CIEN - Earnings call transcript Q1 2019

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Operator

Good morning. My name is James and I will be your conference operator today. At this time, I would like to welcome everyone to the Ciena Fiscal Q1 2019 Financial Results Call. All lines have been placed on mute to prevent any background noise. And after the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator like Investor the Relations, now the over VP of Gregg to would call turn to I Lampf. Please go ahead.

Gregg Lampf

Thank to join the today’s Ciena’s President of With morning us CFO. Scott and for first Jim Products Senior CEO Good Gary call. review. Vice our and is me you, quarter of today and Moylan, Q&A President and Global portion McFeely, XXXX James. fiscal Smith, welcome Services will

includes press addition section that prepared this report and this In today of Investors remarks the made the release, earlier to website. available were morning’s call on our

have presentation as from discussion We an posted highlighted quarter. this also accompanying that reflects items certain as Investor this well

view Our the outlook environment, the for market first second and comments our our quarter. our today fiscal speak of quarter to fiscal financial performance

its the any based targets be forward-looking making during of in company XX-K Gary, and and be could remind I in Before to in context upcoming actual results over statements regarding assumptions factors including about risk certain and financial the expectations, commentary to uncertainties our will the will are our this materially we turning on you recent call today. viewed current that guidance risks from and forecast call cause and statements differ should statements filing. XX-Q the that our discussed include most detailed the markets statements. These Such that our long-term filing

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

Gary Smith

Gregg good Thanks, and morning, everyone.

fiscal QX a outstanding we this off the XXXX. we results reported morning, are our to With in start strong

our strategy meaningful drive execution growth and performance to Solid again including revenue in quarter, EPS. in both once us year-over-year enabled financial of differentiated the

in orders is strong what performance seasonally our challenged particularly we than grew is quarter consequently and revenue This Additionally, a typically the in backlog. greater a were quarter.

clearly are that key distinct is all today well segments geographies, positioned current We specifically to market with aligned customer our of trends. closely and given the

adoption and industry continue customer a the technology. First, players, and driver by customer cycles our architectures these growth continue. already best-in-class have webscale to their a that technology we expect structure, models. deployment network to This consumption are of the meaningful on influence They of is characterized key rapid and significant segment

total is our footprint. Asia-Pacific double-digit new Japan in North by In market single opportunities from was we and applications. of as XX% nearly also Korea had share America, up a see as our revenue another were India quarter supported and base QX, In including QX, we In contribution Japan. to we delivered XX% this a Australia, geographic Year-over-year, very regional quarterly webscale QX’s year-on-year seeing fact, reflecting portfolios. From a business to of growing well are our share with a revenues continued packet XX%. up perspective, set of significant broadening traction region. and expanding Asia-Pacific, us enabling and including across in revenue customer and gains as our additional we to a in comprised increase wins and across diverse continued software of our further and opportunities strength increasing drive result strong In demand broad continue year-over-year XX% enhanced every growth

our few poised in market fiber segments more closer [indiscernible] than traditional and XG slower shifts initiatives after appears up XX% to moves edge the network. and remain customers. like as year-over-year and to years. of new We share towards be a We provider their spend aggregation also and positioned capture the also with service densification where and access some metro was seeing EMEA, cable opportunities are Particularly fiber revenue well content operator growth deep for in

We continued our secured with a their solutions APAC as for Tier from down over to solutions. to our curves. be a inventory business to service and their a Blue And the these they expect of that gain deployment will networks insights Planet we medium-term win X and scale software a drivers that initiatives cost customers provider to In automation while long-term. and in for continues VSO look span interest across of grow our spending QX key range will

optimization We from Blue and Route several Blue during customers solutions. our assurance purchasing existing portfolio elements wins of new had the we also service the Planet Planet new Blue quarter. Planet provider And had

positive two factors of dynamics, to additional opportunity and those the current providing In share. behaviors broader particular, community market customer in some influencing their landscape. In are is addition changes to take vendor us competitive views the landscape the

and financial First, some of experiencing from are vendors the smaller subscale lags. standpoint technology struggling equipment a

engagement sustainability are Chinese to leading share strength disproportionate class and network would With increasingly are in viewed innovation, operators flight necessarily of these and markets vendors world positioned. vendors equipment Clearly seeing describe amount being is the quality. offer certain market not as a by Whilst certain factors are a Second, global as a and I new, customer however, well model. scale, customers. Ciena holding pursue financial who we what

optimized customers’ only portfolio next technology. footprint solutions, roadmap XXX has systems of wave later also the ZR enviable still capable market gig a will the do have first today, are recently another our Ciena across XXX gig single we deliver the have will in including to in pluggables and industry. WaveLogic to stronger. year WaveLogic X With we innovation for continued In we technology detailed our fact length leading coherent technology XXX this a been Not which This in be only provide X our range never position. market in will we agenda, respect year. highly confidence our our deliver

customers across geographies. products, overall diversified growth be Our model and to continues business by enabled

XX% of came quarter For customers. our example, more in the revenues first from non-telco than

and platform QX’s as be Specifically by share with global our comprised and gives the business gives strong the in set our meaningful of will more helped our of to guidance. customers British in With performance X% on market and a I first that growth invest capture us XX% our end and continues to future non-web driver quarter additional a of both scale attributes of of platform recent and us including fuel of front in a news for to of course revenue. details our our to These evidenced And Waveserver global R&D deliver both fiscal This very advantage Telecom. over results Jim? to us Jim with gain market the share our scale XXXX capability competition growth. over turn unique XXXX. optical

Jim Moylan

Thanks Gary. revenue Overall performance quarter, We with of in one everyone. million. three morning Good customers webscale of we XX% the in which $XXX delivered had customer. strong a QX was

highest up customers, provider our In ever webscale year-over-year. revenue was XX% to direct in sales quarterly QX revenue service addition to our

expense XX.X% of operating $XX.X margin of was Our delivered net share. EBS guidance. profitability adjusted in to first our X.X%, and line income QX in the measures $X.XX QX margin with of adjusted With our was adjusted operating million, with in $XXX respect line quarter, adjusted gross million per also outlook. we

In operations. in was million investments. with addition, million in for and $XX QX, and approximately quarter $XX million our we ended in adjusted cash EBITDA used the cash We $XXX

and fiscal plans. share the our we to by In our end shares are are the million we XXX,XXX share buyback approximately purchased repurchase $XXX $XX executing million on about approximately of Finally, in quarter, target we year. on first value for

second operating of year execute. we second XX% deliver revenue a revenue our our high-end expect quarter for closing, dynamic million given $XXX ‘XX. $XXX the now the achieve to $XXX the at we ahead to we to revenue business to XX% X% fiscal Looking have in quarter expect million. and for million respect our quarter and in first this adjusted and have we strategy range proven strong full In X% range, guidance and million, the outlook, expense fiscal right of of to ability fiscal $XXX annual XXXX, results With of between year our to gross margin to adjusted in

quarter performance innovation leading another industry’s yet demonstration diversifying business the while continued deliver to Our strategy of leveraging is first our our this and execution our of scale. global

financial strong that, analysts. James, capture continue We to dynamics we are our full the fiscal the and delivering of in from questions industry XXXX to will performance positive industry taking and position now advantage With differentiated additional take sell-side come. and years today’s share to in

Operator

Go Cowen. line [Operator Paul your question from from Instructions] And the of first ahead please. comes Silverstein

open. is line Your

Paul Silverstein

obviously XX revenue are longer is an one I in next term off Thanks any I no like tell terms the what seeing be share you is believe comment you excited it over are the coming, to trust you trust insight? months it’s now. you out guys. XXX-gig it the if share in the you to but ask questions, are pause for can impacts And but would you if and what from sound not, can obviously on there with two to [indiscernible], of look sometime you the now it? XXX-gig felt of are then issue, which Gary, dynamics? doesn’t in perspective, it’s strengthen launching market I will look about could like going systems business quite as us of as you business, appreciated? diversification I your most that you Again, I That When vacation,

Gary Smith

the me first part of that. let take Paul,

I what the am is think base most demand. I of about excited broad

that’s webscale perspective, strong can strength see years and can quarter, We the growing while very around take which in see a have taken customer webscale. our we at quarter, and you for the this and obviously, moderate, can’t year, we well. the grow you segments in this provider to that continue up base are for flow, service and very XX% was keep X also outlook probably diversified have ebb geographic it to we And got but can a confident EMEA year we in and share year-on-year certain expect strong had webscale, very as but so that will growth, you why

of say a Scott, talk I want depth it’s the and point really view. about are about you the we to excited most what from that? business demand. breadth So That’s just of would overall

Scott McFeely

well-informed recent technology competitive is of make go Yes. one led way but characterized leadership that competitors the those a by over of sometime their we optics. and into a by all know coherent full with, benchmarks this particularly XXX-gig of in also them our will and Paul, with in their position industry regards extremely track on as have purchase roadmaps are the that things we months as customers the visibility informed WaveLogic record of of in available the and They end what’s in XX around the Lots shelf around last witnessed have industry with on clearly lead our of our the set being the competitive believable X decisions, today, but for buyers. in delivering lived through XXX-gig terms the decisions of environment, you system again performance by announcements year. to segment –

by I dynamics that clear space that by of to quite think we that are and it’s little the a points environment. made in years a we see share can playing with X the those are share have our XXXX going our while optical we single for phenomenal. guidance year, to confident continue in in gain X – gains competitive share those And the over over gain are that in quite it’s favor, that you next last

Paul Silverstein

you come terms to in wait not clear, your hearing not revenue XXX-gig are growth? you impacts of it are to So the be move customers Scott on XXX-gig are just for and of how your webscale looking from to concerned, they any to that not out

Scott McFeely

No.

Gary Smith

you, Paul. Thank

Paul Silverstein

I appreciate it.

Operator

Jefferies. Your next is Notter of ahead from Go line the question please, George open. comes line from your

George Notter

products the both version, that you I I guys. on last certainly deliver the different a and really X obviously at those wanted guess to very I that bit, expand with products Hi much. on as the Extreme WaveLogic about question and Waveserver Waveserver, know deliveries would that that mean on helpful? available, are I year got look you WaveLogic have DSPs will Nano announcements Thanks you you talking can does give detail but any I anymore product mean mean does XXXX, when XXXX, us Thanks. specific be more precision by end, become

Gary Smith

Yes.

into series are WaveLogic We and both certainly the AI so familiar will family with family have number of it to technology XXXX platforms be different available we S portfolio for with well. started like into sure, we if will into at see rollout hosted a you in for deliver WaveLogic Nano the we both factors packet models. product a as T the the X – XXXX have that integrated Waveserver sets, series form pluggable then as that And for also in look and our consumption

George Notter

Got it, okay.

that then fair is and would products then by of say to this Wavesever it right So the XXXX target? is of the that be versions year, end available these

Gary Smith

correct. That’s

George Notter

Thank great. Okay, you.

Operator

[Operator Simon Leopold from line please, the of from line Instructions] James. Your next is comes open. ahead question Go Raymond your

Simon Leopold

well I Tier calendar calendar in wondering it contributor year, Thank for webscale other you what little see now the Thank as drivers see market just guess wanted appears ‘XX internationally market that Xs change huge current much the to much. I you I as verticals most which how if if bit could coming maybe growth regarding year if help the or is get that in very India, are as look in just at opportunities the words you. a the more the could I example, color group as us growth? you the the you into or strong am back was understand driving ‘XX,

Gary Smith

point point will of at to drivers webscale, I we sort look the sort growth, we based, see broad view we we will yes yes think geographic a if interconnect. I of datacenter around will think of yes submarine, see see from the of

growth those So be continue to will drivers.

in a in I we at across seeing providers are North the last by strength basically in a good of point few and that certainly you view, board have the the underinvested that. from years. to If there America very Tier think regional expect year look in some very America market for it X a is EMEA, of service we actually encouraged North

Europe. led been our Australia, like terms saw last We we then an demand. as increasingly in in strong won Telekom we quite new up-tick which by Japan course about well. am in QX Asia-Pacific year, very And people Deutsche was was are as in so what of its as beginning I encouraged by there to India, wins as well feel but we of see seeing bullish

for a have the that’s think I high and already very are of of got So to base year range. we guiding why broad the drivers growth end we our

a just broad demand. I based So geographic will say

Jim Moylan

everything…. It is broad based on

Simon Leopold

improving I sounds America, is Telecom, to wanted beyond North cutting what’s Deutsche want pack EMEA like you lead just are what I clarify by getting Asia-Pac saying just Jim that India, it is different in for sorry off, but to….

Gary Smith

yes. Jim, that’s Simon, summary Yes, good go ahead. a

Jim Moylan

a emphasize No, I service was big driver the given X to Tier just you America be relationships in America are going said, all North us newer Simon. North in And to providers nice wins. for going strong. what is

Simon Leopold

much. Thank you very

Operator

Marchetti from comes please. question line from of next ahead Stifel. John Your the Go

Your line is open.

John Marchetti

starting mean a to of Chinese think that market comments. the second bit you out I of of least obviously Telecom it see see by beyond there. talk And was little was wondering of of you on comments your to will but share could and some one if EMEA the very back spend moment some OEMs maybe bit? sort that’s a you growth just even a for with to have spending sounds a bit expand there new a they customers little that that maybe Thanks also about are wondering some a little I much. Gary, you you areas particularly those if I and go starting the Deutsche a could are return or if that your just have or real you maybe you return to like at the if win, do

Gary Smith

Yes.

number around where a the of that. where to market I really sentiment. market you in of think And few perspective of characterize general EMEA you rebalancing of specifically if the you a Europe have had having to sort of in I now of course end talked of the shares I my have in I sort little this towards saw terms we in sort in years is last have high underinvested infrastructure. coming perspective that is is in seen of And dynamic, but new like last we we a got think Telecom a I the year. of Chinese that seeing a think during normal that’s the publicly, are one dynamic wins sort this there think We very, just bit very improvement have and we but have got wins, got through. I is not year rollout a are about carried you think vendors. share the of And not balance market just also of a think I number Deutsche have fruition

have over as got happening you sort we if of and number So of invested the in Europe Europe XX actually sort in well. the a think of positive downturn dynamics in months I will you last

John Marchetti

and you bit of a more maybe bit And that of can level? maybe up of be beyond a mean of to a get of start a Gary, them this little longer kind or to underinvested this back given they for that more little term the a quick have to ‘XX years as something goes maybe is a just number follow-up driver were if spend catch would this I sort where of

Gary Smith

feel plans think I on these in beyond hesitant think strength and do confidence and course but us sustainable the sort continues a that for North are of in lot of augmented good of number with we be again am XXXX way And sustainability strong very is Yes, and more I of this. than I of sort by to India some where The also gives America, it’s the now. of catch-up beyond that Japan to reiterate this that for engaged and stretch and around we other geographies Asia-Pacific, think I spend, about in listen, it’s very addition sure. year I’d carriers

So demand. I and think we have diversified broad-based a very

John Marchetti

you. Thank

Gary Smith

Thanks John.

Operator

next ahead from Your Go comes question Hall please. Rod the Goldman Sachs. from of line

open. Your line is

Unidentified Analyst

then quick have Balaji Do fiscal and driving Jio I Thanks. on in we week two those on potential fiscal have made and XG. This to are us if I last is a those bit little opportunities? continue for India that growth think just with you those or saw ‘XX ask a of Maybe that. you to then And Bharti Rod. behalf on could announcements the follow-up that after you size ‘XX

Gary Smith

mean sort I very India this bigger, as strong in that perspective in saw it think We actually but of gets expected year-on-year and growth XX% couple will that’s seen do we seen Yes. up we – of you we years. growth Obviously, as to in rate year year-on-year. have of the in it see growth moderate the be last well. have give a were India we QX in to I India

healthy seeing in are we So still growth India. very

I of think rollout XG the is us. front in

think but will I see that ‘XX will beyond. ‘XX into in stretch some that and we of

dynamics customers very of a seeing have as there broad Defense. So, of base very are the in we we India and solid well Department including

Unidentified Analyst

it. Got quickly maybe? takes XX% come are there what growth, did puts bit year-over-year it the margins, gross And on follow-up a despite little just revenue down and

Jim Moylan

of strategy will improve gross a our I year to is going gross certainly one variables are in gross a we say we margin, the the that share market We deployment and we this next. market from of some of company. that of have year There get in this. gained well. year, XX% think to would think over margin we lot said I reiterate little out to difficult say have thing stage are direction always is points time. that I the quarter is We call early X proved share to to gain last we it’s a out. would things we as lots we that of are as a margin One in But lot This said XX% share move margin believe that and wins, our do and of

feeling will XXXX, would is I margin today. reiterate targeting be And to it the XXXX in thing a XXXX, are I revenue by up the as other compared come fiscal think that’s mid-XXs operating we that directionally XX% my margin gross a in of higher giving approach not and disciplined a year. although growth that very range necessarily next to management, way to OpEx mainly will

Unidentified Analyst

you. Thank Okay.

Operator

Your from UBS. Tejas next of is question please, Go line from open. your line the comes ahead Venkatesh

Tejas Venkatesh

compress of Thank up you. on prior X, I the had sort think before, at forth, questions the look and iterations topics year that than on more WaveLogic forth? of AI there something meaningful I have WaveLogic two expect so you I it’s when come one timing of sort on of do is to get X here going similar different sort you trajectory trial taken will cycle that revenue, a or the so

Gary Smith

a So very substantial ramp had WaveLogic ramp, continues ramp X and actually WaveLogic sorry, to aggressive had AI a on. very early early

that introduced almost – we remember about XX you XX If months now. ago,

We aggressive same ramp expect WaveLogic the X. on

and we go fact we back if that continue more been way what on basis X. look expect think ramp to and modem a the per all generation its has with aggressive, I successive X, to them In WaveLogic I call I the WaveLogic

Tejas Venkatesh

I could you click X sort growth? last on being of that you. them on sort of you of if see Thank what’s of particularly and you if kind this America year, weak Tier spending driving the double curious year AT&T the strong through in was back North the And rest was touched

Gary Smith

course be expect I AT&T as be expect up be Verizon year-on-year to I CenturyLink expect of year-on-year to up up year-on-year, and to I well.

Scott McFeely

and of growths, we of a number these networks very as core of haul broad around in sort as rollouts long converge have accounts. those characterized And metro all different multiple them specifically driver of a with

Tejas Venkatesh

Thank you.

Gary Smith

Thank you.

Operator

Citi. from ahead Suva Jim of line the Go from comes question next Your please.

open. is line Your

Josh Kehoe

on with competitor’s Verizon expand, there? that recent my you your Jim. taking one with you for Verizon Thanks Hi, to relationship impact any questions. the to seen Kehoe do position What continues of Josh have and comments business make this is for of your

Gary Smith

Verizon No, was to that well, question answer up year-on-year. is no. quick

are expect growth relationship we good and the the to of the knows structure we Verizon of and for all quarter elements. everybody basically with us across be the We sort of Verizon year-on-year expect various a in

and can’t competition, in very the on comment in of business relationship confident strength our I So our Verizon. but is Ciena

Josh Kehoe

And you typical two other your customers? greater the right, XX% customers, was webscale, XX% was or are one the

Gary Smith

guess, That would be yes. a reasonable

Josh Kehoe

Thank you. Thanks.

Operator

JPMorgan. next ahead open. line Your from line your from Chatterjee please, comes is Go question the of Samik

Samik Chatterjee

Hi, taking good Thanks for question. my morning.

wanted Can Just to growth that, driving off that. over about you on as well outlook seen it packet that in just an with the we lower coming the start the for and dynamics how help there? outlook next we terms strong some me the understand time for the towards confidence as of end was what’s of should side, but kind X-year horizon timing of stronger sort have think networking acceleration of

Gary Smith

Yes.

I come and we coming businesses give the about comments forward. then packet it insights historically think couple bullish may from sort the growth you about So, where going of why where some from we of our see are into

back-haul strength and in So, business historically services. had wireless in strength have we

of densification the forward integrated providers, the strength. see look play going on that of As Amex Ethernet more fiber to we in particularly backhaul, optimized more wireless see and service and to activities some we our with becoming starting optics, a the sort we by

of there. bit a see the essentially MSO substantial I out dynamic little in the technology, play fiber instantiation different same dynamic. in we The but deep, same opportunities So, think growth will the space

when X-year dynamics strengths. look are some saw those we the our into of this sort So, quarter-over-quarter, us. growth are play of that horizon and but and at confident of year-over-year much very both in quarter about opportunities we very the We still front

positive other our engaged moving into starting with The to infrastructure PTS are and that platform some one the launched infrastructure show year portfolio provider a the particularly our the starting service packet show of we to providers of us for whole momentum some number is and progression is service revenue. TVM last in that

the really our about dynamics future growth. packet three give those So us confidence

Samik Chatterjee

million clarification you million, a million loop kind $XX Can kind growth planet, it. that contribution just move the to from roughly did of see I kind had, of Got the ask a any that was on quick there all acquisitions? you revenues from we saw or organic $XX quarter of for of $XX

Gary Smith

– out pipeline that’s year the start And well and for very million, gates. obviously off we got in were Planet. and for about I our of guidance is encompassed both. good to engagement $XX Orders our see was around the It XX that think strong positive a Blue as million,

of that where together coming going by integration are on encouraged for organic and would seeing the well, is what elements and target year. extremely the both inorganic think very So, the we I be

Samik Chatterjee

Thank you.

Operator

Your from please. of next question comes from Meta the ahead Stanley. Go Marshall Morgan line

Your line is open.

Meta Marshall

such may exist just at of year customers there or trends build-out kind any as of digestion kind of webscale patterns of that of that XXX-gig, this of? kind with of are kind base With Thanks. exist more any broad on maybe prep might there a is full as we be subsea for Thanks. focusing into then there? And particularly point, of international period should ‘XX kind any your there kind they kind far are aware customers that XX% webscale of or

Gary Smith

very expansion we demand. depending I good we bring so that market very whether to Particularly international a or they with and as share the obviously lot your want out international, continues of that to and environment, helpful with got them go footprint players. that got seeing to to around have to question the a the of they take relationships, the we to a have one relationship all of are we major a the they point that elements we based Meta, I strong webscale think say, broaden there. webscale sort lot to, very fiber on would the directly carrier, regulatory now, number – broad a go with a us a and we submarine that your can most are countries seeing the about of via lot of value is of have Also

seeing So, for applications we XXX-gig? very are broad set on would Scott of say, the them. I

Scott McFeely

demand in of all the not all with common that are same, I the general bandwidth they but couple them so in core think is a exactly It’s they [ph] backbone growth in all for itself Metro are one basis. in applications national they and campus, it’s networks. different their of that in some tremendous at of have is Flash instantiates in ubiquitous, DCI, first them thing

submarine out for them, more Gary of in them carrier. through them many it’s it’s of For those lot as all and some and pointed it’s focus of of trying attention a to almost put in cases, internationally now

the XXX-gig, all So bit, to tomorrow the the state-of-the-shelf it’s per cases comes cost that’s growth being those conversations. whether what’s state-of-the-shelf the bandwidth really driving in so today down XXX-gig and being

Jim Moylan

our that with it’s we’ve year, last web-scale rate year this and business business just at and see growth this we be moderate growth And year. bit a said that going that last grew that grew not still to expect we enormously to we year the before but in players, the

Meta Marshall

guys. Thanks, it. Got

Gary Smith

Meta. Thanks,

Operator

next from Your with of comes ahead, Nomura Instinet. question please. the line Go Kvaal Jeff

Your line open. is

Jeff Kvaal

Yes. the and year general Jim, some of It was going trajectory ought in of have though software on package these gross Thank right be seems tailwinds discussed last be margin number way, seems start maturing. deals a to from you. you right, question to with you your on a to I hoping line. as earlier, the

course of wouldn’t we more of that through why year and bit So, I passed little the the see over to gross guess, margin progress this next? a

Jim Moylan

back we’ve that happen back but we’ve year, probably to true, did going I gross our going firmly that’s mid-XXs to next on is also we’re say Well, not we a to and margins before trajectory to believe this to head signaled you get year, do said expect get said to that gross Jeff. Everything up, point. over but not I margin, we’re and time,

we’re for good All have are stage and lot taking deployment. of but of share, early share, still things us, we a still those

the good, we experience of taking long-term, for can So, bit I in good if will of good for a difficulty you the it’s it think we long-term, assure year, that. be is share little you and this margin

Jeff Kvaal

to more but the happen, obviously, well. it industry? think perhaps are amount of talked yourself you that the consolidation, on I in as doing likely inorganic you, And things side? Do is for mean, you’re organically, where a still Okay. that organically, there then your about but you’re decent sense of there’s Gary you’ve obviously consolidation doing is inorganic What’s it

Gary Smith

a out. that you’ve of consolidation, seen painful It’s seen a time. that. is atrophy, combination competitors think you will of been I a continue a think rule also you’ve number mean, I frankly see wouldn’t and just I and taken what Listen, of I it’s long to particularly sort

to share I kind diversified would one growing, think if it’s dynamic our ability I that that to taking Huawei, that X. balanced X, players us to expect look the achieve and and market to and you given and of at the of number continue favorable number our Nokia, a the structure scale number that’s that’s industry focus, and and is us, ability frankly, business. X, are

ago ago, we actually we industry that’s think I if the years how compared performance it doing. to So, think we’re about in X are much or to of the place, put XX a much, able the state years that is and better financial

doing larger think for the and where improve next to to of EPS when on that a about point these and year around a it’s the at we a the about percentage I share, margin grow of that XX% kind strength we’re and kinds talks XX%. we’re lot talking tell little mature, year, the says we clearly That’s we more but gross get taking these that’s business. the can Jim right taking the in some about the growth will a builds market get that So, also we’re can of as way of very do combination us top-line and return of get thing share, we disciplined to best talking this a software between when

Jeff Kvaal

both. you, Thank

Gary Smith

you. Thank

Operator

Long ahead, Capital from BMO Tim please. of Go Markets. line next comes question with Your the

is line open. Your

Tim Long

service on about just the half you. Thank flat in a there the first compares, Yes, X maybe to a here little with guide look is that? leg follow-up the this And there a think of I something are first in the the you. or that quickly for more the there. of you XG could talked driving Do where potentially markets North half. do second bit up another guidance, moving is the think point in keep to or what’s years? those XG, a Thank is for the particularly that Jim you backlog? Gary, implies few strong about Could Is just or bit XG just kind wanted talk about related aging then full-year really you provider into America you’ve strength strong that markets the conservatism, just little there is difficult next

Jim Moylan

pretty guidance X% and to we’re Tim. year. year saying grow for then going the Yes, top our by are X%, the that to to at for range We we started going QX, the guided now and end we strongly thanks, of we’re be saying

we’ve as are I’d what say trends. So, all can said are signals far for and be the that that misleading this year, of quarter-over-quarter as positive out always also us is comparisons coming

rate coming good you I feel going you look over period would be year and at to about don’t growth if XX-month and look rate. growth the enjoy, we our that do We X-month, the and concerned expect years. to have the about I enjoyed we’re think really think we this what

Gary Smith

think terms North slightly I I So, that’s was expression spend in overall, year, difficult share you and, XG but flat but the all dynamics the kinds fiber to network converged as sheer the to resources some networks. going get deep, fiber more applications are building the space, it’s forms. cable what’s of trying much I it’s they and customer But in dealing bright be infrastructure terms would the of of of are expected what’s with our down that couple various one, last grow, of around in its market probably on closer year say things, of line to and what’s think of up, a bandwidth and growth to There’s if a XG. little draw fact, growth, with right with of I quiet driving obviously and it’s densification those those continuing sort to a to to a the right the as just shared think be in the saw American bit now

build-outs. carriers, XG set always in into ‘XX of get to takes around more view very year metro AT&T I’m mind dynamics on it’s that the is start that. in My you’ll beginning for with years at own everybody, apparent actually it’s of this Verizon least. this think application I longer but do CenturyLink see of in Some of XG providers than a that and the they’re But and the positive their and America next thanks, to end come to North architecture and we service converged specific in mind of the in probably spending this the as couple view that a type

Tim Long

Okay, thank you.

Operator

question comes from the next Catharine of Trebnick ahead, Your Go line from Dougherty. please.

open. is line Your

Catharine Trebnick

us application for the done you’ve Japan growth? is Any EMEA say the other And you’re by that for question. you pipeline could you. then in U.S. Asia-Pac, you taking XXXG for XG in particular Give that really for the color seeing question you’re around XG? that where then the followed Subsea very in others than follow-up Gary, well Thank mostly Japan. is [ph]. particular your seeing by stronger Thank most some strong demand region

Gary Smith

into answer the the Japan and XG one piece. me sort Catharine, then let first back of

and long that’s a in to dynamics fruits a us. seeing very We’ve invested to substantial I for think I in Japan. We’ve been think bear Japan number we’re time. beginning of there

partner – we’re a trusted trusted a We’re there.

to quality think I that. of around flight structure and frankly, we’re concern stuff the industry think on broader indigenous some of sort I you’re vendors seeing sustainability and their to the the from benefiting them back

substantial terms and infrastructure seeing XG. in across catalyst the also also XX They or a focused are Olympics focused the be over to months a on on Japan are infrastructure. things of like so pretty build. for build tends You’re that They next

players and those our there. So, announcement saw recent web-scale some you’ve a combination of of well in got you the all of including elements, Japan as

forward. I I’m in around see what Japan moving So, bullish very

Jim Moylan

a point changed triggered I us a think lot networks, to infrastructure actually business one of in on Gary and a very that talking build hasn’t there’s much some really with general of tends demands sees, been the but changed think of trying infrastructure like that touches be carriers those control the in while, to two and that Japan for every doing emphasis we’ve and resilient view, has application – Subsea What from about agile of by there. space build the more wise it we’re building things, I the our bandwidth is that networks regional plane metro things that recently also Catharine, resilient much, world is

Gary Smith

if to for would gets it I’d would spend. into to application Yes, second, that it it, I push America, of, because discern I us of some of But Asia-Pacific the network probably Catharine, in say, exactly you third. little of difficult sort terms question, first, XG is then and a – North overall were on their the sort EMEA for converged me

Catharine Trebnick

Alright, thank you very much. Excellent quarter.

Gary Smith

Thank you. it. Appreciate

Operator

the from next Deutsche Vijay Your question Bhagavath comes from please. Go of line Bank. ahead,

open. is line Your

Vijay Bhagavath

would Packet how products Optical, head compete? the good hey, next competitive out Jim. the of my Optical, year lot also on particular question the up. again then in we pluggable more the is of optical, competition product of Yes, many coming thoughts year in once on in rest differentiate the your on competitive just front, Ciena and Gary, Metro as morning, cloud Yes, And into coming Waveserver to and products continue and your differentiation

differentiation? your the us competitive and idea give landscape just the So, of you. Thank

Gary Smith

XXX-gig to a et different many, WaveLogic do X we think many applications. across capability, So, amount cetera, market and with we X, component goes WaveLogic talking so, continue believe what of it’s in will back announced Vijay, performance of performance cost it’s capacity, dimensions, bunch translates were we fiber, I into bit, per it’s in our before terms of of about reach what to performance in it the actually Optical we with lead

dealt industry the know X, They more with the we’ll generations. WaveLogic them transport the of in course, the Nano as into say see I’ll power phenomena they’ve never applications capability. and new where Pluggables optimized part application, with We’ve specific a been, not four a pluggables you other line footprint for is scenario. deployment was of play. that’s from The have dominant side but come

I going think that well. will forward as true be

in there an I offer WaveLogic of will DCI have XXXX and they going to is with our X Nano, play we space the think where timeframe. will in course, campus/metro be the

space a which place the same place, Optics play a will out whether new will the system, be providers take of for start into again I probably it’s think Coherent all us. But a make and as the as new itself technology both. Coherent bandwidth integrated that as will or base instantiates of totally access to way pluggable programs increases other out Coherent into densification the a there it where service for network, the its pushes opportunity answer is fiber

from previous that of brings think is think I set it’s Coherent-based. are the challenges generations on miniaturization of opportunities new technology a and different time this I what pluggables as And mean think the going may the what players led will the be past same lead players is in have same in won’t pluggables necessarily will that that I and forward. side that

Vijay Bhagavath

thank Okay, you.

Operator

Paul Your from Cowen. line next ahead, Go Silverstein of please. the comes question from

Your line is open.

Paul Silverstein

going XX% from going on in forward? anyway. I everybody appreciate And OpEx you a rate one XX you it’s days get could percentage comment terms no been operating that. can and Jim, as I’m Has your comments, erosion clear to any change ago, else went previous the revenue. I last you pricing. of much appreciate [indiscernible] respect the in over With you visibility there and of ask price your but to how if historically, of years back leverage, below trust

and lower, it’s R&D, You’ve being, it more you possibly do Thanks. there, hand, from out here you in how question et detail other guess, so, you’ve where that terms unchartered the drive more, the you’re cetera? SG&A, drive do but that done us comes get obviously of proven if offer much can that to get of the you and could One, ability it, in how any I you two to thoughts. on quarter-after-quarter territory, raises and

Jim Moylan

the Paul. I’ll question, leverage take

revenue. to of to in very percent confident a continue as our OpEx drive We’re ability down

OpEx in are expense much increase of and the and our distribution more us just We anybody this R&D rapidly our industry growing revenue across than opportunity an for to about higher leverage base. provides a that

confident going back next to So, we And out to going think be we say XX% in ability business. leverage the we’re said, about And to very also we’ve at of drive margin operating year. this to don’t we are get our continue XXXX. to gross we’re mid-XXs

I on to going trends And the they’re these a situation, had degree be that really leverage that, able had implies to environment whether of pricing and pricing changed will Chinese about consolidation. happen. We’ve had long-term. show play So, mean, but some discussion the We’ve yes, the that unchanged, not things over in some operating have we’ve markets, improvement. significantly

people products you but of to different over out have as and period in show price you out products long aggressors, a come of is You we have done and and the industry have successfully out of – see good keep overall, competitive technology and very it your taking a our time. to costs that

Gary Smith

And make Paul Jim keeps I’m a maybe part so relates as consumers to it, reminding comment of of the just R&D as of the bigger it OpEx me, here. one the

allows focused we’ve have. that is are we the that us put and that fact that around wood – really, a behind arrows on disciplined we to lot been important really staying the are we of who think I

We WaveLogic are look witnessed in modem by was areas on. parallel that’s key outspent that DSP our two in at not the by going – the the anybody industry the being investments X and launch, fact

scale Scale are lead are. we we to but important, the that at comfortable the scale is pretty we’re at continue on to So, fuel innovation. we that enough have

Paul Silverstein

Thanks it. guys. appreciate Alright,

Gary Smith

you, Thank Paul.

Operator

to like concluding I’d that, for call some back with the turn And over Lampf Mr. to remarks.

Gregg Lampf

attention your appreciate today. We you, everyone. Thank

everyone connecting and to with day We’re looking you. Look Thanks OFC today forward tomorrow. to with during people and at forward seeing today following again. the up

Operator

This conference. today’s concludes

may You disconnect. now

Ciena (CIEN) 5 Mar 192019 Q1 Earnings call transcript