REVENUE | REVENUE Disaggregation of Revenue Ciena’s disaggregated revenue as presented below depicts the nature, amount, and timing of revenue and cash flows for similar groupings of Ciena’s various offerings. The sales cycle, contractual obligations, customer requirements, and go-to-market strategies may differ across Ciena’s product lines, resulting in different economic risk profiles for each line. The tables below set forth Ciena’s disaggregated revenue for the respective periods (in thousands): Quarter Ended April 30, 2022 Networking Platforms Platform Software and Services Blue Planet Automation Software and Services Global Services Total Product lines: Converged Packet Optical $ 625,294 $ — $ — $ — $ 625,294 Routing and Switching 109,186 — — — 109,186 Platform Software and Services — 69,157 — — 69,157 Blue Planet Automation Software and Services — — 16,881 — 16,881 Maintenance Support and Training — — — 74,019 74,019 Installation and Deployment — — — 41,430 41,430 Consulting and Network Design — — — 13,260 13,260 Total revenue by product line $ 734,480 $ 69,157 $ 16,881 $ 128,709 $ 949,227 Timing of revenue recognition: Products and services at a point in time $ 734,480 $ 21,743 $ 4,036 $ 13,469 773,728 Services transferred over time — $ 47,414 $ 12,845 $ 115,240 175,499 Total revenue by timing of revenue recognition $ 734,480 $ 69,157 $ 16,881 $ 128,709 $ 949,227 Quarter Ended May 01, 2021 Networking Platforms Platform Software and Services Blue Planet Automation Software and Services Global Services Total Product lines: Converged Packet Optical $ 573,657 $ — $ — $ — $ 573,657 Routing and Switching 63,628 — — — 63,628 Platform Software and Services — 56,688 — — 56,688 Blue Planet Automation Software and Services — — 23,958 — 23,958 Maintenance Support and Training — — — 70,418 70,418 Installation and Deployment — — — 37,999 37,999 Consulting and Network Design — — — 7,579 7,579 Total revenue by product line $ 637,285 $ 56,688 $ 23,958 $ 115,996 $ 833,927 Timing of revenue recognition: Products and services at a point in time $ 637,285 $ 20,765 $ 10,765 $ 1,411 $ 670,226 Services transferred over time — 35,923 13,193 114,585 163,701 Total revenue by timing of revenue recognition $ 637,285 $ 56,688 $ 23,958 $ 115,996 $ 833,927 Six Months Ended April 30, 2022 Networking Platforms Platform Software and Services Blue Planet Automation Software and Services Global Services Total Product lines: Converged Packet Optical $ 1,166,230 $ — $ — $ — $ 1,166,230 Routing and Switching 194,896 — — — 194,896 Platform Software and Services — 142,074 — — 142,074 Blue Planet Automation Software and Services — — 37,992 — 37,992 Maintenance Support and Training — — — 146,509 146,509 Installation and Deployment — — — 81,800 81,800 Consulting and Network Design — — — 24,169 24,169 Total revenue by product line $ 1,361,126 $ 142,074 $ 37,992 $ 252,478 $ 1,793,670 Timing of revenue recognition: Products and services at a point in time $ 1,361,126 $ 51,424 $ 12,810 $ 21,960 $ 1,447,320 Services transferred over time — 90,650 25,182 230,518 346,350 Total revenue by timing of revenue recognition $ 1,361,126 $ 142,074 $ 37,992 $ 252,478 $ 1,793,670 Six Months Ended May 01, 2021 Networking Platforms Platform Software and Services Blue Planet Automation Software and Services Global Services Total Product lines: Converged Packet Optical $ 1,085,981 $ — $ — $ — $ 1,085,981 Routing and Switching 127,934 — — — 127,934 Platform Software and Services — 106,527 — — 106,527 Blue Planet Automation Software and Services — — 40,892 — 40,892 Maintenance Support and Training — — — 138,049 138,049 Installation and Deployment — — — 77,610 77,610 Consulting and Network Design — — — 14,064 14,064 Total revenue by product line $ 1,213,915 $ 106,527 $ 40,892 $ 229,723 $ 1,591,057 Timing of revenue recognition: Products and services at a point in time $ 1,213,915 $ 36,828 $ 15,939 $ 3,268 $ 1,269,950 Services transferred over time — 69,699 24,953 226,455 321,107 Total revenue by timing of revenue recognition $ 1,213,915 $ 106,527 $ 40,892 $ 229,723 $ 1,591,057 Ciena reports its sales geographically 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 Six Months Ended April 30, May 1, April 30, May 1, 2022 2021 2022 2021 Geographic distribution: Americas $ 700,840 $ 587,475 $ 1,295,984 $ 1,084,086 EMEA 145,106 155,054 295,891 310,472 APAC 103,281 91,398 201,795 196,499 Total revenue by geographic distribution $ 949,227 $ 833,927 $ 1,793,670 $ 1,591,057 Ciena’s revenue includes $642.2 million and $518.6 million of United States revenue for the second quarter of fiscal 2022 and 2021, respectively. For th e six months ended April 30, 2022 and May 1, 2021 , United States revenue was $1.2 billion and $1.0 billion, respectively. No other country accounted for 10% or more of total revenue for the periods presented above. For the periods below, the only customer that accounted for at least 10% of Ciena’s revenue was as follows (in thousands): Quarter Ended Six Months Ended April 30, May 1, April 30, May 1, 2022 2021 2022 2021 AT&T $ 103,189 125,138 214,065 193,941 AT&T purchased products and services from each of Ciena’s operating segments for each of the periods presented. • Networking Platforms revenue reflects sales of Ciena’s Converged Packet Optical and Routing and Switching product lines. • Converged Packet Optical - includes the 6500 Packet-Optical Platform, the Waveserver® stackable interconnect system, the 6500 Reconfigurable Line System (RLS), the 5400 family of Packet-Optical Platforms, and the Coherent ELS open line system (OLS). This product line also includes the Z-Series Packet-Optical Platform and Optical Microsystems products. • Routing and Switching - includes the 3900 family of service delivery platforms and the 5000 family of service aggregation. This product line also includes the 6500 Packet Transport System (PTS), which combines packet switching, control plane operation, and integrated optics, the 8100 Coherent IP networking platforms, and the 8700 Packetwave Platform. This product line also includes the Vyatta (as defined in Note 4 below) virtual routing and switching products acquired from AT&T during the first quarter of fiscal 2022. 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, as well as planning tools and 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 described 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 enables customers to implement large-scale software and IT-led operations support system (OSS) transformations by transforming legacy networks into “service ready” networks, accelerating the creation, delivery and lifecycle management of new, cloud-based services. Ciena’s Blue Planet Automation Platform includes multi-domain service orchestration (MDSO), inventory management (BPI), route optimization and analysis (ROA), network function virtualization orchestration (NFVO), and unified assurance and analytics (UAA). 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 either perpetual or term-based software licenses, and these sales are considered distinct performance obligations in which revenue is generally recognized upfront at a point in time upon transfer of control. Revenue from software subscription and support 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 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 for which 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 is also 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 April 30, 2022 Balance at October 30, 2021 Accounts receivable, net $ 774,896 $ 884,958 Contract assets for unbilled accounts receivable, net $ 144,344 $ 101,355 Deferred revenue $ 218,769 $ 175,464 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 in the Condensed Consolidated Balance Sheets. See Note 12 below. Contract liabilities consist of deferred revenue and represent advanced payments against non-cancelable customer orders received prior to revenue recognition. Ciena recognized approximately $82.0 million and $78.0 million of revenue during the first six months of fiscal 2022 and 2021, respectively, that was included in the deferred revenue balance as of October 30, 2021 and October 31, 2020, respectively. Revenue recognized due to changes in transaction price from performance obligations satisfied or partially satisfied in previous periods was immaterial during the six months ended April 30, 2022 and May 1, 2021. Capitalized Contract Acquisition Costs Capitalized contract acquisition costs consist of deferred sales commissions, and were $32.5 million and $27.6 million as of April 30, 2022 and October 30, 2021, respectively. Capitalized contract acquisition costs were included in (i) prepaid expenses and other and (ii) other long-term assets. The amortization expense associated with these costs was $14.1 million and $10.7 million during the first six months of fiscal 2022 and 2021, respectively, and was included in selling and marketing expense on the Condensed Consolidated Statement of Operations. 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 April 30, 2022, the aggregate amount of RPO was $2.7 billion. As of April 30, 2022, Ciena expects approximately 90% of the RPO to be recognized as revenue within the next 12 months . |