Ciena (CIEN) 31 May 182018 Q2 Earnings call transcript

Company Profile

Participants

Gregg Lampf	Vice President, Investor Relations
Gary Smith	President & Chief Executive Officer
Jim Moylan	Chief Financial Officer
Scott McFeely	Senior Vice President of Global Products and Services
Doug Clark	Goldman Sachs
George Notter	Jefferies & Co.
Meta Marshall	Morgan Stanley
Vijay Bhagavath	Deutsche Bank
Samik Chatterjee	JP Morgan
Simon Leopold	Raymond James
Jim Suva	Citi
Michael Genovese	MKM Partners
Dmitry Netis	William Blair
Tim Long	BMO Capital Markets
Alex Henderson	Needham & Company
Tejas Venkatesh	UBS Securities
Jeffrey Kvaal	Nomura
Catharine Trebnick	Dougherty & Company
Tim Savageaux	Northland Capital Markets
James Kisner	Loop Capital Markets
Woo Jin Ho	Bloomberg Intelligence

Call transcript

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Operator

Good morning. My name is Sharon and I will be your conference operator today. At this time, I would like to welcome everyone to the Ciena Fiscal Q2 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. you. Thank Instructions] [Operator President, you Vice conference. begin Investor Lampf, may Relations, your Gregg

Gregg Lampf

ciena.com. President Jim is you. to Vice join me for morning's review. Smith, welcome morning, President This today the call. the on CEO; XXXX Gary Thank National and and Business us quarter of Ciena's Global Good Services McFeely, CFO. Wire Moylan, Scott fiscal available Products second and is Q&A release and Senior of and will press With portion

have Investor's certain accompanying items We the investor presentation from an posted of ciena.com also Section quarter. that highlighted includes the

comments fiscal with on the follow-ups side questions from on announced comment Our person outlook. market detail analysts include transaction morning, call to taking this today our on open the second quarter we then sell Design per Packet our as the environment results, question views allows. one our time and the We'll

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

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

Gary Smith

Thanks, everyone. Gregg and morning, good

targets We are outlined now two December. in quarters performance into three-year that we financial our

line top demand scale us bookings, quarter. structure our a Our X total financially tier order early and network our in high with reach in expand achieve the they with which long-term. three we're and them our industry than us positions leadership to in help service sustain a leadership the partner fiscal drivers confidence target to greater on There global view the solid take to share an to ability Illustrating are was our webscale to gives growth revenue stable growth with higher our significantly and international as the innovation their tier exposure a to diversified performance That fiscal set because revenue. Increasing those business, global as markets. providers and is This respect to progress, we seeing achieve transformation technology second rate latter, our us flow directly principally QX approach for today; over as us we X our an addressable additional market and market service focus principal year. continue goals clear ability to well exceed India, With providers. growth accelerating evolve, of plans. even and continues resulted delivered backlog even and performance record our

margin these business international While for absorb network analytics. opportunities long acquire right focused is the and a and these in service provider and agreement time. Layer over model of of today, combination share, reasonably Design, our capture Also definitive size, absolutely additional these management that Packet on of the that a recover can our to volume, long of providers pressure We topology on early the gross signing network demonstrating is proven deployments primarily business the footprint route optimization, with market performance are announced and our the a resulting helping software we our strategy and record of track sheer have these grow startup believe we some costs drivers gross timing X to term margins. pursuing

Design our additive X associated XX% key will multilayer to automation the range growing say Packet a Their with optimization our intelligent over approximately said edge. features announced with software to network X, differentiation, give targets, X capabilities also when definitive accelerate closed-loop services long-term beyond to will by growth, towards network I Packet goal strategy software-based in Planet, the Blue complementary and we a we Layer absolutely contribute financial capabilities automation are and leading IP and our support is annually broader business new and our both Blue extending use financial Layer is of portfolio XX% would critical that competitive software cases our Packet automation profitability. Design and business into and automation. expanding is across our next Blue Planet to and unique combination multivendor of Planet years. networks. us As long-term Design's advantage three Planet world-class expanding and of Blue experts a our driver

our during quarter. We third close fiscal expect to the acquisition

the for few market I'd Before observations details to Jim turn a landscape. quarter, like I current about over the to share on

over-the-top is to to adaptive transition and with cloud-based of continued open, more rapid continued content in and in proliferation services resulting move the networks. the and programmable, Firstly, consumers investment both to enterprises

maintain in and capacity technology From to a relevance. aligns Ciena struggling industry and forms niche various to to perfectly plays alluded and for are vendors. the to fiber strengths And our corresponding are with optical Specifically, continued to fiber those our directly to both for our has portfolio There solutions growing clearly fueling are be our global as a there Blue need maximize that see bifurcation utilization. data diversified their This scale. players Planet coherent these. I a quite to we to increase the built automation of out platform. structure business demand trends earlier, an those and are continue all perspective, WaveLogic amongst who in smaller frankly have high centers

we technology leading the in Additionally, industry. the have

addition advantages, components, remain of and to market these competitive address systems, also to in player customer the we needs; necessary all the with the services. In software only pieces

certainly As despite new anytime believe going from pricing my away a challenging, be continues in we in is this do a long soon. finally, be still been anything to our result been competitive And and and for the won't it in industry. It that is only growing the company has landscape and We've recent we to others some me but not this the there profitable. talking address time about comments space let dynamic, view environment.

successfully We've that, it thrive. our to Within these proven Jim dynamics, result. I'll and to our demonstrated diversify performance for over executing and performances that second we strategy and our on we have details quarter turn a delivering on With differentiated business can been as financial guidance.

Jim Moylan

more and year-over-year than one as of number business XX.X%. our revenue. XX% million categories share up global we alone QX have quarter multiple a year as across market APAC gross India and providers, revenue, Gary. of delivered continued morning webscale $XXX last same in where second delivered margin fiscal by led In Good in percentage period our growth doubled customers. we with quarterly Thanks, over Today the million well revenue was our Notably, $XX everyone. service as webscale

a in of margin been service due we've several in mentioned, successful Gary at early providers. international new As on pressure volume securing predominantly our resulting to high opportunities deployments gross

margins. stages As often carry correspondingly lower early we have gross deployments of said before,

this confident in very are have demonstrated improve gross our time we However, over margin repeatedly. our ability the in past profile and we to

reported X.X%, of in $XXX.X EPS million second share. adjusted also net operating income million. operating $XX.X QX and profitability quarter, to adjusted of We the delivered $X.XX respect we expense margin adjusted adjusted of of per With measures

across flow In $XX.X are operations having adjusted was $XX.X $XX.X cash million addition, million. and now free approximately growing highlights we aggregate contributed in of XX% and in the total share India than regions, and of quarter million in the revenue from on our APAC turn global X.X an common country. some for million. fastest momentum was to to $XX.X region. again QX shares business. respect with repurchase QX of that quarter our amount continued more and growing our our approximately once stock from illustrates cash our million executing the remains million. I'll generated ended repurchased fastest in We We EBITDA performance investments $XXX was plans With cash our

exploring emerging with are performance to see Japan We we South as in growth geographies also webscale up Indonesia. opportunities Korea, this our EMEA a strong the strong global contributed also EMEA scale new and continue Notably, in in year-over-year. and XX% in market to strength QX quarter. had Australia, position customers and such

in provider service X tier year. roll begin a with win region significant a later secured out will also this We which the to

direct which our Moving business to significant vertical vertical, XX% QX, of highest continues us. ever been. is webscale the This for than upside it's comprised total a to the be opportunity more revenue webscale in

their two nearly vertical of the more customer. now bringing customer the year. XX XX In half was from quarter in finally, that was a networks. the one And double XX% revenue than WaveLogic market WaveLogic our this our deploying technology quarter same new period portfolio, to first Ai only in in with fact, XXXG wins customers, viable alone, top including that Ai five remains last of secured in were today. webscale respect our XXXG-capable to We of coherent fiscal the this customers customers Direct second the us XXXX

make currently revenue be Blue footprint our in the to Planet high is revenue figure for software and platform both our three And which platform Waveserver bookings Our customers. major last best-in-class growing The second to quarter, orchestration by demand. for a continues continues an million largest competitively marked nearly quarter annual extremely generated at approaching in $XX ever entire business the year. unmatched and progress,

to our increased XXs million. line, a the X% to third fiscal to expect quarter to we in to of expect that of we margin market in XXXX, for revenue range $XXX achieve we've In gross ahead opportunities to referenced now million, light fiscal the range $XXX million low our success expense X% top operating growth Looking the leveraging approximately the million of to confidence rate $XXX in revenue in our $XXX and of continuing and deliver grow XXXX.

the as take quarter number it shows opportunities revenue quarterly we share size as our will well of note continued significantly delivered in share and closing, of solid guidance order that seeing. are and gains. QX to In You is market market record that another and growth this a we from up clearly previous flow

period service seeing providers. a new of through opportunities gross because with margin take mainly to market going pressure are share we We international are

responding are We to demand. that

pressure confident margin a phenomenon. However, short-term gross is this that we are

is That why we We remain our have take lower time Thank from gross from laid demonstrated we in that today. confident can Sharon, over in levels we that time sell targets we'll deployments. out side your the analysts. with associated financial the now recover for margin three-year December. questions you early

Operator

comes question is first Your go from Doug Instructions] open. Goldman Clark line [Operator your Sachs. with ahead, Please

Doug Clark

I impact margin bit, weaker to that so XX% had quarter, go a you start Hey looking, then I address great, a to what questions. the gross first we in of a packet didn't quarter which you do taking a were beyond thanks want be of all, would to kind bit mid you piece that expect and address get And the backwards for the software kind a July Can forward anticipated my level? back think secondarily mix little than basis April point headwind. at we margin at sales to both on the bit? gross

Jim Moylan

noted you just margins for what flows did as of margin QX. Doug, happens high that gross a for the Yes, bit and decline affect ebbs that's this of business. We our software, software think a in is area we us our did in and so typically sort

Blue a had As in orchestration. we we quarter Planet mentioned, great bookings

ahead I'd what's should out the are given today control With so QX for here expect We size to plane can as happen is a the to But slightly management it get mainly our say software. depend with guidance upon and and size we of where of would system to we frankly out QX. opportunity in service mid-XXs to going our move in sort expect revenue into respect sit big providers, QX. what new have we of recover. We international it very margin, that the we us. the that will today network don't That we bunch gross from that in customers year we improve put to in there a of the think rolling of strong

confident one gross confident is, mid-XXs our do we level, of in we're thing As depend in far as in gross very in so a the an I margins, improvement recover, margins from can will fact upon say three-year when about that. sort forecast which recovery we're

Doug Clark

focusing you would for detail. XX% my patterns the of America largest your the right with All on talk customers the customer kind visibility American North be the two thanks largest about particular the is in about actually here North Then helpful? in followup so dynamics looks into year-on-year, market. Can spending was down like

Gary Smith

and just them yes expectations them, that been to pretty from where be long to bit both now. would and are the Doug, where Verizon the that. the the as it got Metro AT&T now stronger well. and engagements be year not think packet flat to on I think but I their and we've haul our with Hi be I down consistent second expect I were the has a be in to expect case throughout would half for business they Verizon steady on will with year multiple

Doug Clark

good lot a guys. Thanks luck

Gary Smith

you. Thank

Operator

Your with Jefferies. go next George open. comes from question Please ahead, line Notter your is

George Notter

guys, you Hi hear can me.

Gary Smith

Yes, hear I you can George.

George Notter

very of about has bookings for like the you us And that was said improving a much. then I interested think sense seeing was [indiscernible]? backlog and internationally or that in quarter the what relative Thanks. the talk thanks marketplace in about terms we're about commentary great, well did? there a give got in to about narrative bookings for of in just record quarter. related curious It can I in any backlog, how the revenue opportunities you you sounds big magnitude also there to you differential quite in any Good, and

Gary Smith

us that see carriers. with to frankly our X the it tier turned And Thanks the as for George. began flow seeing and Yes, order demand I we're record this about flows included a result think expectations. exceeded has think growth principally the year was this. I order We international above we X% for where and it which clearly. is strengthened to that's really X% up taken as just frankly And year our be that's revenues for really in expectations started we of around to

secure in I around us. and bifurcation that think result of been sort flows Zee into as demand sort second principally of order in give the really a say I've the I haven't the at visibility that to started great largely I is continue carriers us that has confidence funding seen the has a a getting gives really before the and lot innovation of about got fund The and announcements momentum. the that of and ability expensive. more all the I think the us impactful that say So, - would for sustaining I half to change to This it's with global TV it's the don’t We space long of looking scale innovation. partner think this any dynamics. large industry of think of these term more to in this and

you're to to marketplace. players supply the get fewer sense So that being able it larger to makes going

George Notter

Thank you.

Operator

Morgan comes with question your line Meta ahead, next from Please Stanley. Your open. go is Marshall

Meta Marshall

on? really first that of on that maybe half well, carry some orders? with Thanks. that business is I then as [ph] a do come get the like how that's And to being can second should on do thanks. card upside we the the wins pricing into of we line think international much on of there you and the strength will kind half wanted later second and initial margin think of Great, that the of webscale stronger chassis kind we see versus then think honestly gross just question, lumpiness sense to or international them move kind pressure doing you

Scott McFeely

of Meta. we over deployments. fill. deployments time we to definitely of On Those it gross card early international lower customers the winning question and history the to It's as long know all latter, about early and will recover a is are margins We startup margins. costs have upsell from that initial gross moved going deals

it's the certainly latter. So

differential, that and we the U.S. we piece not some that's say Now what's happening but outside margin there would of of today. players Chinese is said where the we predominant the have

Gary Smith

mean and And you And based talk broad webscale, do applications that and are focused. about to global now scale. I I Meta, leading them? they this and that's where of the really seeing to that customers technology sort want of really multiple out some about would the we're reach it’s characteristic global predominant across particularly and regards think and around they marketplace multiple say rolling stuff with I we uniquely are is with given that Scott, the XXXG positioned expansion appreciate them very we're with our

Scott McFeely

think stay viable technology today for to remind shipping just on I the capability. still XXXG only XXXG coherent the is and state-of-the-art thing one really the you Yes, of we're shelf

into So roadmap front of in buying they technology also they are are put technology, them. buying into the that we

So can forward. those that, we confident very leadership with folks relationships continue we that the are and technology to going that have

Gary Smith

is going We it. our to We like when customers. like those share with market well you show we as where it think are

Gregg Lampf

Thank you.

please? question Next

Operator

Vijay Your with Bank. next go from question Bhagavath Deutsche ahead, comes open. line Please is your

Vijay Bhagavath

say Jim. morning? Gary, Hi I Can good

Gary Smith

Hi Vijay.

Vijay Bhagavath

Thanks. U.S.? with question my compare hey, U.S. on and obviously more India, or the strength contrast heading The year? you same do that in or business are do contrast next activity how order expect your you seeing how Yes, pretty do India? much this and into growth You and acceleration U.S. of you improving with is - the

Gary Smith

terms are I of contrasted in very mean, marketplaces they their dynamics.

seeing, growth of regional that's terms particularly percentage world think other American market, sign said this we the correspondingly growing is consistently, demand a expect so difference know, seeing stronger tier You X world, you North for so underpinning markets I the this second you half, the more a even any fundamental fastest in the in I actually and dynamic pretty carriers, just second Internet I terms I I growth MSOs, from of webscale that of the stopping. the fastest-growing North sort the But are in you're see would say market in and actually of an cetera. is multi-year one India, the in Regards would what think have know, don’t and one in you we know, America will to is know, both be mature North America. the into uptick the carriers, Internet in rates, half et

Vijay Bhagavath

quickly, that India that note you in if than So I here to pressured mean Thank strength of some assume kind multiyear would Gary, gross to like quite you. is much lower India the is be be places in for in reasonable also the margins willingness because time your states?

Gary Smith

bear been the that our experience because ownership I India. received know well You for And been of mind India I our been and a time, long think we we in frankly total dynamics architecture marketplace. that cost in that out hasn’t of has so India in have think of in understand

very of Defense of Government, there broad customers, now of all customers the India, major of and Department X base the We networks, the as in a players the number tier have webscale carriers our are we well. a help obviously

in has So India. not been our that experience

on with have We world, pressure these a where large margin it’s have just it scale. that and particular the about is witnessed parts we’ve new very large that as some and said, of gone costs carriers in Jim we for seen a the just of it’s on the frankly, sort expansions dynamic and about less is more pricing areas similar startup into other

Vijay Bhagavath

you. Okay, thank

Gregg Lampf

Vijay. Thanks,

Operator

Morgan. is Please Chatterjee next Your open. with go JP from comes Samik line your ahead, question

Samik Chatterjee

there? my on you as just for to quarter one Thanks time quarter, to off expectations is wanted the as mentioned you your of in just else or I did visibility last the if mentioned issuing things of start other drove that just there terms revenue particular and that gross were but contributing factors relative the question. that to front, changed sort the anything what, your morning. wanted of check the because terms, margin guidance to into again understand but were on good some I Hi, probably weakness quarter of taking change international of just this you there on guidance, deployment, wanted software your

Gary Smith

QX? about to just clear, you talking be are or QX Samik,

Samik Chatterjee

Yes, QX.

Gary Smith

a portion us XX.X. margins mix from thing Yes, the the clearly for drop we in change through changes a quarter international always contributed There's of the margin the had that as move and change. light biggest our little the software software quarter a gross big gross some downside, the was wins the that to biggest the we affected in in XX.X that but was was to

Samik Chatterjee

follow gross later, then at the just it on phase up in about ramp stages ramp of at When start initial you when got to the a later gross so margins I should initial margins up? and of I up that. deployment Okay you and sort are phase look versus the when think incremental how

Gary Smith

It the Yes, and customer there deploying general Samik. upon is answer and no for depends that he that. all is how

I over a about we to way over gross of and years many What all we deals a So the deployment can that lifecycle the gross margins sort early in customer have thereabouts it. demonstrated give deals. of the recover for get are for that margin stage life from range say I mid-XXs world think to you the can’t is can

Samik Chatterjee

you. Thank it. got Okay,

Operator

from comes question Please Raymond with ahead. go James. Leopold next Your Simon

line is Your open.

Simon Leopold

Great thanks.

I Thank patient I'm that quick First ’XX to obvious as and on can initiatives see then it's hopefully expect if you. I one the wanted has little growth? that assuming think your then was cable talk you've in and to or XG about sure among the case? if in what it's half space And customer, that the about talked XX% in if like to the Deep networking know is networking I want we recent one just just segment, outlook also wanted usual of we that me customer best growth Fiber you three-year XX% improvement fact the wanted And weakness? of X%. more way the still more that that driving horizon, second the products question, bit let to to feel packet your confirm and a be make to a about given improvement, X% packet kind have to correct your in

Gary Smith

top the customer your… the was that Yes, customer

Scott McFeely

And expect We the in half look several the successful the seeing in mirror Simon stronger multiple in I take the do portfolio way it's growing we've packet range the the XX% Scott packet for one. seasons. McFeely. of year-over-year been rearview I’ll our If sort growth by usually from forward variability. than second you're be some going is What packet. quarterly comes applications. The half to first

You key mentioned that's makes ones portfolio. addressable us XG the actually, projections on up for a portfolio for of opens market long and Deep couple us that our part would that what of about and the Fiber term and three-year bullish

Simon Leopold

you. Thank

Gary Smith

Simon. Thanks

Operator

Your Jim next Citi. go with question comes ahead. Please from Suva

Your open. line is

Jim Suva

much and is One a the both you at I more easy have the insightful, very so one questions. I'll Thank very ask time. two them other little and same

months providers Then if growth linked the at longer six you deals duration, versus to because of getting say think much have first it The seen? we of question announced therefore it wonder pressure margin is, other with are we does think annual are past seen much we've is, whether kind much. about timing, longer a quarter more they're is past? the the little will the from the the that what these service from you so historical go improve providers should top margins The and we the the contracts bit I'm there Thank mentioned first pressured, how of how the a anything we gross it's at you you, is, and be forward. the newer question duration, international revenues? acquisition attractive these to about the ramp – question the as you compared is, your I contracts company these international that should the outlook, guidance And for should in lot my anything but help your ones on service

Gary Smith

Jim. Thanks

acquisitions, Just is in not organic our terms our all have that clear, revenue we're in our anything of material about to from guidance business really this talking upside. revenue much, be so does

Jim Moylan

it's on. I the around at this would is going we're seeing greater What and not we're so different seeing we've Jim past what and And more going always of the in seen on pace than scale, it's different dynamics international it's particularly say is more it customers. always, now

new market invest. you particularly to alone I to think give high won dynamic Tier And to of to some scale share this, sort that's flight given talks carriers global year eight the around fiscal to context it around globally already that's and extraordinary. X got can that international and continue a player we've So about this this quality

aggressive them expansion more larger the than we've are seeing in ambitious and the outs we So players, in initial scale. their than we've their We're different and also of the is past build seen the seen past. more seen number past is some we've India, the of and be seeing also in to than existing our like places

let customers this. provides our to story. and very news a These us, nature about, in keep news of challenge diversification Jim our we're road emphasize right good can scale getting with So us place but now this and we of sheer business, that and as margin business for we've our a quality the me goals. middle fantastic that was and of the for the the as with and doing is three-year normally, done. Tier is other footprints things are many our The software This us will that years for in balance X relationships growing be drive talking gross

Jim Suva

details you. greatly for very clarification. the you Thank and That’s appreciated. Thank much

Gary Smith

Thank Jim. you,

Jim Moylan

Thank you.

Operator

from Your comes Genovese next go question Michael with ahead. Please MKM Partners.

is open. Your line

Michael Genovese

Thanks.

to Telco us the India? have in is And help some in in then competitive vertical environment or one that the Thank you. more in questions think India, so of just about you well competitors Ai a spoken about two Just think here, the about those competing on point? Waveserver webscale the customers, are are as mix this primarily secondly, at seeing XX how

Gary Smith

because time. Okay, there been real lot India typically, would as They market players the go we've X,XXX that. is periods been you entrants need that really the mean the deployments, is they expensive India and India, getting we've and incredibly in scale it's a you dynamics And to no I as the that of I into remind have to got dynamics seen. on in for players so well to of infrastructure support long of Indian that multi-faceted the with term. the on larger well have and ground change given in the the people long

the market marketplace. to to sort players it's the the it's existing my dominant in be of that going So not for continue new entrants, own view is, players are that

Scott McFeely

Yes, in add and has the the national environment critical having the sophistication and well. on maturity planes with many that having be control uniquely infrastructures. there Gary those and years just challenging environment things out operational to dealing building on like piece. of India I'll for India being are And experience operational as a

while. that's world also starting providers around service to larger the well, the webscale Waveserver, doing So on have that been experience back online offer as datacenter why carriers in well question the customers come those seeing are as but well. providers, effect tend there towards are to skewed your a in a we're On service as that's that uptake so with for lean that it on is yes

Gary Smith

as for but Japan, obvious in the Jim as across are markets that sort of I'd reasons, highlight thing other big Australia some the seeing Pacific of would buoyant Southern I of region seeing said as smaller say addition us, focus a for growing, or well. Asian other Korea Asia India growth on to demand. we're in we're the and The but benefits

Gregg Lampf

Thanks Mike.

Operator

go from ahead. next Your comes Netis Dmitry with William Please question Blair.

Your line is open.

Dmitry Netis

Great, thanks lot guys. a

it today one revenue is in larger revenue, was I questions, two back times have I three XXXX. if look at your than So your

is that from gross XX% Your timeframe margin down however.

potentially yet expenses base, revenue very high on you a drive I'm in is nice what change pretty of there to job get the landscape done there little of whether there's controlling margin trying anything to You've and bunch side business, be can on get to or they're as for do drive a if there out to out seem to to that? of the them, of of years landscape competitive your could XX trying calling kind about leverage Metro or been seeing is, you do you commentary that and losing change topic out the the now we've but given the anything industry but almost the pressures business guys dynamic business there, and of will the kind aggressive some that to you're there's the going a bit, almost out them

Scott McFeely

the us share. for thing to to smartest that continue to market believe do is take We

we market If we've the teens past done and the up eight look share of over or the XX% grown global market that years, a of our relationships combination through you great low seven around technology, to and at from we've doesn't term. going do in that's out world the the around us do. and consolidation. could whether at near looked taking smartest to us for likely to That for at least the certainly share, We've thing be seem

ones We take and particularly forward, for to is see about will our continue it do smaller competitors, goes to the us share. down the how but to thing smartest bear on

time industry. over will It’s that take. and going a do to longer like to than all just to would going we’re improve what the landscape of little we that’s it the take So

Gary Smith

that perspective gone journey the the having highlighted. offer also through just you I'd Dmitry,

think it right I changing the structure is changing, is industry now.

You’re the also position with optical the don’t, in scale the those for the large core on between that increase. staying own people have large focuses But and reach. got scale global largest salesforce we everybody to really bifurcation scale to technology of because terms world global you've continuing that channels. cost those and and global is the those only that of in a with And the technology, I in leadership seeing is a highlight, have that real have would

at we’re our maybe So I that little a so growing the under term X% And margins growing is marketplace reflected change in to the is growth? are in I whilst you short and X% seeing you pressure, are and that the performance. that think think Who seeing profitable in player bifurcation. really only our is

Dmitry Netis

with Liberty All them right, business would does negative? your how buying Global assets, Vodafone Liberty or Global be response. I positive quick on that appreciate My question impact that and second the

Jim Moylan

for carriers a think those us stronger Tier players in makes X that’s probably we getting relationships both of lot think in a sense. have stronger positive I with Europe and net Europe of players, I

to That seeing I think are XX% QX, European saw don’t but a performance to up we You getting we’re steady play be seems in quarter-to-quarter, environment improvement business. going our that’s better. and nice in our

Gregg Lampf

Dmitry. Thanks

Operator

with comes Your next go BMO Long Capital ahead. Please question from Tim Markets.

open. is line Your

Tim Long

these talk think you, I little just Thank then think timing that do could in rate the model Thank long-term it the the you and the the XXX will sustainable faster, become I regularly of will Could sense sense good out second if second couple to more in of contributing? of but and contributor, the of much you. looking you you run of just bit give like And or sounds new could. quarters a see XXX, it’s and the Good software two when business, it that’s some us start we know about Jim, if range over positive a you when as give Blue Planet half. OpEx next better wins new a grows more do kind as to maybe well? ramp just going us a get

Gary Smith

let I bit seeing our But momentum Planet, a seeing are context take think seeing nascent still this frankly then Blue quarters the go space you’re sort underlying we of back. positive, performance, that important, Tim, good you’re is it’s a I now. down then in and the think come of trend the you good is and me

of are that in few market. the well on think a applications in honing playing We’re extremely the we

I mass think required we today would record the be for revenues. it’s see in think strategy, year for would I the flows part out and was as set I nascent, would had marketplace. the flows think that also Blue also order the Planet We've But flush extremely part we the in we say of is an But I it’s the acquisition of of the rest critical that order Our announced again, improvement about quarter our capability in is QX. strong.

able you I be I sort and of we think move to growth So help XXXX think through we we I should help, growth that consistent also that forward. well kind think gross will Software of question, your get rate as and in the our answer as to should good of see will as to and XX% steady sort that space a get margins performance in more

Jim Moylan

with on Tim our And year. plan right OpEx for on OpEx, we’re the

is grow not said we’re for we that next not And we if is quarters, the far That for can higher I reasons expect about have prepared what to but of plan plan one leverage over As assure the QX give flow might as say. we've revenue two to to such guidance we’re OpEx. that eight is as anything you having that bad from QX, far can that into what year or we’re repeatedly as a grow than a we order continue very sales as right I we now. years. move talking our primary strong knows there, the that. why shown operating The range faster who base, be we XXXX, That's commission will our past always seven that’s

Tim Long

Excellent.

Gary Smith

you. Thank

Operator

Needham. comes Please question go with Your from Henderson next Alex ahead.

Your open. line is

Alex Henderson

that seeing doing are growth markets? that I you for I which mix the generally appreciate two services then coming that parsing the coming hoping how or backlog much bit of you would on India is between and of talk much. that parse it? less questions is other and growth would services mix margins more you of assume orders footprint question lower build, how you're thank building, So could on could second Great, and little between is you platforms. from carry those if was international as And very a be much are of you you. a the the about from that installation higher I would

Jim Moylan

India really places. a in revenue orders major sitting called backlog are reasons our is of yes two Alex, backlog. is the the our of the why year. growth had our GCN. that up webscale customers and the inflow other It One one We've for our we've in is big Hey from is

Gary Smith

and part the And things we've positive for us displaying customer weighs the you're we deploy, always, but think lower is up of new right that is which and I operating of procedure, a it's typically Alex cost that mix one it's so that to of It's cost dynamic the as at for view. point But say when on not on weighing that. the you services that's margins margins, a That service us now. sharing is and Tier some look that from includes X but there installation customers. would before margin And on end is very the also of services services as right been installation also on standard well our story. I that the

Alex Henderson

normal particularly don't Is cost that in know how or cost is lighter than I heavy service installation that versus installation...? India,

Gary Smith

customers your a there out answer that some on carry to different both, to question that India. mix you've Actually have approaches how got models actually got so is you've the large installation, of in they

Alex Henderson

Thank you.

Gary Smith

Alex. Thanks

Operator

Venkatesh Your Please next comes Tejas UBS. go from ahead. with question

open. is line Your

Tejas Venkatesh

you the How fast systems market grown ex-China year? this believe optical has do

Gary Smith

Low single digits.

Tejas Venkatesh

All that share lot of a gain. so right, represents

Gary Smith

the with concur would of look industry analysts you them. at most if of are Yes, in we and that range kind

Tejas Venkatesh

are and whether to on of thoughts about a I systems? lot your time, towards And XXX margin of couple gross revenue thinking over the you GR your want into open Waveserver Got impact also a get term questions, where trend growth? the of the how it eat and could market long you're and it line seeing

Gary Smith

you through both one we used to that, three-year our industry that's we announced Microsystems. the called short Certainly out component for From so component Yes line GR of targeted. first I’ll evolve piece. that our all a what to back in With or that actually, Ciena one I'll explicitly component cases we point was that plan the against I’ll our will participation perspective, data of revenue with the XXXG the and the campus piece, so a use take center case metros. those start connectedly of be reach in going

at the wavelengths we've not sort piece, historically on the open folks Razorblade, decisions and systems where lower our in to higher systems same The the the that margins. razor a to benefit it's have ads were the and of they're margins system the because those On recognize make channel are on that industry economic get transaction the going go line recognized line being at of relatively dynamic had model. towards online pushed interesting in an able model open

pricing than closed bit different quite system. open pricing an a So for the system for the line is a

So net-net the by being win piece transponder the the overall way margins you can same. ends about ironically, the assuming

Tejas Venkatesh

then And XXX GR?

Gary Smith

see to that opportunities DCI about so do technology have short case talked campus do I player a as forward. going address reach the metro And the based reach answer, we for short use that. first in a XXX or GR we

Tejas Venkatesh

you. Thank

Operator

Next question comes from Jeff ahead. go Kvaal with Nomura Please Instinet.

Your line is open.

Jeffrey Kvaal

strength them would to you hoping for that cautioned had about I I could you Yes, the the if of of one better, you quarter us things things can gotten quarter the a to not webscale talk year the little out us balance extrapolate last in clarify that be couple grateful? a that is and was of obviously bit have

Gary Smith

seeing frankly all stronger also and Yes, think players than the as across robust order the that of webscales in particularly the we Jeff this some players. I would flows highlight we around anticipated. and I emerging that. strong well, and webscale webscale of We're also the highlighted The demand received QX Jim were ones major had

Asia wins spaces And their number I a international note we're is major have we've Europe, are countries in in and saying that uniquely distinct positioned think expansion, particularly the which confidence players gives into content of seen looking get on different Pacific so year. countries as of them particularly QX We well. with for to uptick we India, us in the these that, like particularly so that

Scott McFeely

just Ai. coming next. what's They the so current going that it's where WaveLogic WaveLogic it's our like attracted really with like They to, chip not we're technology they're and really

Gary Smith

seasons well. component as very of them also the the with work And I we've software phases couple over fit, on a are last that done to Ai obviously it, their operational is WaveLogic Ai cetera key to think Jim, them important et but the

Jeffrey Kvaal

Okay, great.

that ago in their place? to what thinking accelerated the they you're say have it better that be they fair a already plans quarter plans had would versus doing you within were or own So just

Gary Smith

I'd say both.

probably I there's. the putting of seeing customer we customer I logos relationships have is in we're of even expectations those I that exceeding in the terms expansion relationships they're amount our the of think think within number and capacity think of

Jeffrey Kvaal

Okay, much. very all thank you

Gregg Lampf

Thanks Jeff.

Operator

Catharine from Next question Please ahead. Dougherty. Trebnick go comes with

is line open. Your

Catharine Trebnick

into Thanks this for about, was color one it. federal taking give of appreciate undertone behind Two to business Thank a that heading on and bringing opportunities major And us you. is, there is one healthy lot I of through, you was some questions new that's a last could or other year are markets, could vertical the talked QX? pull lot the little call. you opportunity a business come the your business upon that of there you a a my subsea business, coming? idea where touch Waveserver part some

Scott McFeely

On delay that things and really I’d say the past see government spending the side, some there's been government starting because have movement the in We're over year. that government spending, a finally. of been happening how to is

and business and in recovery we'll a that We position nice we hopefully get QX. have QX into get as some

Gary Smith

optics. business number great in Yes, a continues that the share went business to our us to by submarine position innovation years nothing market ago then and driven largely remind sort be I'll on one the you from of for leadership it five

today though major service Waveserver provider getting a and the It in platform is of it say those I'd technology sort optical be of be is deployed key networks. Waveserver in necessarily to model, classic is a specifically. our WaveLogic deployment more You X,XXX tends terms mentioned that tends platform, the a Ai continuing in there leadership absolutely us in submarine to not

Catharine Trebnick

coming lot of or Okay, is and through the and the business and of a doing piece are how Amazon Google it mostly Facebook international that, carriers? you from is the

Scott McFeely

are that sort Facebooks through positions back the is that the relationships folks to of Amazon mentioned, Gary's or influence their they're Googles, provider the in certainly and sides the Both, both or equity on you having they point doing it both, of significant of direct influence significant is of the the take those cables service critical. whether and and

Catharine Trebnick

much. you right, All thank very

Gregg Lampf

Catharine. Thanks

Operator

go Tim Northland Capital. from comes with Savageaux question Next ahead. Please

open. Your line is

Tim Savageaux

Can morning. good hear Question on Thanks, you me? another.

Gary Smith

you. hear can we Yes,

Tim Savageaux

gather cable diversified and terms pretty what key to year sorry haven't extraordinary growth a in it of set out you're that kind and are terms drivers of to in you overall what Webscale especially for sort growth the But if growth we more that an seeing in that year on implying much comment drivers? revenue of looks market driver you're this maybe increasingly great, and the sounds I this Yes, okay about vertical international that. opportunities be TV could of next too dynamics Question vertical wonder demand a discussed of as like importantly of morning upside I another and on QX.

Scott McFeely

if Metro this in operator be we're it think this that's long steady the year. where infrastructure, it at I infrastructure us look cable I haul year their Yes, at sort exposed their and business for of pretty been whether

for event. opportunity looking as going their Fiber the is into initiatives the they I think network to access Deep opportunity and deeper think I that's significant a fiber forward us drive with us that's for a be XXXX beyond

Tim Savageaux

you. thank Great,

Operator

Next from Loop Please question go with comes Markets. ahead. Kisner Capital James

open. Your line is

James Kisner

a this looking webscale a drive for forward big it's to continue expect opportunity? that should nice it's or First we it's geographic trending is assume EMEA market just I think or forward years year. be to somewhat are of also Thanks. a I result, mean be was that outlook expecting targeted I couple mean just of should I we just XX% an point that base? I but for that kind been should or helping and you or might Webscale this clarification, revenuehas obviously not mentioned just probably to you next it's should the in underlying continue trends in conversely July, that revenue kind slower that breakout, sort congrats mean rate EMEA X. rate bleeding wondering And being higher of of in I'm CALA, to on sort is but then that Direct growing severally, nice of is about we separately a at I’m go off at a wondering of the since assume going down down, about been we I years that something know, acceleration. a just the and expect been

Jim Moylan

we're and se. happened I forward the end this of going I we year three X% or that at don't you as to grow I per growth said year our X% next growth but said to year. years, this what's low don't be about forward, that the the this two going we have What would the to above outlook should beat pull say rate. year of see going a of this We're think we'd end to Yes, a that's high look each we think I we're any is rate pull just X% X% there's as thought years. this the into was to for don't actually next that think thought we be different rate

we out those So we combination hit the you that laid this beginning we're of numbers of is year. that the all of confident targets for can at

Gary Smith

it, James, increasingly better actually with element regards to around we the webscale feeling sounds EMEA. dynamics EMEA the are to

challenges in we've year, we couple the beginning I Last think of around that recovery had in nice some very last the historically. think we've years As of and signaled good I the of EMEA had pretty we at trajectory. couple now years feel a

Europe, as about X Tier We so a also international when that in of some couple actually gives we wins are have significant confidence talk us well.

some in in So about got sustain actually this we've morning X that our Tier big wins talked forward. Pacific of help lot Asia and too a India going will have those EMEA we conversations webscale, growth and but

I very included get second in our in the perspective, perhaps it about of et major we've think for carriers couple think steadied they the it's but we're second sure. accurate. for we half predominantly, the as and had rest it I and CALA mean CALA think and build think and I the really there on challenging Olympics expect talking half I do opportunity is into commentary dominate and growth economy do that's cetera a Brazil large for space and Your there's be ‘XX an not in not of since I outs seen the then. ’XX I

James Kisner

Thank much. you very

Gregg Lampf

Thanks James.

Operator

go Jin open. your question last from is with ahead Bloomberg Woo comes line Intelligence. Ho Please Your

Woo Jin Ho

you for questions. my taking thank Great,

couple been and rollouts of growth to to So of the Gary, these you before large wins transition capacity gross had drive about into on margin mentioned concerns that but you've of footprint footprint some visibility a here Jim, over the you could just we've pressure as wins in terms these you confidence that, give the margins, and guys times to timing XXXX? some talk on the

Jim Moylan

saying now, right not about anything we're really Well, specifically XXXX Jin. Woo

of will we well. of look these periods at I customer at we've we on we and a based said have these that what are that weigh shown we that at we're we We the believe things gross the repeatedly we've saying view of three-year good outlook we in look footprint I time declines that our pressure. multiyear different had we decisions stage to from nature as early stage country, margin and the of when from at say are, late the confident our these big will this and now is compared do the strategic look customer margin the we at no recovered we margin financial this What win. targets that all we're increases, this look past make wins, and strategic look we as that of a

Woo Jin Ho

my Telco Great. followup that Ai you guys clearly chip, the has lead technology influenced deals? And with your your WaveLogic have for much how you on are then upbeat

Gary Smith

about and leadership seeing that, the importantly on continue are they I innovate When say think what leadership. specifically this want to I just you there as next yes technology the and would ability talk that architecture they're to three is, generation the Telcos, I think elements.

now. leadership got So mean we've right I make technology no mistake, I

to going able that be the it. and to to because scope got scale We’re continue push do we've to

are that's market deliver just And we've your got and So in the the delivering not biased on the they both, with support guys we've dissimilar roadmap is say what would to and with lead be them continue technology technology I what now, and it's and got piece. your and financial that and significant stable. hugely not as about we've got financially roadmap stability I that It’s around today towards will to the to ability these webscale, it’s that's leading, you’re think except scale global well. more listen, we've got a ability

Woo Jin Ho

questions. my for you thank taking Great,

Gary Smith

you. Thank

Gregg Lampf

forward this weeks. Thanks Woo the the everyone you, joining thank Thank your for over next on for us. you road Jin everyone We and several to look seeing time morning.

Operator

This concludes disconnect. you today's conference call, now may

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