Ciena (CIEN) 30 Aug 182018 Q3 Earnings call transcript

Company Profile

Participants

Gregg Lampf	VP, IR
Gary Smith	President and CEO
Jim Moylan	CFO
Scott McFeely	SVP, Global Products and Services
Paul Silverstein	Cowen & Company
Meta Marshall	Morgan Stanley
George Notter	Jefferies
Jim Suva	Citi
Simon Leopold	Raymond James
Rod Hall	Goldman Sachs
Michael Genovese	MKM Partners
Tejas Venkatesh	UBS
James Kisner	Loop Capital Markets
Vijay Bhagavath	Deutsche Bank
Dmitry Netis	William Blair
Catharine Trebnick	Doherty
Joe Cardoso	JP Morgan
Alex Henderson	Needham
Tim Savageaux	Northland Securities

Call transcript

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Operator

Good morning. My name is Emily and I will be your conference operator today. At this time, I would like to welcome everyone to the Ciena’s Fiscal Q3 2018 Financial Results Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator President, please Vice ahead. Investor Lampf, go Relations, Gregg

Gregg Lampf

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

the section items of to accompanying posted presentation that highlighted an also certain investor from have We Investors ciena.com includes quarter. the

include on allows. of from question side analysts our today outlook comments time the year. third per Our and on the sell person remainder the open detail questions the quarter views results, to one our as for environment taking We’ll fiscal follow-ups market with the then our call

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

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

Gary Smith

Thanks, good everyone. morning, and Gregg,

the start performance and a a Let validation that importantly, clear strong financial QX execution. But more of strategy me was is our our saying by continued consistency great quarter. of

scale of a leadership applications. and and of to us across spectrum broad robust advantage clear global diversification, demand customers Our enable take technology full

a quarter very deliver continue and faster revenue third result, As And take our we in market market strong. came than share. to considerable growth

greater fact, were than achieved revenue, of we backlog In coming record in the orders and QX. out quarter

Asia Fundamental to importantly, diversification to industry and EPS of This point, also also profitable. of strong continued as in the This our is customers, We mention increasingly whom differentiates in business, key of from EPS that our diversification growth last revenue Pacific that particular enables of X our and $X.XX. international with pronounced. strong of we QX our is like growth. non-telco improved contributing company the better diversification increasingly out or I’ll distinction saw specifically execution providers service in both is temporarily Western customers, only top-line focused positions continued the in are substantially on that profitable performance between webscale benefits business. of to and space customers. adversely region XX% quarter, us verticals, across through affect EPS, I’d growing we challenged financial may bottom-line delivered tier And the point in consistent coming strategic and a on many general. from to our to And as distractions. this weakening the that the performance illustrated is to QX, adjusted navigate with our our more it we with addition with dynamics Similar metric geographies. that and become winners are And more losers a performance, we even as us and competitors, becoming remain

demands. webscale. set influencer on customer clearly Let’s start architecture key the in of space. network we are a major to we is see this increasing extremely now we segment. opportunities well-positioned And capitalize And This continue with in this

several by $XXX of represents $XXX million webscale year-to-date. DCI mentioned help QX, revenue European pleased plans. were them Last XX% This play share our a And as in million XX% of transformation to sales, new project we top of those that business in wide up providers, WaveLogic with XXXX. are compares leveraging Ciena, specifically In very service quarterly for deployment, rapid X Overall, all of seen This fact, customers, Telekom, Waveserver, Deutsche which a quarter, XX X webscale its than has international that network in including that customers, to webscale support accounts a for revenue with wholesale technology. to out. continues to dynamic we’re business for example many platform their This is I’m us. which tier was with was record more whom revenue one first total a entity. The of of And direct XXX% is QX. you network one customers year-over-year. with exceeded quarterly an our international adoption our includes fiscal of working

us seen sustain opportunity are ability meaningfully to long-term. our stable And you’ve the innovation customers capabilities, and results, to Pacific us to Importantly, as financially see with region And to our coming in new continues continuing. reach a our over generally leadership because contribute partner view Asia lastly, this growth. as set global we an and of they this

customers are robust to detail. to roughly In market QX, performance flows was advantage network smartphone and With market demand estimated was also to consistent in well-positioned ebbs to With the strong the specific turn have and of is XXXX, infrastructure our region’s same it obviously some India And half quarterly the our region. that, Overall, year-over-year generally and by of grew which the our we reinforces of demand. performance support Australia more contributor to take results. doubled for again, once which region than period. a the I’ll further digital over booming this segments. representing billion resiliency this users by Japan and in led XXX% world’s the X.X population Jim extremely to additional

Jim Moylan

Gary, of and contribution, we comprised Verizon, were everyone. and customers major $XXX Today, million. performance delivered QX morning, In a customers of company. with these of these we good revenues. three strong aggregate, quarter. Notably, quarterly order revenue XX% had XX% Thanks, three this In AT&T webscale

few of customer evolved. past composition the has changed the our list For top and years,

products. successfully We and diversified have our across intentionally customer and segments, geographies business

performance top included XX Also quarter, now three in our revenue the quarterly is note even correlated one webscalers. to annual less customers any or region. Our and of customer

gross favorable XX.X%, expense We reported products QX quarterly mainly was Our margin operating $XXX driven million. adjusted of by mix.

was profitability third adjusted our million cash measures, a generated from $XXX the million, QX, million. in in With we quarter, and in our we operations, respect $XX $XX We was addition, million, adjusted with delivered In the flow to investments. free EBTIDA approximately adjusted mentioned, $XXX million net quarter $XX and of EPS cash XX%, operating of in income margin $X.XX. of Gary ended and adjusted as cash

to allocation. Moving capital

free aggregate which million approximately represented quarter, stock about of cash the During our shares flow an at repurchased common we of million, in quarter. value of X.X $XX the half third

the our indicated our new plans in on update upon $XXX you Previously, which want to today the to In maturity. addition, intent XXXX settle value to respect with million cash we of our notes, XXXX mature we face notes, October. in

stock Given likely will these market our value at price, value current face the exceed of notes maturity. their

face repurchase of the an As the This in million value additional that $XXX a we’ve decided of cash shares settle market in of in result, notes these amount. to value represents excess upon maturity. up to of effectively

share Taken returning in to our now This highlight significant to webscale our and subsea year-over-year preferred illustrate together managing a business in the dilution quarter, and submarine XX% from vendor momentum continued we business confidence which geographies steps activity, third We for logos, X and seeing capital continued new Key APAC stockholders. the as performed was with cables. the this I’ll than to by highlights large nearly region. traction two business. our and XX% revenue. with QX once selected segment continued driven XX% global was of quarter we’re new and again up key of in strong contributing were in vertical, our I’ll some repurchase company particular, these that across including our growth are India indicators ongoing greater share every the diversification. nearly our up the growth also demand. strong additional contributor commitment In well the largely had several year-over-year, wins remains consortium in

in the portfolio, breed by is our networking to webscale grew XX% our clearly evidenced market. respect WaveLogic than we In in optical, with market year-over-year. more our growing share business platform as our coherent technology modem packet best demanding Finally,

no mark significant approach there we WaveLogic XXX Ai year availability, still innovation As on challenger to-date. gigs from the one is

quarter Our portfolio, leadership provides in our with customer it growth reflects to our months still as software, Planet a capability. quarter-over-quarter, and Packet strategy learning both our our is leverage the the efforts the early market’s some in software and Blue early gross we In to continue Networking encouraged the We’ll are deployments of needs and automation Planet. diversifies with Blue are to increasing our XX% expand our network and we strong space. with an market, And position the This be margin Verizon. we business had Blue domain accelerate base time. automation several a our Planet. next which opportunity nascent about over grows reception customer also business this over by our in growth to investments

deliver Looking million. to ahead to range revenue of to we a fiscal million quarter expect in XXXX, fourth $XXX $XXX

in deliver expense expect $XXX we operating million. And approximately We to expect low-XXs. to the margin of report gross

fiscal outstanding robust in to across Design. customers as of We we solid In execution in and well applications. the closing, demand of a QX, performance wide Packet slightly year, and given be OpEx range to delivered XX-week expect as the QX addition higher due

increasing and leader. are are we the market market share, We

and those on as model We targets when at to projections targets. our Thank are in ability We’ll XXXX business December from take year for three-year time. our sell commentary full your against time analysts. the we our questions well now additional today. fiscal progress that as Emily, provide you updates we’ll confident financial to report achieve to our look in our the side any

Operator

Cowen [Operator Instructions] the And line Company. of & from question first Paul our from Silverstein comes

open. Your is line

Paul Silverstein

orders a are in seeing? looking -- you Can of a ago maybe exceeding as compare can about year you XX some beyond more I visibility revenue. you’re what comment Gary, you give heard ago, to and beyond the clearly but us and days us quarter, give is now the improving terms Thanks. insight it

Gary Smith

with Europe the We customers. but talked geographically the Xs. I it about visibility very as we’re improved and seeing Pacific opportunities also think it’s in both being I’d year. describe throughout Asia improving tier strong and we steadily see particularly diverse,

these going We’re getting engagements, of out wins. was visibility early And and obviously the QX one of -- But, think of largest another visibility to revenues The some dimensions had. backlog our now -- and upwards. that’s is one. point customer dimension clearly that’s forecasting, pipeline we’ve these our I all that

Paul Silverstein

all quick all much Not there I I history and steps we in a regard. know forward, to margins, that are step on like of is me If question. outlook general. back, revenue follow-up, improvement the margins? And but guidance you it terms and extent characterize How two wrong... conservative if meaningful visibility to that extend something in strikes just that’s the what there -- optical one sound may, has to the been in question could as it’s the both in the conservative, But, being does your

Gary Smith

take is Let the think I in mean, what very consistent over seen years first optical I the demand. one, last few Paul. me we’ve

performance consistent the revenue been years, seven five to has If you top-line and consistent. our has look over and been very has been our performance last demand it at consistent. The

one based characteristic this that the back and very done. believe that two is what in analytics XXXX broad-based seeing. on that, of notion being think, happened optical and This all we’re demand we’ve and forward I honestly think I a I is

Jim Moylan

Paul. margins, gross On

average. in times, enjoy early stages of in to many deployments, said going slightly we’ve lower As big margins the we’re

As more the getting conservative so view guide. get in will mature XXs. to and project, we’re life the though more, in happens and we get we don’t cycle We of we time in we experiencing move gross a win margins. margins that the our are low opportunities this as great we because are improvement It winning

going new fact, a to be slightly good business. as to is the In range been in for this positive we’re QX. of QX down might a year. story. think in we This good where It’s we’ve the But, I compared future be sign the of

Operator

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

Your line is open.

Meta Marshall

Great. Thanks. on Maybe just that. following up

expected in I QX. think lower margins slightly we had gross fiscal

then, level what to from there year, expectation that the But maybe of hadn’t weaker, of away started detail that strong a upside is customers. from you be into particular on And gross the the in as of that perhaps rest they mentioned to more expected, the you margin So, diversify customers just to through fiscal through fiscal the ability the just, lot first second fiscal second, particularly projects we or was cloud there led Thanks. any QX? the have the heading have QX, half been -- potentially would lumpiness the year? throughout

Jim Moylan

have the where mix, the markets, in good situation lifecycle had The a before, two because better and said that Yes. our projects the than in nature We those products gross by of of in we are are certain do, slightly products quarter margin, others. drivers as product and mix us. pretty margins product I helped competitive the of very

Gary Smith

out I be a business the the of demonstrated to for we’ve in year. both that, folks to visibility terms In customer geographically overall, resilient built into very and of think, this applications. And with the we’ve as diversification, think we’re I mindful build wise, like webscale, need

will the early and the ebbs internationally, you I you of flows. get content more particularly more And and they’re and of connectivity I their at take shows to which centers. stages eyeballs the particularly to no mean, get data But people, get outside out this. think segment at more still believe I specifically, more U.S. means You basically of to and if abating more strategy signs trying we’re when look webscale it

are a So, now, customers and during emerging the within ebbs base centers. got that I as their players mean, and certain sure. have connect it’s to going predominant of to looking webscale flows both well broad We’ve customers, the also for increasingly data players,

medium I around of the sort a we’re demand near very term. as segment, think characteristics of positive to So, certainly for the this

Operator

Our of next line from Notter the Jefferies. question George comes from

open. Your is line

George Notter

growth people Not Hi, guys. you year-on-year at of that growth versus Is XXXX. how capture? look you the about that rates long Thanks year-on-year very I for sense the that growth And I quarter. much of noticed rate, that looking you that market much. share digits hired single also, XX%. And, about growth what mid think there just are might ascribing to XXX in in like? I any as was then ago, were talking sales growth guys

incremental I think Thanks. I those from come may But, a some wondering, of have Packet you’re I’m guess, Design. that’s right now. quarter. making really big where investments hiring

Gary Smith

sort take Let the came me than three-year of well. we on The more Yes, a that. first is XX% considerably as when the into thought part of year projections we right. you’re

see anticipated, into Webscale’s that’s think, stronger to that Tier these Pacific the well about. driven beginning come in wins saw, revenues. we than I been areas by than we’ve X Asia growth we’d stronger the talked we’re come as also and

those the of year. above. analysts taken data, which down at, on, you market us their industry for I And in digits. of Interestingly, the they’re actually elements think contribution numbers I think, the single revised I many depending three look the the has have very So, think analyst

this is have something So, the of globally, back X% the anticipate this And gain. by end year the we market on share like performance. to share, of gained

Jim Moylan

R&D we’re gain people on half for our people in that hiring people not with do we’re that $XXX to right the frankly takes And of year on was count, the spend quite to And Design. of acquisition this year. going George, to our Packet due But that. million plan

Operator

Suva comes question line of the Citi. Our Jim from next from

open. is line Your

Jim Suva

guidance, Can webscale tier-X major on from Thanks and the material. that or clarity color understand? And assuming your in this focus geographic get quarter-out? heard that or I very strong help And much. guidance that it because us am you help you was that by little Just on bit that or at upon think, it quite can revenues based land-based impressive. like your correct was undersea? from reported, revenues quarter if us say, was was prepared it there was was revenue of some more, pull-in I confirm the no strength. strength all I just I you comments the case? beat The very And strong a your think,

Jim Moylan

Yes.

GCNs. the is said, over we’re we said with it tier past tier As mostly we’ve of Xs Remember, quarters Xs, winning that and we’re opportunities increasing couple seeing those.

take And a sometimes they revenues. to to time of get bit

is And performance. quarter, into WaveLogic space this changes from expected and attractive market of are gaining in who happening what that’s is piece big something high we in Ai as demand quarter. side very other the technology, that webscale we we’re we’re share. to that’s So, the two Those particularly the winning a customers the but came

say business did we we or that share quarter that a Now, sort XX%, now of and in grew strong quarter XX% in we said subsea market had Networking. Packet strong that in and

company, really products across So, geographies across we’re winning. and the across

Scott McFeely

Jim, spoke the it’s applicable win very we’re McFeely. part continuing to to to why and submarine number also market The reason about big very share is technology space there. our and the that show Jim Scott Ai a continuing one of

Jim Suva

your lots you you help of could But, a Great. market really market factors briefly follow-up, us it react gains? us you gains. it things you. product, like or ability share to share insights is can about key is gain. mention very the are driving quick what is class understand it driving execution, your that? manner? think in Thank as There that world lead And What’s share could Is of give to my

Gary Smith

talk can scale world. largest optical many very the we’ve the at technology we’ve of geared that, meaningfully sales to of roadmap in force that this fact over the And for global a got years. and up absolute Scott leading and I that the level, virtuous think, combination technology, the highest combination of it’s and

And customer more the than else of customer those things anybody those in in best have combination relationships we relationships the are, the we so, two have of world; reach.

And just years that’s and get so, we’re do go and share combination that, virtuous is the the and you to combine designed two. you over business of last so few taking market leadership. velocity because And why two the the of the the dramatically completely

Scott McFeely

growth ever, of ability actually Yes. we core to folks, to say, question the that not roadmap And portfolio, continue of to a which now, with every that X the of and even the the tier some number an industry the other say, through become only a buying combined some long industry lowest and deliver, around perspective story have to be a to ability continue and have drive innovation to able a time surprises the differentiator. major portfolio that with follow it in are, folks software the that. webscale applications in the what’s network invest with I buying I the the resonating dimensions cost the financial drive where significant more goes people a been adaptive think innovation. on And matter the programmable than our the shelf, that starting at think, this people, for breadth to are the from your And on right is bit you I’ve into strength engagement customers. and they’re of story And through able to starting infrastructure with I’ll they’re in per time. for access that from our that being in strategy is differentiation, automation And for and just that’s a to a I’d

Operator

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

Your line open. is

Simon Leopold

if then, the much your to offered I today versus identify you beat, surprised just product by the offer could that segment, on assuming Networking just trending, group the not terms talked color see, Packet particular biggest you elements cable a you. reflecting is maybe on expectations Thank Maybe the what particular more trending. quarter wanted And thanks. that which long-term you guidance? grower of were how around strong TV business you in when the you that looks I’m this could about haven’t you Great, and webscale, driven bit like if in see good a and wireless. that is little that outlook.

Gary Smith

take first Simon, the let me of part that.

I the of lot think, parts always into there quarter. moving a is

that, was than thing got of a these came the stronger did thought keep we in think thought. it Xs you got, little as we tier the just wins Asia simple than Japan better I was want initial than as that to we’ve we and that I think bit than as Pacific, you’ve demand a stronger if stronger we then webscale new anticipated, some thirdly general region, thought,

really a business. that really big was blew diversity that talks to in of out. the which there thing about, one Packet. It do combination, dynamics have you our it the So I no we think was to want talk Scott,

Scott McFeely

benefiting last marry Networking, we historically our Ethernet optical geographically. end has I seasons also to on efforts the wireless and the geographically. aggregation, we’re very holistic We’ve portfolio over with that to and benefits. And solution. Packet see of access And our from business worked so backhaul. diligently it, a to to we’re state diversify been the services couple starting Yes, strength And focused the that on think to can end I’ll provide more diversify

of So, piece. portfolio that’s sort a

quite that with their dominant a cable more providers, deployment And And that enhancing that those as they’re way, Both the The dynamic wireless or benefiting that by from typically or property. fiber other looking network, access. opportunity have the end that for segments means market experience. the for perspective, are folks user diversification. MSO a at means packet of from scenarios thing well. folks us right access you’re we’re or the just And service so

Simon Leopold

past. Great. Has you it Japan. something talked about market come? to or Gary, One quick that on still the is mentioned clarification, for This inflected is you’ve you in

Gary Smith

got really I think I here. front in us more do. we’ve of

And has sort can innovation got change need a been they’re had momentum number we’re a that players scale I terms they’re the ramp months big of think them, beginning to tier significant vendor of now. now there’s and that not about. X so that XX or that the of of in We’ve for in wins see think customers sustain global of comfortable, last to have the been really talked before to the beginning Scott I up. a get

Operator

question from Hall from Rod the Goldman comes next line Our Sachs. of

open. is line Your

Rod Hall

whether of question. and whether Yes. the XXX-gig about wanted the -- -- Hi, see footprint there you’re that of now competition guys. the gaining you well you’ve gained the learned you there more I that you kind of the more there comes? competitive mean, ask and just I’ve wonder but a right about is see Thanks you you’re with as more Ai. on customers for follow-up give your than obviously, resonating you’ve guess then, look might the on on bit are if competition as what to I lot got other And front I’m you and DCI, that field WaveLogic platform that think as competition stickiness forward. a And well. it I there little are things ahead are with guys to even, question leapfrogged the saying I you chip kind of on chat. traction curious just

Scott McFeely

deployable we’re perspective, that’s in XXX-gig things believe on for solution bit. coming well. this a assured, will marketplace of pipe a announcement million spending, as I to call. the some From not going be to that more project on But continue now. $XXX with we’ve but a rest the make we’re R&D got competition be No comes we’re think going the And only there question, still the I commercially little XXX-gig

very terms your of good question, it’s In second actually, point. a yes,

for I’ll lean kind webscale I and optics really optics, which a IT one side of network, they think a lot to bit. on the approach the the cost run comes of relatively folks an focus is, people But, automation. line operation of and of on, the operating depend of the say sort attributes with

of programming a ability the become you the adds barrier the to it starts stickiness. application supporting engrained software the go to to as think And around So, having network, a of get the infrastructure that, that certainly I bit entry. in interfaces and program right

Rod Hall

-- I that follow then, things corporate of then, DCI like the India, surprise has ask, follow think wanted driving over again. of -- just average some question this kind wanted margins, asked that margins. on that that have this but and are And Scott. are and And you and historically, Okay. thanks things to for I either of the up kind know to said and I better over guys I mix the on margin But, been up

whether I’m hold some product categories these over in specific maybe be time? deal you anticipated or have curious So, would or that’s a margin you are would of we seeing seeing better than

Gary Smith

across slightly a the gross our in quarter if had packet, But, higher margins there biggest geographies. not get customer business. slightly our we the to margins contributor this or is than you really across Well, that optical lot of was segments has business, which gross we higher look difference the margins that

and credits the then products mix in of deployments and as is lifecycle -- costs. are said, in deploying whatever, and we We than individual start-up it. costly. might where time, have we to improving We So, going are customers. margin And to as gross stage matters, might what we we give the other to get through we early upselling better we’re going with really be move move

over So that’s just expected. driver positively our although a to margin. on that we In natural more happening things than lifecycle as the is lifecycle projects mix us a surprises. But some recurring be Things gross phenomenon compared time. balance, any we to that get And of is we going early happens quarter, later deployments of are expect. don’t as happen for visible, of given

Operator

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

open. is line Your

Michael Genovese

guys, lot good on the a and congratulation, execution. Thanks Great.

may didn’t have talk mid-XXs One that. talked was timing back I here. things the gross You return lot to the a expectation thing hear or about about but of the of a and of on positive margins lot I missed

us you please? could give that, an So, on update

Jim Moylan

Mike, guidance not margins I’m Yes. though for on beyond some as it mistaken, looking quarter. you’re sounds If gross fourth

at We’re on update that. end the to margin opportunity and lots we’re will to quarter. of provide we progression got say -- going you our win that not fourth we’ll I of seeing gross

Michael Genovese

X X when you -- about just you targets year targets? to the can sorry, what or gross in your us But, years margins targets, X remind Okay. the X X-year are talk to

Jim Moylan

provided don’t I gross said. to XX% we’ve what XXXX. that a actually it we That’s achieve by guidance margin. Yes. on margin said was operating know What we we expect

Michael Genovese

my Okay. one And more, follow-up… then,

Jim Moylan

we revenue was going was to be X% What Yes. said growth to rate X%. our

we if You know range that guidance that this in we’ll year. be fourth quarter, hit above for our

other to three-year that’s going Again, to we’re going so, and on be about when updated our that. targets view to And talk our have we thing is December, at in the look EPS. talk

Michael Genovese

Okay. Actually, targets. next two three-year clarify or for be the forward to And three at five you three-year to point? the to for are basically If for my years are targets on this seven years, them more of the was three related two years -- if -- years, that. the that is more follow-up more rolling to

Jim Moylan

gave guidance the of We at three-year year. this beginning

we’ll talk period targets don’t the So, look set. year. we that ‘XX new things of just and we know this the three-year we at guidance; our three-year that come as talked we And ‘XX. saying about ‘XX, our that I consider to I’m progress certainly those we against of will giving about And end we’ll all will.

any update we will updated. to feel be need We that

Operator

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

line open. is Your

Tejas Venkatesh

the comment are bit you from little you. Planet You could about remarks. bookings business? strong quarter. think Thank an talked on we in prepared prior it quarter had very the Blue away far inflection I in a the But, in hoping you I a was how

and how away So, just inflection? are curious, going from far the how we that’s

Gary Smith

Yes.

last lot done is, we acquisition as Blue Planet, You of we’ve Packet of entrants over of those What tested year learning a by Design, this. a early is this to we’ve still and we’ve saw the momentum. With some the seeing. context were very that into what three nascent encouraged the really years, we’re of got two know, space. learnings, we’re good you We’ve

the of And for we we we come very that importantly, But, be to to roadmap. year bookings think the said, we’ve year little should you XXXX. that as next -- year, together a that with come put talk identified As the we’ll backlog into able want about roadmap for those the out encouraging. I were more And capabilities. a

has to want there into the would out identified. And We’re Blue automation we’ll we be pieces little very story that year, inorganic. inorganic fill going going here. go some the I as more where but visibility clear with And to And forward. part We’ve to turn acquisitions got forward predominantly our a out together, the little a thinking now. we’ve there putting the that’s we probably Planet been a probably -- has key on direction of give our going been roadmap organically, rule

Tejas Venkatesh

follow-up, of And you. from you thinking through are the the as how AT&T and rest Verizon revenue calendar about Thank a year?

Gary Smith

big quarter. I time given always those stronger individual of two in for We’ve customer But said customers we revenue happen spaces. combination guess, because hard a really as in we’ve AT&T It’s in expect QX. long-term. from said, we we any they’re a lot will say of to a do over on going with would important and any growing the performance customers, as are that the remain comment going customers our those of what’s to to percentage expect I that other are consistently decline also

Operator

the next from Markets. Our from Loop Capital James comes Kisner question line of

open. is line Your

James Kisner

for question. thank little taking more on you just follow-up clarify the very your that have a much question; last bit comments. I Hey,

you. I AT&T, to flat or changed the down, said I for Verizon, you be clarify, down be expectation just want to Thank that guys is thought year. in have past is the they’d So, for that think not? going the

Gary Smith

changed hasn’t It all. No. at

James Kisner

a then, is think math follow-up, And right as on just Networking, here. that I Okay. Packet

your the for have that your coming quarter. this to expectation you’d for Is or Packet the were rate -- be guys in you. generate the growth $XXX in bit business, for Thank going to what target growth think you’d I hit expect you that low to X X% long-term below of Networking? million If you end

Jim Moylan

a The just remind to actually, target, James, target. it’s three-year you,

three-year as we’re we this as that through in think a we’ll three-year customer target. working achieving diversify comfortable We go of very from we it So, target. see we’re and flows a geography business, perspective. But, said, to ebbs terms and

Operator

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

is line Your open.

Vijay Bhagavath

Two if questions, I may.

webscale, to on of I first mean XX% great hear revenue. The

coming the part also then, into position in how feeds that as of speeds is, second the cycle up next competitions, question with and routing? the on And you’re opportunity? switching fiber in is both product this we how that do densification, my question on and XXX-gig with deep, So, cloud pricing see seeing head on year fiber and you

Scott McFeely

Let me take them. a of crack at the two

On space segments. market piece, I an the our webscale guess, everybody the -- attractive competition in it’s for been

continue competition’s to the it there forward. we see been So, will going and forever,

in opportunity. fiber of network the of lots continuing it’s into it’s alone decide transport, we the can there. from roadmap be have. I in drive the coherent to more is lead if like, the dimensions sort infrastructure network, of node of win we’ve play at that’s to hand combination will piece, the you capabilities fiber that capabilities on the that is do. in it’s I there, to for. And optical but of going look demonstrated fiber to field important best competition, saying focus actually I’m they’re that terms for technology a packet we’re both both deep And, a we well. great in pretty who will expect share like we of think both set If in More past drive and what On market the those to those who and bandwidth which what here you in deep where of the dimensions. good have able programmable we attributes not which I of who’s terms think looking optics I the fiber, has And plays there’s our

movers since front that. the some of filled early in quite XXXX of event. of the some or a event us still of it that out of that first But is that deployments more one, probably XXXX on have is We much

Operator

Our next question comes from William the line Blair. Netis of Dmitry from

open. Your is line

Dmitry Netis

Thanks, guys. Nice questions. Couple of results, nice guidance.

look I ICT? are AT&T, X% or is customers, what have mark, India that customer? And coming to XX% Are close said. XX% maybe in you those you think Japan then, Verizon, the suspects, them your three -- XX%, at of at usual you As there any customers

Gary Smith

a That’s good question.

a think been first player Verizon get had the those on. got, this particularly, two, webscale webscale that considering the You’ve XX% player. AT&T the the other a into the and That’s was largest time interestingly were two then we’ve quarter, of Company’s growth I the bracket,

players, the including, close. There of are you’ve So, customers of you customers just XX% that other other sort mentioned got one a players, of makeup are those number of under Indian percentage. that very the

in fact, range. high digits, got pushing single and those the customers In XX% more of into we’ve more the

Dmitry Netis

is of is the what operators, And -- something one that.. Japan Japanese Perfect.

Gary Smith

but yet, yet. Not But, months. next wouldn’t isn’t course of see to I the it XX over be shocked that the

Dmitry Netis

Excellent.

their AT&T’s quarter, small Okay. deployment. earnings in emphasized And be also up half for year. you of as they Jim, through probably sluggish first AT&T their the quite then, ahead the by numbers progress mentioned call, diversification you’d by as we after and XG to fourth that’s On expect projects guidance cell that fiber accelerating CapEx Verizon’s evidenced

at head does commentary? So, acceleration would that that into see you mean fourth on based that quarter, Verizon as well as we

Jim Moylan

QX, it’s of in to different will because Again, be lower QX. I it in will be it’s be for but difficult to us or in they’re Verizon know higher projects. customers stages strong. if going their progress how don’t these say strong

Dmitry Netis

think you yet? driving XG that Do is

Jim Moylan

rolling seeing they’re I the think deployments; we the some in out that of in converged metro packet. are

side just packet We’re with on beginning them. the

feel next for of bullish couple we certainly years. Verizon pretty So, the around

that is this that. of I And we’ve think, got converged metro consideration -- it reasonable deployment think, I visibility the XG. is to around

-- definitely to thinking it’s difficult roll it’s that of XG outs. these when much how is whether they’re see considerations the in but it’s exactly So, capacity of

Dmitry Netis

Last on I basis. may. It on software a in question the side, came year-over-year light the little bit if

in up said there You here? plan specifically doing how increasing us Blue and ramp Can investments you from walk Planet. you you’re on what could this

Gary Smith

Yes.

quarter terms the down. slightly is revenues in was the just think -- of I

just ebbs flows. and strong, the strong and normal of sort that’s very pipeline the have engagement increasing. been think is Orders is I

we financial those. we the from into visibility at our I think a degree around on. capabilities as our we’d element roadmap, the refining market maturity think increasingly turn think roadmap. into around give around engagement are But, with a the So, not Design quite of in more what I getting elements view. get plans both There a year the ‘XX, and a we working confident was talk the of of And a think and Packet around that point other that. that some offering Dmitry, that we’re and for might our Blue little yet. more of terms Planet fulfilling methodology we’re of I They’re we’ll as little key probably, also mean

Operator

question Trebnick next the Our from of line from Doherty. comes Catharine

open. is Your line

Catharine Trebnick

of last in Great very you. year you. to doing you well the market? -- that Thank you’ve break in Can where explain some Can been guys. the you you’ve quarter, Japan. describe market obviously able dynamics Thank into been in that

Gary Smith

by that. that’s The we’re Japan. the They in companies their that trouble enough have domestic available technology. big best having want in and lost west order just have thing served why keep Japanese operators at innovation noted companies is the class. -- And driver biggest in doing market companies. that of the market single Japan to well That’s those are think several to I in get has are world make they sure share, And several investing been Japanese like the

Operator

Morgan. Chatterjee comes JP question of Our Samik from from next the line

Your line is open.

Joe Cardoso

Hi. Samik. on This of is Cardoso behalf Joe

question for and wanted I Just the to m, dive just to one subsea in business.

any great I’m highlighted You I from other want to project this some like, And those. do has Subsea industry second And for a sustainable it’s growth just guys think I’m prior that curious of business curious, guys well in there. just part cycles? being the So, cyclical? very why on that, seen just the if you just you seeing And delays. haven’t known different are cycles because see participants then, how is, because business

Gary Smith

well. and think upgrade also got positioned I is both as with really we’ve the cycle the difference, that Joe, new builds the we’re

very see demand. of So, diverse we sources

cables consortia change we technology from two say capacity going The last I basically talked have to you also cables view. actually -- just quarter we economic take through But, is cycle. are them dynamics Jim, of upgrade think, elongated new would because going cycle, wan I and was about, we the point it now you our able old build to seeing new that in. and -- a of alone. cables a

by driven cables. other on key of is they’re own this increasingly, webscale; They’re cables. in saying also their also We’re putting drivers capacity

particularly is So, not for up I think, as the It’s demand right, cyclical. into the capacity you’d expect. overall

I and in we new think market threshold come over the in we’ve this submarine. share of builds. -- basically in think the terms So, year we’re market upgrade both we XX% well-placed And the

Scott McFeely

Yes.

I think a point out. I’d couple of items

say, future. traffic. said mirror, market bandwidth in think increase folks. shift bandwidth rearview webscale to, the the and in from dominant is actually ago, the -- happening, was for by Gary of the by is the significant going today, folks. demand. back five And And voice look the actually cables it’s I And webscale you biggest those that’s years driver dominated, we’re being and exposed as upgrade If new the cable on led bandwidth What to actually talking is continue a we’re seeing the the market the

happen on of comments people And The project other cable seeing on thing may number a I’d be less if of -- back globe. just the but of That delay. in we other susceptible we’re the to on some have project relative company and pretty to much limited your you’re bases. to delays say those any you And business, a one cables individual may relatively to delays. susceptible individual we’re quarter diversification the major every serving

Operator

question Henderson Alex next from the comes of line Our from Needham.

is open. Your line

Alex Henderson

clear that’s leader much. the these about a the can off as market of projects Thank with getting result it what with look you and Japanese rate the you. knocking will to of probably then how me out, When gradually we’ve those dynamic environment starts of smaller a current you things. Guys, at Infinera in Coriant the think of time it huge seems in of Great. acquisition by most that share is Japan, other radical do pretty Obviously, a bit clearly price over and in fast lost Japan, that that? aggressive a and long environment is here very position now Fujitsu obviously in been you changing Japan dynamically time? seen going has seems marketplace, out there’s a change It on the little that terms has NTT. roll-off shift in position. most And where in Hitachi into -- clear the you Fujitsu will the the seems i.e. of major talk slope dynamics, kingpin gradually and pricer. its in of that players U.S. pushed It for the change raise positive the pretty what’s Plus,

Gary Smith

Generally, I industry the the I think think, we improving feel years. over very considerably last positive around few of structure the

placed over the elements places that over we infrastructure We’ve markets been reason we’ve India, of time over ground, the for bet key well, right success and in the We’ve think, and XX us there These years. I Similarly, for around and the doing and all placed. that right been markets Japan of XX as time. built are long investment early these And of years. a lot putting in we’re in very picking are resources being well global scale present that at term lot a on. bets the on relationships we have like that.

on in the X,XXX to We have close ground people India.

in sales about optical. force global it’s we have which combination clearly So, technology and of the the largest leadership

take of those And to so, dynamics. we’re able advantage

I about In the I’m table. it bets long well-positioned them, Japan terms specifically, it. with you positive we’ve good bullish one got than time. a take always just and on on things very of Japan of but It’s I take incredibly think think. runway And think the there will longer very that But, we’re

Scott McFeely

bigger to shares. addition are by consolidation consolidating, and of losing companies structure getting companies, industry are smaller the and winners market the is In share

you’re good to a industry. direction of the in respect really with consolidation moving So,

but that dynamics the As time, said, of feel us. We takes are this the all we moving Gary industry think great. toward

Alex Henderson

around of of soft If has industry couple a couple large I a February digesting typically a or other and there large thinking bit question. The careful has the side more of actually It quarters, here, for is follow-up could had a then builds the -- the very fact could that? or the seasonally our major be more of programs January, that India Should and in metro. of on history quarter it’s in January with that of U.S. the them, implies just little history the about lumpiness whether quarter. number with Company doing a we players possibility the a that softness be

Gary Smith

would this our think, generally industry, going generally, continue. talking not demand the year, say, There element talking I the always many think, get I into you’re beginning year. you What But, actually on now, perception about Obviously, will got -- big QX. and incorrect. we that quarter, very next. we for over haven’t optical is and about around would I cycles has finished really of think speaking, seasonality before next you’re, of the robust to end yet I start talking I been QX capacity to, is say, the this consistent, with the lower because sort year, fiscal is years

to think I think I that But, this reason for robust don’t see the change. I consistent, any context of demand. is

Scott McFeely

across is project-driven the geographies; This execution a across to segments; And have that. business, key kind Alex. is right, shown diversification. showing products. we that’s it’s the demonstrated customer And You’re it’s we’ve of consistent that but across

consistent to to continue So, deliver we performance. expect

Operator

the last from Tim Our from comes Savageaux of Northland line question Securities.

is line Your open.

Tim Savageaux

and really extent, other a I of seeing cloud growth the in the markets have particular. in Good nature I quarter. And in kind some of congrats some on here. and very question the and to on strong guess similar other focused you’re the to on morning general questions strong APAC India

year, it the past wraps couple have, this years. your of think, might the I time tripled all up, over by revenue India

you growth, either you driving India your forward a potential large share any And that small. with to Thanks. overall the in expectations opportunity about market wonder can if for you in sustainability being or is what position position thoughts. India I wonder concentrated a carriers? as are. degree So, I of growth kind players, what market heard commentary there, and various have comment look and on continued region of your on your of that range if We’ve and

Gary Smith

the specific there Yes. say for time. a generic sort than of most I’d us long attention things around market. been got a to has recently. India We’ve couple of a lot of

big in the for over very XX a years and we’ve there So, been on way. ground

Let me say, I fastest dynamics think, growing at it’s highest world. usage the that in internet the level -- the are you the

broadband penetration less XX%. still got than You

So, this front in we’ve got all us. of

think demand for goal. India, population years the of these I certainly think, as gravity and few the will the demographics sustain build-outs next just I

they’re think There is ebbs I Now, going what doubt I about think flows. tried to we to But, that. and do no ourselves. is position have

major India. We’re in in the of players all

in We’re also the government various manifestations with and DOD. the

also some We’re into regional carriers.

no that We’re of also market. players in about clearly webscale all India well. question in strategic the as There’s as They a that. view

I done India. customer So, -- diversify in everything we’re our base to we’ve think

bullish demand. going this be next any see we’ve some we areas flows of And any investment the that. there about potential the very sustainability don’t there. years, Asia curtailing will our a over But, about; in how Pacific know ebbs as of and anticipation And flows. just term. we our to we of two structured in we’ve is talked and the in We’re is that offset got Japan But lot other that well. dynamic one short ebbs that’s

Operator

final at And the will questions there Gregg remarks. I for over to call further are Lampf back turn no this time.

Gregg Lampf

forward day. the time for today. road. on Emily. few Have a on Thanks, the everyone the road and Thanks everybody be We’ll for seeing your next look weeks to out good

Operator

today’s this conference And concludes call.

You may now disconnect.

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