CIEN - Earnings call transcript Q1 2018

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Operator

Good morning, my name is Lisa, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Ciena Fiscal First Quarter 2018 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. of you President conference. begin Vice Lampf, Investor may Relations, your Gregg

Gregg Lampf

Smith, well and an you, welcome our Eastern with this portion With as quarter Gary and Good CTO, me and Ciena's is morning's the prepared Thank for were certain morning, first will to join remarks this Lisa. the Steve along Moylan, Jim of CFO. XXXX us as presentation fiscal made available today reflects President Alexander, CEO; Q&A release from today, and accompanying items call. Today's at investor that X:XX the a.m. highlighted press discussion quarter. review.

comments market, guidance second quarter. Our quarter the an first update fiscal on for the repurchase on include management's today our our and of results, management's view share details program

discuss recent in will tax our the on We of reform results. impact U.S. the also

most to forecasts you forward-looking making the I'll expectations, current statements turning during that Before risks the Such company statements the be statements. be SEC actual the differ from statements Gary, over materially These will call, certain on today. discussed in cause include and that this and regarding detailed our factors call the filing. assumptions context viewed could on we risk results of based remind that are to uncertainties recent should

our these on discussion for is file operations. result release. discussed or non-GAAP otherwise. in of Our to being Ciena's information events results date. today's that call of by obligation of and of available be X, press with website. Investors replay or measures filed update reconciliation will recorded, is certain new non-GAAP required assumes the GAAP and adjusted the XX-Q section Ciena whether to future is we includes of detailed call included results from the measures SEC to This expect be Today's our as A information, to March no this by a

the call over like to Jim. to Now hand I’d

Jim Moylan

business next Last hit financial targets. we a years strategy the over quarter, set everyone. Good Gregg. the shared of you long-term to our several and managing targets morning, Thanks, with those for

results Our in strong that toward making are to a QX off those today goals. solid start demonstrate progress we

are business. level struggling for As we the with how we given threshold of the profitability competitors quarter, on In including number and today. the we required we In of the share, fronts, see meantime, the current the keeping pace opportunities taking a on our last and market quarter, high of innovation, expertise the industry within our focused and diversify grow continued are environment. up is investment said given first to to

This sales. quarter, we of comprised metrics. total delivered XX% diversification strong roughly revenue Non-telco particularly

revenue webscale Our which key is this in of was both business Direct as segment 'XX, and of a from double percentage QX dollars. the in absolute customer revenue, roughly XX% contribution

The momentum particularly And same last traffic. strong of Pacific driven challenging is XX% flow for quarter, customers contributed including which very contributions seasonality. QX, a order base. we performed in the QX largely year-over-year, submarine year, XX% up well first XX% India region outside growth webscale to Asia performance revenue, quarter including fiscal several our by our continued Our strong of up due of was continued. from business our the from Overall, often

with backlog with customers. new footprint our we in execute also the non-telco and service capturing revenue on around to exceeded slightly global our of Looking primarily strategy grew, and providers continue world,

share within new XX.X%, footprint from gain of which posted gross is is margin and midpoint $XXX to For our delivered of revenue and competitors existing above our QX, deliberate we is a the strategy customers. range of with expected We guidance. result and which of our adjusted million, take

adjusted net delivered EBITDA as Finally, to we and With profitability grown was adjusted operations, first we of $XX. in million and Both free have measures of quarter, adjusted in of respect progress we million. our income the X.X%, $XX.X business $XXX $XX cash our X cash was $X.XX. of measures reported adjusted EPS operating operating has million, generated $XX.X and expense of flow meaningful and and become million our million. cash matured. more from flow performance adjusted In EBITDA QX, margin

Finally, Gary. the we investments. billion that, quarter ended I'll over it $X and With approximately with in cash turn to

Gary Smith

Jim. Thanks,

we've for in innovations now. of directly to to topline rapid delivering success technologies, respect and and adoption From first and working exposure today. cash operators help of growth, ahead with over-the-top that of uniquely ability our As differentiated the beginning and applications, networks this to respond and Jim our market been And number the our including drivers intersect the to time challenge. you emerging examples services, demand streaming, XXXG, successful play the With market few a to to generation consumption the mobile will two, increased that to because unit are competition the for of continue and in the of lead them models to profitability number a in WaveLogic capacity. the customer’s demand one, role I'd to range We’ve across modem, the we for at capacity financial changing of to performance video deliver quarter. proliferation we dimensions full and to are outlined, been consistent world investment be solve some of of in high-growth cloud-based change the our network which these Ciena customers. Ai our around key And currency opportunities. positioned coherent high-capacity our is like share with share address business leverage do markets

while distances. wins of to long-haul to and WaveLogic for now us distances, many had Specifically, XXXG can for expect deployed reach Ai, X XXXG-capable we replace XXXX-kilometer XXXG XX begin be connections to will bringing new our for XXXG total QX, over XXXG shorter that we date. time, In

growth customer the key revenue from Jim discussed, as Pacific, in rolling in a in service strong traffic in that it driving claims strength a notably a rapid in And, DCI this January expected. including cables approximately the our applications, exactly DCI are more our generated in capacity trend contribution surprise levels wins a continued providers, continue in Asia the network purpose-built subsea, also out signed is QX as with solution. for was being Waveserver out builds trans-pacific recent particularly to Tier is Korea, in mentioned metro new deployed. seeing in where than global existing and and We now cables region cable system, one need base XX our for webscale In system. higher-capacity our million are globally. Japan a today are and two encompasses Highlighting revenue to QX, $XX This trend solutions. play X customers We rise Verizon which to trans-Atlantic from other we’ve no deals project in addition alone, adoption on metro for of QX, capacity new India. contributor the

fiber is software we for more strategies conversation our we side our secured becoming the topic Deep Fiber On were the driver MSO growth need like course, Reform. spend speculation our is of clearly. includes with has customers. is automation operators. emerging continued plans. into network seeing XG of densification, last the about network and last This to our our increased becoming drivers also includes to are strategic Accordingly, in In customers, network announced increasingly with service operators’ and at And, QX recently architectures customer cable fiber end of It a where densification for we is grow impact application. this out are solution frequent positive start second targets Since which deploy of the there drivers stress of long-term our in the well tax reform contribution report, in Blue line with Tax year We is to to our controller believe of very demand a all our the board QX optimizing solutions. for orchestration customer our laid I'd clear in in factors Overall, networks. the it capacity. quarter. conditions, last Planet space from open, across performed industry, however, market strong off programmable transition network first very domain got the is including capacity segments U.S. With the a overall market been for in the continues - a that demand respect that the implemented. critical incorporated top our to good requirements, and this software capacity additional and a and as quarterly these and us our financial the manage traffic, our lot of that network to for quarter. to year key more adaptive verticals you primary and strategies, we

impacting X Tax I'll who of line. topics, remained for back drive In cover faster Jim? and more for any turn stress the industry are We have guidance the to the long-term trends plans really confident would it fiscal spending. definitive expanding provided effect the the continue the bottom quarter. to market our months Reform few network will view second ago yet largely However we that growing continue managing than event, in to profitability business and as to be our plans that including been in at over Jim, determined. core and we outlook a I our secondary to customer

Jim Moylan

Thanks, Gary.

results. law companies, in the had U.S.-based we’ve Tax to account the other like for First, impact financial of our

a significant in quarter, we loss, to rate This non-cash GAAP deferred new $XXX there for for of the experienced rate. As XX% to quarterly a with our And expense. our result, the first charge the of an respect in estimated asset tax fiscal million due maybe XXXX, a fluctuations. tax to tax primarily the XX% rate from revaluation resulted

year for balance. future, to to we XX% due calculating deferred expect pay our adjusted continues a not be rate - fiscal case currently income, foreseeable the expect In the for to do to we blended net tax tax 'XX. tax for income we GAAP asset be to expect calculated cash our XX%. rate the U.S. However, that It use federal taxes for primarily

announced quarter's program Next, you the with results. I'll we share update last repurchase on that

to we fiscal XXXX. activity of shares about We $XX.XX commitment repurchase intend quarter. articulated through and first common Ciena repurchased strategy of aggregate an million X, up in share. purchase to part the to $XXX at an average to last of approximately million began authority stock, our through price to board have of $XX returning stock per quarter March have repurchasing shareholders. of of And amount we for the our continue this as capital We We late XXX,XXX end repurchases common fiscal

We as have confidence in and sheet as well long-term flow generation. balance cash our growth, our strong

targeting second range, in a to QX equivalent the in range low XXXX quarter deliberately new roughly of approximately margin, we deliver Gross I'll world, mid-XXs opportunities expect specifically, million expense $XXX million. operating remind around margin gross you the $XXX to ahead, footprint winning. and are to fiscal are gross $XXX On that again revenue we Looking of margin million. in to and we

a These we in a deployments significant result early of carry correspondingly success, large lower As often have of currently their gross number stages. margins. this

said we have these mix, time carry we've deployments around favorable product past, projects experienced over this world. years a which more in and pricing many As generally the many the reach and over stages over

As XXXX, last fiscal of we is pattern we the as thought quarters out would this that continue said expected. playing quarter, and for that we first two

As our are our results guide, and on quarter business is our second well strategy. and strong, executing highlighted our quarter by first we

will to positioned we and now generation cash for top growth, questions. this with the industry continue the line are profitability combination uniquely line in delivering open strengthening sheet. balance a of Lisa, We

Operator

[Operator Instructions] Sachs. the from comes of Goldman Our line Clark first Doug question from

Your line open. is

Doug Clark

about to taking clear question. be to reiterated my one growth confidence mentioned that, a outlook, specifically, that in your revenue year-on-year. is, into at you or Is sustainable large scale you you basis? CAGR. the My Can a X% And just X% I a the quarterly involve - includes first penetrated may for How then, guide hyper long-term Waveserver Thanks on there? the that this doubling want point? are talk number Hi. trends in this

Gary Smith

next making what achieve We're board. to all going absolutely very we think to X on of for the those still strategic across great last the years. We out about range are off a feel Thanks, Doug. for us compares numbers start not say the of good this I'd that progress outlook ourselves only we're for year the are set the in and but quarter. we

Jim Moylan

have trend generally the speaking, now with it's sure, I webscale the most as last clearly compared indirect think, footprint, of to upwards when think, players Listen, think fluctuate going webscale on looking yes, specifically Ciena a business a I see you're business and the well. the you're Doug, we strong globally I at and quarter-to-quarter year. but it the as overall, period customers. for major direct particularly do Listen, we that very performance, seeing with the same in webscale,

you the continue I’d So years. know, to couple good over with of webscale expect next growth

Doug Clark

follow-up the Planet? first talk software that and about a basis my Then sequentially was you I that being a services year-on-year was, Planet on monetization contributor in Blue then Okay. Is mentioned noticed quarter. Blue and drove inflection? software-related what of Can you good it strong

Gary Smith

Yes.

getting it's multi-domain market. think our I out controller into

nascent very the I show to think encouraging time, that. we've and still, years of revenues had last for traction And we to the financial market to Again, are orchestration early up us, beginning with the that couple performance. QX. the saw see but we're the relative is we in in space, beginning first think, days into packages that that For learning also, come over getting I speed now the

Gregg Lampf

Thanks, Doug.

Doug Clark

next Great. the Operator Thanks Our comes Cowen. Paul line lot. of from from question a Silverstein

is Your line open.

Paul Silverstein

you me? Can hear guys. Hey,

Gary Smith

Paul. Hello,

Jim Moylan

Yes, we can.

Paul Silverstein

on this much margin? about do data on QX belief? QX have morning. And I margin much outlook, on have a you follow-up. is talk rebalancing How based in your how points? you and that a into Then much quarter, gross how and hope Jim, will the [indiscernible] Good gross per terms visibility of [indiscernible]

Jim Moylan

hard All based our data Paul. of on forecast are points,

X We bring to expectation backlog, we in going quarters. what the of or orders have next over a we’re X have

on So it based it's based projections up. we is not bottoms in all are today, that but on all quarters have

confident feel our we gross So margin about prediction.

Paul Silverstein

see when from there QX, other be going that - footprint start feel won gross coverage these confident, in of to to margin a factors? card because you to you're line you confident and see year elsewhere Jim, new are QX appreciation just come the impact the and meaningful deals clear, first expansion? you feel Asia-Pac shift you'll Or will start

Jim Moylan

lot be for Basically, lower which Our international correspondingly and in will reasons. lot gross margins. in QX of and we a what's of range a expectation happening QX early-stage is is deployments QX mid-XXs QX the different that have carry

played road, will out revenue those that be have move summer are again the recover percentage [ph] pattern overall this they will confident base. We our a and and of also over around smaller over we so as we through contracts

from that recovery well. some get we'll So as

Paul Silverstein

QX Jim, my apologies, you that… did QX, say mid-XXs in was

Jim Moylan

QX mid-XXs in Yes, and QX.

Paul Silverstein

strength, Gary not And guys India I detailed terms the right. give heard how you more may. With ongoing if about All at I respect but nature was, service a clarification, your surprised, I talked one of the to are you you many of business, long-term what revenue if think update I'm providers, And can in build what outs would? from the in they're where a longer-term contribution perspective? us

Gary Smith

providers mean, India. we major relationships I have the say are all – with I’d Yes. service in we of

Ciena The carriers, think [ph] X into and subsea India to. or As there up significant with were number Idea, think in you customers know, we are Then, I number regional forms. with the X there's I X some the their market that various Vodafone carriers have X consolidating share the customer, so that Ciena. you'll also got number end of customers carriers, large which specialist with you've also of come all

Defense We year. Department plus have government India, we the won in India, last contracts into which of

So is the fastest It’s adoption the this very a thing I think stress now. Internet right in to market world growing India. is in broad-based the

that able growth. few think next very I sustainable that's deliver to be years to the over

framework digital of the think I also kind supporting growth. economic is this India activity around of

So I growth sustained think Ciena India. is incredibly for in well-positioned

Paul Silverstein

I appreciate guys. it. Thanks,

Gary Smith

Paul. Thanks,

Operator

Our line comes Tejas Venkatesh next from the UBS. question of from

open. line is Your

Tejas Venkatesh

sell your alluded prepared to you're WaveLogic X wanted for wins that Ai with Thanks I trying for remarks, to to the X that my question. your that's partners? module confirm taking in that by for you The XX just

Jim Moylan

referring was X the completely - that's was So I believe, that Waveserver separate is X from that wins, module was those, - to, So by it Waveserver right? wins. I

complete system. the that's So

Gary Smith

And and XX to both we Waveserver And have in X date, that's quarter, the XXXX. total.

Tejas Venkatesh

almost seen, sort a Got what on it's comment you've you of that been announced And it. could merchant And modem business? that? year since you

Gary Smith

Right.

was right, this some from year And doing, XXXX are would we revenue the of of XXXX, parts to we so XXXX, of recognize start said feedback and – we getting from…. [ph] be middle is what end achievements and we end then to said customers this sampling got. which this So we about we

Jim Moylan

year. this of End

Gary Smith

End of year. End year. fiscal this of our

Tejas Venkatesh

bit as so follow-up, just little is spending pause And consolidation it. Got a a turn? of year, from last customer starting to that

Gary Smith

I don't of were think saw very, we that, too much diversified. because very we

year, beat. at barely look we results our last a for You missed

have going ebbs of you're think customer always I consolidation. flows listen, to and So

We are we're to really with quarter deal to us a now impact basis, at the frankly where it. it quarterly on size able doesn't quite

Tejas Venkatesh

you. Thank

Gregg Lampf

Thanks, Tejas.

Operator

line the from from comes Simon James. Raymond question of next Our Leopold

Your line is open.

Simon Leopold

relatively for couple historically mentioned things. of give companies, of little and bit thinking perspective but a has a market I that a Last us you A big recall non-Japanese I been Japan progress taking close bit little you of in where on stand question. call, Thanks to my of also market. today? and Japan, opportunity. establishing Great. you opportunity that your think Could a

Jim Moylan

Yes.

I that years, we've over had of many, there but generally, market, continued accurate. pretty there classification indigenous preference local suppliers. presence for Your Historically, has many been think is a

local the is be for globally for getting think global the fewer a what world-class is the to seeing their of core you're in supply. space, fewer that player Japan I diversify to vendor and and looking really the increasing, base consolidating the a I of and is think cost help ability them as in business technology. you're other players players And on

we've it's come seen revenue. months, to last so And to beginning actually XX this over and the

the deploy We Japan in pretty about carriers much to of XXXX. most deploying either major now have Ciena all or

Simon Leopold

XX% could size Is opportunity? we where revenue? it - see trajectory a of maybe X% see that Japan Ciena's you to do have And be

Jim Moylan

a little tell, it's but I tough sounds that high. think, I to think,

we've you in from Asia, and than other other breakthrough see. of in if But places more consistent definitely, historically. with we're had Asia, get side elements just you India Korea. X% seeing Japan we'll revenues seeing I have we're to putting like growth that a things that corner, put one whether together the it'll to look good at But South think

Pacific, go very you Australia strong If the as further Telstra got we've down to well. in

that I few over spending years. region clearly infrastructure is next on think So the

Simon Leopold

projects calendar cable of get half on Great. Deep I lot to second A comments work the to or likely and opportunity. should the a pivot inflect [ph] whether And that initiatives. want Fiber that these around in the And your of of market our would wanted suggests TV participant be leading Ciena lag better to understanding just a 'XX. I in in spending

So you is Or that start is Thank in more to your quarter? XXXX Ciena? something it see opportunity for it of April you.

Jim Moylan

is overall, I'd this I think, America. of people think the But second and this and until the North year, the that in I sort ramp as in we'll sort do it larger et some characterize our half, architecture, early of won't I XXXX testing about year. the in think putting encompassed Fiber you cetera. deployments thinking Deep are revenue see see

Simon Leopold

Great. Thanks questions. for my taking

Jim Moylan

Simon. Thanks,

Operator

from question next Citi from Research. Kovler Stanley of Our the comes line

line is Your open.

Stanley Kovler

Thanks a around say guys. XG I as, that a Gary, And would taking tax any for can us Hall XG let's spending for more you Thanks. and the question. [ph] I or Do have mentioned other about identify morning, that about related? also maybe follow-up. type my purely driver. for more you as Good spending Hi. optimistic of ask wanted you I deployments. say, regarded detail have drivers. was just market reform you to

Steve Alexander

Yeah, Stanley, Steve Alexander.

said over of going you Things. point-to-point the up going right, coming while, be quite get it's infrastructure up the X the And then to was XG. lots for a the to places, to of kind we've it So saw cell faster, attention Congress, World term, of for Mobile news right, phones long microwave the shows and in out of show if Internet

XXX view the kind view So was take it use network we gig, XX a it's gig, we wide the driver and of be X a many, going if gig. that's long-term back many get If to to of at of very as really early it not, to view quarters, going spot it certainly deployments XX point go on for going edge to They're of capacity. - was gig, of capacity scale to but years trials higher going And the networks. it's deployment. to

Gary Smith

that their for seeing of larger say seeing of Stan, high and I degrees to I'm into this. the fiber and we getting encompass some quarters carriers connectivity basically the But to would a are - few metro thinking very begin now, support

the ways customer are the the characterized, major little off some of sort impact we're do in greater of is Steve deployments. Internet seeing I Things planning that XG, of for applications closer as about over think terms higher on talking benefits personally, we getting a already XG. direct So of But I to think capacity the of around

Jim Moylan

And have around to to commitments contractual grow metro of the just the companies and North remind do with American beginning big relationships metro. all big and everybody, we we’re world in

to a of going for it’s us, a So it's timing. question be just plus

Stanley Kovler

in potentially, there if look for a a characterize into deployment at follow-up services, 'XX, customers. about AT&T business basis, what's around And out on then your 'XX? as spending And things, QX? would initiatives the Thanks. How before up. other Significantly, guided have the refund outlook the nominal and FirstNet they lot’s specifically you a business fiscal look just of their on [ph] we point large then it you fiber

Gary Smith

have all we're kind healthy. to we the which, know, I board, engagements the these including and there applications business AT&T, than mean, I think, with are about Listen, across overall QX. software XX% business of as solid And become customer you with though total. has some in percentage elements. lesser them, grown, dynamics us grows, of of multiple is good of were for they think a favorably exposed that their even There I Obviously,

most of of given have this of couple dynamics. So we're think going the in years I to North carriers major listen, kinds a America, good with

Stanley Kovler

Thanks.

Gregg Lampf

you. Thank

Operator

comes Partners. question from Our next MKM line of the from Michael Genovese

open. Your line is

Michael Genovese

more the little up trouble us you a specifically innovation, just where up? good areas give hard some the When talk results, about on keeping congratulations competitors are where granularity, can the with bit keeping are technology and And a Thanks. time having they having differentiating guys. of Great. you you

Gary Smith

Sure, Mike.

set to So I I the of with the so piece clearly in the make a you that functionality. adding DSP, the of able the that analytics, convergence performance features, to this we've we WaveLogic, orchestration, vendors, out and standard the may way what the of key that's allows and think to box the the of what have to, that get the come And discover basically working the you done systems, for such, the [ph] software think they packet operate happens systems were point basic network they right or boxes in optical that then, have will, so the the X way if very - is and kind X the very transport they operate, same they that proverbially, the would operate are stack operators But terms of put definition, we ought we're made the I X automation, software we’ve drive know, the rates of you how intelligence, other all we’ve it. flexible, done as want. them determine to to

just So all. around heavily We've physical the then and convergence intelligence at two one it invested and layer, those the we've of the packet goes invested that software automation the it's not thing. layer, heavily

Jim Moylan

viable XXXG viable only truly deploying. would the and simple I sound to player now. thing We're is sort out just the it, actually Stanley of there to player. shipping right bite [ph] the other That if only is we wanted you are say

Michael Genovese

year. that chatter Right. of will has at whether my did think true? larger And quarter, maybe a maybe contract you there that's it competitor actually out doesn’t really guys. some a in this can that into and talk be largest there Obviously, could future? customers well out any really, be as in half about the impact impacting be someone follow-up, And were that the DCI second all, in but there, you or whether the to seem you put your unconfirmed signed your was and I There coming account DCI

Gary Smith

I should at think results. you our look

think as in themselves, I business. doing fact was our stand by that testament the well results extremely we're DCI

going about we're sorts our and DCI DCI to business. of think sorts time There all do all I to very feel all really about around are the rumors well we continue in position. things, good of chatter

Michael Genovese

good the work, up Keep Right. guys.

Gary Smith

Thank you.

Jim Moylan

Mike. Thanks,

Operator

the question next comes from line Meta Stanley. of from Our Marshall Morgan

open. Your line is

Meta Marshall

XX would who that Great, wanted a of smaller kind I like of traditionally bigger customers, have get because and the makes to I thanks. Waveserver number thought guess, that, are was – what up I a sense customers.

kind ICPs how ISPs? the of are some seemed have maybe wanted how continuing on it a acceleration to to So pace. but that I of was much the participants noted in or are other be the And rollout, are telcos? your second, that it ecosystem much then And clarify of just kind some in noting you Verizon

Just the helpful? any commentary around Verizon rollout be will Thanks.

Gary Smith

Meta, let me deal with that one first.

to around of that rollout, with pretty it throughout. around say would basically the rest acceleration on-plan Verizon, the been it's and with Verizon. I I frankly, been we much really and will – consistent speculation agreed been there's think since the deal consistently, they've very

what And they so what predicted. we're seeing now exactly is

overall encompassed very and So it's - our and as I consistent, expected, guidance. think into

thing the up I the remember the is point. requiring data about Waveserver, are, you know, amount applications the applications, to the connectivity. it center broadens basically anybody that think Regarding That's really of

Jim Moylan

to Yeah, Meta, folks, centers, connections, scale right. hyper a centers if you of centers. data over open folks, you architecture, had we in interested now it the to as the interconnecting, know, data remember classed into the right, buildings that lots sells but kind people data Clearly are right, content-to-content webscale

data X a of even And to want Tier not there's called, and just Tier I folks, Tier center as large there's Xs have so a X market the very lot mean, but connectivity. that now the webscale

customer So base. there's a broadening

Gary Smith

Waveserver Also, the XX% education telco, is which market, of we would cetera, of largely a outside include as et benefactor our that business dynamic. enterprises, of non-core why governments, have

Meta Marshall

[ph] a it. kind - question And telco over differing business two non-core? of third Got kind you follow-up of buds of one this would see and Or on you kind do is envision those that, do thirds the like kind you business towards time? of moving

Jim Moylan

of come Well, we driven we market increased purchasers GCNs the is fact in business, as that which by percentage over non-telco, have have, the part large time, the capacity. of certainly our into

GCN the As hard it's internationally. however, some providers, to through far fastest-growing still particularly do, service future, capacity the today buy The of their is the of predict. as market. segment They

I'm confident and GCN's, their well So they to around we're provider with it's predict. going do U.S. them. use just service world that customers to when the hard with

good world. So it the around we about feel

Meta Marshall

Got it. guys. Thanks. I’ll pass

Operator

Jeff question Kvaal Our comes of from the line from next [Operator Instructions] Nomura.

line Your is open.

Jeff Kvaal

base spoke with being Yes. Thanks begin about line quarter? then orders very Could little great? order color ahead the talk to be seasonal you typically in of you the from any Jim, of that ordeXr clarification. relative earlier is provide like be could pattern. coming a about – bit And strength a might much. I'd the where what for would you orders January

Jim Moylan

Yes. encompasses quarter first cases our season the budgets first month many in Well, in a of as we all holiday set. year the know, aren't

a in very Asia, the We it's a really good lot is grew particularly GCN the a as as the well, that we in - It's across lower business but of other QX. sign. happen we that we to strength in I did, so And this quarter particularly And expect our those of had board, India. always in say, revenues a have to quarters quarter, and strong year. slightly orders QX, percentage of a actually the backlog which as year lot business, compared of

really across-the-board. it's So

Jeff Kvaal

the migration great. And with able competitors, of developments? pricing technology is a gone about been particularly out of also now Does to secondly, at reflect scale. about gain we a being you've from then, these all? has aggressively that, bit any more -- share are struggling talking those of changed that for And Okay, pricing couple extent, quarters environment is what it that our - think that environment underway. has should To of the you,

Jim Moylan

I the it really pricing would hasn't say has overall stable, changed. been environment pretty

we carriers number of our in I seeing think are expansion with what internationally consistent Tier a X particularly Japan. is

got new And customers we to I who a of player. are their And these number had increasingly with customers Xs think at got Ciena. a Tier global Europe, these their East do large of to in what carriers we've they Asia. anyway, that's before, share that time. the them winning a the think us I unusual, infrastructure partner is to And not Tier same X but network strategic such as and and that in market haven't is long-term both large want coming we're number - have unusual other particularly you've we then around of Middle looking

is are partnership want people with. think infrastructure thinking and their I conclusion hard about to they their very long put who So

Jeff Kvaal

Okay…

Jim Moylan

We grew last go digits, to year, the a that X If down-ish. market to grown X has mid-single you grown have last flat X% X%. or years, was market in we've back

great And to about ability share. our take so feel we continue to market

Jeff Kvaal

Thank you, both.

Jim Moylan

Thanks, Jeff.

Gary Smith

Thanks, Jeff.

Operator

next line from comes the from of Deutsche Bank. Our Vijay Bhagavath question

open. is line Your

Unidentified Analyst

can replace back give XXXX we for [ph] Vijay. a in. Is you Brian Ai, WaveLogic to XXXG? think Thanks. us on view your become starts when on can XXXG story? you regard Thanks 'XX? half for something to potential of a see is guys? Or start Yun revenue This of the And from meaningful this squeezing of you more of me to In XXXG when in driver timeframe for sort

Gary Smith

say terms can The the we’re in generally gig contribution more I say various know So have XXX because run it important. I mirror, been effectively it's of kind a don't I is them there, more and rear-view revenue, rate XXX take available. them rates. at would of becoming I'd are our breakdown let's you gig, webscale highest see, that. done of what at we've in shipping will guys to programmable.

carriers we're the gig higher rates when us performance, yesterday's do seeing can of we're Some today high but news. gig for of looking XXX the now and is - kind XXX also, is forward, it

Jim Moylan

thing… One

Unidentified Analyst

Thank you…

Jim Moylan

went by a cycles rates rate of and been XXX, is of adoption in there's part to faster the XX driven to XXX now through as on we several early GCN. but high, XXX that are We're early gig, adoptions As XXX. days mostly

Unidentified Analyst

Or comments just just clarify, reach? reference to the around being in shorter of that sort So long-haul as well? in is to that the XXX connections rear-view,

Jim Moylan

can at use them various they right. various Again distances, rates,

we’re So rates. problem XXX higher is on us the to kind the gig to of to and solve done

Gary Smith

Yeah.

be of So we clear still gig. XXX a to Brian, just sell though, ton

XXX, in be we'll and that. We stopped – now XXX, confident selling we're gig. XXX, in XXX about continue a But we’re market – and to not with haven't leader to we’re innovation, first

Gregg Lampf

Brian. you, Thank

Operator

question Savageaux next of from Tim comes Our Capital Markets. the line from Northland

Your line is open.

Tim Savageaux

I on on in to the general. want focus cloud on congrats strong Waveserver strength And report. a initially morning. notable and good in Hi,

for end in target You that range, with a maybe year QX, range number you you last in you’d of seems above last given started growth a I you year, - the end range XXX, I comparable again. we saw high to come particular, in QX started was which for now low think the seen - provide maybe double Waveserver to indicated toward last you've that and meaningfully XX to type expectations for if Waveserver, of cared of I in at XXX XX any to to where expect that end wonder fiscal pretty XXXX the could the or strength imagine the low year. that similar of

Jim Moylan

a feel today about great with for So a ready number. to the to We’ll and webscale you business based not the with that all we're we about web, give companies model and our of have feel great Time, progress we're on prepared that year number Waveserver great not we companies though. give but Waveserver. with product, the Look, all

Tim Savageaux

And are becoming of carriers, overall enough. at cloud any are who numbers up. may top if important give address getting Fair cloud you do may know, well, direct maybe I guess were you’re perhaps you I characterize and customers? quarters can to Or American XX and and you that individual be are or top [ph] significant you the assuming how – North as both sense X – major the given the XX% follow still guys your indirect I'm in closed, in any mix? could cloud of context how customers have and but

Jim Moylan

webscale X here. at approached X knows, We've our of at who ones, customers obviously. about great least XX% but not most be the the our a we'll had of we're top all smaller But couple in and positions, We've XX of just of companies as in ones We’ve customers. XX%, or top well. and happens got big X times the see what

Gary Smith

would as international customers of on a to enough just add incredibly piece is, well, the coming had thing number XX%. The diversification be I we've other close

as Jim of couple a and said, folks, X% international as have carriers, X% well as We in them range. X% the to the webscale X%,

of I where listen, through it's So think quarter pretty predictable a one that a have them customer. as XX% breaks soon we'll

Tim Savageaux

Thanks.

Jim Moylan

you, Thank Tim.

Operator

questions have presenters. We to call queue. no turn the I'll the back further in

Gary Smith

catching joining forward We up further and everyone on today. today and for OFC Lisa, road. you, thank with at us look you, the Thank you. to everyone, Thank down

Operator

conference concludes This today's call.

You may now disconnect.

Ciena (CIEN) 6 Mar 182018 Q1 Earnings call transcript