loan due September 28, 2025 (Old)~~ ⁽¹⁾	$	~~6,691~~
Term Loan due September 28, 2025 ~~(New)~~ ⁽²⁾(1)	~~8,926~~$	9,754
Interest rate swaps⁽³⁾(2)	~~4,762~~7,520
ABL Credit Facility⁽⁴⁾(3)	~~1,320~~1,447
Finance leases	~~3,579~~3,671
Cash paid during period	$	~~25,278~~22,392

⁽¹⁾Interest on the Old 2025 Term Loan was payable periodically based on the interest period selected for borrowing. The Old 2025 Term Loan bore interest at LIBOR for the chosen borrowing period plus a spread of 2.00% subject to a minimum LIBOR rate of 0.00%. On January 23, 2020, we refinanced and replaced this term loan with the New 2025 Term Loan. See Note 16 to our Condensed Consolidated Financial Statements included in Item I of Part I of this report for more information.

⁽²⁾~~Interest on the New~~ 2025 Term Loan is payable periodically based on the interest period selected for borrowing. The ~~New~~ 2025 Term Loan bears interest at LIBOR for the chosen borrowing period plus a spread of 1.75% subject to a minimum LIBOR rate of 0.00%. At the end of the third quarter of fiscal ~~2020,~~2021, the interest rate on the ~~New~~ 2025 Term Loan was ~~1.94%~~1.83%.

⁽³⁾(2) The interest rate swaps fix the LIBOR rate for $350.0 million of the ~~New~~ 2025 Term Loan at 2.957% through September 2023.

⁽⁴⁾(3) During the first nine months of fiscal ~~2020,~~2021, we utilized the ABL Credit Facility to collateralize certain standby letters of credit and paid ~~$1.3~~$1.4 million in commitment fees, interest expense and other administrative charges relating to the ABL Credit Facility.

Contractual Obligations

There have been no material changes to our contractual obligations since ~~November 2, 2019.~~October 31, 2020. For a summary of our contractual obligations, see Item 7 of Part II of our ~~2019~~2020 Annual Report.

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet financing arrangements. In particular, we do not have any equity interests in so-called limited purpose entities, which include special purpose entities (SPEs) and structured finance entities.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expense, and related disclosure of contingent assets and liabilities. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. On an ongoing basis, we reevaluate our estimates, including those related to revenue recognition, share-based compensation, bad debts, inventories, intangible and other long-lived assets, goodwill, income taxes, warranty obligations, restructuring, derivatives and hedging, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. The inputs into certain of our judgments, assumptions, and estimates reflect, among other things, the information available to us regarding the economic implications of the COVID-19 pandemic, and expectations as to its impact on our business and on our critical and significant accounting estimates. Among other things, these estimates form the basis for judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions. To the extent that there are material differences between our estimates and actual results, our consolidated financial statements will be affected. In addition, ~~including~~ because the duration, severity, and ~~severity~~impact of the COVID-19 pandemic ~~are~~remain uncertain, certain of our estimates could require further judgment or modification, and therefore carry a higher degree of variability and volatility. As events continue to evolve, our estimates may change materially in future periods.

~~Our~~Except for items listed below, our critical accounting policies and estimates have not changed materially since ~~November 2, 2019, except for items listed below.~~October 31, 2020. For a discussion of our critical accounting policies and estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of our ~~2019~~2020 Annual Report.

~~Leases~~Deferred Tax Assets

~~For our lease accounting policies due~~Pursuant to ASC ~~842,~~Topic 740, Income Taxes, we maintain a valuation allowance for a deferred tax asset when it is deemed to be more likely than not that some or all of the deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent on the generation of future taxable income (including the reversals of deferred tax liabilities) during the periods in which those deferred tax assets will become deductible. In evaluating whether a valuation allowance is required under such rules, we consider all available positive and negative evidence, including prior operating results, the nature and reason for any losses, our forecast of future taxable income, utilization of tax planning strategies, and the dates on which any deferred tax assets are expected to expire. These assumptions and estimates require a significant amount of judgment and are made based on current and projected circumstances and conditions.

Quarterly, we perform an analysis to determine the likelihood of realizing our deferred tax assets and whether sufficient evidence exists to support reversal of all or a portion of the valuation allowance. The valuation allowance balances at July 31, 2021 and October 31, 2020 were $159.2 million and $151.4 million, respectively. The corresponding net deferred tax assets were $784.7 million and $647.8 million, respectively. We will continue to evaluate future financial performance to determine whether such performance is both sustained and significant enough to provide sufficient evidence to support reversal of all or a portion of the remaining valuation allowance. The value of our net deferred tax asset may be subject to change in the future, depending on our generation or projections of future taxable income, as well as changes in tax policy or our tax planning strategy.

In the third quarter of fiscal 2021, we completed an internal transfer of certain of our non-U.S. intangible assets, which created amortizable tax basis resulting in the discrete recognition of a $124.2 million deferred tax asset with a corresponding tax benefit. The recognition of the deferred tax asset from the internal transfer of the non-U.S. intangible assets requires management to make significant estimates and assumptions to determine the fair value of the intangible assets transferred and judgments concerning the jurisdiction where the deferred tax asset will be recovered. Critical estimates in valuing the intangible assets include, but are not limited to, internal revenue and expense forecasts, the estimated life of the intangible assets, and discount rates, which are affected by expectations about future market or economic conditions. Although we believe the assumptions and estimates we have made are reasonable and appropriate, they are based, in part, on historical experience and are inherently uncertain. Unanticipated events and circumstances may occur that could affect either the accuracy or validity of such assumptions, estimates or actual results. For further discussion, see ~~Notes~~Note 7 to our Condensed Consolidated Financial Statements included in Item I of Part I of this report.

Allowance for Credit Losses for Accounts Receivable and Contract Assets

See Note 2 ~~and 15~~ to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this ~~report.~~report for information regarding the change in our allowance for credit losses for accounts receivable and contract assets accounting policies as a result of our adoption of ASU 2016-13, Financial Instruments - Credit Losses.

Effects of Recent Accounting Pronouncements

See Note 2 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report for information relating to our discussion of the effects of recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. For a discussion of quantitative and qualitative disclosures about market risk, see Item 7A of Part II of our ~~2019~~2020 Annual Report.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any significant impact to our internal control over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. The design of our processes and controls allow for remote execution with secure accessibility to data. We are continually monitoring and assessing the COVID-19 situation to minimize the impact, if any, on the design and operating effectiveness on our internal controls.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

The information set forth under the heading “Litigation” in Note 21, Commitments and Contingencies, to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report, is incorporated herein by reference.

Item 1A. Risk Factors

Investing in our securities involves a high degree of risk. Before investing in our securities, you should consider carefully the information contained in this report and in our ~~2019~~2020 Annual Report, including the risk factors identified in Item 1A of Part I thereof (Risk Factors). This report contains forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements” in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” above. Our actual results could differ materially from those contained in the forward-looking statements. Any of the risks discussed in our ~~2019~~2020 Annual Report, in this report, in other reports we file with the SEC, and other risks we have not anticipated or discussed, could have a material adverse impact on our business, financial condition or results of operations. Except as set forth below, there has been no material change to our Risk Factors from those presented in our ~~2019~~2020 Annual Report.

~~The COVID-19 pandemic has impacted~~Our reliance on third-party component suppliers, including sole and limited source suppliers, exposes our business to additional risk and could limit our sales, increase our costs and harm our customer relationships. Challenges relating to current supply chain constraints, including semiconductor components, could adversely impact our growth, gross margins and financial results.

We maintain a global sourcing strategy and depend on a diverse set of third-party suppliers in international markets that comprise our supply chain. We rely on these third parties for activities relating to product design, development and support, and in the sourcing of products, components, subcomponents and related raw materials. Our products include optical and electronic components for which reliable, high-volume supply is often available only from sole or limited sources. We do not have any guarantees of supply from our third-party suppliers, and in certain cases we have limited contractual arrangements or are relying on standard purchase orders. As a result, there is no assurance that we will be able to secure the components or subsystems that we require, in sufficient quantity and quality, and on reasonable terms.

The loss of a source of supply, or lack of sufficient availability of key components, could require that we locate an alternate source or redesign our products, either of which could result in business interruption and increased costs. Increases in market demand or scarcity of raw materials or components have resulted, and may in the future result, in shortages in availability of important components for our solutions, supply allocation challenges, deployment delays and increased cost, lead times and delivery cycle timelines. There are a number of significant technology trends or developments underway or emerging – including the Internet of Things, autonomous vehicles, and advances in mobile communications such as the emergence of 5G – that have previously resulted in, and can be expected in the future to result in, increased market demand for key raw materials or components upon which we rely.

By way of example, due to increased demand across a range of industries, the global supply chain for certain raw materials and components, including the semiconductor components used in most of our products, has experienced significant strain in recent periods. This constrained supply environment has adversely affected, and could further affect, availability, lead times and cost of components. These conditions have impacted lead times for our products, and could impact our ability to meet customer demand where we cannot timely secure supply of these components. In an effort to mitigate these risks, in some cases, we have incurred higher costs to secure available inventory, or have extended or placed non-cancellable purchase commitments with semiconductor suppliers, which introduces inventory risk if our forecasts and assumptions prove inaccurate. Despite our attempts to mitigate the impact on our business, these constrained supply conditions are expected to adversely impact our costs of goods sold, including our ability to continue to reduce the cost to produce our products in a manner consistent with prior

periods. In addition, some suppliers have indicated that as a result of current shortages they intend to cease manufacture of certain components used in our products. These supply chain constraints and their related challenges, which are expected to persist through at least the first half of fiscal 2022, could result in shortages, increased material costs or use of cash, engineering design changes, and delays in new product introductions, each of which could adversely impact our growth, gross margin, and financial results.

These conditions and other industry, market and regulatory disruptions and challenges affecting our suppliers could expose our business to increased costs, loss or lack of supply, or discontinuation of components, lost revenue, increased lead times and deployment delays that could harm our business, results of ~~operation~~operations and customer relationships.

The resurgence of COVID-19 in countries where we or our supply chain partners have operations could have a material adverse effect on our business, results of operations and financial ~~condition in the future.~~condition.

~~On January 30, 2020,~~New and potentially more contagious variants of the ~~World Health Organization (“WHO”) declared a global emergency due to the outbreak of~~ COVID-19 and on March 11, 2020, the WHO characterized COVID-19 as a pandemic. Unprecedented actions have been taken by governments globally to try to contain the pandemic, such as travel bans and restrictions, business closures, social distancing measures, quarantines and shelter-in-place orders. This pandemic and these countermeasures to contain the virus ~~have caused economic and financial disruptions globally,~~are developing in several countries, including ~~in most of the~~ regions in which we ~~sell our products and services and conduct our business~~have significant operations. In the second quarter of fiscal 2020, the COVID-19 pandemic adversely impacted our financial results and business operations, primarily due to supply chain disruptions, limitations on customer fulfillment activity and our level of success in obtaining new customers or selling into recent customer design wins on their original timelines. During the third quarter of fiscal 2020, our order volumes declined significantly from the previous quarter and were meaningfully below our quarterly revenue as we experiencedWe operate a more cautious customer spending and customer delays in operationalizing network projects that we anticipated. The magnitude and duration of disruption from the COVID-19 pandemic, and its impact on global business activity and our business and operations remains uncertain and could worsen.

~~Employees~~

As a result of the COVID-19 pandemic, we have temporarily closed Ciena offices globally, implemented travel restrictions and withdrawn from industry events. Our transition from existing flexible working arrangements to a work from home policy for most of our employees could impact the ability of our employees to advancelarge research and development ~~projects as efficiently or productively as they could~~facility in Gurgaon, India and have significant headcount there across a ~~lab environment or office setting. The extent~~range of functions, including research and ~~duration~~development, information technology, finance and accounting, and operations. In March 2021, a new, serious outbreak of ~~ongoing workplace restrictions~~COVID-19 began affecting India, which led to a significant spike in illness and ~~limitations could adversely impact our ability to continue to push~~death rates and put a significant strain on the ~~pace of innovation~~healthcare infrastructure in our industry. Continued restrictions on travel and limitations on interaction with customers, such as field and lab trials, may impact our sales and marketing activities, including our ability to secure new customers, to qualify and sell new products, or to grow sales with customers where or with whom we do not have a longer-standing supply relationship, such as within international markets and for our Blue Planet Automation Software & Services segment and our Packet Networking product line.

~~Supply Chain~~

~~Also as a result of the COVID-19 pandemic, we have experienced some disruption and delays in our global supply chain and related operations.~~India. We rely on third-party manufacturing operations in Mexico, Thailand, the United States and Canada. We also rely on a global component supply network involving many vendors and countries throughout the world. During the second quarter of fiscal 2020, some of our component suppliers – particularly those with facilities in China and Malaysia – experienced challenges related to COVID-19 that resulted in temporary closures or reductions of supply capacity. During the third quarter of fiscal 2020, we took a number of steps, some of which remain ongoing, including multi-sourcing and pre-ordering components and finished goods inventory, in an effort to reduce the impact of the adverse supply chain conditions we experienced. However, there can be no assurance that supply chain disruptions will not continue, or worsen, in the future. Limits on manufacturing availability or capacity, or delays in production or delivery of components or raw materials, due to COVID-related restrictions could delay or inhibit our ability to obtain supply of components and produce finished goods. If the

COVID-19 pandemic worsens, it could also result in further disruptions or restrictions on our ability to source, manufacture or distribute our products, including temporary closures of our key manufacturing facilities, or the facilities of our suppliers and their manufacturers. If we experience more pronounced disruptions in our operations, we may experience constrained supply that may materially adversely impact our business and results of operations in future periods.

~~Services and Customer Fulfillment~~

We have experienced some disruption in our ability to provide installation, professional and fulfillment services to customers during the COVID-19 pandemic due to site access limitations, limited customer availability, project delays or re-prioritization by customers, and travel bans or restrictions on movement or gatherings, which adversely impacted revenue. We have also experienced transportation disruptions, such as reduced availability of air transport, port closures, and increased border controls or closures. These conditions have also made it more challenging to execute and adversely impacted the timing of customer plans to operationalize newer projects and recent customer design wins, primarily in international markets. We expect these conditions to persist in the short-term, adversely impacting our revenue and results of operations. If any of these logistics or transportation disruptions persist for longer periods or worsen, our operations and ability to meet customer demand could be materially adversely affected. Our customers have also experienced, and may continue to experience, disruptions in their operations, which can result in delayed, reduced, or canceled orders, and increased collection risks, and which may adversely affect our results of operations.

~~Demand for Products and Services~~

~~During the second quarter of fiscal 2020, we~~ experienced higher than ~~typical orders~~normal levels of employee absenteeism due to illness or employees caring for family members. In addition, the Indian government reinstated lockdowns and other restrictions, limiting in certain cases the movement of our products and services among a concentrated set of larger customers with whom we had existing positions as a supplier. At that time, we believed that some portion of these orders likely reflected short-term purchasing behaviors based on customer-specific considerations inemployees. COVID-19 variants continue to impact other countries, including the ~~face~~United States. If there is any further deterioration of the pandemic, including: customer concerns about future continued availability of supply; implementation of customer business continuity actions; our desire for increased visibility into expected demand; customer consumption of their existing inventory or spare equipment; additional network capacity requirements; acceleration of capital spending; and, possibly, increased bandwidth demands being placed on networks due to the pandemic. During the third quarter of fiscal 2020, our order volumes declined significantly from the previous quarter, particularly within our communications service provider and cable operator customers,situation in the face of continued economic uncertainty stemming from COVID-19. With respect to these customer segments in particular, we believe that this greater capital expenditure restraint stems from the deferral or re-prioritization of certain new network initiatives and continued uncertainty associated with the impact of the pandemic and economic uncertainty upon their enterprise business segments. As a result, our quarterly order volumes were meaningfully below revenue during the third quarter of fiscal 2020, challenging our visibility and the outlook for our orders and revenue in future periods. In the near-term, we expect this more cautious spending environment to continue into the fourth quarter of fiscal 2020 and, likely, periods thereafter in fiscal 2021. We expect these conditions to continue to adversely affect our order volumes and to adversely impact revenue in the short term, with revenue for our fourth fiscal quarter expected to decline meaningfully on a sequential and year-over-year basis. In addition, as our customers and their customers evaluate the ways in which networks and working environments will change even after the pandemic subsides, there may be long-lasting changes in customer behaviors and needs, including the end-users of our customers, which may impact the demand for our products and services in the long-term.

~~Market and Economic Conditions~~

~~Our business and operating results depend significantly on general market and economic conditions. Market volatility and weakness in the regions in which~~countries where we operate ~~have previously resulted in sustained periods of decreased demand~~or if the current situation persists for an extended period, our ~~products~~employees and services, which has adversely affected our operating results. Macroeconomic and market conditions could be adversely affected by a variety of political, economic or other factors, including long-term factors emerging from the effects of the pandemic in the United States and international markets, which could in turn adversely affect spending levels of our customers and their end users, and could create volatility or deteriorating conditions in the markets in which we operate. Due to our concentration of revenue in the United States, and the increasing concentration of our customers experienced in the second and third quarters of fiscal 2020, we would expect to incur a more significant impact from any adverse change in the capital spending environment or macroeconomic or market weakness in the United States.

As a result of continued economic uncertainty stemming from the pandemic, during the third quarter of fiscal 2020 we experienced a significant reduction in our order volumes, as compared to our revenue, and a reduction in our short-term outlook for our orders and revenue. We believe that ongoing concerns relating to the pandemic, and its impact on the enterprise business segments of our communications service provider and cable operator customers continue to adversely impact the velocity of business in general, with a particular impact on customer willingness and ability to initiate new network projects. We believe customers are exercising greater restraint in these projects, and more carefully prioritizing where and when to add network

capacity. Delays in operationalizing new network projects that we anticipated have also adversely affected our expectations for revenue in the future. As a result of these dynamics, we expect the growth rates in our addressable markets to slow and the overall market growth to be flat to down in 2020 as compared to 2019, which we expect to adversely impact our revenue in the near term. We expect these market dynamics, including constrained customer spending and the decreased velocity of new business execution, to persist through the fourth quarter of fiscal 2020 and, likely, periods thereafter in fiscal 2021. If these dynamics persist for longer periods or worsen, our revenue and operating results could be materially adversely affected.

While the COVID-19 pandemic has not materially impacted our liquidity and capital resources to date, it has led to increased disruption and volatility in capital markets and credit markets. The duration and severity of any further economic or market impact of the COVID-19 pandemic remains uncertain and there can be no assurance that it will not have an adverse effect on our liquidity and capital resources, including our ability to access capital markets, in the future. The inputs into certain of our judgments, assumptions, and estimates considered the economic implications of the COVID-19 pandemic on our critical and significant accounting estimates. The actual results that we experience may differ materially from our estimates. As the impact of COVID-19 pandemic continues, our estimates may carry a higher degree of variability and volatility, and, as events continue to evolve, our estimates may change materially in future periods. In addition, if COVID-19 impacts the financial position of our customers or resale channel partners, we may have difficulty collecting receivables, and our business and results of operations could be ~~exposed to risks associated with uncollectible accounts. Lack~~significantly impacted. The business continuity procedures we have implemented across a range of liquidity in the capital markets, macroeconomic weakness and market volatility, including disruption caused by the COVID-19 pandemic, may increase our exposure to these credit risks. Our attempts to monitor customer payment capability and to take appropriate measures to protect ourselvesfunctions may not be sufficient and ~~it is possible that~~the resurgence of COVID-19 in countries where we ~~may have to write down~~ or write off accounts receivable. Such write-downs or write-offs could negatively affect our operating results for the period in which they occur, and, if large, could have a material adverse effect on our revenue and operating results.

~~Other Factors~~

The situation relating to the COVID-19 pandemic and its potential effects on our business and financial results remains dynamic, including in our fourth quarter of fiscal 2020 and thereafter. The broader implications for our business and results of operations remain uncertain and will depend on many factors outside our control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development and availability of effective treatments and vaccines, the imposition of protective public safety measures, and the impact of the pandemic on the global economy and enterprise and consumer behaviors. If these and other effects of the COVID-19 pandemic, including its effect on broader economies, financial markets and overall demand environment for our products, continues or worsens, it could have a material adverse effect on our business, financial condition, results of operations, or cash flows.

The COVID-19 pandemic may also increase the likelihood and severity of other risks discussed in Item 1A of Part I of our 2019 Annual Report, including but not limited to risks related to competition, development of the market for and demand for our products, delays in the development and production of our products, reliance on third parties, our international scale, our exposure to currency exchange rate fluctuations and the credit risks of our customers and resellers, and volatility in the capital markets.

~~Our revenue, gross margin and operating results can fluctuate significantly and unpredictably from quarter to quarter.~~

Our revenue, gross margin and results of operations can fluctuate significantly and unpredictably from quarter to quarter. Our budgeted expense levels are based on our visibility into customer spending plans and our projections of future revenue and gross margin. Visibility into customer spending levels can be uncertain, spending patterns are subject to change, and reductions in our expense levels can take significant time to implement. A significant portion of our quarterly revenue is generated from customer orders received during that same quarter (which we refer to as “book to revenue”). Accordingly, our revenue for a particular quarter is difficult to predict, and a shortfall in expected orders in any given quarter can materially adversely affect our revenue and results of operations for that quarter or future quarterly periods. For example, our quarterly order volumes were meaningfully below revenue during the third quarter of fiscal 2020, challenging our visibility and the outlook for our orders and revenue in future periods. Additional factors that contribute to fluctuations in our revenue, gross margin and operating results include:

•~~changes in spending levels or network deployment plans by customers, particularly with respect to our service provider and Web-scale provider customers;~~

•~~order timing and volume, including book to revenue orders;~~

•~~shipment and delivery timing;~~

•~~backlog levels;~~

•~~the level of competition and pricing pressure in our industry;~~

•~~the pace and impact of price erosion that we regularly encounter in our markets;~~

•~~the impact of commercial concessions or unfavorable commercial terms required to maintain incumbency or secure new opportunities with key customers;~~

•~~the mix of revenue by product segment, geography and customer in any particular quarter;~~

•~~our level of success in achieving targeted cost reductions and improved efficiencies in~~ our supply ~~chain;~~

•~~our incurrence of start-up costs, including lower margin phases of projects required to support initial deployments, gain new customers or enter new markets;~~

•~~our level of success in accessing new markets and obtaining new customers;~~

•~~long- and short-term changing behaviors or customer needs that impact demand for our products and services or the products and services of our customers;~~

•~~technology-based price compression and our introduction of new platforms with improved price for performance;~~

•~~changing market, economic and political conditions, including the impact of tariffs and other trade restrictions or efforts to withdraw from or materially modify international trade agreements;~~

•~~factors beyond our control such as natural disasters, acts of war or terrorism, and epidemics, including the COVID-19 pandemic;~~

•~~the financial stability of our customers and suppliers;~~

•~~consolidation activity among our customers, suppliers and competitors;~~

•~~the timing of revenue recognition on sales, particularly relating to large orders;~~

•~~installation service availability and readiness of customer sites;~~

•~~availability of components and manufacturing capacity;~~

•~~adverse impact of foreign exchange; and~~

•~~seasonal effects in our business.~~

As a result of these factors and other conditions affecting our business and operating results, we believe that quarterly comparisons of our operating results are not necessarily a good indication of possible future performance. Quarterly fluctuations from the above factors may cause our revenue, gross margin and results ofchain partners have operations to underperform in relation to our guidance, long-term financial targets or the expectations of financial analysts or investors, which may cause volatility or decreases in our stock price. See the risk factor above entitled ~~“The COVID-19 pandemic has impacted our business and results of operation and~~ could have a material adverse effect on our business, results of operations and financial ~~condition in the future”~~ ~~for additional factors related to COVID-19 that could cause our revenue, gross margin and operating results to fluctuate.~~

A small number of customers account for a significant portion of our revenue. The loss of these customers or a significant reduction in their spending could have a material adverse effect on our business and results of operations.

A significant portion of our revenue is concentrated among a small number of customers. For example, our ten largest customers contributed 56.6% of our revenue for the nine months ended August 1, 2020 and 59.3% of our fiscal 2019 revenue, and we have seen a further concentration in our orders during the second and third quarters of fiscal 2020. Historically, our largest customers by revenue principally consisted of large communications service providers. For example, AT&T and Verizon accounted for approximately 11.3% and 10.0%, respectively, of our revenue for the nine months ended August 1, 2020, and 10.9% and 12.9%, respectively, of fiscal 2019 revenue. As a result of efforts in recent years to diversify our business, the customer segments and geographies that comprise our customer base and top customers by revenue have changed. During fiscal 2019, three Web-scale providers were among our top ten customers. Web-scale customers have been important contributors to our overall growth through both our direct sales to them, including for data center interconnection, and their indirect impact on purchases by other network operators. Consequently, our financial results and our ability to grow our business are closely correlated with the spending of a relatively small number of customers. Our business and results of operations could be materially adversely impacted by the loss of a large customer within or outside of these customer segments as well as by reductions in spending or capital expenditure budgets, changes in network deployment plans or changes in consumption models for acquiring networking solutions by our largest customers.

Because of our concentration of revenue with communications service providers and Web-scale providers, our business and results of operations can be significantly affected by market, industry or competitive dynamics adversely affecting these customer segments. For example, communications service providers continue to face a rapidly shifting competitive landscape as cloud service operators, “over-the-top” (OTT) providers, and other content providers challenge their traditional business models and network infrastructures. These dynamics have in the past had an adverse effect on network spending levels by certain of our largest service provider customers. Several of these, including AT&T, have announced various initiatives that seek to modify how they purchase networking infrastructure or reduce capital expenditures on network infrastructure in future periods that may adversely affect our results of operations. Similarly, certain of our largest Web-scale customers have announced an intention to reduce capital spending in future periods and we expect our revenue from this customer segment to moderate from the level achieved in fiscal 2019. Web-scale providers are also under consumer and government scrutiny and have been the subject of regulatory and other government actions, including antitrust investigations. There can be no assurance that these government

actions will not adversely impact the network spending, procurement strategies, or business practices of our Web-scale customers in a manner adverse to us. Our business and results of operations could be materially adversely affected by these factors and other market, industry or competitive dynamics adversely impacting our customers.

In addition, the negative effects of the COVID-19 pandemic on global economic conditions have affected and may continue to affect the network spending, procurement strategies, or business practices of our largest customers. For example, our service provider customers rely in part upon the sale of services to consumers and enterprises, including those in the retail, entertainment, and travel industries, which have been acutely impacted by the negative economic effects of the COVID-19 pandemic. Similarly, certain of our Web-scale customers have business models that heavily rely upon advertising revenue from enterprises, including those in industries acutely affected by the COVID-19 pandemic. If any of our large customers experience a loss in revenue due to the impact of COVID-19 on their consumer or enterprise customers, they may reduce capital spending on networking projects, including data centers, which could materially adversely affect our business and results of operations.

Our business and operating results could be adversely affected by unfavorable changes in macroeconomic and market conditions and reductions in the level of spending by customers in response to these conditions.

Our business and operating results depend significantly on general market and economic conditions. Market volatility and weakness in the regions in which we operate have previously resulted in sustained periods of decreased demand for our products and services, which has adversely affected our operating results. The current global macroeconomic environment is challenging and volatile, and is being significantly and adversely impacted by the COVID-19 pandemic. Macroeconomic and market conditions could also be adversely affected by a variety of political, economic or other factors in the United States and international markets, which could in turn adversely affect spending levels of our customers and their end users, and could create volatility or deteriorating conditions in the markets in which we operate. Due to our concentration of revenue in the United States, we would expect to incur a more significant impact from any adverse change in the capital spending environment or macroeconomic or market weakness in the United States. Macroeconomic uncertainty or weakness could result in:

•~~reductions in customer spending and delay, deferral or cancellation of network infrastructure initiatives;~~

•~~increased competition for fewer network projects and sales opportunities;~~

•~~increased pricing pressure that may adversely affect revenue, gross margin and profitability;~~

•~~decreased ability to forecast operating results and make decisions about budgeting, planning and future investments;~~

•~~increased overhead and production costs as a percentage of revenue;~~

•~~tightening of credit markets needed to fund capital expenditures by us or our customers;~~

•~~customer financial difficulty, including longer collection cycles and difficulties collecting accounts receivable or write-offs of receivables; and~~

•~~increased risk of charges relating to excess and obsolete inventories and the write-off of other intangible assets.~~

Each of our customers has a unique set of circumstances, and it is unclear how the macroeconomic and market conditions created by COVID-19 may continue to impact their purchasing volumes or behaviors. Reductions in customer spending in response to unfavorable or uncertain macroeconomic and market conditions, globally or in a particular region where we operate, would adversely affect our business, results of operations and financial condition.

~~COVID-19-related restrictions on travel and gatherings could adversely impact our ability to compete for business, particularly with customers where we are not an incumbent supplier.~~

Competition for sales of communications networking equipment, software and services is intense on a global basis, as we and our competitors aggressively seek to capture market share and displace incumbent equipment vendors. Our strategy is to leverage our technology leadership and to aggressively capture additional market share and displace competitors, particularly with communications service providers internationally. This market share capture has been an important contributor to our growth in recent years. Restrictions on travel and gatherings due to COVID-19 countermeasures have impacted our interaction with customers, and the timing of certain field and lab trials. Restrictions have impacted and may continue to impact our ability to carry out certain sales and marketing activities, and adversely impacted our ability to secure new customers, to qualify and sell new products, and to grow sales with customers where we do not have longer-standing supply relationships, including within our Blue Planet Automation Software and Services segment and our Packet Networking product line. If we fail to win new business or to compete successfully in our markets, our business and results of operations could suffer.

Investment of research and development resources in communications networking technologies for which there is not an adequate market demand, or failure to sufficiently or timely invest in technologies for which there is market demand, would adversely affect our revenue and profitability.

The market for communications networking hardware and software solutions is characterized by rapidly evolving technologies, changes in market demand and increasing adoption of software-based networking solutions. We continually invest in research and development to sustain or enhance our existing hardware and software solutions and to develop or acquire new technologies including new software platforms. There is often a lengthy period between commencing these development initiatives and bringing new or improved solutions to market. Accordingly, there is no guarantee that our new products, including our Blue Planet Automation Software and Services, or enhancements to other solutions, will achieve market acceptance or that the timing of market adoption will be as predicted. As a result of the COVID-19 pandemic, technology preferences, customer demand and the markets for our solutions may move in directions that we had not anticipated. As a general matter, there is a significant possibility that some of our development decisions, including significant expenditures on acquisitions, research and development, or investments in technologies, will not meet our expectations, and that our investment in some projects will be unprofitable. There is also a possibility that we may miss a market opportunity because we failed to invest or invested too late in a technology, product or enhancement sought by our customers or the markets into which we sell. Changes in market demand or investment priorities may also cause us to discontinue existing or planned development for new products or features, which can have a disruptive effect on our relationships with customers.

Restrictions on the ability of our research and development employees to work in our facilities, including in Canada, India and the United States, as a result of restrictions imposed by governments or us to combat the COVID-19 pandemic could reduce their effectiveness including, for example, by making it more difficult for them to collaborate as effectively in the development of new solutions. Failure to develop, on a cost-effective basis, innovative new or enhanced solutions that are attractive to customers and profitable to us could have a material adverse effect on our business, results of operations, financial condition and cash flows.

~~Our reliance on certain third-party suppliers exposes us to certain risks relating to their businesses and financial position that, in turn, could disrupt our business or limit our sales.~~

We are exposed to risks relating to unfavorable economic conditions, financial difficulties and a wide range of market, regulatory and industry challenges affecting the businesses, financial position and results of operations of our third-party suppliers of components and certain finished goods inventory. These challenges can affect their business in a number of ways, including material costs, sales, liquidity levels, ability to continue investing in their businesses, ability to import or export goods, ability to meet development commitments and manufacturing capability.

A number of our key technology vendors rely upon sales to customers, including our competitors, in China for a material portion of their revenue. Recently, there have been a number of significant geopolitical events, including trade tensions and regulatory actions, involving the governments of the United States and China. In May 2019, the U.S. Department of Commerce amended the Export Administration Regulations by adding Huawei Technologies Co., Ltd. and certain affiliates to the “Entity List” for actions contrary to the national security and foreign policy interests of the United States, imposing significant new restrictions on export, reexport and transfer of U.S. regulated technologies and products to Huawei. In August 2020, the U.S. Department of Commerce added additional Huawei affiliates to the Entity List, confirmed the expiration of a temporary general license applicable to Huawei and amended the foreign direct product rule in a manner that represents a significant expansion of its application to Huawei. Several of our third-party component suppliers, including certain sole and limited source suppliers, sell products to Huawei and, in some cases, Huawei is a significant customer for such suppliers. At this time, there can be no assurance regarding the scope or duration of these restrictions, including the foreign direct product rule, or further actions imposed on Huawei, and any future impact on our suppliers. Any continued restriction on our suppliers’ ability to make sales to Huawei may adversely impact their businesses and financial position. In addition, in January 2018, China’s Ministry of Industry and Information Technology released its Optoelectronic Devices Industry Technology Roadmap, a five-year plan to improve China’s capabilities in the optoelectronics industry. There can be no assurance that this initiative, or similar efforts in China such as the Made in China 2025 initiatives, will not have an adverse impact on the business of our suppliers or our access to necessary components. These and similar industry, market and regulatory disruptions affecting our suppliers could, in turn, expose our business to loss or lack of supply or discontinuation of components that could result in lost revenue, additional product costs, increased lead times and deployment delays that could harm our business and customer relationships. Our business and results of operations would be negatively affected if we were to experience any significant disruption or difficulties with key suppliers affecting the price, quality, availability or timely delivery of required components.

We rely on third-party contract manufacturers, and our business and results of operations may be adversely affected by risks associated with their businesses, financial condition and the geographies in which they operate.

We rely on third-party contract manufacturers with facilities in Mexico, Thailand, the United States and Canada to perform a substantial portion of our supply chain activities, including component sourcing, manufacturing, product testing and quality, and fulfillment and logistics relating to the distribution and support of our products. There are a number of risks associated with our dependence on contract manufacturers, including:

•~~reduced control over delivery schedules and planning;~~

•~~reliance on the quality assurance procedures of third parties;~~

•~~potential uncertainty regarding manufacturing yields and costs;~~

•~~availability of manufacturing capability and capacity, particularly during periods of high demand;~~

•risks and uncertainties associated with the locations or countries where our products are manufactured, including potential manufacturing disruptions caused by social, geopolitical, environmental or health factors, including pandemics or widespread health epidemics such as the COVID-19 pandemic;

•changes in U.S. law or policy governing tax, trade, manufacturing, development and investment in the countries where we currently manufacture our products, including the World Trade Organization Information Technology Agreement or other free trade agreements;

•~~inventory liability for excess and obsolete supply;~~

•~~limited warranties provided to us; and~~

•~~potential misappropriation of our intellectual property.~~

These and other risks could impair our ability to fulfill orders, harm our sales and impact our reputation with customers. If our contract manufacturers are unable or unwilling to continue manufacturing our products or components of our products, or if we experience a disruption of manufacturing or our contract manufacturers discontinue operations, we may be required to identify and qualify alternative manufacturers, which could cause us to be delayed in or unable to meet our supply requirements to our customers and result in the breach of our customer agreements. The process of qualifying a new contract manufacturer and commencing volume production is expensive and time-consuming, and if we are required to change or qualify a new contract manufacturer, we would likely experience significant business disruption and could lose revenue and damage our existing customer relationships. See the risk factor above entitled ~~“The COVID-19 pandemic has impacted our business and results of operation and could have a material adverse effect on our business, results of operations and financial condition in the future”~~ ~~for additional factors related to COVID-19 and our third-party contract manufacturers that could adversely affect our business and financial results.~~

~~The international scale of our sales and operations exposes us to additional risk and expense that could adversely affect our results of operations.~~

��We market, sell and service our products globally, maintain personnel in numerous countries, and rely on a global supply chain for sourcing important components and manufacturing our products. Our international sales and operations are subject to inherent risks, including:

•~~adverse social, political and economic conditions;~~

•~~effects of adverse changes in currency exchange rates;~~

•~~greater difficulty in collecting accounts receivable and longer collection periods;~~

•~~difficulty and cost of staffing and managing foreign operations;~~

•~~higher incidence of corruption or unethical business practices;~~

•~~less protection for intellectual property rights in some countries;~~

•~~tax and customs changes that adversely impact our global sourcing strategy, manufacturing practices, transfer-pricing, or competitiveness of our products for global sales;~~

•~~compliance with certain testing, homologation or customization of products to conform to local standards;~~

•significant changes to free trade agreements, trade protection measures, tariffs, export compliance, domestic preference procurement requirements, qualification to transact business and additional regulatory requirements; and

•~~natural disasters, acts of war or terrorism, and epidemics, including the COVID-19 pandemic.~~

Our international operations are subject to complex foreign and U.S. laws and regulations, including anti-bribery and corruption laws, antitrust or competition laws, data privacy laws, such as the EU General Data Protection Regulation, and environmental regulations, among others. In particular, recent years have seen a substantial increase in anti-bribery law enforcement activity by U.S. regulators, and we currently operate and seek to operate in many parts of the world that are recognized as having greater potential for corruption. Violations of any of these laws and regulations could result in fines and penalties, criminal sanctions against us or our employees, prohibitions on the conduct of our business and on our ability to offer our products and services in certain geographies, and significant harm to our business reputation. Our policies and procedures to ensure compliance with these laws and regulations and to mitigate these risks may not protect us from all acts committed by our employees or third-party vendors, including contractors, agents and services partners. Additionally, the costs of complying with these laws (including the costs of investigations, auditing and monitoring) could adversely affect our current or future business.

The success of our international sales and operations will depend, in large part, on our ability to anticipate and manage these risks effectively. Our failure to manage any of these risks could harm our international operations, reduce our

~~international sales, and could give rise to liabilities, costs or other business difficulties that could adversely affect our operations and financial results.~~

~~If we are unable to attract and retain qualified personnel, or if our existing personnel are harmed by COVID-19, we may be unable to manage our business effectively.~~

Our future success and ability to maintain a technology leadership position depends upon our ability to recruit and retain the services of executive, engineering, sales and marketing, and support personnel. Competition to attract and retain highly skilled technical, engineering and other personnel with experience in our industry is intense, and our employees have been the subject of targeted hiring by our competitors. Competition is particularly intense in certain jurisdictions where we have research and development centers, including the Silicon Valley area of northern California, and we may experience difficulty retaining and motivating existing employees and attracting qualified personnel to fill key positions. Because we rely on equity awards as a significant component of compensation, particularly for our executive team, a lack of positive performance in our stock price, reduced grant levels, or changes to our compensation program may adversely affect our ability to attract and retain key employees. In addition, none of our executive officers is bound by an employment agreement for any specific term. We have a number of workforce planning initiatives underway and our failure to manage these programs effectively could result in the loss of key personnel. Similarly, the failure to properly manage the necessary knowledge transfer required from these employee transitions could impact our ability to maintain industry and innovation leadership. The loss of members of our management team or other key personnel, including due to COVID-19, could be disruptive to our business and, were it necessary, it could be difficult to replace such individuals. If we are unable to attract and retain qualified personnel, we may be unable to manage our business effectively, and our operations and financial results could suffer.

In addition, a number of our team members are foreign nationals who rely on visas or work-entry permits in order to legally work in the United States and other countries. Changes in government policy and global events such as pandemics may interfere with our ability to hire or retain personnel who require these visas or entry permits. For example, in response to the COVID-19 pandemic, the United States has suspended entry of foreign nationals who have recently been in China, the United Kingdom, Brazil, numerous countries within the European Union, and other countries into the United States, which could impact our ability to attract, develop, integrate and retain highly skilled employees with appropriate qualifications from other countries. In addition, on April 22, 2020, in a stated effort to protect Americans from competition from foreign workers during the COVID-19 pandemic, the U.S. President signed an executive order to pause for 60 days the issuance of immigrant visas issued at U.S. embassies to enter the United States, and on June 22, 2020 extended the pause and added restrictions on the issuance of several categories of temporary visas through at least the end of the calendar year, including restrictions on H-1B visas for certain skilled workers and L-1 visas for intracompany transfers of executives/managers and specialized knowledge persons such as those employed in information technology and engineering, subject to certain exceptions. Additional changes in immigration policy, including the implementation of restrictive interpretations by the U.S. Citizenship and Immigration Services of regulatory requirements for H-1B, L-1 and other U.S. work visa categories, may also adversely affect our ability to hire or retain key talent, which could have an impact on our business operations.

Data security breaches and cyber-attacks could compromise our intellectual property or other sensitive information and cause significant damage to our business and reputation.

In the ordinary course of our business, we maintain on our network systems, and on the networks of our third-party providers, certain information that is confidential, proprietary or otherwise sensitive in nature. This information includes intellectual property, financial information and confidential business information relating to us and our customers, suppliers and other business partners. Companies in the technology industry have been increasingly ~~subject~~subjected to a wide variety of security incidents, cyber-attacks and other attempts to gain unauthorized access to networks or sensitive information. Our network systems and storage and other business applications, and the systems and storage and other business applications maintained by our third-party providers, have been in the past, and may be in the future, ~~subject~~subjected to attempts to gain unauthorized access, breach, malfeasance or other system disruptions. In some cases, it is difficult to anticipate or to detect immediately such incidents and the damage caused thereby. If an actual or perceived breach of security occurs in our network or any of our third-party providers’ networks, we could incur significant costs and our reputation could be harmed. In addition, the internet has experienced an increase in cyber threats during the COVID-19 pandemic in the form of phishing emails, malware attachments and malicious websites.

While we work to safeguard our internal network systems and validate the security of our ~~third party~~third-party providers to mitigate these potential risks, including through information security policies and employee awareness and training, there is no assurance that such actions will be sufficient to prevent future cyber-attacks or security breaches. We have been subjected in the past, and expect to be subjected in the future, to a range of incidents including phishing, emails purporting to come from a company executive or vendor seeking payment requests, and communications from look-alike corporate ~~domains.~~domains, as well as security-related risks created by the use of third party software and services. For example, in December 2020 we learned that SolarWinds, an information technology company, was the subject of a cyberattack that created potential security vulnerabilities for its customers, including Ciena. We believe that none of our products, software or research and development environments were accessed as a result of the SolarWinds attack; however, other similar attacks could have a material adverse impact on our systems and operations. While these types of incidents to which we have been subjected have not had a material effect on our business or our network security to date, ~~security~~future incidents involving access to or improper use of our systems, networks or products could compromise confidential or otherwise protected information, destroy or corrupt data, or otherwise disrupt our

operations. These security events could also negatively impact our reputation and our competitive position and could result in litigation with third parties, regulatory action, loss of business, potential liability and increased remediation costs, any of which could have a material adverse effect on our financial condition and results of operations.

Changes in ~~trade policy, including~~tax law or regulation, effective tax rates and other adverse outcomes with taxing authorities could adversely affect our results of operations.

Our future effective tax rates could be subject to volatility or adversely affected by changes in tax laws, regulations, accounting principles, or interpretations thereof. The impact of income taxes on our business can also be affected by a number of items relating to our business. These may include estimates for and the actual geographic mix of our earnings; changes in the valuation of our deferred tax assets; the use or expiration of net operating losses or research and development credit arrangements applicable to us in certain geographies; and changes in our methodology for transfer pricing, valuing developed technology or conducting intercompany arrangements.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law and introduced significant changes to U.S. federal corporate tax law. These changes include a reduction to the federal corporate income tax rate, the current taxation of certain foreign earnings, the imposition of ~~tariffs~~base-erosion prevention measures which may limit the deductions relating to certain intercompany transactions, and ~~efforts to withdraw from~~possible limitations on the deductibility of net interest expense or ~~materially modify international trade agreements, may adversely affect our business, operations~~corporate debt obligations. Accounting for the income tax effects of the Tax Act requires significant judgments and ~~financial condition.~~

~~The United States~~estimates that are based on then current interpretations of the Tax Act and ~~various foreign governments have established certain trade and tariff requirements under which we have implemented a global approach to~~could be affected by changing interpretations of the ~~sourcing and manufacture of our products,~~Tax Act, as well as ~~distribution~~additional legislation and ~~fulfillment to customers~~guidance around the ~~world. Recently,~~Tax Act. Any refinements to tax estimates are difficult to predict and could impact our financial results. In April 2021, President Joseph R. Biden released the Made in America Tax Plan, which includes significant modifications to key provisions of the existing U.S. ~~government has indicated~~corporate income tax regime, including an increased tax rate, promotion of a ~~willingness to revise, renegotiate, or terminate various existing multilateral trade agreements~~global minimum tax and ~~to impose new~~other changes that address taxes on ~~certain goods imported into the U.S. Because we rely on a global sourcing strategy~~profits from intangible assets and ~~third-party contract manufacturers in markets outside~~activities of foreign subsidiaries. In June 2021, finance leaders of the ~~U.S.~~Group of Seven countries agreed to ~~perform substantially~~back a new global minimum tax rate that would apply regardless of headquarters location or physical presence. In August 2021, the Senate Finance Committee released draft legislation that would overhaul the international tax provisions of the Tax Act and address taxes on profits from intangible assets and activities of foreign subsidiaries. Although it is uncertain if some or all of ~~the manufacturing~~these proposals will be enacted, a significant change in U.S. tax law, or that of ~~our products, such steps, if adopted, could~~other countries where we operate or have a presence, may materially and adversely impact our ~~business~~income tax liability, provision for income taxes, effective tax rate and ~~operations, increase~~results of operations.

We are also subject to the continuous examination of our ~~costs, and make our products less competitive in the U.S.~~income tax and other ~~markets.~~

~~For example,~~returns by the ~~U.S. government has threatened to undertake~~Internal Revenue Service and other tax authorities and have a number of ~~actions relating to trade~~such reviews underway at any time. It is possible that tax authorities may disagree with ~~Mexico, including the closure~~certain positions we have taken and an adverse outcome of ~~the border~~such a review or audit could have a negative effect on our financial position and the imposition of escalating tariffs on goods imported into the U.S. from Mexico. A substantial portion of our products are manufactured and distributed by third-party contract manufacturers in Mexico. If adopted, such actions could adversely impact our business and significantly disrupt our operations. These actions may also make our products less competitive in the United States and other markets. In addition, the U.S. government reached a new trade agreement with the Canadian and Mexican governments to replace the North American Free Trade Agreement (“NAFTA”) with the United States-Mexico-Canada Agreement (“USMCA”).operating results. There can be no assurance that ~~a transition~~the outcomes from ~~NAFTA to the USMCA would not adversely impact~~such examinations, or changes in tax law or regulation impacting our ~~business or disrupt our operations.~~

In addition, as a result of our global sourcing strategy, our supply chain includes certain direct and indirect suppliers based in China who supply goods to us, our manufacturers or our third-party suppliers. Recently, there have been a number of significant geopolitical events, including trade tensions and regulatory actions, involving the governments of the United States and China. The U.S. government has raised tariffs, and imposed new tariffs, on a wide range of imports of Chinese products, including component elements of our solutions and certain finished goods products that we sell. In May 2020, the U.S. introduced significant further restrictions limiting access to controlled U.S. technology to additional Chinese government and commercial entities, including certain of our competitors based in China. In August 2020, the U.S. Department of Commerce took further action against Huawei by adding additional affiliates to the Entity List, confirming the expiration of a temporary general license applicable to Huawei and amending the foreign direct product rule in a manner that represents a significant expansion of its application to Huawei. The situation involving U.S.-China trade relations remains volatile and uncertain and there can be no assurance that further actions by either countryeffective tax rates, will not have an adverse ~~impact~~effect on our business, ~~operations~~financial condition and ~~access to technology, or components thereof, sourced from China.~~

~~At this time, it remains unclear what additional actions, if any, will be taken by the U.S. or other governments with respect to international trade agreements, the imposition~~results of tariffs on goods imported into the U.S., tax policy related to international commerce, or other trade matters. Based on our manufacturing practices and locations, there can be no assurance that any future executive or legislative action in the United States or other countries relating to tax policy and trade regulation would not adversely affect our business, operations and financial results.

Government regulation of usage, import or export of our products, or our technology within our products, changes in that regulation, or our failure to obtain required approvals for our products, could harm our international and domestic sales and adversely affect our revenue and costs of sales. Failure to comply with such regulations could result in enforcement actions, fines, penalties or restrictions on export privileges. In addition, costly tariffs on our equipment, restrictions on importation, trade protection measures and domestic preference requirements of certain countries could limit our access to these markets and harm our sales. These regulations could adversely affect the sale or use of our products, substantially increase our cost of sales and adversely affect our business and revenue.

operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~Not applicable.~~Issuer Purchases of Equity Securities

The following table provides a summary of repurchases of our common stock during the third quarter of fiscal 2021:


Period	Total Number of Shares Purchase (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands)
May 2, 2021 to May 29, 2021	167,480	$	52.26	167,480	$	227,238
May 30, 2021 to June 26, 2021	131,482	$	57.82	131,482	$	219,636
June 27, 2021 to July 31, 2021	169,402	$	56.69	169,402	$	210,033
	468,364	$	55.42	468,364

(1) On December 13, 2018, we announced that our Board of Directors authorized a program to repurchase up to $500.0 million of our common stock. After temporarily suspending repurchases of our common stock during fiscal 2020, we reinstituted our stock repurchase program in the first quarter of 2021. The amount and timing of repurchases are subject to a variety of factors including liquidity, cash flow, stock price and general business and market conditions. The program may be modified, suspended, or discontinued at any time.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

5543

Not applicable.

Item 5. Other Information

Not applicable.

5644

Item 6. Exhibits











31.1			Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1			Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2			Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS			Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			Inline XBRL Taxonomy Extension Schema Document
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

5745

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Ciena Corporation

Date:

September ~~9, 2020~~8, 2021

By:

/s/ Gary B. Smith

Gary B. Smith

President, Chief Executive Officer
and Director
(Duly Authorized Officer)

Date:

September ~~9, 2020~~8, 2021

By:

/s/ James E. Moylan, Jr.

James E. Moylan, Jr.

Senior Vice President, Finance and
Chief Financial Officer
(Principal Financial Officer)

5846


	Balance at November 2, 2019		New Lease Accounting Standard			Adjusted Balance at November 3, 2019
ASSETS:
Operating right-of-use assets	$	—	$	53,334	(1)	$	53,334

Total assets	$	3,893,346	$	53,334		$	3,946,680

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Accrued liabilities and other short-term obligations	$	382,740	$	(1,484)	(2)	$	381,256
Short-term lease liabilities	$	—	20,498		(3)	$	20,498
Other long-term obligations	$	148,747	(21,244)		(4)	$	127,503
Long-term operating lease liabilities	$	—	55,564		(5)	$	55,564

Total liabilities and stockholders’ equity	$	3,893,346	$	53,334		$	3,946,680


	Quarter Ended August 3, 2019
	Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total
Product lines:
Converged Packet Optical	$	724,245	$	0	$	0	$	0	$	724,245
Packet Networking	71,823		0		0		0		71,823
Platform Software and Services	0		37,312		0		0		37,312
Blue Planet Automation Software and Services	0		0		10,530		0		10,530
Maintenance Support and Training	0		0		0		65,936		65,936
Installation and Deployment	0		0		0		39,802		39,802
Consulting and Network Design	0		0		0		10,958		10,958
Total revenue by product line	$	796,068	$	37,312	$	10,530	$	116,696	$	960,606

Timing of revenue recognition:
Products and services at a point in time	$	796,068	$	12,657	$	1,941	$	4,804	$	815,470
Services transferred over time	0		24,655		8,589		111,892		145,136
Total revenue by timing of revenue recognition	$	796,068	$	37,312	$	10,530	$	116,696	$	960,606