Ciena (CIEN) 5 Sep 192019 Q3 Earnings call transcript

Company Profile

Participants

Gregg Lampf	Vice President, Investor Relations
Gary Smith	President and Chief Executive Officer
Jim Moylan	Chief Financial Officer
Scott McFeely	Senior Vice President, Global Products and Services
George Notter	Jefferies
Paul Silverstein	Cowen
Simon Leopold	Raymond James
Rod Hall	Goldman Sachs
Tejas Venkatesh	UBS
Michael Genovese	MKM Partners
Jeff Kvaal	Nomura Instinet
John Marchetti	Stifel
Samik Chatterjee	JPMorgan
Tim Long	Barclays
Jim Suva	Citi
Meta Marshall	Morgan Stanley
Alex Henderson	Needham
Tim Savageaux	Northland Capital
Ryan Koontz	Rosenblatt Securities

Call transcript

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Operator

Good morning. My name is Sharon and I will be your conference operator today. At this time, I would like to welcome everyone to the Ciena Fiscal Third Quarter 2019 Financial Results Conference 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. Instructions]. [Operator you. Thank

Vice your Lampf, Investor you Relations, Mr. President begin conference. may Gregg of

Gregg Lampf

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

of highlighted to our call this the release, the and presentation Investors posted reflects well section the an In discussion addition to that website we press investor items accompanying as have quarter. this as from certain

for speak Our fiscal some and around environment today our our fourth current fiscal third of commentary XXXX. to comments guidance quarter and financial well performance, the our fiscal as industry quarter market the position, view our as

targets could are Before that over turning financial certain uncertainties statements expectations, our and today. that regarding assumptions to our commentary risks include its will during be remind statements. about and that company call discussed I forecast guidance and actual Such materially you Gary, making the from markets results we statements including will any differ the forward-looking the based this to cause on and call current long-term

by which by These required factors the recent filing, with statements our that to should most context be be viewed date. risk XX, on is SEC detailed expect in the XX-Q in September we upcoming our of to the XX-Q and filed and filing file

results conference press information to assumes non-GAAP measures as otherwise. the operations. events new discussed obligation or is Today's information, result GAAP of discussion these whether detailed of future A update or in includes reconciliation non-GAAP Ciena's measures our today's no of this a release. in included of call adjusted certain Ciena also to results

With that, over turn the to will I call Gary.

Gary Smith

industry reported our Today and good competitive position and Gregg, everyone. benefit the from quarterly within morning, gain market strong we share. as strong again another we continue very to Thanks, performance,

contributed revenue the the web-scale more including Third in followed service XX% web-scale America our from first significantly in year-over-year a by for sequentially. service North in was closely provider. our Tier-X ever, quarter time quarter and customer quarter top fact and up the was company, customers. And than XX% providers

a in in EMEA performance recent also up some of largely business have had as of XX% the EMEA. strong our nearly strength service sequentially QX, wins to provider even ramp more yet our design on web-scale

we In in entered from market we so meaningfully addition year that we would and standpoint significantly profitability increase revenue as the growth indicated a year outpacing to XXXX, that recall far fiscal beyond. this

operating performed per In of and profitability, share on XX.X% earnings adjusted QX, we of measures extremely margin including $X.XX. well adjusted

performance to overall as as Our dynamics. environment favorable essentially solid consistent industry our and and continues differentiated a by be of well strategy, execution outstanding financial driven demand

Specifically, our we across and to continue geographies diversify business customer segments.

example web-scale network QX, and in two this of our customers North service MSO top As XX provider. comprised an one providers, service companies, of three international one wholesale American providers, were three

and credible the Importantly, portfolio investment made by considerable today future possible we vertical most and our to most capability the roadmap robust also compelling have integration. continue for and development, capacity,

score. its are secured the Coherent recently Ciena firm overall which We hardware for was recognized offering in today XXXX in report, by Markit This market scorecard strongest optics. IHS the analyst vendor in highest the global network

region. orders WaveLogic for powered quarter, to be of the our vote ahead and the our our XXX platform customer with first we gig of well single competition with of ability a confidence X systems, booked a first-to-market During in XXXXX in large the wavelength subsea Asia-Pacific

And in of our our X are won optical vertical a large gig are metro American Rather, during that its providers momentum sizable optical for a full customer. XXX a the including not quarter, new timelines. in delivery X integration that means Tier MSO. with a we North highlight of architecture to would with continued dates. Also also I with and beholden Importantly, and the control build we merchant we long-haul the our Tier degree service own market award development Metro

With respect to packet a Tier new functionality to quarter, in introduce In America. in driving features our X packet with networking, North investment and customer we this continued a provider landed is third business. service new significant portfolio the win

service X also win EMEA We a design secured with a in provider. Tier

a Packet With portfolio. year strong this the our for expecting Networking finish to momentum, we overall are

engagement. Planet Our continues to Blue portfolio also mature customer increased drawing and evolve

region a win service we with APAC a entire Solutions. Software fact, recently suite Planet Intelligent the provider the Automation in In for solidified new Blue of

overall, would globally, and say And on in FY million. to gain continues XXXX automation target traction $XX $XX software of deliver remain portfolio we between million on to I revenue fact, our and that track our

our the to while leveraging leading the of In business deliver industry's innovation, our success. summary, is our ability foundation diversifying global scale our and

our and continued is enabling extraordinary of gains. financial continued Our and and deliver strategy position to strong technology execution performance share market drive us

customers advantage. We the quarterly Ciena to results testament and stability leading Customers meet now those a we continue deliver and to engagement competitive who that are to that with quality, those partner stringent pursue is a with consistently flight and the into world. the and the innovation models, financial requirements, vendors long to future. to are strongest around term offer confident strength and Today's

will our that, With take Jim the outlook. QX through Jim? us and results

Jim Moylan

includes strong government Thanks, growth revenue continued demonstrates XX.X% in line and web-scale, about spoke of a revenue morning, the million in very non-telco $XXX.X enterprise, We delivered like QX the Gary Gary. representing diversification XX%. earlier. third performance quarter, Of and with note year-over-year. MSOs, Good top everyone. This customers was

total web-scale Direct revenue did segment, Web, respect With a in customer we to of XX% as quarter. the standalone

exceeds Our year-to-date strong our order flow and is revenue. year-to-date

bookings quarter. under incredibly in somewhat the after expected, for and came QX, As in QX, moderated strong orders revenue our in

a With mix QX profitability benefit QX XX.X%, in of Moving geographic income mentioned, expense been million. than in us to was operating and adjusted $XXX.X respect third our stronger quarter. as adjusted the to Gary million strong results gross and have the the product $X.XX. adjusted net which gross margin focus margin, operating a quarter, reflecting adjusted delivered margin for XX.X% EPS $XXX.X adjusted of including was we measures, of of expected

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

continue to $XX.X approximately share to we end million plans. Finally, the value track quarter, buyback In for $XXX million on shares the repurchased our approximately and buyback in XXXX. execute on X.X remain share by we million fiscal of third

million. million fourth the to to range aim $XXX Looking gross we to quarter revenue range to in in a XX% Adjusted and margin operating quarter fourth ahead, $XXX fiscal expense million. deliver a XX% of XXXX approximately of in $XXX be in

be quarter Combined third continuing strategy delivering by with on In the results closing, leveraging revenue fiscal today our drive of extraordinary profitability. to Ciena, our industry’s leading innovation outlook, marked global by and growth advance we gains will XXXX and our business competitive posted execute share position QX an double for and market our scale. significant we increased digit while exceptional year diversifying our as

of high than believe year, usual performance comment on current fiscal that views it's XXXX. a at Considering to annual and earlier level important we somewhat this our expected

roughly share digits. we continue We growth, taking for have double single to year of which confident low ability market is grow more market expect expectations our to never that and been rate the in next at revenue of current of a

That expectations performance with XXXX. would for current consistent be consensus revenue

will a expect impact XX XX achieve the we to Additionally, several as taken months efficiencies during positively operational additional last and that actions months to new leverage result we've business. of the

operating As in a our drive margin we XX% ability meaningful fiscal in target XXXX and result, EPS increased growth. achieve have our confidence to

We additional will December. quarter on provide our in XXXX earnings fiscal detail fourth during call

questions we'll analysts. sell-side operator, from With the that now take

Operator

Instructions]. [Operator

Notter comes George from go with Your Please first Jefferies. question ahead.

George Notter

the company margin the as obviously taking gross very over XX% maybe margin gross business wanted on start guys intermediate XX.X%. I and you Hi, terrific much were these much, If better thanks back, footprint about go guess, results. thought asking guys you to the of I was short result Jim, a to is and out the term margins. XX% and congratulations I question here gross

think a adding surprise you are as you but footprint. it last of seems positive I quarter course, guys had guys well still

about new this tell mode us you're side? guys for Thanks. what's do norm and you footprint, the going on even a what is gross where the think now, margins of you taking margin sort in So in

Jim Moylan

George will those don't. results always sometimes and said for new our impact lot they As there give credits are deals our that and of deals that sometimes we've customers sometimes variables hit margin, new a big to gross

And so hit. they're hard exactly it's when that's something going to to call that

of quarters. result shown has those variables, the XX.X% volatility over moved some from to six XX% have our margins we in a of past As gross kinds

given be haven't year, in I and this gross a range to don't believe when profitability XX% into be. margins. know don't of really to up mid-XXs. getting we're year next going post year range. next I certainly we're I the that now exactly it's think XX% on at that say this going going to significant to would that's I We but right

George Notter

I’m around I And share, about curious just attitudes follow wanted customer it. Huawei. then talked up, Got about but guys present. attitudes, about to customer market as they've ever a taking also been Historically, guess, I ask you have

competing to changing with I on getting been the of there, but that RFPs, do and you out is industry issues in are disruptive side that they've international profitability, think you on historically you they things new see or pretty security changing see do the business, know I invited given them your think you there? business are

Gary Smith

is this Gary. George,

business you're large on of from of a impact date years of what I for in of impact talking overdependence of -- that the share. time to I I business, really last of revenues. much It's think generally, the point seeing think depends them. do in spend I discern and it infrastructure telecom rebalancing a In market the would and say taken in the think sort decisions to takes about substantive infrastructure what over They've you're think are sort such on our date. on of you're takes couple potential very the no just rebalancing seeing region through roll that a now. I face view, country. market I to that we to difficult But think terms of

time. are is that lot reduce say their dependence it know overall, of but geographically over I dependent, would very think carriers to you I the international looking a

George Notter

Thank you.

Operator

from Cowen. question Paul Next Silverstein comes with

Paul Silverstein

questions. three. lot got try two keep or it to I’ve of a to I'll

deck X% to First the call I’ve seen Jim your clarify, time ago. just short reiterated on a growth your off, to slide X% you

for said You single just growth X% you're XXXX trust talking to still digit to on year for growth? revenue X% next be fiscal clear market to double I rate.

Jim Moylan

that that to going said we're also we where about with consensus the Yeah, be. consistent we think is current Yes. number

Paul Silverstein

Or you’re anticipating this.

given that that to growth say year you're you when to So is absolute you're number going this [Indiscernible]? that to larger referring you dollar a referring the be say

Jim Moylan

number. revenue The dollar

Paul Silverstein

dollar okay. number, The

Jim Moylan

Yes.

Paul Silverstein

drove upside What gross QX? the margin in

Jim Moylan

know You the of a quarter, we just just affecting to it new quarter. deals hit hit couple expected and didn't the

It's So, that's call within of say for a it in a nutshell. hard the percentage us number I'd points. couple to

Paul Silverstein

was But ratio [line those didn't Jim, the credit] [ph] be better will deals? [Indiscernible] that because to you of your translation new have

Jim Moylan

Generally yes.

the deals. deals that or Well, just than things mean have capture more Although affect commons. can credits new other can the new we of

Paul Silverstein

and one What for path out first call. the you meaningfully are Gary announced ask for last the incremental your customer. year, others that? to end that on extent I'll With be comment right. factoring of All out and coming the on what you And terms does XXX respect of in just glide of to could what you gig frame time prove in question if your revenue?

Gary Smith

XXX… The

Paul Silverstein

impact I have before web-scale to to going XXX have just going reach Gary, customers, on that's greater service you gig with just XXX not also gig defined, a provider direct but the respond, the you're apologize not standpoint. from Thanks. and your narrowly

Scott McFeely

Yes.

Paul, I think Scott.

continue strong us confidence faster market. extremely we're that's position significantly grow competitive to think say I and what to the than going the gives have to

guide that's So certainly factored part the sort like that's of of you if into and that.

Operator

Next question Leopold Raymond James. with Simon from comes

Simon Leopold

the comfort margin I you year for confirm quick of the all squeeze target full expect hopefully about all. fiscal XX% just net in Jim, the talk just in benefit hope when for to quarters to like that, clarification the that for for one I'd the a or you but value XXXX. want to you achieve XXXX, operating that, that's fiscal year, Thanks. two for not the

Jim Moylan

That’s year a full number.

QX, in targeting of of it first and don't up year. a quarter sort margin the out quarters is in certainly next we gross always to will trend subsequent Our make XX% get high for we line and operating but we're for

Simon Leopold

XXX in terms X to introduction And then what gig. Great. That's just in of thought, I make the just WaveLogic sure. wanted

I those are. synonymous think some folks be there might some confusion launches about amongst how two

about are in does well this XXX X coming also So out calendar features simultaneously? just that year, WaveLogic gig talked the as mean that to you've confirm, XXXX available

Scott McFeely

WaveLogic XX for I so capability think we've since ago, of target the the to brand we talked -- of is coherent clarify includes products. progress in our our specifically of X Yes for try remain and to in said days to that I and about optics, the made -- generation as and form that of the that, confident we in year would hands be and customers end great

Simon Leopold

Great. Thanks. the comment click maybe did of trends some Huawei, the you in if in to about terms strength could of EMEA. of you given help the And in EMEA, relative kind earlier double trending

region how particular this of of that sustainability in customer, you help given in terms you. past. there's about is the Deutsche I'd Telekom, of to center trend, maybe single slowness this understanding in much much it's relative EMEA about deployment talked how XG the some about the in that drivers interconnect, a EMEA. I us of guess that strength? So see of data is like Thank just we've better from How understand

Gary Smith

is this Gary. Simon, Yes

seeing of -- I the the and think it's QX centers we that datacenter based to expansion in the that of revenue there. data continue. and in think broadly interconnect I we would by the say the going that's we're driven growth think, web-scale pretty that's strength there, largely was terms

course know of haven't number to we meaningful next wins come a in. that the months the XX of got X to expect six have over that We and revenue Tier to really

time. particularly Chinese And the looking So the a my business I back us. are I to I that's think around over EMEA that on we think bullish vendors, that's sort feel to in actually think, comments Europe. of you around positive And for that case quite do dependency reduce somewhat I major and most think earlier the know carriers dynamic in of overdependence

bullish the as So we Europe. pretty about we feel year turn we as

Simon Leopold

Thank you.

Operator

question Rod next Sachs. from comes Your with Hall Goldman

Rod Hall

question. flattish phasing as the into Hi for that implies revenue this with a the of start the little guys. maybe next about kind Thanks bit to look then and as year QX of and well, of guide revenue I talk so yet wanted you've year, we that some what you're enterprise had trends pause XXX strong maybe I to revenue change or or up change that just this in government, very through what's sequential stage. ahead whether in driving and wanted see there gig. of is lack whether is seeing

what just realizing kind is us that is help You extremely and middle know the of has what understand the year. why year of in this part QX, guide an strong that in it been

of in minds. therefore gig up. year follow as we extend kind to are And revenue And you us then year I to next a of in of wanted into next also would understand and seeing kind terms then that paths some of move how I next into year, a XXX got the different phases any help expect ahead be seasonality we your

Gary Smith

Sure.

Rod that with QX, extraordinary revenue will our around which for that XX% we individual can say actions said we've and orders, always last ebbs is XX% customer assuming thing. is it posted all flows and And have we I'd sort year. thing after hit that this of growth guide quarters First of reflect and year,

is to going grow XX% emphasize not guess, for we're so, to that that would And flat I year our revenue I QX QX. this

said think to into we growth We which to go that year, is move going range as the X% that back X%. long of term also next to we're we revenue have

to it's increased be of a of bigger profitability. significantly at off base, and So, and going much course that's

they've flows, to QX. revenue like the quarterly wanted would So are We next a quarterly more strong be year have in did had last a and what customers we quarter early equipment particularly I certain emphasize that's with year. With ebbs that It to do and here. flows traditionally. to of flows respect what our going frankly think been lot

Rod Hall

assuming answer QX the just think numbers how available – the by that, the volume release up expect demand know affects especially that for still pent gig? XXX we some see you demand move first of couple Do if you revenue of think volume, guys becomes you that end or you through I'm could quarters? seeing do And you'd in of as you product are you that

Scott McFeely

of and it’s The Rod, a that for technology into state from demand They way People Scott. factory it's gets by very quickly from the is, perspective shelf there needs have optics for this continues sitting Hey it's bandwidth the we at served the the continues best The I the to demand are And increase, have. look to the bandwidth. this going next. network. not for coherent port increase. waiting it

wait don't XXX pent So bandwidth gig increase see a see I demand. at I in continuing for up all.

Rod Hall

and one an in if competitive check seen, XXX see gig just there. these I strength wondering to of then you've amazing you I'm there. performance just And environment I Okay. seen have I done. solutions then just more can, whether hyperscale some such I'm aren't And wanted traction. it's alternative because guys mean on gaining and if the

Can there, head-to-head it solutions kind or whether you gig out what's kind and that's XXX on you is gig. just anticipation are against competitively, say that of going gig XXX winning XXX with of guys

on what's You kind what going hyperscale right give an of know -- is on us update now? with

Gary Smith

and share our XX%. be Market we strong. is I about you we're in now clearly very We of having and we've so to year-to-date, market grown think it. about a I year visibility continues competitive of we a got obviously than Yes, into XX% projects would say growth term very sort is web-scale. know, our know XX% greater think globally. taking We've lot And think that good long we're good position share

to have roadmap established there, we're And embedded is to competition piece be but there I globally. very think I in no competition a stress. obviously expect and have in We've and them. confident for we you a systems, couple their and that for a very can strategically incumbency know of things we that continuing know us the space, would great around important You

I our web-scale of And our we reach think competitive where partner players helping The position. that's lot other different in global with is these is I thing would world. stress is, a helping

Rod Hall

Okay great. Thank you.

Operator

question Venkatesh UBS. with Next Tejas from comes

Tejas Venkatesh

Thank you.

then of does specific And your the to in basis? below changes the go-forward if XX% share what Given go customers wonder and able I a customers. did that mean on you're percentages top Verizon XX% the relatedly,

Gary Smith

Actually the was of customers a XX% growing still for we're and AT&T with time doing nobody anything read under customer. very in bunch a a in Yes. strongly and XX% first time that long that was not we're It except should just into AT&T.

of Verizon, great a percentages are other the was having So Verizon. XXish -- they twelveish customer with course to of. see you'll twelve The sort it year

Tejas Venkatesh

up Got qualitatively the I'd XXXX the to about then are your it. to growth. are of strength you you, including gig on, Thank in – these course a pluggables strength How of follow and the ask comments about and And There understood. of thinking parts number packet. takes? a fiscal like then coming revenue moving puts

Jim Moylan

While of story we'll we're gig, so going that's roadmap to fact with year. Well XXX what gig really a be packet customers we we're market a about our not as market at to is part credible on that is results going we Scott show that's next and more much coherent in that important. have say XXX growth XXX drive going deliver grow. but as least it's be more saying XXX But the and gig going so. demand in most our to gig, the maybe as so, I'd to that of to said, most important and what's going believe talked we're first we’re that

year said XX% about be were around X% year And was we this growth the year We of at better. beginning We're other was… the to maybe asking our little three rate. piece bit this to then that that going a

Scott McFeely

I’d asking don't place timing XXXX. collectibles perspective say material, meaningful a market, collectibles. become the is this, until a from about a And perspective Was really our in markets

piece a really plan. it’s big XXXX -- not our of So

Tejas Venkatesh

Thank you.

Scott McFeely

you Thank Tejas.

Operator

with Genovese MKM Next Partners. question comes from Michael

Michael Genovese

about in telecom long Thanks cycle we those or How very early we late you are terms are much. XXX where in Great. both of and G rollouts? in Can talk the haul metro.

Scott McFeely

two this ways. say I'll

transparently. around long have dominant So per I the XXX know using happened for been time. interface XXX-gig yet e-clients as will think market very it, we When the gig we'll to technology, to hasn't real side be you the differentiator. world. site these to that signal to when be that'll the XXX-gig, with a XXX be be to side being What cost first me it the X fiber me, the -- people into And that in on on transmission that happens, everybody is about is end-to-end bit you is which That a WaveLogic hyped key as fiber be it gig world absolutely XXX-gig about able need XXX-gig normalized carry versus able carry well everywhere but a will solution a the the things. think is

your ask cycle because at there to so early haven't we're And the gotten clients yet. the I very question, think specific

Michael Genovese

of Okay, in here. a then, very I lot everything there basically, outlook call you're of the before? specific and beat is to last that quarter outlook; cautious or question positive. conservative the though, the the either Or sense that saying is but a you the more sounds broader just anything we're than want a makes Because outlook directly want to And quarter, didn't ask nice you I company on macro-wise raise of just sort sort getting? in great. makes just ask but sort of this

Gary Smith

and see give it's know that say try one best that the we and I can, most conservative. We outlook that on. pass the accurate you we wouldn't

is extraordinary year. I saying you're think what an

we've been think X% sort of to growing a pretty we've market sort XX% around and said, X% Jim consistent of in we that really grown As is that.

thought. and year three-year we of we be don't the sky of than gave we'd We're ahead you're you thought kind when trees sort where numbers much, to guidance. obviously So talking would grow about of a bigger much

confident is take leverage ever a return can what continue normalized globally. probably share more than operating to the things; we one, basically our think more to We're to two, two number we're that get growth. forward. ability around going saying I And

So, the think diversification. ebbs through drive There's but macro normal anything. flows strong position. side, We're because in that a we're we're our and not of to we actually very seeing on able

You're places seeing that these that slowness -- which allows some the in of scale fact I drive that business India, now to anticipated. like some of But issues. well through was got so diversified us a we've think global many of these

Scott McFeely

forward-looking And and world just next the obvious, the what to QX with is stay our very both consistent expecting statements year. for for are

where are is our next guides The profitability our be going So strong. to very year right thing is. the is said market one we've that

our And going year. be so performance next to bottom-line good very, very is

Michael Genovese

Scott, thanks Thanks much. very

Scott McFeely

Thanks.

Operator

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

Jeff Kvaal

and maybe out Thank a of suffer given last growth the therefore I bit point little to rapid a been great revenue edging on XX% periods I have some the you, obviously deal that range bit? then, lag probability. slow wanted I'm think XXXX. guess deals Jim, revenue I But I of bit about signing. gross where to gentlemen. specifically little you're the margins into, delve or accustomed those mean we a And traditionally And new a side, starts XX% wondering maturing a margin that maybe we to a wouldn't the that little margins why fiscal up bit, if little growth be to off new the shouldn't break

Jim Moylan

that feel the mid-XXs next get XX% to year, level. We're XXXX come certainly don't But it and so got able to our to a the from to I going that, is for question mix it's say taken and margin gross still The gross I'd about still being going expect we're what I'd we margin. particular, hit margin we've at to next it’s really next our that's it's about XX% Well, just plan really But probability we in say, our back be way in improvement in haven't think be I there's and to still to not we next year's year. done. by All business. work detail, say number. that can good operating actions thinking year. transform developing

Jeff Kvaal

mind make products would just what WaveLogic through sure laid win that about to win for can secondly, trials we you have customer Thank expecting revenue? be timelines? and should to as out. then And we When all I being and -- you. Okay. just as which X specific contributed hands and want you

Gary Smith

quarter. Yes. target would revenue What and the we're year. to in and by the and target first that products has is first of will consistently with XXXX. we be the we've instantiate on will the ramp first end start the confident it after customer's on that quarter And said that Waveserver be product will hands contributor -- The material expect to through

Jeff Kvaal

Okay.

Gregg Lampf

Thanks Jeff.

Jeff Kvaal

Thank you all.

Operator

comes question Marchetti John Next from Stifel. with

John Marchetti

curious market. that if the it's of much. with DCI expanding European side Webscale the sort very I'm necessarily of know more customers Thanks traditionally the that's you or Gary, you set about strength just bit on you in that the if I was market. wondering little if could participated talk haven't traditional a into

a existing relationships? curious, Just expansion if with participants seeing if more or it's in new of you're geographic there some

Gary Smith

love think sort the players and I We're connectivity of the John. think I large well. Webscale it's actually and more seeing as smaller some folks. global to type would be seeing I what us, say Well, that some wins Europe aggressive And know data of get both, center into you we're for also would

both So I it's think combination a things. those of of

space. pretty right Webscale I now in healthy its market think

John Marchetti

for the coming a I can, XXX-gig moment. if back And to then just

been XXXX? moving adoption you the that through go we expectation obviously maybe think into Telco as some year? particularly side side fairly then mentioned for obviously next that uptake there. transport initial of You DCI do decent Telco the XXX, look on we the your market fiscal about particularly into How XXX-gig within that for network mention Curious, seeing market, what on expectations the are or Given and side you as we the win. the subsea

Gary Smith

market every leadership your is our to important on cost bit. per this leading all cost hands customers and place gives per Like of Yes. cycle market you the technology having bit technology and

in application less of one, we of no so gig, So there when sort XXX or the able e that in other terms but need going about WaveLogic service there'll the be providers technology, they're talked network. that well. Maybe do need question, uses applications X and to an they're gig to XXX using to offering as interest e technology over XXX transport be gig They And service that. as to the all capability. in

John Marchetti

you. Thank

Gary Smith

you, Thank John.

Operator

from Next Chatterjee JPMorgan. with question Samik comes

Samik Chatterjee

with just last most one seeing from Thanks that this to my revenue I the is had morning. investors, roughly year. Good that you're to year or questions X% we of question. Hi. next X% of to off and year me start guiding address often you help XX% wanted for XX% you which taking if growth kind given can get

of start that broader spend towards providers the investors is toward, like XG the service the Verizon. impressions will Tier large Telecom with spend Xs preparing and to XG's One of have AT&A and moderate, particularly

to preparedness? And with providers X see you thinking from you're from about So, of particularly help how I large service Tier ramp if can the kind of the just investments you're address here revenues kind thinking XG them Telecom towards wanted on? us the of how about

Jim Moylan

And respect don't First any speaking. in of I'd North say taken in a North sense with America. strength America. see We thing that, also generally lot is slowdown America to we North we've share

us So going be to very next we market move strong we year. is America as that a for into believe North

the India. a think part bit That's reason part bit all that's We our And of of the a long-term slowdown factored players. We order really into of to It's quarter. outlook. of Indian the are this still a digestion on they're period slowed why flow our seeing in buildout. committed a

Gary Smith

XG still think the would fairly of to you're say at early I stages that I buildout. specific piece, the Samik,

wins networks. this You're We're backhaul investment the of seeing indicative saw of that and network. basically We metro converged buildout, carries some to converged XG have we quarter. traffic across facilitate

work. at of to pure we're infrastructure talking it. talking not I'm think early about I'm of stages that ramp piece I all now make the just about buildout. specific it

So, see of a three I buildout basis on over years major Tier most Xs. it that to think one the global next the as with you'll

Samik Chatterjee

comment what's decline APAC about follow just we into of Jim back we how APAC to for in had year growth. next you're I your India, visibility just kind thinking year? quickly the – if And region the next We've as of it. flow in that getting Got understand order the had but in on look can terms and up

Jim Moylan

Yes. mostly grow last for We will really a as spend think they're to service year digesting had. online from the they've going of the as big come think we next is year and big slowdown to the APAC back made their providers buildouts it They India us. in result

year. the in not Korea, next see out South Australia, So we'll well. Korea. particularly like where place Vietnam countries doing is India of we're APAC well We're only of expect to the Japan, doing and some growth some smaller

Samik Chatterjee

you. Thank

Operator

with Tim from comes Long Barclays. question Next

Tim Long

and players, strong could. severe Thank some obviously to visibility. lumpiness if Two I you Webscale But the the and there had kind you. weakness. Gary, have could think some of a you obviously of go back pretty other been you mentioned lot companies just really sector I good had in

you over diverse enough So, do some and the that of business enough kind and enough is year? business disruption customers we you that into that think next won't see visibility have

you a little if gone last secondly, actually of down just few then on bit. the touch Blue a at been quarters kind And we've Planet; level,

mentioned You of higher the that or maybe Thank up Should start well. function win point we at move grind some year as or it key another be should step think a we two? next about you. How business? through – to kind as there taking

Gary Smith

Yes.

piece. take So first all Webscale of let me the

based. our and there into players of pretty and relationships the particularly were market sort then, players Top for which us. business. some of of us. are spend, None XX center broadly is insight a customers you Three that demand for to aggregate in important Webscale were too, the smaller of and balance gives Webscale I concentrated think And quarter multiple also growth players data which to is get pretty there is but large our

going got summary, think forward. be in we're around We've is over XX% think which continue the the market one nearly pretty the We think technology in I number around next XX competitive being I were months, to our sort player out And to are position. there. over of to be rolling that able confident pretty ability number So we Webscale testament our the confident feel up with we one I year to-date continue XX% to to provider share.

centers I by Webscale see the the well, And medium-size more the globe, of of think proliferation Webscale Webscale I abatement online call players. around there coming are in demand, all we no data major sort as players. overall guess we players And sort of of, them

years. pretty generally over this couple space bullish the we're around So of next

Gregg Lampf

Tim. Thanks

Gary Smith

I actually where but part the Blue automation strengthen. of the get going the your flows revenues, engagement Planet. to and customer you're think suite quarter-to-quarter of Yes, increased was seeing Tim, ebbs base on question capabilities the Sorry, we're across second

expect go – in So next we're It's increase of growth would next going through as to that to couple the still a we for our we're the years. confident of pretty year. I target decent expect or our growth XX nascent space place, good a which so. space. I We're in portfolio learning. the now pretty putting We're next think that together is so good in I would months pretty achieving over

Tim Long

you. Thank Okay.

Operator

Suva Your next from comes Citi. Jim question with

Jim Suva

you. X% still it well you just growth, higher consensus grow What of consensus your very gave. what than you're regarding discussing? shouldn't comfortable dollar a or But much. the mentioned that like with we commentary and about clear am numbers is be base twice with as should are or outlook grow basis. higher base numbers fiscal you're commentary we question mean if Thank question My the the kind X% on misunderstanding Thank just market the you the markets. you XQ. a very you'll growth that I XXXX market higher kind It's double you said But a I higher then that is of or is the you splitting to sound revenue of

Jim Moylan

out to little we beginning Just a that. X% grow faster at and to going growth to – We be a little long-term this year were rate clear. X% talking going this laid a about And grow I'm of of year than were XXXX, we to said we the revenue. for

you if faster to that next consensus X% year X% And that quite than number. in you have be to for year, take range. to apply get to going that X% our we're X% to it where return think to bit range. will a close range this the a grown is and that We going revenue What number to we've pretty said is we

why that's we're consensus referencing So number. the

and had points to the say never keep about number a to been that going believe We've in had year than to extraordinary grow just We've faster our we've confident taking an of growth market of We've market market I'd that's gained of XXXX. and great happen year. ability year more a we share in XXXX. share. next

that's guess it. I So I'd why answer

that is the statements market consistent of All are what those we've with forward-looking given expecting. both and for said we what

Tim Long

Thanks now. I clarification. fully the so for understand much

Operator

Next from Marshall Stanley. Morgan question comes with Meta

Meta Marshall

Great.

of the of of thoughts pending I who there know -- lot more question know kind that's on and of any merchant been then a you've something hasn't your And customers know or some just you Acacia traction of what any Just from Thanks. pickup that end after a acquisition there, been offer, customers their inbounds of given pickup willing you that been maybe the business, work? some of kind so Acacia. broadly, DSP acquisition customers on any to interest are but of

Scott McFeely

Meta, it's Scott.

that target over multiyear next on traction us. And some in with plays revenue create three-year remain call I'll We've – We say on for that $XX news. business Cisco, plan, our its to start engagement I'd increased dynamic the say, since on opportunities XX so. we'll And will the market think not our of microsystem Acacia is results. may when we've So, XXXX that'll and We on the what XXXX. our and enhanced had, out we think be months in materials we overall plan. coincidental materialize million pluggable with had or somewhat changes the see how

Meta Marshall

Thanks. it. Got

Operator

with Next Alex Needham. Henderson question comes from

Alex Henderson

Thanks.

focuses performance XXX XXX, getting as we point to push do to everybody to the we're you that already environment. you we see the rates limit bandwidth are up world XXX, the XXX improving that limit changing not approaching but bit we're far we've to run pushing XXX, on Ciena's the if of within brackets how rather going are XXX, can type where up, see to it established? now XXX and a So to into how we And

Scott McFeely

is of yet. So, certainly a technology generations; there but lot they're the value this, going of number to we specific, I'll our to believe economic Alex. future there's that bring say customers. not Certainly there we're And

those are that and had is at pretty that The be be ones economic able ones other costly more to think we're folks. and I'd to scale, value think that and say that is I going confident only getting getting more the amongst that we'll do

Alex Henderson

sort from as capabilities with DSPs, of understanding those timelines. to impact product any we along a win had at and sub-carrier NEL and same issues both implement [ph] rollout in delayed on try Is So, perspective, shaping particularly to your competitive their APAC? ability their the XXX-gig and lines consolation Nokia that have and they EMEA having business

Jim Moylan

of that the is we well. has surprise of the competitive year for be for the say just the we a back that lack part the of I'll did and last on drivers was, expect of this said our And headwinds consistently say continued as the us marketplace to year. one to what see year upside quarter I'd in the reality going into the

probably yes. is answer short the So

Alex Henderson

to XXX-gig want just – your your I And understand to to product cycle, it just sure going make I because back fully. product

You've taped out DSP the for XXX gigs.

on DSP it’s the the a schedule XXX-gig -- not fourth back and quarter product the in that got that You to calendar correct? is in fourth roll you're full here, out quarter a

Jim Moylan

year. We in this support and and be made with think earlier was beyond confused technology key probably innovation and into the go customers with market XXX-gig. merchant modem the a we're all said it's and see DSP, just not our great to the based way plan. deal are with anybody. the able confidence I that on progress people, fix and the because with the The XXX% control orders a the that that. technology QX for market intimate bit they their that that other very out not DSP. with we've have is DSP when year-end we're will their What drivetrain for they it entire to we that's we at roll customers go of the we're really little components is it confident components Its vote that why That's than By the on don't the component out situation. at where others We

Alex Henderson

to clear. be back, just But has The come DSP correct?

Jim Moylan

We are multiple we're I'll we're to Alex be there going just confident in extremely Methodology, it. chips don't internal on comment, that the marketplace. milestones. say, in

Gregg Lampf

Thank questions. you much the very Okay. for

Alex Henderson

you. Thank

Operator

Next Savageaux from Tim with question Capital. comes Northland

Tim Savageaux

the All results. right. congrats morning on Good and

Gary Smith

Tim. you, Thank

Tim Savageaux

ZR kind refresh the which ZR is around you drivers references Cisco, in welcome. briefly, of for position the kind could if pluggable question in main on was Kind extensively reference I My at us acquisition. of you're market general Ciena's on of Acacia XXX-gig least that's the – and wonder of or one driver particular.

XXXX-XXXX was I expectation think ramp XXXX – for the there. type given of beginnings the

to opportunity? market how all participate Ciena of more changed And in is that who that kind that Thanks. has at or Cisco, plan threat acquisition? view Just post as Acacia the

Gary Smith

Yes.

kilometer Metro single at is of couple lot on opportunities, things, and span, not. is GCNs of architectures what look a as Metro of the basically their DCI think has So XXX-gig a there's dynamics ZR spec going the XX it in DCI

will be in that also adoption the engineering marketplace, the place lots to the be and technology to go go that be of [Indiscernible] the of It a obviously paradigms the portion a market. the and available. of of able into there's it users that out take will infrastructure switching that add think availability and they're around I making science that sure for operational But there, upgrading figuring it. to advantage

is ZR portion a small specifically perspective Our market. that be would of

in the of off technology We have investment. bet that

personally like We I X. think, this there have players market. don't -- a XXX I be some in people our don't believe WaveLogic will different

because investment to technology and the and be there. make an limited we expect I very offer required think will it of

is substantial rate. it market of transport can you either our dedicated at think think but as not of an today, because to revenue the growing alternative some I Waveserver substituted

Tim Savageaux

be I if might And to quickly. Thanks. able

ecosystem mentioned elements of other But speaks there Okay, strategy terms I endorses obviously clearly chain or in referenced a vertical the great. kind Acacia And you DSP of think the also Cisco, kind optical previously are standpoint. food in well, to as from previously components. integration your of

Ciena you if vertical I'd strategically of I mentioned But about bit got integration more integration vertical sort in kind general heading of and view you say, think on going technology new on talk is increased vertical overall your maybe forward? of fair pieces some think than a there. of in strategic Ciena? for stuff incremental likely now you Or could if as integration for stand you've markets

Gary Smith

ecosystem said is the would market. invested just to bring the it's competitive pretty that said, around advantage overall that And think of the around it us. to technology a we I years in we're think all an around Scott much of say, the not for And be I somewhat – of over we've I integrated. and capability Scott destiny issue, and inorganically key own ensuring, our organically Because we're the that. owned to DSPs, elements as so what both that very to able pace it's the vertically ability the

here don't that there's we that on anything lack think So I journey. vertical sitting particularly integration today

we've like -- pretty feel a place got. overall that we So good in we're what with

Gregg Lampf

Tim. you, Thank

Tim Savageaux

you. Thank

Operator

from with last Our comes question Ryan Rosenblatt Securities. Koontz

Ryan Koontz

the investment that. the upgrades? to direct metro and starting see your you Thanks trends if wonder speak opportunities position could required how the Are metro you questions. for to Thank XG XG with you. like the I to regards to and feel you

Gary Smith

in of its months largely, it hindsight itself various I think I of of think in but in converged story, we see most got And most We've ago. include And XX of manifests you that sort one all able Verizon's we're forms, carriers that now beginning to see points of architecture. sort sort it in some that and buildout and to that. around America bonds public North Tier AT&T. X at the metro got about major

got You Link. Central

You've carriers X in got bunch Europe. of Tier

I the for space. I pretty stages be underlying And think couple dynamic think, think think going various two do of all that healthy buildout I is are we years But in to So to wins I one which see there announced be will sort of the quarter it. that this a next over we when industry.

Ryan Koontz

platform Is seeing opportunities that there? also you most of are packet the some or XXXX

Gary Smith

nature it packet. but approach, a of Its taking of both, know [Indiscernible] it architectural architecture different the that speaking some converged a includes generally slightly is you converged because being

it's the And for our standalone a still pieces of real well, we're integrated packet of so seeing packet we're and opportunity in the so portfolio increasingly that's large. an and as that continuing capability are XXXX, the then why packet overall increase aggregation investment some portfolio, as on to

Ryan Koontz

very helpful. you. That's Thank

Gregg Lampf

this for to weeks. that, morning. have us We good catching joining day. several Ryan. forward the and we thank you next Thank up And look with Thank over you, everyone

Operator

This concludes call. today's conference

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